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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21803
---------------------------------
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.)
900 OAKMONT LANE, SUITE 100
WESTMONT, IL 60559
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (630) 455-6000
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 27, 1998) was $205 million.
The number of shares outstanding of the Registrant's Common Stock, as of
February 27, 1998, was 19,868,296 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, 1997
Page
ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . 15
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . 16
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . 25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . 44
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. . . . . . 44
ITEM 11. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . 47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . 51
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . 53
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . 56
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FORWARD LOOKING STATEMENT NOTICE
Certain statements contained in this Annual Report that are not related
to historical results are forward-looking statements. Actual results may
differ materially from those projected or implied in the forward-looking
statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed under Item 1.
"Business--Certain Factors Affecting the Company" and Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Further, certain forward-looking statements are based upon assumptions as to
future events that may not prove to be accurate.
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"), Replacement and Exchange Parts Co., Inc. ("REPCO") in
January 1997, ATS Remanufacturing ("ATS") in July 1997, Trans Mart, Inc.
("Trans Mart") in August 1997 and the Metran companies (Metran Automatic
Transmission Parts Corp., Metran Boston, Inc. and Metran Parts of
Pennsylvania, Inc.) ("Metran") in November 1997 (collectively, the "1997
Acquisitions"), and the OEM Division ("Autocraft") of Fred Jones Enterprises,
Inc. (formerly known as Autocraft Industries, Inc.) in March 1998 (the
"Autocraft Acquisition" and, together with the Initial Acquisitions, the 1995
Acquisitions, the 1996 Acquisitions and the 1997 Acquisitions, the
"Acquisitions"). 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. ("Holdings"), the sole stockholder of
ATC prior to the IPO, was merged into ATC (the "Reorganization"). Upon the
effectiveness of the Reorganization, 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 was converted into one share of ATC Redeemable Exchangeable Cumulative
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 repair of vehicles in the automotive aftermarket. 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 assemblies. The Company's two primary
customer groups are: original equipment manufacturers ("OEMs"), principally
Chrysler Corporation, which purchase remanufactured transmissions and other
remanufactured drive train components for use as replacement parts by their
dealers primarily during the warranty period following the sale of a vehicle;
and independent transmission rebuilders, general repair shops, distributors
and retail automotive parts stores (the "Independent Aftermarket"), which
purchase remanufactured torque converters and engines and other
remanufactured and new parts for repairs generally during the period
following the expiration of the vehicle warranty. As a result of recent
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acquisitions, the Company's OEM customers now also include Ford Motor
Company, General Motors Corporation and certain European OEMs and its
products now include electronic control modules, instrument display clusters,
cellular telephones and radios.
Since the Initial Acquisitions, the Company has grown both internally
and through ten additional acquisitions. The Company and the Predecessor
Companies have achieved compound annual growth in revenue of approximately
35.7% from 1992 through 1997 (including both internal growth and growth
through acquisitions). 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 products 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 Company's strategy is to achieve growth both internally and through
strategic acquisitions. The Company intends to expand its business by: (i)
increasing penetration of its current customer base; (ii) gaining new OEM and
Independent Aftermarket customers; and (iii) introducing new products to both
existing and new customers. The Company plans to continue to support these
growth strategies through strategic acquisitions in the future. In addition,
the Company believes that its core competency of remanufacturing, which has
been applied to the drive train products segment of the automotive
aftermarket, has the potential to be utilized in other aftermarket segments.
Therefore, the Company is conducting selective market studies to explore
possible additional markets for its remanufacturing capabilities.
See "Certain Factors Affecting the Company."
AUTOMOTIVE AFTERMARKET
The automotive aftermarket in the United States and Canada, which
consists of sales of parts and services for vehicles after their original
purchase, has been noncyclical and has generally experienced steady growth
over the past several years, unlike the market for new vehicle sales.
According to the Automotive Parts & Accessories Association, between 1988 and
1997 (the most recent period for which data is available), estimated
industry-wide revenue for the automobile aftermarket increased from
approximately $99.2 billion to $151.2 billion. This consistent growth is due
principally to the increase in the number of vehicles in operation, the
increase in the average age of vehicles, and the increase in the average
number of miles driven annually per vehicle. The Company competes primarily
in the aftermarket segment for automotive transmissions, engines and other
drive train related products, which represents more than $7 billion of the
entire automotive aftermarket. The Company believes that within this segment
the market for remanufactured drive train products has grown faster than the
overall automotive aftermarket.
REMANUFACTURING
Remanufacturing is a process through which used assemblies are returned
to a central facility where they are disassembled and their component parts
cleaned, refurbished and tested. The usable component parts are then
combined with new parts in a high volume, precision assembly line
manufacturing process to create remanufactured assemblies.
When an assembly such as a transmission or engine fails, there are
generally three alternatives available to return the vehicle to operating
condition. The dealer or independent repair shop may: (i) remove the
assembly, disassemble it into its component pieces, replace worn or broken
parts with remanufactured or new components, and reinstall the assembly in
the vehicle ("rebuild"); (ii) replace the assembly with an assembly from a
remanufacturer such as the Company; or (iii) in rare instances, replace the
assembly with a new assembly manufactured by the OEM.
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 and the components
that can be incorporated into the remanufactured product are cleaned,
refurbished
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and tested. All components determined not reusable or repairable
are replaced by other remanufactured or new components. The units are then
reassembled 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. After testing, completed products are then packaged for
immediate delivery or shipped to one of the Company's distribution centers.
The cores used in the Company's remanufacturing process for sale to its
OEM customers are provided by the OEMs. In the case of OEMs other than
Chrysler, the dealers return cores to the OEM, which then ships them to the
Company. Chrysler cores are sent to the Company through its central core
return center. See "Customers--OEM Customers."
The majority of the cores used in the Company's remanufacturing process
for sale to its Independent Aftermarket customers are obtained from customers
as trade-ins. The Company encourages its Independent Aftermarket 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.
There are three primary benefits of using remanufactured components
rather than rebuilt or new components in repair of vehicles:
- - First, costs to the OEM associated with remanufactured assemblies generally
are 50% less than new or rebuilt assemblies due to the remanufacturer's use
of high volume manufacturing techniques and salvage methods that enable the
remanufacturer to refurbish and reuse a high percentage of original
components.
- - Second, remanufactured assemblies are generally of consistent high quality
compared to rebuilt assemblies because of the precision manufacturing
techniques, technical upgrades and rigorous inspection and testing
procedures employed in remanufacturing. In contrast, the quality of a
rebuilt assembly is heavily dependent on the skill level of the particular
mechanic, who typically is less able to remain current with engineering
changes than remanufacturers, who work in close liaison with OEM engineers.
In addition, the proliferation of transmission and engine designs, the
increasing complexity of transmissions and engines that incorporate
electronic components and the shortage of highly trained mechanics
qualified to rebuild assemblies have tended to favor remanufacturing over
rebuilding assemblies for aftermarket repairs. For warranty repairs,
consistent quality is important to the OEM providing the applicable
warranty, because once installed, the remanufactured product is usually
covered by the OEM's warranty for the balance of the original warranty
period.
- - Third, replacement of a component with a remanufactured component generally
takes considerably less time than the time needed to rebuild the component,
thereby significantly reducing the time the vehicle is at the dealer or
repair shop.
The Company believes that because of this combination of high quality, low
cost and efficiency, the use of remanufactured assemblies for aftermarket
repairs is growing compared to the use of new or rebuilt assemblies. Although
the primary customers for the Company's remanufactured components have
historically been OEMs, the Company expects the Independent Aftermarket to
increase its use of remanufactured components in the future.
PRODUCTS
The principal product lines of the Company are remanufactured
transmissions, repair kits and hard parts used in drive train repairs, and
remanufactured engines. Following the Autocraft Acquisition, the Company also
remanufactures electronic control modules, instrument display clusters, cellular
telephones and radios.
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REMANUFACTURED TRANSMISSIONS
The Company remanufactures transmissions that are factory approved and
suitable for warranty and post-warranty replacement of transmissions for
Chrysler, Ford, General Motors and 12 foreign OEMs, including Hyundai Motor
America, Mitsubishi 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.
In addition, the Company rebuilds heavy duty and medium duty truck
transmissions, differentials and air compressors for truck manufacturers such as
Navistar, Freightliner and Western Star. These assemblies are sold primarily to
truck dealers in Canada.
REPAIR KITS AND HARD PARTS
Repair kits sold by the Company consist of gaskets, friction plates,
seals, bands, filters, clutch components 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
transmission model. Due to its high volume of kit sales, the Company
maintains a variety of supply relationships that enable the Company to
purchase components for its kits at prices that the Company believes are more
favorable than those available to its lower volume competitors. The Company
also believes that its remanufacturing of some of the parts used in its kits
gives it an additional pricing advantage over some of its competitors who
purchase all their parts from suppliers.
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.
Many of the Company's competitors do not distribute as broad a line of hard
parts or remanufacture the hard parts that they distribute. The Company
believes these factors provide it both an availability and cost advantage
over many of its competitors.
The Company's Independent Aftermarket customers typically require both
repair kits and hard parts in order to complete a vehicle repair. For this
reason, the Company believes that the breadth of its product line, which
enables a customer to obtain all the parts for a repair job from a single
source, gives the Company a competitive advantage.
REMANUFACTURED ENGINES
The Company remanufactures engines for use as replacement engines in
many domestic passenger cars and light trucks. Principal customers include
Western Auto, as well as general repair garages and distributors. Over the
past four years, the variety of engine models remanufactured by the Company
has increased from 50 to 77 as the Company has expanded the range of engines
offered to meet customer requirements. In addition, the Company obtains
remanufactured engines for many foreign passenger cars and light trucks from
independent suppliers.
The Company began remanufacturing selected engine models for Chrysler in
1997 and through the Autocraft Acquisition the Company now also operates a
facility in England that remanufactures engines that are factory approved and
suitable for warranty and post-warranty replacement of engines for seven
European OEMs, including Jaguar and the European divisions of Ford and
General Motors This facility also does assembly and modification of new
production engines for certain of its OEM customers.
ELECTRONIC COMPONENTS
Through the Autocraft Acquisition, the Company now also remanufactures
automotive electronic control modules (which manage various engine
functions), instrument display clusters, cellular telephones and radios for
Ford, General Motors, Audi, Jaguar and Volkswagen. In addition, Autocraft
provides warehouse and distribution services for AT&T Wireless, the cellular
telephone subsidiary of AT&T, and recently began remanufacturing cellular
telephones on a limited basis for AT&T Wireless.
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CUSTOMERS
The Company's customers are Chrysler, Ford, General Motors and 18
foreign OEMs, and the Independent Aftermarket, which includes independent
transmission rebuilders, general repair shops, distributors and retail
automotive parts stores.
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 remanufactured transmissions to 12 foreign OEMs, including
Hyundai Motor America, Mitsubishi and American Isuzu. The Company added
General Motors as a customer in July 1997 with the purchase of ATS and
expanded its General Motors business with the acquisition of Autocraft. As a
result of the Autocraft Acquisition, the Company has begun to provide
factory-approved remanufactured components to several new OEM customers
including transmissions to Ford, electronic components to Ford, General
Motors, Audi, Jaguar and Vokswagen, and engines to Jaguar, Land Rover, Aston
Martin and the European divisions of Ford and General Motors. Products are
sold to each OEM pursuant to supply arrangements for individual transmission
or engine models, which supply arrangements typically may be terminated by
the OEM at any time.
Sales to the Company's OEM customers accounted for 51.9% of the
Company's 1996 revenues and 46.9% of its 1997 revenues. Sales to Chrysler
accounted for 37.2% and 32.0% of the Company's revenues in 1996 and 1997,
respectively. On a pro forma basis as if the Autocraft Acquisition had
occurred on January 1, 1997, sales to OEM customers would have accounted for
approximately 55% of pro forma 1997 revenues with sales to Chrysler and Ford
accounting for approximately 20% and 15%, respectively, of the total pro
forma revenues.
Over the past 15 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 each of 1995, 1996 and 1997 the Company was awarded the Platinum
Pentastar award, the highest award Chrysler bestows on a supplier. The
Company is one of only seven of Chrysler's approximately 3,500 suppliers to
receive the Platinum Pentastar every year since the creation of the award,
and the Company remains the only exclusively MOPAR aftermarket supplier to
ever be awarded the Platinum Pentastar.
In August 1997, the Company's facilities that remanufacture
transmissions for Chrysler and General Motors received QS-9000 certification,
a complete quality management system developed for Chrysler, Ford, General
Motors and truck manufacturers who subscribe to the ISO 9002 quality
standards. The system is designed to help suppliers such as the Company
develop a quality system that emphasizes defect prevention and continuous
improvement in manufacturing processes. The Company's facility that
remanufactures heavy and medium duty truck transmission received ISO 9002
certification in November 1997. In addition, with the Company's recent
acquisition of Autocraft, several of these newly acquired facilities received
QS-9000 and ISO 9002 certifications in 1997. Certain of Autocraft's
facilities have also received Ford's Q1 quality certification.
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, the
Company provides all remanufactured front wheel drive transmissions purchased
by Chrysler. In late 1996, the Company, with the approval of Chrysler,
developed a new production line to remanufacture substantially all of
Chrysler's rear wheel drive transmission models and has built up a core
supply necessary to support the program, although Chrysler has not yet
released firm orders for these models.
Autocraft began remanufacturing transmissions for Ford in 1989 and for
General Motors in 1985. The Company believes that as a result of the
acquisition of Autocraft, the Company provides approximately 90% of the
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remanufactured transmissions purchased by Ford and approximately 50% of the
remanufactured transmissions purchased by General Motors.
As part of its relationship with Ford, Autocraft also provides material
recovery services to assist Ford with the management of its dealer parts
inventory. Under this program, Ford dealers send their excess parts
inventory to Autocraft. The parts are then sorted and disposed of in one of
three ways: useful parts that are needed by other dealers are redistributed;
useful parts that are not needed by other dealers are sold to
remanufacturers, distributors and other third parties; and useless parts are
scrapped. Revenue from sales to third parties are shared by Ford and
Autocraft. Prior to the introduction of the material recovery program, Ford
scrapped all excess dealer parts but under the program the number of parts
that are scrapped has declined to less than 2%.
As part of its expanding relationship with Chrysler and in response to
periodic shortages of cores in the past, the Company established and expanded
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 continuing to work 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. In
addition, the increased number of cores has resulted in a greater number of
reusable parts, which, together with recently expanded production capacity at
Chrysler, has increased the Company's supply of parts required in the
remanufacturing process. In 1996, the Company also established a technical
support center to assist selected Chrysler dealers in evaluating transmission
warranty repair options.
INDEPENDENT AFTERMARKET
The Company, through its ATC Distribution Group, supplies transmission
repair kits and hard parts used in drive train repairs to over 25,000 of the
approximately 71,000 independent transmission rebuilders, distributors and
general repair shops in the United States and Canada. 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 remanufactured
engines and transmission filter kits to over 1,600 of the approximately
40,000 retail automotive parts 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.
As the number of vehicle models has proliferated and repairs have become
increasingly complex, independent transmission rebuilders and general repair
shops have grown more dependent on their suppliers for technical support and
for assistance in managing inventory by delivering product on a just-in-time
basis at competitive prices. To address these needs, the Company maintains
60 distribution centers located in metropolitan areas throughout the United
States and Canada from which the Company provides technical support and a
wide range of drive train related products that are delivered on a same day
basis by trucks to customers in and around metropolitan areas and on a next
day basis by overnight carrier to customers in more remote areas. The
Company believes that its distribution system is the most extensive in the
drive train segment of the automotive aftermarket and represents a
competitive advantage for the Company relative to its typically smaller,
local competitors. The Company believes there are opportunities for further
geographic penetration in this relatively fragmented market. See "Business
Strategy."
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. The Company provides high quality
products, competitive prices and high service levels as well as value added
promotional literature and advertising support. The Company's principal
retail customers are Western Auto and Advance Auto.
The Company significantly expanded its telemarketing capability with the
acquisition of Trans Mart in August 1997. Telemarketing from a central
location in Alabama, coupled with the Company's next day delivery strategy to
more remote areas, enables the Company to reach customers in areas that
cannot support the costs associated with establishing and maintaining a
distribution center. In addition to telemarketing, new customers are
developed by
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the Company's direct sales force operating from its distribution centers, and
by national and local trade publication advertising. In addition, the
Company participates in various trade shows. The Company believes its
DIVERCO, HTP, INTERCONT, KING-O-MATIC, MAMCO, METRAN, OLYMPIC, REPCO, RPM and
TRANZPARTS brand names are well recognized and respected in their regional
markets.
The Company has developed a common product identification and numbering
system which is currently being implemented on a company-wide basis in
conjunction with a computer network electronically linking its distribution
centers. The Company expects to complete this process by the end of 1998.
These changes are expected to improve customer service, increase product
availability, enhance inventory management and improve operational
efficiencies.
The Company believes it is well positioned within the highly fragmented
aftermarket for drive train products as a result of its extensive product
line, diverse customer base and broad geographic presence, with 60
distribution centers throughout the United States and Canada. Sales to
Independent Aftermarket customers accounted for 48.1% of the Company's
revenues in 1996 and 53.1% of its revenues in 1997.
BUSINESS STRATEGY
The Company's strategy is to achieve growth both internally and through
strategic acquisitions. The Company intends to expand its business by: (i)
increasing penetration of its current customer base; (ii) gaining new OEM and
Independent Aftermarket customers; and (iii) introducing new products to both
existing and new customers. Strategic acquisitions have been an important
element in the Company's historical growth, and the Company plans to continue
to support its growth strategy through strategic acquisitions in the future.
The Company's management is experienced in identifying acquisition
opportunities and completing and integrating acquisitions within the
automotive aftermarket. In addition, the Company believes that its core
competency of remanufacturing, which has been applied to the drive train
products segment of the automotive aftermarket, has the potential to be
utilized in other aftermarket segments.
INCREASING SALES TO EXISTING CUSTOMERS
OEM CUSTOMERS. The Company intends to increase its business with its
existing OEM customers by working with OEMs to increase dealer utilization of
remanufactured transmissions in both the warranty and post-warranty period.
The Company is working in tandem with OEMs to highlight to dealers the
quality and cost advantages of using remanufactured assemblies versus
rebuilding. In addition, the post-warranty repair market, which the Company
believes is approximately eight times as large as the OEM dealer warranty
repair market, presents a growth opportunity. Currently, the vast majority
of post-warranty repairs are performed in the Independent Aftermarket rather
than at OEM dealers. Given the relatively low cost and high quality of
remanufactured components, OEM dealers can enhance their cost competitiveness
compared to independent service centers through the increased use of
remanufactured components as well as providing end customers with a high
quality product. To the extent that OEM dealers increase their level of
post-warranty repairs, the Company is well positioned to capitalize on this
market growth. The Company has introduced a number of new transmission
models and related drive train products in the last several years for its OEM
customers. The Company, with the approval of Chrysler, developed a new
production line in late 1996 dedicated to remanufacturing substantially all
of Chrysler's rear wheel drive transmission models and has built up a core
supply necessary to support the program, although Chrysler has not yet
released firm orders for these transmission models.
INDEPENDENT AFTERMARKET CUSTOMERS. The Company believes that it
currently supplies less than one-third of the remanufactured or new drive
train component requirements of its independent transmission rebuilder and
general repair shop customers. The Company believes it is well positioned to
expand sales to these customers through a common product identification and
numbering system which is currently being implemented on a company-wide basis
in conjunction with a computer network that will electronically link its
distribution centers. The Company also intends to expand its business with
existing customers by cross-selling products among its subsidiaries'
customers. For example, after its acquisition in January 1997, REPCO
introduced Mamco and RPM torque converters to its customers. The Company
intends to increase its business with its existing retail automotive
customers by offering "niche" products at competitive prices throughout these
customers' networks.
7
<PAGE>
INTRODUCING NEW PRODUCTS
OEM CUSTOMERS. The Company believes that OEMs recognize that the use of
remanufactured assemblies provide a high quality, lower cost alternative to
rebuilding damaged assemblies or replacing them with new assemblies. For this
reason, the Company believes that OEMs are interested in working with large,
high quality remanufacturers to reduce the OEMs' warranty expenditures and
increase their parts sales into the post-warranty aftermarket. The Company
continues to work with its OEM customers to identify additional remanufactured
products and services where the Company can provide value to the OEM. In this
way, the Company believes that it will be able to leverage its customer
relationships and remanufacturing competency. For example, in 1997 the Company
began remanufacturing 4.0 liter engines for Chrysler. In addition, the Company
also intends to leverage the electronic component capability of Autocraft by
introducing these products to some of its other OEM customers.
INDEPENDENT AFTERMARKET CUSTOMERS. The Company believes that its
reputation for high quality products and customer service enables it to leverage
its relationships with existing customers to sell additional products. The
Company monitors sales trends and is in frequent communication with customers
regarding potential new products. For example, in 1997 the Company began to
offer clutch kits, transmission filter kits and torque converters to its retail
customers. The acquisition of Diverco in October 1996 has enabled the Company
to begin offering standard transmission components to its independent
transmission rebuilder and general repair shop customers.
ESTABLISHING NEW CUSTOMER RELATIONSHIPS
OEM CUSTOMERS. The Company believes that opportunities for growth exist
with several OEMs regarding United States based remanufacturing programs. The
Company believes that this represents an opportunity for growth and is currently
working to develop programs with certain foreign OEMs. During 1997, the Company
began remanufacturing standard transmissions for New Venture Gear, a joint
venture between Chrysler and General Motors. In July 1997, the Company became
one of four suppliers of remanufactured transmissions to General Motors when the
Company acquired ATS, which has been remanufacturing transmissions for General
Motors for 12 years. In March 1998, the Company expanded its business with
General Motors by purchasing Autocraft, one of General Motors' other three
transmission suppliers. The Autocraft Acquisition also marked the addition of
Ford as one of the Company's customers.
INDEPENDENT AFTERMARKET CUSTOMERS. The Company believes that its product
mix and distribution network position it to expand its Independent Aftermarket
customer base in three ways. First, although the Company's distribution network
is currently the most extensive in the drive train segment of the automotive
aftermarket, there are further opportunities for the Company to expand to
additional geographic markets. Second, as a result of the acquisition of Trans
Mart in August 1997, which significantly expanded the Company's telemarketing
capability, the Company expects to reach new Independent Aftermarket customers
in non-metropolitan areas. Third, in the last few years, the Company has
expanded its customer base to include general repair shops and retail automotive
parts stores. The Company now serves over 1,600 of the 40,000 retail automotive
parts stores in the United States, primarily by selling products to two retail
chains, and 25,000 of the approximately 71,000 independent transmission
rebuilders, distributors and general repair shops in the United States and
Canada. The Company intends to leverage its breadth of products and
distribution network to supply "niche products" such as transmission filter kits
and remanufactured engines at improved availability rates and competitive
prices. The Company believes that its position as a leading national supplier
of remanufactured engines affords it the opportunity to service additional
national retail chains to the extent that these chains migrate away from their
existing fragmented base of suppliers. In addition, the Company's position
enables it to supply other chains that may expand their product lines in the
future to include remanufactured engines.
ADDITIONAL REMANUFACTURING OPPORTUNITIES
The Company has begun to look beyond the automotive aftermarket to identify
other aftermarket segments that utilize the Company's core competency of
remanufacturing. The Company believes that other markets may have similar
characteristics to those experienced by the Company in the automotive
aftermarket. If remanufacturing
8
<PAGE>
opportunities are identified in these other markets, the Company will review
them and may pursue those that are expected to be consistent with its
capabilities and investment objectives.
The foregoing discussion of the Company's business strategy contains
forward looking statements. See "Forward Looking Statement Notice."
COMPETITION
The Company competes in the highly fragmented automobile aftermarket for
transmissions, engines and other drive train components, in which the
majority of industry supply comes from small local or regional participants.
Competition is based primarily on product quality, service, delivery,
technical support and price. Many of the Company's competitors operate only
in certain geographic regions with a limited product line. The Company is
one of the largest participants in the aftermarket for remanufactured drive
train components, offers a more complete line of products across a diverse
customer base and has a much broader geographic presence than many of its
competitors. As a result, the Company believes that it is well positioned to
enhance its competitive position by expanding its product line through the
development of new products or acquisition of new businesses as well as by
expanding its distribution network into new geographic markets.
Nevertheless, the aftermarket for remanufactured drive train components
remains highly competitive, and 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.
EMPLOYEES
As of December 31, 1997, the Company employed approximately 3,500
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. As a
result of the Autocraft Acquisition, in March 1998 the Company hired
approximately 1,500 new employees who had previously been employed by the
seller of Autocraft.
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 and impose liability
for the costs of cleaning up, and certain damages resulting from, past
spills, disposals or other releases of hazardous substances.
In connection with the Acquisitions, the Company conducted certain
investigations of the acquired 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 facilities have had or
may have had releases of hazardous materials that may require remediation and
also may be subject to potential liabilities for contamination from off-site
disposal of substances or wastes. These assessments also found that certain
reporting and other regulatory requirements, including certain waste
management procedures, were not or may not have been satisfied. Although
there can be no assurance, the Company believes that, based in part on the
investigations conducted, in part on certain remediation completed prior to
the acquisitions, and in part on the indemnification provisions of the
agreements entered into in connection with the Company's acquisitions, the
Company will not incur any material liabilities relating to these matters.
The company from which RPM acquired its assets (the "Prior RPM Company")
has been identified by the United States Environmental Protection Agency (the
"EPA") as one of many potentially responsible parties for environmental
liabilities associated with a "Superfund" site located in the area of RPM's
former manufacturing facilities and current distribution facility in Azusa,
California. The Federal Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended ("CERCLA" or "Superfund"), provides for
cleanup of sites from which there has been a release or threatened release of
hazardous substances, and authorizes recovery of related response costs and
certain other damages from potentially responsible parties ("PRPs"). PRPs
are broadly defined
9
<PAGE>
under CERCLA, and generally include present owners and operators of a site
and certain past owners and operators. As a general rule, courts have
interpreted CERCLA to impose strict, joint and several liability upon all
persons liable for cleanup costs. As a practical matter, however, at sites
where there are multiple PRPs, the costs of cleanup typically are allocated
among the PRPs according to a volumetric or other standard. The EPA has
preliminarily estimated that it will cost approximately $47 million to
construct and approximately $4 million per year for an indefinite period to
operate an interim remedial groundwater pumping and treatment system for the
part of the Superfund site within which RPM's former manufacturing facilities
and current distribution facility, as well as those of many other potentially
responsible parties, are located. The actual cost of this remedial action
could vary substantially from this estimate, and additional costs associated
with the Superfund site are likely to be assessed. The Company has
significantly reduced its presence at the site and has moved all
manufacturing operations off-site. Since July 1995, the Company's only real
property interest in this site has been the lease of a 6,000 square foot
storage and distribution facility. The RPM acquisition agreement and the
leases pursuant to which the Company leased RPM's facilities after the
Company acquired the assets of RPM (the "RPM Acquisition") expressly provide
that the Company did not assume any liabilities for environmental conditions
existing on or before the RPM Acquisition, although the Company could become
responsible for these liabilities under various legal theories. The Company
is indemnified against any such liabilities by the seller of RPM as well as
the Prior RPM Company shareholders. There can be no assurance, however, that
the Company would be able to make any recovery under any indemnification
provisions. 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. Although there can be no assurance, the Company believes that it will
not incur any material liability as a result of these environmental
conditions.
CERTAIN FACTORS AFFECTING THE COMPANY
Set forth below are certain factors that may affect the Company's
business:
DEPENDENCE ON SIGNIFICANT CUSTOMER
The Company's largest customer, Chrysler, accounted for approximately
37.2% and 32.0% of the Company's net sales for 1996 and 1997, respectively.
No other customer accounted for more than 10% of the Company's net sales
during either of these years, although the Company expects that Ford will
account for more than 10% of the Company's net sales in 1998.
Chrysler, like other North American OEMs, generally requires its dealers
using remanufactured products to use only those from approved suppliers.
Although the Company is currently the only factory-approved supplier of
remanufactured transmissions to Chrysler, Chrysler (like the Company's other
OEM customers) 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, within the last
three years 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 future. Any such action could have the effect of reducing
the amount of warranty work performed by Chrysler dealers. An extended,
substantial decrease in orders from Chrysler would have a material adverse
effect on the Company. See "Customers--OEM Customers."
SHORTAGE OF TRANSMISSION CORES AND COMPONENT PARTS
In its remanufacturing operations, the Company obtains used
transmissions, hard parts, engines and related components, commonly known as
"cores," which are sorted and either placed into immediate production or
stored until needed. The majority of the cores remanufactured by the Company
are obtained from OEMs or from Independent Aftermarket customers as
trade-ins. The ability to obtain cores of the types and in the quantities
required by the Company is critical to the Company's ability to meet demand
and expand production. With the increased acceptance in the aftermarket of
remanufactured assemblies, the demand for cores has increased. The Company
periodically has experienced situations in which the inability to obtain
sufficient cores has limited its ability to accept all of the orders
available to it. As part of its expanding relationship with Chrysler and in
response to the periodic shortage of cores, in 1995 the Company established a
central core return center for all of Chrysler's transmission product lines.
The operation of this facility enables the Company to receive cores on a more
timely basis and better monitor the
10
<PAGE>
availability of cores. There can be no assurance that the Company will not
experience core shortages in the future. If the Company were to experience
such a shortage, it could have a material adverse effect on the Company.
Certain component parts required in the remanufacturing process are
manufactured by Chrysler and the Company's other OEM customers. The Company
has experienced shortages of such component parts from time to time in the
past, and future shortages could have a material adverse effect on the
Company.
ABILITY TO ACHIEVE AND MANAGE GROWTH
An important element in the Company's growth strategy is the acquisition
and integration of complementary businesses in order to broaden product
offerings, capture market share and improve profitability. There can be no
assurance that the Company will be able to identify or reach mutually
agreeable terms with acquisition candidates, or that the Company will be able
to manage additional businesses profitably or successfully integrate such
additional businesses into the Company without substantial costs, delays or
other problems. Acquisitions may involve a number of special risks,
including: initial reductions in the Company's reported operating results;
diversion of management's attention; unanticipated problems or legal
liabilities; and a possible reduction in reported earnings due to
amortization of acquired intangible assets in the event that such
acquisitions are made at levels that exceed the fair market value of net
tangible assets. Some or all of these items could have a material adverse
effect on the Company. There can be no assurance that businesses acquired in
the future will achieve sales and profitability that justify the investment
therein. In addition, to the extent that consolidation becomes more
prevalent in the industry, the prices for attractive acquisition candidates
may increase to unacceptable levels. See "Business Strategy."
The Company also plans to expand its existing operations by broadening
its product lines and increasing the number of its distribution centers in
the United States. There can be no assurance that any new product lines
introduced by the Company will be successful, that the Company will manage
successfully the start-up and marketing of new products or that additional
distribution centers will be integrated into the Company's existing
operations or will be profitable. See "Business Strategy."
In addition, the Company is exploring possible additional markets for
its remanufacturing capabilities, but no assurance can be given that the
Company will pursue any such opportunity or be successful outside the
automotive aftermarket. See "Business Strategy--Additional Remanufacturing
Opportunities."
INDEBTEDNESS AND LIQUIDITY
The Company had outstanding long-term indebtedness of $273.1 million at
March 6, 1998. See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources." The level of the Company's consolidated indebtedness could have
important consequences, including the following: (i) a substantial portion of
the Company's cash flow from operations must be dedicated to the payment of
principal of and interest on its indebtedness and will not be available for
other purposes; (ii) the ability of the Company to obtain financing in the
future for working capital needs, capital expenditures, acquisitions,
investments, general corporate purposes or other purposes may be materially
limited or impaired; (iii) the Company's level of indebtedness may reduce its
flexibility to respond to changing business and economic conditions or take
advantage of business opportunities that may arise; and (iv) the ability of
the Company to pay dividends is restricted. See Item 5. "Market for
Registrant's Common Equity and Related Stockholder Matters." Any default by
the Company with respect to its outstanding indebtedness, or any inability on
the part of the Company to obtain necessary liquidity, would have a material
adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the continued services of its management
team, including Stephen J. Perkins, Chairman of the Board, President and
Chief Executive Officer. Although the Company believes it could replace key
employees in an orderly fashion should the need arise, the loss of such
personnel could have a material adverse effect on the Company.
11
<PAGE>
ENVIRONMENTAL MATTERS
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 and impose liability
for the costs of cleaning up, and certain damages resulting from, past
spills, disposals or other releases of hazardous substances. In connection
with the Acquisitions, the Company conducted certain investigations of the
acquired companies' facilities and their compliance with applicable
environmental laws. These investigations found various environmental matters
and conditions that could, under certain circumstances, expose the Company to
liability. Furthermore, the company from which RPM acquired its assets has
been identified by the United States Environmental Protection Agency as one
of the many potentially responsible parties for environmental liabilities
associated with a "Superfund" site located in the area of RPM's former
manufacturing facilities and one of its current distribution facilities.
Although no assurances can be given, the Company believes that it will not
incur any material liabilities relating to these matters. See "Environmental
Matters."
COMPETITION
The automotive aftermarket for transmissions, engines and other drive
train products is highly fragmented and highly competitive. There can be no
assurance that the Company will compete successfully with other companies in
its industry segment, some of which are larger than the Company and have
greater financial and other resources available to them than does the
Company. See "Competition."
CONTROL OF THE COMPANY; ANTI-TAKEOVER MATTERS
The Company is controlled by Aurora Equity Partners L.P. ("AEP") and
Aurora Overseas Equity Partners I, L.P. ("AOEP" and together with AEP, the
"Aurora Partnerships"), which hold approximately 52% of the voting power in
the Company (through direct ownership and certain voting arrangements).
Therefore, the Aurora Partnerships will be able to elect all of the directors
of the Company and approve or disapprove any matter submitted to a vote of
the Company's stockholders. As a result of the Aurora Partnerships'
substantial ownership interest in the Common Stock, it may be more difficult
for a third party to acquire the Company. A potential buyer would likely be
deterred from any effort to acquire the Company absent the consent of the
Aurora Partnerships or their participation in the transaction. The general
partner of each of the Aurora Partnerships is controlled by Richard R.
Crowell, Gerald L. Parsky and Richard K. Roeder, each of whom is a director
of the Company. The Indentures governing the Company's 12% Senior
Subordinated Notes due 2004 (the "Senior Notes") contain provisions that
would allow a holder to require the Company to repurchase such holder's
Senior Notes at a cash price equal to 101% of the principal amount thereof,
together with accrued interest, upon the occurrence of a "change of control"
of the Company (as defined therein), which could also have the effect of
discouraging a third party from acquiring the Company. See Item 12.
"Security Ownership of Certain Beneficial Owners and Management."
In addition, the Company's Board of Directors is authorized, subject to
certain limitations prescribed by law, to issue up to 5,000,000 shares of
preferred stock in one or more classes or series and to fix the designations,
powers, preferences, rights, qualifications, limitations or restrictions,
including voting rights, of those shares without any further vote or action
by stockholders. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock, while providing flexibility in connection with possible acquisitions
and other corporate transactions, could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. The Company has no current plans to issue shares of
preferred stock.
12
<PAGE>
ITEM 2. PROPERTIES
The Company leased 76 facilities with total leased space of
approximately 2.5 million square feet as of December 31, 1997. The following
table sets forth certain information regarding the manufacturing facilities
and distribution centers of the Company as of December 31, 1997.
<TABLE>
<CAPTION>
Lease
Approximate Expiration
Location Sq. Feet Date Type of Facility/Products Manufactured
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Florence, Alabama 85,100 2002 Distribution Center (1)
Phoenix, Arizona 22,000 2000 Distribution Center (1)
Tucson, Arizona 6,400 1998 Distribution Center (1)
Azusa, California 5,600 2000 Distribution Center (1)
Fresno, California 14,000 2000 Distribution Center (1)
Los Angeles, California 4,700 2000 Distribution Center (1)
Rancho Cucamonga, California 153,000 2002 Distribution Center (1)
Sacramento, California 11,200 1998 Distribution Center (1)
San Diego, California 10,000 2002 Distribution Center (1)
San Jose, California 10,000 2000 Distribution Center (1)
San Leandro, California 13,000 2002 Distribution Center (1)
Van Nuys, California 6,800 2000 Distribution Center (1)
Colorado Springs, Colorado 5,000 * Distribution Center (1)
Denver, Colorado 9,000 2000 Distribution Center (1)
Jacksonville, Florida 12,000 1999 Distribution Center (2)
Orlando, Florida 11,900 2002 Distribution Center (1)
Orlando, Florida 4,000 1998 Distribution Center (2)
Atlanta, Georgia 14,900 1998 Distribution Center (1)(2)
Harvey, Illinois 46,000 2001 Distribution Center (1)
Hillside, Illinois 20,000 2000 Distribution Center (1)(2)
Westmont, Illinois 5,900 2002 Corporate Offices
Louisville, Kentucky 51,500 1999 Distribution Center (1)
Louisville, Kentucky 9,200 * Distribution Center (1)(2)
Harahan, Louisiana 2,500 1998 Distribution Center (2)
Baltimore, Maryland 4,000 1999 Distribution Center (2)
Malden, Massachusetts 6,200 2001 Distribution Center (1)
Grand Rapids, Michigan 9,000 1998 Distribution Center (1)(2)
Taylor, Michigan 12,200 2000 Distribution Center (1)(2)
Berkeley, Missouri 18,000 1998 Distribution Center (1)
Creve Coeur, Missouri 9,700 1998 Distribution Center (1)(2)
Joplin, Missouri 264,000 2008 Manufacturing Facility
Kansas City, Missouri 10,200 2000 Distribution Center (1)(2)
Springfield, Missouri 280,800 2004 Manufacturing Facility
Springfield, Missouri 30,000 1999 Manufacturing Facility
Springfield, Missouri 12,100 2001 Distribution Center (1)(2)
Springfield, Missouri 34,000 * Manufacturing Facility
Springfield, Missouri 60,400 2000 Manufacturing Facility
Springfield, Missouri 98,800 * Manufacturing Facility
Springfield, Missouri 10,000 * Manufacturing Facility
Springfield, Missouri 200,000 2006 Manufacturing Facility
Las Vegas, Nevada 7,500 1999 Distribution Center (1)
Las Vegas, Nevada 250 * Sales Office
East Rutherford, New Jersey 5,700 1999 Distribution Center (2)
13
<PAGE>
Lease
Approximate Expiration
Location Sq. Feet Date Type of Facility/Products Manufactured
- ---------------------------------------------------------------------------------------------------------------
Mahwah, New Jersey 160,000 2003 Manufacturing Facility
Albuquerque, New Mexico 7,000 2000 Distribution Center (1)
Jericho, New York 13,800 1998 Distribution Center (1)
Charlotte, North Carolina 23,000 2001 Distribution Center (1)(2)
Gastonia, North Carolina 130,000 2000 Manufacturing Facility
Gastonia, North Carolina 60,000 * Manufacturing Facility
Dayton, Ohio 42,000 1999 Manufacturing Facility
Forest Park, Ohio 10,000 1998 Distribution Center (1)
Portland, Oregon 20,000 2000 Distribution Center (1)
Croydon, Pennsylvania 7,100 2000 Distribution Center (1)
Memphis, Tennessee 37,800 2003 Distribution Center (1)(2)
Nashville, Tennessee 6,500 2000 Distribution Center (1)
Austin, Texas 5,000 * Distribution Center (1)
Dallas, Texas 93,000 2012 Distribution Center (1)
Dallas, Texas 9,000 1998 Distribution Center (1)
Houston, Texas 13,500 2002 Distribution Center (1)(2)
San Antonio, Texas 13,000 2002 Distribution Center (1)
Salt Lake City, Utah 15,000 2000 Distribution Center (1)
Norfolk, Virginia 9,700 2000 Distribution Center (1)
Norfolk, Virginia 13,500 2002 Distribution Center (1)(2)
Seattle, Washington 22,000 2000 Distribution Center (1)
Spokane, Washington 9,500 2000 Distribution Center (1)
Janesville, Wisconsin 30,000 2001 Distribution Center (1)
Calgary, Alberta 9,200 2001 Distribution Center (1)
Edmonton, Alberta 14,800 2003 Distribution Center (3)
Delta, British Columbia (Vancouver) 13,000 2004 Distribution Center (1)
Moncton, New Brunswick 12,000 2000 Distribution Center (3)
Mississauga, Ontario 35,100 1998 Distribution Center (3)
Mississauga, Ontario 12,200 2001 Manufacturing Facility
Mississauga, Ontario 24,000 2000 Distribution Center (1)
Montreal, Quebec 11,200 2000 Distribution Center (1)
Regina, Saskatchewan 600 * Distribution Center (1)
Mexicali, Mexico 77,100 2002 Manufacturing Facility
</TABLE>
______________
* Month-to-month lease.
(1) Transmission repair kits & drive train hard parts.
(2) Engines
(3) Heavy duty truck transmissions & differentials
In connection with the Autocraft Acquisition, the Company purchased the
207,000 square foot facility in Oklahoma City, Oklahoma at which its Ford
transmission remanufacturing operations are conducted, as well as an adjacent
98,000 square foot facility at which the Ford material recovery program is
conducted. In addition, the Company began leasing 12 additional facilities
with an aggregate of approximately 450,000 square feet at which the other
Autocraft operations are conducted. These leased facilities are located in
Oklahoma City, Oklahoma; Carrollton, Fort Worth and Houston, Texas; Sparks,
Nevada; and Charlotte, North Carolina. The Company's new United Kingdom
subsidiary (which was acquired as part of the Autocraft Acquisition) owns a
120,000 square foot facility in Grantham, England from which it conducts its
engine remanufacturing operations.
14
<PAGE>
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. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders of the Company
during the quarter ended December 31, 1997.
15
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock has been traded on the Nasdaq National Market
under the symbol "ATAC" since the IPO in December 1996. As of February 27,
1998, there were approximately 88 record holders of its Common Stock. The
following table sets forth for the periods indicated the range of high and
low sale prices of the Common Stock as reported by Nasdaq:
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
1996
Fourth quarter (beginning December 17) ............. $17 5/8 $14 1/4
1997
First quarter ...................................... 19 5/8 14 3/8
Second quarter ..................................... 23 14 3/4
Third quarter ...................................... 27 1/4 18 1/2
Fourth quarter ..................................... 24 3/4 15 1/2
</TABLE>
On February 27, 1998, the last sale price of the Common Stock, as
reported by Nasdaq, was $23 15/16 per share.
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 its Common Stock in the foreseeable future. Furthermore, as a holding
company with no independent operations, the ability of the Company to pay
cash dividends is dependent upon the receipt of dividends or other payments
from its subsidiaries. Under the terms of the Indentures governing the
Senior Notes, the Company is not permitted to pay any dividends on its Common
Stock unless certain financial ratio tests are satisfied. In addition, the
Company's $100.0 million Credit Facility contains certain covenants that,
among other things, prohibit the payment of dividends by the Company. See
Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources." Any determination to
pay cash dividends on the Company's Common Stock in the future will be at the
sole discretion of the Company's Board of Directors.
During 1997, the Company did not issue any securities that were not
registered under the Securities Act of 1933, as amended.
16
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below with respect to the
statements of income data for the years ended December 31, 1995, 1996 and
1997 and the balance sheet data at December 31, 1996 and 1997 are derived
from the 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, 1993, the seven
months ended July 31, 1994 and the five months ended December 31, 1994 and
the balance sheet data at December 31, 1993, 1994 and 1995, are derived from
the audited Combined Financial Statements of the Predecessor Companies and
the Consolidated Financial Statements of the Company 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.
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
--------------------------------- ------------------------------------------------------
FOR THE YEAR FOR THE SEVEN FOR THE FIVE
ENDED MONTHS ENDED MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
DECEMBER 31, JULY 31, DECEMBER 31, -------------------------------
1993 1994(1) 1994 1995 1996 1997(2)
--------------- ------------- -------------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net sales .......................... $110,702 $90,056 $67,736 $190,659 $272,878 $346,110
Cost of sales....................... 66,687 52,245 40,112 115,499 166,810 212,416
------- ------ ------ ------- ------- -------
Gross profit........................ 44,015 37,811 27,624 75,160 106,068 133,694
Selling, general and
administrative expenses............ 25,682 20,475 14,206 38,971 55,510 73,768
Amortization of intangible assets .. 28 16 1,210 3,308 3,738 4,501
------- ------ ------ ------- ------- -------
Operating income ................... 18,305 17,320 12,208 32,881 46,820 55,425
Interest expense (income), net ..... (302) (158) 6,032 16,915 19,106 16,910
Income taxes (3).................... 471 (5) 2,565 6,467 11,415 15,512
------- ------ ------ ------- ------- -------
Income before extraordinary item ... $ 18,136 $17,483 3,611 9,499 16,299 23,003
======= ======
Preferred stock dividends........... 853 2,093 2,222 -
------ ------- ------- -------
Income before extraordinary item
available to common stockholders.. $ 2,758 $ 7,406 $ 14,077 $23,003
====== ======= ======= =======
Diluted earnings per share before
extraordinary item (4) ........... $ 0.65 $ 1.02 $ 1.19
Shares used in computation of
diluted earnings per share
before extraordinary item (4) .... 14,616 15,918 19,335
OTHER DATA:
Capital expenditures (5)............ $ 2,310 $ 1,850 $ 1,336 $ 5,187 $ 7,843 $ 8,682
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Combined Consolidated
--------------- ---------------------------------
December 31,
---------------------------------------------------
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
(in thousands)
BALANCE SHEET DATA:
Working capital.............................. $26,651 $40,499 $60,012 $103,371 $98,523
Property, plant and equipment, net........... 4,678 6,196 10,784 17,482 24,414
Total assets................................. 45,618 187,293 247,932 320,747 368,677
Long-term liabilities (6).................... 998 121,483 165,724 167,233 152,571
Preferred stock.............................. - 20,853 22,946 - -
Common stockholders' equity ................. 31,720 22,757 30,188 105,832 175,429
_______________
</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. All material transactions between the Predecessor
Companies have been eliminated.
(2) Income before extraordinary item for the year ended December 31, 1997
excludes an extraordinary item in the amount of $3,749 ($6,269 less related
income tax benefit of $2,520). This amount is comprised of (i) a $5,700
charge resulting from the early redemption of $40,000 in principal amount
of the Senior Notes in February 1997, which included the payment of a 12.0%
early redemption premium and the write-off of related debt issuance costs
and (ii) a charge of approximately $600 for the write-off of previously
capitalized debt issuance costs in connection with the termination of the
Company's previous revolving credit facility.
(3) Two of the Predecessor Companies elected to be taxed as S Corporations for
all periods prior to 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 that would have been provided
had these companies been C Corporations and included in consolidated
returns with the Company is as follows: $7,334 for the year ended
December 31, 1993 and $7,004 for the seven months ended July 31, 1994.
(4) See Note 1 to Consolidated Financial Statements for a description of the
computation of net income per share.
(5) Excludes capital expenditures made by certain of the Company's subsidiaries
prior to such subsidiaries' respective acquisitions and any capital
expenditures made in connection with such acquisitions.
(6) Includes deferred tax liabilities of $1,438, $3,478, $5,252 and $8,044 at
December 31, 1994, 1995, 1996 and 1997, respectively.
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and notes thereto included
elsewhere in this Annual Report.
OVERVIEW
The Company's revenues are generated through the sale of drive train
products used in the repair of vehicles in the automotive aftermarket. 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 approximately 33.0% from 1993 through 1997 (including
both internal growth and growth through acquisitions).
The Company's revenues from sales to Independent Aftermarket customers
increased by 26.9% compounded annually from $70.9 million to $183.8 million
from 1993 through 1997. This growth was due to geographic expansion through
the addition of distribution centers, a broadened product line, enhanced
customer service, effective sales efforts, the addition of retail automotive
parts stores as customers and acquisitions. During the same period, revenues
from sales to OEM customers increased by 42.1% compounded annually from $39.8
million to $162.3 million due to increased sales to existing customers,
including Chrysler, and the addition of new customers.
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 1993
through 1997. 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 23.2% in 1993 to 21.3% in 1997 principally due to the effect of
spreading certain fixed costs over a larger sales base.
The Company regularly evaluates strategic acquisition opportunities in
the automotive aftermarket business and expects to continue to do so in the
future. On March 6, 1998, the Company completed the acquisition of
substantially all the assets of the OEM Division of Autocraft. See Item 1.
"Business."
RESULTS OF OPERATIONS
The following table sets forth certain financial statement data expressed
in millions of dollars and as a percentage of net sales.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995 1996 1997
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(in millions)
Net sales............................... $190.7 100.0% $272.9 100.0% $346.1 100.0%
Cost of sales........................... 115.5 60.6 166.8 61.1 212.4 61.4
------ ----- ------ ----- ----- -----
Gross profit............................ 75.2 39.4 106.1 38.9 133.7 38.6
SG&A expenses .......................... 39.0 20.5 55.5 20.3 73.8 21.3
Amortization of intangible assets ...... 3.3 1.7 3.8 1.4 4.5 1.3
------ ----- ------ ----- ----- -----
Operating income ....................... 32.9 17.2 46.8 17.2 55.4 16.0
Interest expense, net................... 16.9 8.8 19.1 7.0 16.9 4.9
Provision for income taxes.............. 6.5 3.4 11.4 4.2 15.5 4.5
------ ----- ------ ----- ----- -----
Income before extraordinary item ....... $ 9.5 5.0% $ 16.3 6.0% $ 23.0 6.6%
====== ===== ====== ===== ===== =====
</TABLE>
19
<PAGE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996.
Income before extraordinary item increased 41.1% from $16.3 million in
1996 to $23.0 million in 1997. Net sales increased 26.8%, from $272.9
million in 1996 to $346.1 million in 1997, primarily due to sales generated
by the acquisitions of REPCO, ATS, Trans Mart and Metran as well as increased
sales volumes to OEM customers. In general, costs and expenses also
increased; however, overall the Company was able to spread its overhead
expenses over a larger revenue base, which contributed to the comparatively
higher income from before extraordinary item for the year.
On a per share basis, income before extraordinary item increased from
$1.02 per diluted share in 1996 to $1.19 per diluted share in 1997. The
number of shares used in the per share calculations were 15.9 million in 1996
and 19.3 million in 1997. The increase in shares resulted primarily from the
Company's public offering of Common Stock in October 1997.
NET SALES. Net sales increased $73.2 million, or 26.8%, from $272.9
million in 1996 to $346.1 million in 1997. Of this increase, $23.2 million
was due to the internal growth described above and $50.0 million was due to
the incremental net sales generated by the companies acquired in 1997 (REPCO,
ATS, Trans Mart and Metran). Net sales to Chrysler represented 37.2% of
total net sales in 1996, as compared to 32.0% in 1997.
Net sales on a proforma (unaudited) basis, to reflect the 1996
acquisitions of Tranzparts and Diverco and the 1997 acqusitions of REPCO,
ATS, Trans Mart and Metran as if all acquisitions had occurred on January 1,
1996, were $358.6 million for 1996 and $392.5 million for 1997.
GROSS PROFIT. Gross profit as a percentage of net sales remained
relatively constant at 38.9% in 1996 as compared to 38.6% in 1997.
SG&A EXPENSES. The Company's SG&A expenses increased $18.3 million,
from $55.5 million in 1996 to $73.8 million in 1997. As a percentage of net
sales, SG&A expenses increased from 20.3% to 21.3% between the two periods.
The increase in SG&A expenses is primarily due to the ongoing incremental
expenses of the Tranzparts, Diverco, REPCO, ATS, Trans Mart and Metran
acquisitions, certain enhancements to the Company's infrastructure (including
additional management and improved information systems) and additional
selling and other variable overhead costs associated with the higher sales
volume (including increased production capacity). The increase in SG&A
expenses as a percentage of net sales is primarily attributable to: (i) the
deferred compensation expense described below, (ii) certain enhancements to
the Company's infrastructure (including additional management and improved
information systems) and (iii) the additional ongoing expenses associated
with being a publicly held company.
Included in SG&A expenses are non-cash charges totaling $0.5 million in
1996 and $1.8 million in 1997, representing the pro rata portion for each
year of deferred compensation expense relating to the difference between the
exercise price and the intrinsic value for financial statement presentation
purposes of stock options granted to Mr. Stephen J. Perkins, the Company's
Chairman of the Board, President and Chief Executive Officer, and other
members of senior management. The Company expects to recognize additional
compensation expense aggregating $1.1 million over the balance of the
respective vesting periods of the options, which generally range from three
to five years from the date of grant.
AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets
increased from $3.8 million in 1996 to $4.5 million in 1997. The increase
resulted from the additional intangible assets arising from the acquisitions
of Tranzparts, Diverco, REPCO, ATS, Trans Mart and Metran.
INCOME FROM OPERATIONS. Principally as a result of the factors
described above, income from operations increased 18.4%, from $46.8 million
in 1996 to $55.4 million in 1997.
INTEREST EXPENSE, NET. Interest expense decreased from $19.1 million in
1996 to $16.9 million in 1997. The lower interest resulted from the net
effect of the early redemption in February 1997 of $40.0 million of the
Senior Notes
20
<PAGE>
offset to some extent by increased borrowings under the Company's $100.0
million revolving credit facility (the "Credit Facility"). The Credit
Facility carries a significantly lower effective interest rate than did the
Senior Notes.
EXTRAORDINARY ITEM. An extraordinary item in the amount of $3.8 million
($6.3 million, net of related income tax benefit of $2.5 million) was
recorded in 1997. This amount is comprised of (i) a $5.7 million charge
resulting from the early redemption of $40.0 million of the Senior Notes
in February 1997, which included the payment of a 12.0% early redemption
premium and the write-off of related debt issuance costs and (ii) a charge of
approximately $0.6 million for the write-off of previously capitalized debt
issuance costs in connection with the termination of the Company's previous
revolving credit facility.
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 both of its
customer groups, OEMs and the Independent Aftermarket including retail
automotive parts stores. 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 number 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 associated with the opening of five new
distribution centers 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.
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.
SG&A 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 approximately $0.7 million for certain planned reorganization costs
associated with the relocation of the Company's corporate headquarters to the
Chicago area and costs associated with a realignment of the Independent
Aftermarket division.
21
<PAGE>
AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets
increased approximately $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, 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 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 Senior Notes were issued
on June 1, 1995 and therefore were only outstanding for the last seven months
of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company had total cash and cash equivalents on hand of $78,000 at
December 31, 1997, representing a decrease in net cash of $46.4 million in
1997. Net cash provided by operating activities was $11.7 million for the
year. Net cash used in investing activities was $71.5 million for the
period, including $60.8 million for the acquisitions of REPCO, ATS, Trans
Mart and Metran, a scheduled payment of $2.0 million relating to the
acquisition of Diverco, and $8.7 million in capital expenditures, primarily
for purchases of equipment. Net cash provided by financing activities was
$13.3 million, including $47.9 million from the public offering of Common
Stock in October 1997 and net borrowings of $11.1 million under the Credit
Facility partially offset by payments totaling $44.8 million in connection
with the redemption of $40.0 million of Senior Notes.
The Company raised total net proceeds of $61.6 million in the IPO and
concurrent private placement of Common Stock in December 1996 and an
additional $47.9 million in the secondary offering in October 1997. From the
Company's inception in July 1994 to December 1996, the Company funded its
operations and investments in property and equipment, including acquisitions,
through the issuance of Senior Notes totaling $162.4 million, the private
sale of preferred stock of $20.0 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, $40.0 million in principal amount of the Senior Notes
was redeemed, with a combination of the proceeds from the IPO and borrowings
under the Credit Facility. The net proceeds from the secondary offering were
used to repay borrowings under the Credit Facility.
The Company's capital expenditures in 1997 were $8.7 million. These
capital expenditures consisted primarily of additional transmission, engine
and torque converter remanufacturing equipment and other improvements to
support planned increases in production capacity in the Joplin and
Springfield, Missouri and Mahwah, New Jersey plants.
The Company has budgeted $12.4 million for capital expenditures during
1998. These will include replacement and additional remanufacturing
equipment to support planned increases in production capacity in the
Company's Joplin and Springfield, Missouri and Mahwah, New Jersey facilities.
Overall, planned capital expenditures for 1998 are considered adequate for
normal replacement and consistent with projections for future sales and
earnings.
The ATS acquisition involves contingent payments aggregating up to $19.0
million (present value $13.6 million as of December 31, 1997) expected to be
made over eight years. The Autocraft Acquisition includes a deferred
purchase payment of up to $12.5 million payable in 1999.
In February 1997, the Company terminated its $30.0 million revolving
credit facility with The Chase Manhattan Bank (the "Bank") that had been
scheduled to mature in July 1999 and replaced it with the $100.0 million
Credit Facility, which is also with the Bank. The 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 Credit Facility are secured by
substantially all assets of the Company. As of December 31, 1997, the
Company had approximately $86.2 million available under the Credit Facility.
22
<PAGE>
In March 1998 the credit agreement for the Credit Facility was amended
and restated to provide a $120.0 million term loan facility in addition to
the existing revolving facility. The Company borrowed $120.0 million under
the term loan facility on March 6, 1998 to purchase Autocraft and pay related
transaction expenses. The term loan is payable in quarterly installments
through December 31, 2003 and bears interest at a rate of at either (i) the
Alternate Base Rate plus a specified margin or (ii) the Eurodollar Rate plus
a specified margin. 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% and (c) the federal funds rate plus 0.5%,
in each case as in effect from time to time. The "Eurodollar Rate" is the
rate offered by the Bank for eurodollar deposits for one, two, three, six or,
if available by all lenders, nine months (as selected by the Company) in the
interbank eurodollar market in the approximate amount of the Bank's share of
the advance under the Credit Facility. The applicable margins for both
Alternate Base Rate and Eurodollar Rate loans are subject to a quarterly
adjustment based on the Company's leverage ratio as of the end of the four
fiscal quarters then completed. The Alternate Base Rate margin is zero
currently and the Eurodollar margin is currently at 1.0%.
In September 1997, 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 the Canadian subsidiaries up to an aggregate
maximum of C$3.5 million.
The Company believes that cash on hand, cash flow from operations and
existing borrowing capacity will be sufficient to fund its ongoing operations
and its budgeted capital expenditures. In pursuing future acquisitions, the
Company will continue to consider the effect any such acquisition costs may
have on its liquidity. In order to consummate such acquisitions, the Company
may need to seek additional capital through additional borrowings or equity
financings.
IMPACT OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share," which was adopted by the Company on December 31, 1997.
As a result, the Company changed the method previously used to compute
earnings per share and is restating all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect
of stock options and warrants is excluded.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure," which was adopted by the Company on
December 31, 1997. This Statement requires additional disclosures relating to
liquidation preferences of preferred stock, information about the pertinent
rights and privileges of the outstanding equity securities, and the
redemption amounts for all issues of capital stock that are redeemable at
fixed or determinable prices on fixed or determinable dates. The Company
does not currently issue such securities; accordingly, this Statement has no
impact on the Company's financial statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." In addition to net income, comprehensive income includes items
recorded directly to stockholders' equity such as cumulative foreign currency
translation adjustments. This Statement establishes new standards for
reporting and displaying comprehensive income and its components in a full
set of general-purpose financial statements. This Statement is effective for
fiscal years beginning after December 15, 1997. Adoption of this standard
will only require additional financial statement disclosure detailing the
Company's comprehensive income.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131 establishes
new standards for reporting information about operating segments in interim
and annual financial statements. This Statement is also effective for fiscal
years beginning after December 15, 1997. The Company will evaluate the
impact, if any, this Statement will have on disclosures in the consolidated
financial statements.
23
<PAGE>
YEAR 2000 COMPLIANCE
The Company has been informed by the vendors of all its material
computer software that such software will continue to function properly
during the transition from 1999 to 2000 without disruption of the Company's
operations or the Company incurring additional cost for software upgrades or
modifications. The Company intends to conduct tests to confirm compliance by
the end of 1998. The Company's software includes both operational software
and software that is being implemented as part of the Company's continuing
efforts to seek operating efficiencies by upgrading its information systems.
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 Item 1. "Business--Environmental" for a discussion of certain
environmental matters relating to the Company.
24
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
CONTENTS
Report of Ernst & Young LLP, Independent Auditors. . . . . . . . . . . 26
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . 27
Consolidated Statements of Income. . . . . . . . . . . . . . . . . . . 28
Consolidated Statements of Changes in Stockholders' Equity . . . . . . 29
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . 30
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 31
25
<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, 1996 and 1997,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Aftermarket Technology Corp. at December 31, 1996 and 1997, and the
consolidated results of the Company's operations and cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 23, 1998,
(Except for Note 17, as to which the date is March 6, 1998)
26
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 46,498 $ 78
Accounts receivable, net 38,780 53,761
Inventories 60,586 76,166
Prepaid and other assets 2,917 4,706
Refundable income taxes - 1,011
Deferred income taxes 2,272 3,478
---------- ---------
Total current assets 151,053 139,200
Equipment and leasehold improvements:
Machinery and equipment 12,907 19,335
Autos and trucks 2,011 2,712
Furniture and fixtures 1,553 3,139
Leasehold improvements 4,585 6,058
---------- ---------
21,056 31,244
Less accumulated depreciation and amortization (3,574) (6,830)
---------- ---------
17,482 24,414
Debt issuance costs, net 6,320 4,260
Cost in excess of net assets acquired, net 145,430 200,393
Other assets 462 410
---------- ---------
Total assets $ 320,747 $ 368,677
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 25,226 $ 16,055
Accrued payroll and related costs 4,429 5,820
Accrued interest payable 7,996 6,253
Other accrued expenses 3,372 4,904
Bank lines of credit 4,335 4,596
Income taxes payable 321 -
Acquisition notes payable - 1,435
Due to former owners 2,003 1,614
---------- ---------
Total current liabilities 47,682 40,677
12% Series B and D Senior Subordinated Notes 161,981 121,288
Acquisition notes payable - 9,097
Amount drawn on revolving credit facility - 11,100
Deferred compensation - 3,042
Deferred income taxes 5,252 8,044
Commitments and contingencies (See Note 13)
Stockholders' equity:
Preferred stock, $.01 par value;
shares authorized - 5,000,000;
Issued and outstanding shares - none - -
Common stock, $.01 par value;
shares authorized - 30,000,000;
Issued and outstanding shares -
16,980,794 and 19,577,274
at December 31, 1996 and
December 31, 1997, respectively 169 195
Additional paid-in capital 81,380 131,604
Retained earnings 24,240 43,494
Cumulative translation adjustment 43 136
---------- ---------
Total stockholders' equity 105,832 175,429
---------- ---------
Total liabilities and stockholders' equity $ 320,747 $ 368,677
========== =========
</TABLE>
SEE ACCOMPANYING NOTES.
27
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1996 1997
----------- --------- ---------
<S> <C> <C> <C>
Net sales $ 190,659 $ 272,878 $ 346,110
Cost of sales 115,499 166,810 212,416
----------- --------- ---------
Gross profit 75,160 106,068 133,694
Selling, general and administrative expense 38,971 55,510 73,768
Amortization of intangible assets 3,308 3,738 4,501
----------- --------- ---------
Income from operations 32,881 46,820 55,425
Interest and other income 1,100 1,181 1,912
Interest expense 18,015 20,287 18,822
----------- --------- ---------
Income before income taxes and extraordinary item 15,966 27,714 38,515
Provision for income taxes 6,467 11,415 15,512
----------- --------- ---------
Income before extraordinary item 9,499 16,299 23,003
Extraordinary item - net of income tax
benefit of $2,520 - (See Note 16) - - 3,749
----------- --------- ---------
Net income 9,499 16,299 19,254
----------- --------- ---------
Dividends accrued on preferred stock 2,093 2,222 -
----------- --------- ---------
Net income available to common stockholders $ 7,406 $ 14,077 $ 19,254
=========== ========= =========
Basic earnings per common share:
Income before extraordinary item $ 0.69 $ 1.15 $ 1.31
Extraordinary item - - (0.21)
----------- --------- ---------
Net income $ 0.69 $ 1.15 $ 1.10
=========== ========= =========
Diluted earnings per common share:
Income before extraordinary item $ 0.65 $ 1.02 $ 1.19
Extraordinary item - - (0.20)
----------- --------- ---------
Net income $ 0.65 $ 1.02 $ 0.99
=========== ========= =========
</TABLE>
SEE ACCOMPANYING NOTES
28
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Cumulative
Preferred Common Capital in Excess Retained Translation
Stock Stock of Par Value Earnings Adjustments Total
--------- ------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1994 $ 20,853 $ 120 $ 19,880 $ 2,757 $ - $ 43,610
Net income - - - 9,499 - 9,499
Accrued dividends on preferred stock 2,093 - - (2,093) - -
Translation adjustment - - - - 25 25
----------------------------------------------------------------------------------------
Balance as of December 31, 1995 22,946 120 19,880 10,163 25 53,134
----------------------------------------------------------------------------------------
Issuance of 4,980,794 shares of common
stock for cash at $13.50 per share,
net of offering costs of $4,788 - 49 61,500 - 61,549
Redemption of preferred stock (25,168) - - - - (25,168)
Net income - - - 16,299 - 16,299
Accrued dividends on preferred stock 2,222 - - (2,222) - -
Translation adjustment - - - - 18 18
----------------------------------------------------------------------------------------
Balance as of December 31, 1996 - 169 81,380 24,240 43 105,832
----------------------------------------------------------------------------------------
Issuance of 2,200,000 shares of common
stock for cash at $22.03 per share,
net of offering costs of $530 - 22 47,915 - - 47,937
Issuance of 396,480 shares of common stock
from exercise of stock options - 4 2,309 - - 2,313
Net income - - - 19,254 - 19,254
Translation adjustment - - - - 93 93
----------------------------------------------------------------------------------------
Balance as of December 31, 1997 $ - $ 195 $ 131,604 $ 43,494 $ 136 $ 175,429
========================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
29
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 9,499 $ 16,299 $ 19,254
Adjustments to reconcile net income to
net cash provided by operating activities:
Extraordinary item - - 6,269
Depreciation and amortization 4,680 5,773 7,890
Amortization of debt issuance costs 710 842 905
Provision for losses on accounts receivable 1,239 668 921
Loss (gain) on sale of equipment (6) 22 8
Deferred income taxes 1,274 1,769 1,586
Changes in operating assets and liabilities
(net of acquired businesses):
Accounts receivable (3,914) (4,537) (10,258)
Inventories (8,119) (12,574) 544
Prepaid and other assets (1,138) (988) (1,583)
Accounts payable and accrued expenses 6,556 10,521 (13,803)
-------- -------- --------
Net cash provided by operating activities 10,781 17,795 11,733
-------- -------- --------
INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements (5,187) (7,843) (8,682)
Acquisition of companies, net of cash received (40,265) (12,199) (62,871)
Proceeds from sale of equipment 8 85 77
-------- -------- --------
Net cash used in investing activities (45,444) (19,957) (71,476)
-------- -------- --------
FINANCING ACTIVITIES:
Issuance of senior subordinated notes 42,400 - -
Borrowings (payments) on revolving credit facility, net (1,242) - 11,100
Borrowings on bank lines of credit, net - 3,523 171
Payment of debt issuance costs (2,179) - (786)
Redemption of senior subordinated notes - - (44,800)
Sale of Common Stock, net of offering costs - 61,549 47,937
Redemption of preferred stock - (25,168) -
Proceeds from exercise of stock options - - 662
Payments on amounts due to former owners (4,987) - (961)
-------- -------- --------
Net cash provided by financing activities 33,992 39,904 13,323
-------- -------- --------
Increase (decrease) in cash and cash equivalents (671) 37,742 (46,420)
Cash and cash equivalents at beginning of period 9,427 8,756 46,498
-------- -------- --------
Cash and cash equivalents at end of period $ 8,756 $ 46,498 $ 78
======== ======== ========
Cash paid during the period for:
Interest $ 15,376 $ 19,412 $ 19,094
Income taxes $ 3,221 $ 10,970 $ 10,880
</TABLE>
SEE ACCOMPANYING NOTES
30
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
NOTE 1. THE COMPANY
Aftermarket Technology Corp. and its subsidiaries ("ATC" or the
"Company") is a remanufacturer and distributor of drive train products used
in the repair of vehicles in the automotive aftermarket. The Company's
principal products include remanufactured transmissions, engines, torque
converters and remanufactured and new parts for the repair of automotive
drive train assemblies. The Company's customers include original equipment
manufacturers, independent transmission rebuilders, general repair shops,
distributors and retail automotive parts stores. Established in 1994, the
Company maintains manufacturing facilities and distribution centers in the
United States and Canada.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries from the respective dates of
acquisition. All significant intercompany balances and transactions have
been eliminated.
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.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
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, 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 $1,373, $2,035 and $3,394 for the years ended
December 31, 1995, 1996 and 1997, respectively.
FOREIGN CURRENCY TRANSLATION
The Company's Canadian subsidiaries use the Canadian dollar as their
functional currency. Accordingly, all balance sheet accounts have been
translated using the exchange rates in effect at the balance sheet date and
income statement amounts have been translated using the average exchange rate
for the year. The translation adjustments resulting from the changes in
exchange rates have 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.
31
<PAGE>
DEBT ISSUANCE COSTS
Debt issuance costs incurred in connection with the sale of the 12%
Series B and Series D Senior Notes (See Note 7) and revolving credit facility
(See Note 6) are being amortized over the life of the debt of ten, nine, and
five years, respectively, using a method which approximates the interest
method.
COST IN EXCESS OF NET ASSETS ACQUIRED
The excess of cost over the fair market value of the net assets of
businesses acquired (goodwill) is amortized on a straight-line basis over 40
years. Cost in excess of net assets acquired is reflected net of accumulated
amortization of $8,262 and $12,758 at December 31, 1996 and 1997,
respectively.
In accordance with Statement of Financial Accounting Standards ("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.
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 $1,326 and $1,146 at December 31, 1996 and 1997, 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
As allowed under the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company continues to apply APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for the stock options awarded under the Company's 1996 plan.
Accordingly, a compensation cost is recognized only for those options whose
price is less than market at the measurement date.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") issued SFAS No. 128,
"Earnings Per Share," in February 1997. This statement, which establishes
new standards for computing and presenting earnings per share, includes the
presentation of basic and diluted earnings per share. As of December 31,
1997, the Company has adopted this statement and prior periods have been
restated. See Note 11 for further discussion and related disclosures.
The FASB issued SFAS No. 130, "Reporting Comprehensive Income," in June
1997. In addition to net income, comprehensive income includes items
recorded directly to stockholders' equity such as cumulative foreign currency
translation adjustments. This statement establishes new standards for
reporting and displaying comprehensive income and its components in a full
set of general-purpose financial statements. This statement is effective for
fiscal years beginning after December 15, 1997. Adoption of this standard
will only require additional financial statement disclosure detailing the
Company's comprehensive income.
32
<PAGE>
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131 establishes
new standards for reporting information about operating segments in interim
and annual financial statements. This statement is also effective for fiscal
years beginning after December 15, 1997. The Company will evaluate the
impact, if any, this statement will have on disclosures in the consolidated
financial statements.
RECLASSIFICATIONS
Certain prior-year amounts have been reclassified to conform to the 1997
presentation.
NOTE 3. ACQUISITIONS
During the year ended December 31, 1995, the Company acquired Component
Remanufacturing Specialists ("CRS"), Mascot Truck Parts Inc. ("Mascot") and
King-O-Matic ("King"), for a purchase price of approximately $30.5 million,
$3.0 million and $9.3 million, respectively, including transaction fees and
related expenses. 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"). Goodwill recorded for CRS,
Mascot and King approximated $24.6 million, $2.0 million and $4.9 million,
respectively. The Company issued $40 million in principal amount of 12%
Senior Notes due in 2004 concurrently with the acquisition of CRS, the
proceeds of which financed the 1995 Acquisitions (See Note 7).
The Company acquired Tranzparts, Inc. ("Tranzparts") for $4.2 million
and Diverco, Inc. ("Diverco") for $10.9 million in April 1996 and October
1996, respectively, including transaction fees and related expenses.
Goodwill recorded for Tranzparts and Diverco approximated $2.4 million and
$6.6 million, respectively. The operations of Tranzparts and Diverco were
not material to the Company's consolidated operations.
In January 1997, the Company acquired REPCO Industries, Inc. ("REPCO");
a Texas based distributor of transmission repair parts, for a purchase price
of approximately $12.3 million, including transaction fees and related
expenses. Goodwill recorded approximated $6.8 million. The operations of
REPCO were not material to the Company's consolidated operations.
In July 1997, the Company acquired substantially all of the assets of
ATS Remanufacturing ("ATS"), a remanufacturer of automatic transmissions and
related components located in Gastonia, North Carolina. In August 1997, the
Company acquired all of the outstanding capital stock of Trans Mart, Inc.
("Trans Mart"), a distributor of automatic and standard transmission parts
and related drive train components based in Florence, Alabama. To complete
these acquisitions, the Company made cash payments totaling $12.9 million and
$27.9 million for ATS and Trans Mart, respectively, including transaction
fees and related expenses. In addition, the ATS acquisition calls for
subsequent payments due on each of the first eight anniversaries of the
closing date. Substantially all of these additional payments, which will
aggregate up to approximately $19.0 million (present value $13.6 million as
of December 31, 1997), are contingent upon the attainment of certain sales
levels by ATS, which the Company believes are more likely than not to be
attained. Goodwill recorded for ATS and Trans Mart approximated $26.1
million and $20.9 million, respectively. The operations of ATS and Trans Mart
were not material to the Company's consolidated operations.
In November 1997, the Company acquired Metran Automatic Transmission
Parts Corp. ("Metran"), a New York based distributor of automatic and manual
transmission parts and related drive train components, for a purchase price
of approximately $8.1 million, including transaction fees and related
expenses. Goodwill recorded approximated $5.2 million. The operations of
Metran were not material to the Company's consolidated operations.
These acquisitions have been accounted for under the purchase method of
accounting. Accordingly, the allocation of the cost of the acquired assets
and liabilities has been made on the basis of the estimated fair value.
Goodwill for all acquisitions is amortized over 40 years on a straight-line
basis. The consolidated financial statements include the operating results
of each business from the date of acquisition.
33
<PAGE>
The consolidated financial statements include the operating results of
each business from the date of acquisition. Unaudited pro forma net sales
of $210,958 and net income of $10,043 for the year ended December 31, 1995
gives effect to the 1995 acquisitions as if such acquisitions had occurred on
January 1, 1995. 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. Pro forma information to
reflect the 1996 and 1997 acquisitions has not been presented because the
effect of such acquisitions was not material to prior periods.
NOTE 4. RELATED-PARTY TRANSACTIONS
The Company had liabilities to former owners totaling $2,003 at December
31, 1996 and $1,614 at December 31, 1997. These amounts are composed
primarily of additional purchase price payable to the former owners of those
companies acquired in 1996 and 1997. The remaining amounts are payable during
1998 and 1999.
The Company paid Aurora Capital Partners (ACP), which controls a
significant stockholder, approximately $0.3 million and $1.4 million in fees
for investment banking services provided in connection with companies
acquired in 1996 and 1997, respectively. In addition, ACP was paid management
fees of $513 and $534 in 1996 and 1997, respectively. ACP is also entitled
to various additional fees depending on the Company's profitability or
certain significant corporate transactions. No such additional fees were
paid in 1996 and 1997.
NOTE 5. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1997
------------------------------
<S> <C> <C>
Raw materials, including core inventories . . . $30,413 $24,788
Work-in-process . . . . . . . . . . . . . . . . 1,166 3,125
Finished goods. . . . . . . . . . . . . . . . . 29,007 48,253
------------------------------
$60,586 $76,166
==============================
</TABLE>
Finished goods include purchased parts which are available for sale.
NOTE 6. BANK LINES OF CREDIT
CURRENT LIABILITIES
In September 1997, the Canadian subsidiaries entered into a revolving
credit agreement with Bank of Montreal (the "BOM Revolving Credit Agreement")
for a C$3.5 million revolving credit facility to accommodate the working capital
needs of the Canadian subsidiaries. Subject to the satisfaction of customary
conditions, advances under the BOM Revolving Credit Agreement may be made, and
letters of credit may be issued, up to an aggregate of C$3.5 million, due upon
demand, subject to annual review. The funds available to be advanced may not
exceed the 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. Amounts advanced are secured by substantially
all assets of the Canadian subsidiaries and are guaranteed by the Company.
Interest is payable monthly at the Bank of Montreal's prime lending rate plus
0.25%. The agreement contains certain covenants including a tangible net worth
covenant for the combined results of Canadian subsidiaries. At December 31,
1997, $1.9 million was outstanding under this line of credit.
34
<PAGE>
In January 1996, the Company entered into an agreement with Commerce
Bank, N.A. providing financing for equipment purchases 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 Commerce Bank's prime lending
rate at the date of the advance plus 1%. As of December 31, 1997, $2.6
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
In February 1997, the Company entered into an agreement with The Chase
Manhattan Bank (the "Bank"), as agent, providing for a $100 million revolving
credit facility (the "Revolving Credit Facility") available to the Company
for acquisitions and working capital purposes. Amounts advanced under
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.
At the Company's election, amounts advanced under the Revolving Credit
Facility will bear interest at either (i) the Alternate Base Rate plus a
specified margin, or (ii) the Eurodollar Rate plus a specified margin. 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% and (c) the federal funds rate plus 0.5%, in each case as in effect from
time to time. The "Eurodollar Rate" is the rate offered by the Bank for
eurodollar deposits for one, two, three or six months (as selected by the
Company) in the interbank eurodollar market in the approximate amount of the
Bank's share of the advance under the Credit Facility. The applicable
margins for both Alternate Base Rate and Eurodollar Rate loans are subject to
a quarterly adjustment based on the Company's leverage ratio as of the end of
the four fiscal quarters then completed. At December 31, 1997, the Alternate
Base Rate and the Eurodollar Rate margins are 0.5% and 1.5%, respectively.
Interest payments on advances that bear interest based upon the Alternate
Base Rate are due quarterly in arrears and on the Termination Date, and
interest payments on advances that bear interest 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
the effective date of the Credit Facility and is required to pay the Bank
quarterly in arrears a commitment fee equal to a per annum percentage of the
average daily unused portion of the Credit Facility during such quarter. The
commitment is subject to a quarterly adjustment based on the Company's
leverage ratio as of the end of the four fiscal quarters then completed. The
quarterly commitment fee percentage is 0.375%. The Company must also
reimburse the Bank for certain legal and other costs of the Bank and pay a
fee on outstanding letters of credit at a rate per annum equal to the
applicable margin then in effect for advances bearing interest at the
Eurodollar Rate.
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, 1997, $11,100 was outstanding under this line of credit.
Subsequent to December 31, 1997, the credit agreement for the Revolving
Credit Facility was amended and restated (See Note 17).
NOTE 7. 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 of the Company. 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.
35
<PAGE>
Interest on the 12% Series B and Series D Senior Subordinated Notes (the
"Senior Notes") is payable semiannually on February 1 and August 1 of each
year. The Senior Notes will mature on August 1, 2004. On or after August 1,
1999, the Senior Notes may be redeemed at the option of the Company, in whole
or in part, at specified redemption prices plus accrued and unpaid interest:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
1999. . . . . . . . . . . . . . . . . . . . . . 106%
2000. . . . . . . . . . . . . . . . . . . . . . 104
2001. . . . . . . . . . . . . . . . . . . . . . 102
2002 and thereafter . . . . . . . . . . . . . . 100
</TABLE>
In addition, at any time on or prior to August 1, 1997, the Company
could have, subject to certain requirements, redeemed up to $30 million of
the Series B Senior Notes and $10 million of the Series D Senior 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 Senior Notes and $10 million in principal amount of the Series D
Senior Notes resulting in a loss on early extinguishment of debt (See Note
16).
In the event of a change in control, the Company would be required to
offer to repurchase the Senior Notes at a price equal to 101% of the
principal amount plus accrued and unpaid interest.
The Senior Notes are general obligations of the Company, subordinated in
right of payment to all existing and future senior debt (including the
Company's revolving credit facility). The Senior Notes are guaranteed by each
of the Company's existing and future subsidiaries other than any subsidiary
designated as an unrestricted subsidiary (as defined). As of December 31,
1997, the Company had no unrestricted subsidiaries. The Company may incur
additional indebtedness, including borrowings under its revolving credit
facility (See Note 6), subject to certain limitations.
The indentures under which the Senior Notes were issued contain 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, 1997, the Company was in compliance with such covenants.
36
<PAGE>
NOTE 8. 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:
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1997
----------- ---------
<S> <C> <C>
Deferred tax liabilities:
Tax amortization basis of intangible assets in
excess of book amortization . . . . . . . . . . $4,630 $6,987
Tax depreciation of equipment & leasehold
improvements in excess of book depreciation . . 622 1,057
------------------------
Total deferred tax liabilities . . . . . . . . . . . 5,252 8,044
------------------------
Deferred tax assets:
Inventory obsolescence reserve. . . . . . . . . . 1,182 854
Bad debt reserves . . . . . . . . . . . . . . . . 778 378
Product warranty accruals . . . . . . . . . . . . 312 506
Other accruals & deferrals. . . . . . . . . . . . -- 1,740
------------------------
Total deferred tax assets. . . . . . . . . . . . . . 2,272 3,478
------------------------
Net deferred tax liability . . . . . . . . . . . . . $2,980 $4,566
========================
</TABLE>
Significant components of the provision for income taxes attributable to
operations are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------
1995 1996 1997
----------- ---------- -------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . . . $4,422 $8,350 $11,902
State . . . . . . . . . . . . . . . . . . . . . . 764 1,147 1,919
Foreign. . . . . . . . . . . . . . . . . . . . . 7 149 105
-----------------------------------
Total current. . . . . . . . . . . . . . . . . . . . 5,193 9,646 13,926
-----------------------------------
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . 1,137 1,621 1,366
State . . . . . . . . . . . . . . . . . . . . . . 137 148 220
-----------------------------------
Total deferred . . . . . . . . . . . . . . . . . . . 1,274 1,769 1,586
Extraordinary item . . . . . . . . . . . . . . . . . -- -- ( 2,520)
-----------------------------------
$6,467 $11,415 $12,992
===================================
</TABLE>
The components of the provision for deferred income taxes are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
Amortization of intangible assets. . . . . . . . . . $1,759 $1,422 $2,357
Inventory obsolescence reserve . . . . . . . . . . . (333) (284) 328
Bad debt reserves. . . . . . . . . . . . . . . . . . (223) (233) 400
Product warranty accruals. . . . . . . . . . . . . . (20) 126 (194)
Depreciation . . . . . . . . . . . . . . . . . . . . 339 427 435
Other accruals & deferrals . . . . . . . . . . . . . (248) 311 (1,740)
---------------------------------------
Provision for deferred income taxes. . . . . . . . . $1,274 $1,769 $1,586
=======================================
</TABLE>
37
<PAGE>
The reconciliation of income tax expense computed at the U.S. federal
statutory tax rates to income tax expense is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------------------------------
1995 1996 1997
---------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory rates. . . . . . . . . . . . . $5,588 35.0% $9,700 35.0% $11,286 35.0%
State income taxes, net of federal tax benefit . . . 529 3.3 842 3.0 1,167 3.6
Other. . . . . . . . . . . . . . . . . . . . . . . . 350 2.2 873 3.2 539 1.7
---------------------------------------------------------------------
$6,467 40.5% $11,415 41.2% $12,992 40.3%
=====================================================================
</TABLE>
NOTE 9. STOCK OPTIONS
The Company adopted its 1994 Stock Incentive Plan, which was
subsequently renamed the 1996 Stock Incentive Plan (the "Plan"), in July 1994
in order to provide incentives to employees and directors of the Company.
The Company has reserved 2,400,000 shares of Common Stock for issuance under
the Plan. 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. Options available for grant are 127,782 and 9,606 as
of December 31, 1996 and 1997, respectively.
A summary of the status of the Company's option plan is presented below:
<TABLE>
<CAPTION>
1995 1996 1997
Weighted- Weighted- Weighted-
Average Average Average
1995 Exercise 1996 Exercise 1997 Exercise
Shares Price Shares Price Shares Price
--------- --------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of year . . . . . . . . . . 1,403,514 $1.67 1,526,778 $1.67 2,272,218 $ 2.65
Granted. . . . . . . . . . . . . . . . . . . . . . . 123,264 $1.67 745,440 $4.67 130,176 $ 17.64
Exercised. . . . . . . . . . . . . . . . . . . . . . -- -- -- -- (396,480) $ 1.67
Forfeited. . . . . . . . . . . . . . . . . . . . . . -- -- -- -- (12,000) $ 4.67
--------- --------- ---------
Outstanding at end of year . . . . . . . . . . . . . 1,526,778 $1.67 2,272,218 $2.65 1,993,914 $ 3.82
========= ========= =========
Exercisable at end of year . . . . . . . . . . . . . 760,235 $1.67 1,117,113 $1.67 1,163,944 $ 2.27
========= ========= =========
Weighted-average fair value of
options granted during the year . . . . . . . . . $1.08 $7.10 $ 12.11
</TABLE>
38
<PAGE>
The following summarizes information about options outstanding as of
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- ------------------------
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Contractual Exercise Exercise
Prices Shares Life Prices Shares Prices
------------------------------------------ ------------------------
<S> <C> <C> <C> <C> <C>
$1.67 1,130,298 6.7 years $ 1.67 931,161 $1.67
$4.67 733,440 8.7 years $ 4.67 232,783 $4.67
$13.80-$16.10 47,088 9.3 years $14.88 -- --
$16.11-$18.40 59,088 9.5 years $17.66 -- --
$18.41-$23.00 24,000 9.6 years $23.00 -- --
----------- --------
1,993,914 7.6 years $ 3.82 1,163,944 $2.27
=========== ========
</TABLE>
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.
As allowed under the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company will continue to apply APB Opinion No.
25 and related interpretations in accounting for the stock options awarded
under the Company's 1996 plan. Accordingly, no compensation cost has been
recognized for these stock options except the expense relating to options
granted with an exercise price below the market value at the date of grant.
Had compensation cost for the Company's 1996 Plan been determined in
accordance with SFAS No. 123, the Company's net income and earnings per share
would have been reduced to the proforma amounts indicated below:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
Income before extraordinary item:
As reported . . . . . . . . . . . . . . . . . . $9,499 $16,299 $23,003
Pro forma . . . . . . . . . . . . . . . . . . . $9,142 $15,982 $22,127
Basic earnings per common share:
As reported . . . . . . . . . . . . . . . . . . $ 0.69 $ 1.15 $ 1.31
Pro forma . . . . . . . . . . . . . . . . . . . $ 0.66 $ 1.13 $ 1.26
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with weighted-average
assumptions for expected volatility of 51.31%, risk-free interest rates of
6.00% and expected option lives of 8.2 years for 1995, 1996 and 1997. The
Company has not paid and does not anticipate paying dividends; therefore, the
expected dividend yield is assumed to be zero.
The Black-Scholes option model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
39
<PAGE>
NOTE 10. 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.
On December 17, 1996 the Company sold 4,025,000 shares of Common Stock
through an initial public offering (Initial Public Offering). The price per
share for such Common Stock was $13.50 (Initial 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 of $12.555
(the Initial Public Offering Price less Underwriters' discounts and
commissions).
On October 28, 1997, the Company completed a public offering of
3,650,000 shares of its common stock. The price per share for such Common
Stock was $23.25 (Public Offering Price). Of the shares sold in the offering,
2,200,000 shares were sold by the Company and 1,450,000 shares were sold by
certain stockholders. The Company did not receive any proceeds from the sale
of shares by the selling stockholders. The net proceeds to the Company of
approximately $47.9 million were used to repay a portion of the outstanding
indebtedness under the Company's revolving credit facility.
NOTE 11. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------------
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Numerator:
Net income. . . . . . . . . . . . . . . . . . . . $9,499 $16,299 $19,254
=========================================
Denominator:
Weighted-average common shares outstanding. . . . 12,000,000 12,203,021 17,496,173
Common shares issued from preferred stock . . . 1,774,597 1,948,767 --
-----------------------------------------
Denominator for basic earnings per common share. . 13,774,597 14,151,788 17,496,173
Effect of dilutive securities:
Employee stock options and warrants. . . . . . . 841,563 1,766,596 1,839,186
-----------------------------------------
Denominator for diluted earnings per
common share . . . . . . . . . . . . . . . . . . 14,616,160 15,918,384 19,335,359
=========================================
Basic earnings per common share. . . . . . . . . . . $0.69 $1.15 $1.10
=========================================
Diluted earnings per common share. . . . . . . . . . $0.65 $1.02 $0.99
=========================================
</TABLE>
The share calculations for 1995 and 1996 are based upon the Pro forma effects
from 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.
NOTE 12. 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 $108, $206 and $359 for the plan years ending in
1995, 1996 and 1997, respectively.
40
<PAGE>
NOTE 13. COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities under various operating lease
agreements, which expire on various dates through 2004. Facility leases that
expire generally are expected to be renewed or replaced by other leases. Future
minimum rental commitments under non-cancelable operating leases with terms in
excess of one year are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1998. . . . . . . . . . . . . . . . . . . . . . . $ 7,917
1999. . . . . . . . . . . . . . . . . . . . . . . 7,300
2000. . . . . . . . . . . . . . . . . . . . . . . 6,036
2001. . . . . . . . . . . . . . . . . . . . . . . 4,123
2002. . . . . . . . . . . . . . . . . . . . . . . 4,596
Thereafter. . . . . . . . . . . . . . . . . . . . 7,303
-----------
$ 37,275
===========
</TABLE>
Rent expense for all operating leases approximated $3,115, $4,582 and
$7,228 for the years ended December 31, 1995, 1996 and 1997, respectively.
Rent expense includes amounts paid to related parties of $611, $940 and
$1,574 for the years ended December 31, 1995, 1996 and 1997, 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 and impose liability for the costs of cleaning
up, and certain damages resulting from, past spills, disposals or other releases
of hazardous substances.
In connection with the acquisition of certain subsidiaries, 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 facilities have had or
may have had releases of hazardous materials that may require remediation and
also may be subject to potential liabilities for contamination from off-site
disposal of substances or wastes. These assessments also found that certain
reporting and other regulatory requirements, including certain waste management
procedures, were not or may not have been satisfied. Although there can be no
assurance, the Company believes that, based in part on the investigations
conducted, in part on certain remediation completed prior to the acquisitions,
and in part on the indemnification provisions of the agreements entered into in
connection with the Company's acquisitions, the Company will not incur any
material liabilities relating to these matters.
The company from which RPM Merit ("RPM") acquired its assets (the "Prior RPM
Company") has been identified by the United States Environmental Protection
Agency (the "EPA") as one of many potentially responsible parties for
environmental liabilities associated with a "Superfund" site located in the area
of RPM's former manufacturing facilities and current distribution facility in
Azusa, California. The Federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA" or "Superfund")
provides for cleanup of sites from which there has been a release or threatened
release of hazardous substances, and authorizes recovery of related response
costs and certain other damages from potentially responsible parties ("PRPs").
PRPs are broadly defined under CERCLA, and generally include present owners and
operators of a site and certain past owners and operators. As a general rule,
courts have interpreted CERCLA to impose strict, joint and several liability
upon all persons liable for cleanup costs. As a practical matter, however, at
sites where there are multiple PRPs, the costs of cleanup typically are
allocated among the PRPs according to a volumetric or other standard. The EPA
has preliminarily estimated that it will cost approximately $47 million to
construct and approximately $4 million per year for an indefinite period to
operate an interim remedial groundwater pumping and treatment system for the
part of the Superfund site within which RPM's former manufacturing facilities
and current distribution facility, as well as those of many other potentially
responsible parties, are located. The actual cost of this remedial action could
vary substantially
41
<PAGE>
from this estimate, and additional costs associated with the Superfund site
are likely to be assessed. The Company has significantly reduced its presence
at the site and has moved all manufacturing operations off-site. Since July
1995, the Company's only real property interest in this site has been the
lease of a 6,000 square foot storage and distribution facility. The RPM
acquisition agreement and the leases pursuant to which the Company leased
RPM's facilities after the Company acquired the assets of RPM (the "RPM
Acquisition") expressly provide that the Company did not assume any
liabilities for environmental conditions existing on or before the RPM
Acquisition, although the Company could become responsible for these
liabilities under various legal theories. The Company is indemnified against
any such liabilities by the seller of RPM as well as the Prior RPM Company
shareholders. There can be no assurance, however, that the Company would be
able to make any recovery under any indemnification provisions. 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. Although there can be no
assurance, the Company believes that it will not incur any material liability
as a result of these environmental conditions.
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of all financial instruments approximate their fair
values at December 31, 1996 and 1997, except for the Series B and Series D
Senior Notes.
The fair values of the Company's Series B and Series D Senior Notes 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:
<TABLE>
<CAPTION>
1996 1997
------------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Series B Senior Notes.............. $120,000 $126,900 $90,000 $98,811
Series D Senior Notes.............. 40,000 42,300 30,000 32,937
</TABLE>
NOTE 15. SIGNIFICANT CUSTOMER
For the years ended December 31, 1995, 1996 and 1997 sales to one customer
accounted for 35%, 37% and 32% of net sales, respectively. Additionally, at
December 31, 1995, 1996 and 1997 this customer accounted for approximately 46%,
51% and 45% of accounts receivable, respectively. No other customer accounted
for more than 10% of net sales in any period.
NOTE 16. EXTRAORDINARY ITEM
The extraordinary item of $3.8 million, net of income tax benefit of $2.5
million, consists largely of a pre-tax charge of $5.7 million related to the
early redemption of $40 million in principal amount of the Company's Senior
Notes, consisting of the early redemption premium charge of $4.3 million plus
unamortized deferred financing fees of $1.4 million. The extraordinary item
also includes a pre-tax charge of $0.6 million related to the restructuring of
the Company's revolving credit facility. Both events occurred in February 1997.
42
<PAGE>
NOTE 17. SUBSEQUENT EVENTS
On March 6, 1998, the Company acquired substantially all the assets of the
OEM Division of Autocraft Industries, Inc. ("Autocraft"), a remanufacturer and
distributor of drivetrain and electronic parts used in the warranty and
aftermarket repair of passenger cars and light trucks. The cash purchase price
for the acquisition consists of $112.5 million paid at closing, plus up to an
additional $12.5 million to be paid in 1999 based on the performance of the OEM
Division's European operations during 1998. The transaction is being accounted
for using the purchase method of accounting and goodwill recorded (estimated to
be approximately $60-70 million, which would increase by up to an additional
$12.5 million dependent on the potential 1999 payment described above) will be
amortized over 40 years on a straight-line method beginning on the date of
acquisition.
In March 1998, the credit agreement for the Credit Facility was amended and
restated as a new credit facility comprised of a $100 million revolving portion
and a $120 million term loan portion with The Chase Manhattan Bank, as agent,
(the "New Credit Facility") to finance the Company's working capital
requirements, future acquisitions and the acquisition of Autocraft. Amounts
advanced under the revolving portion of the New Credit Facility are secured by
substantially all assets of the Company and will become due on December 31,
2003, although the Company may prepay outstanding advances in whole or in part
without incurring any premium or penalty. The term loan portion of the New
Facility is due and payable in quarterly installments beginning in September
1998 and ending on December 31, 2003 as outlined in the agreement. The New
Credit Facility contains several covenants, including levels of net worth,
leverage, EBITDA and cash flow coverage, and certain limitations on the
Company's ability 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.
NOTE 18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Quarter
------------------------------------
First Second Third Fourth
------- ------- ------- -------
<S> <C> <C> <C> <C>
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
1997
- ----
Net sales............................... $82,688 $85,410 $88,392 $89,620
Gross profit............................ 31,575 33,363 33,873 34,883
Income before extraordinary item........ 5,567 5,912 5,652 5,872
Diluted earnings per share.............. $0.29 $0.31 $0.30 $0.29
</TABLE>
43
<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.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Stephen J. Perkins 50 Chairman of the Board, President and
Chief Executive Officer
Ronald E. Bradshaw 53 Executive Vice President
John C. Kent 46 Chief Financial Officer
John J. Machota 46 Vice President--Human Resources
Joseph Salamunovich 38 Vice President, General Counsel and
Secretary
Kenneth A. Bear 44 President, Aaron's Automotive
Products, Inc.
James D. Carey 58 President, Autocraft Electronics
Wesley N. Dearbaugh 46 President, ATC Distribution Group
Thomas R. Kawsky 49 President, Autocraft Industries
Michael L. LePore 44 President, Component Remanufacturing
Specialists, Inc.
Robert Anderson 77 Director
Richard R. Crowell 43 Director
Dale F. Frey 65 Director
Mark C. Hardy 34 Director
Dr. Michael J. Hartnett 52 Director
Gerald L. Parsky 55 Director
Richard K. Roeder 49 Director
William A. Smith 52 Director and Chairman Emeritus of the
Board of Directors
J. Richard Stonesifer 61 Director
</TABLE>
STEPHEN J. PERKINS joined the Company as President and Chief Executive
Officer in October 1996 and became Chairman of the Board of Directors in
August 1997. 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. Prior to that, Mr. Perkins held various positions with the
Flexonics Division of what is now Allied Signal Inc. and several management
positions in manufacturing at multiple facilities for the Steel Tubing Group
of Copperweld Corporation.
RONALD E. BRADSHAW became Executive Vice President of the Company in
March 1998 following the completion of the Company's acquisition of Autocraft
from Fred Jones Enterprises, Inc. (which was formerly known as Autocraft
Industries, Inc.) ("Fred Jones Enterprises"). Prior to that, Mr. Bradshaw
served as President and Chief Operating Officer of Fred Jones Enterprises
since October 1997 and as Senior Vice President and Chief Financial Officer
from 1994 to 1997 and as Treasurer from 1990 to 1994.
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 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.
44
<PAGE>
JOHN J. MACHOTA joined the Company as Vice President--Human Resources in
June 1997. From 1996 to 1997, he was a self-employed human resources
consultant. From 1995 to 1996, Mr. Machota was Vice President--Compensation
for Waste Management, Inc. and from 1993 to 1995 served as Waste Management's
Vice President--Human Resource Services. From 1986 to 1993 Mr. Machota was
Vice President--Human Resources for a subsidiary of Waste Management and
prior to that held various other positions in the human resources area.
JOSEPH SALAMUNOVICH joined the Company as Vice President, General
Counsel and Secretary in March 1997. From January 1995 to March 1997, Mr.
Salamunovich was a partner in the law firm of Gibson, Dunn & Crutcher LLP,
where he specialized in corporate and securities law matters. From 1986 to
1995, Mr. Salamunovich was an associate of the same firm.
KENNETH A. BEAR became President of Aaron's in February 1998. Prior to
that he held various other positions with Aaron's, including Executive Vice
President since 1989. Mr. Bear joined Aaron's in 1983.
JAMES D. CAREY became President of Autocraft Electronics in March 1998
following the Autocraft Acquisition. Prior to that he served as Senior Vice
President of Fred Jones Enterprises since March 1997. Before joining Fred
Jones, Mr. Carey was employed for 32 years by Ford Motor Company, where he
served most recently as Manager of North American Parts Supply and Logistics
for the Ford Customer Service Division.
WESLEY N. DEARBAUGH joined ATC as President of the ATC Distribution
Group 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.
THOMAS R. KAWSKY became President of Autocraft Industries in March 1998
following the Autocraft Acquisition. Prior to that he served as Vice
President and General Manager of the OEM Division of Fred Jones Enterprises
since October 1997 and before joining Fred Jones he served as Vice
President--Manufacturing for the G&O Division of TransPro, Inc. since March
1997. Prior to that, Mr. Kawsky was employed by Cummins Engine Company for
26 years, where he served most recently as General Manager--Engines for the
Cummins Diesel ReCon Division.
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, Motor Cargo Industries, Inc.,
Optical Data Systems Company and The Timken Company.
RICHARD R. CROWELL became a director of the Company in July 1994. Mr.
Crowell is President and a founding partner 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.
DALE F. FREY became a director of the Company in August 1997. Prior to
his retirement in early 1997, Mr. Frey was Chairman of the Board, President
and Chief Executive Officer of General Electric Investment Corporation, a
position he had held since 1984, and a Vice President of General Electric
Company since 1980. Mr. Frey is a director of USF&G Corporation, Praxair,
Inc., First American Financial Corporation, Roadway Express and Promus Hotel
Corp.
45
<PAGE>
MARK C. HARDY became a director of the Company in July 1994. Mr. Hardy
is a Principal of ACP and joined ACP in June 1993. Prior to joining ACP, Mr.
Hardy was an Associate at Bain & Company, a consulting firm.
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. 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.
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 of 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.
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.
WILLIAM A. SMITH has been a director and Chairman Emeritus of the Board
of Directors since August 1997 and prior to that served as Chairman of the
Board 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. Prior to that,
Mr. Smith held various positions with Navistar International Transportation
Corporation, Labinal, Inc. (a French automotive and aerospace equipment
manufacturer) and Cummins Engine Company.
J. RICHARD STONESIFER became a director of the Company in August 1997.
Prior to his retirement in 1996, Mr. Stonesifer was employed with the General
Electric Company for 37 years, serving most recently as President and Chief
Executive Officer of GE Appliances, and an executive officer and Senior Vice
President of the General Electric Company, from January 1992 until his
retirement. Mr. Stonesifer is also a director of Grand Union Co.
DIRECTOR NOMINEE
Fred J. Hall has been nominated to fill a newly created directorship
resulting from the directors' expansion of the Board of Directors from 10 to
11 members effective May 6, 1998. Mr. Hall is Chairman of the Board,
President and Chief Executive Officer of Fred Jones Enterprises, which in
March 1998 completed the sale of Autocraft to the Company. In addition to
being employed in various capacities by Fred Jones Enterprises and its
affiliates since 1977, Mr. Hall served as Deputy Assistant Secretary of State
for European and Canadian Affairs from 1986 to 1988. Mr. Hall is 46 years
old.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
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 Securities and Exchange Commission 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 July 10, 1997 by Mr. LePore and on November
10, 1997 by Mr. Smith, in each case to report the exercise of stock options.
These oversights were subsequently corrected when Mr. LePore reported his
transaction in a Form 4 filed in December 1997 and Mr. Smith reported his
transaction in a Form 5 filed in February 1998.
46
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the three most recently completed
fiscal years, the cash compensation for services in all capacities to the
Company of those persons who were, as of December 31, 1997, (i) the Company's
Chief Executive Officer, (ii) the four other most highly compensated
executive officers of the Company and its subsidiaries during the last fiscal
year, and (iii) the Chairman Emeritus of the Company's Board of Directors
(collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
------------------------- --------------
Number
of Securities
Underlying All Other
Name and Principal Position Year Salary(1) Bonus(2) Options (#)(3) Compensation
- --------------------------- ---- --------- -------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Stephen J. Perkins 1997 $300,000 $225,000 -- --
Chairman of the Board, President 1996 70,385 125,000 498,000 --
and Chief Executive Officer(4) 1995 -- -- -- --
James R. Wehr 1997 282,728 154,086 35,088 --
President, Aaron's(5) 1996 282,297 300,000 -- --
1995 258,000 -- -- --
Michael L. LePore 1997 232,425 71,377 -- --
President, CRS 1996 226,520 181,745 -- --
1995 160,838(6) 179,038(7) 70,176 --
Wesley N. Dearbaugh 1997 200,000 47,400 -- --
President, ATC Distribution 1996 116,457 50,000 140,352 --
Group 1995 -- -- -- --
John C. Kent 1997 150,000 75,000 -- 25,000(8)
Chief Financial Officer 1996 127,918 100,000 35,088 --
1995 124,615 12,000 -- --
William A. Smith 1997 242,081 -- -- --
Chairman Emeritus of the 1996 319,196 315,803 -- --
Board of Directors(9) 1995 300,000 -- -- --
_______________
</TABLE>
(1) For information regarding the salary of certain Named Executive Officers in
1998, see "Executive Compensation--Employment Agreements."
(2) Bonuses for a particular year are paid during the first quarter of the
following year.
(3) Consists of options to purchase securities of the Company, which options
were issued pursuant to the Company's 1996 Stock Incentive Plan. Pursuant
to the 1996 Stock Incentive Plan, the Compensation and Human Resources
Committee makes recommendations to the Board of Directors regarding the
terms and conditions of each option granted.
(4) Mr. Perkins joined the Company as President and Chief Executive Officer in
October 1996 and was appointed Chairman of the Board in August 1997.
(5) Mr. Wehr ceased to be President of Aaron's in February 1998.
(6) Includes five months' salary of $56,777 prior to the acquisition of CRS by
the Company in April 1995.
(7) Includes $86,759 of bonus earned prior to the acquisition of CRS by the
Company in April 1995.
(8) Consists of a one-time bonus paid in connection with Mr. Kent's relocation
from Washington to Illinois.
(9) Mr. Smith served as the Company's President and Chief Executive Officer
until October 1996 and as the Chairman of the Board until August 1997. In
August 1997 his annual salary was adjusted from $326,224 to $126,224.
47
<PAGE>
OPTION GRANTS TABLE
Shown below is information concerning grants of options issued by the
Company to the Named Executive Officers during 1997:
<TABLE>
<CAPTION>
Individual Grants Potential
------------------------------- Realizable Value at
Number of % of Total Assumed Annual Rates of
Securities Options Stock Price Appreciation
Underlying Granted to Exercise For Option Term(1)
Options Granted Employees in Price Expiration -------------------------
Name (#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ------------------------------ --------------- ------------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Perkins . . . . . . -- -- -- -- -- --
James R. Wehr. . . . . . . . . 35,088(2) 27.0% $17.25 1/1/07 $380,650 $964,641
Michael L. LePore. . . . . . . -- -- -- -- -- --
Wesley N. Dearbaugh. . . . . . -- -- -- -- -- --
John C. Kent . . . . . . . . . -- -- -- -- -- --
William A. Smith . . . . . . . -- -- -- -- -- --
</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 Company's 1996 Stock Incentive Plan.
One third of the options vest and become exercisable on each of January 1,
1998, 1999 and 2000 and expire on January 1, 2007.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
Shown below is information relating to the exercise of stock options during
1997 by the Named Executive Officers and the value of unexercised options for
each of the Named Executive Officers as of December 31, 1997:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Shares Options at Fiscal Year-End at Fiscal Year-End (1)
Acquired on Value ---------------------------- -----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------ ---------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Perkins . . . . . . -- -- 166,000 332,000 $2,233,530 $4,467,060
James R. Wehr. . . . . . . . . 70,000 $1,370,600 70,352(2) 35,088 1,157,642 30,702
Michael L. LePore. . . . . . . 35,088 581,759 -- 35,088 -- 577,373
Wesley N. Dearbaugh. . . . . . -- -- 35,087 105,265 472,096 1,416,341
John C. Kent . . . . . . . . . -- -- 58,480 46,784 927,200 699,655
William A. Smith . . . . . . . 230,000 4,826,272 612,106(3) -- 10,072,204 --
</TABLE>
__________________
(1) Calculated using the closing price on December 31, 1997 of
$18.125 per share.
(2) These options were exercised in January 1998.
(3) 147,500 of these options were exercised during the first two months
of 1998.
EMPLOYMENT AGREEMENTS
Stephen J. Perkins entered into a three year employment agreement with
the Company effective as of October 7, 1996, pursuant to which he serves as
Chairman of the Board, President and Chief Executive Officer of the Company
at a current annual salary of $335,000. 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.
48
<PAGE>
Mr. Perkins 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 served as President of
Aaron's until February 1998 when he stepped down as an officer. Mr. Wehr
will continue as an employee of Aaron's until the end of 1998 at an annual
salary of $287,534. 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 a three year employment agreement with
CRS effective as of June 1, 1995, pursuant to which he serves as President of
CRS at a current annual salary of 236,376. 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.
John C. Kent entered into a three year employment agreement with the
Company effective as of October 1, 1996, pursuant to which he serves as Chief
Financial Officer of the Company at a current annual salary of $165,000. 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.
William A. Smith entered into an employment agreement with the Company
effective as of August 1, 1997 pursuant to which he serves as Chairman
Emeritus of the Board of Directors of the Company until December 31, 1998 at
a current annual salary of $126,224. The employment agreement with Mr. Smith
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. This agreement replaced an earlier employment agreement with the
Company pursuant to which Mr. Smith served as Chairman of the Board,
President and Chief Executive Officer of the Company at an annual salary of
$316,000 (subject to cost of living adjustments).
Ronald E. Bradshaw entered into a three year employment agreement with
the Company effective as of March 6, 1998, pursuant to which he serves as
Executive Vice President of the Company at a current annual salary of
$275,000. The employment agreement with Mr. Bradshaw 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. Bradshaw is also
entitled to participate in any bonus, incentive or other benefit plans
provided by the Company to its employees.
Joseph Salamunovich entered into a three year employment agreement with
the Company effective as of March 17, 1997, pursuant to which he serves as
Vice President, General Counsel and Secretary of the Company at a current
annual salary of $173,000. The employment agreement with Mr. Salamunovich
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. Salamunovich is also entitled to participate in any bonus,
incentive or other benefit plans provided by the Company to its employees.
Kenneth A. Bear entered into an employment agreement with Aaron's
effective as of July 28, 1994, pursuant to which he serves as President of
Aaron's at a current annual salary of $180,000. 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.
49
<PAGE>
1996 STOCK INCENTIVE PLAN
Upon completion of the Reorganization, the Company assumed the Amended
and Restated 1994 Stock Incentive Plan of Holdings and renamed it the 1996
Stock Incentive Plan (the "Stock Plan"). Pursuant to the Stock Plan,
officers, directors, employees and consultants of the Company and its
subsidiaries are eligible to receive options to purchase Common Stock and
other awards. The Stock Plan is administered by the Compensation and Human
Resources Committee, which has broad authority in administering and
interpreting the Stock 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. Options granted to
employees under the Stock 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 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 and Human
Resources Committee, any change of control of the Company.
As of February 27, 1998, there were outstanding options to purchase an
aggregate of 1,678,892 shares of Common Stock granted to officers and
employees of the Company and its subsidiaries and certain independent
contractors pursuant to the Existing Stock Plan. The exercise price of these
options are as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION SHARES Exercise Price
----------------------- --------------
<S> <C>
839,276 $ 1.67
733,440 4.67
35,088 14.75
12,000 15.25
35,088 17.25
24,000 18.25
</TABLE>
Each option is subject to certain vesting provisions and expires on the
tenth anniversary of the date of grant. As of February 27, 1998, the number
of shares available for issuance pursuant to options yet to be granted under
the Existing Stock Plan was 33,606. For certain information regarding
options granted to officers of the Company, see Item 12. "Security Ownership
of Certain Beneficial Owners and Management."
COMPENSATION AND HUMAN RESOURCES COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The members of the Compensation and Human Resources Committee are
Messrs. Crowell, Parsky and Stonesifer. Messrs. Crowell and Parsky 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 the Company, 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
the Company. See Item 12. "Security Ownership of Certain Beneficial Owners
and Management." In addition, Messrs. Crowell and Parsky are two of the
three managing directors of ACP, which provides management services to the
Company pursuant to a management services agreement. See Item 13. "Certain
Relationships and Related Transactions."
50
<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 27,
1998, by each director and director nominee 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 was known by the Company to
beneficially own more than 5% of the outstanding shares of any class of
voting securities of the Company.
<TABLE>
<CAPTION>
Number of Voting
Shares (1) Percentage
------------ -----------
<S> <C> <C>
Aurora Equity Partners L.P. (other beneficial owners: Richard R.
Crowell, Gerald L. Parsky and Richard K. Roeder)(2)(3). . . . . . . . . 9,273,598 46.7
Aurora Overseas Equity Partners I, L.P. (other beneficial owners:
Richard R. Crowell, Gerald L. Parsky and Richard K. Roeder)(3)(4) . . . 3,683,660 18.5
General Electric Pension Trust(5). . . . . . . . . . . . . . . . . . . . . 1,825,652 9.2
Stephen J. Perkins(6)(7) . . . . . . . . . . . . . . . . . . . . . . . . . 167,000 *
John C. Kent(7)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,480 *
Wesley N. Dearbaugh(7)(9). . . . . . . . . . . . . . . . . . . . . . . . . 36,088 *
Michael L. LePore(10). . . . . . . . . . . . . . . . . . . . . . . . . . . 36,688 *
James R. Wehr(11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 718,548 3.6
Robert Anderson(12). . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,628 *
Richard R. Crowell(2)(4)(13)(14) . . . . . . . . . . . . . . . . . . . . . 10,335,468 52.0
Dale F. Frey(15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Mark C. Hardy(13)(14)(16). . . . . . . . . . . . . . . . . . . . . . . . . 12,460 *
Dr. Michael J. Hartnett(17). . . . . . . . . . . . . . . . . . . . . . . . 70,176 *
Gerald L. Parsky(2)(4)(13)(14)(18) . . . . . . . . . . . . . . . . . . . . 10,335,468 52.0
Richard K. Roeder(2)(4)(13)(14). . . . . . . . . . . . . . . . . . . . . . 10,335,468 52.0
J. Richard Stonesifer(19). . . . . . . . . . . . . . . . . . . . . . . . . -- --
William A. Smith(20) . . . . . . . . . . . . . . . . . . . . . . . . . . . 698,484 3.7
Fred J. Hall(21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,600 *
All directors and officers as a group (20 persons)(22) . . . . . . . . . . 12,186,712 58.8
</TABLE>
_______________
* Less than 1%.
(1) The shares of Common Stock underlying options or warrants that are
exercisable as of February 27, 1998 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 or
warrants, but are not deemed to be outstanding for the purpose of computing
the beneficial ownership of any other person.
(2) Consists of (i) 6,651,808 shares owned by AEP (one of the Aurora
Partnerships), (ii) 1,825,652 shares owned by the General Electric Pension
Trust ("GEPT") (See Note (5) below) and (iii) 796,138 shares that are
subject to an irrevocable proxy granted to the Aurora Partnerships by
certain holders of Common Stock, including Messrs. Crowell, Hardy, Parsky
and Roeder, certain other limited partners of AEP and certain affiliates of
a limited partner of AOEP (the other Aurora Partnership). 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 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 of 1933.
(3) The address for this beneficial holder is West Wind Building, P.O. Box
1111, Georgetown, Grand Cayman, Cayman Islands, B.W.I.
51
<PAGE>
(4) Consists of (i) 1,061,870 shares owned by AOEP, (ii) 1,825,652 shares owned
by GEPT (See Note (5) below) and (iii) 796,138 shares that are subject to
an irrevocable proxy granted to AEP and AOEP by certain holders of Common
Stock, including Messrs. Crowell, Hardy, Parsky and 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.
(5) With limited exceptions, GEPT has agreed to vote these shares in the same
manner as the Aurora Partnerships vote their respective shares of the
Company's Common Stock. This provision terminates upon the transfer of
such shares. The address of GEPT is 3003 Summer Street, Stamford, CT
06905.
(6) Includes 166,000 shares of Common Stock subject to options granted under
the Stock Plan that are exercisable as of February 27, 1998 or that will
become exercisable within 60 days thereafter. Excludes 332,000 shares of
Common Stock subject to options granted under the Stock Plan that are not
exercisable within 60 days of February 27, 1998.
(7) The address for this beneficial holder is 900 Oakmont Lane, Suite 100,
Westmont, IL 60559.
(8) Includes 58,480 shares of Common Stock subject to options granted under the
Stock Plan that are exercisable as of February 27, 1998 or that will become
exercisable within 60 days thereafter. Excludes 46,784 shares of Common
Stock subject to options granted under the Stock Plan that are not
exercisable within 60 days of February 27, 1998.
(9) Includes 35,088 shares of Common Stock subject to options granted under the
Stock Plan that are exercisable as of February 27, 1998 or that will become
exercisable within 60 days thereafter. Excludes 105,264 shares of Common
Stock subject to options granted under the Stock Plan that are not
exercisable within 60 days of February 27, 1998.
(10) Excludes 35,088 shares of Common Stock subject to options granted under the
Stock Plan that are not exercisable within 60 days of February 27, 1998.
Mr. LePore's address is 400 Corporate Drive, Mahwah, NJ 07430.
(11) Includes 11,696 shares of Common Stock subject to options granted under the
Stock Plan that are exercisable as of February 27, 1998 or that will become
exercisable within 60 days thereafter. Excludes 23,392 shares of Common
Stock subject to options granted under the Stock Plan that are not
exercisable within 60 days of February 27, 1998. Mr. Wehr's address is
2699 North Westgate, Springfield, MO 65803.
(12) 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. Excludes 12,000 shares of Common Stock
subject to options granted under the Stock Plan that are not exercisable
within 60 days of February 27, 1998. Mr. Anderson's address is
10877 Wilshire Boulevard, Suite 1405, Los Angeles, CA 90024-4341.
(13) The address for this beneficial holder is 1800 Century Park East,
Suite 1000, Los Angeles, CA 90067.
(14) The shares actually held by this person (as distinguished from the shares
that this person is deemed to beneficially own) are subject to an
irrevocable proxy granted to the Aurora Partnerships.
(15) Excludes 12,000 shares of Common Stock subject to options granted under the
Stock Plan that are not exercisable within 60 days of February 27, 1998.
Mr. Frey's address is One Gorham Island, Westport, CT 06880.
(16) Includes 4,000 shares of Common Stock subject to options granted under the
Stock Plan that are exercisable as of February 27, 1998 or that will become
exercisable within 60 days thereafter. Excludes 8,000 shares of Common
Stock subject to options granted under the Stock Plan that are not
exercisable within 60 days of February 27, 1998.
52
<PAGE>
(17) Consists of shares of Common Stock subject to exercisable warrants. Mr.
Hartnett's address is 60 Round Hill Road, Fairfield, CT 06430.
(18) Includes 2,000 shares held by Mr. Parsky's wife, as to which Mr. Parsky
disclaims beneficial ownership.
(19) Excludes 12,000 shares of Common Stock subject to options granted under the
Stock Plan that are not exercisable within 60 days of February 27, 1998.
Mr. Stonesifer's address is 8473 Bay Colony Drive, Naples, FL 34108.
(20) Includes 464,606 shares of Common Stock subject to options that are
exercisable as of February 27, 1998 or that will become exercisable within
60 days thereafter. Mr. Smith's address is 629 SW 293rd Street, Federal
Way, WA 98023.
(21) Consists of shares owned by Fred Jones Industries A Limited Partnership, a
Texas limited partnership ("Fred Jones Industries"), which is a significant
stockholder of Fred Jones Enterprises. The general partner of Fred Jones
Industries is a corporation of which Mr. Hall is a director, officer and
significant stockholder. Mr. Hall is also a limited partner of Fred Jones
Industries.
(22) Includes 868,526 shares of Common Stock subject to warrants and options
that are exercisable as of February 27, 1998 or that will become
exercisable within 60 days thereafter. Excludes 621,312 shares of Common
Stock subject to options granted under the Stock Plan that are not
exercisable within 60 days of February 27, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company believes the transactions described below, which were
entered into by the Company and its subsidiaries, were beneficial to the
respective companies, and were on terms 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
The Company was formed in 1994 at the direction of ACP, which is
affiliated with the Aurora Partnerships. ACP is controlled by Messrs.
Crowell, Parsky and Roeder, who are directors of the Company. As of March 9,
1998, the Company had paid ACP aggregate fees of approximately $4.2 million
for investment banking services provided by ACP in connection with the
Company's acquisitions in 1995-1998.
The Company also pays to ACP a base annual management fee of
approximately $540,000 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 has not
been increased as a result of any of the Company's acquisitions. The base
annual management fee is also subject to increase for specified cost of
living increases pursuant to which the base annual management fee was most
recently increased in July 1997 from $530,000. 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 1997, ACP did
not receive this additional management fee in 1997. In the event the Company
consummates any significant acquisitions or dispositions, 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 any of the Indentures
governing the Company's 12% Senior Subordinated Notes due 2004 or the
Company's bank credit facility. The Management Services Agreement also
provides that the Company
53
<PAGE>
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 the Aurora Partnerships
declines below 50% as follows: for any period during which the collective
beneficial ownership of the Aurora Partnerships 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 the Aurora Partnerships'
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 the
Aurora Partnerships 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
the Aurora Partnerships' collective beneficial ownership declines below 20%,
the Management Services Agreement will terminate. As of February 13, 1998,
the collective beneficial ownership of the Aurora Partnerships for purposes
of the Management Services Agreement was approximately 52%. See Item 12.
"Security Ownership of Certain Beneficial Owners and Management."
In October 1996, the Company granted options for an aggregate of 48,000
shares of Common Stock to Mark C. Hardy (a director of the Company), Kurt
Larsen (a former director of the Company) and two consultants of the Company,
all four of whom were then employees of ACP. These options, which have an
exercise price of $4.67 per share, become exercisable in one-third increments
on each of the first three anniversaries of the date of grant and expire in
2006. In 1997, 12,000 of these options terminated when Mr. Larsen resigned
from ACP.
AUTOCRAFT ACQUISITION
In March 1998 the Company purchased Autocraft from Fred Jones
Enterprises (then known as Autocraft Industries, Inc.) for $112.5 million in
cash plus up to an additional $12.5 million to be paid in 1999 based on the
performance of Autocraft's European operations during 1998. Of the $112.5
million, $1.25 million was paid to Fred Jones Industries in exchange for an
agreement from Fred Jones Industries to cooperate with the Company and not
compete against it for a specified period of time following the Autocraft
Acquisition. In connection with the Autocraft Acquisition, the Company
entered into a lease with Fred Jones Enterprises pursuant to which the
Company leases a manufacturing facility on a month to month basis at a rate
of $21,000 per month.
Fred J. Hall, who is nominated to serve as a director of the Company, is
(i) the Chairman of the Board, President and Chief Executive Officer and a
significant stockholder of Fred Jones Enterprises, and (ii) a director,
officer and significant stockholder of the corporation that is the general
partner of Fred Jones Industries, which is also a significant stockholder of
Fred Jones Enterprises. Mr. Hall is also a limited partner of Fred Jones
Industries.
FACILITY LEASES
In connection with its acquisition of Aaron's, the Company entered into
a lease with CRW, Inc., an affiliate of C.R. Wehr and James R. Wehr (whose
individual family trusts owned all of the outstanding capital stock of
Aaron's prior to its acquisition by the Company), for Aaron's headquarters
and primary remanufacturing facility located in Springfield, Missouri with an
initial term beginning as of January 1, 1994 and expiring as of 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 C.R. Wehr, Westway
Partnership, JRW, Inc. and C.J. Cates Real Estate Co. (each, an affiliate of
C.R. Wehr and James R. 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 as of January 1, 1994 and expiring as of
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.
The Company is responsible for paying
54
<PAGE>
property taxes, insurance and maintenance expenses for each of these leased
premises. James R. Wehr is an executive officer of the Company.
In addition, the Company is a party to a lease with Patricia L.
Bridgeforth, Mr. Wehr's sister, for Aaron's 200,000 square foot core storage
facility. The lease has an initial term of ten years, expiring October 31,
2006, with an option to renew for five years. The base monthly rent is
$35,833 for the initial term, with specified increases for each renewal term.
The Company is also required to pay taxes, maintenance and operating
expenses.
INDEMNIFICATION AGREEMENTS
The Company has entered into separate but identical indemnification
agreements (the "Indemnification Agreements") with each director and
executive officer of the Company. The Indemnification Agreements provide
for, among other things, the following: (i) indemnification to the fullest
extent permitted by law against any and all expenses (including attorneys'
fees and all other costs and obligations of any nature whatever), judgments,
fines, penalties and amounts paid in settlement (including all interest,
assessments and other charges paid or payable in connection therewith) of any
claim, unless the Company determines that such indemnification is not
permitted under applicable law; (ii) the prompt advancement of expenses to
the director or officer, including attorneys' fees and all other costs, fees,
expenses and obligations paid or incurred in connection with investigating or
defending any threatened, pending or completed action, suit or proceeding
related to the fact that such director or officer is or was a director or
officer of the Company or is or was serving at the request of the Company as
a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise, and for repayment to the Company if it is found that such
director or officer is not entitled to such indemnification under applicable
law; (iii) a mechanism through which the director or officer may seek court
relief in the event the Company determines that the director or officer is
not permitted to be indemnified under applicable law (and therefore is not
entitled to indemnification under the Indemnification Agreement); and (iv)
indemnification against expenses (including attorneys' fees) incurred in
seeking to collect from the Company an indemnity claim or advancement of
expenses to the extent successful.
PAYMENT OF PREFERRED STOCK REORGANIZATION CONSIDERATION
In connection with the formation of the Company, in July and August 1994
Holdings issued shares of its preferred stock to each purchaser of Holdings
common stock, including the Aurora Partnerships and Messrs. Anderson,
Crowell, Hardy, Parsky, Roeder, Smith and Wehr (each of whom is a director of
the Company, except Mr. Wehr, who is a former executive officer), for
consideration of $100 per share. These shares were converted into shares of
the Company's preferred stock in the Reorganization in December 1996,
immediately after which the Company redeemed the preferred stock for an
amount per share equal to $100 plus an amount equal to the accrued and unpaid
dividends on the Holdings preferred stock through the date of the
Reorganization. Upon the redemption of their shares of preferred stock
Messrs. Anderson, Crowell, Hardy, Parsky, Roeder, Smith and Wehr received
$23,630, $159,195, $13,701, $176,403, $30,596, $70,765 and $1,414,051,
respectively. The Aurora Partnerships distributed their shares of preferred
stock to their respective general and limited partners prior to the
redemption.
REGISTRATION RIGHTS
The holders of the Common Stock outstanding before the IPO in December
1996 have certain "demand" and "piggyback" registration rights pursuant to a
Stockholders Agreement. In addition, GEPT has certain "demand" and
"piggyback" registration rights with respect to a portion of the 1,825,652
shares of Common Stock owned by it.
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<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 25.
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.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of Aftermarket
Technology Corp. (previously filed as Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 and
incorporated herein by this reference)
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. (previously filed as Exhibit 3.2 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 and incorporated
herein by this reference)
3.3 Amended and Restated Bylaws of Aftermarket Technology Corp.
(previously filed as Exhibit 3.3 to the Company's Registration
Statement on Form S-1 (File No. 333-35543) filed on September 12,
1997 and incorporated herein by this reference)
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
56
<PAGE>
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)
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 (previously filed as Exhibit 10.4 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 and incorporated
herein by this reference)
10.5 Amendment No. 4 to Stockholders Agreement, dated as of December 16,
1996 (previously filed as Exhibit 10.5 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 and incorporated
herein by this reference)
*10.6 Amended and Restated Credit Agreement, dated as of March 6, 1998,
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 March 6, 1998, 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 Amended and
Restated Credit Agreement (see Exhibit 10.6)
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. (previously filed as
Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by this reference)
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 (previously
filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 and incorporated herein by this
reference)
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 August 1, 1997 between William A.
Smith and Aftermarket Technology Corp. (previously filed as Exhibit
10.13 to the Company's Registration Statement on
57
<PAGE>
Form S-1 (File No. 333-35543) filed on September 12, 1997 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 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)
10.16 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)
10.18 Amended and Restated Warrant Certificate, dated as of August 2, 1994,
for 280,704 warrants issued to William E. Myers, Jr. (previously
filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 and incorporated herein by this
reference)
10.19 Amended and Restated Warrant Certificate, dated as of August 2, 1994,
for 70,176 warrants issued to Brian E. Sanderson (previously filed as
Exhibit 10.19 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by this
reference)
10.20 Amended and Restated Warrant Certificate, dated June 24, 1996, for
70,176 warrants issued to Michael J. Hartnett (previously filed as
Exhibit 10.20 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by this
reference)
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)
58
<PAGE>
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. (previously filed as
Exhibit 10.30 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by this
reference)
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)
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 Amended and Restated Lease, dated as of June 1, 1997, by and among
Confar Investors II, L.L.C. and Aaron's Automotive Products, Inc.
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. 333-5597, 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
59
<PAGE>
No. 333-5597, and incorporated herein by this reference)
10.39 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)
10.40 Amendment and Consent dated as of July 25, 1997 to the Credit
Agreement dated as of February 14, 1997 among Aftermarket Technology
Corp., the several banks and other financial institutions from time
to time parties thereto and The Chase Manhattan Bank, as agent
(previously filed as Exhibit 10.40 to the Company's Registration
Statement on Form S-1 (File No. 333-35543) filed on September 12,
1997 and incorporated herein by this reference)
10.41 Asset Purchase Agreement dated as of July 31, 1997 among Automatic
Transmission Shops Inc., C.W. Smith, ATS Remanufacturing, Inc. and
Aftermarket Technology Corp. (previously filed as Exhibit 10.41 to
the Company's Registration Statement on Form S-1 (File No. 333-35543)
filed on September 12, 1997 and incorporated herein by this
reference)
10.42 Lease Agreement dated as July 31, 1997 between C.W. Smith and ATS
Remanufacturing, Inc. (previously filed as Exhibit 10.42 to the
Company's Registration Statement on Form S-1 (File No. 333-35543)
filed on September 12, 1997 and incorporated herein by this
reference)
10.43 Stock Purchase Agreement dated as of July 21, 1997 among Gary A.
Gamble, James E. Henderson, Trans Mart, Inc., TM-AL Acquisition Corp.
and Aftermarket Technology Corp. (previously filed as Exhibit 10.43
to the Company's Registration Statement on Form S-1 (File No. 333-
35543) filed on September 12, 1997 and incorporated herein by this
reference)
10.44 Amendment No. 1 to Stock Purchase Agreement dated as of August 15,
1997 among Gary A. Gamble, James E. Henderson, Trans Mart, Inc., TM-AL
Acquisition Corp. and Aftermarket Technology Corp. (previously filed
as Exhibit 10.44 to the Company's Registration Statement on Form S-1
(File No. 333-35543) filed on September 12, 1997 and incorporated
herein by this reference)
10.45 Amendment No. 2 to Stock Purchase Agreement dated as of August 15,
1997 among Gary A. Gamble, James E. Henderson, Trans Mart, Inc., TM-AL
Acquisition Corp. and Aftermarket Technology Corp. (previously filed
as Exhibit 10.45 to the Company's Registration Statement on Form S-1
(File No. 333-35543) filed on September 12, 1997 and incorporated
herein by this reference)
10.46 Form of Indemnification Agreement between Aftermarket Technology
Corp. and directors and certain officers (previously filed as Exhibit
10.46 to Amendment No. 1 the Company's Registration Statement on Form
S-1 (File No. 333-35543) filed on October 1, 1997 and incorporated
herein by this reference)
10.47 Amendment Agreements dated August 25, 1997 to Firstbank Lending
Agreement between Bank of Montreal, Mascot Truck Parts, Inc. and
King-O-Matic Industries Limited (previously filed as Exhibit 10.47 to
Amendment No. 1 the Company's Registration Statement on Form S-1
(File No. 333-35543) filed on October 1, 1997 and incorporated herein
by this reference)
*10.48 Stock Purchase Agreement, dated as of November 14, 1997, by and among
Matthew Obeid, Metran Automatic Transmission Parts Corp., Metran of
Boston, Inc., Metran Parts of Pennsylvania, Inc., TM-AL Acquisition
Corp. and Aftermarket Technology Corp.
*10.49 Asset Purchase Agreement, dated as of February 10, 1998, by and among
Autocraft Industries, Inc., Fred Jones Industries A Limited
Partnership, and Aftermarket Technology Corp.
*10.50 Amendment No. 1 to Asset Purchase Agreement, dated as of February 10,
1998, by and among Autocraft Industries, Inc., Fred Jones Industries
A Limited Partnership, and Aftermarket Technology Corp.
*10.51 Employment Agreement, dated as of July 28, 1994, between Kenneth A.
Bear and Aaron's Automotive Products, Inc.
*10.52 Employment Agreement, dated as of February 21, 1997, between Joseph
Salamunovich and Aftermarket Technology Corp.
*10.53 Employment Agreement, dated as of March 6, 1998, between Ronald E.
Bradshaw and Aftermarket Technology Corp.
*11 Statement Re Computation of Net Income Per Share
*21 List of Subsidiaries
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*23 Consent of Ernst & Young LLP, independent auditors
*27 Financial Data Schedules
</TABLE>
___________
* Filed herewith
(b) Reports on Form 8-K
During the last quarter of 1997, the Company filed a Report on Form 8-K
dated July 31, 1997 disclosing the acquisition of ATS Remanufacturing
pursuant to Item 2 of Form 8-K. No financial statements were required to be
filed pursuant to Item 7 of Form 8-K.
(c) Refer to (a) 3 above.
(d) Refer to (a) 2 above.
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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 24, 1998.
AFTERMARKET TECHNOLOGY CORP.
By: /s/ Stephen J. Perkins
------------------------------
Stephen J. Perkins
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed by the following persons in
the capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------- ------------------------------- --------------
<S> <C> <C>
/s/ Stephen J. Perkins Chairman of the Board, President March 24, 1998
---------------------------- and Chief Executive Officer
Stephen J. Perkins (Principal Executive Officer)
/s/ John C. Kent Chief Financial Officer March 24, 1998
---------------------------- (Principal Financial and
John C. Kent Accounting Officer)
/s/ Robert Anderson Director March 24, 1998
----------------------------
Robert Anderson
/s/ Richard R. Crowell Director March 24, 1998
----------------------------
Richard R. Crowell
/s/ Dale F. Frey. Director March 24, 1998
----------------------------
Dale F. Frey.
/s/ Mark C. Hardy Director March 24, 1998
----------------------------
Mark C. Hardy
/s/ Michael J. Hartnett Director March 24, 1998
----------------------------
Michael J. Hartnett
/s/ Gerald L. Parsky Director March 24, 1998
----------------------------
Gerald L. Parsky
62
<PAGE>
Signature Title Date
- ---------------------------- ------------------------------- --------------
/s/ Richard K. Roeder Director March 24, 1998
----------------------------
Richard K. Roeder
/s/ William A. Smith Chairman Emeritus of the March 24, 1998
---------------------------- Board of Directors
William A. Smith
/s/ J. Richard Stonesifer Director March 24, 1998
----------------------------
J. Richard Stonesifer
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
AFTERMARKET TECHNOLOGY CORP.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
Additions
-------------------------
Balance at Charged to Charge to Balance
Beginning Costs and Other at End
of Period Expenses Accounts Deductions of Period
----------- ----------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Reserve and allowances deducted
from asset accounts:
Allowance for uncollectible accounts $ 766 $ 1,239 $ 1,217(2) $ 753(1) $ 2,469
Reserve for inventory obsolescence 786 1,034 294(2) -- 2,114
Year ended December 31, 1996:
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible accounts 2,469 668 14(2) 1,825(1) 1,326
Reserve for inventory obsolescence 2,114 1,411 -- 784 2,741
Year ended December 31, 1997:
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible accounts 1,326 921 183(2) 1,284(1) 1,146
Reserve for inventory obsolescence 2,741 930 -- 1,575 2,096
</TABLE>
(1) Accounts written off, net of recoveries
(2) Balances added through new acquisitions
S-1
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
CREDIT AGREEMENT
AMONG
AFTERMARKET TECHNOLOGY CORP.,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
CHASE SECURITIES INC.,
AS GLOBAL ARRANGER
AND
THE CHASE MANHATTAN BANK,
AS AGENT
DATED AS OF MARCH 6, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . . 18
SECTION 2. AMOUNT AND TERMS OF CREDIT COMMITMENTS . . . . . . . . . . . . . . . 19
2.1 Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . . 19
2.2 Procedure for Revolving Credit Borrowing . . . . . . . . . . . . . . 19
2.3 Termination or Reduction of Revolving Credit Commitments . . . . . . 20
2.4 Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.5 Procedure for Term Loan Borrowing. . . . . . . . . . . . . . . . . . 20
2.6 Swing Line Commitments . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1 L/C Commitment.. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.2 Procedure for Issuance of Letters of Credit. . . . . . . . . . . . . 23
3.3 L/C Participations.. . . . . . . . . . . . . . . . . . . . . . . . . 23
3.4 Reimbursement Obligation of the Borrower.. . . . . . . . . . . . . . 24
3.5 Obligations Absolute.. . . . . . . . . . . . . . . . . . . . . . . . 25
3.6 Letter of Credit Payments. . . . . . . . . . . . . . . . . . . . . . 25
3.7 Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4. GENERAL PROVISIONS APPLICABLE
TO LOANS AND LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . 26
4.1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.2 Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . . . . 27
4.3 Amortization of Term Loans . . . . . . . . . . . . . . . . . . . . . 28
4.4 Optional and Mandatory Prepayments . . . . . . . . . . . . . . . . . 29
4.5 Conversion and Continuation Options. . . . . . . . . . . . . . . . . 30
4.6 Maximum Number of Tranches . . . . . . . . . . . . . . . . . . . . . 31
4.7 Interest Rates and Payment Dates . . . . . . . . . . . . . . . . . . 31
4.8 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . 31
4.9 Inability to Determine Interest Rate . . . . . . . . . . . . . . . . 32
4.10 Pro Rata Treatment and Payments. . . . . . . . . . . . . . . . . . . 32
4.11 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.12 Requirements of Law. . . . . . . . . . . . . . . . . . . . . . . . . 33
4.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.14 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.15 Change of Lending Office . . . . . . . . . . . . . . . . . . . . . . 36
<PAGE>
<CAPTION>
PAGE
<S> <C>
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 36
5.1 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . 36
5.2 No Change; Solvency. . . . . . . . . . . . . . . . . . . . . . . . . 37
5.3 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . 38
5.4 Corporate Power; Authorization; Enforceable Obligations. . . . . . . 38
5.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . 39
5.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.8 Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . . 39
5.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . 39
5.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.11 Federal Regulations. . . . . . . . . . . . . . . . . . . . . . . . . 39
5.12 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.13 Investment Company Act; Other Regulations. . . . . . . . . . . . . . 40
5.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.15 Purpose of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.16 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . 41
5.17 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . 42
5.18 No Material Misstatements. . . . . . . . . . . . . . . . . . . . . . 42
5.19 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.20 Senior Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . 43
6.1 Conditions to Extensions of Credit . . . . . . . . . . . . . . . . . 43
6.2 Conditions to Each Extension of Credit . . . . . . . . . . . . . . . 46
SECTION 7. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 47
7.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 47
7.2 Certificates; Other Information. . . . . . . . . . . . . . . . . . . 47
7.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . 49
7.4 Conduct of Business and Maintenance of Existence . . . . . . . . . . 49
7.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . 49
7.6 Inspection of Property; Books and Records; Discussions . . . . . . . 49
7.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.8 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.9 Additional Collateral. . . . . . . . . . . . . . . . . . . . . . . . 51
7.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.11 Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 8. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 53
-2-
<PAGE>
<CAPTION>
PAGE
<S> <C>
8.1 Financial Condition Covenants. . . . . . . . . . . . . . . . . . . . 53
8.2 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . 54
8.3 Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . . . . 56
8.4 Limitation on Guarantee Obligations. . . . . . . . . . . . . . . . . 57
8.5 Limitation on Fundamental Changes. . . . . . . . . . . . . . . . . . 58
8.6 Limitation on Sale of Assets . . . . . . . . . . . . . . . . . . . . 58
8.7 Limitation on Leases . . . . . . . . . . . . . . . . . . . . . . . . 58
8.8 Limitation on Dividends. . . . . . . . . . . . . . . . . . . . . . . 58
8.9 Limitation on Capital Expenditures . . . . . . . . . . . . . . . . . 59
8.10 Limitation on Investments, Loans and Advances. . . . . . . . . . . . 60
8.11 Limitation on Optional Payments and Modifications of Debt
Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.12 Limitation on Transactions with Affiliates . . . . . . . . . . . . . 62
8.13 Limitation on Sales and Leasebacks . . . . . . . . . . . . . . . . . 62
8.14 Limitation on Changes in Fiscal Year . . . . . . . . . . . . . . . . 62
8.15 Limitation on Negative Pledge Clauses. . . . . . . . . . . . . . . . 62
8.16 Limitation on Lines of Business; Creation of Subsidiaries. . . . . . 62
8.17 Limitation on Borrowings . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . 66
10.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . 66
10.4 Reliance by Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.6 Non-Reliance on Agent and Other Lenders. . . . . . . . . . . . . . . 67
10.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.8 Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . 68
10.9 Successor Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . 69
11.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . 71
11.4 Survival of Representations and Warranties . . . . . . . . . . . . . 71
11.5 Payment of Expenses and Taxes. . . . . . . . . . . . . . . . . . . . 71
11.6 Successors and Assigns; Participations and Assignments . . . . . . . 72
11.7 Adjustments; Set-off . . . . . . . . . . . . . . . . . . . . . . . . 74
11.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
-3-
<PAGE>
<CAPTION>
PAGE
<S> <C>
11.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.10 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.11 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.12 Submission To Jurisdiction; Waivers. . . . . . . . . . . . . . . . . 75
11.13 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.14 WAIVERS OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
A Performance Pricing Grid
1.1 Commitments and Addresses of Lenders
5.14 Subsidiaries
5.16 Environmental Matters
8.2 Existing Indebtedness
8.3 Existing Liens
8.10 Existing Investments
EXHIBITS
A-1 Form of Revolving Credit Note
A-2 Form of Term Note
A-3 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
</TABLE>
-4-
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 6, 1998,
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"), CHASE SECURITIES INC., as global arranger (the
"Global Arranger") and THE CHASE MANHATTAN BANK, a New York banking corporation,
as agent for the Lenders hereunder (in such capacity, the "Agent").
WHEREAS, the Borrower, Chase and certain financial institutions are
parties to a Revolving Credit Agreement, dated as of February 14, 1997 (as
amended, the "Existing Credit Agreement"); and
WHEREAS, the parties hereto wish to amend and restate the Existing
Credit Agreement as herein provided;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree that the Existing Credit
Agreement shall be and hereby is amended and restated in its entirety 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-
<PAGE>
2
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) (the
"BOARD"), 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 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 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.
"ACQUISITION": the acquisition by the Borrower, through Acquisition
Corp., of certain assets of Autocraft pursuant to the Purchase Agreement.
"ACQUISITION CORP": the collective reference to any newly created
acquisition vehicles in connection with the Acquisition.
"ADJUSTMENT DATE": each date on or after June 30, 1998, 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.
<PAGE>
3
"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 agent for the Lenders under this Agreement and the other Loan
Documents.
"AGENT'S PAYMENT OFFICE": the Agent's office located at One Chase
Manhattan Plaza, New York, New York, or such other office as may be
designated by the Agent by written notice to the Borrower and the Lenders.
"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, and (c) such Lender's Commitment Percentage of the
L/C Obligations then outstanding.
"AGREEMENT": this Amended and Restated Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"APPLICABLE MARGIN": initially, 0% in the case of ABR Loans and 1.00%
in the case of Eurodollar Loans; PROVIDED that, 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 based on the financial statements and Compliance Certificate
relating to the end of the four fiscal quarters of the Borrower immediately
preceding such Adjustment Date; PROVIDED that, notwithstanding the
foregoing, for the period from the Closing Date until the first Adjustment
Date to occur after December 31, 1998, the Applicable Margin in respect of
Loans shall not be less than the initial Applicable Margin set forth above;
and 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
<PAGE>
4
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 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).
"AUTOCRAFT": Autocraft Industries, Inc., an Oklahoma corporation.
"AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Lender at any
time, an amount equal to the excess, if any, of (a) the amount of such
Lender's Revolving Credit Commitment over (b) such Lender's Revolving
Credit Exposure.
"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 2.5 as a date on which the Borrower requests the Lenders
to make Loans hereunder.
"BUSINESS": as defined in subsection 5.16.
<PAGE>
5
"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; PROVIDED, that with respect to any borrowings, disbursements and
payments in respect of and calculations, interest rates and Interest
Periods pertaining to Eurodollar Loans, such day is also a day on which
dealings are carried on in the relevant interbank Eurodollar market.
"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.
"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
<PAGE>
6
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.
"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 3.1(b)(i)(2).
"COMMITMENTS": the collective reference to the Revolving Credit
Commitments and the Term Loan Commitments.
"COMMITMENT PERCENTAGE": as to any Lender at any time, the percentage
which the sum of (i) the unpaid principal amount of the outstanding Term
Loans held by such Lender at such time and (ii) the Revolving Credit
Commitment of such Lender (or, if the Revolving Credit Commitments have
expired or been terminated, the Revolving Credit Exposure of such Lender)
at such time then constitutes of the sum of (x) the aggregate outstanding
principal amount of the Term Loans held by all Lenders and (y) the
aggregate Revolving Credit Commitments of all Lenders (or, if the Revolving
Credit Commitments have expired or been terminated, the aggregate Revolving
Credit Exposures of all Lenders).
"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
<PAGE>
7
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) 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.
<PAGE>
8
"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.
"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
<PAGE>
9
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.
"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 AGREEMENT": as defined in the recitals hereto.
"EXTENSION OF CREDIT": as to any Lender, (a) the making of a
Revolving Credit Loan, a Term Loan or a Swing Line Loan by such Lender or
(b) 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.
<PAGE>
10
"GLOBAL ARRANGER": CSI, as the arranger of the Commitments under this
Agreement and the other Loan Documents.
"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
<PAGE>
11
or other interest or currency rate hedge arrangement, to or under which
such Person is a party or a beneficiary.
"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 whether or not 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 (i) 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 to all Lenders,
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
<PAGE>
12
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three, six or, if available to all Lenders, 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 3.4(a).
"L/C PARTICIPANTS": the collective reference to all the Lenders
holding Revolving Credit Commitments other than the Issuing Lender.
"LETTERS OF CREDIT": as defined in subsection 3.1(a).
"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; PROVIDED that for purposes of calculating Consolidated EBITDA
of the Borrower and its Subsidiaries for any period for inclusion in the
Leverage Ratio for the purposes of subsection 8.1(a) only, (i) the
Consolidated
<PAGE>
13
EBITDA of any Person acquired by the Borrower or its Subsidiaries during
such period shall be included on a PRO FORMA basis for such period
(assuming the consummation of such acquisition and the incurrence or
assumption of any Indebtedness in connection therewith occurred on the
first day of such period) if the consolidated balance sheet of such
acquired Person and its consolidated Subsidiaries as at the end of the
period preceding the acquisition of such Person and the related
consolidated statements of income and stockholders' equity and of cash
flows for the period in respect of which Consolidated EBITDA is to be
calculated (x) have been previously provided to the Agent and the
Lenders and (y) either (A) have been reported on without a qualification
arising out of the scope of the audit by independent certified public
accountants of nationally recognized standing or (B) have been found
acceptable by the Agent (it being agreed that, for the purposes of
determining such PRO FORMA Consolidated EBITDA in connection with the
Acquisition, the Consolidated EBITDA of the OEM Division shall be deemed
to be $4,375,000 for each fiscal quarter of 1997 and $3,500,000 for the
period from January 1, 1998 through March 6, 1998), and (ii) the
Consolidated EBITDA of any Person (or attributable to assets
constituting a significant business unit) disposed of by the Borrower or
its Subsidiaries during such period shall be excluded on a PRO FORMA
basis for such period (assuming the consummation of such disposition in
connection therewith occurred on the first day of such period).
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any 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, the
Security Agreements and any Hedging Agreement to which any Lender is a
party in respect of any Loans made hereunder.
"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.
<PAGE>
14
"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 4.13(b).
"NET PROCEEDS": with respect to any sale, transfer or other
disposition of any property or asset of the Borrower or any of its
Subsidiaries, 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
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
$90,000,000, 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
$30,000,000, issued by the Borrower pursuant to the Indenture dated as of
June 1, 1995.
"NON-EXCLUDED TAXES": as defined in subsection 4.13(a).
"NON-U.S. LENDER": as defined in subsection 4.13(b).
"NOTES": the collective reference to the Revolving Credit Notes, the
Term Notes and the Swing Line Note.
"OEM DIVISION": the collective reference to the assets acquired
pursuant to the Acquisition.
"PARTICIPANT": as defined in subsection 11.6(b).
<PAGE>
15
"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.
"PURCHASE AGREEMENT": the Purchase Agreement, dated as of February
10, 1998, between Acquisition Corp. and Autocraft.
"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.
"REIMBURSEMENT OBLIGATION": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to subsection 3.4(a) 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, (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 and
(c) Aurora and any investment funds controlled by Aurora.
"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
<PAGE>
16
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
sum of (i) the aggregate unpaid principal amount of the Term Loans and (ii)
the aggregate Revolving Credit Commitments or, if the Revolving Credit
Commitments have been terminated, the aggregate Revolving Credit Exposures
of all Lenders.
"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,
the treasurer or the chief financial officer of the Borrower.
"REVOLVING CREDIT COMMITMENT": as to any Lender, the obligation of
such Lender to make Revolving Credit 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.
"REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Lender at any
time, the percentage which such Lender's Revolving Credit Commitment then
constitutes of the aggregate Revolving Credit Commitments (or, at any time
after the Revolving Credit Commitments shall have expired or been
terminated, the percentage which the aggregate principal amount of such
Lender's Revolving Credit Loans then outstanding constitutes of the
aggregate principal amount of the Revolving Credit Loans then outstanding).
"REVOLVING CREDIT COMMITMENT PERIOD": the period from and including
the Closing Date to but not including the Termination Date or such earlier
date on which the Revolving Credit Commitments shall terminate as provided
herein.
"REVOLVING CREDIT EXPOSURE" shall mean with respect to any Lender, at
any time, the sum of (a) the aggregate outstanding principal amount of such
Lender's Revolving Credit Loans at such time, plus (b) such Lender's
Revolving Credit Commitment Percentage of the L/C Obligations, plus (c)
such Lender's Revolving Credit Commitment Percentage of the Swing Line
Loans outstanding at such time; PROVIDED that, for purposes of calculating
Available Revolving Credit Commitments for the purposes of subsection
4.1(a), the amount of Swing Line Loans shall be deemed to be zero.
"REVOLVING CREDIT LENDER": a Lender with a Revolving Credit
Commitment or an outstanding Revolving Credit Loan.
"REVOLVING CREDIT LOANS": as defined in subsection 2.1(a).
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17
"REVOLVING CREDIT NOTES": as defined in subsection 4.2(e).
"SECURITY AGREEMENTS": the collective reference to the Guarantee and
Collateral Agreement, any 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 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 3.1(b)(i)(1).
"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 and,
in any case, shall include Acquisition Corp. after
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18
giving effect to the Acquisition.
"SWING LINE COMMITMENT": the Swing Line Lender's obligation to make
Swing Line Loans pursuant to subsection 2.6(a).
"SWING LINE LENDER": Chase in its capacity as provider of the Swing
Line Loans.
"SWING LINE LOANS": as defined in subsection 2.6(a).
"SWING LINE NOTE": as defined in subsection 2.6(b).
"TERM LOAN COMMITMENT": with respect to each Lender, the commitment,
if any, of such Lender to make a Term Loan hereunder on the Closing Date in
a principal amount not to exceed the amount set forth opposite such
Lender's name on Schedule 1.1.
"TERM LOAN LENDER": a Lender with a Term Loan Commitment or an
outstanding Term Loan.
"TERM LOANS": as defined in subsection 2.4.
"TERM NOTE": as defined in subsection 4.2(e).
"TERMINATION DATE": December 31, 2003.
"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.
"U.K. SUBSIDIARIES": U.K. Holdings and Automotive Developments, Ltd.
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
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19
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 REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and
conditions hereof, each Revolving Credit 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 Revolving Credit
Commitment Period in an aggregate principal amount at any one time outstanding
which, when added to such Revolving Credit Lender's Revolving Credit 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 Revolving
Credit Lender's Revolving Credit Commitment.
(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
4.5, 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 Revolving Credit Commitment Period the Borrower may use the Revolving
Credit 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 REVOLVING CREDIT BORROWING. The Borrower may
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, PROVIDED that the Borrower shall give the
Agent, except as expressly set forth in subsections 3.4 and 4.9, irrevocable
notice (which notice must be received by the Agent prior to 12:00 noon, 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)
on the day of 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 Revolving Credit
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 Revolving Credit
Commitments are less than $500,000, such lesser amount). Upon receipt of any
such notice from the Borrower, the Agent shall promptly notify each Revolving
Credit Lender thereof. Each Revolving Credit 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 Revolving Credit Lenders irrevocable notice by 11:00 A.M. New
York City time one Business Day before the requested Borrowing
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20
Date, if the Closing Date is a Borrowing Date, and on such date each
Revolving Credit 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 Revolving Credit Lenders and in like funds as received by the
Agent.
2.3 TERMINATION OR REDUCTION OF REVOLVING CREDIT COMMITMENTS. The
Borrower shall have the right, upon not less than five Business Days' notice to
the Agent, to terminate the Revolving Credit Commitments or, from time to time,
to reduce the amount of the Revolving Credit 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 Revolving Credit
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 Revolving Credit Commitments then in effect.
2.4 TERM LOANS. Subject to the terms and conditions hereof each Term
Loan Lender severally agrees to make a term loan (a "TERM LOAN") to the Borrower
on the Closing Date in an amount not to exceed the amount of such Lender's Term
Loan Commitment. The Term Loans may be (a) Eurodollar Loans, (b) ABR Loans or
(c) a combination thereof, as determined by the Borrower and notified to the
Agent in accordance with subsections 2.5 and 4.5.
2.5 PROCEDURE FOR TERM LOAN BORROWING. The Borrower shall give the
Agent irrevocable telephonic notice (promptly confirmed in writing), which
notice must be received by the Agent prior to 11:00 A.M., New York time, one
Business Day prior to the anticipated Closing Date, requesting that the Term
Loan Lenders make the Term Loans on the Closing Date and specifying the amount
to be borrowed. The Term Loans made on the Closing Date shall initially be ABR
Loans and no Term Loan may be converted into or continued as a Eurodollar Loan
having an Interest Period in excess of one month until the date that is 90 days
after the Closing Date. Upon receipt of such notice the Agent shall promptly
notify each Term Loan Lender thereof. Not later than 10:00 A.M., New York time,
on the Closing Date, each Term Loan Lender shall make available to the Agent at
the Agent's Payment Office an amount in immediately available funds equal to the
Term Loan or Term Loans to be made by such Lender. The Agent shall credit the
account of the Borrower on the books of such office of the Agent with the
aggregate of the amounts made available to the Agent by the Term Loan Lenders in
immediately available funds (or, in the event that the Borrower specifies in the
notice a different account to which such amounts should be transferred, the
Agent shall transfer, by wire transfer, to such account the aggregate amount
made available to the Agent by the Term Loan Lenders in immediately available
funds).
2.6 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 Revolving
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21
Credit Commitment Period in an aggregate principal amount at any one time
outstanding not to exceed $5,000,000, PROVIDED that at no time may the sum of
the then outstanding Swing Line Loans, Revolving Credit Loans and L/C
Obligations exceed the Revolving Credit Commitments then in effect. Amounts
borrowed by the Borrower under this subsection 2.6 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 4.7. 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 4.7.
(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 Revolving Credit Lender, including the Swing
Line Lender, to make a Revolving Credit Loan as an ABR Loan in an amount equal
to such Revolving Credit Lender's Revolving Credit 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 4.4.
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 hereof with respect to the Borrower (in which event
the procedures of paragraph (d) of this subsection 2.6 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.
(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 hereof with respect to the Borrower) at
any time while Swing Line Loans are
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22
outstanding, each Revolving Credit Lender shall, at the option of the Swing
Line Lender, 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 Revolving Credit Commitment Percentage
determined on the date of, and immediately prior to, expiration or
termination of the Revolving Credit 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 Revolving
Credit 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 Revolving Credit
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 3.3(a), agrees to issue letters of credit ("LETTERS OF CREDIT")
for the account of the Borrower on any Business Day during the Revolving Credit
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 Revolving
Credit Commitments of all Lenders would be less than zero.
(b) Each Letter of Credit shall:
(i) be denominated in Dollars and shall be either (1) a
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23
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 Agreement 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 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 Revolving Credit 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
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24
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 Revolving Credit
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 subsection 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 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.
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25
(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 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
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26
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 Revolving Credit 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 (as adjusted in
a manner corresponding to the adjustments to Applicable Margin set forth in the
definition thereof) on the average daily Available Revolving Credit Commitment
of such Revolving Credit 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 to occur after December 31, 1998, 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 Revolving Credit 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 February 6, 1998, among Chase, CSI and the Borrower, in the
amounts and on the dates set forth therein.
4.2 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower hereby
unconditionally promises to pay (i) to the Agent for the account of each
Revolving Credit Lender the then unpaid principal amount of each Revolving
Credit Loan of such Revolving Credit Lender, on the Termination Date (or such
earlier date on which the Revolving Credit Loans become due and payable pursuant
to Section 9) and (ii) to the Agent for the account of each Term Loan Lender the
then unpaid principal amount of each Term Loan of such Term Loan
<PAGE>
27
Lender as provided in subsection 4.3. 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 4.7.
(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(d) and a subaccount
therein for each Lender, in which shall be recorded (i) the amount of each Loan
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 (i) a promissory
note of the Borrower evidencing the Revolving Credit 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") and/or (ii) a promissory note
of the Borrower evidencing the Term Loan of such Lender, substantially in the
form of Exhibit A-2, with appropriate insertions as to date and principal amount
(a "TERM 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 Revolving Credit Loans and/or Term Loans of such
Lender, with interest on the unpaid principal amount thereof from time to time
outstanding under such Note(s) as set forth in subsection 4.7. A Note and the
obligations 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 obligations evidenced thereby in the Register (and each Note shall expressly
so provide). Any assignment or transfer of all or part of the obligations
evidenced by a Note shall be registered in the Register only upon surrender for
registration of assignment or transfer of the Note evidencing such obligations,
accompanied by an Assignment and Acceptance substantially in the form of Exhibit
E duly executed by the 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
<PAGE>
28
"cancelled." No assignment of a Note and the obligations 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
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 AMORTIZATION OF TERM LOANS. (a) Subject to adjustment pursuant to
clause (c) of this subsection, the Borrower shall repay Term Loans on each date
set forth below in the aggregate principal amount of Dollars set forth opposite
such date:
<TABLE>
<CAPTION>
DATE AMOUNT
---- ------
<S> <C>
September 30, 1998 $5,000,000
December 31, 1998 $5,000,000
March 31, 1999 $3,750,000
June 30, 1999 $3,750,000
September 30, 1999 $3,750,000
December 31, 1999 $3,750,000
March 31, 2000 $5,000,000
June 30, 2000 $5,000,000
September 30, 2000 $5,000,000
December 31, 2000 $5,000,000
March 31, 2001 $6,250,000
June 30, 2001 $6,250,000
September 30, 2001 $6,250,000
December 31, 2001 $6,250,000
March 31, 2002 $6,250,000
June 30, 2002 $6,250,000
September 30, 2002 $6,250,000
December 31, 2002 $6,250,000
March 31, 2003 $6,250,000
June 30, 2003 $6,250,000
September 30, 2003 $6,250,000
December 31, 2003 $6,250,000
</TABLE>
(b) To the extent not previously paid, all Term Loans shall be due and
payable on the Termination Date (or on such earlier date on which the Term Loans
become due and payable pursuant to Section 9).
<PAGE>
29
(c) Any prepayment of a Term Loan pursuant to subsection 4.4 shall be
applied to reduce the subsequent scheduled repayments of the Term Loans to be
made by the Borrower pursuant to this subsection as set forth in subsection 4.4.
(d) Each repayment or prepayment of a Term Loan shall be applied
ratably to the Term Loans of each Lender included in the repaid Term Loan.
4.4 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 same day 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, Term 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 4.14 and, in the case of prepayments of the Term
Loans only, accrued interest to such date on the amount prepaid. Partial
optional prepayments of the Term Loans shall be applied to the remaining
installments of principal thereof ratably based on the remaining amounts
thereof. Partial voluntary prepayments shall be in an aggregate principal
amount of $500,000 or a whole multiple of $500,000 in excess thereof.
(b) If at any time the sum of the Revolving Credit Loans, the Swing
Line Loans and the L/C Obligations exceeds the Revolving Credit 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 Term Loans and, after
all Term Loans have been repaid, to the permanent reduction of the Revolving
Credit Commitments by an amount equal thereto and, to the extent required by
subsection 4.4(b), to the payment of Loans and cash collateralization of Letters
of Credit as set forth therein; 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 agreed 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; and PROVIDED FURTHER
that such Net Proceeds shall not be required to be so applied
<PAGE>
30
until such Net Proceeds not applied hereunder exceed $2,500,000 in the
aggregate, at which time all of such unapplied Net Proceeds shall be applied
as set forth herein. Any Net Proceeds applied toward the prepayment of the
Term Loans pursuant to this subsection 4.4(c) shall be applied ratably to the
remaining installments outstanding of principal thereof.
(d) In the event of a Change of Control, not later than five days
thereafter, (A) the Revolving Credit 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
4.14, (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.
4.5 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 (in the case of conversions of Revolving Credit Loans) or
the date of the final installment of principal of the Term Loans.
(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, respectively, the Termination Date (in the case of continuations of
Revolving Credit Loans) or the date of the final installment of principal of the
Term Loans 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.
4.6 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.
4.7 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan shall
bear
<PAGE>
31
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 (iv) any 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.
4.8 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 4.7(a), (b) or (c).
4.9 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day
of any Interest Period, (i) 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, or (ii)
the Agent shall have received notice from the Required Lenders that the
Eurodollar Rate determined for such Interest Period will not adequately and
fairly reflect the cost to such Lenders (as conclusively certified by such
Lenders) of making or maintaining their affected Loans during 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,
<PAGE>
32
(y) any Loans that were to have been converted on the first day of such
Interest Period 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.
4.10 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 Revolving Credit
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 Revolving Credit
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 11.2, 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 Revolving Credit 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 Revolving Credit 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.
4.11 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, continue Eurodollar Loans as
such and convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and
(b) such
<PAGE>
33
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 4.14.
4.12 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 4.13 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, on
an after-tax basis, 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 such party becomes a Lender) shall have the
effect of reducing the rate of return on such Lender's or such
<PAGE>
34
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, on an after-tax basis, for such
reduction, PROVIDED that the Borrower shall be not be obligated to compensate
any Lender pursuant to this subsection 4.12 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 4.12 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.
4.13 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 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.
<PAGE>
35
(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 4.13(b), a Non-U.S.
Lender that has previously complied with this subsection 4.13(b) shall not be
required to deliver any Form 1001 or Form 4224 pursuant to this subsection
4.13(b) that such Non-U.S. Lender is not legally able to deliver.
4.14 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 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
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36
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.
4.15 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes
any demand for payment under subsection 4.12 or 4.13(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 4.12 or 4.13(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, 1995 and
December 31, 1996 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 consolidated balance sheet of the OEM Division as of June 30,
1997 and the related consolidated statements of income and of cash flows for the
fiscal year ended on such date, copies of which have heretofore been furnished
to each Lender, are complete and correct and present fairly the consolidated
financial condition of the OEM Division as at such date, and the consolidated
results of its operations and its consolidated cash flows for the fiscal year
then ended, (iii) the unaudited consolidated balance sheets of the Borrower and
its consolidated Subsidiaries as at September 30, 1997 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) and (iv) the unaudited balance sheet of
the OEM Division as at December 31, 1997 and the related unaudited consolidated
statement of income and of cash flows for the six-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
financial condition of the OEM Division as at such date, and the results of its
operations and its cash flows for the six-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
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37
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,
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, 1996 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, 1996 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, 1997 (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 Agreement, (ii) the consummation of the Acquisition 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, 1996, 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
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38
Governmental Authority or any other Person is required in connection with the
borrowings hereunder or with the execution, delivery, performance, 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, 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 the Borrower and such other Loan Party
enforceable against the Borrower and such other 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 Default or 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
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39
"INTELLECTUAL PROPERTY"). No claim has been asserted and is pending by any
Person 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 (as such term is defined herein in the definition of "ABR") as now and
from time to time hereafter in effect or for any purpose which violates the
provisions of the Regulations of such Board. 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
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40
would become subject to any liability under 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 Revolving Credit Loans
shall be used by the Borrower to (i) refinance indebtedness under the Existing
Credit Agreement 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. The proceeds of the Term Loans shall be used by the
Borrower to finance the Acquisition, to refinance certain existing indebtedness
in connection therewith and to pay fees and expenses related thereto. None of
the proceeds of the Revolving Credit Loans or the Term Loans shall be used to
finance the acquisition of any company the shares of which are traded on a
public exchange unless, prior to or concurrently with the consummation of such
acquisition, the board of directors, or equivalent governing body, of the
company to be so acquired has approved such acquisition.
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 (i) which 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
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41
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 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 Agreement, as the
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42
case may be, in the Collateral described in such Security Agreement. As of
the Closing Date, all Equipment and Inventory (as each of such terms is
defined in the Guarantee and 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 Agreement 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
Agreement.
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 under
the Senior Subordinated Notes and the indentures related thereto (the
"INDENTURES") and this Agreement and the other Loan Documents shall collectively
constitute the "Credit Agreement" as such term is defined in such 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, Term 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 and other
obligations of the Borrower and its Subsidiaries under the Existing Credit
Agreement shall have been paid in full, including, without limitation, all
interest and fees owing with respect to such indebtedness.
(c) FINANCIAL STATEMENTS. The Agent shall have received, with a copy
for each
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43
Lender, (i) the financial statements referred to in subsection 5.1(a) and
(ii) the PRO FORMA balance sheet of the Borrower and its Subsidiaries
referred to in subsection 5.1(b), 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 the Borrower's
Chief Financial 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 (including the
Acquisition) 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;
(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; and
(iii) the executed legal opinion of counsel to Autocraft, if any,
delivered in connection with the Acquisition, accompanied by reliance
letters in favor of the Lenders.
(g) ACQUISITION. The Acquisition shall have been consummated for an
aggregate purchase price not exceeding $125,000,000 pursuant to
documentation reasonably satisfactory to the Agent in all material
respects, and no provision thereof shall have been waived, amended,
supplemented or otherwise modified in any material respect.
(h) FEES AND EXPENSES. The Agent shall have received satisfactory
evidence that the fees and expenses incurred, and to be incurred, in
connection with the Acquisition shall not exceed $7,000,000 in the
aggregate.
(i) APPROVALS. All governmental and third party approvals (including
landlords' and other consents) necessary or, in the discretion of the
Agent, advisable in connection with the Acquisition, the financing
contemplated hereby and the continuing operations of the Borrower and its
Subsidiaries shall have been obtained and be in full force and effect, and
all applicable waiting periods shall have expired without any action being
taken or threatened by any competent authority which would restrain,
prevent or otherwise impose adverse conditions on the Acquisition or the
financing thereof.
(j) ENVIRONMENTAL ASSESSMENT. The Agent shall have received a
satisfactory environmental assessment with respect to the real property
owned or leased by Autocraft
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44
and its Subsidiaries from a firm satisfactory to the Agent.
(k) 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.
(l) LIEN SEARCHES. The Agent shall have received the results of a
recent search in each relevant jurisdiction, with respect to the Borrower,
Autocraft and their respective Subsidiaries, of the Uniform Commercial Code
filings which may have been filed with respect to the Borrower, Autocraft
or their respective Subsidiaries, and such search shall reveal no liens on
any of the assets of the Borrower, Autocraft or their respective
Subsidiaries except for liens permitted by subsection 8.3 or liens to be
discharged on or prior to the Closing Date pursuant to documentation
satisfactory to the Agent.
(m) 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.
(n) 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.
(o) 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.
(p) 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
<PAGE>
45
Secretary of the such Loan Party.
(q) 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.
(r) 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:
(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 a Responsible Officer.
(e) DEBT INCURRENCE COMPLIANCE CERTIFICATE. If, on any requested
Borrowing Date, the sum of (i) the aggregate unpaid principal amount of the
Term Loans and (ii) the aggregate Revolving Credit Exposures of all
Lenders, after giving effect to the Extensions of Credit requested to be
made on such Borrowing Date, exceeds 90% of the Borrowing Base (as such
term is defined in the Indentures) as determined in the most recent
calculation thereof delivered pursuant to subsection 7.2(f), the Agent
shall have received a calculation of the Borrowing Base as at such
requested Borrowing Date, together with a certificate of a Responsible
Officer of the Borrower, dated the requested Borrowing Date, demonstrating
that the aggregate Extensions of Credit after giving effect
<PAGE>
46
to the Revolving Credit Loans requested to be made on such Borrowing
Date will not exceed the Borrowing Base calculated as at such date,
PROVIDED that if the foregoing would not be sufficient to demonstrate
that such Extensions of Credit can be made in compliance with the
applicable terms of the Indentures, such Borrowing Base calculation and
certificate shall not be so required, so long as either (x) the total
amount of such requested Extensions of Credit, when added to the total
amount of any other Extensions of Credit and the total amount of
Indebtedness and Disqualified Capital Stock (each as defined in the
Indenture) incurred after the date of the latest calculation of the
Total Incurrence Amount (as defined in subsection 7.2(f)), does not
exceed 90% of such Total Incurrence Amount or (y) the Agent shall have
received a certificate of a Responsible Officer of the Borrower, dated
the requested Borrowing Date, demonstrating that the applicable
Consolidated Coverage Ratio (as such term is defined in the Indentures)
of the Borrower after giving effect to such Extensions of Credit as set
forth in the Indentures satisfies the relevant terms thereof.
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 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
<PAGE>
47
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, 8.7, 8.8 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;
(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;
<PAGE>
48
(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;
(f)concurrently with the delivery of the financial statements referred
to in subsections 7.1(a) and (b), a certificate of a Responsible Officer
demonstrating, in reasonable detail, (i) the Borrowing Base (as such term
is defined in the Indentures) as of such date and (ii) the Consolidated
Coverage Ratio (as such term is defined in the Indentures), along with a
calculation of the maximum amount (the "TOTAL INCURRENCE AMOUNT") of
Indebtedness that could be incurred on such date under Section 4.11(a) of
the Indentures as a result thereof based upon such Consolidated Coverage
Ratio and assuming (for purposes of giving effect on a pro forma basis),
that none of the proceeds of such Total Incurrence Amount are used to
refinance or retire other Indebtedness or to make an Acquisition (as
defined in the Indentures); and
(g) 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; and 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
<PAGE>
49
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, 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
<PAGE>
50
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 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 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
<PAGE>
51
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
<PAGE>
52
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.
7.11 PROPERTY MATTERS. With respect to any real property owned or
leased by the Borrower or its Subsidiaries and not subject to a fee or leasehold
mortgage constituting a Security Document, as applicable, to the extent
reasonably requested by the Agent, no later than 60 days following the Closing
Date, at its own expense (a) deliver to the Agent, for the benefit of the
Lenders, a mortgage on such real property as to which a landlord consent to such
mortgage is not required, (b) with respect to such real property as to which a
landlord consent to such mortgage is required, request and use reasonable best
efforts to obtain a landlord waiver and
<PAGE>
53
consent with respect thereto and 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, (c) with respect to
each leased property to be subject to a leasehold mortgage, use reasonable
best efforts to obtain a landlord waiver and consent in form and substance
reasonably satisfactory to the Agent and (d) take all actions necessary or,
in the opinion of the Agent, desirable to cause any liens created by any such
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 Revolving Credit
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 Leverage Ratio on the last day of any fiscal quarter of the Borrower
to be greater than the ratio set forth below opposite the last day of such
fiscal quarter:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
March 31, 1998 4.00 to 1.0
June 30, 1998 4.00 to 1.0
September 30, 1998 4.00 to 1.0
December 31, 1998 4.00 to 1.0
March 31, 1999 3.50 to 1.0
June 30, 1999 3.50 to 1.0
September 30, 1999 3.50 to 1.0
December 31, 1999 3.50 to 1.0
March 31, 2000 3.25 to 1.0
June 30, 2000 3.25 to 1.0
September 30, 2000 3.25 to 1.0
December 31, 2000 3.25 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
March 31, 2002 3.00 to 1.0
June 30, 2002 3.00 to 1.0
September 30, 2002 3.00 to 1.0
December 31, 2002 3.00 to 1.0
March 31, 2003 3.00 to 1.0
June 30, 2003 3.00 to 1.0
<PAGE>
54
September 30, 2003 3.00 to 1.0
December 31, 2003 3.00 to 1.0
</TABLE>
(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:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
March 31, 1998 2.00 to 1.0
June 30, 1998 2.00 to 1.0
September 30, 1998 2.00 to 1.0
December 31, 1998 2.00 to 1.0
March 31, 1999 2.25 to 1.0
June 30, 1999 2.25 to 1.0
September 30, 1999 2.25 to 1.0
December 31, 1999 2.25 to 1.0
March 31, 2000 2.50 to 1.0
June 30, 2000 2.50 to 1.0
September 30, 2000 2.50 to 1.0
December 31, 2000 2.50 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
March 31, 2002 3.00 to 1.0
June 30, 2002 3.00 to 1.0
September 30, 2002 3.00 to 1.0
December 31, 2002 3.00 to 1.0
March 31, 2003 3.00 to 1.0
June 30, 2003 3.00 to 1.0
September 30, 2003 3.00 to 1.0
December 31, 2003 3.00 to 1.0
</TABLE>
(c) MAINTENANCE OF NET WORTH. Permit the Consolidated Net Worth of
the Borrower at any time to be less than the sum of $140,000,000 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:
(a) Indebtedness of the Borrower under this Agreement;
<PAGE>
55
(b) Indebtedness of (i) the Borrower to any Subsidiary and (ii) any
Subsidiary which is a party to the Guarantee and Collateral Agreement 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%, and not more than 100%, 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);
(f) Indebtedness of the Canadian Subsidiaries and U.K. Subsidiaries at
any time not exceeding an aggregate principal amount outstanding equivalent
at such time to $10,000,000 (U.S. Dollars equivalent);
(g) Indebtedness constituting the defined purchase price "earn-out"
liabilities under (i) the Asset Purchase Agreement, dated as of July 31,
1997, among Automatic Transmission Shops Inc., C.W. Smith, ATS
Remanufacturing, Inc., and the Borrower in an aggregate amount not to
exceed $13,600,000 and (ii) the Acquisition in an aggregate amount not to
exceed $12,500,000;
(h) Indebtedness in respect of (i) Hedging Agreements not involving
more than
<PAGE>
56
$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
(i) 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 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
<PAGE>
57
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 and the U.K.
Subsidiaries of the Borrower securing Indebtedness permitted by subsection
8.2(f).
(l) Liens in respect of security interests in inventory and any
proceeds thereof, granted in the ordinary course of business for the
benefit of any supplier of such inventory bearing the trade or service mark
of such supplier, provided such liens do not extend to assets other than
parts supplied from time to time by such supplier in the ordinary course of
business.
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;
(d) the Guarantee and Collateral Agreement and any other subsidiary
guarantee entered into from time to time pursuant to the terms of this
Agreement;
<PAGE>
58
(e) Guarantee Obligations in respect of Letters of Credit;
(f) Guarantee Obligations in respect of letters of credit issued for
the account of the Borrower or any of its Subsidiaries in the ordinary
course of business in an aggregate face amount not to exceed $2,000,000 at
any time.
(g) guarantees made by the Borrower or any Subsidiary of Indebtedness
of any Subsidiary which is a Guarantor or of the Borrower, which
Indebtedness is otherwise permitted under this Agreement; and
(h) 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 solely 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;
(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
<PAGE>
59
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 $11,000,000 for the
fiscal year ending December 31, 1998, $14,000,000 for the fiscal year ending
December 31, 1999 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 (i) 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, (ii) 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 (iii)
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 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
<PAGE>
60
the fiscal years of the Borrower set forth below, the amount set forth
opposite such fiscal year below:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
1998 $24,000,000
1999 $24,000,000
2000 $28,000,000
2001 $30,000,000
2002 $30,000,000
2003 $30,000,000
</TABLE>
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) the Acquisition;
(b) extensions of trade credit in the ordinary course of business;
(c) investments in Cash Equivalents;
(d) 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;
(e) 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;
(f) 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;
(g) (i) investments by the Borrower in its Subsidiaries which are
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
<PAGE>
61
Guarantee and Collateral Agreement in other Subsidiaries of the
Borrower, (iii) investments by Subsidiaries of the Borrower which are
parties to the Guarantee 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 Canadian Subsidiaries or U.K. Subsidiaries in an
aggregate amount not to exceed $10,000,000 at any time outstanding
(determined on a cumulative basis from and after the Closing Date, but
giving effect to reductions of amounts outstanding by the amount of
capital in respect thereof returned in cash to the Borrower or the
applicable Subsidiary from time to time); PROVIDED that no such
investments shall be permitted in connection with an acquisition not
otherwise permitted under subsection 8.10(j);
(h) payroll advances in the ordinary course of business;
(i) 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;
(j) 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) each
such acquisition, in the case of an acquisition of Capital Stock, shall
result in such corporation or Person becoming a Subsidiary; (iii) after
giving effect to any such acquisition, no Default or Event of Default shall
have occurred and be continuing; (iv) 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 (including the Indebtedness incurred in connection
therewith) had occurred on the first day of the four fiscal quarter period
ended with such most recently ended fiscal quarter; and (v) in the case of
any acquisition by the Borrower and its Subsidiaries, for cash or other
consideration exceeding $30,000,000 in the aggregate, such acquisition
shall be subject to the prior written consent of the Required Lenders;
(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
subsection 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 amount not
to exceed $15,000,000 outstanding at any time (determined on a cumulative
basis from and after the Closing Date, but giving effect to reductions of
amounts outstanding by the amount of capital in respect thereof returned in
cash to the Borrower or the applicable Subsidiary from time to time).
<PAGE>
62
8.11 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS. (a) Make any optional payment or prepayment on or redemption of
any Senior Subordinated Notes other than such payments in an aggregate amount
not to exceed $10,000,000 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
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.
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
<PAGE>
63
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) if such
incurrence 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 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
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64
(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 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
<PAGE>
65
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
(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
<PAGE>
66
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.
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.
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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 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.
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10.6 NON-RELIANCE 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 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 to the extent resulting 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
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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) 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
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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.
900 Oakmont Lane, Suite 100
Westmont, Illinois 60559
Attention: Chief Financial Officer
with a copy to: Gibson, Dunn & Crutcher LLP
2029 Century Park East, 40th Floor
Los Angeles, California 90067
Attention: Bruce D. Meyer
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: Janet Belden
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, 2.5, 4.4 or 4.5 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
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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 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
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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 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 4.12, 4.13 and 4.14
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 4.13, 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
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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 4.12, 4.13, 4.14 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 occurs at
any time when any of the Events of Default described in subsection 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(d). 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
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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(e).
(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.
11.7 ADJUSTMENTS; SET-OFF. (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 subsection 9(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
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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 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
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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;
(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.
<PAGE>
77
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:
Name:
Title:
THE CHASE MANHATTAN BANK, as Agent and
as a Lender
By:
Name:
Title:
<PAGE>
78
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, D/B/A SEAFIRST BANK
By:
---------------------------------
Name:
Title:
<PAGE>
79
BANK OF NOVA SCOTIA
By:
---------------------------------
Name:
Title:
<PAGE>
80
THE FIRST NATIONAL BANK OF CHICAGO
By:
---------------------------------
Name:
Title:
<PAGE>
81
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:
---------------------------------
Name:
Title:
<PAGE>
82
HARRIS TRUST & SAVINGS
By:
---------------------------------
Name:
Title:
<PAGE>
83
LASALLE NATIONAL BANK
By:
---------------------------------
Name:
Title:
<PAGE>
84
NATIONAL CITY BANK
By:
---------------------------------
Name:
Title:
<PAGE>
85
BANK OF NEW YORK
By:
---------------------------------
Name:
Title:
<PAGE>
86
CREDIT AGRICOLE INDOSUEZ
By:
---------------------------------
Name:
Title:
<PAGE>
Schedule A
Pricing Grid
<TABLE>
<CAPTION>
Commitment Eurodollar ABR
Leverage Ratio Fee Rate Applicable Margin Applicable Margin
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Greater than 3.50:1.0 .375% 1.25% 0.25%
- -----------------------------------------------------------------------------------
Less than or equal to .375% 1.00% 0%
3.50:1.00, and greater than
2.50:1.00
- -----------------------------------------------------------------------------------
Less than or equal to .300% .875% 0%
2.50:1.00, and greater than
2.00:1.00
- -----------------------------------------------------------------------------------
Less than or equal to .250% .750% 0%
2.00:1.00
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 1.1
Revolving Credit Commitments and Addresses of Lenders
<TABLE>
<CAPTION>
Revolving
Credit
Lender Commitment
- ------ ----------
<S> <C>
The Chase Manhattan Bank $ 11,818,181.81
Bank of America National Trust and Savings Association $ 10,909,090.91
Bank of Nova Scotia $ 10,909,090.91
The First National Bank of Chicago $ 10,909,090.91
First Union National Bank of North Carolina $ 10,909,090.91
Harris Trust & Savings $ 10,909,090.91
LaSalle National Bank $ 10,909,090.91
National City Bank $ 9,090,909.09
Bank of New York $ 6,818,181.82
Credit Agricole Indosuez $ 6,818,181.82
TOTAL REVOLVING CREDIT COMMITMENT $100,000,000
------------
</TABLE>
<PAGE>
SCHEDULE 1.2
Term Loan Commitments of Lenders
<TABLE>
<CAPTION>
Lender Term Loan Commitment
- ------ --------------------
<S> <C>
The Chase Manhattan Bank $ 14,181,818.19
Bank of America National Trust and Savings Association $ 13,090,909.09
Bank of Nova Scotia $ 13,090,909.09
The First National Bank of Chicago $ 13,090,909.09
First Union National Bank of North Carolina $ 13,090,909.09
Harris Trust & Savings (Chicago) $ 13,090,909.09
LaSalle National Bank $ 13,090,909.09
National City Bank $ 10,909,090.91
Bank of New York $ 8,181,818.18
Credit Agricole Indosuez $ 8,181,818.18
TOTAL TERM LOAN COMMITMENT $120,000,000
------------
</TABLE>
<PAGE>
SCHEDULE 5.14
SUBSIDIARIES
At the Closing Date, the Subsidiaries of the Borrower, the
jurisdictions of their incorporation and the direct or indirect ownership
interest of the Borrower therein will be as follows:
<TABLE>
<CAPTION>
Name Jurisdiction of Percentage Type of
---- Incorporation Interest Ownership
--------------- ---------- ---------
<S> <C> <C> <C>
Aaron's Automotive Products, Inc. Delaware 100 direct
ACI Electronics Holding Corp. Delaware 100 direct
ACI Electronics Investment Corp. Delaware 100 direct
ACI Electronics, L.P. Delaware 100 indirect
ATC Distribution Group, Inc. Delaware 100 direct
ATS Remanufacturing, Inc. Delaware 100 indirect
Component Remanufacturing New Jersey 100 indirect
Specialists, Inc.
CRS Holdings Corp. New Jersey 100 direct
GM Remanufacturing Corp. Delaware 100 indirect
King-O-Matic Industries, Limited Ontario, Canada 100 indirect
Mascot Truck Parts, Inc. Ontario, Canada 100 direct
Metran Automatic Transmission Parts Corp. New York 100 indirect
Morgan Road Acquisition Corp. Delaware 100 direct
Partes Remanufacturadas de Mexico Mexico 100 indirect
RPM Merit, Inc. Delaware 100 indirect
TranShop Management Systems, Inc. Alabama 100 indirect
</TABLE>
<PAGE>
SCHEDULE 5.16
ENVIRONMENTAL MATTERS
Reference is hereby made to the second, third, fourth and fifth
paragraphs under the Section entitled "Business - Environmental" of the
Borrower's Prospectus, dated October 22, 1997, with respect to the offering of
3,500,000 shares of common stock. The Borrower does not believe, or have reason
to believe, that any of the matters disclosed in such sections could reasonably
be expected to have a Material Adverse Effect.
<PAGE>
SCHEDULE 8.2
EXISTING INDEBTEDNESS
<PAGE>
SCHEDULE 8.3
EXISTING LIENS
None.
<PAGE>
SCHEDULE 8.10
EXISTING INVESTMENTS
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
GUARANTEE AND COLLATERAL AGREEMENT
made by
AFTERMARKET TECHNOLOGY CORP.
and certain of its Subsidiaries
in favor of
THE CHASE MANHATTAN BANK,
as Agent
Dated as of March 6, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Directly or Indirectly.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2. GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Right of Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Amendments, etc. with respect to the Borrower Obligations. . . . . . . . 6
2.5 Guarantee Absolute and Unconditional . . . . . . . . . . . . . . . . . . 7
2.6 Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3. GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 8
4.1 Representations in Credit Agreement. . . . . . . . . . . . . . . . . . . 8
4.2 Title; No Other Liens. . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Perfected First Priority Liens . . . . . . . . . . . . . . . . . . . . . 9
4.4 Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Inventory and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 Farm Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7 Pledged Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Covenants in Credit Agreement. . . . . . . . . . . . . . . . . . . . . . 10
5.2 Delivery of Instruments and Chattel Paper. . . . . . . . . . . . . . . . 10
5.3 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.5 Maintenance of Perfected Security Interest; Further Documentation. . . . 11
5.6 Changes in Locations, Name, etc. . . . . . . . . . . . . . . . . . . . . 12
5.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8 Pledged Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.9 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.10 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6. REMEDIAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.1 Certain Matters Relating to Receivables. . . . . . . . . . . . . . . . . 14
6.2 Communications with Obligors; Grantors Remain Liable . . . . . . . . . . 15
6.3 Pledged Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 Proceeds to be Turned Over To Agent. . . . . . . . . . . . . . . . . . . 16
6.5 Application of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 17
6.6 Code and Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . 17
6.7 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.8 Waiver; Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7. THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.1 Agent's Appointment as Attorney-in-Fact, etc . . . . . . . . . . . . . . 19
7.2 Duty of Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.3 Execution of Financing Statements. . . . . . . . . . . . . . . . . . . . 20
7.4 Authority of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1 Amendments in Writing. . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.3 No Waiver by Course of Conduct; Cumulative Remedies. . . . . . . . . . . 21
8.4 Enforcement Expenses; Indemnification. . . . . . . . . . . . . . . . . . 21
8.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.6 Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.9 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.12 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . 23
8.13 Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.14 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.15 Additional Grantors . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.16 Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
2
<PAGE>
AMENDED AND RESTATED
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of March 6, 1998, 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 Amended
and Restated Credit Agreement, dated as of March 6, 1998 (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among Aftermarket Technology Corp. (the "BORROWER"), the Lenders, Chase
Securities Inc., as Global Arranger, 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, Inventory and Investment Property.
(b) The following terms shall have the following meanings:
<PAGE>
2
"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 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
<PAGE>
3
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 The Obligations hereunder are expressly designated Senior Debt
(as such term is defined in the Indentures) and made senior in right of
payment to the respective Notes or Guarantees (as defined in the
Indentures) made by the Grantors.
"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,
<PAGE>
4
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.
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
<PAGE>
5
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.
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
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6
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 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
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7
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 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;
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8
(d) all Equipment;
(e) all General Intangibles;
(f) all Instruments;
(g) all Intellectual Property;
(h) all Inventory;
(i) all Investment Property;
(j) all Pledged Securities;
(k) all books and records pertaining to the Collateral; and
(l) 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 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
<PAGE>
9
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.
(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
<PAGE>
10
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.
(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 _________ in each calendar year and such supplemental reports with respect
thereto as the Agent may from time to time reasonably request.
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11
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 DOCUMENTATION.
(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;
(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
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12
(b) of 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 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
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13
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.
(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.
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14
(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
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 6.5, 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
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15
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 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
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16
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.
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.
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,
<PAGE>
17
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 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
<PAGE>
18
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 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,
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19
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.
(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.
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20
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
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
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21
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.
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
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22
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:
(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
<PAGE>
23
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.
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.
<PAGE>
24
IN WITNESS WHEREOF, each of 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:____________________________
Name:
Title:
AARON'S AUTOMOTIVE PRODUCTS, INC.
By:____________________________
Name:
Title:
ACI ELECTRONICS HOLDING CORP.
By:____________________________
Name:
Title:
ACI ELECTRONICS INVESTMENT CORP.
By:____________________________
Name:
Title:
ACI ELECTRONICS, L.P.
By: ACI ELECTRONICS HOLDING CORP., its
General Partner
By:____________________________
Name:
Title:
<PAGE>
25
ATC DISTRIBUTION GROUP, INC.
By:____________________________
Name:
Title:
ATS REMANUFACTURING, INC.
By:____________________________
Name:
Title:
COMPONENT REMANUFACTURING SPECIALISTS, INC.
By:____________________________
Name:
Title:
CRS HOLDINGS CORP.
By:____________________________
Name:
Title:
GM REMANUFACTURING CORP.
By:____________________________
Name:
Title:
METRAN AUTOMATIC TRANSMISSION PARTS CORP.
By:____________________________
Name:
Title:
<PAGE>
26
MORGAN ROAD ACQUISITION CORP.
By:____________________________
Name:
Title:
RPM MERIT, INC.
By:____________________________
Name:
Title:
<PAGE>
SCHEDULE 1
NOTICE ADDRESSES OF GUARANTORS
1. Aaron's Automotive Products, Inc.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
2. ACI Electronics Holding Corp.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
3. ACI Electronics Investment Corp.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
4. ACI Electronics, L.P.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
5. ATC Distribution Group, Inc.
900 Oakmont Lane, Suite 100
Westmont, IL 60059
6. ATS Remanufacturing, Inc.
900 Oakmont Lane, Suite 100
Westmont, IL 60059
7. Component Remanufacturing Specialists, Inc.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
8. CRS Holdings Corp.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
9. GM Remanufacturing Corp.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
10. Metran Automatic Transmission Parts Corp.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
11. Morgan Road Acquisition Corp.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
12. RPM Merit, Inc.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
<PAGE>
SCHEDULE 2
DESCRIPTION OF PLEDGED SECURITIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ENTITY STOCK # SHARES HOLDER % OWNED
CERTIFICATE # BY ATC(1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaron's Automotive 1 1,000 ATC 100%
Products, Inc.(1)
- --------------------------------------------------------------------------------
ACI Electronics 1 1,000 ATC 100%
Holding Corp.
- --------------------------------------------------------------------------------
ACI Electronics 1 1,000 ATC 100%
Investment Corp.
- --------------------------------------------------------------------------------
ATC Distribution 1 1,000 ATC 100%
Group, Inc.
("ATCDG")(2)
- --------------------------------------------------------------------------------
ATS Remanufacturing, 1 1,000 Component 100%
Inc. Remanufacturing
Specialists, Inc.
- --------------------------------------------------------------------------------
Component 11 1,000 CRS Holdings 100%
Remanufacturing
Specialists, Inc.
- --------------------------------------------------------------------------------
CRS Holdings Corp. 1 1,000 ATC 100%
- --------------------------------------------------------------------------------
GM Remanufacturing 1 1,000 Component 100%
Corp. Remanufacturing
Specialists, Inc.
- --------------------------------------------------------------------------------
King-O-Matic 2 650 ATCDG 100%
Industries
Limited
- --------------------------------------------------------------------------------
Metran Automatic 7 50 ATCDG(3) 100%
Transmission
Parts Corp.
- --------------------------------------------------------------------------------
Morgan Road 1 1,000 ATC 100%
Acquisition Corp.
- --------------------------------------------------------------------------------
ENTITY STOCK # SHARES HOLDER % OWNED
CERTIFICATE # BY ATC
- --------------------------------------------------------------------------------
Partes 1 64,740(4) RPM 100%
Remanufacturadas
de Mexico, S.A.
de C.V.
</TABLE>
____________________
(4) Constitutes 65% of the issued and outstanding stock owned by RPM.
___________________
(1) The stock certificate is in the name of AAP Acquisition Corp., as the
shares were issued before the merger of Aaron's Automotive Products, Inc.
into AAP Acquisition Corp. and the simultaneous name change to Aaron's
Automotive Products, Inc.
(2) The certificate was issued when ATCDG was called "TM-AL Acquisition
Corp."
(3) The certificate was issued to ATCDG prior to its name change from
"TM-AL Acquisition Corp." The merger of Metran into ATCDG is pending
in New York.
<PAGE>
2
<TABLE>
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RPM Merit, Inc.(5) 1 1,000 ATCDG 100%
- -------------------------------------------------------------------------------------
TranShop Management
Systems, Inc. 4 100 ATCDG 100%
- -------------------------------------------------------------------------------------
10468 Newfoundland Inc. 2 650 ATC 100%
- -------------------------------------------------------------------------------------
10469 Newfoundland Inc. 2 650 ATC 100%
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
_____________________________
(5) The stock certificate is in the name of AAP Acquisition Corp., as the
shares were issued before the merger of Aaron's Automotive Products,
Inc. into AAP Acquisition Corp. and the simultaneous name change to
Aaron's Automotive Products, Inc.
<PAGE>
SCHEDULE 3
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
UNIFORM COMMERCIAL CODE FILINGS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF DEBTOR STATE OF FILING STATE LOCAL
FILING OFFICE FILING OFFICE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aftermarket Technology Corp. Illinois Secretary of State DuPage County
900 Oakmont Lane, Suite 100
Westmont, IL 60559
- ---------------------------------------------------------------------------------------------------------------------
Aaron's Automotive Products, Florida Secretary of State Orange County
Inc.
2600 N. Westgate
Springfield, MO 65803-9503
-------------------------------------------------------------------------
Illinois Secretary of State Cook County
-------------------------------------------------------------------------
Louisiana Secretary of State Jefferson County
-------------------------------------------------------------------------
Maryland Secretary of State Baltimore City
-------------------------------------------------------------------------
Michigan Secretary of State Wayne County
-------------------------------------------------------------------------
Missouri Secretary of State Greene County
Jackson County
Jasper County
St. Louis County
-------------------------------------------------------------------------
North Carolina Secretary of State Mecklenburg County
-------------------------------------------------------------------------
New Jersey Secretary of State Bergen County
-------------------------------------------------------------------------
Tennessee Secretary of State Shelby County
-------------------------------------------------------------------------
Texas Secretary of State Harris County
-------------------------------------------------------------------------
Virginia Secretary of State City of Norfolk
- ---------------------------------------------------------------------------------------------------------------------
ACI Electronics Holding Corp. Illinois Secretary of State DuPage County
900 Oakmont Lane, Suite 100
Westmont, IL 60559
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ACI Electronics Investment Corp. Illinois Secretary of State DuPage County
900 Oakmont Lane, Suite 100
Westmont, IL 60559
- ------------------------------------------------------------------------------------------------------------------------
ACI Electronics, L.P. Illinois Secretary of State DuPage County
900 Oakmont Lane, Suite 100
Westmont, IL 60559* ------------------------------------------------------------------------------
Nevada Secretary of State Washoe County
------------------------------------------------------------------------------
North Carolina Secretary of State Mecklenburg County
------------------------------------------------------------------------------
Oklahoma Secretary of State Canadian County
Oklahoma County
------------------------------------------------------------------------------
Texas Secretary of State Dallas County
Denton County
Harris County
- ------------------------------------------------------------------------------------------------------------------------
ATC Distribution Group, Inc. Alabama Secretary of State Lauderdale County
900 Oakmont Lane, Suite 100
Westmont, IL 60559
------------------------------------------------------------------------------
Florida Secretary of State Duval County
Orange County
------------------------------------------------------------------------------
Georgia Secretary of State Fulton County
------------------------------------------------------------------------------
Illinois Secretary of State Cook County
DuPage County
------------------------------------------------------------------------------
Kentucky Secretary of State Bullitt County
------------------------------------------------------------------------------
Maryland Secretary of State Baltimore City
------------------------------------------------------------------------------
Massachusetts Secretary of State Malden City
------------------------------------------------------------------------------
Michigan Secretary of State Kent County
Wayne County
------------------------------------------------------------------------------
Minnesota Secretary of State Hennepin County
Anoka County
------------------------------------------------------------------------------
Missouri Secretary of State Greene County
Jackson County
</TABLE>
<PAGE>
3
<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------------------------
St. Louis County
-----------------------------------------------------------------------------
New York Secretary of State Nassau County
-----------------------------------------------------------------------------
North Carolina Secretary of State Mecklenburg County
-----------------------------------------------------------------------------
Ohio Secretary of State Butler County
Montgomery County
-----------------------------------------------------------------------------
Pennsylvania Secretary of State Bucks County
King County
-----------------------------------------------------------------------------
Tennessee Secretary of State Davidson County
Shelby County
-----------------------------------------------------------------------------
Texas Secretary of State Bexar County
Dallas County
Harris County
Travis County
-----------------------------------------------------------------------------
Virginia Secretary of State City of Norfolk
-----------------------------------------------------------------------------
Wisconsin Secretary of State Rock County
- ------------------------------------------------------------------------------------------------------------------------
ATS Remanufacturing, Inc. North Carolina Secretary of State Gaston County
1224 Isley Road
Gastonia, NC 28052
- ------------------------------------------------------------------------------------------------------------------------
Component Remanufacturing Specialists, Inc. New Jersey Secretary of State Bergen County
400 Corporate Drive
Mahwah, NJ 07430
- ------------------------------------------------------------------------------------------------------------------------
CRS Holdings Corp. New Jersey Secretary of State Bergen County
400 Corporate Drive
Mahwah, NJ 07430
- ------------------------------------------------------------------------------------------------------------------------
GM Remanufacturing Corp. Illinois Secretary of State DuPage County
900 Oakmont Lane, Suite 100
Westmont, IL 60559 (*)
------------------------------------------------------------------------------
Oklahoma Secretary of State Oklahoma County
- ------------------------------------------------------------------------------------------------------------------------
Metran Automatic Transmission New York Secretary of State Nassau County
</TABLE>
- ----------------------------
* The address will change to the address of the target after completion
of the acquisition.
<PAGE>
4
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Parts Corp.
48 Jericho Turnpike
Jericho, NY 11753
- ------------------------------------------------------------------------------------------------------------------------
Morgan Road Acquisition Corp. Illinois Secretary of State DuPage County
900 Oakmont Lane, Suite 100
Westmont, IL 60669*
------------------------------------------------------------------------------
Michigan Secretary of State Wayne County
------------------------------------------------------------------------------
Oklahoma Secretary of State Canadian County
Oklahoma County
- ------------------------------------------------------------------------------------------------------------------------
RPM Merit, Inc. Arizona Secretary of State Pima County
12250 E. 4th Street Maricopa County
Rancho Cucamonga, CA 91730
------------------------------------------------------------------------------
California Secretary of State Alameda County
Fresno County
Los Angeles County
Sacramento County
San Bernardino County
San Diego County
Santa Clara County
------------------------------------------------------------------------------
Colorado** Secretary of State
------------------------------------------------------------------------------
Nevada Secretary of State Clark County
------------------------------------------------------------------------------
New Mexico Secretary of State Bernalillo County
------------------------------------------------------------------------------
Oregon Secretary of State Multnomah County
------------------------------------------------------------------------------
Utah*** Secretary of State
------------------------------------------------------------------------------
Washington**** Secretary of State
- ------------------------------------------------------------------------------------------------------------------------
TranShop Management System, Inc. Alabama Secretary of State Lauderdale County
900 Oakmont Lane, Suite 100
Westmont, IL 60559
</TABLE>
- ----------------------------
** No filing in El Paso County and Denver County; only real estate filings
are accepted.
*** No filing in Salt Lake City County; only real estate filings are accepted.
**** No filing in King County and Spokane County; only real estate filings are
accepted.
<PAGE>
5
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------------------
Illinois Secretary of State DuPage County
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
PATENT AND TRADEMARK FILINGS
United States Patent and Trademark Office
ACTIONS WITH RESPECT TO PLEDGED STOCK
Delivery of Pledged Stock to Agent in New York
OTHER ACTIONS
None
<PAGE>
SCHEDULE 4
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
<TABLE>
Grantor Location
------- --------
<S> <C>
Aftermarket Technology Corp. (Delaware) 900 Oakmont Lane, Suite 100
Westmont, IL 60559
Aaron's Automotive Products, Inc. (Delaware) 2600 N. Westgate
Springfield, MO 65803-9503
ACI Electronics Holding Corp. (Delaware) 900 Oakmont Lane, Suite 100
Westmont, IL 60559
ACI Electronics Investment Corp. (Delaware) 900 Oakmont Lane, Suite 100
Westmont, IL 60559
ACI Electronics, L.P. (Delaware) 900 Oakmont Lane, Suite 100
Westmont, IL 60559
ATC Distribution Group, Inc. (Delaware) 900 Oakmont Lane, Suite 100
Westmont, IL 60559
ATS Remanufacturing, Inc. (Delaware) 1224 Isley Road
Gastonia, NC 28052
Component Remanufacturing Specialists, Inc. (New Jersey) 400 Corporate Dr.
Mahwah, NJ 07430
CRS Holdings Corp. (New Jersey) 900 Oakmont Lane, Suite 100
Westmont, IL 60559
GM Remanufacturing Corp. (Delaware) 900 Oakmont Lane, Suite 100
Westmont, IL 60559
Metran Automatic Transmission Parts Corp. (New York) 48 Jericho Turnpike
Jericho, NY 11753
Morgan Road Acquisition Corp. (Delaware) 900 Oakmont Lane, Suite 100
Westmont, IL 60559
RPM Merit, Inc. (Delaware) 12250 E. 4th Street
Rancho Cucamonga, CA 91730
TranShop Management System, Inc. (Alabama) 900 Oakmont Lane, Suite 100
Westmont, IL 60559
</TABLE>
<PAGE>
SCHEDULE 5
LOCATION OF INVENTORY AND EQUIPMENT
<TABLE>
<CAPTION>
COMPANY ADDRESS CITY STATE/ZIP COUNTY
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaron's 1900 W. New Hampshire Orlando FL 32804 Orange Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 5635 Powell St. Harahan LA 70123 Jefferson Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 100 S. Mannheim Rd. Hillside IL 60162 Cook Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 1903 South Charles St. Baltimore MD 21230 Baltimore City
(No County)
- ---------------------------------------------------------------------------------------------------
Aaron's 21750 W. Trolley Dr. Taylor MI 48180 Wayne Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 656 Godfrey SW Grand Rapids MI 49503 Kent Co.
- ---------------------------------------------------------------------------------------------------
Aaron's *A423001 Davis Blvd. Joplin MO 64804 Jasper Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 2333 E. Chestnut Springfield MO 65803 Greene Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 1719 W. Mt. Vernon Springfield MO 65803 Greene Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 1851 E. Florida Springfield MO 65803 Greene Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 2665 N. Airport Springfield MO 65803 Greene Co.
Commerce Ave.
- ---------------------------------------------------------------------------------------------------
Aaron's 2500 N. Westgate Springfield MO 65803 Greene Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 1645 E. Florida Springfield MO 65803 Greene Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 2821 W. Chestnut Springfield MO 65803 Greene Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 1225 N. Warson Rd. Creve Coeur MO 63132 St. Louis Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 1651 N. Topping Kansas City MO 64108 Jackson Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 2000 Freedom Dr. Charlotte NC 28208 Mecklenburg Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 27 Poplar Dr. E. Rutherford NJ 07073 Bergen Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 3580 E. Raines St. Memphis TN 38118 Shelby Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 3202 Harrisburg Blvd. Houston TX 77003 Harris Co.
- ---------------------------------------------------------------------------------------------------
Aaron's 1114 Ballentine Blvd. Norfolk VA 23509
- ---------------------------------------------------------------------------------------------------
ACI Electronics 3000-H Cross Point Charlotte NC 28269 Mecklenburg Co.
Center Lane
- ---------------------------------------------------------------------------------------------------
ACI Electronics 2000 Vista Blvd., Sparks NV 89434 Washoe Co.
Suite 800
- ---------------------------------------------------------------------------------------------------
ACI Electronics 1301 Cornwell Pkwy., Oklahoma City OK 73108 Oklahoma Co.
Suite 800
- ---------------------------------------------------------------------------------------------------
ACI Electronics 1612 Hutton Drive, Carrollton TX 75006 Dallas Co.
Suite 120
- ---------------------------------------------------------------------------------------------------
ACI Electronics 10535 Harwin Drive Houston TX 77036 Harris Co.
- ---------------------------------------------------------------------------------------------------
ACI Electronics 10631 Harwin Drive Houston TX 77036 Harris Co.
<PAGE>
COMPANY ADDRESS CITY STATE/ZIP COUNTY
- ---------------------------------------------------------------------------------------------------
ACI Electronics 2153 Eagle Pkwy Fort Worth TX 76177 Denton Co.
- ---------------------------------------------------------------------------------------------------
ATC 900 Oakmont Lane, Westmont IL 60559 DuPage Co.
Ste. 100
- ---------------------------------------------------------------------------------------------------
ATCDG 501 County Rd. 30 Florence AL 35630 Lauderdale Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 5535 Commonwealth Jacksonville FL 32254 Duval Co.
Avenue
- ---------------------------------------------------------------------------------------------------
ATCDG 1900 W. New Hampshire Orlando FL 32804 Orange Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 4290 Seaboard Rd. Orlando FL 32806 Orange Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 510 Van Heusen Blvd. Atlanta GA 30318 Fulton Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 100 S. Mannheim Rd. Hillside IL 60162 Cook Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 255 East 167th St. Harvey IL 60426 Cook Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 249 Velva Dr. Louisville KY 40229 Bullitt Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 4282 Blue Lick Rd. Louisville KY 40229 Bullitt Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 170 Commercial St. Malden MA 02148
- ---------------------------------------------------------------------------------------------------
ATCDG 21750 W. Trolley Dr. Taylor MI 48180 Wayne Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 656 Godfrey SW Grand Rapids MI 49503 Kent Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 3900 Jackson St. NE Columbia Hts. MN 55421 Anoka Co.
Ste. 150
- ---------------------------------------------------------------------------------------------------
ATCDG 719 Hampshire Avenue S. Golden Valley MN 55426 Hennipin Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 1225 N. Warson Rd. Creve Coeur MO 63132 St. Louis Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 4605 World Parkway Berkeley MO 63134 St. Louis Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 1651 N. Topping Kansas City MO 64108 Jackson Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 1350 E. Chestnut Springfield MO 65803 Greene Co.
Expressway
- ---------------------------------------------------------------------------------------------------
ATCDG 2000 Freedom Dr. Charlotte NC 28208 Mecklenburg Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 11125 Ashburn Drive Forest Park OH 45240 Butler Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 1825 E. First St. Dayton OH 45403 Montgomery Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 606 State Rd. Croydon PA 19021 Bucks Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 3580 E. Raines St. Memphis TN 38118 Shelby Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 3540 Dickerson Pike Nashville TN 37207 Davidson Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 2425 Irving Blvd. Dallas TX 75207 Dallas Co.
Page 3
<PAGE>
COMPANY ADDRESS CITY STATE/ZIP COUNTY
- ---------------------------------------------------------------------------------------------------
ATCDG 4520 Mint Way Dallas TX 75236 Dallas Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 1339 South Brazos San Antonio TX 78207 Bexar Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 3202 Harrisburg Blvd. Houston TX 77003 Harris Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 1416 B S. Lamar Blvd. Austin TX 78704 Travis Co.
- ---------------------------------------------------------------------------------------------------
ATCDG 1360 Ingleside Rd. Norfolk VA 23502 No County
- ---------------------------------------------------------------------------------------------------
ATCDG 1114 Ballentine Blvd. Norfolk VA 23509 No County
- ---------------------------------------------------------------------------------------------------
ATCDG 2921 Kennedy Rd. Janesville WI 53545 Rock Co.
- ---------------------------------------------------------------------------------------------------
ATS 1224 Isley Road Gastonia NC 28052 Gaston Co.
- ---------------------------------------------------------------------------------------------------
ATS 2015 N. Chester Blvd. Gastonia NC 28052 Gaston Co.
- ---------------------------------------------------------------------------------------------------
ATS 200 Kinder Drive Kings Mountain NC 28086 Cleveland Co.
- ---------------------------------------------------------------------------------------------------
CRS 400 Corporate Drive Mahwah NJ 07430 Bergen Co.
- ---------------------------------------------------------------------------------------------------
GM Reman 3920 Northwest 39th Oklahoma City OK 73112 Oklahoma Co.
Street
- ---------------------------------------------------------------------------------------------------
GM Reman 3300 North Santa Fe Oklahoma City OK Oklahoma Co.
- ---------------------------------------------------------------------------------------------------
King-O-Matic 6025 3rd St. S.E. Calgary Alberta (Canada)
- ---------------------------------------------------------------------------------------------------
King-O-Matic 1486 Clividen Avenue Delta BC (Vancouver)
- ---------------------------------------------------------------------------------------------------
King-O-Matic 5128 Everest Drive Mississauga Ontario L4W 2R4
- ---------------------------------------------------------------------------------------------------
King-O-Matic 939 Pantera Drive Mississauga Ontario L4W 2R9
- ---------------------------------------------------------------------------------------------------
King-O-Matic 10442 Armand-Lavergne Montreal Quebec
Avenue
- ---------------------------------------------------------------------------------------------------
King-O-Matic 1125 Osler St. Regina Saskatchewan
- ---------------------------------------------------------------------------------------------------
Mascot 1415 Shawson Drive Mississauga Ontario L4W 1X7
-------------------------------------------------------------------------------
15345 114th Avenue Edmonton Alberta
-------------------------------------------------------------------------------
43 Driscoll Crescent Moncton New Brunswick E1E4C8
- ---------------------------------------------------------------------------------------------------
Metran 48 Jericho Turnpike Jericho NY 11753 Nassau Co.
- ---------------------------------------------------------------------------------------------------
Morgan Road 9901 West Reno Oklahoma City OK 73099 Canadian Co.
- ---------------------------------------------------------------------------------------------------
Morgan Road 10001 Northwest 2nd Oklahoma City OK 73099 Canadian Co.
- ---------------------------------------------------------------------------------------------------
Morgan Road 814 West Sheridan Oklahoma City OK Oklahoma Co.
Page 3
<PAGE>
COMPANY ADDRESS CITY STATE/ZIP COUNTY
- ---------------------------------------------------------------------------------------------------
Morgan Road 800 West Sheridan Oklahoma City OK Oklahoma Co.
- ---------------------------------------------------------------------------------------------------
Morgan Road 100 Nortwest 63rd, Oklahoma City OK 73116 Oklahoma Co.
Suite 301
- ---------------------------------------------------------------------------------------------------
Morgan Road 501 North Miller Oklahoma City OK Oklahoma Co.
- ---------------------------------------------------------------------------------------------------
Morgan Road 900 West Main Street Oklahoma City OK 73106 Oklahoma Co.
- ---------------------------------------------------------------------------------------------------
RPM 4530 N. 43rd Avenue Phoenix AZ 85719 Maricopa Co.
- ---------------------------------------------------------------------------------------------------
RPM 1011 S. Euclid Tucson AZ 85719 Pima Co.
- ---------------------------------------------------------------------------------------------------
RPM 12825 S. Broadway Los Angeles CA 90061 Los Angeles Co.
- ---------------------------------------------------------------------------------------------------
RPM 15229 Keswick St. Van Nuys CA 91405 Los Angeles Co.
- ---------------------------------------------------------------------------------------------------
RPM 12250 E. 4th Street Rancho Cucamonga CA 91730 San Bernardino Co.
- ---------------------------------------------------------------------------------------------------
RPM 663 N. 33rd St. Unit C San Diego CA 92113 San Diego Co.
- ---------------------------------------------------------------------------------------------------
RPM 704 G Street Fresno CA 93706 Fresno Co.
- ---------------------------------------------------------------------------------------------------
RPM 1987 Davis St. San Leandro CA 94577 Alameda Co.
- ---------------------------------------------------------------------------------------------------
RPM 1451 13th St. Oakland CA 94607 Alameda Co.
- ---------------------------------------------------------------------------------------------------
RPM 434 Perrymont Avenue San Jose CA 95126 Santa Clara Co.
- ---------------------------------------------------------------------------------------------------
RPM 2410 Manning Street Sacramento CA 95815 Sacramento Co.
- ---------------------------------------------------------------------------------------------------
RPM 215-217 Irwindale CA 91702 Los Angeles Co.
Avenue Azusa
- ---------------------------------------------------------------------------------------------------
RPM 1548 W. Byers Ave. Denver CO 80223 Denver Co.
- ---------------------------------------------------------------------------------------------------
RPM 2639 E. Willamette Colorado Springs CO 80909 El Paso Co.
Avenue
- ---------------------------------------------------------------------------------------------------
RPM KM.6 Carretera A Mexicali Mexico
San Luis, R.C.
- ---------------------------------------------------------------------------------------------------
RPM 2401-A Phoenix NE Albuquerque NM 67107 Bernalillo Co.
- ---------------------------------------------------------------------------------------------------
RPM 388 W. Diablo Las Vegas NV 89118 Clark Co.
- ---------------------------------------------------------------------------------------------------
RPM 536 SE 6th St. Portland OR 97214 Multnomah Co.
- ---------------------------------------------------------------------------------------------------
RPM 3472 W. 2100 South Salt Lake City UT 84119 Salt Lake Co.
- ---------------------------------------------------------------------------------------------------
RPM 401 S. Webster Seattle WA 98106 King Co.
- ---------------------------------------------------------------------------------------------------
RPM N. 1415 Thierman Rd. Spokane WA 99212 Spokane Co.
- ---------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
SCHEDULE 6
COPYRIGHTS AND COPYRIGHT LICENSES
None
PATENTS AND PATENT LICENSES
None
TRADEMARKS AND TRADEMARK LICENSES
None
<PAGE>
SCHEDULE 7
EXISTING PRIOR LIENS
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Amended
and Restated Guarantee and Collateral Agreement dated as of March 6, 1998 (the
"AGREEMENT"), made by the Grantors parties thereto for the benefit of The Chase
Manhattan Bank, as Agent. The undersigned agrees for the benefit of the Agent
and the Lenders as follows:
1. The undersigned will be bound by the terms of the Agreement and
will comply with such terms insofar as such terms are applicable to the
undersigned.
2. The undersigned will notify the Agent promptly in writing of the
occurrence of any of the events described in Section 5.8(a) of the Agreement.
3. The terms of Sections 6.3(a) and 6.7 of the Agreement shall apply
to it, MUTATIS MUTANDIS, with respect to all actions that may be required of it
pursuant to Section 6.3(a) or 6.7 of the Agreement.
---------------------------------------
[NAME OF ISSUER]
---------------------------------------
By
Title
Address for Notices:
<PAGE>
2
Annex 1 to
GUARANTEE AND COLLATERAL AGREEMENT
ASSUMPTION AGREEMENT, dated as of ________________, 199_, made by
______________________________, a ______________ corporation (the "ADDITIONAL
GRANTOR"), in favor of THE CHASE MANHATTAN BANK, as administrative agent (in
such capacity, the "AGENT") for the banks and other financial institutions (the
"LENDERS") parties to the Credit Agreement referred to below. All capitalized
terms not defined herein shall have the meaning ascribed to them in such Credit
Agreement.
W I T N E S S E T H :
WHEREAS, Aftermarket Technology Corp. (the "BORROWER"), the Lenders
and the Agent have entered into an Amended and Restated Credit Agreement, dated
as of March 6, 1998 (as amended, supplemented or otherwise modified from time to
time, the "CREDIT AGREEMENT");
WHEREAS, in connection with the Credit Agreement, the Borrower and
certain of its Affiliates (other than the Additional Grantor) have entered into
the Amended and Restated Guarantee and Collateral Agreement, dated as of March
6, 1998 (as amended, supplemented or otherwise modified from time to time, the
"GUARANTEE AND COLLATERAL AGREEMENT") in favor of the Agent for the benefit of
the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor to
become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee and Collateral
Agreement;
NOW, THEREFORE, IT IS AGREED:
1. GUARANTEE AND COLLATERAL AGREEMENT. By executing and delivering
this Assumption Agreement, the Additional Grantor, as provided in Section 8.15
of the Guarantee and Collateral Agreement, hereby becomes a party to the
Guarantee and Collateral Agreement as a Grantor thereunder with the same force
and effect as if originally named therein as a Grantor and, without limiting
the generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Grantor thereunder. The information set forth in Annex 1-A
hereto is hereby added to the information set forth in Schedules
____________(*****) to the Guarantee and Collateral Agreement. The Additional
Grantor hereby represents and warrants that each of the representations and
warranties contained in Section 3 of the Guarantee and Collateral Agreement is
true and correct on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
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(*****) Refer to each Schedule which needs to be supplemented.
<PAGE>
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IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
--------------------------------
Name:
Title:
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THIS AMENDED AND RESTATED LEASE (this "Lease") is made and entered into
as of June 1, 1997 by and between CONFAR INVESTORS II, L.L.C., an Arizona
limited liability company, having its principal office at c/o Bridge Street
Investments, Inc., One Securities Centre, 3490 Piedmont Road, Suite 1020,
Atlanta, Georgia 30305 (the "Landlord") and AARON'S AUTOMOTIVE PRODUCTS,
INC., a Delaware corporation, having its principal office at 2600 North
Westgate, Springfield, Missouri, 65803 ("Tenant").
RECITALS:
WHEREAS, Landlord and Tenant or their predecessors in interest have
previously entered into that certain lease dated August 26, 1968, as amended
by those certain amendments dated, respectively, September 20, 1974, November
10, 1974 and July 24, 1995 (such lease, as so amended, the "Original Lease").
WHEREAS, Landlord and Tenant desire to make certain changes to the
Original Lease.
WHEREAS, for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto do hereby agree to amend and restate
the Original Lease in its entirety as follows:
FUNDAMENTAL TERMS AND DEFINITIONS
For the purposes of this Lease, the following terms shall have the
following definitions and meanings:
A. LANDLORD: Confar Investors II, L.L.C., as well as the owner at
any time of the Premises and of the interest of Landlord under this Lease.
B. TENANT: Aaron's Automotive Products, Inc., as well as any
permitted transferee at any time of the interest of Tenant under this Lease.
C. BUILDING: All buildings presently erected on the land described
in Exhibit A and any building or buildings erected in place thereof or in
addition thereto.
D. PREMISES: The land described in Exhibit A hereto and the
Building and the sidewalks, curbs, gutters and streets adjacent thereto.
E. LEASE COMMENCEMENT DATE: June 1, 1997. (Section 2.01)
F. EXPIRATION DATE: August 31, 2008 (unless extended pursuant to
Section 2.02)
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G. TERM: The Initial Term plus any Extended Term(s). (Sections 2.01
and 2.02)
H. INITIAL TERM: Eleven (11) years and three (3) months. (Section
2.01)
I. EXTENDED TERM: Either of the five (5) year terms provided in
Section 2.02.
J. FIXED RENT: $190,000.00 per annum. (Section 3.01)
K. LANDLORD'S ORIGINAL COST: $1,494,145.14
L. LANDLORD'S COST OF FIRST EXPANSION: $2,000,000
M. LANDLORD'S ADDRESS: c/o Bridge Street Investments, Inc., One
Securities Centre, 3490 Piedmont Road, Suite 1020, Atlanta, Georgia 30305,
Attention: Mr. Neal Gumbin, President, or such address as Landlord designates.
N. TENANT'S ADDRESS: The Premises with a copy addressed to (i)
Aaron's Automotive Products, Inc. at 2600 North Westgate, Springfield,
Missouri 65803, Attention: Mr. Ken Bear, Vice President, and (ii) Carnahan,
Evans, Cantwell & Brown, P.C., Four Corporate Centre, Suite 410, 1949 E.
Sunshine, P.O. Box 10009 G.S.S., Springfield, Missouri 65808-0009, or such
other address as Tenant designates. (Section 12.13).
ARTICLE I
PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord,
the Premises located in Joplin, Jasper County, Missouri, for the term, at
the rental, and upon all of the terms, covenants and conditions set forth in
this Lease, and subject to the following:
(A) Such rights, easements, covenants, conditions, restrictions and
other interests of Persons (as defined in Section 3.03B below) other than
Landlord as now affect Landlord's title to the Premises, including but not
limited to those set forth in Exhibit A hereto or incorporated therein by
reference;
(B) Zoning rules, restrictions, regulations, resolutions, ordinances,
building restrictions and governmental regulations now in effect or hereafter
adopted by any governmental authority having jurisdiction;
(C) Violations (other than any caused by Landlord) of laws, ordinances,
orders or requirements that might be disclosed by an examination, inspection
or search of the Premises
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as the same now exist by any federal, state or municipal department
or authority having jurisdiction;
(D) Any defects of title, encumbrances or encroachments now or hereafter
existing except such as may hereafter result from any act or omission of
Landlord or its predecessors in interest;
(E) All taxes, assessments, water charges and sewer rents, accrued or
unaccrued, fixed or not fixed;
(F) The present condition and state of repair of the Premises; and
(G) Such state of affairs as would be disclosed by an accurate
survey.
ARTICLE II
INITIAL TERM AND EXTENDED TERMS
SECTION 2.01. The Initial Term of this Lease shall be a term of eleven
(11) years and three (3) months beginning on the first day of June, 1997 and
expiring on the last day of August, 2008, unless earlier terminated pursuant
to any provision of this Lease or extended pursuant to Section 2.02.
SECTION 2.02.
A. Unless Tenant notifies Landlord in writing on or before the date
that is one (1) year prior to expiration of the Initial Term hereof (i.e.,
August 31, 2007) that it elects not to extend the Initial Term of this Lease,
this Lease shall automatically be extended for a term of five (5) years (the
"First Extended Term") upon the expiration of the Initial Term.
B. In the event this Lease is extended for the First Extended Term,
unless Tenant notifies Landlord in writing on or before the date that is one
(1) year prior to the expiration of the First Extended Term (i.e., August 31,
2012) that it elects not to extend the Term of this Lease for a succeeding
five (5) year term (the "Second Extended Term") (the "First Extended Term"
and the "Second Extended Term", each, an "Extended Term"), this Lease shall
automatically be extended for the Second Extended Term upon the expiration of
the First Extended Term.
C. In the event Tenant for any reason elects not to extend the Term
of this Lease for the First Extended Term or the Second Extended Term, Tenant
shall have no further privilege to extend the Term of this Lease and said
Term shall expire and come to an end upon the expiration of the Initial Term
or the First Extended Term, as the case may be.
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SECTION 2.03. Notwithstanding the foregoing, any extension of this
Lease shall be subject to the express condition that at the commencement of
any Extended Term, Tenant shall not be in default under any of the terms,
covenants or conditions of this Lease.
ARTICLE III
RENT
SECTION 3.01.
A. Tenant shall pay Fixed Rent to Landlord at its principal office above
set forth and at the times hereinafter set forth, without previous demand
therefor and in money of the United States of America which at the time of
payment shall be legal tender for public and private debts.
B. Fixed Rent shall be payable in equal monthly installments of
$15,833.34 in advance on the first business day of each month during the
Initial Term and any Extended Term commencing on the Lease Commencement Date.
It is the purpose and intent of Landlord and Tenant that the Fixed Rent shall
be absolutely net to Landlord so that this Lease shall yield, net to
Landlord, the Fixed Rent specified in the Fundamental Terms and Definitions
in each Lease Year (as defined in Section 3.05), free of any charges,
assessments, or impositions of any kind charged, assessed, or imposed on or
against the Premises, and without abatement, deduction or set-off by the
Tenant, and Landlord shall not be expected or required to pay any such
charge, assessment or imposition, or be under any obligation or liability
hereunder except as herein expressly set forth, and that all costs, expenses
and obligations of any kind relating to the maintenance, preservation, care,
repair and operation of the Premises, including all replacements, alterations
and additions as hereinafter provided, which may arise or become due during
the Term of this Lease shall be paid by Tenant, and Landlord shall be
indemnified and saved harmless by Tenant from and against such costs,
expenses and obligations.
SECTION 3.02. As additional rent, Tenant shall pay, commencing on the
Lease Commencement Date (whether ordinary or extra-ordinary, foreseen or
unforeseen and without regard to the nature thereof), all:
A. Taxes, assessments (including special assessments) and other
governmental charges;
B. Water and sewer rents, water frontage charges, water meter rents and
all other charges of a similar kind;
C. Costs of obtaining and maintaining the policies of insurance set
forth in Article V; and
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D. Expenses of occupying, operating, altering, maintaining and repairing
the premises and of making any additions thereto (including structural as
well as nonstructural alterations, additions and repairs).
SECTION 3.03.
A. Tenant shall pay each sum payable pursuant to Section 3.02 when the
same becomes due and payable; provided, however, that if any authority having
jurisdiction or alleging to have jurisdiction assesses real estate taxes or
assessments (including special assessments), or levies any other charges
against the Premises as contemplated and provided in this Lease and Tenant
deems the same or any of them excessive, improper or illegal, and provided
further that failure to pay said real estate taxes, assessments (including
special assessments) or other charges will not result in a forfeiture of the
title to the Premises or a sale thereof for such nonpayment, Tenant may defer
compliance therewith to the extent permitted by law so long as the validity
or amount thereof is contested by Tenant in good faith, in its name, or at
Tenant's option, in Landlord's name but at Tenant's expense, in which event
Tenant, if requested by Landlord so to do, shall furnish to Landlord a bond,
satisfactory to Landlord as to surety, in an amount equal to the taxes,
assessments, or other charges so assessed plus one (1) year's penalties and
interest thereon at the annual rate provided for by law. If any contest shall
not have been concluded within one year from the date penalties and interest
shall be accruing on the taxes, assessments (including special assessments) or
other charges being contested, Tenant shall furnish Landlord, upon demand,
with such additional bond as Landlord may reasonably request. In the event
that such a bond is furnished by Tenant and there is a sale of the Premises
by Landlord at the time that any tax, assessment (including special
assessments) or other charge is then being contested, Landlord will assign
said bond to the purchaser. Except as provided in this Section 3.03 Landlord
may, upon default by Tenant under the terms hereof, pay such real estate
taxes, assessments (including special assessments) or other charges and
collect the same together with interest thereon computed at the rate of six
percent (6%) per annum from the date of any such payment, as additional rent
when the next Fixed Rent thereafter becomes due and payable.
B. Tenant shall pay all sums due hereunder to the individual,
partnership, firm, corporation or governmental authority ("Person(s)") to
whom the same are payable, but, if any Person refuses to accept any payment
from Tenant, Tenant shall forthwith notify Landlord thereof and pay such sum
to the Landlord and Landlord shall thereupon pay the same forthwith to the
Person or Persons entitled thereto, and thereupon Tenant shall be relieved of
any further obligation for the payment of any such sum.
C. Landlord for the purpose of the performance of any obligations of
Tenant imposed hereunder, appoints Tenant its attorney for making all
payments to persons other than Landlord pursuant to this Section 3.03.
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SECTION 3.04. At any time and from time to time upon request of
Landlord, Tenant shall exhibit to Landlord a receipted bill for any tax,
assessment (including special assessment), governmental charge or water rent
which has become due and payable under this Lease, or any other evidence
satisfactory to the Landlord of the payment thereof.
SECTION 3.05. A "Lease Year" for the purposes of this Lease is a period
of twelve (12) consecutive months commencing on the Lease Commencement Date
and on the anniversary of such date.
ARTICLE IV
USE, OPERATION, MAINTENANCE AND ALTERATION
SECTION 4.01. Tenant shall, at its own expense, comply with, and
maintain the Premises in compliance with, all laws and all requirements of
all governmental authorities applicable to the Premises and to the use
thereon (including those requiring alterations, additions or repairs of a
structural as well as a nonstructural nature) and shall maintain the Premises
in compliance with the requirements of the insurance companies with which
Tenant maintains the insurance required by Section 5.01 hereof.
SECTION 4.02. Tenant shall, at its own expense, keep the Premises in
good repair, operating condition and working order and shall make all
structural, exterior and interior repairs, renewals and replacements
necessary to that end, and shall commence promptly and proceed diligently
with any repair or restoration required, provided however that consideration
may be given to the age of the Building.
SECTION 4.03. Except as provided in this Section 4.03, Tenant shall
make no alterations to the structure of the Building or other alterations
which will change the character of the Building or its adaptability for use
as a warehouse without the consent of Landlord. Tenant may, however, make
alterations not exceeding $200,000 in cost to Tenant at any one time, and may
erect, remove and change partitions not part of the structure of the
Building, provided the character and value of the Building is not materially
changed. Landlord will not unreasonably withhold its consent to alterations
of a cost in excess of $200,000.
SECTION 4.04. Except as provided in Section 3.03 and 12.01, Tenant
shall not create, or permit to be created or exist, any lien or encumbrance
which might be or become a lien or encumbrance having priority over or
ranking on a parity with Landlord's interest in the Premises or under this
Lease.
SECTION 4.05. Tenant will pay and discharge and indemnify, save, defend
and hold harmless Landlord from and against all liabilities, obligations,
damages, penalties, claims, costs, charges and expenses, including reasonable
architects' and attorneys' fees, which may be
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imposed upon or incurred by or asserted against Landlord by reason of any of
the following occurring during the Term of this Lease:
(A) any work or thing done in, on or about the Premises or any part
thereof;
(B) any use, nonuse, possession, occupation, condition, operation,
maintenance or management of the Premises or any part thereof or any street,
alley, sidewalk, mall, garden, curb, vault, passageway or space adjacent
thereto;
(C) any negligence on the part of Tenant or any of its agents,
contractors, servants, employees, licensees, concessionaires or invitees;
(D) any injury or damage to, any person or property occurring in, on
or about the Premises or any part thereof or any street, alley, sidewalk,
mall, garden, curb, vault, passageway or space adjacent thereto; or
(E) any failure on the part of Tenant to perform or comply with any
of the covenants, agreements, terms or conditions contained in Lease on its
part to be performed or complied with.
In case any action or proceeding is brought against Landlord by reason of any
such claim, Tenant upon written request from Landlord will at Tenant's
expense resist or defend such action or proceeding by counsel approved by
Landlord in writing, such approval not to be unreasonably withheld.
SECTION 4.06. Landlord shall be entitled to make inspections of the
Premises during business hours, but shall be under no obligation to make any
such inspections nor to perform any act or do anything required to cure any
default of Tenant.
ARTICLE V
INSURANCE
SECTION 5.01. Tenant shall maintain at Tenant's sole cost and
expense, for the benefit of Landlord and Tenant, insurance with respect to
the Premises, of the following types and in the following amounts:
A. Fire with extended coverage insurance in an amount not less
than the full insurable value of the Premises (excluding excavations and
foundations) as same is determined at five (5) year intervals by an architect
or engineer designated by Tenant and satisfactory to Landlord. Such
determination may be made by the engineering department of the insurance
carrier then furnishing the largest amount of such insurance, if such
services are furnished by said insurance carrier.
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B. Boiler damage insurance with a limit of not less than $100,000;
or such other coverage as may be reasonably required.
C. Public liability insurance (including elevator insurance if
applicable) with limits of not less than $1,000,000 combined single limit for
personal injury, bodily injury or death, or property damage or destruction
per occurrence.
D. At all times when any work is in progress in connection with
altering, repairing or making additions to the Premises, pursuant to a
written contract with an independent contractor (other than routine upkeep,
maintenance and repair work) Tenant at its expense shall either (i) maintain
workmen's compensation insurance covering all persons engaged in such work
and with respect to whom claims for death or bodily injury might be asserted
against Landlord, Tenant or the Premises, or (ii) obtain the customary
certification from the Person with whom the Tenant has contracted to perform
such work that such Person carries such workmen's compensation insurance.
E. Such other insurance as is customarily maintained by owners and
operators of similar property, or as may be reasonably required by Landlord
from time to time for its protection against any loss, hazard or liability to
which Landlord may be exposed.
Notwithstanding the limits for insurance specified in this Section
5.01, Tenant agrees to indemnify Landlord against all damage, loss or
liability resulting from any of the risks referred to in this Section 5.01.
Such indemnification shall be in effect whether or not Tenant has placed and
maintained the insurance specified in this Section 5.01 and whether or not,
such insurance having been placed and maintained, proceeds from such
insurance actually are collectible from one or more of the insurance
companies; provided however that Tenant shall be relieved of its obligation
of indemnity herein to the extent of the amount actually recovered from one or
more of the insurance companies by reason of injury or damage to, or loss
sustained on, the Premises and paid to Landlord. If Tenant does not designate
an architect or engineer for determination of insurable value as required by
this Section 5.01, said architect or engineer may be designated by Landlord.
Tenant may maintain any or all of the insurance provided for in
Section 5.01 under a blanket policy or policies covering other property,
provided that (i) each such blanket policy shall comply in all respects with
the requirements of this Article V, (ii) the protection afforded Landlord by
each such blanket policy shall be not less than would be afforded by a
separate policy relating only to the Premises, and (iii) each such blanket
policy including insurance provided for in Section 5.01A shall specify
therein the portion of the total insurance allocated to the Building (unless
such portion is specified in a written statement of the insurer delivered to
Landlord) which shall be at least that required by Section 5.01A, and shall
specify therein that any loss payable thereunder with respect to the Building
and contents shall be payable first with respect to the Building and the
balance with respect to the contents. Tenant shall furnish to Landlord a copy
of each schedule or make-up of all items included in this Lease
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which are covered by any blanket policy, within thirty (30) days after it is
filed with any insurance rate-making body.
Section 5.02.
A. Each insurance policy shall:
1. be issued by an insurance company of recognized standing
satisfactory to Landlord;
2. be in the standard form customarily in use in the State; and
3. be carried as respects fire and extended coverage insurance
with loss payable to Tenant if loss should be $200,000 or less, and to
Landlord and Tenant, as their interests may appear, if over $200,000 and as
respects other insurance required by Section 5.01 be carried in favor of
Landlord and Tenant as their interests may appear.
B. Tenant shall procure renewals of all insurance policies at
least ten (10) days before the expiration thereof.
C. Each policy or certificate therefor obtained by Tenant pursuant
to Section 5.01 of this Lease shall to the extent obtainable contain an
agreement by the insurer that such policy shall not be cancelled without at
least ten (10) days' prior written notice to both Landlord and Tenant.
D. Tenant shall furnish Landlord with originals or copies
certified by the insurance companies or certificates of all insurance
policies or in lieu thereof, upon receipt of written notice from Landlord and
until further written notice from Landlord to the contrary, file with
Landlord upon the execution hereof and annually thereafter on the anniversary
of such execution, a certificate over the signature of one of its officers
that the insurance required hereunder in the form required by Section 5.01
hereof, is in full force and effect as of the date of said certificate.
SECTION 5.03 Except as provided in Section 5.06 of this Lease,
notwithstanding any injury to or destruction of the Premises, Tenant shall
not be entitled to any adjustment of rent or of any of Landlord's or Tenant's
rights or liabilities under this Lease or to surrender this Lease; and Tenant
shall continue to be liable to pay the full Fixed Rent and additional rent
and any other sums due hereunder, and waives any rights with respect to any
such injury or destruction, at any time conferred upon it a law, in equity,
by statute or otherwise.
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SECTION 5.04.
A. In case any Building shall be damaged or destroyed by fire or other
cause covered by the insurance policies provided for in Section 5.01 of this
Lease, all insurance moneys payable on account of such damage shall be paid
to Tenant if $200,000 or under, and if over $200,000 to Landlord or Tenant.
With respect to any insurance monies payable to Tenant, if at the time the
owner of Tenant's interest under this Lease is a person other then Aaron's
Automotive Products, Inc., Tenant will place the same in a special account
dedicated and earmarked for use in connection with the provisions of this
Lease. In the case of any insurance monies payable to Landlord and Tenant,
Tenant agrees that it will endorse the checks promptly and, if at the time
the owner of the Premises and of Landlord's interest under this Lease is a
person other than Confar Investors II, L.L.C, the same shall be placed in a
special account in the name of Landlord and separate and distinct from all
other funds of Landlord, and said account shall be dedicated and earmarked
for the payment and application of said insurance monies as provided in this
Lease. From the insurance monies paid on account of damage as provided in
this Article V Tenant shall be entitled to payment or reimbursement for all
amounts necessary to make temporary repairs or such work as may be necessary
to protect the Premises against further injury and also, pending the
adjustment of the insurance, for the preparation for the making of permanent
repairs, restoration or reconstruction. In addition, Tenant shall be entitled
to payment from such insurance moneys of such part thereof as shall equal the
cost of repairing, restoring, or reconstructing the Building so that on
completion the Building or buildings will be substantially the same as before
in value and character. Payments shall be made promptly which shall equal the
cost of labor and materials, architect's and engineers' fees and other
charges and such payments shall be made to Tenant upon the delivery of a
certificate of the architect engaged to supervise such work (who shall be
designated by Tenant but satisfactory to Landlord), in which the architect
shall certify that payments are due as herein provided. Each such certificate
shall also contain a representation by such architect (i) that the work has
been performed in accordance with the plans and specifications (except as the
same may have been altered or changed with the consent of the Landlord) and
(ii) that the amount covered by such certificate does not include the cost of
any of the alterations and rebuilding for which a prior certificate has been
issued. Tenant agrees to complete such repairs or restoration free of lien.
B. If the Premises, or any part thereof, shall suffer injury to or
destruction in whole or in part from any of the causes set forth in this
Article V, Tenant shall notify Landlord within five (5) days after such
injury or destruction and shall proceed deligently to repair or restore the
injury or destruction pursuant to plans and specifications to be prepared by
Tenant and satisfactory to Landlord. Tenant shall thereupon pursue diligently
the completion of the repairs or restoration as aforesaid and Landlord will
comply with all the requirements provided for in paragraph A of this Section
5.04. Tenant shall not be liable to Landlord if any contractor or
contractors, subcontractors or materialmen are delayed by strikes, riots,
fires, acts of God or the public enemy or inability to obtain construction
materials due to war or govern-
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ment interference or other conditions unavoidable or beyond the control of
the Tenant (hereinafter referred to as "Unavoidable Delays").
C. The provisions of this Section 5.04 shall apply to the proceeds of
insurance derived from policies furnished by Tenant pursuant to the
requirements of Section 5.01. If Tenant has provided all policies as required
by Section 5.01 and in the further event that Tenant has taken out additional
insurance for its own further protection, then, and with respect to such
additional insurance, the proceeds thereof shall be deposited and paid over
in like manner as applies to the policies furnished by the Tenant pursuant to
the requirements of Section 5.01.
D. If, upon completion of the repair, restoration or reconstruction,
there are any insurance proceeds in the hands of Landlord, Landlord shall pay
the same to Tenant, upon demand. If the insurance proceeds are insufficient
to pay the cost of the repair or restoration, Tenant shall nevertheless
complete the repair or restoration, as provided in this Article V, at its own
cost and expense.
E. If, upon the expiration or termination of this Lease, there are any
insurance proceeds in the hands of Landlord in excess of the proceeds to
which Tenant shall have become entitled under Section 5.04A, Landlord shall
be entitled to retain such excess.
SECTION 5.05. If Tenant does not commence promptly to repair or restore
the injury or destruction, or if, having commenced the repair or restoration,
Tenant does not proceed diligently to complete the same, Landlord shall be
entitled (but shall be under no obligation) at any time thereafter to enter
the Premises and repair or restore the injury or destruction and to apply any
insurance proceeds in its hands to the payment of the cost thereof; but if
the insurance proceeds are insufficient for the cost of the repair,
restoration or reconstruction, Tenant shall pay to Landlord, upon demand and
as additional rent as the work progresses, such amounts as shall be necessary
to complete the repairs, restoration or reconstruction upon delivery of the
certificate of an architect or engineer in the form referred to in Section
5.04A of this Article V.
SECTION 5.06. Anything in this Article V to the contrary notwithstanding,
A. If less than one-half of the then aggregate floor space in the
Building shall have been so injured and destroyed and made untenantable,
Tenant shall at its expense repair, restore and reconstruct the same as
nearly as practicable to its value and condition immediately before such
damage or destruction, notwithstanding the fact that the proceeds of
insurance may not be sufficient to cover the cost of such repair, restoration
or reconstruction. Such repair, restoration or reconstruction shall be begun
within a reasonable time after such notice to Landlord but not later four (4)
months after the injury or destruction shall have occurred, and shall be
continued diligently until completed, subject in each case to Unavoidable
Delays. Tenant shall be entitled to the proceeds of the salvage.
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B. If one-half or more of the then aggregate floor space in the
Building shall have been so injured or destroyed and made unusable, Tenant at
its option exercisable by notice to Landlord within three (3) months after
the injury or destruction occurred, either shall repair, restore or
reconstruct the Building as required by paragraph A of this Section 5.06, or
shall terminate this Lease effective as of a date specified in such notice,
which shall be at least thirty (30) days after the date such notice is given
to Landlord. If Tenant exercises its option to terminate this Lease, it shall
purchase the Premises from Landlord on the date of such termination for a
price, in cash, equal to the greatest from the following:
1. The sum of (i) the fair market value, as of the date of
commencement of the initial term of the Original Lease (as such term is
defined in the Recitals, of the land covered by this Lease considered vacant
and unimproved land unencumbered by this Lease, which fair market value is
hereby agreed to be $15,000 compounded at the rate of two percent (2%) per
year from the date of the commencement of the initial term of the Original
Lease to the date of such purchase, plus (ii) Landlord's Original Cost of the
Building reduced at the rate of two and one-half percent (2-1/2%) per year,
computed from the beginning of the initial term of the Original Lease to the
date of such purchase, plus (iii) Landlord's Cost of First Expansion (as such
term is defined in the Fundamental Terms and Definitions) depreciated on a
straight line basis at the rate of two and one-half (2-1/2%) percent per year
computed from the first day of December, 1974; or
2. The present value of the aggregate amount of all rent not
theretofore paid which would have otherwise been payable under Article III
thereof if Tenant had exercised all its options to renew this Lease pursuant
to Article II, computed as of the date of such purchase on the basis of a
discount rate of six percent (6%) per year but in no event an amount greater
than Landlord's Original Cost plus Landlord's Cost of First Expansion.
If Tenant shall purchase the Premises pursuant to the provisions of this
paragraph B of Section 5.06, all proceeds of insurance shall belong to and
become the sole property of the Tenant.
ARTICLE VI
CONDEMNATION
SECTION 6.01. If during the Initial Term or any Extended Term a fee
simple interest in the entire Premises is taken or condemned under power of
eminent domain (such a taking or condemnation being herein called a
"Condemnation"), this Lease shall terminate as of the date of Condemnation
and Landlord shall be entitled to receive and retain out of the award from
the condemning authority, after deducting all expenses incurred in obtaining
payment thereof including but not limited to reasonable fees of counsel and
experts (the amount of such award after deduction of such expenses being
herein called the "Net Award"), an amount equal to the percentage of the Net
Award shown by Exhibit B annexed hereto and made a part hereof
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to be applicable as of the Lease Year in which the date of Condemnation falls
and Tenant shall be entitled to receive and retain the balance of such excess.
SECTION 6.02.
A. If during the Initial Term or any Extended Term a fee simple
interest in less than all the Premises is taken or condemned as aforesaid and
Tenant, within six (6) months thereafter, gives Landlord notice that by
reason of such Condemnation the continued use of the remainder of the
Premises for Lessee's business would be uneconomical or impractical, this
Lease shall terminate as of a date ninety (90) days after the date of such
notice; Landlord shall convey title to, and Tenant shall accept the
conveyance of, the portion of the Premises not taken or condemned; and the
rights of Landlord and Tenant in respect of the division of the Net Award and
the obligation of Tenant in respect of payments to Landlord shall be as set
forth in Section 6.01 of this Lease.
B. If during the Initial Term or any Extended Term a fee simple
interest in less than all the Premises is taken or condemned as aforesaid,
and Tenant does not give the notice described in paragraph A of this Section
6.02 this Lease shall continue in effect as to the remainder of the Premises,
and Tenant shall restore any damage and make such repairs or alterations to
the Building situated thereon as may be necessary to make such Building a
separate structural unit capable of being operated independently of any
building not situated wholly upon the remainder of the Premises and shall be
entitled to the proceeds of salvage. Tenant shall be entitled to receive and
retain out of the Net Award an amount equal to the cost of such restoration,
repairs or alterations and if the Net Award exceeds such cost, Landlord shall
be entitled to receive and retain the percentage of the excess shown by
Exhibit B hereto to be applicable as of the Lease Year in which the date of
Condemnation falls, and Tenant shall be entitled to receive and retain the
balance of such excess. If the Condemnation affects the land but not the
Building so that no restoration, repairs or alterations are necessary,
Landlord shall receive and retain the percentage of the Net Award shown by
Exhibit B hereto to be applicable as of the Lease Year in which the date of
Condemnation falls, and Tenant shall be entitled to receive and retain the
balance of the Net Award.
SECTION 6.03. Condemnation of any or all of the Premises for use or
occupancy for a period of temporary or undetermined duration shall not reduce
any of Tenant's obligations under this Lease except to the extent that Tenant
is prevented by the condemning authority from performing such obligations. If
such use or occupancy by the condemning authority does not extend beyond the
duration of this Lease (including the Term current when the Condemnation
occurs and any succeeding term or terms for which Tenant has theretofore
exercised or does thereafter exercise its option to extend the Term of this
Lease pursuant to Section 2.02), Tenant shall be entitled to the entire Net
Award and on termination of such use or occupancy Tenant shall at its sole
cost and expense restore the Premises as nearly as practicable to its
condition immediately before the Condemnation. If such use or occupancy does
extend beyond the duration of this Lease (including such current and
succeeding terms),
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Landlord shall be entitled to receive and retain from the Net Award an amount
equal to the estimated expense of restoring the Premises as nearly as
practicable to its condition immediately before the Condemnation and the
remainder of the Net Award shall be apportioned between Landlord and Tenant
as of the date of expiration of this Lease.
SECTION 6.04. Except to the extent otherwise expressly provided in this
Article VI, this Lease shall not terminate nor shall Tenant be entitled to
any abatement of Fixed Rent or reduction thereof nor shall the respective
obligations of Landlord and Tenant be otherwise affected by reason of damage
to or destruction of all or any part of the Premises from whatever cause, the
taking of said Premises or any portion thereof by condemnation or otherwise,
the prohibition of Tenant's use of the Premises, the interference with such
use by any Person, or by reason of any eviction by paramount title, or for any
other cause whether similar or dissimilar to the foregoing, any present or
future law to the contrary notwithstanding.
SECTION 6.05. The Net Award shall be deposited by Landlord in a special
account in the name of Landlord and separate and distinct from all other funds
of Landlord and said account shall be dedicated and earmarked for the
application and payment pursuant to the provisions of this Article VI.
SECTION 6.06. Anything in this Article VI to the contrary
notwithstanding, any award or proceeds for removable trade fixtures or other
personal property owned by the Tenant shall be the sole property of the
Tenant, and shall not comprise any part of the "Net Award" as hereinabove
defined.
ARTICLE VII
SALES, MORTGAGES, ASSIGNMENT AND SUBLEASES.
SECTION 7.01. Landlord shall be entitled to convey and otherwise
dispose of the Premises and its interest under this Lease at any time, and
thereafter shall not be subject to any of the obligations of Landlord under
this Lease. Landlord shall also be entitled to mortgage the Premises but
Landlord hereby confirms that this Lease will remain prior in interest to any
mortgage which may hereafter during the Term hereof become a lien against the
Premises, unless the Tenant in its sole discretion shall expressly agree to
subordinate this Lease to the lien of such mortgage.
SECTION 7.02. During a period of one hundred eighty (180) days prior to
the expiration of any of the Initial or any Extended Term of this Lease,
Landlord shall have the right to exhibit the Premises during business hours
for the purpose of selling or leasing the same or selling Landlord's interest
under this Lease and to attach to the Premises a notice or notices
advertising the Premises for sale or lease.
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SECTION 7.03. Tenant may mortgage its interest under this Lease, but
any such mortgage shall be subject and subordinate to the provisions of this
Lease, and no such mortgage shall impair any of the rights, remedies or
interest of Landlord under this Lease. Landlord agrees to give notice of any
default hereunder to any mortgagee of this Lease who shall have given
Landlord written notice of such mortgage and furnished Landlord with a
certified copy thereof, and further agrees to accept performance by such
mortgagee of the terms, covenants and conditions of this Lease in the manner
and within the time provided for hereunder as if such performance were by
Tenant.
SECTION 7.04. Tenant may assign, sell or otherwise dispose of its
interest in this Lease or sublet the whole or any part of the leased Premises
for any lawful purpose not inconsistent with this Lease; provided, however,
that no assignment, sale, disposal, or subletting, nor the acceptance of
rents or other payments from, nor any other dealing by the Landlord with any
assignee, under-tenant, occupant,or other person, shall release the Tenant from
its obligation to pay the rents herein reserved and perform all the terms,
covenants and conditions as set forth in this Lease.
ARTICLE VIII
DEFAULT
SECTION 8.01. If any one or more of the following events (each of which
is herein sometimes called "Event of Default") shall happen:
(A) If default shall be made in the due and punctual payment of any
Fixed Rent or additional rent or other sums required to be paid under this
Lease or any part thereof when and as the same shall become due and payable,
and such default shall continue for a period of ten (10) days after notice;
(B) if default shall be made by Tenant in the performance of or
compliance with any of the covenants, agreements, terms or conditions
contained in this Lease other than those referred to in the foregoing
paragraph (A), and such default shall continue for a period of thirty (30)
days after written notice thereof from Landlord to Tenant, provided, that
Tenant's time to cure such default shall be extended for such additional time
as shall be reasonably required for the purpose if Tenant shall proceed with
due diligence during such thirty (30) day period to cure such default and is
unable by reason of the nature of the work involved to cure the same within
the said thirty (30) days, and if such extension of time shall not subject
Landlord or Tenant to any liability, civil or criminal, and the interest of
Landlord in this Lease shall not be jeopardized by reason thereof;
(C) if Tenant shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent, or shall take the benefit of any
relevant legislation that may be in force for bankrupt or insolvent debtors
or shall file any petition or answer seeking any
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reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future federal,
state or other statute, law or regulation, or if any proceedings shall be
taken by Tenant under any relevant bankruptcy act in force in any
jurisdiction available to Tenant, or if Tenant shall seek or consent to or
acquiesce in the appointment of any trustee, receiver or liquidator of Tenant
or all or any substantial part of its properties or of the Premises, or shall
make any general assignment for the benefit of creditors; or
(D) if a petition shall be filed against Tenant seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal, state or
other statute, law or regulation, and shall remain undismissed for an
aggregate of one hundred and twenty days, or if any trustee, receiver or
liquidator of Tenant or of all or any substantial part of its properties or
of the Premises shall be appointed without the consent or acquiescence of
Tenant and such appointment shall remain unvacated for an aggregate of one
hundred and twenty (120) days;
then and in any event covered by subdivisions (A), (B), (C) and (D) above,
Landlord at any time thereafter may give written notice to Tenant specifying
one or more such Events of Default and stating that this Lease and the term
hereby demised shall expire and terminate on the date specified in such
notice, which shall be at least five (5) days after the giving of such
notice, and upon the date specified in such notice, subject to the provisions
of Section 8.04 hereof, this Lease and the term hereby demised and all rights
of Tenant under this Lease shall expire and terminate.
SECTION 8.02. Upon any such expiration or termination of this Lease,
Tenant shall quit and peacefully surrender the Premises to Landlord, and
Landlord, upon or at any time after any such expiration or termination, may
without further notice, enter upon and re-enter the Premises and possess and
repossess itself thereof, by force, summary proceedings, ejectment or
otherwise, and may dispossess Tenant and remove Tenant and may have, hold and
enjoy the Premises and the right to receive all rental income of and from the
same.
SECTION 8.03. At any time or from time to time after any such
expiration or termination, Landlord may relet the Premises or any part
thereof, in the name of Landlord or otherwise, for such term or terms (which
may be greater or less than the period which would otherwise have constituted
the balance of the term of this Lease) and on such conditions (which may
include concessions or free rent) as Landlord, in its uncontrolled
discretion, may determine and may collect and receive the rent therefor.
Landlord shall in no way be responsible or liable for any failure to relet
the Premises or any part thereof, or for any failure to collect any rent due
upon any such reletting.
SECTION 8.04. No such expiration or termination of this Lease shall
relieve Tenant of its liability and obligations under this Lease and such
liability and obligations shall survive any such expiration and termination.
In the event of any such expiration or termination,
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whether or not the Premises or any part thereof shall have been relet, Tenant
shall pay to Landlord the Fixed Rent, additional rent and all other charges
required to be paid by Tenant up to the time of such expiration or
termination of this Lease, and thereafter Tenant, until the end of what would
otherwise have been the Term of this Lease but for such expiration or
termination, shall be liable to Landlord for, and shall pay to Landlord, as
and for liquidated and agreed current damages for Tenant's default:
(A) the equivalent of the amount of the Fixed Rent and the additional
rent, and charges which would be payable under this Lease by Tenant if this
Lease were still in effect, less
(B) the net proceeds of any reletting effected pursuant to the
provisions of Section 8.03 hereof and of amounts collected from tenants,
subtenants, concessionaires and occupants of the Premises after deducting all
Landlord's expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage commissions, legal expenses,
reasonable attorneys' fees, alteration costs, and expenses or preparing said
Premises for such reletting.
Tenant shall pay such current damages (herein called "deficiency") to
Landlord monthly on the days on which the Fixed Rent would have been payable
under this Lease if this Lease were still in effect, and Landlord shall be
entitled to recover from Tenant each monthly deficiency as the same shall
arise. At any time after any such expiration of termination, Landlord, at its
option, shall be entitled to recover from Tenant and Tenant shall pay to
Landlord, on demand, as and for liquidated and agreed final damages for
Tenant's default, an amount equal to the difference between the Fixed Rent
and all additional rent reserved hereunder for the unexpired portion of the
term demised and the then fair and reasonable rental value of the Premises
for the same period. In the computation of such damages the difference
between any installment of Fixed Rent becoming due hereunder after the date
of termination and the fair and reasonable rental value of the Premises for
the period for which such installment was payable shall be discounted to the
date of termination at the rate of five and one-half percent (5-1/2%) per
annum. If the Premises or any part thereof be relet by the Landlord for the
unexpired term of said Lease, or any part thereof, before presentation of
proof of such liquidated damages to any court, commission or tribunal, the
amount of rent reserved upon such reletting shall be deemed prima facie to be
the fair and reasonable rental value for the part or the whole of the
Premises so relet during the term of the reletting. Nothing herein contained
shall limit or prejudice the right of the Landlord to prove for and obtain as
liquidated damages by reason of such termination, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved, whether or
not such amount be greater, equal to, or less than the amount of the
difference referred to above.
SECTION 8.05. At Landlord's option, upon any such expiration or
termination of this Lease, all subleases then in effect shall be deemed
assigned to Landlord by Tenant, and
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Tenant shall, upon notice from Landlord, execute and deliver to Landlord
instruments, in proper form for recording, assigning to Landlord Tenant's
interest in and to each such sublease, Tenant hereby irrevocably appointing
Landlord, in the event of Tenant's failure or refusal execute any and all
such assignments, its true and lawful attorney to execute the same.
SECTION 8.06. No failure by Landlord to insist upon the strict
performance of any covenant, agreement, term or condition of this Lease or to
exercise any right or remedy consequent upon a breach thereof, and no
acceptance of full or partial rent during the continuance of any such breach,
shall constitute a waiver of any such breach or of such covenant, agreement,
term or condition. No covenant, agreement, term or condition of this Lease to
be performed or complied with by Tenant, and no breach thereof, shall be
waived, altered, modified or terminated except by a written instrument
executed by Landlord. No waiver of any breach shall affect or alter this
Lease, but each and every covenant, agreement, term and condition of this
Lease shall continue in full force and effect with respect to any other then
existing or subsequent breach thereof.
SECTION 8.07. Landlord's rights and remedies herein are not exclusive.
In the event of any breach by Tenant of any of the covenants, agreements,
terms or conditions contained in this Lease, Landlord, in addition to any and
all other rights, shall be entitled to enjoin such breach and shall have the
right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise for such breach as though re-entry, summary proceedings,
and other remedies were not provided for in this Lease.
SECTION 8.08. All Fixed Rent or additional rent in arrears and all
amounts collectible hereunder shall bear interest at the rate of six percent
(6%) per annum from their respective due dates until paid, provided that this
shall in no way limit, lessen or affect any claim for any breach or default
by Tenant.
ARTICLE IX
INVALIDITY OF PARTICULAR PROVISIONS
If any term or provision of this Lease or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remaining terms and provisions of this Lease, or the application of such term
or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and each term
and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
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ARTICLE X
COVENANT OF QUIET ENJOYMENT
Landlord covenants and agrees that Tenant, upon payment of the rents
reserved herein and the observance of and compliance with the covenants and
agreements of this Lease, shall lawfully, peaceably and quietly hold, occupy
and enjoy the Premises during the term of this Lease and any extension or
extensions thereof, without hindrance, trouble or ejection by Landlord or any
person or persons claiming under Landlord.
ARTICLE XI
MACHINERY, EQUIPMENT AND FIXTURES INSTALLED
AND USED IN BUSINESS
Tenant from time to time during the Initial Term or any Extended Term
may install machinery, equipment and fixtures of various kinds and
descriptions for the purpose of carrying on, and used in connection with, its
business, and upon any of such machinery, equipment and fixtures being so
installed in or placed on the Premises by Tenant, the same shall remain at
all times the property of Tenant, and, at any time during the Initial Term or
any Extended Term and at the termination of the Lease, Tenant shall be
entitled to remove any and all of such machinery, equipment and fixtures;
provided, however, that if any machinery, equipment, or fixtures are so
attached to the Building as not to be readily removable without damage to the
Building, then in such event, if Tenant shall remove the same, Tenant shall
promptly repair and replace any damage caused to the Building by such
removal. At the expiration or other termination of the Term of this Lease
Landlord may require Tenant to remove any and all of such machinery,
equipment and fixtures at the expense of the Tenant and Tenant shall promptly
repair and replace any damage caused to the Building by such removal. If the
Lease shall be extended as provided in Section 2.02 of this Lease it shall
not be necessary for Tenant to reserve its right to such machinery, equipment
and fixtures or their removal but such machinery, equipment and fixtures
shall remain the property of Tenant. Nothing herein contained shall be deemed
to confer upon Tenant any right to remove any equipment or fixtures used in
the operation of the Premises.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Subject to the provisions of Section 3.03A of Article
III hereof Tenant, upon prior notice to Landlord, shall be entitled to
contest, in good faith, in the name of Landlord or Tenant, but at the expense
of Tenant, by appropriate proceedings diligently conducted, the validity or
applicability, as the case may be, of any:
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A. law or requirement or any proposed law or requirement of
governmental authority,
B. tax, assessment (including special assessment) or other
governmental charge, or any proposed tax, assessment or any other
governmental charge, subject to Section 3.03 hereof,
C. lien or encumbrance,
D. requirement of any insurance carrier, or
E. other expense or charge, which during the Term of this Lease shall
be levied, assessed, imposed, demanded or threatened to be levied, assessed,
demanded or imposed by any governmental authority (provided non-compliance
therewith or nonpayment thereof, as the case may be, does not impose any
criminal liability upon the Landlord or Tenant) or insurance carrier upon or
with respect to, or alleged by any person to have been insured in connection
with the possession, occupation, operation, alteration, maintenance, repair
or use of the Premises or the making of any additions thereto. The period of
any such permitted contest shall be excluded in computing the period during
which a default shall be deemed to exist, if such default would not have
occurred but for such contest.
SECTION 12.02. Tenant will not create or permit to be created or to
remain, and will discharge, any lien, encumbrance, or charge (levied on
account of any imposition or any mechanic's, laborer's or materialman's lien
or any mortgage, sale, title, retention agreement or chattel mortgage, or
otherwise) which might be or become a lien, encumbrance or charge upon the
Premises or any part thereof or the income therefrom, having any priority
or preference over or ranking on a parity with the estate, rights and
interest of Landlord in the Premises or any part thereof or the income
therefrom and Tenant will not suffer any other matter or thing whereby the
estate, rights and interest of Landlord in the Premises, or any part thereof
might be impaired; provided that any imposition may, after the same becomes a
lien on the Premises, be paid or contested in accordance with Section 12.01
hereof and any mechanic's, laborer's or materialman's lien may be discharged
in accordance with Section 12.03 hereof.
SECTION 12.03. If any mechanic's, laborer's or materialman's lien shall
at any time be filed against the Premises or any part thereof, Tenant, within
thirty (30) days after notice of the filing thereof, will cause the same to
be discharged of record by payment, deposit, bond, order of a court of
competent jurisdiction or otherwise. If Tenant shall fail to cause such lien
to be discharged within the period aforesaid, then, in addition to any other
right or remedy, Landlord may, but shall not be obligated to, discharge the
same either by paying the amount claimed to be due or by procuring the
discharge of such lien by deposit or by bonding proceedings, and in such
event Landlord shall be entitled, if Landlord so elects, to compel the
prosecution of an action for the foreclosure of such lien by the lienor and
to pay the amount of
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the judgment in favor of the lienor with interest, costs and allowances. Any
amount so paid by Landlord and all costs and expenses incurred by Landlord in
connection therewith, together with interest thereon at the rate of six
percent (6%) per annum from the respective dates of Landlord's making of the
payment or incurring of the cost and expense shall constitute additional rent
payable by Tenant under this Lease and shall be paid by Tenant to Landlord on
demand.
SECTION 12.04. Nothing contained in this Lease shall be deemed or
construed in any way as constituting the consent or request of Landlord,
express or implied by inference or otherwise, to any contractor,
subcontractor, laborer or materialman for the performance of any labor or the
furnishing of any materials for any specific improvement, alteration to or
repair of the Premises or any part thereof.
SECTION 12.05. Upon the expiration of this Lease, or upon the earlier
termination of the same in accordance with any of the provisions hereof,
Tenant shall surrender and deliver peaceful and immediate possession of the
Premises to Landlord in as good order and condition as they were at the time
of the execution and and delivery of this Lease, reasonable wear and tear and
damage by the elements excepted.
SECTION 12.06. Tenant will not do or suffer any waste or damage,
disfigurement or injury to the Building or any part thereof.
SECTION 12.07. Vaults and areas, if any, now or hereafter built extending
beyond the building line of the Premises are not included within the
Premises, but Tenant may occupy and use the same during the Term of this
Lease, subject to such laws, permits, rules and regulations as may be imposed
by appropriate governmental authorities with respect thereto.
SECTION 12.08. No revocation on the part of any governmental department
or authority of any license or permit to maintain and use any such vault
shall in any way affect this Lease or the amount of the rent or any other
charge payable by Tenant hereunder. If any such license or permit shall be
revoked, Tenant will, at its sole cost and expense, do and perform all such
work as may be necessary to comply with any order revoking the same.
SECTION 12.09. Each right, power and remedy of Landlord provided for in
this Lease shall be cumulative and concurrent and shall be in addition to
every other right, power or remedy provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise, and the
exercise or beginning of the exercise by landlord of any one or more of the
rights, powers or remedies provided for in this Lease or now hereafter
existing at law or in equity or by statute or otherwise shall not preclude
the simultaneous or later exercise by Landlord of any or all such other
rights, powers or remedies.
SECTION 12.10. The headings of the Articles and the numbering of the
paragraphs in this Lease are inserted as a matter of convenience to the
parties and shall not affect the construction of this Lease.
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SECTION 12.11. This Lease may be executed in any number of
counterparts, each of which shall be an original and the counterparts shall
constitute but one and the same instrument.
SECTION 12.12. This Lease shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns. This Lease may not be modified, altered, terminated or discharged
orally but only by an agreement in writing signed by the parties hereto.
SECTION 12.13 Any notice required or permitted to be given
hereunder shall be in writing, and shall be (i) delivered personally, (ii)
sent via commercial messenger, courier or overnight mail service, or (iii)
sent by United States mail, registered or certified delivery, return receipt
requested, in each case addressed to the Tenant or to Landlord at the
respective addresses set forth in the Fundamental Terms and Definitions.
Personally delivered notices shall be deemed given upon actual delivery to
the appropriate address. Notices sent via commercial messenger, courier or
overnight mail service shall be deemed given upon actual delivery to the
appropriate address, as evidenced by the receipt of the delivery service.
Mailed notices shall be deemed given upon the date of the actual receipt (or
refusal of receipt) as evidenced by the return receipt. Either party may
specify a different address for notice purposes in the manner aforesaid. A
copy of all notices to be given to Landlord hereunder shall be concurrently
transmitted by Tenant to any additional party hereafter designated by a
notice from Landlord to Tenant.
ARTICLE XIII
CONDITION OF AND TITLE TO THE PREMISES
Tenant represents that the Premises, the title thereto, the
sidewalks and structures adjoining the same, any subsurface conditions
thereof, and the present uses and non-uses thereof, have been examined by
Tenant and that Tenant accepts the same in the condition or state in which
they or any of them now are, without representation or warranty, express or
implied in fact or by law, by Landlord and without recourse to Landlord, as
to the title thereto, the nature, condition or usability thereof or the use
or uses to which the Premises or any part thereof may be put.
ARTICLE XIV
TERMS OF PURCHASE BY TENANT
In the event of any sale by Landlord to Tenant and purchase by
Tenant from Landlord of the Premises or any part thereof pursuant to any
provisions of this Lease:
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A. Upon delivery of the applicable notice required by the
provisions of this Lease as a condition precedent to such sale and purchase,
there shall be in existence, without further action of the parties, a binding
agreement, enforceable at law or in equity, for the sale and purchase of the
Premises or such part thereof at the applicable price and upon the additional
terms and conditions hereinafter set forth;
B. Closing shall take place at the office of the Landlord upon the
date fixed for consummation of such sale and purchase in accordance with the
provisions of this Lease pursuant to which such sale and purchase is to be
consummated;
C. At closing, Landlord shall convey the Premises or such part
thereof to Tenant by deed in which the Landlord therein shall covenant and
agree that the grantor has not done, committed, or knowingly or willingly
suffered to be done or committed, any act, matter or thing whatsoever whereby
the Premises thereby granted or any part thereof is, or has been, charged or
encumbered and which shall be in sufficient form to be entitled to record;
D. Tenant shall accept title subject to zoning rules, restrictions,
regulations, resolutions and ordinances and to any violations of building
codes, fire laws, and other laws and regulations;
E. Tenant shall pay all charges incident to the conveyance,
including but not limited to escrow fees, if any, recording fees, title
insurance premiums, cost of documentary transfer taxes and any applicable
state and local taxes and Landlord's and Tenants attorneys' fees;
F. There shall be no proration of any taxes, insurance premiums or
other charges which Tenant is required to pay under and pursuant to the
provisions of this Lease;
G. Tenant, having examined and being familiar with the state of the
title to the Premises and the title examination made for Landlord in
connection with its acquisition of title, will accept title to the Premises
or such part thereof subject to those matters disclosed by such title
examination, except for so much thereof as may have been taken or condemned
by eminent domain, and further subject to: (i) this Lease, (ii) any and all
taxes, assessments and other charges which Tenant agrees to pay pursuant to
the provisions of this Lease, and (iii) any other liens, encumbrances and
exceptions not caused by Landlord; and
H. Upon the completion of such purchase and the payment by Tenant
of the purchase price plus an amount equal to five and one-half percent
(5-1/2%) per annum thereon computed from the first day of the immediately
preceding monthly period for which Fixed Rent shall have been paid to the
date of settlement, this Lease shall terminate, and all the rights and
obligations of Landlord and Tenant hereunder shall cease and come to an end.
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ARTICLE XV
ESTOPPEL CERTIFICATES
SECTION 15.01. Tenant agrees at any time and from time to time
during the Term of this Lease upon not less than ten (10) days' prior notice
by Landlord to execute, acknowledge and deliver to Landlord a statement in
writing certifying that this Lease is unmodified and in full force and effect
(or if there have been modifications, that the same is in full force and
effect as modified and stating the modifications), and the dates to which the
Fixed Rent and other charges have been paid in advance, if any, and stating
whether or not to the best knowledge of the signer of such certificate
Landlord is in default in performance of any covenant, agreement or
condition contained in this Lease and, if so, specifying each such default of
which the signer may have knowledge, it being intended that any such
statement delivered pursuant to this Section 15.01 may be relied upon by
prospective purchaser of the fee or any mortgagee thereof, or any prospective
assignee thereof.
SECTION 15.02. Landlord agrees at any time and from time to time
during the Term of this Lease upon not less than ten (10) days' prior notice
by Tenant to execute, acknowledge and deliver to Tenant a statement in
writing certifying that this Lease is unmodified and in full force and effect
(or if there shall have been modifications that the same is in full force and
effect as modified and stating the modifications) and the dates to which the
Fixed Rent and other charges have been paid in advance, if any, and stating
whether or not to the best knowledge of the signer of such certificate Tenant
is in default in performance or any covenant, agreement, or condition
contained in this Lease and, if so, specifying each such default of which the
signer may have knowledge, it being intended that any such statement
delivered pursuant to this Section 15.02 may be relied upon by any
prospective assignee of the Tenant's interest in this Lease.
ARTICLE XVI
HAZARDOUS MATERIALS
SECTION 16.01. Tenant shall not (and shall not permit its
employees, agents, officers, directors, invitees of Tenant or any person
occupying the Premises to) bring in, on or under the Premises any Hazardous
Materials (other than lubricating oils, oil additives, plastics, rubber
products, inventory, cleaning supplies and other materials in normal
quantities ordinarily used or stored in the operation of its business, which
include a tank farm). Tenant shall indemnify, defend, save, protect, and
hold Landlord harmless from and against, any and all claims, suits, orders,
judgments, clean-up or remediation costs, liabilities, losses, obligations,
costs and expenses (including without limitation reasonable attorneys' fees)
arising from the introduction of any Hazardous Materials in, on, under or
about the Premises from and after June 22, 1995, by Tenant, its employees,
agents, officers, directors, invitees or any other person occupying the
Premises, or any portion thereof, by, through or under Tenant.
24
<PAGE>
SECTION 16.02. As used herein "Hazardous Materials" means any and all
substance or substances: (i) the presence of which requires investigation or
remediation under any federal, state or local statute, regulation, ordinance,
order, action, policy or common law; (ii) which is or becomes defined as a
"hazardous waste", "hazardous substance", pollutant or contaminant under any
federal, state or local statute, regulation, rule or ordinance or amendments
thereto including, without limitation, the Comprehensive Environmental
Response, Compensation and Recovery Act (42 U.S.C. Section 6901 et seq.);
or (iii) which contain gasoline, diesel fuel or other petroleum hydrocarbons.
SECTION 16.03. If Landlord becomes aware of the presence or suspected
presence of any Hazardous Materials in, on, under or about the Premises in
violation of Section 16.01 above, Landlord may so notify Tenant and request
that Tenant institute remedial action. Tenant will, within ten (10) days of
receipt of such notice, at its sole cost and expense, commence such action as
is reasonably specified by Landlord to remove all such Hazardous Materials
from the Premises and will diligently pursue such action to completion. Such
work will be performed in accordance with all applicable laws, ordinances and
regulations governing such work. If Tenant fails to undertake the work
required by this Section 16.03, Landlord may, at its option, to be exercised
by notice to Tenant, undertake such work, in which event Tenant shall
reimburse Landlord for all costs and expenses, including fees of attorneys,
engineers and other consultants incurred by Landlord for such work. However,
Landlord shall not be under any obligation to exercise the remedy specified
in the preceding sentence, and the remedies provided in this Section 16.03
shall not be considered exclusive or preclude any claim for damages or any
other remedy which may be available under this Lease or under law.
SECTION 16.04. The indemnification obligations under this Lease shall
be subject to the following provisions:
(A) The party seeking indemnification ("INDEMNITEE") shall notify the
other party ("INDEMNITOR") of any claim against Indemnitee within fifteen
(15) days after it has notice of such claim, but failure to notify Indemnitor
shall in no case prejudice the rights of Indemnitee under this Lease unless
Indemnitor shall be prejudiced by such failure and then only to the extent of
such prejudice. Should Indemnitor fail to discharge or undertake to defend
Indemnitee against such liability (with counsel approved by Indemnitee),
within ten (10) days after Indemnitee gives Indemnitor written notice of the
same, then Indemnitee may settle such claim, and Indemnitor's liability to
Indemnitee shall be conclusively established by such settlement, the amount
of such liability to include both the settlement consideration and the
reasonable costs and expenses, including attorney's fees, incurred by
Indemnitee in effecting such settlement. Indemnitee shall have the right to
employ its own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of Indemnitee unless: (i) the employment of
such counsel shall have been authorized in writing by Indemnitor in
connection with the defense of such action, (ii) Indemnitor shall not have
employed counsel to direct the defense of such action, or (iii) Indemnitee
shall have reasonably concluded that there may be defenses available to it
which are different from or additional to those available to Indemnitor
25
<PAGE>
(in which case Indemnitor shall not have the right to direct the defense of
such action or of Indemnitee), in any of which events such fees and expenses
shall be borne by Indemnitor.
(B) The indemnification obligations under this Lease shall also
extend to any present or future advisor, trustee, director, officer, partner,
member, employee, beneficiary, shareholder, participant or agent of or in
Indemnitee or any entity now or hereafter having a direct or indirect
ownership interest in Indemnitee.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed in their respective corporate names and their respective corporate
seals to be hereunto affixed and signed by their respective officers
thereunto duly authorized, all as of the day and year first above written.
LANDLORD:
CONFAR INVESTORS II, L.L.C.,
an Arizona limited liability company
By: Continental Ventures, Ltd.,
an Arizona corporation
Its Manager
By: /s/ Neal M. Gumbin
------------------------------
Neal M. Gumbin
President
TENANT:
AARON'S AUTOMOTIVE PRODUCTS, INC.,
a Delaware corporation
By: /s/ Kenneth A. Bear
-------------------------------
Name: Kenneth A. Bear
-----------------------------
Title: Vice President
----------------------------
26
<PAGE>
EXHIBIT "A"
DESCRIPTION OF PREMISES
[SEE ATTACHED]
A-1
<PAGE>
COMMENCING AT THE SOUTHWEST CORNER OF LOT TEN (10) IN BLOCK NUMBERED TWO (2)
IN JOPLIN-SOUTHERN CORPORATION PLAT NO. 1, IN THE CITY OF JOPLIN, JASPER
COUNTY, MISSOURI, THENCE NORTH 00 DEGREES 19 MINUTES EAST ALONG THE EAST LINE
OF DAVIS BOULEVARD, A DISTANCE OF 624.00 FEET TO THE POINT OF BEGINNING,
THENCE NORTH 00 DEGREES 19 MINUTES EAST ALONG THE EAST LINE OF DAVIS
BOULEVARD A DISTANCE OF 994.47 FEET TO THE NORTHWEST CORNER OF LOT NUMBERED
SIX (6) IN BLOCK 5, IN SAID PLAT NO. 1, THENCE NORTH 89 DEGREES 59 MINUTES
EAST ALONG THE NORTH LINE OF SAID LOT SIX (6), 472.52 FEET TO THE NORTHEAST
CORNER OF SAID LOT SIX (6), THENCE NORTH 89 DEGREES 59 MINUTES EAST ALONG
THE NORTH LINE OF SAID LOT SIX (6) PRODUCED A DISTANCE OF 431.59 FEET, THENCE
SOUTH 00 DEGREES 04 MINUTES WEST A DISTANCE OF 993.45 FEET, THENCE SOUTH 89
DEGREES 55 MINUTES WEST A DISTANCE OF 908.40 FEET TO THE POINT OF BEGINNING,
EXCEPT ANY PART TAKEN OR DEEDED FOR ROAD OR RAILROAD PURPOSES.
AND COMMENCING AT THE SOUTHWEST CORNER OF LOT TEN (10) IN BLOCK NO. 2 IN
JOPLIN-SOUTHERN CORPORATION PLAT NO. 1 IN THE CITY OF JOPLIN, JASPER COUNTY,
MISSOURI. THENCE NORTH 00 DEGREES 19 MINUTES EAST ALONG THE EAST LINE OF
DAVIS BOULEVARD, A DISTANCE OF 408.00 FEET TO THE POINT OF BEGINNING. THENCE
NORTH 89 DEGREES 55 MINUTES EAST A DISTANCE OF 909.33 FEET, THENCE NORTH 00
DEGREES 04 MINUTES EAST A DISTANCE OF 216.00 FEET, THENCE SOUTH 89 DEGREES 55
MINUTES WEST A DISTANCE OF 908.40 FEET, TO THE EAST LINE OF DAVIS BOULEVARD,
THENCE SOUTH 00 DEGREES 19 MINUTES WEST ALONG SAID EAST LINE OF DAVIS
BOULEVARD A DISTANCE OF 216.00 FEET TO THE POINT OF BEGINNING, EXCEPT ANY
PART TAKEN OR DEEDED FOR ROAD OR RAILROAD PURPOSES.
AND
COMMENCING AT THE SOUTHWEST CORNER OF LOT TEN (10) IN BLOCK 2 IN JOPLIN-
SOUTHERN CORPORATION PLAT NO. 1, IN THE CITY OF JOPLIN, JASPER COUNTY,
MISSOURI. THENCE NORTH 0 DEGREES 19 MINUTES EAST ALONG THE EAST LINE OF DAVIS
BOULEVARD 312.14 FEET TO THE POINT OF BEGINNING. THENCE NORTH 00 DEGREES 19
MINUTES EAST ALONG SAID LINE 95.86 FEET. THENCE NORTH 89 DEGREES 55 MINUTES
EAST 909.33 FEET TO THE WEST LINE OF STEPHENS BOULEVARD. THENCE SOUTH 00
DEGREES 04 MINUTES WEST ALONG SAID LINE 95.86 FEET, THENCE SOUTH 89 DEGREES
55 MINUTES WEST 909.76 FEET TO THE POINT OF BEGINNING, BEING SUBJECT TO ALL
RIGHT-OF-WAYS, EASEMENTS AND RESERVATIONS OF RECORD IF ANY, AND EXCEPT ANY
PART TAKEN OR DEEDED FOR ROAD OR RAILROAD PURPOSES.
<PAGE>
EXHIBIT "B"
YEAR LANDLORD'S PERCENTAGE
---- ---------------------
1 42%
2 45%
3 48%
4 51%
5 54%
6 57%
7 60%
8 63%
9 66%
10 69%
11 72%
12 75%
13 78%
14 81%
15 84%
16 87%
17 90%
18 93%
19 96%
20 98%
21 100%
B-1
<PAGE>
CONFAR INVESTORS II, L.L.C.
177 North Church Street, Suite 613
Tucson, Arizona 85701
Date: as of June 1, 1997
Aaron's Automotive Products, Inc.
2600 North Westgate
Springfield, Missouri 65803
Re: Amended and Restated Lease (the "Lease") dated as
of June 1, 1997 by and between Confar Investors II,
L.L.C. ("Landlord") and Aaron's Automotive Products,
Inc. ("Tenant") for property located in Joplin,
Jasper County, Missouri (the "Premises")
---------------------------------------------------
Gentlemen:
Please refer to the Lease. This letter agreement contains certain
additional agreements between Landlord and Tenant with respect to the Lease.
1. LEGAL FEES. Landlord hereby acknowledges and agrees that it will pay
the first Five Thousand Dollars ($5,000) of legal fees incurred by Tenant in
connection with the review and negotiation of the Lease. Tenant shall forward
invoices for such legal services to Landlord.
2. PROMISSORY NOTE. Tenant hereby reaffirms its obligations under that
certain Promissory Note (the "Note") dated June 22, 1995, made by Tenant
payable to the order of Landlord as successor-in-interest to Fleming
Companies, Inc., in the original principal amount of Seven Hundred Fifty
Thousand Dollars ($750,000), including, without limitation, Tenant's
obligation to make payments of principal under the Note in the amounts of Two
Hundred Fifty Thousand Dollars ($250,000) on each of June 20, 1997 and June
20, 1998.
<PAGE>
Please execute the enclosed copy of this letter to signify your
agreement with, and acceptance of, the terms set forth herein.
Very truly yours,
CONFAR INVESTORS II, L.L.C.,
an Arizona limited liability
company
By: Continental Ventures, Ltd.,
an Arizona corporation
Its Manager
By: /s/ Neil M. Gumbin
-------------------------
Neil M. Gumbin
President
AGREED AND ACCEPTED:
AARON'S AUTOMOTIVE PRODUCTS, INC.,
a Delaware corporation
By: Aarons Automotive Products Inc
-----------------------------------
Name: /s/ Kenneth A Bear
---------------------------------
Title: Vice president
--------------------------------
<PAGE>
Please execute the enclosed copy of this letter to signify your
agreement with, and acceptance of, the terms set forth herein.
Very truly yours,
CONFAR INVESTORS II, L.L.C.,
an Arizona limited liability
company
By: Continental Ventures, Ltd.,
an Arizona corporation
Its Manager
By: /s/ Neal M. Gumbin
-------------------------
Neal M. Gumbin
President
AGREED AND ACCEPTED:
AARON'S AUTOMOTIVE PRODUCTS, INC.,
a Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into as
of November 14, 1997 by and among Matthew Obeid, an individual
("Stockholder"), Metran Boston, Inc., a Massachusetts corporation ("Metran
MA"), Metran Automatic Transmission Parts Corp., a New York corporation
("Metran NY"), Metran Parts of Pennsylvania, Inc., a Pennsylvania corporation
("Metran PA"), TM-AL Acquisition Corp., a Delaware corporation ("Buyer"), and
Aftermarket Technology Corp., a Delaware corporation ("ATC"). For purposes
of this Agreement, Metran MA, Metran NY and Metran PA are sometimes
individually or collectively referred to as the "Company."
R E C I T A L S
A. The Company is engaged in the sourcing, distribution and sale
of automotive and light truck component parts (the "Business"); and
B. Stockholder owns all of the issued and outstanding shares
(collectively the "Shares") of the capital stock of each of Metran MA, Metran
NY and Metran PA, and Buyer desires to purchase and Stockholder 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" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Act of 1934, as amended.
Without limiting the generality of the foregoing, after the Closing Date the
Affiliates of Buyer shall include the Company.
"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 (including any Environmental Law) 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).
<PAGE>
"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 10%
or more of any class of equity securities issued by such other Person, (b)
any trust or other estate in which such Person has a beneficial interest of
more than 50% or as to which such Person serves as trustee or in a similar
fiduciary capacity, and (c) any parent, grandparent, aunt, uncle, sibling,
child 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, other
than an Employee Benefit Plan, maintained by the Company or any ERISA
Affiliate of the Company covering the employees, former employees, directors
and former directors of the Company and the beneficiaries of any of them,
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.
"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 Chicago, Illinois 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 the Company 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
Prime Rate in effect from time to time, 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. In determining
Damages, tax effects shall be considered and appropriate adjustments made for
the tax consequences of such Damages.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan, as defined
in Section 3(3) of ERISA, that is sponsored or contributed to by the Company
or any ERISA Affiliate thereof covering employees or former employees of the
Company.
2
<PAGE>
"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
Hazardous Substances, occupational health and safety, or the environment
including, without limitation, (i) all Applicable Laws 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 Applicable Laws
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 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 and other tangible property (and interests in any of the
foregoing) of the Company.
"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.
"EXCLUDED ENVIRONMENTAL LIABILITY" means Environmental Liabilities
arising as a result of the actions or inactions of Buyer, ATC or the Company
after the Closing Date.
"GAAP" means generally accepted accounting principles in the United
States as in effect at the time the relevant financial statement is prepared,
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.
3
<PAGE>
"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 requires investigation or remediation under any Applicable
Law; or (ii) the generation, storage, treatment, transportation, disposal,
remediation, removal, handling or management of which is regulated by any
Environmental Law; or (iii) that is defined as a "hazardous waste" or
"hazardous substance" under any Applicable Law; or (iv) that is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic or
mutagenic or otherwise hazardous and is regulated by any Governmental
Authority having or asserting jurisdiction over the Business or the Company;
or (v) the presence of which constitutes a nuisance, trespass or other
tortious condition; or (vi) the presence of which on adjacent properties
constitutes a trespass by Seller; or (vii) 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.
"INDEBTEDNESS" means all liabilities and obligations, contingent or
otherwise, of the Company (i) in respect of borrowed money, (ii) evidenced by
bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or
services, other than those incurred in the ordinary course of its business
that constitute trade payables to trade creditors, (iv) evidenced by a
bankers' acceptance or similar instrument issued or accepted by banks, (v)
for the capitalized amount of a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP, (vi) evidenced by a
letter of credit or a reimbursement obligation of the Company with respect to
any letter of credit, and (vii) any of the foregoing of another Person as to
which the Company is a guarantor or otherwise liable (except endorsements of
customer checks in the ordinary course of business), but excluding the
portion of any of the foregoing that is due within 12 months of the date
hereof.
"INDEMNIFYING PARTY" means: (1) Stockholder when any Buyer
Indemnitee is asserting a claim under Sections 9.01(a) or (2) Buyer and ATC
when any Stockholder Indemnitee is asserting a claim under Sections 9.01(b).
"INDEMNITEE" means: (1) each of Buyer and its Affiliates
(including, without limitation, ATC and, after the Closing, the Company) with
respect to any claim for which Stockholder is an Indemnifying Party under
Sections 9.01(a); or (2) Stockholder and his Affiliates with respect to
claims for which Buyer and ATC are Indemnifying Parties under Sections
9.01(b).
"INVENTORY" means all items of inventory notwithstanding how
classified in the financial records of the Company, including all raw
materials, work-in-process, finished goods, supplies, spare parts, samples,
cores and stores of the Company.
"IRS" means the Internal Revenue Service.
4
<PAGE>
"KNOWLEDGE" means, with respect to the Company, all things actually
known by any of Matthew Obeid, Susan West, Carmine Prisco, Chris Hart or Tom
DeMille and, with respect to any other corporation, all things actually 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 the Company or the
Business that results in a material adverse effect on, or a material adverse
change in, the Company 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.
"OUTSIDE DATE" means December 31, 1997.
"PERMITTED LIENS" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for
Taxes the validity of which are being contested in good faith by appropriate
proceedings; (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 or being contested in good faith; (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 and Encumbrances specifically identified in
the 1997 Balance Sheet; and (v) Liens securing executory obligations under
any Lease that constitutes an "operating lease" under GAAP; PROVIDED,
HOWEVER, that to the extent that any such Encumbrance or Lien arose prior to
the date of the 1997 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 accrual for such Liability
has been established therefor on the 1997 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 the Company 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.
5
<PAGE>
"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.
"PRIME RATE" means per annum rate of interest publicly announced
from time to time by The Chase Manhattan Bank as its prime rate (or reference
rate). Any change in the Prime Rate shall take effect at the opening of
business on the day specified in the public announcement of such change.
"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.
"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.
1.02 ADDITIONAL DEFINED TERMS. The following terms are defined in
the Sections referred to below:
"1997 Balance Sheet" . . . . . . . . . . . . . . . . . . . . . . Section 3.08
"AAA Rules". . . . . . . . . . . . . . . . . . . . . . . . . Section 11.11(a)
"Agreement". . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Annual Statements". . . . . . . . . . . . . . . . . . . . . . . Section 3.09
"ATC". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Business" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Recital A
"Buyer Indemnitees". . . . . . . . . . . . . . . . . . . . . .Section 9.01(a)
"Buyer". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . .Section 2.02(a)
"Closing". . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.02(a)
"Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Distributions". . . . . . . . . . . . . . . . . . . . . . . .Section 3.10(h)
"Encumbrances" . . . . . . . . . . . . . . . . . . . . . . . .Section 3.11(a)
"Financial Statements" . . . . . . . . . . . . . . . . . . . . . Section 3.09
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"Indebtedness Certificate" . . . . . . . . . . . . . . . . . .Section 2.03(a)
"Insurance Policies" . . . . . . . . . . . . . . . . . . . . . . Section 3.23
"Intellectual Property Rights" . . . . . . . . . . . . . . . .Section 3.20(a)
"Interim Statements" . . . . . . . . . . . . . . . . . . . . . . Section 3.09
"Leased Real Property" . . . . . . . . . . . . . . . . . . . .Section 3.11(a)
"Leases" . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.11(b)
"Metran MA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Metran NY". . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Metran PA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Owned Real Property". . . . . . . . . . . . . . . . . . . . .Section 3.11(a)
"Permits". . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.16(a)
"Personal Property Leases" . . . . . . . . . . . . . . . . . .Section 3.11(b)
"Proceedings". . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.14
"Real Property Leases" . . . . . . . . . . . . . . . . . . . .Section 3.11(b)
"Required Consents". . . . . . . . . . . . . . . . . . . . . .Section 3.16(b)
"Required Contractual Consent" . . . . . . . . . . . . . . . .Section 3.16(b)
"Required Governmental Approval" . . . . . . . . . . . . . . .Section 3.16(b)
"Scheduled Contracts". . . . . . . . . . . . . . . . . . . . .Section 3.15(a)
"Share Encumbrances" . . . . . . . . . . . . . . . . . . . . .Section 3.01(a)
"Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Recital B
"Stockholder Indemnitees". . . . . . . . . . . . . . . . . . .Section 9.01(b)
"Stockholder". . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Subsequent Material Contract" . . . . . . . . . . . . . .Section 5.01(b)(iv)
ARTICLE II
PURCHASE AND SALE
2.01 PURCHASE OF SHARES FROM STOCKHOLDER. On the terms and subject
to the conditions set forth herein, at the Closing Stockholder shall sell,
transfer, convey, assign and deliver to Buyer, free and clear of all Share
Encumbrances, and Buyer shall purchase, acquire and accept from Stockholder,
all the Shares. At the Closing, Stockholder shall deliver to Buyer
certificates evidencing the Shares duly endorsed for transfer and such other
instruments as may be reasonably requested by Buyer to transfer full legal
and beneficial ownership of the Shares to Buyer, free and clear of all Share
Encumbrances. Buyer shall pay the purchase price for the Shares in accordance
with the terms of Section 2.02(b). Such purchase price is allocated as
follows: Metran MA--1.5%, Metran NY--78.5% and Metran PA--20.0%.
2.02 CLOSING.
(a) The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Schupbach,
Williams & Pavone, 401 Franklin Avenue, Garden City, New York 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 Stockholder may agree (the
"Closing Date"); PROVIDED, HOWEVER, that, as provided in Section 10.01(d),
Stockholder or Buyer may terminate this Agreement if the Closing shall not
have been consummated by the Outside Date.
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(b) At the Closing Buyer shall pay to Stockholder, in cash by
wire transfer of immediately available funds to a bank account or bank
accounts designated in writing by Stockholder, an aggregate amount equal to
$7,172,545.82 minus the amount, if any, by which the Indebtedness as of the
Closing Date exceeds $440,000.
2.03 CALCULATION OF INDEBTEDNESS AND CLOSING BALANCE SHEET.
(a) For purposes of determining the purchase price to be paid
by Buyer pursuant to Section 2.02(b), the Company shall deliver at the
Closing a certificate, executed by an officer of the Company, setting forth
the Company's good faith estimate of the amount of Indebtedness as of the
Closing Date, broken down by type of Indebtedness (the "Indebtedness
Certificate"). As soon as practicable but in no event more than 45 days
after the Closing Date, Stockholder shall cause to be prepared and delivered
to Buyer a balance sheet of the Company as of the Closing Date, together with
all supporting documentation, prepared in accordance with GAAP except for
such adjustments as to which the parties agree. If Buyer disputes any aspect
of such balance sheet and the parties are unable to resolve such dispute
within 15 days of Buyer's notification to Stockholder of the nature of the
dispute, the dispute shall be referred for final and conclusive resolution to
Deloitte & Touch LLP or, if such firm is not available, such other
independent accounting firm of national reputation selected by the mutual
agreement of Stockholder and Buyer. The fees and expenses of the accounting
firm resolving the dispute shall be paid by Stockholder and/or Buyer as such
firm shall determine.
(b) If the amount of Indebtedness as of the Closing Date, as
shown on the closing balance sheet (as finally determined pursuant to Section
2.03(a)), is other than as set forth in the Indebtedness Certificate, then:
(i) Stockholder shall pay to Buyer cash in the amount,
if any, equal to the lesser of (A) the Indebtedness as of the Closing Date
minus the amount set forth in the Indebtedness Certificate and (B) the
Indebtedness as of the Closing Date minus $440,000; or
(ii) Buyer shall pay to Stockholder cash in the amount,
if any, equal to the lesser of (A) the amount set forth in the Indebtedness
Certificate minus the Indebtedness as of the Closing Date and (B) the amount
set forth in the Indebtedness Certificate minus $440,000.
The payment called for by this Section 2.03(b), together with interest from
the Closing Date to the date of payment at the Prime Rate, shall be made
within five Business Days after the ultimate determination of the amount of
Indebtedness as of the Closing Date and shall be in immediately available
funds by wire transfer to an account designated in writing by the recipient.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
STOCKHOLDER AND THE COMPANY
As an inducement to Buyer and ATC to enter into this Agreement and
to consummate the transactions contemplated herein, Stockholder and the
Company represent and warrant to Buyer and ATC as follows:
3.01 REPRESENTATIONS REGARDING THE SHARES.
(a) Stockholder has good and marketable title to the Shares
free and clear of any and all covenants, conditions, restrictions (other than
restrictions under federal or state securities laws), 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; and on the Closing Date, Stockholder will have, and will
deliver to Buyer, good and marketable title to the Shares free and clear of
any and all Share Encumbrances (including without limitation those set forth
in SCHEDULE 3.01).
(b) Stockholder 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. Upon consummation of the purchase contemplated hereby,
Buyer will acquire from Stockholder good and marketable title to the Shares,
free and clear of all Share Encumbrances except those created or permitted by
Buyer.
3.02 EXISTENCE AND POWER. Metran MA is a corporation duly organized
and validly existing and in good standing under the laws of the State of
Massachusetts, Metran NY is a corporation duly organized and validly existing
and in good standing under the laws of the State of New York, and Metran PA
is a corporation duly organized and validly existing and in good standing
under the laws of the State of Pennsylvania. The Company has all corporate
power and all governmental licenses, authorizations, consents, approvals and
qualifications 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,
approvals and qualifications would not have a Material Adverse Effect. The
Company 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. SCHEDULE 3.02, sets forth those states in which the Company is
duly qualified to do business and in good standing.
3.03 AUTHORIZATION. The execution, delivery and performance by the
Company and Stockholder of this Agreement and the consummation thereby of the
transactions contemplated hereby are within each of the Company's and
Stockholder's powers and have been duly authorized by all necessary corporate
action on the part of the Company. This Agreement has been duly and validly
executed by the Company and Stockholder and constitutes the legal, valid and
binding agreement of the Company and Stockholder, enforceable against each of
them
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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.
3.04 NON-CONTRAVENTION. The execution, delivery and performance by
the Company and Stockholder of this Agreement do not and will not (a)
contravene or conflict with the charter or bylaws of the Company, true and
correct copies of which have been delivered to Buyer, (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 the
Company, Stockholder, 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 the Company is entitled under, any material Contract or any Permit or
similar authorization relating to the Company, the Business or the Shares by
which the Company, the Business or the Shares may be bound, or (d) result in
the creation or imposition of any Lien on any assets of the Company(other
than Permitted Liens) or any Share Encumbrance.
3.05 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Company and Stockholder 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 otherwise expressly
referred to in this Agreement or set forth on SCHEDULE 3.05 or SCHEDULE
3.16(b). To the Knowledge of the Company and Stockholder, there are no facts
relating to the identity or circumstances of the Company or Stockholder that
would prevent or materially delay obtaining any of the Required Consents.
3.06 SUBSIDIARIES. The Company does not have any subsidiaries.
3.07 SUFFICIENCY OF AND TITLE TO ASSETS. The Company 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.
3.08 CAPITAL STOCK. The authorized capital stock of Metran MA
consists solely of 15,000 shares of common stock, no par value, of which 100
shares are issued and outstanding on the date hereof; the authorized capital
stock of Metran NY consists solely of 200 shares of common stock, no par
value, of which 50 shares are issued and outstanding on the date hereof; and
the authorized capital stock of Metran PA consists solely of 1,000 shares of
common stock, no par value, of which 100 shares are issued and outstanding on
the date hereof. 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 the Company's capital stock and are owned beneficially and of
record by Stockholder. Except as set forth on SCHEDULE 3.08, there are not,
and on the Closing Date there will not be, outstanding (a) any options,
warrants or other rights to purchase from the Company or any Person any
capital stock of the Company, (b) any securities convertible into or
exchangeable for shares of such stock or (c) any other commitments of any
kind for the issuance of additional shares of capital stock or options,
warrants or other securities of the Company.
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3.09 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Attached
hereto as EXHIBIT A are true and complete copies of the consolidated balance
sheet and related consolidated statement of operations and retained earnings
for the Company as of and for the eight months ended August 31, 1997 (the
"Financial Statements"). The balance sheet is referred to herein as the
"1997 Balance Sheet." Each of the Financial Statements has been prepared
based on the books and records of the Company in accordance with GAAP (except
for the omission of footnote disclosure required by GAAP) and the Company's
normal accounting practices, consistent with past practice and with each
other, and present fairly the financial condition and results of operations
of the Company as of the date indicated or for the period indicated.
3.10 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE
3.10, since the date of the 1997 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 the Company 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 the Company
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 the Company, (ii) any incurrence of any
Liability relating to a documentary or standby letter of credit by the
Company, (iii) any change in any material Liability other than in the
ordinary course of business, or (iv) any incurrence of any other Liability by
the Company, other than in the ordinary course of business;
(c) any creation, assumption or sufferance of the existence
of any Lien on any of the Company's assets, other than Permitted Liens;
(d) any material transaction or commitment made, or any
material Contract entered into, by the Company, or any waiver, amendment,
termination or cancellation of any material Contract by the Company, or any
relinquishment of any rights thereunder by the Company, or of any other
material right or debt owed to the Company, other than in each such case
actions taken in the ordinary course of business consistent with past
practice;
(e) except for actions taken in the ordinary course of
business consistent with the past practice of the Company 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 the
Company 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 the Company 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 the Company
or any Associate of any of the
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foregoing, (iv) except as required by Applicable Law, increase in
compensation, bonus or other benefits payable or potentially payable to
directors, officers, stockholders or employees of the Company or any
Associate of any of the foregoing, (v) except as required by Applicable Law,
change in the terms of any bonus, pension, insurance, health or other Benefit
Plan of the Company, or (vi) representation of the Company to any employee or
former employee of the Company 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 the
Company 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 the Company in its accounting
principles, methods or practices or in the manner it keeps its books and
records or any material change by the Company of its current practices with
regard 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 the
Company to any officer, director, or Affiliate of the Company or any of their
respective Affiliates or Associates (collectively, "Distributions"), other
than Distributions to Stockholder;
(i) the entering into of any Contract or other arrangement
between the Company and any officer, director or stockholder of the Company
or any of their respective Affiliates or Associates; or
(j) any payment, discharge or satisfaction of any Liabilities
of the Company, other than payments, discharges or satisfactions in the
ordinary course of business.
3.11 PROPERTIES; LEASES; TANGIBLE ASSETS.
(a) The Company does not own any real property or have a
leasehold interest in any real property other than the real property
identified on SCHEDULE 3.11(a) (the "Owned Real Property" and the "Leased
Real Property," respectively), which constitutes all of the real property
used in the Business. The Company 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 the Owned Real Property and its other
tangible assets. The Company 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
(i) all personal property leases or licenses (A) to which the Company is a
party or by which the Company is bound and (B) that provide for annual
payments by the Company in excess of
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$10,000 that cannot be terminated without charge by the Company within 30
days (the "Personal Property Leases") and (ii) all leases or licenses of
Leased Real Property that provide for annual payments by the Company in
excess of $10,000 that cannot be terminated without charge by the Company
within 30 days (the "Real Property Leases" and collectively with the Personal
Property Leases, the "Leases"). With respect to the Leases, except as set
forth on SCHEDULE 3.11(b), there exist no defaults by the Company, or, to the
Knowledge of the Company, any default or threatened default by any lessor or
third party thereunder, that has materially affected or could reasonably be
expected to materially affect the rights and privileges thereunder of the
Company. Assuming the Required Consents are obtained, the consummation of
the transactions contemplated hereby will not result in a breach of, or give
any Person the right to terminate, any Lease to which the Company is a party
with non-Affiliates or by which it is bound.
(c) Except as disclosed in SCHEDULE 3.11(c) or SCHEDULE
3.22(c), the Company 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 the Company 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.
(a) Except as set forth in SCHEDULE 3.12, neither the Company
nor Stockholder or any officers or directors of the Company (or any immediate
family member of any such officer or director) now has or at any time
subsequent to December 31, 1995, had, either directly or indirectly, an
equity or debt interest in any Person that furnishes or sells or during such
period furnished or sold services or products to the Company or purchases or
during such period purchased from the Company any goods or services, or
otherwise does or during such period did business with the Company of a
material nature or amount; PROVIDED, HOWEVER, that neither the Company, nor
Stockholder nor any of the Company's officers and directors or other
Affiliates shall be deemed to have such an interest solely by virtue of the
ownership of less than 5.0% 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.
(b) Except as set forth in SCHEDULE 3.12, neither the Company
nor Stockholder or any officers or directors of the Company (or any immediate
family member of any such officer or director) now is or at any time
subsequent to December 31, 1995, was, a party to any contract, commitment or
agreement to which the Company is or during such period was a party or under
which the Company is or was obligated or bound or to which any of their
respective properties may be or may have been subject, other than through the
Company.
3.13 INVENTORIES. Subject to any reserve therefor that is included
in the 1997 Balance Sheet and except as disclosed in SCHEDULE 3.13, all
Inventories of the Company (a) have been acquired or manufactured in the
ordinary course of business, in accordance with the Company's normal
inventory practices; (b) are of a quality usable (including processing into
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merchantable finished inventories for sale in the ordinary course of
business), free of any material defect or deficiency; and (c) are in
merchantable and undamaged condition and meet customer specifications.
3.14 LITIGATION. Except as disclosed on SCHEDULE 3.14, (i) there
are no actions, suits, hearings, arbitrations, proceedings (public or
private) or governmental investigations that have been brought by or against
any Governmental Authority or any other Person (collectively, "Proceedings")
pending or, to the Knowledge of the Company or Stockholder, threatened,
against or affecting the Company, the Business, Stockholder or the Shares or
which seek to enjoin or rescind the transactions contemplated by this
Agreement or otherwise prevent the Company or Stockholder 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
the Company, the Business, Stockholder 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
the Company (collectively with the Leases and the Employment Agreements, the
"Scheduled Contracts"):
(i) each Contract between the Company and (A) each
present or former director, officer or other member of management or other
personnel of the Company, (B) any supplier of services or products to the
Company whose dollar volume of sales to the Company exceeded $10,000 in 1996
or is expected to exceed $10,000 in 1997, and (C) any Person in which the
aggregate payments made to the Company under such Contract exceeded $10,000
in 1996 or is expected to exceed $10,000 in 1997;
(ii) each other agreement or arrangement of the Company
that (A) requires the payment or incurrence of Liabilities or the rendering
of services by the Company, subsequent to the date of this Agreement, of more
than $10,000 and (B) cannot be terminated without charge by the Company
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 the Company in excess of $10,000 and cannot be terminated
without charge by the Company 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 the Company is a party or by which the Company
is otherwise bound; and
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(vi) all other material 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 the Company and, to the Knowledge of the Company and
Stockholder, each other party thereto, enforceable (except to the extent such
enforceability may be limited by bankruptcy, equity and creditors' rights
generally) against the Company and, to the Knowledge of the Company and
Stockholder, each such other party in accordance with its terms, and neither
the Company nor, to the Knowledge of the Company and Stockholder, any other
party thereto is in material default or has failed to perform any material
obligation thereunder. Complete and correct copies of each written Scheduled
Contract have been delivered to Buyer.
(c) SCHEDULE 3.15(c) sets forth a list (by name and address) of
the 10 largest customers of and the 10 primary vendors providing services to the
Company from January 1, 1997 to November 12, 1997 together with the approximate
dollar amount of sales by or services provided to the Company during said
period.
3.16 PERMITS; REQUIRED CONSENTS.
(a) SCHEDULE 3.16(a) sets forth all material approvals,
authorizations, certificates, consents, licenses, orders, permits,
qualifications or other similar authorizations of all Governmental
Authorities (and all other Persons) necessary for the operation of the
Business or the Company's assets in substantially the same manner as
currently operated 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 the Company or Stockholder 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 the Company
or Stockholder by virtue of the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby to avoid the
invalidity 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.
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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 sets forth all Benefit Plans. The Company
has made true and correct copies of all governing instruments and related
agreements pertaining to such Benefit Plans available to Buyer. The Company
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) Except as set forth on SCHEDULE 3.18, neither the Company
nor any ERISA Affiliates of the Company sponsors or has within the last five
years 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, 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
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 the
Company nor any ERISA Affiliates of the Company 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 the
Company or Stockholder, is there a basis for any such claim. No officer,
director or employee of the Company 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 the Company threatened, involving any Benefit
Plan by any Person against such plan or the Company or any ERISA Affiliate.
There is no pending or, to the Knowledge of the Company or Stockholder,
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, 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.
The Company 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 the Company and each ERISA Affiliate shall continue to do so through the
Closing.
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(g) With respect to any Group Health Plans maintained by the
Company or its ERISA Affiliate, whether or not for the benefit of the Company
and its ERISA Affiliate, the Company 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. The Company 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 the Company 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 the Company or Stockholder, threatened by or on behalf of any labor union
to organize any employees of the Company.
(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
the Company or Stockholder, 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 the Company nor Stockholder 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 the Company.
(c) The Company has complied and is currently complying, in
all material respects, in respect of all employees of the Company, 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. Except as set forth on SCHEDULE 3.19, since
January 1, 1994 the Company has not received any citation or other
notification for the violation of occupational and health safety laws or
regulations.
(d) All individuals who are performing or have performed
services for the Company and are or were classified by the Company 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.
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3.20 INTELLECTUAL PROPERTY.
(a) SCHEDULE 3.20 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 the Company (the "Intellectual Property Rights").
(b) Except as disclosed in SCHEDULE 3.20, the Company has not
during the three years preceding the date of this Agreement been a party to
any Proceeding nor, to the Knowledge of the Company or Stockholder, is any
Proceeding threatened as to which there is a reasonable possibility of a
determination adverse to the Company 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, no
Intellectual Property Right is subject to any outstanding order, judgment,
decree, stipulation or agreement restricting the use thereof by the Company,
or restricting the licensing thereof by the Company 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, the Company 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 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 that 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. Except for Buckingham (whose fees and expenses
will be paid by Stockholder), 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 the Company, Stockholder 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.
3.22 ENVIRONMENTAL COMPLIANCE.
(a) Except as disclosed in SCHEDULE 3.22, the Company has
obtained all material approvals, authorizations, certificates, consents,
licenses, orders and permits or other similar authorizations of all Governmental
Authorities, or from any other Person, that are
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required under any Environmental Law. SCHEDULE 3.22 sets forth all material
permits, licenses and other authorizations issued under any Environmental Law
to the Company.
(b) Except as disclosed in SCHEDULE 3.22, the Company is in
compliance in all material 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 material limitations, restrictions,
conditions, standards, requirements, schedules and timetables required or
imposed under all Environmental Laws.
(c) Except as disclosed in SCHEDULE 3.22, there are no past
or present events, conditions, circumstances, activities, practices,
incidents, actions, omissions or plans relating to or in any way affecting
the Company or the Business that could reasonably be expected to prevent, or
make more expensive, continued compliance with any Environmental Law by Buyer
or the Company 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.
(a) SCHEDULE 3.23 sets forth a complete and correct list of
all material insurance policies of any kind currently in force with respect
to the Company (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. No cancellation or material amendment or increase of premiums
is pending or, to the Knowledge of the Company or Stockholder, threatened
with respect to any of the Insurance Policies.
(b) No insurance company that issued any Insurance Policy,
Board of Fire Underwriters or similar body, or Governmental Authority has
issued a recommendation or requirement for any changes in the conduct of the
Business or any repairs or other work to be done on or with respect to any
assets of the Company.
3.24 TAX MATTERS. Except as set forth on SCHEDULE 3.24:
(a) The Company 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
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are true, correct and complete in all material respects. The Company
is not currently the beneficiary of any extension of time within which to
file any Tax Return.
(b) The Company has not received notice that the IRS or any
other taxing authority has asserted against the Company 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 the Company's assets.
(c) The Company 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 the Company may
be subject. No claim has ever been made by any Taxing Authority in a
jurisdiction in which the Company does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction.
(d) The Company has withheld or collected and paid over all
Taxes required to have been withheld or collected and paid over in connection
with amounts or paid or owing to, or received from, any employee, independent
contractor, creditor, stockholder, or other Person;
(e) The Company 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) The Company 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 the Company constitutes tax-exempt
bond financed property or tax-exempt use property, with the meaning of
Section 168 of the Code. The Company 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) The Company is not a party to any joint venture,
partnership or other arrangement that is treated as a partnership for federal
income Tax purposes.
(i) The Company 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) The Company 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) The Company 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
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similar provision of state or local law for any period on or prior to or
including the Closing Date, except for any such liability as may arise as
a result of the consummation of the transactions contemplated by this
Agreement.
(l) Each of Metran MA, Metran NY and Metran PA has 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 beginning on and after August 30, 1996, January 1, 1987
and April 24, 1990, respectively (which are the dates each elected to be
treated as an S corporation), and each of Metran MA, Metran NY and Metran PA
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.
3.25 DISTRIBUTIONS TO STOCKHOLDER. Except as set forth on
SCHEDULE 3.25, the Company has not made any Distributions to
Stockholder since December 31, 1996.
3.26 MATERIAL DISCLOSURES. No statement, representation or warranty
made by the Company or Stockholder 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. Matters disclosed on one or more schedules attached hereto and
made a part hereof shall be deemed to have been disclosed on each and every
relevant schedule to the extent necessary to make any other statement,
representation or warranty contained herein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND ATC
As an inducement to Stockholder and the Company to enter into this
Agreement and to consummate the transactions contemplated herein, Buyer
and ATC hereby represent and warrant to Stockholder and the Company that:
4.01 ORGANIZATION AND EXISTENCE. Each of Buyer and ATC 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 Buyer
and ATC 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
Buyer and ATC of this Agreement and the consummation by Buyer and ATC of the
transactions contemplated hereby are within the corporate powers of Buyer and
ATC and have been duly authorized by all necessary corporate action. This
Agreement constitutes a legal, valid and
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binding agreement of each of Buyer and ATC, 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.
4.03 GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance
by Buyer and ATC 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
Buyer and ATC of this Agreement does not (a) contravene or conflict with the
Certificate of Incorporation or Bylaws of Buyer or ATC, 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 Buyer or ATC.
4.05 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 Buyer who might be entitled to any fee, commission or
reimbursement of expenses from the Company or Stockholder any of his
Affiliates upon consummation of the transactions contemplated by this
Agreement.
4.06 LITIGATION. There is no Proceeding pending against, or to the
Knowledge of Buyer or ATC, threatened against or affecting, Buyer or ATC
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 STOCKHOLDERS AND METRAN
5.01 CONDUCT OF THE BUSINESS; DISTRIBUTIONS. From the date hereof
until the Closing Date, the Company shall, and Stockholder shall cause the
Company 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,
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. The Company
shall use its reasonable efforts to preserve intact the Business and the
business organizations and relationships and goodwill of the Company with
third parties and keep available the services of the present officers,
employees, agents and other personnel of the Company. 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) The Company will, and Stockholder will cause the Company to:
(i) (A) maintain the assets of the Company in the ordinary
course of business consistent with past practice in operating order and
condition, reasonable wear and tear excepted, (B) promptly repair, restore or
replace any assets of the Company in the
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ordinary course of business consistent with past practice, (C) upon any
damage, destruction or loss to any of the assets of the Company, 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
the Company before such event or set such proceeds aside for application by
the Company after the Closing, (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 Proceeding by or against the Company or
Stockholder, or the Company or Stockholder 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 the
Company or Stockholder of any representation or warranty, or any covenant or
agreement, contained in this Agreement.
(b) without Buyer's prior consent, the Company will not, and
Stockholder shall not permit the Company to, do any of the following and will
not agree to:
(i) purchase or otherwise acquire assets from any other Person
other than in the ordinary course of business;
(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 the Company, including Leased Real Property,
except in the ordinary course of 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 the Company outside the ordinary course of business;
(iv) amend or modify in any material respect or terminate any
Scheduled Contract or any other Contract entered into by the Company after
the date hereof which, if in existence on the date hereof, would be required
to be set forth in the SCHEDULE 3.15(a) 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 $10,000, other than capital
expenditures expressly required under any Scheduled Contract;
(vi) enter into or commit or propose to enter into any
Subsequent Material Contract;
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(vii) make any distribution, dividend, bonus or other payment to
any officer, director, stockholder or Affiliate of the Company or any of
their respective Affiliates or Associates, except (A) as otherwise required
by this Agreement or (B) as set forth on SCHEDULE 5.01;
(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 the ordinary course of business where
the aggregate dollar amount of all of the foregoing does not exceed $10,000;
(ix) except as set forth on SCHEDULE 5.01, (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
3.15(a);
(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 Long-Term Debt; and
(xi) issue or sell any (A) shares of capital stock of the
Company, (B) options, warrants or other rights to purchase from the Company
shares of its capital stock, (C) securities convertible into or exchangeable
for shares of its capital stock or (D) any other commitments of any kind for
the issuance or sale of additional shares of capital stock or options,
warrants or other securities of the Company.
5.02 ACCESS TO INFORMATION. Subject to compliance with Applicable Laws,
from the date hereof until the Closing Date, the Company will, and Stockholder
will cause the Company to, and Stockholder will, promptly: (a) give Buyer and
its counsel, financial advisors, auditors and other authorized representatives
reasonable access to the offices, properties, books and records relating to the
Company 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 the Company or the Business as Buyer may
reasonably request and (c) instruct the directors, officers, employees,
counsel, auditors and financial advisors of the Company and Stockholder
to cooperate with Buyer and its counsel, financial advisors, auditors and
other authorized representatives in their investigation of the Company and
the Business. Such investigation shall include, but shall not be limited to:
(i) A business and financial performance review of the Business;
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(ii) A review of the financial statements and tax returns of
the Company;
(iii) An environmental review as to the presence and nature of
any Hazardous Substance in or on any real property owned or leased by the
Company; and
(iv) A standard legal due diligence examination relating to the
Company and the Business.
5.03 COMPLIANCE WITH TERMS OF REQUIRED GOVERNMENTAL APPROVALS AND
REQUIRED CONTRACTUAL CONSENTS. On and after the Closing Date, Stockholder
shall comply at his own expense with all conditions and requirements
affecting the Company 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 the Company 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 the Company.
5.04 MAINTENANCE OF INSURANCE POLICIES. Between the date hereof and the
Closing Date, the Company shall not, and Stockholder shall cause the Company
to 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 the Company or the
Business with respect to the period of time ending on the Closing Date.
5.05 CONFIDENTIALITY.
(a) The Company and Stockholder will, and will cause their
representatives to, treat any data and information obtained with respect to
Buyer or any of its Affiliates from any representative, officer, director, or
employee of Buyer, or from any books or records of 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 the Company,
Stockholder or their Affiliates or representatives, so long as such other party
is not in breach of a confidentiality obligation, (ii) information available to
the Company or Stockholder on a non-confidential basis prior to its disclosure
pursuant to this Agreement, (iii) information that is required to be disclosed
by Applicable Law, (iv) information required to be disclosed to obtain any
Required Consents, or (v) 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, the Company and Stockholder, 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 Buyer
or any of its Affiliates to the Company or Stockholder 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
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furnished by Buyer to the Company or Stockholder shall be destroyed by the
Company and Stockholder or shall be turned over to Buyer, and the Company and
Stockholder shall confirm to Buyer in writing that all such materials have
been turned over 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
Buyer or its 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 this Section 5.05, Buyer and its Affiliates shall
be entitled to an injunction restraining the Company and Stockholder from any
breach without showing or proving actual damage sustained by Buyer or its
Affiliates, as the case may be. Nothing in the preceding sentence shall limit
or otherwise affect any remedies that Buyer and its Affiliates may otherwise
have under Applicable Law.
5.07 CAPITAL CONTRIBUTION OF CERTAIN DEBT. Prior to the Closing Date,
Stockholder shall contribute to the Company all Indebtedness then owed by the
Company to Stockholder, other than accrued payroll, and such Indebtedness will
ceased to be outstanding.
5.08 Pennsylvania FACILITY. Prior to the Closing Date, Metran PA shall
distribute to Stockholder all of Metran PA's right, title and interest in
and to its facility located at 606 State Road, Croydon, Pennsylvania (the
"Pennsylvania Facility") and Stockholder will assume the outstanding balance
of the mortgage relating to the Pennsylvania Facility and all property taxes
and assessments relating thereto. Stockholder shall obtain from the mortgage
holder a complete release of Metran PA under such mortgage.
ARTICLE VI
COVENANTS OF BUYER AND ATC
6.01 CONFIDENTIALITY.
(a) Buyer and ATC will, and will cause their representatives to,
treat any data and information obtained with respect to the Company or
Stockholder from any representative, officer, director or employee of the
Company or Stockholder, or from any books or records of the Company or
Stockholder 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 Buyer or its Affiliates or representatives,
so long as such other party is not in breach of a confidentiality obligation,
(ii) information available to Buyer, its Affiliates or representatives on a
non-confidential basis prior to its disclosure pursuant to this Agreement,
(iii) information that is required to be disclosed by Applicable Law,
(iv) information required to be disclosed to obtain any Required Consents;
(v) any information that is disclosed by Buyer or its Affiliates to any
of their actual or prospective lenders in connection with financing
the transactions contemplated by this
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Agreement; or (vi) any information that is disclosed by 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 the Company.
(b) In the event that the Closing fails to take place and this
Agreement is terminated, Buyer, upon the written request of the Company, will,
and will cause their representatives to, promptly deliver to the Company any and
all documents or other materials furnished by the Company or Stockholder to
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 the
Company or Stockholder to Buyer shall be destroyed by Buyer or shall be turned
over to the Company, and Buyer shall confirm to the Company and Stockholder in
writing that all such materials have been turned over or destroyed. No failure
or delay by the Company and Stockholder 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
the Company and Stockholder 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 the Company and Stockholder therefrom.
Accordingly, if there should be a breach or threatened breach of this
Section 6.01, the Company and Stockholder shall be entitled to an injunction
restraining Buyer from any breach without showing or proving actual damage
sustained by the Company and Stockholder. Nothing in the preceding sentence
shall limit or otherwise affect any remedies that the Company and Stockholder
may otherwise have under Applicable Law.
6.02 ACCESS TO INFORMATION. Subject to compliance with Applicable Laws,
from the Closing Date until December 31, 2002, the Company will, and Buyer
will cause the Company to, and Buyer will, promptly: (a) furnish to
Stockholder and his counsel, financial advisors, auditors and other authorized
representatives such information relating to the Company or the Business as
Stockholder may reasonably request in connection with the preparation of Tax
Returns and (b) instruct the directors, officers, employees, counsel, auditors
and financial advisors of the Company and Buyer to cooperate in all reasonable
respects with Stockholder and his counsel, financial advisors, auditors and
other authorized representatives in connection with the preparation of Tax
Returns. After the Closing Date, in the event that the Company intends to
destroy any documents that contain or otherwise reflect information in
connection with the Business for any period prior to the Closing Date, the
Company will provide written notice to Stockholder of its intention to destroy
such documents and provide Stockholder with the opportunity to request that such
documents instead be delivered to Stockholder. Any information or documents
provided to Stockholder pursuant to this Section 6.02 shall be held by
Stockholder pursuant to Section 5.05.
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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. Buyer, ATC, the Company and Stockholder 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.
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. Up to (and including) the Closing Date, the
parties agree that they will not make any disclosure with respect to 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 or Nasdaq regulations, and the parties
hereto cannot reach agreement upon a mutually acceptable form of release.
Notwithstanding the foregoing, the parties hereto may, on a confidential basis,
advise their respective agents, accountants, attorneys and financing sources
with respect to the contents of this Agreement and the transactions contemplated
hereby.
7.04 ADMINISTRATION OF ACCOUNTS. All payments and reimbursements
received by Stockholder after the Closing Date from any third party in the name
of or to the Company shall be held by Stockholder in trust for the benefit of
the Company and, immediately upon receipt by Stockholder of any such payment or
reimbursement, Stockholder shall pay, or cause to be paid, over to the Company
the amount of such payment or reimbursement without right of set off.
7.05 TAXES.
(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 Stockholder.
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Except as provided in the preceding sentence and Section 7.05(e)(iii), all
other Taxes relating to the sale of the Shares shall be borne by Stockholder.
(b) (i) Stockholder shall have the exclusive authority and
obligation and shall be responsible for the correct and timely filing of all
Tax Returns of the Company with respect to 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,
the Company shall, and Buyer shall cause the Company to, provide reasonable
access to such books and records of the Company as necessary to prepare such
Tax Returns which may be reviewed and copied at Stockholder' 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 the Company shall be reported
or disclosed on such Tax Returns; PROVIDED, HOWEVER, that Stockholder shall
provide Buyer with draft Tax Returns of the Company 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 for filing such Tax Returns. In the
event Buyer has any objection to any items set forth on such draft Tax
Returns, Buyer and Stockholder 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
substantially 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 the Company 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 the Company shall be reported
or disclosed on such Tax Returns.
(c) (i) After giving effect to all payments in respect thereof
which have been made or accrued (to the extent that such accrued Taxes arise
in the ordinary course of business and are not income Taxes) prior to the
Closing Date, Stockholder 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 the Company for all periods ending on or prior to
the Closing Date.
(ii) Buyer shall be responsible and liable for the timely
payment of all Taxes imposed on or with respect to the properties, income and
operations of the Company for all periods beginning after the Closing Date.
(d) (i) Stockholder, at his sole expense, shall have the
exclusive authority to represent the Company before any taxing authority or
any court regarding the Tax consequences of the operations of the Company for
all periods ending on or prior to the Closing Date; PROVIDED, HOWEVER, that
Stockholder shall not enter into any settlement of any contest or otherwise
compromise any issue that affects or may affect the Tax Liability of the
Company for any period beginning after the Closing Date without the prior
written consent of Buyer, which
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shall not be unreasonably withheld. Stockholder 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 the
Company for all taxable periods.
(ii) Except as provided in Section 7.05(d)(i), Buyer shall
have the sole right to control any audit or examination by any taxing authority,
initiate 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, the Company; PROVIDED, HOWEVER,
that with respect to any audit or examination by any taxing authority regarding
the Tax consequences of the operations of the Company for all periods ending on
or prior to the Closing Date, the Company shall, and Buyer shall cause the
Company to, notify Stockholder thereof and keep them reasonably informed, and
PROVIDED FURTHER, that Buyer shall not enter into any settlement of any contest
or otherwise compromise any issue that affects or may affect the Tax Liability
of the Company or Stockholder for any period ending prior to the Closing Date
without the prior written consent of Stockholder, which shall not be
unreasonably withheld.
(e) (i) If Buyer, in Buyer's sole discretion, shall request,
Stockholder 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 the Company
as a Section 338(h)(10) Election. Stockholder 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 Stockholder agrees that Buyer may make any
determination or election required or permitted to be made in connection with
the Section 338(h)(10) Elections. Stockholder 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 Stockholder
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) Stockholder shall indemnify and hold harmless Buyer
and its Affiliates in respect of Damages resulting from the Section
338(h)(10) Election being invalid or unavailable due to any of Metran MA,
Metran NY and/or Metran PA not being treated as an "S corporation" under the
Code.
(iii) Buyer agrees that if the Section 338(h)(10)
Elections are made, Buyer will pay Stockholder an amount equal to the excess
of (A) 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
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make Stockholder whole as a result of the taxes created by this Section
7.05(e)(iii) over (B) the federal and state income taxes that would be
payable by Stockholder 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.
7.06 LEASE. At the Closing, Stockholder, as lessor, will enter into
a lease in the form of EXHIBIT B hereto with Metran PA, as lessee, for the
Pennsylvania Facility. The monthly rental rate for such lease shall be equal
to the "market rate" as established by a MAI appraiser selected by the mutual
agreement of Stockholder and Buyer and having experience in appraising
properties in the Philadelphia area. The appraiser may not be Associated
With the Company, Stockholder, Buyer or ATC. The fee of the appraiser shall
be shared equally by Buyer on the one hand and Stockholder on the other.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01 CONDITIONS TO OBLIGATION OF BUYER AND ATC. The obligation of
Buyer and ATC to consummate the transactions contemplated hereby is subject
to the satisfaction of each of the following conditions:
(a) (i) the Company and Stockholder shall each have performed
and satisfied in all material respects each of their 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 the
Company and Stockholder 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 Stockholder and a duly
authorized executive officer of the Company to the foregoing effect and to
the effect that the conditions specified within this Section 8.01 have been
satisfied.
(b) All Required Consents (including such consents as are
required under Subsequent Material Contracts) shall have been obtained
without the imposition of any conditions that are or would become applicable
to the Company, the Business, the Shares, Buyer or any of its Affiliates
after the Closing that Buyer in good faith reasonably determines would be
materially burdensome upon the Company, 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. All such Required
Consents 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 Consent; all applicable waiting
periods with respect to such Required Consents shall have expired; and all
conditions and requirements prescribed by Applicable Law or by such Required
Consents to be satisfied on or prior to the Closing Date shall have been
satisfied to the
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extent necessary such that all such Required Consents are, and will remain,
in full force and effect assuming continued compliance with the terms thereof
after the Closing.
(c) 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 the Company, 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 such businesses, as of the date hereof, would be reasonably
expected to be conducted after the Closing Date.
(d) Since the date hereof, there shall not have been any
event, occurrence, development or state of circumstances or facts or change
in the Company 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 the Company 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.
(e) Stockholder shall have executed and delivered to Buyer a
Noncompetition Agreement in the form of EXHIBIT C hereto.
(f) Stockholder shall have executed and delivered to Buyer an
Employment Agreement in the form of EXHIBIT D hereto.
(g) Stockholder, as lessor, shall have executed and delivered
to Metran PA the lease agreement called for by Section 7.06.
(h) Buyer shall have received an opinion of Schupbach,
Williams & Pavone in a form reasonably acceptable to Buyer.
(i) As of the Closing Date, there shall exist no Liens on any
assets of the Company, other than Permitted Liens, nor any Share Encumbrances.
8.02 CONDITIONS TO OBLIGATION OF STOCKHOLDER. The obligation of
Stockholder to consummate the transactions contemplated hereby is subject to
the satisfaction of each of the following conditions:
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(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
Stockholder; (ii) the representations and warranties of 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)
Stockholder shall have received a certificate signed by a duly authorized
executive officer of 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 Consents (including such consents
as are required under Subsequent Material Contracts) for the transactions
contemplated by this Agreement shall have been obtained without the
imposition of any conditions that are or would become applicable to
Stockholder or any of their respective Affiliates after the Closing that
Stockholder in good faith reasonably determine would be materially burdensome
upon such Person. All such Required Consents that relate to Stockholder'
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 Stockholder' 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 Consent. All
applicable waiting periods with respect to such Required Consents shall have
expired, and all conditions and requirements prescribed by Applicable Law or
by such Required Consents to be satisfied on or prior to the Closing Date
shall have been satisfied to the extent necessary such that all such Required
Consents are, and will remain, in full force and effect assuming continued
compliance with the terms thereof after the Closing.
(c) 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 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.
(d) Buyer shall have executed and delivered to Stockholder an
Employment Agreement in the form of EXHIBIT D hereto.
(e) the Company, as lessee, shall have executed and delivered
to Stockholder the lease agreements called for by Section 7.06.
(f) Stockholder shall have received an opinion of Joseph
Salamunovich, Esq. in a form reasonably acceptable to Stockholder.
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ARTICLE IX
INDEMNIFICATION
9.01 AGREEMENT TO INDEMNIFY.
(a) Subject to the limitations provided herein, ATC and the
direct and indirect subsidiaries of ATC (including Buyer and, after the
Closing has occurred, the Company) (collectively, the "Buyer Indemnitees")
shall each be indemnified and held harmless to the extent set forth in this
Article IX by Stockholder 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 or failure to perform any
representation, warranty, covenant, agreement or obligation of the Company or
Stockholder in this Agreement or (ii) in connection with any Environmental
Liability other than Excluded Environmental Liabilities. The aggregate
liability of Stockholder under this Section 9.01(a) shall not exceed the
purchase price paid for the Shares pursuant to Section 2.02(b), except in the
case of Damages due to Stockholder's fraud or willful misconduct.
(b) Stockholder and his Affiliates (collectively the
"Stockholder Indemnitees") shall each be indemnified and held harmless to the
extent set forth in this Article IX on a joint and several basis by Buyer and
ATC in respect of any and all Damages reasonably and proximately incurred by
any Stockholder Indemnitee as a result of (i) any inaccuracy or
misrepresentation in or breach of or failure to perform any representation,
warranty, covenant, agreement or obligation of Buyer or ATC in this Agreement
or (ii) the Company's conduct of the Business after the Closing.
(c) Notwithstanding the foregoing, Buyer Indemnitees may not
seek indemnification hereunder from Stockholder unless and until the claims
in the aggregate exceed $20,000, provided that if such threshold is exceeded,
Buyer Indemnitees may seek indemnification hereunder for any and all claims.
(d) From and after the Closing Date, the Company shall have
no liability to Stockholder for contribution or reimbursement due to, or
other Damages arising out of, liability incurred by Stockholder pursuant to
Section 9.01(a) notwithstanding that such liability may have arisen out of a
misrepresentation or breach by the Company.
9.02 SURVIVAL OF REPRESENTATION, WARRANTIES AND COVENANTS.
(a) Except as hereinafter provided in this Section 9.02, all
representations, warranties, covenants, agreements and obligations of each
Indemnifying Party contained herein and all claims of any Indemnitee in
respect of any breach of any representation, warranty, covenant, agreement or
obligation of any Indemnifying Party contained in this Agreement, shall
survive the Closing and shall expire on the second (2nd) anniversary of the
Closing Date.
(b) Notwithstanding Section 9.02(a), the representations,
warranties, covenants, agreements and obligations of Stockholder as an
Indemnifying Party shall survive the Closing Date until the expiration of 60
days following any applicable statute of limitations,
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including extensions thereof with respect to: (i) the inaccuracy or
misrepresentation in or breach of any representation, warranty, covenant or
agreement made by Stockholder in this Agreement arising out of fraud or
willful misconduct; (ii) any inaccuracy or misrepresentation in or breach of
any representation or warranty made in Sections 3.17 and 3.24 regardless of
whether such inaccuracy or misrepresentation or breach arises out of fraud or
willful misconduct; and (iii) the breach or failure to perform by Stockholder
after the Closing Date of any of the covenants, agreements or obligations of
such Person contained in this Agreement or in the Exhibits attached hereto.
(c) Notwithstanding Section 9.02(a), the representations and
warranties of Stockholder contained in Section 3.22 (except for any
inaccuracy or misrepresentation arising out of fraud or willful misconduct)
and Stockholder's obligation to indemnify the Buyer Indemnitees against
Environmental Liabilities shall survive the Closing Date until the expiration
of the fifth (5th) anniversary of the Closing Date.
(d) Notwithstanding Section 9.02(a), each of the following
representations, warranties, covenants, agreements and obligations of Buyer
and ATC as Indemnifying Parties shall survive the Closing Date until the
expiration of 60 days following the applicable statute of limitations,
including extensions thereof: (i) any inaccuracy or misrepresentation in or
breach of any representation, warranty, covenant or agreement made by Buyer
or ATC in this Agreement arising out of fraud or willful misconduct; and (ii)
the breach or failure to perform by Buyer or ATC after the Closing Date of
any of the covenants, agreements or obligations of such Person contained in
this Agreement or in the Exhibits attached hereto.
(e) The expiration of any representation, warranty, covenant,
agreement or obligation pursuant to this Section 9.02 shall not relieve an
Indemnifying Party of his or its obligation with respect to any claim of
breach of such representation, warranty, covenant, agreement or obligation
asserted prior to such expiration.
9.03 CLAIMS FOR INDEMNIFICATION. 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. Any such notice shall set
forth in reasonable detail and to the extent then known the basis for such
claim for indemnification. The failure of such Indemnitee to give notice of
any claim for indemnification promptly shall not adversely affect such
Indemnitee's right to indemnity hereunder except to the extent that such
failure materially adversely affects the right of the Indemnifying Party to
assert any reasonable defense to such claim. The Indemnifying Party shall
have 30 days following its receipt of such notice either (a) to acquiesce in
such claim by giving such Indemnitee written notice of such acquiescence or
(b) 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
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(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 that 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 that (i) the Indemnifying Parties shall pay or
cause to be paid all amounts arising out of such settlement or judgment
concurrently with the effectiveness thereof, (ii) 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 (iii) 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 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
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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) and any such settlement shall expressly release the Indemnifying
Parties from any further liability with respect to the claim.
(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, PROVIDED that such settlement expressly
releases the Indemnifying Parties from any further liability with respect to
the claim. 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 a party at any time following the expiration of 15
days from the date that such party has given notice to another party of any
one or more inaccuracies or misrepresentations in or breaches of the
representations or warranties made by the recipient of such notice contained
in this Agreement that, if not cured prior to the Closing Date, would give
the notifying party 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 the notifying
party shall have given notice to previously pursuant to 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 a party at any time following the expiration of 15
days from the date that such party has given written notice to another party
of the failure by recipient of such notice to perform and satisfy in any
material respect any of his or its material obligations under this Agreement
required to be performed and satisfied by him or it on or prior to the
Closing Date, or the failure to perform and satisfy any other obligations of
the recipient of such notice
37
<PAGE>
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 any party hereto, if the Closing shall not have been
consummated by the Outside Date; PROVIDED, HOWEVER, that a party may not
terminate this Agreement pursuant to this clause (d) if the Closing shall not
have been consummated within such time period by reason of the failure of
such party or any of its Affiliates to perform in all material respects any
of its or their respective covenants or agreements contained in this
Agreement; or
(e) 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.
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, except that if Stockholder terminate this Agreement pursuant to
Section 10.01(g), they will not be liable for Damages relating to the
breaches giving rise to their right of termination. The provisions of
Sections 5.05, 6.01, 10.02, 11.01, 11.03, 11.05 11.07, 11.08, 11.10, 11.11
and 11.12 shall survive any termination of this Agreement pursuant to Article
X.
ARTICLE XI
MISCELLANEOUS
11.01 NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be deemed duly given
(i) when delivered by personal delivery, (ii) 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) the
day following being sent through an overnight delivery service in
circumstances in which such service guarantees next day delivery, or (iv)
once such notice or other communication is transmitted to the 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:
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If to the Company or Stockholder:
Matthew Obeid
5 Lloyd Haven Drive
Huntington, NY 11743
with a copy to:
Schupbach, Williams & Pavone
401 Franklin Avenue
Garden City, NY 11530
Telecopier No.: (516) 742-4211
Attn: Arthur C. Schupbach, Esq.
If to Buyer or ATC:
Aftermarket Technology Corp.
900 Oakmont Lane, Suite 900
Westmont, Illinois 60559
Telecopier No: (630) 455-2650
Attn: Stephen J. Perkins and Joseph Salamunovich
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.
39
<PAGE>
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, Stockholder shall pay (i) the fees and expenses of Buckingham. and
(ii) all legal, accounting and other fees and expenses incurred by
Stockholder and/or the Company 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 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 New York.
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 oral and written and all
contemporaneous oral agreements, understandings and negotiations 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 CONSTRUCTION. 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. Neither party hereto, nor its respective counsel, shall be deemed
the drafter of this Agreement, and all provisions of this Agreement shall be
construed in accordance with their fair meaning, and not strictly for or
against either party hereto.
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.
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<PAGE>
11.10 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 the Company or any Affiliate
thereof (including any beneficiary or dependent thereof).
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 New York, New York. 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.
41
<PAGE>
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.
42
<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.
STOCKHOLDER:
/s/ Matthew Obeid
--------------------------------------
Matthew Obeid
METRAN BOSTON, INC.
By: /s/ Matthew Obeid
----------------------------------
Matthew Obeid
President
METRAN AUTOMATIC TRANSMISSION
PARTS CORP.
By: /s/ Matthew Obeid
----------------------------------
Matthew Obeid
President
METRAN PARTS OF PENNSYLVANIA, INC.
By: /s/ Matthew Obeid
----------------------------------
Matthew Obeid
President
43
<PAGE>
TM-AL ACQUISITION CORP.
By: /s/ Stephen J. Perkins
----------------------------------
Stephen J. Perkins
President and
Chief Executive Officer
AFTERMARKET TECHNOLOGY CORP.
By: /s/ Stephen J. Perkins
----------------------------------
Stephen J. Perkins
President and
Chief Executive Officer
44
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A. . . . . . . . . . . . . . . . Financial Statements
Exhibit B. . . . . . . . . . . . . . . . Form of Lease
Exhibit C. . . . . . . . . . . . . . . . Form of Noncompetion Agreement
Exhibit D. . . . . . . . . . . . . . . . Form of Employment Agreement
SCHEDULES
Schedule 3.01. . . . . . . . . . . . . . Share Encumbrances
Schedule 3.02. . . . . . . . . . . . . . Company Qualifications to do Business
Schedule 3.05. . . . . . . . . . . . . . Governmental Authorizations
Schedule 3.08. . . . . . . . . . . . . . Capital Stock Matters
Schedule 3.10. . . . . . . . . . . . . . Absence of Certain Changes
Schedule 3.11(a) . . . . . . . . . . . . Leased Real Property
Schedule 3.11(b) . . . . . . . . . . . . Personal Property Leases
Schedule 3.11(c) . . . . . . . . . . . . Land-Use Regulation
Schedule 3.12. . . . . . . . . . . . . . Affiliate Transactions
Schedule 3.13. . . . . . . . . . . . . . Inventories
Schedule 3.14. . . . . . . . . . . . . . Litigation
Schedule 3.15(a) . . . . . . . . . . . . Scheduled Contracts
Schedule 3.15(b) . . . . . . . . . . . . Non-Binding Scheduled Contracts
Schedule 3.15(c) . . . . . . . . . . . . Primary Customers and Suppliers
Schedule 3.16(a) . . . . . . . . . . . . Permits
Schedule 3.16(b) . . . . . . . . . . . . Required Consents
Schedule 3.17. . . . . . . . . . . . . . Compliance with Applicable Laws
Schedule 3.18. . . . . . . . . . . . . . Benefit Plans
Schedule 3.19. . . . . . . . . . . . . . Labor and Employment Matters
Schedule 3.20. . . . . . . . . . . . . . Intellectual Property
Schedule 3.22. . . . . . . . . . . . . . Environmental Matters
Schedule 3.23. . . . . . . . . . . . . . Insurance Policies
Schedule 3.24. . . . . . . . . . . . . . Tax Matters
Schedule 3.25. . . . . . . . . . . . . . Distributions to Stockholder
</TABLE>
1
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is entered into as of
February 10, 1998 by and among Autocraft Industries, Inc., an Oklahoma
corporation ("Seller"), Fred Jones Industries A Limited Partnership, a Texas
limited partnership ("Stockholder"), and Aftermarket Technology Corp., a
Delaware corporation ("Buyer").
R E C I T A L S
A. Seller's OEM Division is engaged in, among other thing, (i) the
remanufacture of transmissions and related drivetrain components for Ford Motor
Company and General Motors Corporation, (ii) the remanufacture of electronic
control modules, instrument display clusters, telephones and radios for certain
original equipment manufacturers, (iii) the remanufacture of engines for certain
original equipment manufacturers in Europe, (iv) the distribution of cellular
telephones for AT&T Wireless, and (v) material recovery services for Ford Motor
Company (the "OEM Business," which term excludes Seller's operations that
(x) participate in Ford's "FAR" program, (y) remanufacture non-GM transmissions
for AC-Delco, or (z) are not part of the OEM Division);
B. Stockholder, together with the Principals (as defined below),
owns a majority of the issued and outstanding shares of the voting capital stock
of Seller; and
C. Buyer desires to purchase the OEM Business but not the other
businesses conducted by Seller and its subsidiaries, and Stockholder and Seller
desire to sell the OEM Business to Buyer on the terms and conditions set forth
herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements set forth below,
the parties hereto agree as follows.
ARTICLE I
DEFINITIONS
1.01 DEFINITIONS. The following terms, as used herein, have the
following meanings:
"ADL" means Automotive Developments Limited.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Act of 1934, as amended.
"APPLICABLE LAW" means, with respect to any Person, any domestic or
foreign, federal, state, provincial, territorial, county or local statute, law,
ordinance, rule, administrative interpretation, regulation, policy, guidance,
order, writ, injunction, directive, judgment, decree or
<PAGE>
other requirement of any Governmental Authority (including any Environmental
Law) applicable to such Person or any of its 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).
"ASSOCIATE" or "ASSOCIATED WITH" means, when used to indicate a
relationship with any Person, (i) any other Person of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities issued by such other Person, (ii) any
trust or other estate in which such Person has a beneficial interest of more
than 50% or as to which such Person serves as trustee or in a similar fiduciary
capacity, and (iii) any parent, grandparent, aunt, uncle, sibling, child,
grandchild 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, other
than an Employee Benefit Plan, maintained by the Company or any ERISA Affiliate
of the Company covering present or former OEM Employees and the beneficiaries of
any of them, including, without limitation, the following to the extent that
they relate to present or former OEM Employees: (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.
"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 Chicago, Illinois are authorized or required by law
to close.
"BUYER ENVIRONMENTAL LIABILITY" means Environmental Liabilities
arising as a result of the actions of Buyer, the U.K. Subsidiaries or the
Mexican Joint Venture after the Closing Date.
"COMPANY" for purposes of Article III means Seller and the Mexican
Joint Venture, individually and collectively. For all other purposes, the
"Company" means Seller, the U.K. Subsidiaries and the Mexican Joint Venture,
individually and collectively.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DAMAGES" means, with respect to any Person, all assessments, losses,
damages, costs, expenses, liabilities, judgments, awards, fines, sanctions,
penalties, charges and amounts paid in settlement, net of insurance proceeds and
indemnification proceeds actually received, including without limitation,
(i) interest on cash disbursements made by such Person in respect of any of the
foregoing, at the Reference Rate in effect from time to time, from the date each
such cash disbursement is made until such Person shall have been indemnified in
respect thereof and
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<PAGE>
(ii) reasonable costs, fees and expenses of attorneys, accountants and other
agents of such Person, but excluding any consequential, incidental or special
damages.
"EBITDA" has the meaning set forth in the Share Purchase Agreement.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan, as defined in
Section 3(3) of ERISA, that is sponsored or contributed to by the Company or any
ERISA Affiliate thereof covering present or former OEM Employees.
"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 Hazardous
Substances, occupational health and safety, or the environment including,
without limitation, (i) all Applicable Laws 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 Applicable Laws 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 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), the Environmental Act of 1995 of England and Wales
and all requirements promulgated pursuant to any of these or analogous domestic
or foreign, federal, state, provincial, territorial, county or local statutes.
"ENVIRONMENTAL LIABILITIES" means Liabilities of a Person that arise
under any Environmental Law.
"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 as in effect at the time the relevant financial statement is
prepared, applied on a consistent basis.
"GOVERNMENTAL AUTHORITY" means any foreign or domestic, federal,
territorial, state, provincial, county or local governmental authority,
quasi-governmental authority, instrumentality, court, government or
self-regulatory organization, commission, tribunal or
3
<PAGE>
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 requires investigation or remediation under any Applicable Law,
(ii) the generation, storage, treatment, transportation, disposal, remediation,
removal, handling or management of which is regulated by any Environmental Law,
(iii) that is defined as a "hazardous waste" or "hazardous substance" under any
Applicable Law, (iv) that is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic or mutagenic or otherwise hazardous and is regulated
by any Governmental Authority having or asserting jurisdiction over the OEM
Business or the Company, (v) the presence of which constitutes a nuisance,
trespass or other tortious condition, 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.
"INDEBTEDNESS" means all liabilities and obligations, contingent or
otherwise, of Seller (i) in respect of borrowed money, (ii) evidenced by bonds,
notes, debentures or similar instruments, (iii) representing the balance
deferred and unpaid of the purchase price of any property or services, other
than those incurred in the ordinary course of its business that constitute trade
payables to trade creditors but only to the extent that such trade payables
relate to the OEM Business, (iv) evidenced by a bankers' acceptance or similar
instrument issued or accepted by banks, (v) for the capitalized amount of a
lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP, (vi) evidenced by a letter of credit or a reimbursement
obligation of Seller with respect to any letter of credit, and (vii) any of the
foregoing of another Person as to which Seller is a guarantor or otherwise
liable (except endorsements of customer checks in the ordinary course of
business). "Indebtedness" shall also include any interest on, or prepayment
penalty or redemption premium with respect to, any Indebtedness.
"INDEMNIFYING PARTY" means (i) Stockholder or Seller when any Buyer
Indemnitee is asserting a claim under Sections 9.01(a), or (ii) Buyer when any
Seller Indemnitee is asserting a claim under Sections 9.01(b).
"INDEMNITEE" means (i) each of Buyer and its Affiliates with respect
to any claim for which Stockholder and Seller are Indemnifying Parties under
Sections 9.01(a), or (ii) Seller and its Affiliates (including, without
limitation, Stockholder) with respect to claims for which Buyer is an
Indemnifying Party under Sections 9.01(b).
"IRS" means the Internal Revenue Service.
4
<PAGE>
"KNOWLEDGE" means, with respect to any Person that is a legal entity,
all things actually known, after due inquiry, by any director, executive
officer, trustee or general partner, as the case may be, of such Person. Due
inquiry with respect to a particular matter shall be satisfied if inquiry has
been made to those members of such Person's management whose job
responsibilities are such that they reasonably would be expected to have
information regarding such matter.
"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, but excluding liens
for taxes not yet due and payable.
"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 the Company or the OEM
Business that results in a material adverse effect on, or a material adverse
change in, the Transferred Assets or the OEM Business taken as a whole.
"MATERIAL TITLE DEFECT" means any condition of title that will
materially interfere with Buyer's operation of a Transferred Asset in the manner
in which Seller has historically operated such asset. Without limiting the
generality of the foregoing, "Material Title Defect" shall include any of the
following to the extent that it will materially interfere with Buyer's operation
of a Transferred Asset in the manner in which Seller has historically operated
such asset: (i) lack of access to any Real Property for the benefit of Buyer,
(ii) material violations of zoning laws or regulations, (iii) zoning or building
restrictions, and (iv) easements, rights of way and servitudes for the benefit
of third Persons.
"MEXICAN JOINT VENTURE" means Fred Jones de Mexico, S.R.L. de C.V.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in
Section 3(37) and 4001(a)(3) of ERISA.
"OEM EMPLOYEE" means any employee of the Company or any of its
Affiliates or ERISA Affiliates who devotes substantially all of his or her
working time to the OEM Business.
"OUTSIDE DATE" means April 30, 1998; PROVIDED, HOWEVER, that the
"Outside Date" shall mean May 31, 1998 if by April 30, 1998 the parties have not
received clearance under the HSR Act (whether by termination or expiration of
the waiting period under the HSR Act or otherwise) to complete the transactions
contemplated by this Agreement.
"PERMITTED LIENS" means those Liens listed on SCHEDULE 1.01 hereto.
5
<PAGE>
"PERSON" means an individual, corporation, limited liability company,
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.
"PRINCIPALS" means Messrs. Fred J. Hall, Brooks Hall, Jr. and Kirkland
Hall.
"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.
"PRORATION FACTOR" means the quotient of (i) EBITDA for the 12 months
ending December 31, 1998 minus L1,000,000 divided by (ii) L1,000,000, PROVIDED
that in no event shall the Proration Factor be less than 0.0 nor greater than
1.0.
"REFERENCE RATE" means the per annum rate of interest publicly
announced from time to time by The Chase Manhattan Bank 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.
"SHARE PURCHASE AGREEMENT" means that certain Share Purchase Agreement
dated 10 October 1997 among Seller and certain other parties, including the
former shareholders of ADL, pursuant to which Seller and U.K. Seller acquired
all the outstanding shares of the share capital of ADL.
"TAX" means all taxes imposed of any nature including foreign or
domestic, federal, state, provincial, territorial, county or local 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 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.
"U.K. SELLER" means Autocraft Developments Limited, a wholly owned
subsidiary of Seller and the owner of a portion of the outstanding shares of the
share capital of ADL.
"U.K. SUBSIDIARIES" means ADL, Elbar Industrial Limited (a wholly
owned subsidiary of ADL), Elbar Industrial (Trading) Limited (a wholly owned
subsidiary of Elbar Industrial Limited), S.E.L.E. Europe Limited (a dormant
wholly owned subsidiary of Elbar
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Industrial Limited), and South East Lincs Engineering Limited (a dormant wholly
owned subsidiary of Elbar Industrial (Trading) Limited).
"VENDORS" has the meaning set forth in the Share Purchase Agreement.
"WARRANTORS" has the meaning set forth in the Share Purchase
Agreement.
1.02 ADDITIONAL DEFINED TERMS. The following terms are defined in the
Sections referred to below:
<TABLE>
<S> <C>
"1997 Balance Sheet" . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.08
"AAA Rules". . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.11(a)
"Absent OEM Employees. . . . . . . . . . . . . . . . . . . . . . . Section 7.08(a)(i)
"Accounts" . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 7.08(a)(ii)
"Agreement". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Assumed Liabilities". . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.03
"Buyer". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Buyer Indemnitees". . . . . . . . . . . . . . . . . . . . . . . . . .Section 9.01(a)
"Buyer's 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . .Section 7.08(a)(ii)
Buyer's Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . Section 7.08(a)(i)
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.06(a)
"Closing". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.06(a)
"Contracts". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.01(d)
"Covered Employees". . . . . . . . . . . . . . . . . . . . . . . .Section 7.08(a)(ii)
"Equipment". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.01(b)
"Excluded Assets". . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.02
"Excluded Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.04
"Hired OEM Employees . . . . . . . . . . . . . . . . . . . . . . . Section 7.08(a)(i)
"Insurance Policies" . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.20(a)
"Intellectual Property Rights" . . . . . . . . . . . . . . . . . . . .Section 3.18(a)
"Inventory". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.01(c)
"Leased Real Property" . . . . . . . . . . . . . . . . . . . . . . . .Section 3.09(a)
"Leases" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.09(b)
"OEM Business" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Recital A
"Owned Real Property". . . . . . . . . . . . . . . . . . . . . . . . .Section 3.09(a)
"Permits". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.14
"Personal Property Leases" . . . . . . . . . . . . . . . . . . . . . .Section 3.09(b)
"Proceedings". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.12
"Real Property". . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.09(a)
"Required Approvals and Consent" . . . . . . . . . . . . . . . . . . . . Section 3.04
"Scheduled Contracts". . . . . . . . . . . . . . . . . . . . . . . . .Section 3.13(a)
"Seller" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Seller Indemnitees" . . . . . . . . . . . . . . . . . . . . . . . . .Section 9.01(b)
"Seller's 401(k) Plan" . . . . . . . . . . . . . . . . . . . . . .Section 7.08(a)(ii)
"Stockholder". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
</TABLE>
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<TABLE>
<S> <C>
"Subsequent Material Contract" . . . . . . . . . . . . . . . . . .Section 5.01(b)(iv)
"Transferred Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.01
</TABLE>
ARTICLE II
TRANSFER OF ASSETS
2.01. TRANSFER OF ASSETS BY SELLER. Upon the terms and subject to
the conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Buyer agrees to purchase from Seller
and Seller agrees to sell or cause to be sold to Buyer at the Closing, free and
clear of all Liens other than Permitted Liens, all the assets, properties,
rights, licenses, permits, contracts, causes of action and claims, of every kind
and description as the same shall exist on the Closing Date (other than the
Excluded Assets), wherever located, whether tangible or intangible, real,
personal or mixed, that are used by, owned by, leased by or in the possession of
Seller in connection with the OEM Business, whether or not reflected on the
books and records of Seller, including all assets shown on the 1997 Balance
Sheet and not disposed of in the ordinary course of business or as permitted by
this Agreement prior to the Closing Date (the collective assets, properties,
rights, licenses, permits, contracts, causes of action and claims to be
transferred to Buyer by Seller pursuant hereto are referred to collectively
herein as the "Transferred Assets") and including without limitation all right,
title and interest of Seller in, to and under the following, to the extent owned
or leased by Seller at the time of Closing to the extent that such assets are
used in or relate to the OEM Business:
(a) all real property, including, without limitation, leases
(whether capitalized or operating), all buildings, fixtures and improvements on
and appurtenances to real property, and all leasehold improvements relating to
any leased real property, including the foregoing listed on SCHEDULE 3.09(a)(i);
(b) all machinery, equipment, furniture, office equipment,
computer equipment (including all hardware and software), communications
equipment, vehicles, storage tanks, spare and replacement parts, fuel and other
tangible property (and interests in any of the foregoing) of Seller
("Equipment") including any of the foregoing listed on SCHEDULE 2.01(b);
(c) all items of inventory notwithstanding how classified in the
financial records of Seller, including all raw materials, purchased parts,
work-in-process, finished goods, supplies, spare parts and samples
("Inventory");
(d) all contracts, agreements, options, licenses, sales and
purchase orders, commitments and other instruments of any kind, whether written
or oral, to which Seller is a party, including the Scheduled Contracts and the
Subsequent Material Contracts (the "Contracts"), (i) including, without
limitation, all rights of Seller and U.K. Seller under the Share Purchase
Agreement except as otherwise provided in Section 2.02(c), but (ii) excluding
any documents executed in connection with the Share Purchase Agreement except as
otherwise expressly provided herein;
(e) all books, records, files and papers of Seller, whether in
hard copy or computer format, including books of account, invoices, engineering
information, sales and
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promotional literature, manuals and data, sales and purchase correspondence,
lists of present and former suppliers, personnel and employment records of
present and former employees, and documentation developed or used for
accounting, marketing, engineering, manufacturing or any other purpose;
(f) all prepaid charges and expenses of Seller other than
prepaid insurance, including any such charges and expenses with respect to ad
valorem taxes, leases and rentals and utilities;
(g) cash;
(h) all of Seller's rights, claims, credits, causes of action or
rights of set-off against third parties, whether liquidated or unliquidated,
fixed or contingent, including claims pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers, contractors and
other third parties in connection with products or services purchased by or
furnished to Seller affecting any of the Transferred Assets;
(i) except as otherwise provided in Section 5.06, all of
Seller's patents, copyrights, trademarks, trade names, service marks, service
names, designs, know-how, processes, trade secrets, inventions, and other
proprietary data, including any of the foregoing listed on SCHEDULE 3.18;
(j) all transferable franchises, licenses, permits or other
authorizations issued or granted by any Governmental Authority that are owned
by, granted to or held or used by Seller, whether or not actually utilized by
Seller;
(k) all lists of present customers and lists of former
customers;
(l) all goodwill associated with the OEM Business or the
Transferred Assets;
(m) all product designations used in Seller's catalogs;
(n) all accounts receivable and notes receivable (including,
without limitation, any gainsharing payments from customers and rebates from
suppliers), together with any unpaid interest or fees accrued thereon or other
amounts due with respect thereto, and any security or collateral therefor;
(o) all of the outstanding shares of the share capital of ADL
and Seller's interest in the Mexican Joint Venture; and
(p) all assets of any kind or nature at the locations listed on
SCHEDULE 2.01(p).
2.02. EXCLUDED ASSETS. Buyer expressly understands and agrees
that the following assets and properties of Seller (the "Excluded Assets") shall
be excluded from the Transferred Assets and shall be retained by Seller:
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(a) those assets listed on SCHEDULE 2.02;
(b) those assets of Seller that are completely unrelated to the
OEM Business;
(c) all rights of Seller and U.K. Seller under paragraphs 2, 3
(except for paragraph 3.2), 4, 5, 6, 8, 12 and 13 of the Share Purchase
Agreement;
(d) the outstanding shares of the share capital of U.K. Seller;
and
(e) the originals of Seller's books and records to the extent
that Seller provides copies thereof to Buyer.
2.03. ASSUMPTION OF LIABILITIES. Upon the terms and subject to
the conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Buyer agrees, effective at the time
of Closing, to assume and in due course perform, pay and discharge each of the
following (the "Assumed Liabilities"):
(a) all Liabilities and obligations of Seller arising after the
Closing under Contracts and Leases included in the Transferred Assets;
(b) all trade payables of the OEM Business arising in the
ordinary course of business as of the Closing Date;
(c) all obligations to OEM Employees hired by Buyer for accrued
vacation and personal days as of the Closing Date;
(d) except as otherwise provided in Section 2.04(j), all
obligations of Seller under the Share Purchase Agreement; and
(e) all Liability arising out of warranty claims relating to the
products of the OEM Business pursuant to any of the warranties contained in the
Scheduled Contracts and the Subsequent Material Contracts.
2.04. EXCLUDED LIABILITIES. Buyer does not hereby assume, and
shall not at any time hereafter (including on or after the Closing Date) become
liable for, any of the Liabilities of Seller or any of its Affiliates or any
ERISA Affiliate of any of the foregoing other than the Assumed Liabilities (the
"Excluded Liabilities"). The Excluded Liabilities shall include, without
limitation, the following Liabilities:
(a) any Liability of any of Seller or any of its Affiliates or
any ERISA Affiliate of any of the foregoing whether currently in existence or
arising hereafter that is not attributable to, or that does not arise out of the
conduct of, the OEM Business;
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(b) any Liability whether presently in existence or arising
hereafter relating to an Excluded Asset;
(c) except as otherwise provided in Section 6.03, any
Environmental Liability (including any Environmental Liability of any U.K.
Subsidiary or the Mexican Joint Venture), whether presently in existence or
arising hereafter, other than Buyer Environmental Liabilities;
(d) any Liability whether currently in existence or arising
hereafter relating to fees, commissions or expenses owed to any broker, finder,
investment banker, attorney, accountant or other intermediary or advisor
employed by Stockholder, Seller or any of their Affiliates in connection with
the transactions contemplated hereby or otherwise;
(e) any Liability the existence of which constitutes a breach of
any representation or warranty of Stockholder and Seller hereunder;
(f) any contingent Liabilities of Seller related to any
transactions by Seller prior to the date hereof except Liabilities that Buyer
has expressly agreed to assume pursuant to the terms of this Agreement;
(g) any Liability related to Indebtedness;
(h) except as set forth on SCHEDULE 7.05, any Liability for
Taxes, including, without limitation, any Taxes relating to Seller's operations
on or prior to the Closing Date that may be imposed upon Buyer after the Closing
Date as the successor to Seller;
(i) except as otherwise provided in Section 2.03(c), any
Liability arising under any of Seller's Benefit Plans;
(j) any Liability of Seller or U.K. Seller under any of
paragraphs 2, 3 (except for paragraph 3.2), 4, 5, 6, 8, 12 and 13 of the Share
Purchase Agreement, or any liability of Seller or U.K. Seller under any other
paragraph of the Share Purchase Agreement to the extent that such liability
constitutes an accrued payment obligation as of the Closing Date;
(k) any Liability of Seller for accrued payroll for its
employees, including accrued payroll as of the Closing Date for OEM Employees;
and
(l) any Liability of Seller arising under this Agreement.
Any Liability that is listed in both Section 2.03 and Section 2.04 shall be
deemed an Excluded Liability.
2.05. ASSIGNMENT OF CONTRACTS AND RIGHTS.
(a) With respect to any material Contract and any claim, right
or benefit arising thereunder or resulting therefrom that constitute Transferred
Assets, promptly after the date hereof, to the extent requested by Buyer, Seller
will use reasonable efforts to obtain
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<PAGE>
the written consent of the other parties to any such Contract to the
assignment thereof to Buyer or written confirmation from such parties
reasonably satisfactory in form and substance to Buyer confirming that such
consent is not required. In this regard, Seller's reasonable efforts will
not include the payment of money.
(b) If such consent, waiver or confirmation is not obtained
with respect to any such Contract and notwithstanding the provisions of
Section 8.01(b) Buyer elects to consummate the Closing, Seller and Buyer
shall cooperate in an arrangement reasonably satisfactory to Buyer and Seller
under which Buyer will obtain, to the extent practicable, the claims, rights
and benefits and assume the corresponding obligations thereunder in
accordance with this Agreement, including subcontracting, sub-licensing or
sub-leasing to Buyer, or under which Seller will enforce for the benefit of
Buyer, with Buyer assuming Seller's obligations to be performed after the
Closing Date, any and all claims, rights and benefits of Seller against a
third party thereto. Seller will promptly pay to Buyer when received all
monies received by Seller under or with regard to any Transferred Asset or
any claim, right or benefit arising thereunder not transferred to Buyer
pursuant to this Section 2.05(b).
(c) Buyer understands that Seller and Stockholder will not
attempt to obtain the consent of the Vendors to the assignment of the Share
Purchase Agreement rights listed in Section 2.01(d). If at any time after
the Closing Date any Vendor fails or refuses to provide to Buyer the benefit
of any such rights, Seller shall, at the request and expense of Buyer, take
all action reasonably necessary to enforce such rights on behalf of Buyer.
2.06. CLOSING.
(a) The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of McAfee &
Taft, Two Leadership Square, 10th Floor, Oklahoma City, Oklahoma on March 2,
1998 or such other date as to which Buyer and Seller may agree (the "Closing
Date"), unless this Agreement is terminated pursuant to Section 10.01.
(b) At the Closing, Buyer shall pay (i) $101,500,000 to
Seller, $9,750,000 to U.K. Seller, and (iii) subject to approval by Seller's
shareholders pursuant to Section 280G(b)(5) of the Code, $1,250,000 to
Stockholder, in cash by wire transfer of immediately available funds to a
bank account or bank accounts designated in writing by the recipients prior
to the Closing. If approval of Seller's shareholders as described in Section
280G(b)(5) of the Code is not obtained for the payment described in clause
(iii) above, such payment shall be paid to Seller instead of Stockholder.
(c) Seller shall deliver or cause to be delivered to Buyer
such bills of sale, certificates of title, endorsements, consents,
assignments and other good and sufficient instruments of conveyance and
assignment (which in the case of Intellectual Property Rights, shall be
documents immediately recordable in the respective countries of origin) of
such rights as the parties and their respective counsel shall deem reasonably
necessary or appropriate to vest in Buyer all of Seller's right, title and
interest in, to and under the Transferred Assets.
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2.07. POST CLOSING PAYMENTS.
(a) If the audited consolidated profit and loss accounts for
the U.K. Subsidiaries for the 12 months ending December 31, 1998 show that
EBITDA for such period was greater than L1,000,000, then Buyer shall pay to
Seller an amount equal to (i) $12,500,000 multiplied by the Proration Factor
minus (ii) the aggregate amount, if any, that Buyer pays to the Vendors
pursuant to paragraph 3.2 of the Share Purchase Agreement. EBITDA for such
period will be determined in accordance with the terms of the Share Purchase
Agreement and with respect to such determination Buyer shall have the rights
and obligations of "Purchaser" under the Share Purchase Agreement and Seller
shall have the rights and obligations of the Vendors under the Share Purchase
Agreement.
(b) If Buyer is required to pay an aggregate amount to the
Vendors pursuant to paragraph 3.2 of the Share Purchase Agreement that
exceeds the amount, if any, that Buyer is required to pay to Seller pursuant
to Section 2.07(a), Seller shall pay to Buyer an amount equal to such excess.
(c) Any payment required by to be made to Buyer or Seller
pursuant to this Section 2.07 shall be paid within three Business Days after
the final determination of the amount of such payment and shall be made in
cash by wire transfer of immediately available funds to a bank account or
bank accounts designated in writing by the recipient.
2.08. PURCHASE PRICE ALLOCATION. Prior to the Closing Date,
Buyer and Seller shall agree upon the final allocation of the payment to be
made to Seller at Closing among the Transferred Assets for purposes of
complying with Section 1060 of the Code and making any required filings under
state or local law and shall set forth such allocation on a statement. Buyer
and Seller shall report the tax consequences of the transactions contemplated
by this Agreement in a manner consistent with such allocation statement and
shall not take any position inconsistent therewith. The payment made at
Closing to U.K. Seller and the payment, if any, to be made pursuant to
Section 2.07 shall be allocated to the shares of ADL.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
STOCKHOLDER AND SELLER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated herein, Stockholder and Seller
represent and warrant to Buyer as follows:
3.01 EXISTENCE, GOOD STANDING AND POWER.
(a) Seller is a corporation duly organized and validly
existing and in good standing under the laws of the State of Oklahoma and has
all corporate power and all governmental licenses, authorizations, consents,
approvals and qualifications required to carry on its 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,
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approvals and qualifications would not have a Material Adverse Effect.
Seller 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. SCHEDULE 3.01, sets forth those states in which Seller is duly
qualified to do business and in good standing.
(b) Stockholder is a limited partnership duly organized and
validly existing and in good standing under the laws of the State of Texas
and has all partnership power and all governmental licenses, authorizations,
consents, approvals and qualifications required to carry on its 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, approvals and qualifications would not have a
Material Adverse Effect.
(c) The general partner of Stockholder is a corporation duly
organized and validly existing and in good standing under the laws of the
State of Texas and has all corporate power and all governmental licenses,
authorizations, consents, approvals and qualifications required to carry on
its 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, approvals and qualifications would not
have a Material Adverse Effect.
(d) Each of the U.K. Subsidiaries is in good standing under
the laws of England and Wales.
(e) The Mexican Joint Venture is a Sociedad de
Responsabilidad Limitada Con Capital Variable duly formed and validly
existing and in good standing under the laws of the United Mexican States,
and has all corporate power and all governmental licenses, authorizations,
consents, approvals and qualifications required to carry on its 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, approvals and qualifications would not have a
Material Adverse Effect.
3.02 AUTHORIZATION AND ENFORCEABILITY. Stockholder and Seller
have the full right, power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby, including, in the case of
Seller, the transfer, conveyance and sale of the Transferred Assets to Buyer.
This Agreement has been duly and validly executed and delivered by
Stockholder and Seller and constitutes the legal, valid and binding agreement
of each of them, enforceable against each of them in accordance with the
terms of this Agreement, 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.
3.03 NON-CONTRAVENTION. The execution, delivery and
performance by Seller and Stockholder of this Agreement do not and will not
(i) contravene or conflict with the charter or bylaws of Seller, true and
correct copies of which have been delivered to Buyer, (ii) contravene or
conflict with the partnership agreement of Stockholder, (iii) assuming
receipt
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of the Required Approvals and Consents, contravene or conflict with or
constitute a violation of any provision of any Applicable Law binding upon or
applicable to the Company, Stockholder, the OEM Business or the Transferred
Assets, (iv) assuming receipt of the Required Approvals and 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 the
Company is entitled under, any material Contract or any Permit or similar
authorization relating to the Company, the OEM Business or the Transferred
Assets by which the Company, the OEM Business or the Transferred Assets may
be bound, or (v) result in the creation or imposition of any Lien on any
Transferred Assets.
3.04 REQUIRED APPROVALS AND CONSENTS. SCHEDULE 3.04 lists (i)
each governmental or other registration, filing, application, notice,
transfer, consent, approval, order, qualification and waiver required under
Applicable Law to be obtained or made by Stockholder or the Company by virtue
of the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby in order to comply with Applicable Law or
avoid the loss of any material Permit, and (ii) each Scheduled Contract with
respect to which the consent of the other party or parties thereto must be
obtained by the Company by virtue of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby to
avoid the invalidity of such Contract, the termination thereof, a breach or
default thereunder or any other change or modification to the terms thereof
(the "Required Approvals and Consents"). To the Knowledge of Seller or
Stockholder, there are no facts relating to the identity or circumstances of
the Company, Stockholder or the Transferred Assets that would prevent or
materially delay obtaining any of the Required Approvals and Consents. This
Agreement and the transactions contemplated hereby have been approved by the
Board of Directors of Seller and the necessary vote of the stockholders of
Seller.
3.05 CAPITAL STOCK OF SELLER. Stockholder owns of record and
beneficially shares of the outstanding capital stock of Seller constituting
approximately 40% of the aggregate voting power of such outstanding capital
stock. The Principals collectively own of record and beneficially shares of
the outstanding capital stock of Seller constituting approximately 16% of the
aggregate voting power of such outstanding capital stock.
3.06 SUBSIDIARIES AND OTHER INTERESTS.
(a) The outstanding shares of the share capital of U.K.
Seller and each of the U.K. Subsidiaries are owned, either directly or
indirectly, of record and beneficially by Seller. There are not outstanding
(i) any options, warrants or other rights to purchase from any Person any
shares of U.K. Seller or any U.K. Subsidiary, (ii) any securities convertible
into or exchangeable for shares of U.K. Seller or any U.K. Subsidiary, or
(iii) any other commitments of any kind for the issuance of additional shares
or options, warrants or other securities of U.K. Seller or any U.K.
Subsidiary.
(b) The corporate capital of the Mexican Joint Venture
consists of 2,309,420 votes, which are issued and outstanding on the date
hereof. Seller owns of record and beneficially 1,247,086.8 votes of such
corporate capital. Seller has not granted to any person any option, warrant,
or other right to purchase any of Seller's interest in the Mexican Joint
Venture
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other than contractual rights granted to other members of the Mexican Joint
Venture (such as rights of first refusal) as set forth in Article X11 of the
Operating Agreement of the Mexican Joint Venture, a true and correct copy of
which has been furnished to Buyer.
(c) The OEM Business does not include, either directly or
indirectly, any interest in any Person other than the U.K. Subsidiaries and
the Mexican Joint Venture.
3.07 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) Attached hereto as EXHIBIT A are true and complete copies
of the consolidated balance sheets and related consolidated statements of
operations, cash flows and change in net assets for the OEM Business as of
and for the 12 months ended June 30, 1997 and the six months ended December
31, 1997 and the consolidated balance sheet and related consolidated
statement of operations for the OEM Business as of and for the 12 months
ended June 30, 1996. The December 31, 1997 balance sheet is referred to
herein as the "1997 Balance Sheet." Each of the financial statements has
been prepared based on the books and records of Seller in accordance with
GAAP (except for the omission of footnotes and adjustments, consisting only
of normal recurring adjustments, in the case of the quarterly statements) and
Seller's normal accounting practices, consistent with past practice and with
each other, and present fairly the financial condition and results of
operations of the OEM Business as of the dates indicated or for the periods
indicated. The financial statements as of and for the 12 months ended June
30, 1997 have been audited by the accounting firm of Grant Thornton L.L.P.
(b) There are no material Liabilities relating to the OEM
Business or the Transferred Assets except for those Liabilities set forth on
the 1997 Balance Sheet or set forth on SCHEDULE 3.07, except for those
arising since the date of the 1997 Balance Sheet in the ordinary course of
business consistent with past practices.
3.08 ABSENCE OF CERTAIN CHANGES. Except as set forth on
SCHEDULE 3.08, since the date of the 1997 Balance Sheet, the OEM Business has
been conducted in the ordinary course, and with respect to the OEM Business
there has not been:
(a) any event, occurrence, development or state of
circumstances or facts or change in the Company or the OEM Business
(including any damage, destruction or other casualty loss, but excluding
changes in general economic conditions) affecting the Company or the OEM
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) any incurrence of, or change in, any material Liability
relating to the OEM Business other than in the ordinary course of business;
(c) any creation, assumption or sufferance of the existence
of any Lien on any of the Transferred Assets;
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(d) to the extent related to the OEM Business, any material
transaction or commitment made, or any material Contract entered into, by the
Company, or any waiver, amendment, termination or cancellation of any
material Contract by the Company, or any relinquishment of any rights
thereunder by the Company, or of any other material right or debt owed to the
Company, other than in each such case actions taken in the ordinary course of
business consistent with past practice;
(e) except for actions taken in the ordinary course of
business consistent with past practice that are not, in the aggregate,
material, (i) any grant of any severance, continuation or termination pay to
any OEM Employee, (ii) any entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any such
existing agreement) with any OEM Employee, (iii) any increase in benefits
payable or potentially payable under any severance, continuation or
termination pay policies or employment agreements with any OEM Employee, (iv)
any except as required by Applicable Law, increase in compensation, bonus or
other benefits payable or potentially payable to OEM Employee, (v) any except
as required by Applicable Law, change in the terms of any bonus, pension,
insurance, health or other Benefit Plan of the Company, or (vi) any
representation of the Company to any employee or former employee of the
Company that Buyer would assume, continue to maintain or implement any
Benefit Plan after the Closing Date (except to the extent that any such
representation is consistent with the terms hereof);
(f) any material change by the Company in its accounting
principles, methods or practices or in the manner it keeps its books and
records or any material change by the Company of its current practices with
regard to sales, receivables, payables or accrued expenses that would affect
the timing of recognition of income, collection of receivables or payment of
payables; or
(g) the entering into of any Contract or other arrangement
between the Company and any OEM Employee or any of their respective
Affiliates or Associates.
3.09 TANGIBLE ASSETS.
(a) SCHEDULE 3.09 (a)(i) sets forth a true and complete list of
all (i) real property owned by Seller and used in the conduct of the OEM
Business, other than property included in the Excluded Assets (the "Owned Real
Property") and (ii) real property leased by Seller and used in the conduct of
the OEM Business, other than that included in the Excluded Assets (the "Leased
Real Property" and together with the Owned Real Property, the "Real Property").
SCHEDULE 3.09(a)(ii) sets forth a true and complete list of all personal
property leases or licenses relating to the OEM Business (A) to which the
Company is a party or by which the Company is bound and (B) that provide for
annual payments by the Company in excess of $100,000 and that cannot be
terminated without charge by the Company within 30 days (the "Personal Property
Leases").
(b) With respect to the Personal Property Leases and the
leases relating to the Leased Real Property (collectively, the "Leases"),
except as set forth on SCHEDULE 3.09(b), there exist no defaults by the
Company, or, to the Knowledge of Seller or Stockholder, any
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default or threatened default by any lessor or third party thereunder, that
has materially affected or could reasonably be expected to materially affect
the rights and privileges thereunder of the Company. Assuming the Required
Approvals and Consents are obtained, the consummation of the transactions
contemplated hereby will not result in a breach of, or give any Person the
right to terminate, any Lease or result in any material adverse change in the
terms of any Lease.
(c) The Company has (i) a good and valid leasehold interest
in each piece of Leased Real Property, (ii) a good and valid leasehold
interest in the personal property subject to the Personal Property Leases,
(iii) good and valid fee simple title to each piece of Owned Real Property,
and (iv) good and valid title to its other tangible assets used in the OEM
Business. Except as set forth on SCHEDULE 3.09(c), the Company holds title
to each Transferred Asset free and clear of all Liens. All of the
Transferred Assets are free of Material Title Defects. To the Knowledge of
Seller and Stockholder, there are no encroachments, overlaps, boundary
disputes or other matters affecting the Owned Real Estate that would be
disclosed by an accurate survey of the Owned Real Estate. Seller and
Stockholder make no representation or warranty regarding the status of the
title of any landlord to any Leased Real Property or the title of any lessor
to any property subject to a Personal Property Lease.
(d) Except as disclosed in SCHEDULE 3.09(d), the Company 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
Real Property, nor has the Company received notice of any special assessment
proceedings affecting any Real Property, or applied for any change to the
zoning or land use status of any Real Property.
(e) Since January 1, 1996, the Company has not experienced
any material interruption in the delivery to any of the Real Property of
adequate quantities of any utilities (including without limitation
electricity, natural gas, potable water, water for cooling or similar
purposes and fuel oil) or other public services (including without limitation
foul and surface water drainage) required by the Company during such period.
(f) SCHEDULE 3.09(f) sets forth the description and location
of each item of tangible personal property (other than Inventory) that
constitutes a Transferred Asset and on the date hereof has a depreciated book
value per unit in excess of $100,000.
(g) All of the buildings, fixtures and other improvements
located on the Real Property and all the tangible personal property listed on
SCHEDULE 3.09(f) are in good operating condition and repair.
(h) Except for the real property that will be the subject of
the leases referred to in Section 7.06, the Transferred Assets constitute all
the assets necessary to operate the OEM Business as a going concern
substantially in the same manner as conducted prior to the date hereof.
3.10 AFFILIATES. Except as set forth in SCHEDULE 3.10, neither
Seller nor Stockholder nor any officers or directors or other stockholder of
Seller (or any immediate family
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member of any such officer or director or other stockholder) now has or at
any time since January 1, 1996, had, either directly or indirectly, an equity
or debt interest in any Person that furnishes or sells or during such period
furnished or sold services or products to the Company with respect to the OEM
Business or purchases or during such period purchased from the Company with
respect to the OEM Business any goods or services, or otherwise does or
during such period did business with the Company with respect to the OEM
Business of a material nature or amount; PROVIDED, HOWEVER, that neither
Seller, nor Stockholder nor any of Seller's officers or directors or other
stockholders (or any immediate family member thereof) shall be deemed to have
such an interest solely by virtue of the ownership of less than 5.0% 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.
3.11 INVENTORIES. Subject to any reserve therefor that is included
in the 1997 Balance Sheet and except as disclosed in SCHEDULE 3.11, all
Inventories of the OEM Business (i) have been acquired or manufactured in the
ordinary course of business, in accordance with the Company's normal
inventory practices, (ii) are of a usable quality (including processing into
merchantable finished inventories for sale in the ordinary course of
business), free of any material defect or deficiency, (iii) are in
merchantable and undamaged condition and meet customer specifications, and
(iv) are carried on the books of the Company at the lower of cost or market.
3.12 LITIGATION. Except as disclosed on SCHEDULE 3.12, (i) to the
Knowledge of Seller and Stockholder there are no actions, suits, hearings,
arbitrations, proceedings (public or private) or governmental investigations
that have been brought by or against any Governmental Authority or any other
Person (collectively, "Proceedings") pending or, to the Knowledge of Seller
or Stockholder, threatened, against or affecting the Company with respect to
the OEM Business, the OEM Business or the Transferred Assets or which seek to
enjoin or rescind the transactions contemplated by this Agreement or
otherwise prevent Seller or Stockholder 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 the
Company with respect to the OEM Business, the OEM Business or the Transferred
Assets.
3.13 CONTRACTS.
(a) SCHEDULE 3.13(a) sets forth a complete list of the
following Contracts of the Company (collectively with the Leases, the
"Scheduled Contracts"):
(i) each Contract between the Company and (A) any
present or former OEM Employee, (B) any supplier of services or products
whose dollar volume of sales to the OEM Business exceeded $100,000 during the
12 months ended June 30, 1997 or is expected to exceed $100,000 during the 12
months ending June 30, 1998, and (C) any Person in which the aggregate
payments made to the OEM Business under such Contract exceeded $100,000
during the 12 months ended June 30, 1997 or is expected to exceed $100,000
during the 12 months ending June 30, 1998;
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(ii) each other agreement or arrangement of the Company
that relates to the OEM Business and (A) requires the payment or incurrence
of Liabilities or the rendering of services by the Company, subsequent to the
date of this Agreement, of more than $100,000 and (B) cannot be terminated
without charge by the Company within 30 days;
(iii) all Contracts relating to, and evidences of or
guarantees of, or providing security for, the deferred purchase price of any
Transferred Asset (whether incurred, assumed, guaranteed or secured by any
asset);
(iv) to the extent that any of the following cannot be
terminated without charge by the Company 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 of the OEM Business to which the Company is a
party or by which the Company is otherwise bound;
(v) each agreement or covenant not to compete by which
the OEM Business is bound and each joint venture agreement to which the
Company is a party with respect to the OEM Business; and
(vi) all other material contracts, commitments and
obligations relating to the OEM Business that are not in the ordinary course
of business.
(b) Except as disclosed in SCHEDULE 3.13(b), each Scheduled
Contract is a legal, valid and binding obligation of the Company and, to the
Knowledge of Seller and Stockholder, enforceable (except to the extent such
enforceability may be limited by bankruptcy, equity and creditors' rights
generally) against the Company and, to the Knowledge of Seller and
Stockholder, each such other party in accordance with its terms, and neither
the Company nor, to the Knowledge of Seller and Stockholder, any other party
thereto is in material default or has failed to perform any material
obligation thereunder. Complete and correct copies of each written Scheduled
Contract have been delivered to Buyer.
(c) SCHEDULE 3.13(c) sets forth a list (by name and address)
of the customers to whom the Company made sales of more than $5,000,000 and
vendors providing more than $5,000,000 of services or products to the Company
during the 12 months ended June 30, 1997 together with the approximate dollar
amount of sales by or services or products provided to the Company during
said period.
3.14 PERMITS. SCHEDULE 3.14 sets forth all material approvals,
authorizations, certificates, consents, licenses, orders, permits,
qualifications or other similar authorizations of all Governmental
Authorities (and all other Persons) necessary for the operation of the OEM
Business or the Transferred Assets in substantially the same manner as
currently operated or affecting or relating in any way to the OEM Business or
the Transferred Assets (the "Permits"). Except as set forth on SCHEDULE
3.14, each Permit is valid and in full force and effect in all material
respects and, assuming the related Required Approvals and Consents are
obtained prior to the Closing Date, none of the Permits will be terminated or
become terminable or impaired or
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have the terms thereof changed in any material respect as a result of the
transactions contemplated hereby.
3.15 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth in
SCHEDULE 3.15, the operation of the OEM Business has not violated or infringed,
and does not violate or infringe, any material Applicable Law.
3.16 EMPLOYMENT AGREEMENTS; CHANGE IN CONTROL; AND EMPLOYEE
BENEFITS.
(a) SCHEDULE 3.16 sets forth a list of all Benefit Plans.
Seller has made true and correct copies of all governing instruments and related
agreements pertaining to such Benefit Plans available to Buyer. Seller has made
available to Buyer a copy of the three most recently filed Federal Form 5500
series and accountant's opinion, if applicable, for each Employee Benefit Plan.
(b) Neither Seller nor any ERISA Affiliates of Seller sponsors,
maintains or contributes to, or, within the last five years, has sponsored,
maintained, contributed to, or incurred an obligation to contribute to, any
Employee Pension Benefit Plan.
(c) Except as set forth in SCHEDULE 3.16, 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 entitled to
severance, termination allowance or similar payments as a 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 Seller nor
any ERISA Affiliates of Seller 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 Seller or Stockholder, is there a basis
for any such claim. No officer, director or employee of Seller 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 Seller or Stockholder threatened, involving any
Benefit Plan by any Person against such plan or Seller or any ERISA Affiliate.
There is no pending or, to the Knowledge of Seller or Stockholder, threatened
proceeding involving any Employee Benefit Plan before the IRS, the United States
Department of Labor or any other Governmental Authority.
(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. Seller 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
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expenses under such Benefit Plan, and Seller and each ERISA Affiliate shall
continue to do so through the Closing.
(g) With respect to any Group Health Plans maintained by Seller
or its ERISA Affiliate, whether or not for the benefit of Seller and its ERISA
Affiliate, Seller 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. Except as set forth on SCHEDULE 3.16, Seller 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, other than as required by Code
Section 4980B.
3.17 LABOR AND EMPLOYMENT MATTERS.
(a) Except as set forth on SCHEDULE 3.17, no collective
bargaining agreement exists with respect to any OEM Employees that is binding on
the Company and, except as described on SCHEDULE 3.17, no petition has been
filed or proceedings instituted by any OEM Employee or group of OEM Employees
with any labor relations board seeking recognition of a bargaining
representative which petition or proceeding is still pending. SCHEDULE 3.17
describes any organizational effort currently being made or, to the Knowledge of
Seller or Stockholder, threatened by or on behalf of any labor union to organize
any OEM Employees.
(b) Except as set forth on SCHEDULE 3.17, (i) there is no labor
strike, dispute, slow down or stoppage pending or, to the Knowledge of Seller or
Stockholder, threatened against or directly affecting the OEM Business, (ii) no
grievance or arbitration proceeding arising out of or under any collective
bargaining agreement relating to the OEM Business is pending, and no claims
therefor exist; and (iii) neither Seller nor Stockholder 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
OEM Employee or group of OEM Employees.
(c) The Company has complied and is currently complying, in all
material respects, in respect of all OEM Employees, 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.
Except as set forth on SCHEDULE 3.17, since January 1, 1996 the Company has not
received any citation or other notification for the violation of occupational
and health safety laws or regulations with respect to the OEM Business.
3.18 INTELLECTUAL PROPERTY.
(a) SCHEDULE 3.18 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
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registration, and each license or licensing agreement for any of the foregoing
relating to the OEM Business (the "Intellectual Property Rights").
(b) Except as disclosed in SCHEDULE 3.18, since January 1, 1996
the Company has not been a party to any Proceeding nor, to the Knowledge of
Seller or Stockholder, is any Proceeding threatened as to which there is a
reasonable possibility of a determination adverse to the Company 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 3.18, no Intellectual Property Right is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the use thereof by
the Company, or restricting the licensing thereof by the Company to any Person.
The use of the Intellectual Property Rights and the conduct of the OEM Business
do 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 3.18, the Company 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 implied or express
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 that are necessary for the conduct of the
OEM Business in the manner that the OEM 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 OEM Business in the manner that the
OEM Business has heretofore been conducted.
(d) Except as set forth in SCHEDULE 3.18, to the Knowledge of
Seller and Stockholder all of the material computer software, computer firmware,
computer hardware (whether general or special purpose), and other similar or
related items of automated, computerized, and/or software system(s) that are
used or relied on in the conduct of the OEM Business will not malfunction, will
not cease to function, will not generate incorrect data, and will not produce
incorrect results when processing, providing, and/or receiving (i) date-related
data into and between the 20th and 21st centuries and (ii) date-related data in
connection with any valid date in the 20th and 21st centuries.
3.19 ENVIRONMENTAL COMPLIANCE.
(a) Except as disclosed in SCHEDULE 3.19, the Company has
obtained all material 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 in connection with the OEM Business. SCHEDULE 3.19 sets forth all material
permits, licenses and other authorizations issued under any Environmental Law to
the Company relating to the OEM Business.
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(b) Except as disclosed in SCHEDULE 3.19, the Company is in
compliance in all material 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 in connection with the OEM
Business and is also in compliance in all respects with all other material
limitations, restrictions, conditions, standards, requirements, schedules and
timetables required or imposed under all Environmental Laws in connection with
the OEM Business.
(c) Except as disclosed in SCHEDULE 3.19, there are no past or
present events, conditions, circumstances, activities, practices, incidents,
actions, omissions or plans relating to or in any way affecting the Company or
the OEM Business as now conducted or previously conducted that could reasonably
be expected to prevent, or make more expensive, continued compliance with any
Environmental Law by Buyer or any of its Affiliates after the Closing, or that
may give rise to any Environmental Liability for which Buyer or any of its
Affiliates could be responsible, or otherwise form the basis of any claim,
action, demand, suit, Proceeding, hearing, study or investigation affecting
Buyer or any of its Affiliates (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.
(d) Seller and Stockholder have delivered to Buyer copies of all
environmental documents, studies and reports under the control of or in the
possession of Seller or Stockholder relating to (i) any facilities or real
property ever owned, operated or leased by the OEM Business, or (ii) any
Environmental Liability relating to the OEM Business.
3.20 INSURANCE.
(a) SCHEDULE 3.20 sets forth a complete and correct list of all
material insurance policies of any kind currently in force with respect to the
OEM Business (the "Insurance Policies"), including all "occurrence based"
liability policies regardless of the periods to which they relate.
SCHEDULE 3.20 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. No cancellation or material amendment or increase of premiums is
pending or, to the Knowledge of Seller or Stockholder, threatened with respect
to any of the Insurance Policies.
(b) No insurance company that issued any Insurance Policy, Board
of Fire Underwriters or similar body, or Governmental Authority has issued a
recommendation or requirement for any material changes in the conduct of the OEM
Business or any repairs or other work to be done on or with respect to any
material amount of Transferred Assets.
3.21 TAX MATTERS. Except as set forth on SCHEDULE 3.21:
(a) There are no Taxes of Seller or deficiencies in Taxes or
claims for Taxes against Seller for any taxable period that could become a
liability of, or which could be
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assessed against or collected from, Buyer as a result of or after the transfer
of assets contemplated by this Agreement.
(b) There are no Liens against any of the Transferred Assets for
Taxes other than Liens for current Taxes not yet due and payable or which are
being contested in good faith; all of such Liens shall be discharged by Seller
on or before the Closing Date such that Buyer acquires the Transferred Assets
free and clear of any such Liens.
(c) All amounts that are required to be collected or withheld by
Seller, or with respect to Taxes of Seller, have been (or prior to the Closing
will have been) duly collected or withheld and all such amounts that are
required to be remitted to any taxing authority have been (or prior to the
Closing will have been) duly remitted.
(d) None of the Transferred Assets is property that is required
to be treated as owned by any other person pursuant to the "safe harbor lease"
provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954 as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986 and none of the Transferred Assets is "tax exempt use property" within
the meaning of Section 168(h) of the Code.
(e) None of the Transferred Assets secures any debt the interest
on which is tax exempt under Section 103 of the Code.
3.22 ACCOUNTS RECEIVABLE. Except as set forth in SCHEDULE 3.22, the
accounts, accounts receivable, notes and notes receivable of the OEM Business
existing on the date hereof arose out of the sales of inventory or services in
the ordinary course of business and are collectible in full, net of the reserve
set forth on the 1997 Balance Sheet, which reserves are reasonable and were
calculated consistent with past practices.
3.23 ADVISORY FEES. Except for Bear Stearns & Co., Inc. (whose fees
and expenses will be paid by Seller), 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 Seller, Stockholder 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.
3.24 MATERIAL DISCLOSURES. No statement, representation or warranty
made by Seller or Stockholder 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.
3.25 U.K. SUBSIDIARIES. The representations and warranties of the
Vendors and Warrantors contained in the Share Purchase Agreement were true and
correct in all material respects on and as of October 10, 1997, and since
October 10, 1997 there have been no changes in the operations, affairs,
prospects, financial condition, results of operations, assets, Liabilities
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or any other aspects of the U.K. Subsidiaries, except for those occurring in
the ordinary course of business that would not have a Material Adverse Effect.
The Share Purchase Agreement has not been amended from the form delivered to
Buyer prior to the date hereof and Seller and U.K. Seller have not waived any
rights to which they are entitled thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Stockholder and Seller to enter into this
Agreement and to consummate the transactions contemplated herein, Buyer hereby
represents and warrants to Stockholder and Seller that:
4.01 ORGANIZATION AND EXISTENCE. 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 all governmental licenses,
authorizations, consents, approvals and qualifications required to carry on its
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, approvals and qualifications would not have a material
adverse effect on Buyer. 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 AUTHORIZATION AND ENFORCEABILITY. Buyer has full corporate
right, power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Buyer and constitutes the legal, valid and binding
agreement of Buyer, enforceable against it in accordance with the terms of this
Agreement, 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 REQUIRED APPROVALS AND CONSENTS. There are no governmental or
other registrations, filings, applications, notices, transfers, consents,
approvals, orders, qualifications or waivers required to be obtained or made by
Buyer by virtue of its execution and delivery of this Agreement or its
consummation of the transactions contemplated hereby, except for (i) those
required under the HSR Act, (ii) those required under the Revolving Credit
Agreement between Buyer and The Chase Manhattan Bank, as agent, and (iii) those
that have already been obtained. To the Knowledge of Buyer, there are no facts
relating to the identity or circumstances of Buyer that would prevent or
materially delay obtaining any of the foregoing.
4.04 NON-CONTRAVENTION. The execution, delivery and performance by
Buyer of this Agreement does not (i) contravene or conflict with the Certificate
of Incorporation or Bylaws of Buyer, or (ii) 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
Buyer.
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4.05 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 Buyer who might be entitled to any fee, commission or reimbursement
of expenses from Seller or Stockholder or any of their Affiliates upon
consummation of the transactions contemplated by this Agreement.
4.06 LITIGATION. There is no Proceeding pending against, or to the
Knowledge of Buyer, threatened against or affecting, 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.
4.07 PRESENT INTENTION REGARDING MISREPRESENTATIONS. Buyer has no
present intention to assert any claim against Seller or Stockholder relating to
any inaccuracy or misrepresentation in or breach of any representation or
warranty of Seller or Stockholder contained herein.
ARTICLE V
COVENANTS OF STOCKHOLDER AND SELLER
5.01 CONDUCT OF THE OEM BUSINESS. From the date hereof until the
Closing Date, Seller shall, and Stockholder shall cause the Company to, conduct
the OEM Business in the ordinary course and in substantially the same manner as
it has prior to the date of this Agreement and agrees, 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. Seller shall use its reasonable efforts to
preserve intact the OEM Business and the OEM Business organizations and
relationships and goodwill of Seller with third parties and keep available the
services of the present OEM Employees. 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) Seller will, and Stockholder will cause the Company to:
(i) (A) maintain the assets of the OEM Business in the
ordinary course of business consistent with past practice in operating order and
condition, reasonable wear and tear excepted, (B) promptly repair, restore or
replace any assets of the OEM Business in the ordinary course of business
consistent with past practice, (C) upon any damage, destruction or loss to any
of the assets of the OEM Business, apply any and all insurance proceeds received
with respect thereto to the repair, replacement and restoration thereof prior to
the Closing Date to the condition of the assets of the OEM Business before such
event (or in lieu of such repair, replacement and restoration, pay such
insurance proceeds to Buyer upon the Closing), (D) use its best efforts to
obtain, prior to the Closing Date, all Required Approvals and Consents, and (E)
take all actions reasonably necessary to be in compliance with, and to maintain
the effectiveness of, all material Permits;
(ii) comply with all material Applicable Laws relating to
the OEM Business;
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(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 material Proceeding by or against the Company or
Stockholder relating to the OEM Business, or Seller or Stockholder 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 material Proceeding relating to the OEM
Business, and (C) the occurrence of any breach by Seller or Stockholder of any
representation or warranty, or any covenant or agreement, contained in this
Agreement;
(b) without Buyer's prior consent, which shall not be
unreasonably withheld, Seller will not, and Stockholder shall not permit the
Company to, do any of the following and will not agree to:
(i) purchase or otherwise acquire assets for the OEM
Business from any other Person other than in the ordinary course of business;
(ii) sell, assign, lease, license, transfer or otherwise
dispose of, or mortgage, pledge or encumber, any of the assets of the OEM
Business except in the ordinary course of business consistent with past
practices;
(iii) enter any agreement or arrangement with respect to
the OEM Business that requires or allows payment, acceleration of payment or
incurrence of Liabilities, or the rendering of services by Seller outside the
ordinary course of business;
(iv) amend or modify in any material respect or terminate
any Scheduled Contract or any other Contract entered into by Seller after the
date hereof which, if in existence on the date hereof, would be required to be
set forth in SCHEDULE 3.13(a) 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 connection with the OEM Business in excess of
$100,000, other than 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, (A) increase
the rate or terms of compensation payable or to become payable to any OEM
Employee except in the ordinary course of business, (B) pay or agree to pay to
any OEM Employee 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 for the
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benefit of OEM Employees, or increase the rate or terms of any Employee Plan or
Benefit Arrangement for the benefit of OEM Employees, (D) enter into any
employment agreement with or for the benefit of any OEM Employee, (E) increase
the rate of compensation under or otherwise change the terms of any employment
agreement set forth in SCHEDULE 3.13(a), or (F) hire or agree to hire any
management personnel for the OEM Business;
(viii) make any material change in its accounting
principles, methods or practices relating to the OEM Business or in the manner
it keeps its books and records relating to the OEM Business or any material
change of its current practices with regard to sales, receivables, payables or
accrued expenses that would affect the timing of recognition of income,
collection of receivables or payment of payables relating to the OEM Business;
(ix) amend the Share Purchase Agreement or waive any rights
of Seller or U.K. Seller thereunder; and
(x) enter into any agreements to do any of the foregoing.
5.02 ACCESS TO INFORMATION. Subject to compliance with Applicable
Laws, from the date hereof until the Closing Date, Seller will, and Stockholder
will cause the Company to, and Stockholder will, promptly (a) give Buyer and its
counsel, financial advisors, auditors and other authorized representatives
reasonable access to the offices, properties, books and records relating to the
OEM Business upon reasonable prior notice, (b) furnish to Buyer and its counsel,
financial advisors, auditors and other authorized representatives such
information relating to the OEM Business as Buyer may reasonably request, and
(c) instruct the directors, officers, employees, counsel, auditors and financial
advisors of the Company and Stockholder to cooperate with Buyer and its counsel,
financial advisors, auditors and other authorized representatives in their
investigation of the Company and the OEM Business.
5.03 COMPLIANCE WITH TERMS OF REQUIRED APPROVALS AND CONSENTS. On and
after the Closing Date, Stockholder and Seller shall comply at their own expense
with all conditions and requirements affecting Stockholder or Seller set forth
in all Required Approvals and Consents as necessary to keep the same in full
force and effect assuming continued compliance with the terms thereof by Buyer
5.04 MAINTENANCE OF INSURANCE POLICIES. Between the date hereof and
the Closing Date, Seller shall not, and Stockholder shall cause the Company to
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 Policies with
respect to the period of time ending on the Closing Date.
5.05 ADMINISTRATION OF ACCOUNTS. All payments and reimbursements
received by Seller after the Closing Date from any third party with respect to
the Transferred Assets shall be held by Seller in trust for the benefit of Buyer
and, immediately upon receipt by Seller of any such payment or reimbursement,
Seller shall pay, or cause to be paid, over to Buyer the amount of such payment
or reimbursement without right of set off.
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5.06. CHANGE OF NAME. Within three Business Days after the Closing
Date, Seller shall amend its Articles of Incorporation so as to change its
corporate name to a name dissimilar to its current name and thereafter will not
use such name or any "DBA" name used by the OEM Business prior to the Closing,
other than any DBA name that includes the name "Fred Jones," all of which "Fred
Jones" DBA names will be retained by Seller. As promptly as practicable after
the Closing Date, but in no event more than 30 days thereafter, Seller shall
file in all jurisdictions in which it is qualified to do business any documents
necessary to reflect such change in its corporate name and to abandon any DBA
name that was used by the OEM Business prior to the Closing other than the
"Fred Jones" DBA names.
5.09 SATISFACTION OF EXCLUDED LIABILITIES. Seller shall satisfy and
discharge or cause to be satisfied and discharged all of the Excluded
Liabilities in the ordinary course of business consistent with past practices,
except for any Excluded Liability that Seller is contesting in good faith.
5.10 SECURITIES EXCHANGE ACT FINANCIAL STATEMENTS. Seller understands
that following the Closing Date Buyer will be required to file with the
Securities and Exchange Commission a periodic report on Form 8 K (i) disclosing
the purchase of the Transferred Assets in response to Item 2 of Form 8-K and
(ii) setting forth certain financial statements regarding the Transferred Assets
pursuant to Item 7 of Form 8-K. At or prior to the Closing, Seller shall
deliver to Buyer such financial statements as are called by Form 8-K and
Regulation S-X under the Securities Exchange Act of 1934, as amended, in order
for Buyer to file such periodic report.
ARTICLE VI
COVENANTS OF BUYER
6.01 ACCESS TO INFORMATION. Subject to compliance with Applicable
Laws, from the Closing Date until December 31, 2003, Buyer will promptly
(i) furnish to Seller and its counsel, financial advisors, auditors and other
authorized representatives such information relating to the OEM Business as
Seller may reasonably request in connection with the preparation of Tax Returns,
and (ii) instruct the directors, officers, employees, counsel, auditors and
financial advisors of Buyer to cooperate in all reasonable respects with Seller
and its counsel, financial advisors, auditors and other authorized
representatives in connection with the preparation of Tax Returns. After the
Closing Date, in the event that Buyer intends to destroy any documents that
contain or otherwise reflect information in connection with the OEM Business for
any period prior to the Closing Date, Buyer will provide written notice to
Seller of its intention to destroy such documents and provide Seller with the
opportunity to request that such documents instead be delivered to Seller. Any
information or documents provided to Seller pursuant to this Section 6.01 shall
be held by Seller pursuant to Section 7.04.
6.02 USE OF NAMES. Within three Business Days after the Closing Date,
Buyer shall cause the Mexican Joint Venture to take all steps necessary to
remove the words "Fred Jones" from its name and thereafter Buyer and its
Affiliates will not use the name "Fred Jones" in any form or fashion.
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6.03 U.K. ENVIRONMENTAL MATTER. Buyer shall be responsible,
without right of reimbursement from Seller, for 50% of the first L100,000 of
Environmental Liability claims of the type covered by paragraph 2.1.3 of that
certain Environmental Deed of Indemnity dated 10 October 1997 among Seller,
U.K. Seller, ADL and the Vendors, as such Deed existed on the date of its
execution, a true and correct copy of which has been delivered to Buyer.
6.04 SALES TAX PERMITS. Prior to Closing, Buyer will use its
reasonable best efforts to obtain and furnish to Seller (i) an appropriate
"sales tax permit" from the Oklahoma Tax Commission and similar permits or
qualifications from the relevant taxing authority of each other jurisdiction
where the sale of property pursuant to this Agreement is deemed to take
place, and (ii) such other documents, affidavits and instruments, as may be
necessary to authorize Seller to not collect sales, use or other transfer
taxes pursuant to the applicable jurisdiction's statutes on the basis that
certain of the property being sold to Buyer by Seller pursuant to this
Agreement is a sale for resale or is eligible for some other exemption.
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. Buyer, Seller and Stockholder 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.
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. Up to (and including) the Closing Date,
the parties agree that they will not make any disclosure with respect to 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 or Nasdaq regulations,
and the parties hereto cannot reach agreement upon a mutually acceptable form
of release. Notwithstanding the foregoing, the parties hereto may, on a
confidential basis, advise their respective agents, accountants, attorneys,
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investment advisors and financing sources with respect to the contents of
this Agreement and the transactions contemplated hereby.
7.04 CONFIDENTIALITY.
(a) Stockholder and Seller will, and will cause their
Affiliates and representatives to, treat any data and information regarding
the OEM Business or Buyer or any of their Affiliates 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 Stockholder, Seller 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 Approvals and Consents, or (iv) any disclosure of such information
in litigation between the parties hereto; PROVIDED, HOWEVER, that disclosure
pursuant to clause (ii), (iii) or (iv) may be made only to the extent
necessary to satisfy the permitted purpose.
(b) Buyer will, and will cause its Affiliates and
representatives to, treat any data and information obtained with respect to
Stockholder and the Company 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 Buyer or its Affiliates or representatives, so long as
such other party is not in breach of a confidentiality obligation, (ii)
information available to Buyer or its Affiliates or representatives on a
non-confidential basis prior to its disclosure pursuant to this Agreement,
(iii) information that is required to be disclosed by Applicable Law or
Nasdaq regulations, (iv) information required to be disclosed to obtain any
Required Approvals and Consents, (v) any disclosure of such information in
litigation between the parties hereto, (vi) information regarding the OEM
Business disclosed after the Closing Date, or (vii) information disclosed to
prospective lenders in connection with Buyer's financing of the Purchase
Price; PROVIDED, HOWEVER, that disclosure pursuant to clause (iii), (iv), (v)
or (vii) may be made only to the extent necessary to satisfy the permitted
purpose.
(c) In the event that the Closing fails to take place and
this Agreement is terminated, each party, upon the written request of another
party, will, and will cause its representatives to, promptly deliver to the
requesting party any and all documents or other materials furnished by the
requesting party or any of its Affiliates in connection with this Agreement
without retaining any copies thereof. In the event of such request, all
other documents, whether analyses, compilations or studies, that contain or
otherwise reflect the information furnished by the requesting party shall be
destroyed by the other party or shall be turned over to the requesting party,
and the other party shall confirm to the requesting party in writing that all
such materials have been turned over or destroyed. No failure or delay by
the requesting 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
right, power or privilege hereunder.
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(d) The parties hereto recognize and agree that in the event
of a breach of this Section 7.04, money damages would not be an adequate
remedy for such breach and, even if money damages were adequate, it would be
impossible to ascertain with any degree of accuracy the amount of damages
sustained therefrom. Accordingly, if there should be a breach or threatened
breach of this Section 7.04, the nonbreaching party and its Affiliates shall
be entitled to an injunction restraining the breaching party from any breach
without showing or proving actual damage sustained by the nonbreaching party
or its Affiliates. Nothing in the preceding sentence shall limit or otherwise
affect any remedies that the nonbreaching party and its Affiliates may
otherwise have under Applicable Law.
7.05 TAXES.
(a) All Taxes imposed in connection with the sale of the
Transferred Assets shall be borne by Seller except for those Taxes set forth
on Schedule 7.05, which shall be borne by Buyer.
(b) Seller agrees that no new elections with respect to Taxes
affecting the Transferred Assets or any changes in current elections with
respect to Taxes affecting the Transferred Assets shall be made after the
date of this Agreement without the prior written consent of Buyer.
(c) Buyer and Seller shall (i) provide to each other such
assistance as may reasonably be requested in connection with the preparation
of any Tax Return relating to the OEM Business and the conduct of any audit
or other examination by any taxing authority or in connection with judicial
or administrative proceedings relating to any liability for Taxes relating to
the OEM Business, (ii) retain all records or other information that may be
relevant to the preparation of any Tax Returns relating to the OEM Business,
or the conduct of any audit or examination, or other tax proceeding relating
to the OEM Business, and (iii) retain all relevant documents, including prior
year's Tax Returns relating to the OEM Business, supporting work schedules
and other records or information that may be relevant to such returns and
shall not destroy or otherwise dispose of any such records without the prior
written consent of the other party.
(d) Seller shall provide Buyer with all tax clearance
certificates or similar documents that may be required by any state or local
taxing authority in order to relieve Buyer of any obligations to withhold any
portion of the Purchase Price.
(e) Seller shall keep Buyer fully and timely informed with
respect to the commencement, status and nature of any administrative or
judicial proceedings that could reasonably be expected to affect the Tax
Liability of Buyer with respect to the OEM Business.
(f) Buyer shall keep Seller fully and timely informed with
respect to the commencement, status and nature of any administrative or
judicial proceedings that could reasonably be expected to affect the Tax
Liability of Buyer with respect to the OEM Business.
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(g) If Buyer, in Buyer's sole discretion, shall request,
Seller shall (i) assist Buyer in transferring the unemployment tax experience
rating of Seller, (ii) cooperate with Buyer to take all actions reasonably
necessary to effect and preserve such transfer, and (iii) take no position
inconsistent with such transfer. Seller shall provide Buyer with all
relevant information necessary to determine whether such transfer is in
Buyer's best interest.
7.06 LEASES. At the Closing Seller, as lessor, and Buyer, as
lessee, shall enter into leases in the forms of EXHIBITS B and C hereto. The
monthly rental rate to be paid under each such lease shall be equal to the
"market rate" as established prior to the Closing by a MAI appraiser selected
by the mutual agreement of Seller and Buyer and having experience in
appraising properties in the area of the location in question. The appraiser
may not be Associated With Buyer, Seller, Stockholder of any of the
Principals. The fee of the appraiser shall be shared equally by Buyer and
Seller.
7.07 ASSISTANCE, NONCOMPETION AND GUARANTY AGREEMENT. At the
Closing, Buyer, Seller, Stockholder and the Principals shall enter into an
Assistance, Noncompetition and Guaranty Agreement substantially in the form
of EXHIBIT D hereto. Failure of any of the Principals to enter into such
agreement shall constitute a breach of this Agreement by Seller and
Stockholder.
7.08. EMPLOYEES AND EMPLOYEE BENEFIT MATTERS.
(a) OFFERS OF EMPLOYMENT AND BENEFITS FOR OEM EMPLOYEES.
(i) Buyer agrees that it will offer employment to all of
the OEM Employees and shall hire all such OEM Employees who accept such offer
of employment (the "Hired OEM Employees") on the same terms and conditions
that are applicable to such employees as of the Closing Date. The offer of
employment shall also extend to any OEM Employees who are not currently
performing services for Seller because of absence due to injuries covered by
workers' compensation or who are otherwise on any authorized leave of absence
(the "Absent OEM Employees"). Prior to Closing, Seller will provide to Buyer
a list of OEM Employees, including the Absent OEM Employees. Through July
31, 1998, Buyer shall continue to pay to all of the Hired OEM Employees wages
and salaries and other forms of compensation at the same rates as were being
paid by Seller as of the Closing Date, and Buyer will provide to the Hired
OEM Employees the same level and value of employee benefit plans, programs
and arrangements that Seller had been providing to the Hired OEM Employees as
of the Closing Date, other than Seller's bonus plans and retiree medical
plans, as described on SCHEDULE 7.08 attached hereto ("Buyer's Benefit
Plans"), PROVIDED, HOWEVER, that Buyer will provide a bonus plan comparable
to Seller's bonus plan from the Closing Date through December 31, 1998.
After July 31, 1998, Buyer may (A) amend, terminate or otherwise modify
Buyer's Benefit Plans in accordance with the terms and provisions thereof and
(B) modify the terms of employment of the Hired OEM Employees.
(ii) Seller currently sponsors a 401(k)/Profit Sharing Plan
("Seller's 401(k) Plan"). In order to facilitate the obligation of Buyer to
provide Buyer's Benefit Plans as provided under this Section 7.08(a), as of the
Closing Date, Seller will allow Buyer to
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adopt Seller's 401(k) Plan as a participating employer and to permit the
Hired OEM Employees to continue to participate in or begin participation in
Seller's 401(k) Plan through at least July 31, 1998, but in no event longer
than through December 31, 1998. During the period that Buyer is a
participating employer in Seller's 401(k) Plan, Seller's 401(k) Plan shall be
considered a "multiple employer plan" and Seller will administer Seller's
401(k) Plan on behalf of Buyer and the Hired OEM Employees until such time as
the accounts (including loan accounts) (the "Accounts") of the Hired OEM
Employees or any other employees of Buyer who are covered under Seller's
401(k) Plan (such employees of Buyer and the Hired OEM Employees being the
"Covered Employees") are directly transferred to Buyer's 401(k) Plan which
meets the requirements of Sections 401(a), 401(k) and 501(a) of the Code at
the time of such transfer ("Buyer's 401(k) Plan"). The direct transfer of
the Accounts from Seller's 401(k) Plan to Buyer's 401(k) Plan shall occur
within a reasonable time after July 31, 1998, but in no event later than
December 31, 1998. The Accounts and all future contributions made by or on
behalf of the Covered Employees will be held in a separate trust for the
benefit of the Covered Employees which is part of Seller's 401(k) Plan.
Further, due solely to the consummation of the transaction described in this
Agreement, there shall be no distribution made to the Hired OEM Employees
from Seller's 401(k) Plan. Buyer agrees to pay to Seller and the
administrator of Seller's 401(k) Plan a reasonable fee for the administration
of Seller's 401(k) Plan as adopted by the Buyer with respect to the Covered
Employees. Until the Accounts are transferred from Seller's 401(k) Plan to
Buyer's 401(k) Plan, as provided herein, Buyer will allow the Hired OEM
Employees who have outstanding loans in Seller's 401(k) Plan to continue to
remit to Seller's 401(k) Plan the required payments under such loans by
payroll deduction from wages and salary paid by Buyer to the Hired OEM
Employees. As of the Closing Date and the consummation of the transaction
provided for in this Agreement, all Hired OEM Employees, if not sooner
vested, will be 100% vested and nonforfeitable in their respective Accounts.
After the transfer of the Accounts, they shall be held, administered and
distributed in accordance with Buyer's 401(k) Plan. Buyer's 401(k) Plan
shall provide or will be amended to provide with respect to the Accounts of
the OEM Hired Employees the same payment options, optional forms of benefits
and other significant provisions that are contained in Seller's 401(k) Plan
and would be classified as "protected benefits" under Section 411 of the Code
and regulations issued thereunder. The transfer of the Accounts from
Seller's 401(k) Plan to Buyer's 401(k) Plan will be made in a manner that
will continue the qualified status of each such plan under the applicable
provisions of the Code.
(iii) Buyer will recognize and credit the prior
employment service of the Hired OEM Employees with Seller for purposes of
eligibility and vesting with respect to Buyer's Benefit Plans. Further,
Buyer shall cause to be waived any pre-existing condition clause that would
preclude any of the Hired OEM Employees from being eligible to participate in
Buyer's medical plan. It is the intent of Seller and Buyer that the Hired
OEM Employees should have no interruption in their participation in Buyer's
Benefit Plans in connection with commencement of employment with Buyer.
(iv) Notwithstanding the foregoing, the Hired OEM
Employees will be employed at the will of Buyer and after the Closing Date
Buyer will be free to terminate
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the employment of any Hired OEM Employee in Buyer's sole discretion, subject
to Applicable Law and the terms of any written employment agreement between
Buyer and such employee.
(b) LIABILITY FOR WAGES AND BENEFITS. Seller will be
responsible for all liabilities for vested accrued benefits and claims
incurred but not yet paid as of the Closing Date under any employee welfare
plan (as defined in Section 3(1) of ERISA), any Employee Pension Benefit Plan
or any other employee benefit plans, programs or arrangement of Seller that
provide benefits for OEM Employees, their eligible dependents or their
beneficiaries, and for the payment of any wages accrued as of Closing Date,
severance or other termination-related obligations to OEM Employees as may be
required by Applicable Law or otherwise. Buyer will be responsible with
respect to all liabilities arising after the Closing Date with respect to any
of the Hired OEM Employees that relate to or arise from the employment of the
Hired OEM Employees by Buyer, including any obligation that Buyer may have
with respect to (i) payment of any benefits that become payable under Buyer's
Benefit Plans, (ii) payment of any wages accrued after the Closing Date, and
(iii) severance or other termination-related obligation to Hired OEM
Employees as may be required by Applicable Law or otherwise.
(c) OEM EMPLOYEE INFORMATION. Buyer acknowledges that prior
to Closing it may have access to personnel, benefit or other confidential
information pertaining to the OEM Employee pursuant to Section 5.02 or
otherwise. Buyer agrees that it has maintained and used and at all times in
the future shall maintain and use such information only in accordance with
Applicable Law.
(d) WORKERS' COMPENSATION. Seller will bear the entire cost
and expense of all workers' compensation claims arising out of injuries
identifiably sustained by Hired OEM Employees on or before the Closing Date.
Buyer will bear the entire cost and expense of all workers' compensation
claims arising out of injuries identifiably sustained by Hired OEM Employees
after the Closing Date. Buyer shall bear the entire cost and expense of all
workers' compensation claims arising out of injuries without an identifiable
date of occurrence and that are alleged to have arisen either before or after
the Closing Date. After the Closing Date, Buyer will use its reasonable best
efforts to facilitate the return to work of any Hired OEM Employees who were
on disability leave on the Closing Date as a result of a work-related injury
or illness.
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) Seller and Stockholder shall each have performed and
satisfied in all material respects each of their 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
Seller and Stockholder contained in this Agreement shall be true and correct
in all material respects, and shall not contain any misstatement or omission
that would make any such
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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 Stockholder and a duly
authorized executive officer of Seller to the foregoing effect and to the
effect that the conditions specified in this Section 8.01 have been satisfied.
(b) All Required Approvals and Consents (including such
consents as are required under Subsequent Material Contracts) shall have been
obtained without the imposition of any conditions that are or would become
applicable to the OEM Business, the Transferred Assets, Buyer or any of its
Affiliates after the Closing that Buyer in good faith reasonably determines
would be materially burdensome upon the OEM Business, the Transferred Assets,
Buyer or any of its Affiliates or their respective businesses substantially
as such businesses have been conducted prior to the Closing Date. All such
Required Approvals and Consents shall be in effect; no Proceedings or other
action shall have been instituted or threatened by any Person with respect
thereto as to which, in Buyer's good faith opinion, there is a material risk
of termination or revocation of, or material adverse (as to the OEM Business,
the Transferred Assets or Buyer) modification of, any such Required Approval
or Consent; all applicable waiting periods with respect to such Required
Approvals and Consents shall have expired; and all conditions and
requirements prescribed by Applicable Law or by such Required Approvals and
Consents to be satisfied on or prior to the Closing Date shall have been
satisfied to the extent necessary such that all such Required Approvals and
Consents are, and will remain, in full force and effect assuming continued
compliance with the terms thereof after the Closing.
(c) The consummation of the transactions contemplated by this
Agreement 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 consummation of the transactions contemplated hereby, or imposing Damages
on Buyer 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
consummation of the transactions contemplated hereby, or to impose conditions
that Buyer in good faith determines would be materially burdensome upon the OEM
Business, the Transferred Assets, Buyer or any of its Affiliates or their
respective businesses substantially as such businesses have been conducted
prior to the Closing Date or as such businesses, as of the date hereof, would
be reasonably expected to be conducted after the Closing Date.
(d) Since the date hereof, there shall not have been any
event, occurrence, development or state of circumstances or facts (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 the Company
or the OEM 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.
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(e) Seller, as lessor, shall have executed and delivered to
Buyer the real property leases called for by Section 7.06.
(f) Seller, Stockholder and each of the Principals shall have
executed and delivered to Buyer the Assistance, Noncompetition and Guaranty
Agreement called for by Section 7.07.
(g) Buyer shall have received an opinion of McAfee & Taft in
a form reasonably acceptable to Buyer.
(h) As of the Closing Date, there shall exist no Liens on any
Transferred Assets.
(i) Seller shall have executed and delivered a bill of sale
and such other documents of assignment, transfer and conveyance (including
duly endorsed share certificates representing the outstanding shares of the
U.K. Subsidiaries and Seller's interest in the Mexican Joint Venture) as
Buyer shall reasonably request to transfer to Buyer all right, title and
interest of Seller in and to the Transferred Assets.
(j) Buyer shall have received financing on terms reasonably
acceptable to Buyer and in an amount sufficient to pay the Purchase Price and
Buyer's expenses related to the negotiation of this Agreement and the
consummation of the transactions contemplated hereby.
(k) Buyer shall have received the financial statements called
for by Section 5.10.
(l) Buyer shall have satisfied itself, in its reasonable
judgment, that both Ford Motor Company and General Motors Corporation are
willing to purchase remanufactured transmissions and related components from
Buyer after the Closing on terms and in quantities at least comparable to
those on and in which they purchased such items from Seller prior to the
Closing, PROVIDED that this condition shall be deemed to have been satisfied
as of and following February 24, 1998 unless prior to such date Buyer has
notified Seller in writing that this condition will not be satisfied.
(m) each of Ron Bradshaw, James Carey, Tom Kawsky and John
Paschal shall have executed and delivered to Buyer an employment agreement in
substantially the form of EXHIBIT E hereto with such additions thereto as
Buyer and the respective employee may agree upon.
8.02 CONDITIONS TO OBLIGATION OF STOCKHOLDER AND SELLER. The
obligation of Stockholder and Seller 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
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or prior to the Closing Date, (ii) each of the representations and warranties
of Buyer contained in this Agreement 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) Seller shall have received certificates signed by a
duly authorized executive officer of Buyer to the foregoing effect and to the
effect that the conditions specified in this Section 8.02 have been satisfied.
(b) All Required Approvals and Consents (including such
consents as are required under Subsequent Material Contracts) shall have been
obtained without the imposition of any conditions that are or would become
applicable to Stockholder or Seller or any of their Affiliates after the
Closing that Seller in good faith reasonably determines would be materially
burdensome upon Stockholder or Seller or any of their Affiliates or their
respective businesses substantially as such businesses have been conducted
prior to the Closing Date. All such Required Approvals and Consents shall be
in effect; no Proceedings or other action shall have been instituted or
threatened by any Person with respect thereto as to which, in Seller's good
faith opinion, there is a substantial risk of termination or revocation of,
or material adverse (as to Stockholder or Seller) modification of, any such
Required Approval or Consent; all applicable waiting periods with respect to
such Required Approvals and Consents shall have expired; and all conditions
and requirements prescribed by Applicable Law or by such Required Approvals
and Consents to be satisfied on or prior to the Closing Date shall have been
satisfied to the extent necessary such that all such Required Approvals and
Consents are, and will remain, in full force and effect assuming continued
compliance with the terms thereof after the Closing.
(c) The consummation of the transactions contemplated by this
Agreement 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 consummation of the transactions contemplated hereby, or imposing Damages
against Stockholder or Seller 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 consummation of the transactions contemplated hereby, or to
impose conditions that Seller in good faith determines would be materially
burdensome upon Stockholder or Seller or any of their Affiliates or their
respective businesses substantially as such businesses have been conducted
prior to the Closing Date or as such businesses, as of the date hereof, would
be reasonably expected to be conducted after the Closing Date.
(e) Buyer, as lessee, shall have executed and delivered to
Seller the real property leases called for by Section 7.06.
(f) Stockholder and Seller shall have received an opinion of
Joseph Salamunovich, Buyer's General Counsel, in a form reasonably acceptable
to Stockholder and Seller.
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(g) Buyer shall have executed and delivered to Seller a
Computer Services Agreement substantially in the form of EXHIBIT F hereto.
(h) Seller, U.K. Seller and Stockholder shall have received
the payments called for by Section 2.06(b).
(i) Buyer shall have executed and delivered to Seller a Lease
Assignment and Assumption Agreement for each of the Leases included in the
Transferred Assets in a form reasonably acceptable to Seller.
(j) Buyer shall have executed and delivered to Seller an
Assignment and Assumption Agreement for all Contracts included in the
Transferred Assets in a form reasonably acceptable to Seller.
(k) Buyer shall have executed and delivered to Seller,
Stockholder and the Principals the Assistance, Noncompetition and Guaranty
Agreement called for by Section 7.07.
(l) Buyer shall have obtained the permits and qualifications
called for by Section 6.04
(m) Buyer shall have executed and delivered to each of Ron
Bradshaw, James Carey, Tom Kawsky and John Paschal an employment agreement in
substantially the form of EXHIBIT E hereto with such additions thereto as
Buyer and the respective employee may agree upon.
ARTICLE IX
INDEMNIFICATION
9.01 AGREEMENT TO INDEMNIFY.
(a) Subject to the limitations provided herein Buyer and its
Affiliates (collectively, the "Buyer Indemnitees") shall each be indemnified
and held harmless on a joint and several basis by Stockholder and Seller 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 or failure to perform any representation, warranty, covenant,
agreement or obligation of Stockholder or Seller in this Agreement, or
(ii) in connection with any Excluded Liabilities. The aggregate Liability of
Stockholder and Seller under Section 9.01(a)(i) shall not exceed $43,750,000,
except in the case of Damages due to the fraud or willful misconduct of
Stockholder or Seller.
(b) Subject to the limitations provided herein, Stockholder,
Seller and their Affiliates (collectively the "Seller Indemnitees") shall each
be indemnified and held harmless by Buyer in respect of any and all Damages
reasonably and proximately incurred by any of the Seller Indemnitee as a result
of (i) any inaccuracy or misrepresentation in or breach of or failure to perform
any representation, warranty, covenant, agreement or obligation of Buyer in
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this Agreement, (ii) Assumed Liabilities or (iii) the conduct of the OEM
Business after the Closing Date.
(c) Notwithstanding the foregoing, Buyer Indemnitees may not
seek indemnification under Section 9.01(a) for any particular claim that does
not exceed $25,000, such claim being treated as if it did not exist for
purposes of this Agreement.
(d) Notwithstanding the foregoing, Buyer Indemnitees may not
seek indemnification under Section 9.01(a) unless and until the claims in the
aggregate exceed $750,000, provided that if such threshold is exceeded, the
Buyer Indemnitees may seek indemnification hereunder only for such excess.
The foregoing limitation shall not apply to Damages relating to Excluded
Liabilities or Damages due to the fraud or willful misconduct of Stockholder
or Seller.
9.02 SURVIVAL OF REPRESENTATION, WARRANTIES AND COVENANTS.
(a) The representations and warranties contained in this
Agreement shall survive as follows:
(i) Except as otherwise provided in Section 9.02(a)(ii)
or (iii), all representations and warranties shall expire on March 31,
2000.
(ii) Notwithstanding Section 9.02(a)(i), the representations
and warranties of any party contained herein shall survive until 60 days
after the expiration of any applicable statute of limitations, including
extensions thereof, with respect to any inaccuracy or misrepresentation
arising out of fraud or willful misconduct.
(iii) Notwithstanding Section 9.02(a)(i), the
representations and warranties contained in Sections 3.15, 3.19, 3.21 and
3.23 shall survive until 60 days after the expiration of any applicable
statute of limitations, including extensions thereof.
Any cause of action for breach of a representation or warranty contained
herein shall expire and terminate on the date on which such representation or
warranty expires pursuant to this Section 9.02(a) unless the party seeking
indemnification with respect to such breach delivers to the appropriate
Indemnifying Parties written notice and a reasonably detailed explanation of
the alleged breach on or before 5:00 p.m., Central Time, on such expiration
date.
(b) The covenants contained in this Agreement to be performed
after the Closing Date shall survive without expiration unless otherwise
expressly provided in such covenant.
9.03 CLAIMS FOR INDEMNIFICATION. 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. Any such notice shall set forth in
reasonable detail and to the extent then known the basis for such claim for
indemnification. The failure of such Indemnitee to give prompt notice of any
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claim for indemnification shall not adversely affect such Indemnitee's right
to indemnity hereunder except to the extent that such failure materially
adversely affects the right of the Indemnifying Party to assert any
reasonable defense to such claim. The Indemnifying Party shall have 30 days
following its receipt of such notice to either acquiesce in or object to the
claim in writing. 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.
9.04 DEFENSE OF CLAIMS.
(a) In connection with any claim that 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, any
Indemnifying Party may, subject to Section 9.04(c), assume the defense of
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 (i) jointly
acknowledge to the Indemnitee its right to indemnity pursuant hereto in
respect of the entirety of such claim and (ii) provide assurances, reasonably
satisfactory to such Indemnitee, that the Indemnifying Parties will be
financially able to satisfy such claim in full. 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 do not assume the defense of any claim or Proceeding
resulting therefrom in accordance with the terms of this Section 9.04(a), the
Indemnitee may defend against such claim or Proceeding, subject to Section
9.04(d), PROVIDED that the Indemnifying Parties may subsequently elect to
assume the defense of such claim or Proceeding if they provide the notice
called for by the first sentence of this Section 9.04.
(b) If the Indemnifying Parties assume the defense of any
such claim or Proceeding, the Indemnifying Parties shall select counsel
reasonably acceptable to the 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 relating to, such claim or Proceeding, without the prior written
consent of such Indemnitee, PROVIDED that (i) the Indemnifying Parties shall
pay or cause to be paid all amounts arising out of such settlement or
judgment in accordance with the terms thereof, (ii) 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 (iii) 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(c), the 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 being defended by the
Indemnifying Parties pursuant to this Section 9.04.
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(c) 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, there
are 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 pursuant to the last sentence of Section
9.04(a) or pursuant to this Section 9.04(c), (i) the Indemnifying Parties may
participate in, but not control, the defense of such claim or Proceeding, and
(ii) 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 (A) the amount offered
in such settlement proposal, (B) the amount of actual Damages of the
Indemnitee with respect to such claim or Proceeding or (C) the maximum
Liability of the Indemnifying Parties pursuant to Section 9.01(a) and any
such settlement shall expressly release the Indemnifying Parties from any
further Liability with respect to the claim.
(d) If the Indemnitee assumes the defense of any claim or
Proceeding pursuant to the last sentence of Section 9.04(a) or pursuant to
Section 9.04(c), the Indemnitee shall conduct such defense in such manner as
it shall deem appropriate, PROVIDED that the Indemnitee may not settle or
compromise any claim or Proceeding or consent to the entry of any judgment
with respect thereto without the prior written consent of the Indemnifying
Parties, which consent shall not be unreasonably withheld.
9.05 TAX EFFECT. If the payment of any Damages for the benefit of
an Indemnitee results in a reduction of Tax due and payable by such
Indemnitee (a "Tax Benefit"), then the amount of Damages payable shall be
reduced by, or, if Damages have already been paid, then the Indemnitee shall
refund to the Indemnifying Parties, an amount equal to the difference between
the actual amount of Tax due and payable by such Indemnitee with respect to
such year and the amount of Tax that would have paid by such Indemnitee
solely but for such Tax Benefit.
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 a party at any time following the expiration of 30
days from the date that such party has given notice to another party of any
one or more inaccuracies or misrepresentations in or breaches of the
representations or warranties made by the recipient of such notice contained
in this Agreement that, if not cured prior to the Closing Date, would give
the notifying party grounds not to close under Section 8.01 or 8.02, as the
case may be, when taken into account with all other uncured inaccuracies or
misrepresentations in or breaches of such representations or warranties as to
which the notifying party shall have given notice to previously pursuant to
this clause (b); PROVIDED, HOWEVER, that no termination under this clause
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(b) shall take effect if such inaccuracies, misrepresentations or breaches
shall have been cured in all material respects within such 30-day period;
(c) by a party at any time following the expiration of 30
days from the date that such party has given written notice to another party
of the failure by the recipient of such notice to perform and satisfy in any
material respect any of its material obligations under this Agreement
required to be performed and satisfied by it on or prior to the Closing Date,
or the failure to perform and satisfy any other obligations of the recipient
of such notice 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 30-day period;
(d) by any party hereto, if the Closing shall not have been
consummated by the Outside Date; PROVIDED, HOWEVER, that a party may not
terminate this Agreement pursuant to this clause (d) if the Closing shall not
have been consummated by reason of any inaccuracy or misrepresentation in the
representations or warranties made in this Agreement by such party or any
failure of such party or any of his or its Affiliates to perform and satisfy
in all material respects any of his or its respective covenants or
obligations contained in this Agreement; or
(e) by any party hereto if any Applicable Law shall hereafter
be enacted or become applicable that makes the transactions contemplated
hereby illegal or otherwise prohibited, or if any judgment, injunction, order
or decree enjoining any party hereto from consummating the transactions
contemplated hereby is entered, and such judgment, injunction, order or
decree shall become final and nonappealable.
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 7.04, 10.02, 11.01, 11.03, 11.05
11.07, 11.08, 11.10, 11.11 and 11.12 shall survive any termination of this
Agreement pursuant to Section 10.1.
ARTICLE XI
MISCELLANEOUS
11.01 NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be deemed duly given
(i) when delivered by personal delivery, (ii) five 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) the
day following being sent through an overnight delivery service in
circumstances in which such service guarantees next day delivery, or
(iv) once such notice or other communication is transmitted to the telecopier
number specified below and the appropriate answer back or
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telephonic confirmation is received, PROVIDED that such notice or other
communication is promptly thereafter mailed in accordance with the provisions
of clause (ii) above:
If to Seller or Stockholder:
Fred Jones Industries
123 South Hudson
Oklahoma City, OK 73102
Telecopier No.: (405) 231-2468
Attn.: Fred J. Hall
with a copy to:
McAfee & Taft
Two Leadership Square, 10th Floor
211 North Robinson
Oklahoma City, OK 73102
Telecopier No.: (405) 235-0439
Attn.: Gary F. Fuller, Esq.
If to Buyer:
Aftermarket Technology Corp.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
Telecopier No.: (630) 455-2621
Attn.: General Counsel
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
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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.
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 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. Notwithstanding the foregoing, Buyer may assign its
right to purchase some or all of the Transferred Assets to one or more wholly
owned subsidiaries of Buyer, PROVIDED that such assignment shall not relieve
Buyer of any of its obligations hereunder.
11.05 GOVERNING LAW. Except as otherwise provided in Section 11.11
with respect to arbitration under the Federal Arbitration Act, 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 Oklahoma.
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 oral and written and all
contemporaneous oral agreements, understandings and negotiations 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 CONSTRUCTION. 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. Neither party hereto, nor its respective counsel, shall be
deemed the drafter of this Agreement, and all provisions of this Agreement
shall be construed in accordance with their fair meaning, and not strictly
for or against either party hereto. Matters disclosed on one or more
schedules attached hereto and made a part hereof shall be deemed to have been
disclosed on each and every relevant schedule to the extent necessary to make
any other statement, representation or warranty contained herein not
misleading.
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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 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 Seller or any Affiliate
thereof (including any beneficiary or dependent thereof).
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 Federal Arbitration Act and 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 Oklahoma. 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 arbitrator shall not have the power or authority to award
consequential, incidental or punitive damages. 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 it 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.
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(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.
48
<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.
FRED JONES INDUSTRIES A LIMITED
PARTNERSHIP, a Texas limited partnership
By: The Fred Jones Companies, Inc., General
Partner
By: /s/ Fred J. Hall
------------------------------------
Name: Fred J. Hall
Title: Treasurer
AUTOCRAFT INDUSTRIES, INC., an Oklahoma
corporation
By: /s/ Fred J. Hall
----------------------------------------
Name: Fred J. Hall
Title: Chairman and CEO
AFTERMARKET TECHNOLOGY CORP., a Delaware
corporation
By: /s/ Joseph Salamunovich
----------------------------------------
Joseph Salamunovich
Vice President
49
<PAGE>
ACKNOWLEDGEMENTS
STATE OF OKLAHOMA )
)
COUNTY OF Oklahoma )
This instrument was acknowledged before me on February 10, 1998, by
_______ Fred J. Hall, as Treasurer of The Fred Jones Companies, Inc., a Texas
corporation, as general partner of Fred Jones Industries A Limited Partnership,
a Texas limited partnership.
[SEAL]
/s/ Mary Lon Brown
------------------------------------
Notary Public
My Commission Expires: 4-26-2000
STATE OF OKLAHOMA )
)
COUNTY OF Oklahoma )
This instrument was acknowledged before me on February 10, 1998, by
_______ Fred J. Hall, as Chairman and CEO of Autocraft Industries, Inc., an
Oklahoma corporation.
[SEAL]
/s/ Mary Lon Brown
------------------------------------
Notary Public
My Commission Expires: 4-26-2000
STATE OF ILLINOIS )
)
COUNTY OF DU PAGE )
This instrument was acknowledged before me on February 10, 1998, by
Joseph Salamunovich, as Vice President of Aftermarket Technology Corp., a
Delaware corporation.
[SEAL]
/s/ Linda Brost
------------------------------------
Notary Public
My Commission Expires: 12/1/2001
50
<PAGE>
EXHIBITS
Exhibit A. . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements
Exhibit B. . . . . . . . . . . . . . .Form of Real Property Lease (GM Facility)
Exhibit C. . . . . . . . . . . . .Forms of Real Property Lease (Computer Space)
Exhibit D. . . . . . Form of Cooperation, Noncompetition and Guaranty Agreement
Exhibit E. . . . . . . . . . . . . . . . . . . . . Form of Employment Agreement
Exhibit F. . . . . . . . . . . . . . . . . .Form of Computer Services Agreement
SCHEDULES
Schedule 1.01. . . . . . . . . . . . . . . . . . . . . . . . . .Permitted Liens
Schedule 2.01(b) . . . . . . . . . . . . . . . . . . . . . . . . . . .Equipment
Schedule 2.01(p) . . . . . . . . . . . . . . . . . . . . OEM Business Locations
Schedule 2.02. . . . . . . . . . . . . . . . . . . . . . . . . .Excluded Assets
Schedule 3.01. . . . . . . . . . . . . . . . . . . . . . Foreign Qualifications
Schedule 3.04. . . . . . . . . . . . . . . . . .Required Approvals and Consents
Schedule 3.07. . . . . . . . . . . . . . . . . . . . . . . .Certain Liabilities
Schedule 3.08. . . . . . . . . . . . . . . . . . . . Absence of Certain Changes
Schedule 3.09(a)(i). . . . . . . . . . . . . . . . . . . . . . . .Real Property
Schedule 3.09(a)(ii) . . . . . . . . . . . . . . . . . Personal Property Leases
Schedule 3.09(b) . . . . . . . . . . . . . . . . . . . . . . Non-Binding Leases
Schedule 3.09(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Liens
Schedule 3.09(d) . . . . . . . . . . . . . . . . . . . . . .Land-Use Regulation
Schedule 3.09(f) . . . . . . . . . . . . . . . . . . . . . . .Personal Property
Schedule 3.10. . . . . . . . . . . . . . . . . . . . . . Affiliate Transactions
Schedule 3.11. . . . . . . . . . . . . . . . . . . . . . . . . . . .Inventories
Schedule 3.12. . . . . . . . . . . . . . . . . . . . . . . . . . . . Litigation
Schedule 3.13(a) . . . . . . . . . . . . . . . . . . . . . .Scheduled Contracts
Schedule 3.13(b) . . . . . . . . . . . . . . . .Non-Binding Scheduled Contracts
Schedule 3.13(c) . . . . . . . . . . . . . . . .Primary Customers and Suppliers
Schedule 3.14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Permits
Schedule 3.15. . . . . . . . . . . . . . . . Noncompliance with Applicable Laws
Schedule 3.16. . . . . . . . . . . . . . . . . Employee Agreements and Benefits
Schedule 3.17. . . . . . . . . . . . . . . . . . . Labor and Employment Matters
Schedule 3.18. . . . . . . . . . . . . . . . . . . . . . .Intellectual Property
Schedule 3.19. . . . . . . . . . . . . . . . . . . . . . .Environmental Matters
Schedule 3.20. . . . . . . . . . . . . . . . . . . . . . . . Insurance Policies
Schedule 3.21. . . . . . . . . . . . . . . . . . . . . . . . . . . .Tax Matters
Schedule 3.22. . . . . . . . . . . . . . . . . . . . . . . .Accounts Receivable
Schedule 5.01. . . . . . . . . . . . . . . . . . . Certain Compensation Matters
Schedule 7.05. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Taxes
Schedule 7.08. . . . . . . . . . . . . . . . . . . . . . .Buyer's Benefit Plans
<PAGE>
AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT
This Amendment No. 1 to Asset Purchase Agreement (this "Amendment") is
entered into as of March 6, 1998 by and among Autocraft Industries, Inc., an
Oklahoma corporation ("Seller"), Fred Jones Industries A Limited Partnership, a
Texas limited partnership ("Stockholder"), Aftermarket Technology Corp., a
Delaware corporation ("Buyer"), and Aftermarket Technology (U.K.) Holdings
Limited, a company organized under the laws of England and Wales.
R E C I T A L S
_ _ _ _ _ _ _ _
A. Seller, Stockholder and Buyer are parties to that certain Asset
Purchase Agreement dated as of February 10, 1998 (the "Agreement"); and
B. The parties hereto desire to make certain changes to the Agreement as
set forth below.
A G R E E M E N T
_ _ _ _ _ _ _ _ _
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants and agreements set forth below, the
parties hereto agree as follows.
1. AMENDMENT OF SECTION 1.01. Section 1.01 of the Agreement is hereby
amended by adding a definition of "Adjusted EBITDA" as follows:
"ADJUSTED EBITDA" means the sum of (i) the lesser of L2,000,000 or
EBITDA for the year beginning December 31, 1998 plus (ii) the product of
EBITDA for the year ending December 31, 1998 that exceeds L2,000,000, if
any, multiplied by .00001.
2. AMENDMENT OF SECTION 1.01. Section 1.01 of the Agreement is further
amended by amending the definition of "Proration Factor" to read in its entirety
as follows:
"PRORATION FACTOR" means the quotient of (i) Adjusted EBITDA minus
L1,000,000 divided by (ii) L1,000,000, provided that in no event shall the
Proration Factor be less than 0.0.
3. AMENDMENT OF SECTION 2.07. Section 2.07 of the Agreement is hereby
amended to read in its entirety as follows:
<PAGE>
2.07. POST CLOSING PAYMENTS.
(a) If the audited consolidated profit and loss accounts for the U.K.
Subsidiaries for the 12 months ending December 31, 1998 show that EBITDA
for such period was greater than L1,000,000, then Aftermarket Technology
(U.K.) Holdings Limited, a company organized under the laws of England and
Wales ("U.K. Buyer"), shall pay to Seller an amount equal to (i)
$12,500,000 multiplied by the Proration Factor minus (ii) the aggregate
amount, if any, that Buyer pays to the Vendors pursuant to paragraph 3.2 of
the Share Purchase Agreement. EBITDA for such period will be determined in
accordance with the terms of the Share Purchase Agreement and with respect
to such determination Buyer shall have the rights and obligations of
"Purchaser" under the Share Purchase Agreement and Seller shall have
the rights and obligations of the Vendors under the Share Purchase
Agreement.
(b) If Buyer is required to pay an aggregate amount to the Vendors
pursuant to paragraph 3.2 of the Share Purchase Agreement that exceeds the
amount, if any, that U.K. Buyer is required to pay to Seller pursuant to
Section 2.07(a), Seller shall pay to Buyer an amount equal to such excess.
(c) Any payment required to be made to Seller pursuant to Section
2.07(a) shall be paid within three Business Days after the final
determination of the amount of such payment and shall be made by the
issuance and delivery by U.K. Buyer of a number of loan notes equal to
the amount of such payment, such loan notes to be in the form of EXHIBIT
G hereto. If U.K. Buyer is required to issue loan notes pursuant to this
Section 2.07(c), Buyer shall unconditionally guarantee the payment of such
loan notes by executing and delivering to Seller a guarantee in the form
of EXHIBIT H hereto at the time of the issuance of the loan notes.
(d) Any payment required to be made to Buyer pursuant to Section
2.07(b) shall be paid within three Business Days after the final
determination of the amount of such payment and shall be made in cash by
wire transfer of immediately available funds to a bank account or bank
accounts designated in writing by Buyer.
4. AMENDMENT OF SECTION 7.08(a)(ii). Section 7.08(a)(ii) of the
Agreement is hereby amended to read in its entirety as follows:
-2-
<PAGE>
(ii) Seller currently sponsors a 401(k)/Profit Sharing Plan ("Seller's
401(k) Plan"). Seller will continue to maintain the accounts ("Accounts")
of the Hired OEM Employees in Seller's 401(k) Plan until the direct
transfer of the Accounts occurs from Seller's 401(k) Plan to a 401(k) plan
sponsored by Buyer ("Buyer's 401(k) Plan") and such transfer shall occur
within a reasonable time after the Closing Date, but in no event later than
December 31, 1998. Further, due solely to the consummation of the
transactions described in this Agreement, there shall be no distribution
made to the Hired OEM Employees from Seller's 401(k) Plan. Until the
Accounts are transferred from Seller's 401(k) Plan to Buyer's 401(k) Plan,
as provided herein, Buyer will allow the Hired OEM Employees who have
outstanding loans in Seller's 401(k) Plan to continue to remit to Seller's
401(k) Plan the required payments under such loans by payroll deduction
from wages and salary paid by Buyer to the Hired OEM Employees. As of the
Closing Date and the consummation of the transactions provided for in this
Agreement, all Hired OEM Employees, if not sooner vested, will be 100%
vested and nonforfeitable in their respective Accounts. After the transfer
of the Accounts, they shall be held, administered and distributed in
accordance with Buyer's 401(k) Plan. Buyer's 401(k) Plan shall provide or
will be amended to provide with respect to the Accounts of the Hired OEM
Employees the same payment options, optional forms of benefits and other
significant provisions that are contained in Seller's 401(k) Plan and would
be classified as "protected benefits" under Section 411 of the Code and
regulations issued thereunder. The transfer of the Accounts from Seller's
401(k) Plan to Buyer's 401(k) Plan will be made in a manner that will
continue the qualified status of each such plan under the applicable
provisions of the Code.
5. RATIFICATION. Except as provided above, all the terms of the
Agreement are hereby ratified and confirmed.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the date first above
written.
FRED JONES INDUSTRIES A LIMITED PARTNERSHIP,
a Texas limited partnership
By: The Fred Jones Companies, Inc., General
Partner
By: /s/ Fred J. Hall
------------------------------------
Fred J. Hall
Treasurer
AUTOCRAFT INDUSTRIES, INC., an Oklahoma
corporation
By: /s/ Fred J. Hall
-------------------------------------
Fred J. Hall
President
AFTERMARKET TECHNOLOGY CORP., a
Delaware corporation
By: /s/ Joseph Salamunovich
--------------------------------------
Joseph Salamunovich, Vice President
AFTERMARKET TECHNOLOGY (U.K.)
HOLDINGS LIMITED, a company organized
under the laws of England and Wales
By: /s/ Joseph Salamunovich
---------------------------------------
Joseph Salamunovich, Director
-4-
<PAGE>
DATED________________________________1999
AFTERMARKET TECHNOLOGY (U.K.) HOLDINGS LIMITED
-------------------------------
INSTRUMENT
Constituting [ ]
Redeemable
Loan Notes of US $1.00 each
---------------------------------
Nabarro Nathanson
50 Stratton Street
London
W1X6NX
Tel: 0171 493 9933
EXHIBIT G
<PAGE>
INSTRUMENT
This Instrument is entered into this [ ] day of [ ] 1999 by AFTERMARKET
TECHNOLOGY (U.K.) HOLDINGS LIMITED (Company No. 3486543), (the "COMPANY"),
the registered office of which is at 50 Stratton Street, London, W1X 6NX.
WHEREAS
(A) Pursuant to an agreement entered into on 10th February 1998 (the
"AGREEMENT") the Company (inter alia) acquired from Autocraft Industries,
Inc., an Oklahoma corporation, ("SELLER") the whole of its shareholding in
the issued share capital of Automotive Developments Limited ("ADL"), (the
"SHARES").
(B) Section 2.07(a) of the Agreement, as amended by resolution of the parties
thereto on 6th March 1998, provides for a post-closing payment to the
Seller for the Shares, the amount being contingent upon the performance of
ADL and its subsidiaries for the 12 months ending 31st December 1998, (the
"POST-CLOSING PAYMENT"). The Post-Closing Payment has been settled at US$
[ ] and in accordance with the Agreement is to be satisfied by the issue to
Seller by the Company of the [ ] Redeemable Loan Notes of US$ 1.00
each constituted by this Instrument (the "LOAN NOTES").
(C) The Company by a resolution of its board of directors passed on [ ] 1999
has created the Loan Notes to be constituted as provided by this
Instrument.
THIS INSTRUMENT WITNESSES AND THE COMPANY DECLARES AS FOLLOWS:
1. DEFINITIONS AND CONSTRUCTION
1.1 In this Instrument and the Schedules hereto, unless the context
otherwise requires, the following expressions shall have the meanings
set out below:
"CONDITIONS"
means the Conditions set forth in Part II of the Schedule hereto;
"THIS INSTRUMENT"
means this Instrument and the Schedules hereto as modified from time
to time in accordance with the provisions contained in the Conditions.
1.2 The expressions defined in CONDITION 1 of the Conditions shall unless
there is something in the subject or context inconsistent therewith
have the same meanings in the whole of this Instrument.
1
<PAGE>
1.3 Words denoting the singular number only shall include the plural number and
vice versa. Words denoting the masculine gender only shall include the
feminine gender. Words denoting persons shall include corporations.
1.4 The clause headings in this Instrument including the Schedules hereto are
for convenience only and shall be ignored in construing the language or
meaning of this Instrument.
2. AMOUNT AND STATUS OF THE LOAN NOTES
2.1 This Instrument creates and constitutes the [ ] Loan Notes required
to be issued by the Company pursuant to the Agreement to Seller and shall
be issued in their entirety to Seller on the date of this Instrument.
2.2 Each Loan Note has a principal value of US$ 1.00 on redemption.
2.3 The Loan Notes as and when issued shall rank without discrimination or
preference as an unsecured obligation of the Company.
2.4 No invitation shall be made to the public to subscribe for or purchase the
Loan Notes or any of them other than to the extent that the Loan Notes are
offered as consideration pursuant to the Agreement.
2.5 The Loan Notes shall be transferable only with the consent of the Company
in accordance with the Conditions.
3. REDEMPTION OF THE LOAN NOTES
3.1 The Loan Notes constituted by this Instrument have an aggregate principal
value on redemption of US $[ ].
3.2 The Company hereby covenants that unless previously redeemed under
CONDITION 3, all Loan Notes then in issue will be redeemed on [ ] 2000
[BEING THE FIRST ANNIVERSARY OF THEIR ISSUE].
4. LOAN NOTE CERTIFICATES
4.1 Seller as the initial Noteholder and any subsequent Noteholder who shall
become a Noteholder pursuant to a Permitted Transfer as permitted by
CONDITION 9 will be entitled to receive free of charge one Certificate for
the aggregate number of Loan Notes held by him. Every such Certificate
shall be in the form or substantially in the form set out in Part 1 of the
Schedule hereto. Every Certificate shall bear a denoting number. Every
Certificate shall refer to this Instrument and shall be issued under the
Seal of the Company which shall be affixed in accordance with the Articles
of Association of the Company.
2
<PAGE>
4.2 The Company shall comply with the terms of the Certificates (including the
Conditions) and the Loan Notes shall be held subject thereto and to the
provisions set forth in this Instrument which provisions and Conditions
shall be binding on the Company and the Noteholders and all persons
claiming through or under them respectively.
4.3 The Company shall not be bound to register more than four persons as the
joint holders of any Loan Notes. Joint holders of the Loan Notes will be
entitled to one Certificate only in respect of the nominal amount of the
Loan Notes held by them jointly and the same will be delivered to that one
of the joint holders who is first named on the Register or to such person
as the joint holders may in writing direct.
4.4 Each Noteholder shall be entitled to receive without payment of any fee by
him a new Certificate in respect of any balance of Loan Notes held by him
arising from the transfer of part of his holding.
4.5 Each Certificate shall have a copy of the Conditions set out in the First
Schedule attached to or endorsed on it.
4.6 The Conditions to be attached or endorsed on the Certificates in respect of
the Loan Notes and the provisions contained in Part II of the Schedule
hereto shall have effect in the same manner as if such Conditions and
provisions were herein set forth.
5. INTEREST ON THE LOAN NOTES
The Loan Notes shall bear interest in accordance with CONDITION 2 at the
Reference Rate (as defined in the Conditions) until their redemption.
6. COVENANT BY THE COMPANY
The Company hereby covenants with the Noteholders and each of them duly to
perform and observe the obligations herein contained and imposed on it, to
the intent that the terms set out herein shall enure for the benefit of all
Noteholders, each of whom may sue for the performance or observance of the
provisions hereof so far as his holding of Loan Notes is concerned.
7. GUARANTEE
A guarantee of any sum payable to Seller by way of principal or interest
on the Loan Notes is to be granted by Aftermarket Technology Corp., a
Delaware Corporation to Seller upon issue of the Loan Notes.
3
<PAGE>
8. COPIES OF THIS INSTRUMENT
A copy of this Instrument shall be supplied free of charge to each
Noteholder upon receipt by the Company of a written request from such
Noteholder.
9. GOVERNING LAW
This Instrument and the Schedules hereto shall be governed by and construed
in accordance with English Law.
IN WITNESS of which this Instrument has been entered into on the date stated on
the first page of this Instrument.
THE COMMON SEAL of )
AFTERMARKET TECHNOLOGY (U.K.) HOLDINGS LIMITED )
was hereunto affixed in the presence of: )
Director
Director/Secretary
4
<PAGE>
THE SCHEDULE
Part 1
AFTERMARKET TECHNOLOGY (U.K.) HOLDINGS LIMITED
THIS IS TO CERTIFY that [ ] of [ ]
is the registered holder of [ ] Redeemable Loan Notes of the Company,
which are constituted by an Instrument dated [ ] 1999 (the "Instrument")
entered into by the Company and are issued subject to the provisions of the
Conditions attached hereto.
The Loan Notes bear interest pursuant to CONDITION 2.
The Loan Notes represented by this Certificate have an aggregate principal value
on redemption of US $[ ].
The Loan Notes are redeemable at their par value pursuant to CONDITION 3.
GIVEN under the Common Seal of the Company this [ ] day of [ ] 1999
Director
Secretary
Note:
(1) The Loan Notes are only transferable pursuant to CONDITION 9 with the prior
written consent of the Company Secretary of the Company. No transfer of
the whole or any portion of the Loan Notes represented by this certificate
will be registered without the production of this certificate to the
Company or, in the case of loss or destruction of the same, an indemnity in
such form as the Company shall reasonably require.
(2) No application has been made or shall be made to any stock exchange for the
Loan Notes to be listed or dealt in.
5
<PAGE>
Part II
CONDITIONS
1. DEFINITIONS
1.1 In these Conditions the following words shall have the meanings set out
below:
"BOARD"
means the Board of Directors for the time being of the Company or a
duly authorised committee thereof;
"BUSINESS DAY"
means a day other than a Saturday, Sunday or other day on which the
commercial banks in Chicago, Illinois are authorised or required by
law to close;
"COMPANY'S REGISTRAR"
means the company secretary of the Company;
"INSTRUMENT"
means the Instrument executed by the Company constituting the Loan
Notes dated [ ] 1999;
"LOAN NOTES"
means the Redeemable Loan Notes constituted by the Instrument or as
the case may require a specific portion thereof;
"NOTEHOLDER"
means Seller initially and any other person whose name is at the
relevant time entered in the Register as a holder of Loan Notes
pursuant to a Permitted Transfer permitted by CONDITION 9;
"FINAL REDEMPTION DATE"
means [ ] 2000;
"REFERENCE RATE"
means the per annum rate of interest publicly announced from time to
time by The Chase Manhattan Bank 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;
6
<PAGE>
"REGISTER"
means the Register of Noteholders kept by the Company in accordance
with CONDITION 7;
1.2 Words denoting the singular number only shall include the plural number
and vice versa. Words denoting the masculine gender only shall include
the feminine gender. Words denoting persons shall include corporations.
1.3 The headings in these CONDITIONS are for convenience only and shall be
ignored in construing the language or meaning of this Instrument.
2. INTEREST
2.1 Any Loan Notes in issue shall bear interest at the Reference Rate on their
principal value of US$ 1.00 per Loan Note accruing on a daily basis from
their date of issue until the date of their redemption in accordance with
these Conditions.
2.2 Any interest due on the Loan Notes shall be paid quarterly in arrears on
1st May, 1st August, 1st November and 31st January in each year by
reference to the Reference Rate applicable to the quarter in respect of
which interest is to be paid.
2.3 If so required by law, the Company shall deduct tax from any interest
payable on the Loan Notes and shall in such event deliver to each
Noteholder to whom the Interest is being paid a certificate as to the gross
amount of such payment, the amount of tax deducted and the actual amount
paid and certifying that the Company has paid the amount of the tax
deducted to the Inland Revenue. If any such tax deduction is required to
be deducted, the liability of the Company to the Noteholder shall be
limited to the payment of the net amount after such deduction to the
Noteholder and the payment to the Inland Revenue for the tax so deducted
and the Noteholder shall have no right to any additional payment from the
Company in respect of such interest. If any tax is so deducted the Company
will at the request of the Noteholder provide such information and
assistance (at the cost of the Noteholder) as the Noteholder may reasonably
require to assist the Noteholder in any application for a refund from the
Inland Revenue in respect of such deducted tax.
2.4 Accrued or outstanding interest shall be paid on any Loan Notes being
redeemed in accordance with CONDITION 3.4 notwithstanding that the date of
redemption may not be one of the normal interest payment dates set out in
CONDITION 2.2.
3. REDEMPTION OF LOAN NOTES
3.1 On any redemption of Loan Notes under this CONDITION 3, the Company shall
pay to the Noteholder US$ 1.00 by way of repayment of principal on each
Loan Note redeemed.
3.2 Each Noteholder shall be entitled at any time after [ ] 1999 [BEING THE
DATE FALLING 30 DAYS AFTER THE DATE OF ISSUE OF THE LOAN NOTES]
7
<PAGE>
to require the Company on at least 5 Business Day's prior notice to the
Company to redeem all and not some of his holding of Loan Notes at the
date of such notice.
3.3 Any Loan Notes not previously redeemed following service of a notice under
CONDITION 3.2 will be redeemed in full in cash at par by the Company on the
Final Redemption Date.
3.4 Any interest payable under CONDITION 2 which shall be outstanding as at or
shall have accrued due down to the date of any redemption of any Loan Notes
shall be paid by the Company at the same time as repayment of principal on
such Loan Notes is made on such redemption date.
4. METHODS OF PAYMENT
4.1 Unless otherwise requested in writing by the Noteholder concerned every
payment by the Company to a Noteholder by way of principal or interest
shall be made by cheque sent by post by the Company to his address as shown
in the Register (or in the case of joint holders to the holder whose name
first appears in the Register).
4.2 Every payment of principal or interest shall be made by payment of the
amount thereof in US Dollars.
5. FURTHER PROVISIONS REGARDING REDEMPTION
Every Noteholder any of whose Loan Notes are due to be redeemed under any
of the provisions of the Instrument shall not later than the due date for
such redemption deliver up his Certificate to the Company or as it shall
direct.
6. CERTIFICATES
Every Noteholder will be entitled without charge to a Certificate showing
the amount of the Loan Notes held by him and every such Certificate shall
refer to the Instrument and shall bear a serial number. Joint holders of
Loan Notes will be entitled to only one Certificate in respect of the Loan
Notes held by them jointly and the same will be delivered to the first
named of the joint holders or to such person as the joint holders may in
writing direct.
7. THE REGISTER
7.1 A register of the Noteholders will be kept by the Company and there shall
be entered in such register;
7.1.1 the names and addresses and descriptions of the Noteholders;
7.1.2 the amount of the Loan Notes held by every registered Noteholder;
7.1.3 the date at which each person was entered in the Register as a
Noteholder;
8
<PAGE>
7.1.4 the date at which any person ceased to be a Noteholder.
7.1.5 the serial number of each Certificate for Loan Notes issued and the
date of the issue thereof;
7.2 Any change of name or address on the part of any Noteholder shall forthwith
be notified to the Company and thereupon the Register shall be altered
accordingly.
8. TITLE TO LOAN NOTES
The Company will only recognise the registered holder of any of the Loan
Notes as the absolute owner thereof and free from any equity, set-off or
cross claim on the part of the Company against the original or any
intermediate holder and the Company will not be bound to take notice of or
to see to the execution of any trust whether express or implied or
constructive to which any of the Loan Notes may be subject and the receipt
of such person (or in the case of joint holders of any one of such holders)
for amounts due by way of principal or interest payable on redemption of
any of the Loan Notes shall be a good discharge to the Company
notwithstanding any notice it may have whether express or otherwise of the
right, title, interest or claim of any other person to or in such Loan
Notes, interest or moneys. No notice of any trust, express, implied or
constructive shall (except as by statute provided or as required by an
order of a Court of competent jurisdiction) be entered on the Register in
respect of any of the Loan Notes.
9. TRANSFERS OF LOAN NOTES
9.1 A Noteholder may only transfer all or part of his holding of Loan Notes
with the prior written consent of the Company which can be given or
withheld at its absolute discretion without giving any reasons therefor and
on such terms as shall be agreed between the relevant Noteholder, his
proposed transferee and the Company (a "PERMITTED TRANSFER").
9.2 A Permitted Transfer shall be effected by the execution by the transferring
Noteholder of an instrument in writing in any usual or common form or in
any other form approved by the Board in favour of the transferee. There
shall not be included in any instrument of transfer any loan notes other
than Loan Notes constituted by the Instrument. Every such instrument of
transfer shall be signed by the transferor and the transferor shall be
deemed to remain the owner of such Loan Notes until the name of the
transferee is entered in the Register in respect thereof.
9.3 Every instrument of transfer must be sent to the Company's Registrar for
registration accompanied by the relevant Certificate and such other
evidence as the Board may reasonably require to prove the title of the
transferor or his right to transfer the Loan Notes. No fee will be charged
by the Company for the registration of any transfer. The Company and its
officers shall be under no obligation to register transfers of Loan Notes
during the seven days preceding any interest payment date and no transfer
shall be registered unless the instrument of transfer has been duly stamped
for the purposes of stamp duty.
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9.4 All instruments of transfer which shall be registered shall be retained by
the Company.
9.5 A Noteholder is not entitled to transfer, sell or grant the Loan Notes held
by him or any interest therein to or in favour of any person other than by
way of a Permitted Transfer and any such prohibited transfer, sale or grant
shall be void.
10. DEATH OR BANKRUPTCY OF A NOTEHOLDER
10.1 In the case of the death of a Noteholder the survivor, or survivors where
the deceased was a joint holder, and the legal personal representatives of
the deceased where he was a sole holder shall be the only persons
recognised by the Company as having any title to his interest in the Loan
Notes registered in the name of the deceased.
10.2 Any person becoming entitled to any Loan Notes in consequence of the death
or bankruptcy of any Noteholder shall upon producing such evidence that he
sustains the character in respect of which he proposes to act under this
Condition or of his title as the Board shall reasonably require be
registered as the holder of such Loan Notes.
11. NOTICES
11.1 Any notice to the Company or to the Noteholders (as the case may be)
required for any purpose may be served either personally or by sending it
through the post in a first class prepaid letter addressed to the Company's
Registrar at the registered office for the time being of the Company or to
such Noteholder at his address shown in the Register (or in the case of
joint holders to the holder whose name first appears in the Register) or
such other address within the United Kingdom that such Noteholder shall
have notified the Company for such purpose.
11.2 Where a notice or other document is served by post service shall be deemed
to be effected on the second Business Day after the day on which it is
posted and in proving such service it shall be sufficient to prove that
the letter was properly addressed stamped and posted.
12. VARIATION OF RIGHTS AND MEETINGS OF NOTEHOLDERS
12.1 For so long as Seller remains the sole Noteholder no variation to the terms
of the Loan Notes or the Instrument may be made by the Company without the
express prior written consent of Seller. If Seller shall transfer any of
his Loan Notes pursuant to a Permitted Transfer under CONDITION 9, the rest
of this Condition shall apply to any subsequent proposed variation of the
terms of the Loan Notes or the Instrument and the convening of meetings of
Noteholders.
12.2 The Company may at any time convene a meeting of the Noteholders by giving
not less than 21 days' notice thereof (exclusive of the day on which the
notice is posted and the date of the Meeting for which the notice is given)
specifying the place, date and hour of the meeting and the terms of any
Extraordinary Resolution (as defined below) to be
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proposed thereat to the Noteholders and such meeting shall have the power
by an Extraordinary Resolution (being a Resolution passed by a majority
consisting of Noteholders individually or together holding more than three
quarters of the total number of Loan Notes outstanding at that time) to
sanction any modification, abrogation or compromise or any arrangement in
respect of the rights of the Noteholders against the Company and to assent
to any modification of the Instrument or these Conditions and such
Extraordinary Resolution (with the prior written consent of the Company)
shall be binding on all the Noteholders and the Company.
12.3 Any meeting for the purpose of CONDITION 12.2 shall (subject to these
Conditions) be convened, conducted and held in all respects as nearly as
possible in the same way as shall be provided by the Articles of
Association for the time being of the Company with regard to General
Meetings of the Company provided that neither a member of the Company not
being a Director nor the Auditors of the Company shall be entitled to
receive notice of or to attend at any such meeting unless he be a
Noteholder and that the quorum at any such meeting shall be Noteholders
holding or representing by proxy one-tenth of the Loan Notes outstanding at
that time and that if a poll is demanded each Loan Note held shall confer
one vote.
12.4 If within a quarter of an hour from the time appointed for any meeting a
quorum is not present the meeting shall stand adjourned to such day (not
being less than fourteen or more than twenty-eight days after the date of
the meeting from which such adjournment takes place) and time and place as
the Chairman of the meeting may determine and at the adjourned meeting the
Noteholders present shall form a quorum. Notice of the adjourned meeting
shall be given in like manner as for the original meeting and such notice
shall state that the Noteholders present at such meeting whatever their
number or the Loan Notes held or presented by them will constitute a
quorum for all purposes.
12.5 A resolution signed by all the Noteholders shall (subject to the consent of
the Company) be as valid and effectual as if it had been passed at a
meeting of the Noteholders duly convened and held and such resolution in
writing may be contained in one document or in several documents in like
form and each signed for and on behalf of one or more of the Noteholders.
13. NO LISTING
No application has been or shall be made to any stock exchange for the Loan
Notes to be listed or dealt in.
14. LOSS OF CERTIFICATES
If any Certificate issued in respect of the Loan Notes shall be worn out or
defaced then upon production thereof to the Board it may cancel the same
and issue a new Certificate in lieu thereof and if any such Certificate
shall be lost or destroyed then upon proof thereof to the satisfaction of
the Board or in default of proof on such indemnity as the Board may deem
adequate being given, the Board may issue a new Certificate in lieu thereof
to the
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person entitled to such lost or destroyed Certificate. An entry as to the
issue of the new Certificate and indemnity (if any) shall be made in the
Register.
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LOAN NOTE GUARANTY
This Loan Note Guaranty (this "Guaranty") is entered into as of _________,
1999 by Aftermarket Technology Corp., a Delaware corporation ("Guarantor") for
the benefit of Fred Jones Enterprises, an Oklahoma corporation ("Seller").
R E C I T A L S
- - - - - - - -
A. Concurrently herewith, Guarantor's wholly owned subsidiary,
Aftermarket Technology (U.K.) Holdings Limited ("Obligor") is issuing and
delivering to Seller _____ loan notes (the "Loan Notes") pursuant to the terms
of that certain Asset Purchase Agreement dated as of February 10, 1998, as
subsequently amended, among Guarantor, Seller and certain other parties (the
"Purchase Agreement"); and
B. The Purchase Agreement requires Guarantor to guarantee the obligations
of Obligor under the Loan Notes;
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Guarantor agrees for the benefit of Seller as follows:
1. GUARANTY OF LOAN NOTES.
(a) GUARANTY. Guarantor unconditionally guarantees to Seller the
full payment and performance when due of each and every covenant, obligation and
liability of Obligor arising from time to time pursuant to the Loan Notes (the
"Obligations"). This is a continuing guaranty of Guarantor and may not be
revoked and shall not otherwise terminate until all Obligations have been
indefeasibly and irrevocably paid in full.
(b) RIGHT OF DIRECT ACTION; NO IMPAIRMENT. The liability of
Guarantor hereunder is independent of the Obligations and Seller may proceed
against Guarantor directly and independently of Obligor. Guarantor's liability
hereunder shall not be modified or extinguished or otherwise affected by any
modification to the Obligations. Guarantor shall be bound by any ruling, order
or judgment obtained by Seller against Obligor with respect to the Obligations,
whether or not Guarantor was a party to, or received notice of, the action or
proceeding in which such ruling, order or judgment was issued.
(c) NO BANKRUPTCY OR INSOLVENCY DISCHARGE. If at any time any
payment by Obligor in satisfaction of an Obligation is rescinded, invalidated,
declared to be fraudulent or preferential or otherwise required to be restored
or returned to Obligor due to the insolvency, bankruptcy or reorganization of
Obligor, the liability of Guarantor hereunder shall continue or be reinstated,
as the case may be, as though such payment had never been made. Without
limiting the generality of the foregoing, if prior to any such rescission,
invalidation, declaration, restoration or return, this Guaranty shall have been
terminated for any reason, this Guaranty shall be reinstated in full force and
effect, and such prior termination shall not diminish, release,
EXHIBIT H
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discharge, impair or otherwise affect the liability of Guarantor with respect to
the affected payment.
(d) WAIVERS. Guarantor hereby irrevocably waives the following:
(i) presentment, demand, protest, notice of protest, notice of
dishonor or default, notice of action or inaction, and notice of nonpayment;
(ii) the right, if any, to require Seller to proceed against
Obligor or any third party or to pursue any other remedy in Seller's power;
(iii) the right, if any, to assert the insolvency, bankruptcy
or reorganization of Obligor as a defense against Guarantor's liabilities
hereunder;
(iv) any applicable law that purports to reduce a guarantor's
obligations in proportion to the obligation of the principal or that provides
that the obligation of a surety or guarantor must neither be larger nor in other
respects more burdensome than that of the principal;
(v) notice of any new Obligation, and notice of any action
against Obligor; and
(vi) any and all rights and remedies Guarantor may have or be
able to assert by reason of laws relating to the rights and remedies of sureties
or guarantors.
2. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Seller as follows:
(a) EXISTENCE, GOOD STANDING AND POWER. Guarantor is a corporation
duly organized and validly existing and in good standing under the laws of the
State of Delaware.
(b) AUTHORIZATION AND ENFORCEABILITY. Guarantor has the full right,
power and authority to enter into this Guaranty and to consummate the
transactions contemplated hereby. This Guaranty has been duly and validly
executed and delivered by Guarantor and constitutes the terms of this Guaranty,
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.
(c) NON-CONTRAVENTION. The execution, delivery and performance by
Guarantor of this Guaranty do not and will not (i) contravene or conflict with
the Certificate of Incorporation or Bylaws of Guarantor, (ii) contravene or
conflict with or constitute a violation of any provision of any applicable law
to which Guarantor is subject, or (iii) constitute a breach or default under any
material contract, agreement or indenture to which Guarantor is a party.
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3. MISCELLANEOUS.
(a) COMPLETE UNDERSTANDING. This Guaranty constitutes the full and
complete understanding of Seller and Guarantor with respect to the subject
matter hereof and supersedes all prior and contemporaneous understandings and
agreements with respect to the subject matter hereof.
(b) NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telecopy, if a copy is sent by mail as follows) or the
fifth day after mailing by first class mail to the recipient at the address
indicated below:
If to Seller:
Fred Jones Industries
123 South Hudson
Oklahoma City, OK 73102
Telecopier No.: (405) 231-2468
Attn: Fred J. Hall
with a copy to:
McAfee & Taft
Two Leadership Square, 10th Floor
211 North Robinson
Oklahoma City, OK 73102
Telecopier No.: (405) 235-0439
Attn.: Gary F. Fuller, Esq.
If to Guarantor:
Aftermarket Technology Corp.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
Telecopier No.: (405) 455-2621
Attn.: General Counsel
or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
(c) CONSTRUCTION. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof. Neither Guarantor nor Seller, nor their respective counsel, shall be
deemed the drafter of this Guaranty, and all provisions of this Guaranty shall
be construed in accordance with their fair meaning, and not strictly for or
against Seller or Guarantor.
(d) SEVERABILITY. If any term or provision (or any portion thereof)
of this Guaranty is determined by a court to be invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other terms and
provisions (or other portions thereof) of this Guaranty shall nevertheless
remain in full force and effect so long as the economic or legal
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substance of the transactions contemplated hereby is not materially affected.
Upon such determination that any term or provision (or any portion thereof), is
invalid, illegal or incapable of being enforced, this Guaranty shall be deemed
to be modified so as to effect the original intent of Seller and Guarantor as
closely as possible to the end that the transactions contemplated hereby and the
terms and provisions hereof are fulfilled to the greatest extent possible.
(e) SUCCESSORS AND ASSIGNS: THIRD PARTY BENEFICIARIES. This Guaranty
shall be binding upon and inure to the benefit of Guarantor and Seller and their
respective successors and permitted assigns. Nothing in this Guaranty, express
or implied, is intended to confer upon any third person any rights or remedies
under or by reason of this Guaranty.
(f) ATTORNEY'S FEES. If any legal proceeding is necessary to enforce
or interpret the terms of this Guaranty, or to recover damages for breach
therefore, the prevailing party shall be entitled to reasonable attorney's fees,
as well as costs and disbursements, in addition to any other relief to which he
or it may be entitled.
(g) AMENDMENTS; NO WAIVERS. Any provision of this Guaranty may be
amended or waived if, and only if, such amendments or waiver is in writing
and signed, in the case of an amendment, by both Guarantor and Seller, or in
the case of a waiver, by the party against whom the waiver is to be
effective. No waiver by Seller of any default or breach of this Guaranty,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default or breach hereunder or affect in any way any rights
arising by virtue of any prior or subsequent default or breach. No failure
or delay by Seller 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.
(h) GOVERNING LAW. Except as provided in Section 3(i) regarding the
application of the Federal Arbitration Act, this Guaranty shall be construed in
accordance with and governed by the internal laws (without reference to choice
or conflict of laws) of the State of Oklahoma.
(i) DISPUTE RESOLUTION; VENUE. Any dispute or difference between or
among Seller and Guarantor shall be resolved pursuant to Section 11.11 of the
Purchase Agreement.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty effective as of
the date first above written.
AFTERMARKET TECHNOLOGY CORP., a
Delaware corporation
By:______________________
Name:
Title:
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EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into on July 28, 1994
by and between Kenneth A. Bear, an individual ("Executive"), and Aaron's
Automotive Products, Inc., a Missouri corporation (the "Company").
1. EMPLOYMENT BY THE COMPANY AND TERM.
(a) FULL TIME AND BEST EFFORTS. Subject to the terms set forth
herein, the Company agrees to employ Executive as Executive Vice President
and General Manager and Executive hereby accepts such employment. During the
term of his employment with the Company, Executive will devote his full time,
best efforts and attention to the performance of his duties hereunder and to
the business and affairs of the Company.
(b) DUTIES. Executive shall serve in an executive capacity and
shall perform such duties as are customarily associated with his then current
title, consistent with the Bylaws of the Company and as required by the
Company's Board of Directors (the "Board") and the officers to whom the
Executive reports; including, as Executive Vice President and General
Manager, participating as a member of the Company's management team in
developing and implementing strategic and operating plans, executing
day-to-day general management of the Company, maintaining and solidifying
relationships with the Company's key customers and supporting the
distribution growth, process and efficiency at existing and future entities
affiliated with the Company.
(c) COMPANY POLICIES. The employment relationship between the
parties shall be governed by the general employment policies and practices of
the Company, including but not limited to those relating to protection of
confidential information and assignment of inventions, except that when the
terms of this Agreement differ from or are in conflict with the Company's
general employment policies or practices, this Agreement shall control.
(d) TERM. The initial term of employment of Executive under this
Agreement shall begin as of the date hereof and end on the third anniversary
hereof (such three year period, the "Initial Term"), subject to the
provisions for termination set forth herein and renewal as provided in
Section 1(e) below.
(e) RENEWAL. Unless the Company shall have given the Executive
notice that this Agreement shall not be renewed at least two (2) months prior
to the end of the Initial Term, the term of this Agreement shall be
automatically extended for a period of one year, such procedure to be
followed in each such successive period.
2. COMPENSATION AND BENEFITS.
(a) SALARY. Executive shall receive for services to be rendered
hereunder an annual base salary of One Hundred and Four Thousand Dollars
($104,000) payable on a weekly basis, subject to increase at the sole
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discretion of the Board, and subject to standard withholdings for taxes and
social security and the like. The Board of Directors shall review
Executive's salary on an annual basis and may, in their sole discretion,
increase Executive's salary.
(b) PARTICIPATION IN BENEFIT PLANS. During the term hereof,
Executive shall be entitled to participate in any group insurance,
hospitalization, medical, dental, health and accident, disability or similar
plan or program of the Company now existing or established hereafter to the
extent that he is eligible under the general provisions thereof. The Company
may, in its sole discretion and from time to time, establish additional
senior management benefit programs as it deems appropriate. Executive
understands that any such plans may be modified or eliminated in the
Company's discretion in accordance with applicable law.
(c) VACATION. Executive shall be entitled to a period of annual
vacation time equal to that provided to managers of equal position by the
Company's policies and procedures regarding vacation, but in any event not
less than three weeks per year. The days selected for Executive's vacation
must be mutually agreeable to Company and Executive.
3. OPTION AND BONUS PLANS.
(a) PARTICIPATION. During the term hereof, Executive shall be
entitled to participate in any stock option plan (an "Option Plan") and any
bonus or incentive plan (a "Bonus Plan") of the Company currently made
available by the Company to executive employees of the Company or which may
be made available in the future to executive employees of the Company,
subject to and on a basis consistent with the terms, conditions and
administration of any such plan. Executive understands that any such plan may
be modified or eliminated in the Company's discretion in accordance with
applicable law.
(b) OPTIONS. Executive shall be entitled to receive incentive
stock options ("ISOs") of Aftermarket Technology Holdings Corp., a Delaware
corporation ("Holdings") which owns all of the shares of capital stock of
Aftermarket Technology Corp., a Delaware corporation ("ATC"), which in its
turn owns all of the shares of capital stock of the Company, to purchase
Eleven Thousand Six Hundred and Ninety Six (11,696) shares of common stock of
Holdings (the "Common Stock"). Such ISOs shall vest for so long as Executive
shall be employed under this Agreement, as follows: (i) one-third on the
first anniversary of the date of their grant; (ii) one-third on the third
anniversary of the date of their grant; and (iii) one-third on the fifth
anniversary of the date of their grant. The ISOs shall have an exercise price
equal to the price paid by Aurora Equity Partners L.P. for Common Stock
Holdings on or before August 2, 1994.
ISOs granted to Executive as described above pursuant to an Option
Plan shall expire no sooner than ten (10) years from the date of their grant.
(c) BONUSES. If, among other matters, ATC, achieves the
management budget to be adopted by the Company for a full fiscal year and
throughout such fiscal year Executive is employed pursuant to this Agreement,
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the Board may, at its sole discretion, grant Executive a bonus during the term
of this Agreement equal to one hundred percent (100%) of his then annual base
salary.
4. REASONABLE BUSINESS EXPENSES AND SUPPORT.
Executive shall be reimbursed for documented and reasonable
business expenses in connection with the performance of his duties hereunder.
Executive shall be furnished reasonable office space, assistance and
facilities.
5. TERMINATION OF EMPLOYMENT. The date on which Executive's
employment by the Company ceases, under any of the following circumstances,
shall be defined herein as the "Termination Date."
(a) TERMINATION FOR CAUSE.
(i) TERMINATION; PAYMENT OF ACCRUED SALARY AND VACATION. The
Board may terminate Executive's employment with the Company at any time for
cause, immediately upon notice to Executive of the circumstances leading to
such termination for cause. In the event that Executive's employment is
terminated for cause, Executive shall receive payment for all accrued salary
and vacation time through the Termination Date, which in this event shall be
the date upon which notice of termination is given. The Company shall have no
obligation to pay severance of any kind nor to make any payment in lieu of
notice.
(ii) DEFINITION OF CAUSE. "CAUSE" means the occurrence or
existence of any of the following with respect to Executive, as determined by
the Board in its sole discretion: (a) a material breach by the Executive of
his duty not to engage in any transaction that represents, directly or
indirectly, self-dealing with the Company or any of its Affiliates which has
not been approved by the Board or of the terms of his employment, if in any
such case such material breach remains uncured after the lapse of 30 days
following the date that the Company has given the Executive written notice
thereof; (b) the repeated material breach by the Executive of any duty
referred to in clause (a) above as to which at least one written notice has
been given pursuant to such clause (a); (c) any act of dishonesty,
misappropriation, embezzlement, intentional fraud or similar conduct
involving the Company or any of its Affiliates; (d) the conviction or the
plea of nolo contendere or the equivalent in respect of a felony involving
moral turpitude; (e) any intentional damage of a material nature to any
property of the Company or any of its Affiliates; (f) the repeated
non-prescription use of any controlled substance or the repeated use of
alcohol or any other non-controlled substance which, in the reasonable
determination of the Board, in any case described in this clause (f), renders
the Executive unfit to serve in his capacity as an officer or employee of the
Company or its Affiliates; or (g) conduct by the Executive which in the
reasonable determination of the Board demonstrates gross unfitness to serve
in his capacity as an officer or employee of the Company or its Affiliates.
(b) VOLUNTARY TERMINATION. Executive may voluntarily terminate
his employment with the Company at any time upon ninety (90) days prior
written notice, after which termination no further compensation of any kind
or severance payment will be payable under this Agreement.
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(c) TERMINATION UPON DISABILITY. Company may terminate Executive's
employment in the event Executive suffers a disability that renders Executive
unable to perform the essential functions of his position, even with
reasonable accommodation, for two (2) months within any four (4) month
period. After the Termination Date, which in this event shall be the date
upon which notice of termination is given, no further compensation will be
payable under this Agreement.
(d) TERMINATION WITHOUT CAUSE.
(i) TERMINATION PAYMENT DURING THE INITIAL TERM. In the event
Executive's employment is terminated without "cause", as defined above, the
Company shall pay Executive as severance an amount equivalent to his then
base salary for the remaining period of the Initial Term, less standard
withholdings for tax and social security purposes, payable over such term in
weekly PRO RATA payments commencing as of the Termination Date.
(ii) TERMINATION PERIOD AFTER THE INITIAL TERM. In the event
that the term of this Agreement is extended pursuant to Section 1(e) hereof
(an "Extension Period") and during such Extension Period Executive's
employment is terminated without "cause", as defined above, the Company shall
pay Executive as severance an amount equal to twelve (12) months of his then
base salary, less standard withholdings for tax and social security
purposes, payable over such twelve (12) month term in weekly PRO RATA
payments commencing as of the Termination Date.
(iii) FUNDAMENTAL CHANGES. In the event that Company makes a
substantial change which results in diminution in the Executive's duties,
authority, responsibility or compensation without performance or market
justification, he may terminate his employment; PROVIDED, HOWEVER, that
Executive shall provide the Company 15 days' notice prior to any such
termination and the Company shall have until the end of such 15-day period to
cure such diminution. A termination in such circumstances shall be treated as
a Company termination without cause and Executive shall be entitled to the
same severance payments provided in paragraphs 5(d)(i) and (5)(d)(ii), as
applicable.
(e) BENEFITS UPON TERMINATION. All benefits provided under
paragraph 2(b) hereof shall be extended, at Executives' election and cost, to
the extent permitted by the Company's insurance policies and benefit plans,
for one year after Executive's Termination Date, except (a) as required by
law (e.g., COBRA health insurance continuation election) or (b) in the event
of a termination described in paragraphs 5(a).
(f) TERMINATION UPON DEATH. If Executive dies prior to the
expiration of the term of this Agreement, the Company shall continue coverage
of Executive's dependents (if any) under all benefit plans or programs of the
type listed above in paragraph 2(b) herein for a period of three (3) months.
6. PROPRIETARY INFORMATION OBLIGATIONS.
During the term of employment under this Agreement, Executive will
have access to and become acquainted with the Company's confidential and
proprietary information, including but not limited to confidential and
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proprietary information or plans regarding the Company's customer
relationships, personnel, or sales, marketing, and financial operations and
methods; trade secrets; formulas; devices; secret inventions; processes; and
other compilations of information, records, and specifications (collectively
"Proprietary Information"). Executive shall not disclose any of the Company's
Proprietary Information directly or indirectly, or use it in any way, either
during the term of this Agreement, the Consulting Agreement, if any, or at
any time thereafter, except as required in the course of his employment for
the Company or as authorized in writing by the Company. All files, records,
documents, computer-recorded information, drawings, specifications, equipment
and similar items relating to the business of the Company, whether prepared
by Executive or otherwise coming into his possession, shall remain the
exclusive property of the Company and shall not be removed from the premises
of the Company under any circumstances whatsoever without the prior written
consent of the Company, except when (and only for the period) necessary to
carry out Executive's duties hereunder, and if removed shall be immediately
returned to the Company upon any termination of his employment and no copies
thereof shall be kept by Executive; PROVIDED, HOWEVER, that Executive shall
be entitled to retain documents reasonably related to his interest as a
shareholder and any documents that were personally owned or acquired.
7. NONINTERFERENCE. While employed by the Company and for a period of
one year thereafter, Executive agrees not to interfere with the business of
the Company by directly or indirectly soliciting, attempting to solicit,
inducing, or otherwise causing any employee of the Company to terminate his
or her employment in order to become an employee, consultant or independent
contractor to or for any other employer.
8. MISCELLANEOUS.
(a) NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telecopy or telex) or the third day after mailing by
first class mail to the recipient at the address indicated below:
To the Company:
Aaron's Automotive Products, Inc.
c/o Aurora Capital Partners L.P.
1800 Century Park East
Suite 1000
Los Angeles, California 90067
Attention: Richard K. Roeder, Esq.
Facsimile: (310) 277-5591
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To Executive:
Kenneth A. Bear
Aaron's Automotive Products, Inc.
2600 N. Westgate
Springfield, MO 65803
Facsimile: (417) 831-0795
or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
(b) SEVERABILITY. If any term or provision (or any portion
thereof) of this Agreement is determined by a court to be invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
terms and provisions (or other portions thereof) of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any
term or provision (or any portion thereof) is invalid, illegal or incapable
of being enforced, this Agreement shall be deemed to be modified so as to
effect the original intent of the parties as closely as possible to the end
that the transactions contemplated hereby and the terms and provisions hereof
are fulfilled to the greatest extent possible.
(c) ENTIRE AGREEMENT. This document constitutes the final,
complete, and exclusive embodiment of the entire agreement and understanding
between the parties related to the subject matter hereof and supersedes and
preempts any prior or contemporaneous understandings, agreements, or
representations by or between the parties, written or oral.
(d) COUNTERPARTS. This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.
(e) SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors and assigns, except that Executive may not assign
any of his duties hereunder and he may not assign any of his rights hereunder
without the prior written consent of the Company.
(f) ATTORNEYS FEES. If any legal proceeding is necessary to
enforce or interpret the terms of this Agreement, or to recover damages for
breach therefore, the prevailing party shall be entitled to reasonable
attorney's fees, as well as costs and disbursements, in addition to any other
relief to which he or it may be entitled.
(g) AMENDMENTS. No amendments or other modifications to this
Agreement may be made except by a writing signed by both parties. No
amendment or waiver of this Agreement requires the consent of any individual,
partnership, corporation or other entity not a party to this Agreement.
Nothing in this Agreement, express or implied, is intended to confer upon any
third person any rights or remedies under or by reason of this Agreement.
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(h) CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the
internal law, and not the law of conflicts, of the State of Missouri.
IN WITNESS WHEREOF, the parties have executed this agreement effective
as of the date it is last executed below by either party.
/s/ Kenneth A. Bear
-----------------------------------
KENNETH A. BEAR
AARON'S AUTOMOTIVE PRODUCTS, INC.
/s/ James R. Wehr
- ------------------------------
By: --------------------------
Title: President
------------------------
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EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of February 21,
1997 by and between Joseph Salamunovich, an individual ("Executive"), and
Aftermarket Technology Corp., a Delaware corporation (the "Company").
WHEREAS, the Company desires to retain the services of Executive as
Vice President and General Counsel of the Company and Executive is willing to
provide such services on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and conditions contained herein, the Company and Executive agree as
follows:
1. EMPLOYMENT BY THE COMPANY AND TERM.
(a) FULL TIME AND BEST EFFORTS. Subject to the terms set forth
herein, the Company agrees to employ Executive as Vice President and General
Counsel and Executive hereby accepts such employment. During the term of his
employment with the Company, Executive will devote his full time, best efforts
and attention to the performance of his duties hereunder and to the business and
affairs of the Company.
(b) DUTIES. Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his then-current title,
consistent with the Bylaws of the Company and as required by the Company's Board
of Directors (the "Board") and the Company's Chief Executive Officer, including
performing duties for such affiliates as the Board may specify.
(c) COMPANY POLICIES. The employment relationship between the
parties shall be governed by the general employment policies and practices of
the Company, including but not limited to those relating to protection of
confidential information and assignment of inventions, except that when the
terms of this Agreement differ from or are in conflict with the Company's
general employment policies or practices, this Agreement shall control.
(d) TERM. The initial term of employment of Executive under this
Agreement shall begin as of the date (the "Effective Date") that Executive
commences full time employment with the Company, which date shall occur not
later than March 31, 1997 and end on the third anniversary of the Effective Date
(such period, the "Initial Term"), subject to the provisions for termination set
forth herein and renewal as provided in Section 1(e).
(e) RENEWAL. Unless the Company shall have given Executive notice
that this Agreement shall not be renewed at least 90 days prior to the end of
the Initial Term, the term of this Agreement shall be automatically extended for
a period of one year, such procedure to be followed in each such successive
period. Each extended term shall continue to be subject to the provisions for
termination set forth herein.
<PAGE>
2. COMPENSATION AND BENEFITS.
(a) SALARY. Executive shall receive for services to be rendered
hereunder an annual base salary of $165,000 (the "Base Salary") payable on a
monthly basis, subject to increase at the sole discretion of the Board, and
subject to standard withholdings for taxes and social security and the like.
The Board shall review Executive's salary on an annual basis and may, in its
sole discretion, increase Executive's salary, taking into consideration
Executive's performance and scope of responsibilities.
(b) PARTICIPATION IN BENEFIT PLAN. During the term hereof, Executive
shall be entitled to participate in any group insurance, hospitalization,
medical, dental, health and accident, disability or similar plan or program of
the Company now existing or established hereafter to the extent that he is
eligible under the general provisions thereof. The Company may, in its sole
discretion and from time to time, establish additional senior management benefit
programs as it deems appropriate. Executive understands that (i) any such plans
may be modified or eliminated in the Company's discretion in accordance with
applicable law, and (ii) he is not eligible to participate in the Company's
medical plan until he has been employed by the Company for 90 days. The Company
agrees to reimburse Executive for up to $500 per month of the costs incurred by
Executive to maintain medical health care coverage during the foregoing 90 day
period under the COBRA features of Executive's current medical health care plan.
(c) VACATION. Executive shall be entitled to a period of annual
vacation time equal to that provided to managers of equal position by the
Company's policies and procedures regarding vacation, but in any event not less
than four weeks per year. The days selected for Executive's vacation must be
mutually agreeable to the Company and Executive.
(d) 401(K) PLAN. To the extent legally permitted, Executive shall be
entitled to place a portion of his Base Salary into a 401(K) or other qualified
deferred tax annuity plan of the Company or, if the Company does not have such a
plan, of any such plan of any of the Company's subsidiaries, as may be
designated by Executive. The Company shall make contributions to Executive's
401(K) account consistent with its contribution policy in place from time to
time with respect to senior management generally.
(e) MOVING COSTS.
(i) The Company shall reimburse Executive for his (i) reasonable
costs of up to three trips with his wife to the Chicago area to locate housing
and (ii) household goods transfer costs incurred in connection with moving his
residence from Studio City, California to the Chicago area in accordance with
standard Company policy. All such costs for which Executive is entitled to
reimbursement under this Section 2(e)(i) shall be documented in accordance with
the Company's expense reimbursement policies.
(ii) In addition, Executive will be paid on the Effective Date
cash in the amount of $50,000, subject to standard withholdings for taxes and
social security and the like, to cover all other incidental moving costs,
PROVIDED that if Executive ceases to be employed
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by the Company prior to the first anniversary hereof pursuant to Section 5(a)
or (b), Executive shall be required to repay to the Company such amount in
cash.
3. OPTION AND BONUS PLANS.
(a) PARTICIPATION. During the term hereof, Executive shall be
eligible to participate in any stock option plan and any bonus or incentive plan
of the Company currently made available by the Company to executive employees of
the Company or which may be made available in the future to executive employees
of the Company, subject to and on a basis consistent with the terms, conditions
and administration of any such plan. Executive understands that any such plan
may be modified or eliminated in the Company's discretion in accordance with
applicable law and that the Board shall have discretion to determine the number
and terms of options granted to Executive in the future, if any.
(b) OPTIONS. Executive shall be entitled to receive stock options
("Options") under the Company's 1997 Stock Option Plan to purchase 35,088 shares
of the Company's Common Stock (the "Common Stock"). The Options will be
"incentive stock options" if and to the extent permitted under the Internal
Revenue Code and shall have the following terms:
(i) VESTING. The Options shall vest for so long as Executive
shall be employed under this Agreement as follows: (x) one-third on the first
anniversary of the Effective Date; (y) one-third on the third anniversary of the
Effective Date; and (z) one-third on the fifth anniversary of the Effective
Date.
(ii) EXERCISE PRICE. The Options shall have an exercise price
equal to the fair market value of the Common Stock on the date of grant of the
Options, which grant shall occur not later than thirty (30) days after the
Effective Date..
(iii) DURATION. The Options shall expire ten (10) years from
the Effective Date, subject to the terms of the 1997 Stock Option Plan.
The Common Stock underlying the Options shall be subject to the terms and
conditions of the Stockholders Agreement currently in effect with respect to the
Common Stock, a copy of which has been provided to Executive. Executive agrees
to execute a copy of such Stockholders Agreement concurrently with the execution
hereof.
(c) BONUSES. During each year of the term hereof, Executive shall be
eligible to participate in such Bonus Plan as may be adopted by the Board in its
sole discretion, which discretion shall include discretion as to the terms and
conditions under which Executive may be entitled to receive a bonus thereunder.
The maximum bonus which Executive may earn in any such year may not exceed 50%
of his then annual base salary.
4. REASONABLE BUSINESS EXPENSES AND SUPPORT. Executive shall be
reimbursed for documented and reasonable business expenses in connection with
the performance of his duties hereunder. Executive shall be furnished
reasonable office space, assistance and facilities.
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<PAGE>
5. TERMINATION OF EMPLOYMENT. The date on which Executive's employment
by the Company ceases, under any of the following circumstances, shall be
defined herein as the "Termination Date."
(a) TERMINATION FOR CAUSE.
(i) TERMINATION; PAYMENT OF ACCRUED SALARY AND VACATION. The
Board may terminate Executive's employment with the Company at any time for
cause, immediately upon notice to Executive of the circumstances leading to such
termination for cause. In the event that Executive's employment is terminated
for cause, Executive shall receive payment for all accrued salary and vacation
time through the Termination Date, which in this event shall be the date upon
which notice of termination is given. The Company shall have no obligation to
pay severance of any kind nor to make any payment in lieu of notice.
(ii) DEFINITION OF CAUSE. "CAUSE" means the occurrence or
existence of any of the following with respect to Executive, as determined by
the Board at its sole discretion: (a) a material breach by Executive of the
terms of his employment or of his duty not to engage in any transaction that
represents, directly or indirectly, self-dealing with the Company or any of its
affiliates which has not been approved by the Board, if in any such case such
material breach remains uncured after the lapse of 30 days following the date
that the Company has given Executive written notice thereof; (b) the repeated
material breach by Executive of any duty referred to in clause (a) above as to
which at least one written notice has been given pursuant to such clause (a);
(c) any act of dishonesty, misappropriation, embezzlement, intentional fraud or
similar conduct involving the Company or any of its affiliates; (d) the
conviction or the plea of nolo contendere or the equivalent in respect of a
felony involving moral turpitude; (e) any intentional damage of a material
nature to any property of the Company or any of its affiliates; (f) the repeated
non-prescription use of any controlled substance or the repeated use of alcohol
or any other non-controlled substance which, in the reasonable determination of
the Board, in any case described in this clause (f), renders Executive unfit to
serve in his capacity as an officer or employee of the Company or its
affiliates; (g) conduct by Executive which in the reasonable determination of
the Board demonstrates gross unfitness to serve in his capacity as an officer or
employee of the Company or its affiliates; or (h) failure of Executive to
relocate his residence to the Chicago, Illinois metropolitan area by August 31,
1997.
(b) VOLUNTARY TERMINATION. Executive may voluntarily terminate his
employment with the Company at any time upon 45 days prior written notice, after
which no further compensation of any kind or severance payment will be payable
under this Agreement.
(c) TERMINATION UPON DISABILITY. The Company may terminate
Executive's employment in the event Executive suffers a disability that renders
Executive unable, as determined in good faith by the Board, to perform the
essential functions of his position, even with reasonable accommodation, for
four months within any eight-month period. In the event that Executive's
employment is terminated pursuant to this Section 5(c), Executive shall receive
payment for all accrued salary, vacation time and benefits under benefit plans
of the Company through the Termination Date. The Company shall also pay to
Executive a prorated bonus based
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upon the then applicable bonus plan in an amount equal to the bonus that would
otherwise be paid for the fiscal year in which Executive is terminated,
multiplied by a fraction, the numerator of which is the number of days that
Executive was employed during such year, and the denominator of which is 365,
it being understood that such prorated bonus will be payable in accordance with
the normal bonus payment policy of the Company, but in no event later than
April 30 of the year following the fiscal year in which Executive's employment
is terminated. After the Termination Date, which in this event shall be the
date upon which notice of termination is given, no further compensation of any
kind or severance or other payment of any kind will be payable under this
Agreement. All benefits provided under Section 2(b) shall be extended, at
Executive's election and cost, to the extent permitted by the Company's
insurance policies and benefit plans, for one year after Executive's
Termination Date, except as required by law (E.G., COBRA health insurance
continuation election). All other benefits provided by the Company to
Executive under this Agreement or otherwise shall cease as of the Termination
Date.
(d) TERMINATION WITHOUT CAUSE.
(i) TERMINATION PAYMENT DURING THE INITIAL TERM. The Company
may terminate Executive's employment without "cause," as defined above,
immediately upon notice to Executive. In the event Executive's employment is
terminated without "cause," the Company shall pay Executive as severance an
amount equal to 12 months of his then base salary, less standard withholdings
for tax and social security purposes, payable over such 12-month term in monthly
PRO RATA payments commencing as of the Termination Date plus any applicable PRO
RATA earned bonus.
(ii) TERMINATION PERIOD AFTER THE INITIAL TERM. In the event
that the term of this Agreement is extended pursuant to Section 1(e) hereof (an
"Extension Period") and during such Extension Period Executive's employment is
terminated without "cause," as defined above, the Company shall pay Executive as
severance an amount equal to 12 months of his then base salary, less standard
withholdings for tax and social security purposes, payable over such 12-month
term in monthly PRO RATA payments commencing as of the Termination Date.
(iii) FUNDAMENTAL CHANGES. In the event that the Company
makes a substantial change which results in diminution in Executive's duties,
authority, responsibility or compensation without performance or market
justification, he may terminate his employment; PROVIDED, HOWEVER, that
Executive shall provide the Company 15 days' notice prior to any such
termination and the Company shall have until the end of such 15-day period to
cure such diminution. A termination in such circumstances shall be treated as a
Company termination without cause and Executive shall be entitled to the same
severance payments provided in Sections 5(d)(i) and 5(d)(ii), as applicable.
(iv) CONDITIONS TO PAYMENT OF SEVERANCE AMOUNTS. Notwithstanding
the foregoing, the Company's obligation to pay Executive any of the foregoing
severance amounts shall be conditioned upon Executive's continued compliance
with Sections 6, 7 and 8 below during the term of such severance payment period.
5
<PAGE>
(v) BENEFITS UPON TERMINATION. All benefits provided under
Section 2(b) shall be extended, at the Company's election and cost, to the
extent permitted by the Company's insurance policies and benefit plans, for one
year after Executive's Termination Date, except as required by law (e.g., COBRA
health insurance continuation election).
(e) TERMINATION UPON DEATH. If Executive dies prior to the
expiration of the term of this Agreement, the Company shall (i) continue
coverage of Executive's dependents (if any) under all benefit plans or programs
of the type listed above in Section 2(b) for a period of 12 months, and (ii) pay
to Executive's estate the accrued portion of Executive's salary and vacation
time and benefits that Executive is then entitled to receive under benefit plans
of the Company through the Termination Date, less standard withholdings for tax
and social security purposes. The Company shall have no obligation to make any
other payment, including severance or other compensation, of any kind
(including, without limitation, any bonus or portion thereof that otherwise may
have become due and payable to Executive with respect to the year in which such
Termination Date occurs). All other benefits provided by the Company to
Executive under this Agreement or otherwise shall cease as of the Termination
Date.
6. PROPRIETARY INFORMATION OBLIGATIONS.
During the term of employment under this Agreement, Executive will
have access to and become acquainted with the Company's confidential and
proprietary information, including but not limited to information or plans
regarding the Company's customer relationships, personnel, or sales, marketing,
and financial operations and methods; trade secrets; formulas; devices; secret
inventions; processes; and other compilations of information, records, and
specifications (collectively "Proprietary Information"). Executive shall not
disclose any of the Company's Proprietary Information directly or indirectly, or
use it in any way, either during the term of this Agreement or at any time
thereafter, except as required in the course of his employment for the Company
or as authorized in writing by the Company. All files, records, documents,
computer-recorded information, drawings, specifications, equipment and similar
items relating to the business of the Company, whether prepared by Executive or
otherwise coming into his possession, shall remain the exclusive property of the
Company and shall not be removed from the premises of the Company under any
circumstances whatsoever without the prior written consent of the Company,
except when (and only for the period) necessary to carry out Executive's duties
hereunder, and if removed shall be immediately returned to the Company upon any
termination of his employment and no copies thereof shall be kept by Executive;
PROVIDED, HOWEVER, that Executive shall be entitled to retain documents
reasonably related to his interest as a shareholder and any documents that were
personally owned or acquired.
7. NONINTERFERENCE. While employed by the Company and for a period of
one year thereafter, Executive agrees not to interfere with the business of the
Company by directly or indirectly soliciting, attempting to solicit, inducing,
or otherwise causing any employee of the Company to terminate his or her
employment in order to become an employee, consultant or independent contractor
to or for any other employer.
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8. NONCOMPETITION. Executive agrees that during the term of this
Agreement and for a period of 18 months after the termination hereof, he will
not, without the prior consent of the Company, directly or indirectly, have an
interest in, be employed by, be connected with, or have an interest in, as an
employee, consultant, officer, director, partner, stockholder or joint venturer,
in any person or entity owning, managing, controlling, operating or otherwise
participating or assisting in any business that is similar to or in competition
with the business of the Company (i) during the term of this Agreement, in any
location, and (ii) for the five year period following the termination of this
Agreement, in any state in which the Company was conducting business at the date
of termination of Executive's employment and continues to do so thereafter;
PROVIDED, HOWEVER, that the foregoing shall not prevent Executive from being a
stockholder of less than 1% of the issued and outstanding securities of any
class of a corporation listed on a national securities exchange or designated as
national market system securities on an interdealer quotation system by the
National Association of Securities Dealers, Inc.
9. MISCELLANEOUS.
(a) NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telecopy or telex) or the third day after mailing by first
class mail to the recipient at the address indicated below:
To the Company:
Aftermarket Technology Corp.
33309 First Way South
Suite A-206
Federal Way, Washington 98003
Attention: Stephen J. Perkins
Facsimile: (206) 838-1841
To Executive:
Joseph Salamunovich
4538 Kraft Avenue
Studio City, California 91602
Facsimile: (818) 762-1053
or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
(b) SEVERABILITY. If any term or provision (or any portion thereof)
of this Agreement is determined by a court to be invalid, illegal or incapable
of being enforced by any rule of law or public policy, all other terms and
provisions (or other portions thereof) of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or provision (or
any portion
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thereof) is invalid, illegal or incapable of being enforced, this Agreement
shall be deemed to be modified so as to effect the original intent of the
parties as closely as possible to the end that the transactions contemplated
hereby and the terms and provisions hereof are fulfilled to the greatest extent
possible.
(c) ENTIRE AGREEMENT. This document, together with the stock option
agreement evidencing the Options, constitutes the final, complete, and exclusive
embodiment of the entire agreement and understanding between the parties related
to the subject matter hereof and supersedes and preempts any prior or
contemporaneous understandings, agreements, or representations by or between the
parties, written or oral.
(d) COUNTERPARTS. This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.
(e) SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors and assigns, except that Executive may not assign
any of his duties hereunder and he may not assign any of his rights hereunder
without the prior written consent of the Company.
(f) ATTORNEYS FEES. If any legal proceeding is necessary to enforce
or interpret the terms of this Agreement, or to recover damages for breach
therefore, the prevailing party shall be entitled to reasonable attorneys' fees,
as well as costs and disbursements, in addition to any other relief to which he
or it may be entitled.
(g) AMENDMENTS. No amendments or other modifications to this
Agreement may be made except by a writing signed by both parties. No amendment
or waiver of this Agreement requires the consent of any individual, partnership,
corporation or other entity not a party to this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any third person any
rights or remedies under or by reason of this Agreement.
(h) CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the internal
law, and not the law of conflicts, of the State of Illinois.
(i) INTERPRETATION. In interpreting this Agreement, all terms shall
be construed in accordance with their fair meaning and not strictly against any
party as the drafter hereof.
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IN WITNESS WHEREOF, the parties have executed this agreement as of the date
first above written.
/s/ Joseph Salamunovich
------------------------------------
Joseph Salamunovich
AFTERMARKET TECHNOLOGY CORP.
By: /s/ Stephen J. Perkins
---------------------------------
Stephen J. Perkins
Chief Executive Officer
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EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of March 6,
1998 by and between Ronald E. Bradshaw, a natural person ("Employee"), and
Aftermarket Technology Corp., a Delaware corporation (the "Company").
R E C I T A L S
A. Immediately prior to the date hereof, Employee has been
employed by the OEM Division of Autocraft Industries, Inc., an Oklahoma
corporation ("Former Employer"), which is engaged in, among other thing, (i)
the remanufacture of transmissions and related drivetrain components for Ford
Motor Company and General Motors Corporation, (ii) the remanufacture of
electronic control modules, instrument display clusters, telephones and
radios for certain original equipment manufacturers, (iii) the remanufacture
of engines for certain original equipment manufacturers in Europe, (iv) the
distribution of cellular telephones for AT&T Wireless, and (v) material
recovery services for Ford (the "OEM Business," which term excludes Seller's
operations that (x) participate in Ford's "FAR" program, (y) remanufacture
non-GM transmissions for AC-Delco, or (z) are not part of the OEM Division).
B. Concurrently herewith, subsidiaries of the Company are
purchasing substantially all the assets used in the Business pursuant to that
certain Asset Purchase Agreement dated as of February 10, 1998 among Former
Employer, Fred Jones Industries A Limited Partnership and Aftermarket
Technology Corp. (the "Purchase Agreement").
C. The Company desires to retain the services of Employee for the
benefit of the Company and its subsidiaries.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements set forth below, the parties hereto agree as
follows:
1. EMPLOYMENT AND TERM.
(a) FULL TIME AND BEST EFFORTS. Subject to the terms set
forth herein, the Company agrees to employ Employee in a management capacity
and Employee hereby accept such employment. During the term of his
employment, Employee will devote his full time, best efforts and attention to
the performance of his duties hereunder and to the business and affairs of
the Company and its subsidiaries.
(b) DUTIES. Employee shall perform such duties for the
Company and its subsidiaries as are customarily associated with a management
position, consistent with the Bylaws of the Company and as required by the
officer or officers to whom Employee reports.
(c) COMPANY POLICIES. The employment relationship between
the parties shall be governed by the general employment policies and
practices of the Company, including but not limited to those relating to
protection of confidential information and
<PAGE>
assignment of inventions, except that when the terms of this Agreement differ
from or are in conflict with such employment policies and practices, this
Agreement shall control.
(d) TERM. The initial term of employment of Employee under
this Agreement shall begin as of the date hereof and end on the third
anniversary the date hereof, subject to the provisions for termination
contained in Section 5 and renewal contained in Section 1(e).
(e) RENEWAL. Unless the Company shall have given Employee
notice that this Agreement shall not be renewed at least 30 days prior to the
end of the initial term referred to in Section 1(d), the term of this
Agreement shall be automatically extended for a period of one year, such
procedure to be followed in each such successive period.
2. COMPENSATION AND BENEFITS.
(a) SALARY. Employee shall receive for services to be
rendered hereunder an annual base salary of $275,000, payable on the
Company's regular payroll dates, subject to increase at the discretion of the
Company, and subject to standard withholdings for taxes and social security
and the like. The Company shall review Employee's salary on an annual basis
and may, in its sole discretion, increase Employee's salary.
(b) INCENTIVE PLANS. During the term hereof, Employee shall
be eligible to participate in any annual incentive bonus plan and long-term
incentive plan (including, without limitation, any stock option plan) of the
Company generally available to Company employees of a level comparable to
Employee. Such participation shall be subject to and on a basis consistent
with the terms, conditions and administration of any such plan. Employee
understands that (i) the Company shall have discretion to determine
Employee's level of participation in any such plan and (ii) any such plan may
be modified or eliminated in the Company's sole discretion in accordance with
applicable law and the terms of such plan. For the year ending December 31,
1998, Employee's target bonus shall be 50% of his base salary for the period
from the date hereof to December 31, 1998 and will be paid based on
achievement of financial and personal goals to be established by the Company.
(c) PARTICIPATION IN BENEFIT PLANS. Initially, Employee
shall be entitled to participate in all benefit plans generally available to
Hired OEM Employees (as that term is defined in the Purchase Agreement)
pursuant to Section 7.08 of the Purchase Agreement. Thereafter, during the
term hereof, Employee shall be entitled to participate in any group
insurance, hospitalization, medical, dental, health and accident, disability,
retirement income or similar plan or program of the Company to the extent
that he is eligible under the general provisions thereof. The Company, may,
in its discretion and from time to time, establish additional management
benefit programs as it deems appropriate. Employee understands that any such
plans may be modified or eliminated in the Company's discretion in accordance
with applicable law.
(d) VACATION. Employee will be credited for all vacation
days that he has accrued with Former Employer as of the date hereof and will
be able to utilize them in the same manner as previously permitted by Former
Employer. In addition, after the date hereof
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Employee shall be entitled to a period of annual paid vacation time equal to
the period provided to employees of a comparable level by the Company's
policies and procedures. If the period of annual paid vacation time is
determined based on period of service, Employee's prior service with Former
Employee will be included in determining the period to which Employee is
entitled. The days selected for Employee's vacation must be mutually
agreeable to the Company and Employee.
3. PERQUISITES.
(a) AUTOMOBILE. Employee will continue to be reimbursed for
expenses related to his present company automobile to the same extent that he
has been reimbursed by Former Employer prior to the date hereof. After the
expiration of the lease with respect to such automobile, Employee will be
provided with an automobile if and to the extent that automobiles are
generally available to Company employees of a level comparable to Employee.
(b) OTHER REIMBURSEMENTS. During each calendar year during
the term hereof, Employee will receive reimbursement for expenses incurred
during such year for (i) personal financial/tax planning, (ii) estate
planning (including legal fees) and (iii) club (E.G., country club, health
club, social club) dues; PROVIDED, HOWEVER, that the reimbursable amount for
any such year shall not exceed 2% of Employee's base salary paid during such
year.
4. BUSINESS EXPENSES. Employee shall be reimbursed for
documented and reasonable business expenses in connection with the
performance of his duties hereunder.
5. TERMINATION OF EMPLOYMENT. The date on which Employee's
employment by the Company ceases, under any of the following circumstances,
shall be defined herein as the "Termination Date."
(a) TERMINATION FOR CAUSE.
(i) TERMINATION; PAYMENT OF ACCRUED SALARY AND VACATION.
The Company may terminate Employee's employment at any time for cause,
immediately upon written notice to Employee of the circumstances leading to
such termination for cause. If Employee's employment is terminated for
cause, Employee shall receive payment for all accrued salary and vacation
time through the Termination Date, which in this event shall be the date upon
which notice of termination is given. The Company shall have no obligation
to pay severance of any kind nor to make any payment in lieu of notice if
Employee is terminated for cause.
(ii) DEFINITION OF CAUSE. "CAUSE" means the occurrence
or existence of any of the following with respect to Employee, as determined
by the Company in its sole discretion: (A) a material breach by Employee of
(1) his duty not to engage in any transaction that represents, directly or
indirectly, self-dealing with the Company or any of its Affiliates that has
not been approved by the Company, or (2) the terms of his employment, if in
any such case such material breach remains uncured after the lapse of 30 days
following the date that the Company has given Employee written notice
thereof; (B) the material breach by Employee of any duty referred to in
clause (A) above as to which at least one written notice has been given
pursuant to clause (A); (C) any act of dishonesty, misappropriation,
embezzlement,
3
<PAGE>
intentional fraud or similar conduct involving the Company or any of its
Affiliates; (D) the conviction or the plea of nolo contendere or the
equivalent in respect of a felony involving moral turpitude; (E) any
intentional damage of a material nature to any property of the Company or any
of its Affiliates; or (F) the repeated non-prescription use of any controlled
substance or the repeated use of alcohol or any other non-controlled
substance that, in the reasonable determination of the Company renders
Employee unfit to serve in his capacity as an employee of the Company or its
Affiliates.
(b) VOLUNTARY TERMINATION. Employee may voluntarily
terminate his employment with the Company at any time upon 30 days' prior
written notice. On the Termination Date, Employee shall receive payment for
all accrued salary and vacation time through the Termination Date, after
which no further compensation of any kind or severance payment will be
payable under this Agreement.
(c) TERMINATION UPON DISABILITY. The Company may terminate
Employee's employment in the event Employee suffers a disability that renders
Employee unable to perform the essential functions of his position, even with
reasonable accommodation in compliance with the Americans with Disabilities
Act, for three consecutive months within any six month period. After the
Termination Date, which in this event shall be the date upon which notice of
termination is given, no further compensation will be payable under this
Agreement. The foregoing shall not affect any rights that Employee may have
under applicable workers' compensation laws or any disability plan of the
Company.
(d) TERMINATION WITHOUT CAUSE. The Company may terminate
Employee's employment without "cause" (as defined above) at any time upon 30
days' prior written notice. On the Termination Date, Employee shall receive
payment for all accrued salary and vacation time through the Termination Date
and thereafter the Company shall, subject to Section 5(f), pay Employee as
severance an amount equivalent to 100% of Employee's annual base salary as in
effect immediately prior to the Termination Date, less standard withholdings
for taxes and social security and the like. The severance shall be payable
in equal installments on each of the Company's regular payroll dates during
the 12-month period commencing on the first such payroll date following the
Termination Date.
(e) FUNDAMENTAL CHANGES. If the Company (i) materially
diminishes Employee's duties, authority, responsibility or compensation
without performance justification, or (ii) breaches this Agreement in any
material respect, Employee may terminate his employment PROVIDED that
Employee has given the Company 30 days' written notice prior to such
termination and the Company has not cured such diminution or breach, as the
case may be, by the end of such 30-day period. A termination in such
circumstances shall be treated as a Company termination without cause and
Employee shall be entitled to the severance payments provided in Section 5(d).
(f) EMPLOYEE'S DEATH. If Employee dies, his beneficiaries
shall receive payment for all accrued salary and vacation time through the
date of death, after which no further compensation of any kind or severance
payment will be payable under this Agreement.
4
<PAGE>
(g) EARNED BONUS. If Employee's employment hereunder is
terminated by the Company or Employee for any reason, Employee shall be
entitled to receive on the Termination Date, in addition to any other
payments called for by this Section 5, his Earned Bonus, if any, less
standard withholdings for taxes and social security and the like. "Earned
Bonus" means any bonus that is payable to Employee with respect to the
calendar year preceding the Termination Date but that has not been paid prior
to the Termination Date.
6. PROPRIETARY INFORMATION OBLIGATIONS. Prior to and/or during
the term of employment under this Agreement, Employee has had and/or will
have access to and has become and/or will become acquainted with the
confidential and proprietary information of the Business and the Company and
its affiliates, including but not limited to confidential and proprietary
information or plans regarding customer relationships; personnel; sales,
marketing, and financial operations and methods; trade secrets; formulas;
devices; secret inventions; processes and other compilations of information,
records, and specifications (collectively "Proprietary Information").
Employee shall not disclose any of the Proprietary Information directly or
indirectly, or use it in any way, either during the term of this Agreement,
or at any time thereafter, except as required in the course of his employment
hereunder or as authorized in writing by the Company. All files, records,
documents, computer-recorded information, drawings, specifications, equipment
and similar items relating to the Business or the Company or its affiliates,
whether prepared by Employee or otherwise coming into his possession prior to
or during the term of this Agreement, shall remain the exclusive property of
the Company and shall not be removed from the premises of the Company or its
affiliate under any circumstances whatsoever without the prior written
consent of the Company, except when (and only for the period) necessary to
carry out Employee's duties hereunder, and if removed shall be immediately
returned upon any termination of his employment and no copies thereof shall
be kept by Employee.
7. NONINTERFERENCE. While employed by the Company and for a
period of three years thereafter, Employee agrees not to interfere with the
Business or the Company or its affiliates by directly or indirectly
soliciting, attempting to solicit, inducing, or otherwise causing any
employee who is an employee of the Company at the time of such solicitation
to terminate his or her employment in order to become an employee, consultant
or independent contractor to or for any other employer.
8. NONCOMPETITION. Employee agrees that during the term of this
Agreement and for a period of 18 months after the termination hereof, he will
not, without the prior consent of the Company, directly or indirectly, have
an interest in, be employed by, be connected with, or have an interest in, as
an employee, consultant, officer, director, partner, stockholder or joint
venturer, any person or entity owning, managing, controlling, operating or
otherwise participating or assisting in any business that is similar to or in
competition with the Business (or any portion thereof) in any state in which
the Company was conducting business on the date on which Employee ceased to
be an employee of the Company; PROVIDED, HOWEVER, that the foregoing shall
not prevent Employee from being a stockholder of less than 1% of the issued
and outstanding securities of any class of a corporation listed on a national
securities exchange or designated as national market system securities on an
interdealer quotation system by the National Association of Securities
Dealers, Inc.
5
<PAGE>
9. REMEDIES. Employee acknowledges that a breach or threatened
breach by Employee of any the provisions of Sections 6, 7 or 8 will result in
the Business and the Company suffering irreparable harm that cannot be
calculated or fully or adequately compensated by recovery of damages alone.
Accordingly, Employee agrees that the Company shall be entitled to interim,
interlocutory and permanent injunctive relief, specific performance and other
equitable remedies, in addition to any other relief to which the Company may
become entitled should there be such a breach or threatened breach.
10. MISCELLANEOUS.
(a) NOTICES. Any notices provided hereunder must be in
writing and shall be deemed effective upon the earlier of personal delivery
(including personal delivery by telecopy, if a copy is sent by mail as
follows) or the third day after mailing by first class mail to the recipient
at the address indicated below:
To the Company:
Aftermarket Technology Corp.
900 Oakmont Lane, Suite 100
Westmont, IL 60559
Attention: Vice President--Human Resources
Facsimile: (630) 455-2650
To Employee:
Ronald E. Bradshaw
--------------------------
--------------------------
Facsimile: ( ) -
--- --- -----
or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
(b) SEVERABILITY. If any term or provision (or any portion
thereof) of this Agreement is determined by a court to be invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
terms and provisions (or other portions thereof) of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not materially affected.
Upon such determination that any term or provision (or any portion thereof),
is invalid, illegal or incapable of being enforced, this Agreement shall be
deemed to be modified so as to effect the original intent of the parties as
closely as possible to the end that the transactions contemplated hereby and
the terms and provisions hereof are fulfilled to the greatest extent possible.
(c) ENTIRE AGREEMENT. This Agreement constitutes the final,
complete, and exclusive embodiment of the entire agreement and understanding
between the parties related to the subject matter hereof and supersedes all
prior or contemporaneous understandings, agreements, or representations by or
between the parties, written or oral.
6
<PAGE>
(d) COUNTERPARTS. This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.
(e) SUCCESSORS AND ASSIGNS. This Agreement is intended to
bind and inure to the benefit of and be enforceable by Employee and the
Company, and their respective successors and assigns, except that Employee
may not assign any of his duties hereunder and he may not assign any of his
rights hereunder without the prior written consent of the Company.
(f) ATTORNEY'S FEES. If any legal proceeding is necessary to
enforce or interpret the terms of this Agreement, or to recover damages for
breach therefore, the prevailing party shall be entitled to reasonable
attorney's fees, as well as costs and disbursements, in addition to any other
relief to which he or it may be entitled.
(g) AMENDMENTS; NO WAIVERS. Any provision of this Agreement
may be amended or waived if such amendment or waiver is in writing and
signed, in the case of an amendment, by all parties hereto, and in the case
of a waiver, by the party against whom the waiver is to be effective. No
waiver by a party of any breach of this Agreement shall be deemed to extend
to any prior or subsequent breach or affect in any way any rights arising by
virtue of any prior or subsequent breach. 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.
(h) 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 Oklahoma.
(i) CONSTRUCTION. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof. Neither party hereto, nor its respective counsel,
shall be deemed the drafter of this Agreement, and all provisions of this
Agreement shall be construed in accordance with their fair meaning, and not
strictly for or against either party hereto.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the date first above written.
/s/ Ronald E. Bradshaw
-----------------------------------
Ronald E. Bradshaw
AFTERMARKET TECHNOLOGY CORP.
/s/ Joseph Salamunovich
-----------------------------------
Joseph Salamunovich, Vice President
8
<PAGE>
EXHIBIT 11
AFTERMARKET TECHNOLOGY CORP.
STATEMENT RE COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Year Ended December 31,
1995 1996 1997 (a)
----------- ----------- -----------
<S> <C> <C> <C>
Income before extraordinary item $ 9,499 $ 16,299 $ 23,003
Extraordinary item -- net of income tax
benefit of $2,520 -- -- 3,749
----------- ----------- -----------
Net income per statements of income $ 9,499 16,299 $ 19,254
----------- ----------- -----------
----------- ----------- -----------
Shares:
Weighted average common shares outstanding 12,000,000 12,203,021 17,496,173
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
(pro forma) 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 1,839,186
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 (pro
forma) 1,774,597 1,948,767 --
----------- ----------- -----------
Total 14,616,160 15,918,384 19,335,359
----------- ----------- -----------
----------- ----------- -----------
Diluted earnings per common share:
Income before extraordinary item $ 0.65 $ 1.02 $ 1.19
Extraordinary item, net of tax -- -- (0.20)
----------- ----------- -----------
Net income per share $ 0.65 $ 1.02 $ 0.99
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
(a) The December 31, 1995 and 1996 share data includes the pro forma effects
of the Company's initial public offering.
- 64 -
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
The direct and indirect subsidiaries of Aftermarket Technology Corp. are:
<TABLE>
<CAPTION>
JURISDICTION OF NAME UNDER WHICH
NAME INCORPORATION BUSINESS IS CONDUCTED
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Aaron's Automotive Products, Inc. Delaware Aaron's Automotive Products
- -------------------------------------------------------------------------------------------------
ACI Electronics Holding Corp. Delaware Not Applicable
- -------------------------------------------------------------------------------------------------
ACI Electronics Investment Corp. Delaware Not Applicable
- -------------------------------------------------------------------------------------------------
ATC Distribution Group, Inc. Delaware ATC Distribution Group
ATC Diverco
ATC HTP
ATC Mamco
ATC Metran
ATC REPCO
ATC Trans Mart
ATC Tranzparts
Diverco
HTP
Mamco Converters
Metran
REPCO Industries
Trans Mart
Tranzparts
- -------------------------------------------------------------------------------------------------
ATC Electronics & Logistics, L.P. Delaware Autocraft Electronics
- -------------------------------------------------------------------------------------------------
ATS Remanufacturing Corp. Delaware ATS
CRS
- -------------------------------------------------------------------------------------------------
Autocraft Industries, Inc. Delaware Autocraft Industries
- -------------------------------------------------------------------------------------------------
Autocraft Remanufacturing Corp. Delaware Autocraft Industries
- -------------------------------------------------------------------------------------------------
Automotive Development Limited England Autocraft Industries
South East Lincs Engineering
- -------------------------------------------------------------------------------------------------
Aftermarket Technology (U.K.) Holding Limited England Not Applicable
- -------------------------------------------------------------------------------------------------
Component Remanufacturing Specialists, Inc. New Jersey CRS
- -------------------------------------------------------------------------------------------------
CRS Holdings, Corp. New Jersey Not Applicable
- -------------------------------------------------------------------------------------------------
King-O-Matic Industries Limited Ontario, Canada King-O-Matic Industries
- -------------------------------------------------------------------------------------------------
<PAGE>
JURISDICTION OF NAME UNDER WHICH
NAME INCORPORATION BUSINESS IS CONDUCTED
- -------------------------------------------------------------------------------------------------
Metran Automatic Transmission Parts Corp. New York ATC Metran
Metran
- -------------------------------------------------------------------------------------------------
Partes Remanufacturadas de Mexico Mexico ATC RPM
RPM
- -------------------------------------------------------------------------------------------------
RPM Merit, Inc. Delaware ATC RPM
RPM
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 23
Consent of Independent Auditors
Our audit included the financial statement schedules of Aftermarket
Technology Corp. listed in Item 14(a). These schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial statement schedules
referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
We also 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 23, 1998, with
respect to the consolidated financial statements incorporated herein by
reference, and our report included in the preceding paragraph with respect to
the financial statement schedules included in this Annual Report (Form 10-K)
of Aftermarket Technology Corp.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
March 24, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<CASH> 8756 46498 78
<SECURITIES> 0 0 0
<RECEIVABLES> 35435 40106 54907
<ALLOWANCES> 2469 1326 1146
<INVENTORY> 43065 60586 76166
<CURRENT-ASSETS> 89086 151053 139200
<PP&E> 12410 21056 31244
<DEPRECIATION> 1626 3574 6830
<TOTAL-ASSETS> 247932 320747 368677
<CURRENT-LIABILITIES> 29074 47682 40677
<BONDS> 162246 161981 121288
0 0 0
22946 0 0
<COMMON> 120 169 195
<OTHER-SE> 30068 105663 175234
<TOTAL-LIABILITY-AND-EQUITY> 247932 320747 368677
<SALES> 190659 272878 346110
<TOTAL-REVENUES> 191759 274059 348022
<CGS> 115499 166810 212416
<TOTAL-COSTS> 156539 225390 289764
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 1239 668 921
<INTEREST-EXPENSE> 18015 20287 18822
<INCOME-PRETAX> 15966 27714 38515
<INCOME-TAX> 6467 11415 15512
<INCOME-CONTINUING> 9499 16299 23003
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 3749
<CHANGES> 0 0 0
<NET-INCOME> 9499 16299 19254
<EPS-PRIMARY> 0.69 1.15 1.10
<EPS-DILUTED> 0.65 1.02 0.99
</TABLE>
