-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RFKK4j9+NbZDz0f+ErnF8ifnL01X8PkR7S4JIV0oP3UJ8SSuPCmbh100O4vxtLXx y7xeReBtYT4Wx72bFaEMXw== 0000950124-98-001888.txt : 19980401 0000950124-98-001888.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950124-98-001888 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 42 FILED AS OF DATE: 19980331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED ACCESSORY SYSTEMS LLC CENTRAL INDEX KEY: 0001057836 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133848156 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-49011 FILM NUMBER: 98583803 BUSINESS ADDRESS: STREET 1: 12900 HALL RD STREET 2: SUITE 200 CITY: STERLING HEIGHTS STATE: MI ZIP: 48313 BUSINESS PHONE: 8109972900 MAIL ADDRESS: STREET 1: 12900 HALL RD STREET 2: SUITE 200 CITY: STERLING HEIGHTS STATE: MI ZIP: 48313 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALLEY INDUSTRIES LLC CENTRAL INDEX KEY: 0001057827 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 383363492 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-49011-01 FILM NUMBER: 98583804 BUSINESS ADDRESS: STREET 1: 32501 DEXIUINDRE RD CITY: MADISON HEIGHTS STATE: MI ZIP: 48313 BUSINESS PHONE: 8109972900 MAIL ADDRESS: STREET 1: 32501 DEXIUINDRE RD CITY: MADISON HEIGHTS STATE: MI ZIP: 48313 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPORTRACK LLC CENTRAL INDEX KEY: 0001057831 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133848154 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-49011-02 FILM NUMBER: 98583805 BUSINESS ADDRESS: STREET 1: 12900 HALL RD STREET 2: SUITE 200 CITY: STERLING HEIGHTS STATE: MI ZIP: 48313 BUSINESS PHONE: 8109972900 MAIL ADDRESS: STREET 1: 12900 HALL RD STREET 2: SUITE 200 CITY: STERLING HEIGHTS STATE: MI ZIP: 48313 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AAS HOLDINGS INC CENTRAL INDEX KEY: 0001057833 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133848154 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-49011-03 FILM NUMBER: 98583806 BUSINESS ADDRESS: STREET 1: 12900 HALL RD STREET 2: SUITE 200 CITY: STERLING HEIGHTS STATE: MI ZIP: 48313 BUSINESS PHONE: 8109972900 MAIL ADDRESS: STREET 1: 12900 HALL RD STREET 2: SUITE 200 CITY: STERLING HEIGHTS STATE: MI ZIP: 48313 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AAS CAPITAL CORP CENTRAL INDEX KEY: 0001057834 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133963422 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-49011-04 FILM NUMBER: 98583807 BUSINESS ADDRESS: STREET 1: 12900 HALL RD STREET 2: SUITE 200 CITY: STERLING HEIGHTS STATE: MI ZIP: 48313 BUSINESS PHONE: 8109972900 MAIL ADDRESS: STREET 1: 12900 HALL RD STREET 2: SUITE 200 CITY: STERLING HEIGHTS STATE: MI ZIP: 48313 S-4 1 S-4 1 As filed with the Securities and Exchange Commission on March 31, 1998 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------- ADVANCED ACCESSORY SYSTEMS, LLC (Exact Name of Registrant as Specified in Its Charter) DELAWARE 3714 (State or Other Jurisdiction of (Primary Standard Industrial Incorporation or Organization) Classification Code Number)
DELAWARE 13-3848156 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number)
------------------------- 12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MICHIGAN 48313 (810) 997-2900 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------------------- AAS CAPITAL CORPORATION (Exact Name of Registrant as Specified in Its Charter) DELAWARE 6719 (State or Other Jurisdiction of (Primary Standard Industrial Incorporation or Organization) Classification Code Number)
DELAWARE 13-3969422 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number)
------------------------- 12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MICHIGAN 48313 (810) 997-2900 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------------------- AAS HOLDINGS, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 6719 (State or Other Jurisdiction of (Primary Standard Industrial Incorporation or Organization) Classification Code Number)
DELAWARE 38-3319226 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number)
------------------------- 12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MICHIGAN 48313 (810) 997-2900 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------------------- SPORTRACK, LLC (Exact Name of Registrant as Specified in Its Charter) DELAWARE 3714 (State or Other Jurisdiction of (Primary Standard Industrial Incorporation or Organization) Classification Code Number)
DELAWARE 13-3848154 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number)
------------------------- 12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MICHIGAN 48313 (810) 997-2900 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------------------- VALLEY INDUSTRIES, LLC (Exact Name of Registrant as Specified in Its Charter) DELAWARE 3714 (State or Other Jurisdiction of (Primary Standard Industrial Incorporation or Organization) Classification Code Number)
DELAWARE 38-3363492 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number)
------------------------- 12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MICHIGAN 48313 (810) 997-2900 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------------------- MARSHALL D. GLADCHUN CHIEF EXECUTIVE OFFICER 12900 HALL ROAD, SUITE 200 STERLING HEIGHTS, MICHIGAN 48313 (810) 997-2900 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) ------------------------- With a copy to: JOHN J. SUYDAM O'SULLIVAN GRAEV & KARABELL, LLP 30 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10112 (212) 408-2400 ------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ------------------------- CALCULATION OF REGISTRATION FEE
================================================================================================================================= PROPOSED PROPOSED AMOUNT MAXIMUM MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE - --------------------------------------------------------------------------------------------------------------------------------- 9 3/4% Series B Senior Subordinated Notes due 2007.... $125,000,000 100% $125,000,000 $36,875 - --------------------------------------------------------------------------------------------------------------------------------- Guarantees of the 9 3/4% Series B Senior Subordinated Notes............................................... $125,000,000 (1) (1) (1) =================================================================================================================================
(1) This Registration Statement covers the Guarantees to be issued by subsidiaries of Advanced Accessory Systems, LLC of their obligations under the 9 3/4% Series B Senior Subordinated Notes. Such Guarantees are to be issued for no additional consideration, and therefore no registration fee is required. ------------------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 ADVANCED ACCESSORY SYSTEMS, LLC AAS CAPITAL CORPORATION ------------------------ CROSS REFERENCE SHEET PURSUANT TO REGULATION S-K, ITEM 501(B), SHOWING LOCATION OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS -------------------------------- --------------------------------- 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus..... Facing Page of Registration Statement; Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus.............................. Inside Front and Outside Back Cover Pages of Prospectus; Available Information 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information.............. Prospectus Summary; Risk Factors; Selected Consolidated Financial Information 4. Terms of the Transaction................... Prospectus Summary; The Exchange Offer; Description of the Notes 5. Pro Forma Financial Information............ Unaudited Pro Forma Financial Information 6. Material Contracts with the Company Being Acquired................................... * 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters............................ Plan of Distribution 8. Interests of Named Experts and Counsel..... * 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities................................ * 10. Information With Respect to S-3 Registrants................................ * 11. Incorporation of Certain Information by Reference.................................. * 12. Information With Respect to S-2 or S-3 Registrants................................ * 13. Incorporation of Certain Information by Reference.................................. * 14. Information With Respect to Registrants Other Than S-2 or S-3 Registrants.......... Prospectus Summary; Risk Factors; Selected Consolidated Financial Information; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Description of The Credit Facilities 15. Information With Respect to S-3 Companies.................................. 16. Information With Respect to S-2 or S-3 Companies.................................. * 17. Information With Respect to Companies Other Than S-2 or S-3 Companies.................. * 18. Information if Proxies, Consents or Authorization Are to be Solicited.......... * 19. Information if Proxies, Consents or Authorizations Are Not to be Solicited, or in an Exchange Offer....................... Management; Ownership of Capital Stock; Certain Transactions
- ------------------------- * Not applicable or answer is in the negative. 3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE. SUBJECT TO COMPLETION, DATED MARCH 31, 1998 PROSPECTUS ADVANCED ACCESSORY SYSTEMS, LLC AAS CAPITAL CORPORATION OFFER TO EXCHANGE UP TO $125,000,000 OF THEIR 9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007 FOR ANY AND ALL OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007 ------------------------ THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED ------------------------ Advanced Accessory Systems, LLC ("AAS" and, together with its subsidiaries, the "Company") and AAS Capital Corporation ("Capital Corp." and, together with AAS, the "Issuers") hereby offer, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal (which together constitute the "Exchange Offer") to exchange $1,000 principal amount of 9 3/4% Series B Senior Subordinated Notes due 2007 (the "New Notes") of the Issuers for each $1,000 principal amount of the issued and outstanding 9 3/4% Senior Subordinated Notes due 2007 (the "Old Notes," and the Old Notes and the New Notes, collectively, the "Notes") of the Issuers from the Holders (as defined herein) thereof. As of the date of this Prospectus, there is $125,000,000 aggregate principal amount of the Old Notes outstanding. The terms of the New Notes are identical in all material respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended (the "Securities Act"), and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the Registration Rights Agreement (as defined herein), which provisions will terminate as to all of the Notes upon the consummation of the Exchange Offer. Interest on the New Notes will accrue from April 1, 1998 and will be payable in cash semi-annually in arrears on April 1 and October 1 of each year commencing October 1, 1998. Interest will be payable on the Old Notes accepted for exchange to, but not including, April 1, 1998. The New Notes will be unsecured and will be subordinated in right of payment to all existing and future Senior Indebtedness (as defined) of the Issuers. The New Notes will rank pari passu in right of payment with any future senior subordinated Indebtedness (as defined) of the Issuers and will rank senior in right of payment to all Subordinated Indebtedness (as defined) of the Issuers. The New Notes will be guaranteed, on a senior subordinated basis, by each of the Company's direct and indirect domestic subsidiaries (excluding Unrestricted Subsidiaries (as defined)) (collectively, the "Guarantors"). See "Description of the Notes." As of December 31, 1997, on a pro forma basis after giving effect to the 1998 Transactions (as defined), the aggregate principal amount of the Issuers' outstanding Senior Indebtedness would have been approximately $73.4 million (excluding unused commitments). In addition, the Indenture (as defined) permits the Issuers to incur additional indebtedness, including Senior Indebtedness, subject to certain limitations. See "Description of the Notes -- Ranking" and "-- Subordination of the Notes -- Guarantees of the Notes." The Old Notes were not registered under the Securities Act in reliance upon an exemption from the registration requirements thereof. In general, the Old Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act. The New Notes are being offered hereby in order to satisfy certain obligations of the Issuers contained in the Registration Rights Agreement. Based on interpretations by the staff of the Securities and Exchange Commission (the "Commission") set forth in no-action letters issued to third parties, the Issuers believe that the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Issuers within the meaning of Rule 405 promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business, such holder has no arrangement with any person to participate in the distribution of such New Notes and neither such holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes. Notwithstanding the foregoing, each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with any resale of New Notes received in exchange for such Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities (other than Old Notes acquired directly from the Issuers). The Issuers have agreed that, for a period of 180 days after the date of this Prospectus, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." The Old Notes are designated for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") market. There is no established trading market for the New Notes. The Issuers do not currently intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotations system. Accordingly, there can be no assurance as to the development or liquidity of any market for the New Notes. The Issuers will not receive any proceeds from the Exchange Offer. The Issuers will pay all of the expenses incident to the Exchange Offer. Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn as provided herein at any time prior to the Expiration Date (as defined herein). The Exchange Offer is subject to certain customary conditions. This Prospectus has been prepared for use in connection with the Exchange Offer and may be used by Chase Securities Inc. ("CSI") in connection with offers and sales related to market-making transactions in the Notes. CSI may act as principal or agent in such transactions. Such sales will be made at prices related to prevailing market prices at the time of sale. See "Plan of Distribution." ------------------------ SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE EXCHANGE OFFER. ------------------------ THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 1998. 4 MARKET DATA USED THROUGHOUT THIS PROSPECTUS WAS OBTAINED THROUGH COMPANY RESEARCH, SURVEYS OR STUDIES PURCHASED BY THE COMPANY OR THE INITIAL PURCHASERS (AS DEFINED) AND CONDUCTED BY THIRD PARTIES AND FROM INDUSTRY OR GENERAL PUBLICATIONS. THE COMPANY HAS NOT INDEPENDENTLY VERIFIED MARKET DATA PROVIDED BY THIRD PARTIES OR INDUSTRY OR GENERAL PUBLICATIONS. SIMILARLY, INTERNAL COMPANY SURVEYS, WHILE BELIEVED BY THE COMPANY TO BE RELIABLE, HAVE NOT BEEN VERIFIED BY ANY INDEPENDENT SOURCES. ------------------------ FORWARD LOOKING STATEMENTS THIS PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY, INCLUDING STATEMENTS UNDER THE CAPTIONS "SUMMARY," "UNAUDITED PRO FORMA FINANCIAL INFORMATION," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS." ALL OF THESE FORWARD LOOKING STATEMENTS ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE BY MANAGEMENT OF THE COMPANY WHICH, ALTHOUGH BELIEVED TO BE REASONABLE, ARE INHERENTLY UNCERTAIN. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED UPON SUCH ESTIMATES AND STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH ESTIMATES WILL BE REALIZED AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES INCLUDE: (1) INCREASED COMPETITION; (2) INCREASED COSTS; (3) LOSS OR RETIREMENT OF KEY MEMBERS OF MANAGEMENT; (4) INCREASES IN THE COMPANY'S COST OF BORROWING OR UNAVAILABILITY OF ADDITIONAL DEBT OR EQUITY CAPITAL; (5) ADVERSE STATE OR FEDERAL LEGISLATION OR REGULATION OR ADVERSE DETERMINATIONS BY REGULATIONS; AND (6) CHANGES IN GENERAL ECONOMIC CONDITIONS AND/OR IN THE MARKETS IN WHICH THE COMPANY MAY, FROM TIME TO TIME, COMPETE. MANY OF SUCH FACTORS ARE BEYOND THE CONTROL OF THE COMPANY AND ITS MANAGEMENT. FOR FURTHER INFORMATION OR OTHER FACTORS WHICH COULD AFFECT THE FINANCIAL RESULTS OF THE COMPANY AND SUCH FORWARD LOOKING STATEMENTS, SEE "RISK FACTORS." 2 5 AVAILABLE INFORMATION The Issuers have filed with the Commission a Registration Statement on Form S-4 (together with all amendments, exhibits, schedules and supplements thereto, the "Registration Statement") under the Securities Act with respect to the New Notes being offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement, certain portions of which have been omitted pursuant to the rules and regulations promulgated by the Commission. Statements made in this Prospectus as to the contents of any contract, agreement or other document are not necessarily complete. With respect to each such contract, agreement or other document filed or incorporated by reference as an exhibit to the Registration Statement, reference is made to such exhibit for a more complete description of the matter involved, and each such statement is qualified in its entirety by such reference. The Registration Statement may be inspected by anyone without charge at the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such material may also be obtained at the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. Such materials can also be inspected on the Internet at http://www.sec.gov. Upon consummation of the Exchange Offer, AAS will become subject to the informational reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith will file reports and other information with the Commission. Such materials filed by AAS with the Commission may be inspected, and copies thereof obtained, at the places, and in the manner, set forth above. In the event that AAS ceases to be subject to the informational reporting requirements of the Exchange Act, AAS has agreed that, so long as the Notes remain outstanding, it will file with the Commission and distribute to holders of the Notes copies of the financial information that would have been contained in annual reports and quarterly reports, including management's discussion and analysis of financial condition and results of operations, that AAS would have been required to file with the Commission pursuant to the Exchange Act. Such financial information will include annual reports containing consolidated financial statements and notes thereto, together with an opinion thereto expressed by an independent public accounting firm, as well as quarterly reports containing unaudited condensed consolidated financial statements for the first three quarters of each fiscal year. AAS will also make such reports available to prospective purchasers of the Notes, securities analysts and broker-dealers upon their request. In addition, AAS has agreed that for so long as any of the Old Notes remain outstanding it will make available to any prospective purchaser of the Old Notes or beneficial owner of the Old Notes in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act, until such time as the Issuers have either exchanged the Old Notes for securities identical in all material respects which have been registered under the Securities Act or until such time as the holders thereof have disposed of such Old Notes pursuant to an effective registration statement filed by the Issuers. 3 6 PROSPECTUS SUMMARY The following is a summary of certain information contained elsewhere in this Prospectus. Reference is made to, and this summary is qualified in its entirety by, the more detailed information contained elsewhere in this Prospectus. Unless the context otherwise requires, the term the "Company" refers to Advanced Accessory Systems, LLC, a Delaware limited liability company, and its subsidiaries, including SportRack, Brink and Valley. The term "SportRack" refers to SportRack, LLC, a Delaware limited liability company, and its subsidiaries; the term "Brink" refers to Brink International B.V., a private company with limited liability incorporated under the laws of The Netherlands, and its subsidiaries; the term "Valley" refers to Valley Industries, LLC, a Delaware limited liability company; the term "SportRack International" refers to SportRack International Inc., a Quebec corporation and a subsidiary of SportRack; and the term "Ellebi" refers to Ellebi S.r.1., an Italian corporation and a subsidiary of Brink. As used herein, the term "light vehicles" comprises light trucks and passenger cars, and the term "light trucks" includes minivans, standard size vans, sport utility vehicles ("SUVs") and pickup trucks. THE COMPANY GENERAL The Company is one of the world's largest designers, manufacturers and suppliers of towing and rack systems and related accessories for the automotive original equipment manufacturer ("OEM") market and the automotive aftermarket. The Company's products include a complete line of towing systems including accessories such as trailer balls, ball mounts, electrical harnesses, safety chains and locking hitch pins. The Company's broad offering of rack systems includes fixed and detachable racks and accessories which can be installed on vehicles to carry items such as bicycles, skis, luggage, surfboards and sailboards. The Company's products are sold as standard accessories or options for a variety of light vehicles. In 1997, on a pro forma basis, the Company estimates that approximately 49% of its net sales were generated from products sold for light trucks. The Company is the sole Tier 1 OEM supplier of towing or rack systems for eight of the top ten light trucks produced in North America, including the General Motors ("GM") C/K Pickup and Blazer, the Chrysler Grand Cherokee (towing systems and rack systems), T-3000 Pickup and Caravan and the Ford Explorer, Ranger and Windstar. On a pro forma basis for the year ended December 31, 1997, the Company's net sales and EBITDA (as defined) would have been $268.5 million and $36.3 million, respectively. COMPETITIVE ADVANTAGES Leading Global Market Position. The Company is the world's largest designer, manufacturer and supplier of towing systems and one of the world's largest designers, manufacturers and suppliers of rack systems. The Company is the largest supplier of towing systems in Europe, the largest supplier of towing systems to automotive OEMs in North America and the second largest supplier of towing systems to the aftermarket in North America. The Company is also one of the two largest suppliers of rack systems sold to automotive OEMs in North America. The Company has 19 engineering, manufacturing and distribution facilities strategically located in the United States, Canada, The Netherlands, Denmark, Germany, the United Kingdom, Sweden, Italy and France. By virtue of its size and global presence, the Company believes it benefits from several competitive advantages, including the ability to (i) satisfy local design, production, quality and timing requirements of global OEMs; (ii) provide "one-stop shopping" for customers' product and service requirements; (iii) optimize plant production; (iv) maximize its raw material purchasing power; (v) spread its selling, administrative and product development expenses over a large base of net sales; and (vi) develop and maintain state-of-the-art production facilities. Strong Relationships with Diverse Customer Base. The Company has an established position as a Tier 1 supplier of towing and/or rack systems to most of the OEMs manufacturing in North America and Europe including Chrysler, General Motors, Toyota, Opel, Volvo, Isuzu, Ford, Mercedes, BMW, Subaru, Fiat, Mitsubishi, Nissan, Volkswagen, SEAT, Skoda and Kia. The Company supplies Chrysler with substantially all its towing systems and rack systems and accessories. The Company also supplies approximately 50% of the towing and rack system requirements of General Motors. Tier 1 status and strong customer relationships are 4 7 important elements in achieving continued profitable growth because, as OEMs narrow their supplier bases, well regarded, existing suppliers have an advantage in gaining new contracts. The evolution of OEM relationships into strategic partnerships provides a significant advantage to Tier 1 suppliers with system integration capabilities (such as the Company) in retaining existing contracts as well as in participating during the design phase for new vehicles, which is integral to becoming a supplier for such new platforms. The Company is also a leading supplier of towing and rack systems to automotive aftermarket wholesalers, retailers and installers, such as U-Haul, Pep Boys, Balkamp, Advance Auto Parts, Coast Distribution Systems, Discount Auto Parts, Ace Hardware and Canadian Tire. Comprehensive Product Line. The Company continues to position itself as a leading supplier to its customers for a growing range of products and services. Through its offering of over 2,000 towing system models, the Company's products fit virtually every light vehicle produced in North America and Europe. The Company is one of a limited number of European manufacturers with such a broad product line that also satisfies European Community ("EC") regulatory safety standards, even though such standards have not yet been adopted by each EC member country. Competitors whose products do not satisfy such standards face substantial design and testing costs to offer a comparable product line that meets these safety standards. The Company has provided OEMs with fixed rack systems for approximately half of the light truck models produced in North America that utilize vehicle-specific fixed racks. The Company's innovative Mondial(R) product line of detachable rack systems, which consists of only 14 SKUs, is able to fit substantially all the light vehicles produced in North America and Europe, while some competitors' comparable product lines consist of more than 200 SKUs. The Company believes that its broad product offerings also facilitate strategic partnerships with automotive aftermarket wholesalers, retailers and installers. Design and Engineering Expertise. The Company has an engineering and research and development staff that develops new products and processing technologies. The Company works directly with OEM designers to create innovative solutions that simplify vehicle assembly and reduce vehicle cost and weight. For example, the Company developed a roll formed, aluminum cross rail which substantially reduced the weight of the Chrysler minivan rack at a competitive cost. Additionally, the Company is responsible for many industry innovations, including lighter, less obtrusive, round tube towing hitches as well as push button and pull lever stanchions on fixed rack systems. The Company believes its design and engineering capabilities provide significant value to its customers by (i) shortening OEM new product development cycles; (ii) lowering OEM manufacturing costs; (iii) providing technical expertise; and (iv) permitting aftermarket customers to maintain lower inventory levels. The Company also believes that its design innovations have created value for end users by providing products that are durable and easy to install and that enhance vehicle utility and appearance. High Quality, Low Cost Manufacturing Position. The Company believes that it is one of the highest quality, lowest cost suppliers of towing and rack systems in North America and Europe. The Company has received numerous quality and performance awards, including Chrysler's Gold Pentastar Award, Ford's Q-1 Award, Toyota's Distinguished Supplier Award and Nissan's Superior Supplier Performance Award. Supplier quality systems are currently being standardized across OEMs through the ISO-9000 and QS-9000 programs. The Company has achieved ISO-9000 or QS-9000 certification for ten of its 17 manufacturing and engineering facilities and is in the process of obtaining certification for the rest of its facilities. The Company's low cost position is a result of its strict cost controls and continuous improvement programs designed to enhance productivity. OEMs typically prefer stable suppliers who can generate productivity gains that can be shared to reduce OEM costs. The Company's cost controls are closely integrated with its quality driven manufacturing operations, thereby allowing it to profitably deliver high quality, easy to install and competitively priced components on a just-in-time basis. The Company's focus on low cost manufacturing also provides benefits when selling products to the less price sensitive aftermarket. BUSINESS STRATEGY The Company's objective is to strengthen its position as a leading global supplier of automotive exterior accessories, thereby increasing revenue and cash flow. In order to accomplish its goal, the Company intends to pursue the following strategies. 5 8 Increase Global Market Share. The Company intends to capitalize on its expanded presence in North America and Europe by marketing products to its global automotive OEM customers. Through its past acquisitions of complementary product lines, the Company is able to offer an expanded range of products and services to its extended customer base. The Company also expects to secure new customers by virtue of its expanded market presence and broad product and service offerings. The Company believes its continued emphasis on new technology (both product and process), will result in the development of more innovative, high margin towing and rack system products which it expects to market to its expanding customer base. Maintain and Enhance Strong Customer Relationships. The Company intends to strengthen and expand its relationships with global automotive OEMs and aftermarket customers by (i) continuing its commitment to innovative design and development of products during the early stages of vehicle design and redesign; (ii) building on its position as a low cost supplier of quality accessory products; (iii) offering new products in existing and new geographic areas by taking advantage of existing OEM relationships; and (iv) working with aftermarket customers to develop new products and marketing strategies. The Company has recently obtained orders from Mercedes Benz, BMW, SEAT and Chrysler to supply products for new SUVs. Increase Operating Efficiencies. The Company believes there are significant opportunities for improvement in margins and cash flow through intercompany cooperation among its various acquired business units, including (i) realizing economies of scale from the combined purchasing power of a larger company; (ii) achieving production and other operating efficiencies through the implementation of a "best practices" program; (iii) reducing certain selling, administrative and product development expenses; and (iv) reducing capital and operating expenditures from coordinated use of manufacturing resources. Pursue Strategic Acquisitions. In response to the trend in the OEM market toward systems suppliers, the Company is focused on making strategic acquisitions that will enhance its ability to provide integrated systems (such as a towing or rack system) or otherwise leverage its existing business by providing additional product, manufacturing and service capabilities. The Company also intends to pursue acquisitions which will expand its customer base by providing an entree to new customers, including expansion into selected geographic areas. The Company believes that such acquisitions should provide additional opportunities for increased net sales and cash flow by enhancing the Company's manufacturing and marketing capabilities. INDUSTRY OVERVIEW In 1996, the North American exterior accessories market for light vehicles was approximately $3.3 billion. In 1996, in the first year of ownership, North American consumers spent approximately $1.4 billion on exterior accessories for their light trucks as compared to approximately $0.8 billion in 1986, representing a compound annual growth rate of 5.9%. Growth in this market, and in towing systems and rack systems in particular, resulted in large part from the increased production and sale of light trucks, which in 1996 accounted for approximately 46% of total light vehicle production in North America as compared to 32% in 1986. According to DRI/McGraw-Hill Ward's Global Automotive Group, production of light trucks in North America and Western Europe has outpaced overall production in the light vehicle market (ten-year compound annual growth rate of 1.3% in North America and 1.4% in Western Europe), resulting primarily from the growth in minivans (ten-year compound annual growth rate of 8.6% in North America and 30.8% in Western Europe) and SUVs (ten-year compound annual growth rate of 11.6% in North America and 13.7% in Western Europe), although no assurance can be given that such production rates of light trucks will continue or will continue to outpace overall production. The strong growth in production of light trucks is attributable to several factors, including (i) the more sizable and comfortable interiors and aesthetically pleasing modern designs offered by light trucks; (ii) the changing lifestyle of the population, which is aging and therefore devoting more time to recreational activities; (iii) the versatile product offerings targeted toward both the luxury and economy market sectors; (iv) the increasing acceptance of light truck use for everyday transportation; and (v) the durability and special performance capabilities (e.g. four-wheel drive) of light trucks. 6 9 As automobile and light truck manufacturers have faced increased global competition, they have sought to significantly improve quality, reduce costs and shorten the development time required for new vehicle models. These changes have altered the OEM/supplier relationship and benefited larger suppliers that have strong product engineering and development capabilities, superior quality products, lower unit costs and the ability to deliver products on a timely basis. As a result, the Company believes that it will continue to benefit from the following automotive OEM and aftermarket trends: (i) consolidation of supplier base by OEMs; (ii) emergence of EC safety standards; (iii) increased levels of manufacturing in North America by transplants; and (iv) increased outsourcing by OEMs. MANAGEMENT AND OWNERSHIP Chase Capital Partners ("CCP") and certain members of the Company's management formed the Company in September 1995, to make strategic acquisitions of automotive exterior accessory manufacturers and to integrate those acquisitions into a global enterprise that would be a preferred supplier to the automotive industry. The Company's senior management team has an average of over 20 years of experience in manufacturing and marketing automotive-related products. The Company believes that members of its management team have strong and successful track records in the operation of their respective businesses. Members of the Company's senior management own, in the aggregate, approximately 23.2% of the issued and outstanding voting securities of the Company on a fully diluted basis. CCP is the private equity group of The Chase Manhattan Corporation, the largest bank holding company in the United States, and is one of the largest private equity organizations in the United States, with over $4.0 billion under management. Through its affiliates, CCP invests in leveraged buyouts, recapitalizations and venture capital opportunities by providing equity and mezzanine debt capital. Since its inception in 1984, CCP has closed over 450 direct investments in a variety of industries. Affiliates of CCP own approximately 47.7% of the issued and outstanding voting securities of the Company on a fully diluted basis. See "Plan of Distribution." ACQUISITION HISTORY In September 1995, the Company, through its SportRack subsidiary, acquired substantially all of the net assets of the MascoTech Accessories division (the "MascoTech Division") of MascoTech, Inc. ("MascoTech"). The MascoTech Division was a North American supplier of rack systems and accessories to the automotive OEM market and aftermarket. In October 1996, the Company acquired (the "Brink Acquisition") all of the capital stock of Brink B.V., a private company with limited liability incorporated under the laws of The Netherlands and a European supplier of towing systems to the automotive OEM market and aftermarket. In December 1996, ownership of Brink B.V. and its subsidiaries was transferred to a newly formed subsidiary of the Company, Brink International B.V. In August 1997, the Company formed Valley to acquire (the "Valley Acquisition") the net assets of Valley Industries, Inc. ("Valley Industries"), a North American supplier of towing systems to the automotive OEM market and aftermarket. Two smaller acquisitions were completed in July 1997 by a subsidiary of SportRack, SportRack International. SportRack International acquired from Bell Sports Corporation ("Bell") the net assets of its SportRack division, a Canadian supplier of rack systems and accessories to the automotive aftermarket. CCP is a significant equity investor in Bell. SportRack International also acquired the capital stock of Nomadic Sports, Inc. ("Nomadic"), a Canadian supplier of rack systems and accessories to the automotive OEM market and aftermarket. The acquisitions of the SportRack division of Bell and Nomadic are collectively referred to in this Prospectus as the "SportRack International Acquisition." 7 10 In January 1998, the Company formed Ellebi to acquire the net assets of a division of Ellebi S.p.A. (the "Ellebi Acquisition"). Ellebi is an Italian manufacturer and distributor of towing systems to the European automotive OEM market and aftermarket. In February 1998, the Company through SportRack International, Inc., acquired the net assets of Transfo-Rakzs, Inc. (the "Transfo-Rakzs Acquisition"), a designer, manufacturer and distributor of rear hitch rack carrying systems and related products to Canada and the U.S. The Ellebi Acquisition and the Transfo-Rakzs Acquisition are referred to herein collectively as the "1998 Transactions." ------------------------ Capital Corp. is a newly formed Delaware corporation and is a wholly owned subsidiary of the Company. The New Notes will be the joint and several obligations of the Company and Capital Corp. Capital Corp. has no assets and does not conduct any operations. The principal executive offices of the Company are located at 12900 Hall Road, Suite 200, Sterling Heights, Michigan 48313 and its telephone number is (810) 997-2900. 8 11 THE EXCHANGE OFFER Registration Rights Agreement..................... The Old Notes were sold by the Issuers on September 25, 1997 to CSI and First Chicago Capital Markets, Inc. (the "Initial Purchasers"), who resold the Old Notes to qualified institutional investors in reliance on Rule 144A under the Securities Act. In connection therewith, the Issuers, the Guarantors and the Initial Purchasers executed and delivered for the benefit of the holders of the Old Notes a registration rights agreement (the "Registration Rights Agreement") providing, among other things, for the Exchange Offer. The Exchange Offer............ New Notes are being offered in exchange for a like principal amount of Old Notes. As of the date hereof, $125,000,000 aggregate principal amount of Old Notes are outstanding. The Issuers will issue the New Notes to Holders promptly following the Expiration Date. See "Risk Factors -- Consequences of Failure to Exchange." Expiration Date............... 5:00 p.m., New York City time, on , 1998, unless the Exchange Offer is extended as provided herein, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. Interest...................... Each New Note will bear interest from April 1, 1998. Interest will be payable on the Old Notes accepted for exchange to, but not including, April 1, 1998. Conditions to the Exchange Offer......................... The Exchange Offer is subject to certain customary conditions, which may be waived by the Issuers. The Issuers reserve the right to amend, terminate or extend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such condition. See "The Exchange Offer -- Conditions." Procedures for Tendering Old Notes......................... Each Holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Old Notes and any other required documentation to the exchange agent (the "Exchange Agent") at the address set forth herein. By executing the Letter of Transmittal, each Holder will represent to the Issuers, among other things, that (i) the New Notes acquired pursuant to the Exchange Offer by the Holder and any beneficial owners of Old Notes are being obtained in the ordinary course of business of the person receiving such New Notes, (ii) neither the Holder nor such beneficial owner has an arrangement with any person to participate in the distribution of such New Notes, (iii) neither the Holder nor such beneficial owner nor any such other person is engaging in or intends to engage in a distribution of such New Notes and (iv) neither the Holder nor such beneficial owner is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Issuers. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes 9 12 were acquired by such broker-dealer as a result of marketmaking activities or other trading activities (other than Old Notes acquired directly from the Issuers), may participate in the Exchange Offer but may be deemed an "underwriter" under the Securities Act and, therefore, must acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "The Exchange Offer - Procedures for Tendering" and "Plan of Distribution." Special Procedures for Beneficial Owners............. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered Holder promptly and instruct such registered Holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such beneficial owner's own behalf, such beneficial owner must, prior to completing and executing the Letter of Transmittal and delivering his Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such beneficial owner's name or obtain a properly completed bond power from the registered Holder. The transfer of registered ownership may take considerable time. See "The Exchange Offer -- Procedures for Tendering." Guaranteed Delivery Procedures.................... Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not immediately available or who cannot deliver their Old Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures." Withdrawal Rights............. Tenders may be withdrawn as provided herein at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer -- Withdrawal of Tenders." Acceptance of Old Notes and Delivery of New Notes......... The Issuers will accept for exchange any and all Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." Exchange Agent................ First Union National Bank is serving as Exchange Agent in connection with the Exchange Offer. See "The Exchange Offer -- Exchange Agent." Use of Proceeds............... There will be no cash proceeds to the Issuers from the exchange pursuant to the Exchange Offer. 10 13 Consequences of Failure to Exchange.................... Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, Old Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. 11 14 SUMMARY DESCRIPTION OF THE NEW NOTES The Exchange Offer applies to $125,000,000 aggregate principal amount of Old Notes. The terms of the New Notes are identical in all material respects to the Old Notes except that the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the Registration Rights Agreement, which provisions will evidence the same debt as the Old Notes and, except as set forth in the immediately preceding sentence, will be entitled to the benefits of the Indenture, under which both the Old Notes were, and the New Notes will be, issued. See "Description of Notes." Securities Offered............ $125,000,000 aggregate principal amount of 9 3/4% Series B Senior Subordinated Notes due 2007. Maturity...................... October 1, 2007. Interest Payment Dates........ April 1 and October 1, commencing October 1, 1998. Sinking Fund.................. None. Optional Redemption........... Except as described below, the Issuers may not redeem the Notes prior to October 1, 2002. On or after such date, the Issuers may redeem the Notes, in whole or in part, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time and from time to time on or prior to October 1, 2000, the Issuers may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of one or more Public Equity Offerings by the Company, at a redemption price equal to 109.750% of the principal amount to be redeemed, together with accrued and unpaid interest, if any, to the date of redemption, provided that at least 65% of the aggregate principal amount of the Notes originally issued remain outstanding after each such redemption. See "Description of the Notes -- Optional Redemption." Change of Control............. Upon the occurrence of a Change of Control, the Issuers will be required to make an offer to repurchase the Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. See "Description of the Notes -- Change of Control." Subsidiary Guarantees......... The New Notes will be guaranteed (the "Guarantees"), jointly and severally on a senior subordinated basis, by the Guarantors. The Guarantors also guarantee all obligations of the Company under the Amended and Restated Credit Agreement. The obligations of each Guarantor under its Guarantee will be subordinated in right of payment to the prior payment in full of all existing and future Guarantor Senior Indebtedness (as defined) of such Guarantor to substantially the same extent as the Notes are subordinated to all existing and future Senior Indebtedness of the Issuers. See "Description of the Notes -- Guarantees of the Notes." Ranking....................... The New Notes will be unsecured and will be subordinated in right of payment to all existing and future Senior Indebtedness of the Issuers. The New Notes will rank pari passu in right of payment with any future senior subordinated Indebtedness (as defined) of the Issuers and will rank senior to all Subordinated Indebtedness 12 15 (as defined) of the Issuers. As of December 31, 1997, on a pro forma basis after giving effect to the 1998 Transactions, the aggregate principal amount of the Issuers' outstanding Senior Indebtedness would have been approximately $73.4 million (excluding unused commitments). See "Description of the Notes -- Ranking" and "-- Subordination of the Notes." Certain Covenants............. The indenture under which the Old Notes were, and the New Notes will be, issued (the "Indenture") contains certain covenants that, among other things, limit (i) the incurrence of additional indebtedness by the Company and its Restricted Subsidiaries, (ii) the payment of dividends on, and redemption of, capital stock of the Company and its Restricted Subsidiaries and the redemption of certain subordinated obligations of the Company and its Restricted Subsidiaries, (iii) investments, (iv) sales of assets and Restricted Subsidiary stock, (v) transactions with affiliates and (vi) consolidations, mergers and transfers of all or substantially all of the Company's assets. The Indenture also prohibits certain restrictions on distributions from Restricted Subsidiaries. However, all of these limitations and prohibitions are subject to a number of important qualifications and exceptions. See "Description of the Notes -- Certain Covenants." 13 16 SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA The following table presents summary historical financial data of the MascoTech Division ("Predecessor") for the years ended December 31, 1993 and 1994 and the period from January 1, 1995 through September 27, 1995 (the period prior to the acquisition of the net assets of the MascoTech Division by the Company). The data as of and for the years ended December 31, 1993 and 1994 have been derived from the unaudited financial statements of the MascoTech Division and the data for the period from January 1, 1995 through September 27, 1995 have been derived from the audited financial statements included elsewhere in this Prospectus. The historical data as of and for the period from September 28, 1995 through December 31, 1995 and for the years ended December 31, 1996 and 1997 represent consolidated financial data of the Company subsequent to the acquisition of the MascoTech Division, and include (i) the operations of Brink subsequent to the Brink Acquisition on October 30, 1996; (ii) the operations of Bell and Nomadic subsequent to the SportRack International Acquisition on July 2, 1997 and July 24, 1997, respectively, and (iii) the operations of Valley subsequent to the Valley Acquisition on August 5, 1997. The historical data for the Company have been derived from the audited financial statements of the Company included elsewhere in this Prospectus. The summary pro forma statement of operations data and other financial data for the year ended December 31, 1997 were prepared to illustrate the effect of (i) the offering of the Old Notes (the "Offering"); (ii) the Valley Acquisition and the SportRack International Acquisition; and (iii) the 1998 Transactions, as if all of such transactions had occurred on January 1, 1997. The summary pro forma balance sheet data at December 31, 1997 was prepared to illustrate the effect of the 1998 Transactions as if each had occurred on December 31, 1997. The pro forma data do not purport to be indicative of the results of operations or the financial position of the Company that would have been obtained if the acquisitions and Offering had been completed as of such dates or to project the results of operations or the financial position of the Company for any future date or period. The following table should be read in conjunction with the financial statements of the Company, Valley Industries and Ellebi, "Selected Historical Financial Data," "Unaudited Pro Forma Financial Information" and, in each case, the related notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus. 14 17 SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
COMPANY ------------------------------------------------ PREDECESSOR HISTORICAL PRO FORMA --------------------------------- ------------------------------------ --------- YEAR ENDED PERIOD FROM PERIOD FROM YEAR ENDED DECEMBER 31, JANUARY 1 TO SEPTEMBER 28 DECEMBER 31, ----------------- SEPTEMBER 27, TO DECEMBER 31, ------------------------------ 1993 1994 1995 1995 1996(1) 1997(2) 1997 ---- ---- ------------- --------------- ------- ------- ---- (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net sales........................ $59,081 $60,882 $48,698 $16,299 $81,466 $188,678 $268,489 Cost of sales.................... 48,369 47,716 38,645 12,458 53,607 135,556 194,173 ------- ------- ------- ------- ------- -------- -------- Gross profit................... 10,712 13,166 10,053 3,841 27,859 53,122 74,316 Selling, administrative and product development expenses... 6,585 7,313 6,107 1,472 13,413 31,350 46,728 Amortization of intangible assets......................... -- -- -- 546 2,475 2,336 3,448 ------- ------- ------- ------- ------- -------- -------- Operating income............... 4,127 5,853 3,946 1,823 11,971 19,436 24,140 Other (income) expense Interest expense(3)............ -- -- -- 975 4,312 12,627 19,627 Foreign currency loss(4)....... -- -- -- -- 1,330 6,097 6,097 Other, net..................... 665 (105) 65 (22) (80) -- 125 ------- ------- ------- ------- ------- -------- -------- Income (loss) before minority interest, extraordinary charge and income taxes...... 3,462 5,958 3,881 870 6,409 712 (1,709) Provision (benefit) for income taxes(5)....................... 1,247 2,114 1,324 -- (491) (2,856) (2,561) ------- ------- ------- ------- ------- -------- -------- Income before minority interest and extraordinary charge..... 2,215 3,844 2,557 870 6,900 3,568 852 Minority interest................ -- -- -- 9 69 97 97 ------- ------- ------- ------- ------- -------- -------- Income before extraordinary charge....................... 2,215 3,844 2,557 861 6,831 3,471 755 Extraordinary charge(6).......... -- -- -- -- 1,970 7,416 -- ------- ------- ------- ------- ------- -------- -------- Net income (loss).............. $ 2,215 $ 3,844 $ 2,557 $ 861 $ 4,861 $ (3,945) $ 755 ======= ======= ======= ======= ======= ======== ======== OTHER DATA: Cash flows from operating activities..................... $ 8,683 $ 1,165 $ 3,741 $ 1,390 $ 9,917 $ 6,982 $ 10,374 EBITDA(7)........................ 4,890 6,773 4,735 2,651 16,448 27,916 36,291 Depreciation..................... 763 920 789 282 2,002 6,144 8,703 Capital expenditures............. 2,213 1,392 2,079 491 3,124 7,751 10,272 Ratio of EBITDA to interest expense................................. 2.72x 3.81x 2.21x 1.85x Ratio of earnings to fixed charges(8)............................... 1.89x 2.43x 1.06x -- BALANCE SHEET DATA (AT END OF PERIOD): Cash................................................................ $ 1,637 $ 2,514 $ 27,348 $ 6,589 Working capital..................................................... 3,960 14,368 64,375 54,577 Total assets........................................................ 59,979 148,359 265,483 273,374 Total debt, including current maturities............................ 34,900 93,142 197,126 197,963 Mandatorily redeemable warrants..................................... 200 3,498 3,507 3,507 Members' equity..................................................... 14,221 18,463 16,193 16,193
(footnotes on following page) 15 18 - ------------------------- (1) In October 1996, the Company acquired Brink. The Brink Acquisition has been accounted for in accordance with the purchase method of accounting. Accordingly, the operating results of Brink are included in the consolidated operating results of the Company subsequent to October 30, 1996. (2) The Company acquired the SportRack division of Bell on July 2, 1997, Nomadic on July 24, 1997, and Valley on August 5, 1997. The Valley Acquisition and the SportRack International Acquisition have been accounted for in accordance with the purchase method of accounting. Accordingly, the operating results of Valley and SportRack International are included in the consolidated operating results of the Company subsequent to the respective acquisition dates. (3) Prior to its acquisition by the Company on September 28, 1995, the Predecessor was a division of MascoTech and, accordingly, had no outstanding indebtedness. (4) Represents net currency loss on indebtedness, incurred in connection with the Brink Acquisition, which is currently denominated in U.S. dollars. (5) The Predecessor, as a division of MascoTech, was allocated a portion of the consolidated income tax provision, which approximated the division's federal income tax provision on a stand alone basis. The Company is a limited liability company and, as such, the earnings of the Company and its domestic subsidiaries are included in the taxable income of the Company's unitholders and no federal income tax provision is required. The Company's foreign subsidiaries provide for income taxes on their results of operations. (6) In connection with the indebtedness extinguished as a result of the Brink Acquisition, a prepayment penalty of $220,000 and unamortized deferred debt issuance costs of $1.8 million were charged to operations during 1996. In connection with indebtedness extinguished as a result of issuing the Old Notes, a prepayment penalty of $1.4 million, unamortized debt discount of $3.1 million, and unamortized deferred debt issuance costs of $3.2 million were charged to operations during 1997. The debt extinguishment charges in 1997 were reduced by $365,000 representing the income tax benefit recognized by Brink. (7) EBITDA is defined as operating income plus depreciation and amortization. EBITDA is presented because it is generally accepted as providing useful information regarding a company's ability to service and/or incur indebtedness. However, EBITDA should not be considered in isolation from or as an alternative to net income, cash flows from operating activities and other consolidated income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. See "Description of the Notes -- Certain Definitions" for the definition of EBITDA for purposes of the Indenture. (8) For purposes of determining the ratio of earnings to fixed charges, "earnings" are defined as income (loss) before minority interest, extraordinary charge and income taxes, plus fixed charges. "Fixed charges" consist of interest expense on all indebtedness (including amortization of deferred debt issuance costs) and the component of operating lease rental expense that management believes is representative of the interest component of rent expense. The Company's pro forma earnings were insufficient to cover pro forma fixed charges by $452,000 for the year ended December 31, 1997. 16 19 RISK FACTORS In addition to the other matters set forth in this Prospectus, the following factors should be considered carefully by holders of Old Notes before making a decision to tender their Old Notes in the Exchange Offer. CONSEQUENCES OF FAILURE TO EXCHANGE Holders of Old Notes who do not exchange the Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Old Notes under the Securities Act. Based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business, such holder has no arrangement with any person to participate in the distribution of such New Notes and neither such holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes. Notwithstanding the foregoing, each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with any resale of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities (other than Old Notes acquired directly from the Issuers). The Issuers have agreed that, for a period of 180 days after the date of this Prospectus, they will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." However, the ability of any Holder to resell the New Notes is subject to applicable state securities laws as described in "-- Blue Sky Restrictions on Resale of New Notes" below. NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES To participate in the Exchange Offer, and to avoid the restrictions on transfer of the Old Notes, Holders of Old Notes must transmit a properly completed Letter of Transmittal, including all other documents required by such Letter of Transmittal, to the Exchange Agent at one of the addresses set forth below under "The Exchange Offer -- Exchange Agent" on or prior to the Expiration Date. In addition, either (i) certificates for such Old Notes must be received by the Exchange Agent along with the Letter of Transmittal or (ii) a timely confirmation of a book-entry transfer for such Old Notes, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company pursuant to the procedure for book-entry transfer described herein, must be received by the Exchange Agent prior to the Expiration Date or (iii) the Holder must comply with the guaranteed delivery procedures described herein. See "The Exchange Offer." BLUE SKY RESTRICTIONS ON RESALE OF NEW NOTES In order to comply with the securities laws of certain jurisdictions, the New Notes may not be offered or resold by any Holder unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and the requirements of such exemption have been satisfied. The Issuers do not currently intend to register or qualify the resale of the New Notes in any such jurisdictions. However, an exemption is generally available for sales to registered broker-dealers and certain institutional buyers. Other exemptions under applicable state securities laws may also be available. 17 20 LEVERAGE AND LIQUIDITY As a result of the Transactions, the Company is highly leveraged. On a pro forma basis, the Company's indebtedness at December 31, 1997 was approximately $198.0 million. In addition, subject to the restrictions in the Amended and Restated Credit Agreement and the Indenture, the Company and its subsidiaries may incur additional indebtedness (including additional Senior Indebtedness) from time to time to finance acquisitions or capital expenditures or for other purposes. See "Pro Forma Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources," "Description of the Credit Facilities" and "Description of the Notes." The Company's high degree of leverage may have important consequences for the Company, including (i) the ability of the Company to obtain additional financing for acquisitions, working capital, capital expenditures or other purposes, if necessary, may be impaired or such financing may not be available on terms favorable to the Company; (ii) a substantial portion of the Company's cash flow will be used to pay the Company's interest expense and debt amortization, which will reduce the funds that would otherwise be available to the Company for its operations and future business opportunities; (iii) a substantial decrease in net operating cash flows or an increase in expenses of the Company could make it difficult for the Company to meet its debt service requirements and force it to modify its operations; (iv) the Company may be more highly leveraged than its competitors, which may place it at a competitive disadvantage; and (v) the Company's high degree of leverage may make it more vulnerable to a downturn in its business or the economy generally. Any inability of the Company to service its indebtedness or obtain additional financing, as needed, would have a material adverse effect on the Company. The Company's ability to pay principal and interest on the Notes and to satisfy its other debt obligations will depend upon its future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, certain of which are beyond its control as well as the availability of revolving credit borrowings under the Amended and Restated Credit Agreement or a successor facility. The Company anticipates that, based on current and expected levels of operations, its operating cash flow, together with borrowings under the Amended and Restated Credit Agreement, should be sufficient to meet its debt service, working capital and capital expenditure requirements for the foreseeable future, although no assurances can be given in this regard, including as to the ability to increase revenues or profit margins. If the Company is unable to service its indebtedness, it will be forced to take actions such as reducing or delaying acquisitions and/or capital expenditures, selling assets, restructuring or refinancing its indebtedness (which could include the Notes), or seeking additional equity capital. There is no assurance that any of these remedies can be effected on satisfactory terms, if at all, including, whether, and on what terms, the Company could raise equity capital. RESTRICTIVE DEBT COVENANTS The Amended and Restated Credit Agreement and the Indenture contain a number of significant covenants that, among other things, restrict the ability of the Company to (i) declare dividends or redeem or repurchase capital stock; (ii) prepay, redeem or purchase debt, including the Notes; (iii) incur liens; (iv) make loans and investments; (v) incur additional indebtedness; (vi) amend or otherwise alter debt and other material agreements; (vii) make capital expenditures; (viii) engage in mergers, acquisitions and asset sales; (ix) enter into transactions with affiliates; and (x) alter the business it conducts. The indebtedness outstanding under the Amended and Restated Credit Agreement is guaranteed by all of the Company's domestic subsidiaries and is secured by a first priority lien on substantially all of the properties and assets of the Company and its respective domestic subsidiaries, now owned or acquired later, including a pledge of all of the shares of the Company's respective existing and future domestic subsidiaries, and up to 65% of the shares of the Company's existing and future foreign subsidiaries which are owned by the Company or one of its domestic subsidiaries and certain of the tangible and intangible assets of the Company's existing and future foreign subsidiaries. In addition, under the Amended and Restated Credit Agreement, the Company is required to comply with financial covenants with respect to (i) a maximum leverage ratio; (ii) a minimum fixed charge coverage ratio; (iii) a minimum net worth; (iv) capital expenditures; and (v) rentals. If the Company were unable to borrow under the Amended and Restated Credit Agreement due to a default or 18 21 failure to meet certain specified borrowing base prerequisites for borrowing, it could be left without sufficient liquidity. SUBORDINATION OF NEW NOTES AND THE GUARANTEES; NON-GUARANTOR SUBSIDIARIES The New Notes and the Guarantees will be unsecured and subordinated to the prior payment in full of all Senior Indebtedness of the Company and the Guarantors, respectively. As of December 31, 1997, on a pro forma basis, the aggregate outstanding principal amount of all Senior Indebtedness was approximately $73.4 million. In the event of a bankruptcy, liquidation or reorganization of the Company, the assets of the Company or the Guarantors will be available to pay obligations on the New Notes only after all Senior Indebtedness of the Company or the Guarantors, as the case may be, has been paid in full, and there may not be sufficient assets remaining to pay amounts due on any or all of the New Notes. In addition, the Company may not pay principal or premium, if any, or interest on the New Notes if any Senior Indebtedness is not paid when due or any other default on any Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms, unless, in either case, such amount has been paid in full or the default has been cured or waived and such acceleration has been rescinded. In addition, if any default occurs with respect to certain Senior Indebtedness and certain other conditions are satisfied, the Company may not make any payments on the New Notes for a designated period of time. Finally, if any judicial proceeding is pending with respect to any such default in payment on any Senior Indebtedness, or other default with respect to certain Senior Indebtedness, or if the maturity of the New Notes is accelerated because of a default under the Indenture and such default constitutes a default with respect to any Senior Indebtedness, the Company may not make any payment on the New Notes. The New Notes will not be guaranteed by any of the Company's foreign subsidiaries. See "Description of the Notes." On a pro forma basis, approximately 35% of the Company's net sales were made by non-Guarantor subsidiaries in 1997. INTEREST RATE FLUCTUATIONS A significant portion of the indebtedness of the Company to be outstanding following the Offering will bear interest at variable rates. While the Company may enter interest rate protection agreements to limit its exposure to increases in such interest rates, such agreements will not eliminate the exposure to variable rates. Any increase in the interest rates on the Company's indebtedness will reduce funds available to the Company for its operations and future business opportunities. INTEGRATION OF ACQUISITIONS The Company seeks to grow through acquisitions. No assurance can be given that the integration of any future acquisitions will be successful or that the anticipated strategic benefits of any such future acquisitions will be realized. Acquisitions may involve a number of special risks, including, but not limited to, adverse short-term effects on the Company's reported operating results, diversion of management's attention, standardization of accounting systems, dependence on retaining, hiring and training key personnel, and unanticipated problems or legal liabilities. The ability of the Company to successfully implement its acquisition strategy depends on a number of factors, some of which are beyond the Company's control. There can be no assurance that the Company will be able to consummate acquisitions in the future on terms acceptable to it. POTENTIAL RISKS RELATED TO SIGNIFICANT OPERATIONS IN FOREIGN COUNTRIES The Company manufactures and sells certain of its products in Europe, Canada and Mexico. In 1997, on a pro forma basis, approximately 35% of the Company's net sales were derived from operations conducted outside the United States. Such sales are principally in currencies other than U.S. dollars. Foreign operations are subject to certain risks that can materially affect the sales, profits, cash flows and financial position of the Company, such as currency exchange rate fluctuations, inflation, changes in import duties, exchange controls and variable political conditions. In particular, currency exchange rate fluctuations may impact the revenues 19 22 and gross margins of the Company's foreign operations. Moreover, most of the Company's indebtedness is denominated in U.S. dollars and exchange rate moves and other factors may affect the amount and availability of dollars to service such debt. In addition, a highly inflationary economy may also give rise to increased production costs without correspondingly increased prices, especially if products are exported to countries with low inflation rates. OWNERSHIP OF THE COMPANY CCP and its affiliates in the aggregate own approximately 47.7% of the Company's issued and outstanding voting securities on a fully diluted basis. In addition, pursuant to the Members' Agreement (as defined), affiliates of CCP have the ability to appoint a majority of the members of the Company's Board of Managers. See "Management -- Members' Agreement." Accordingly, CCP will be able to exert substantial influence on the direction and future operations of the Company. See "Security Ownership of Certain Beneficial Owners and Management" and "Plan of Distribution." THE OEM SUPPLIER INDUSTRY The Company competes in the global OEM supplier industry which is characterized by a small number of OEMs which are able to exert considerable pressure on OEM suppliers, including the Company. On a pro forma basis, sales to OEM customers were approximately 65% of the Company's aggregate net sales in 1997. In addition, on a pro forma basis, sales to Chrysler and General Motors were approximately 27% and 16%, respectively, of the Company's aggregate net sales in 1997. Sales to these customers consist of a large number of different parts, tooling and other services, which are sold to separate divisions and operating groups within each customer's organizations. Although the Company has purchase orders from such customers, such purchase orders generally provide for supplying the customer's requirements for a particular model or model year rather than for manufacturing a specific quantity of products. The loss of either of such customers or any of such purchase orders, or a significant decrease in demand for certain models or a group of related models sold by any of its major customers could have a material adverse effect on the Company. The failure of the Company to obtain new business for new models or to retain or increase business on redesigned existing models could adversely affect the Company. OEM customers are also able to exert considerable pressure on component and system suppliers to reduce costs, provide integrated systems (as opposed to just parts), finance tooling, improve quality and provide additional design and engineering capabilities. There can be no assurance that the additional costs of increased quality standards, price reductions or additional engineering or systems integration capabilities required by OEMs will not have a material adverse effect on the financial condition or results of operations of the Company. In addition, the Company may not be able to pass on increases in the cost of raw materials to its OEM customers. The OEM supplier industry is highly cyclical and, in large part, dependent upon the overall strength of consumer demand for light trucks and passenger cars. There can be no assurance that the automotive industry for which the Company supplies components and systems, will not experience downturns in the future. An economic recession typically impacts substantially leveraged companies such as the Company more than similarly situated companies with less leverage. A decrease in overall consumer demand for motor vehicles in general or specific types of vehicles could have a material adverse effect on the Company's financial condition and results of operations. LABOR RELATIONS Approximately 150 of the Company's employees in the United States at the Company's Port Huron, Michigan facility are represented by the Teamsters Union. Collective bargaining agreements with the Teamsters Union affecting these employees expire in April 1999. As is common in many European jurisdictions, substantially all of the Company's employees in Europe are covered by country-wide collective bargaining agreements. While the Company believes that its relations with its employees are satisfactory, a dispute between the Company and its employees could have a material adverse effect on the Company. 20 23 Many of the Company's OEM and other Tier 1 supplier customers, and other suppliers to the Company's customers, are unionized, and work stoppages, slowdowns or other labor disputes experienced by, and the labor relations policies of, OEMs and other Tier 1 suppliers could have an adverse effect on the Company's results of operations. PURCHASE OF THE NOTES UPON CHANGE OF CONTROL Upon a Change of Control, the Company is required to offer to purchase all outstanding New Notes at 101% of the principal amount thereof plus accrued and unpaid interest to the date of purchase. The source of funds for any such purchase will be the Company's available cash or cash generated from operations or other sources, including borrowing, sales of assets, sales of equity or funds provided by a new controlling person. However, there can be no assurance that sufficient funds will be available at the time of any Change of Control to make any required repurchases of New Notes tendered, or that, if applicable, restrictions in the Amended and Restated Credit Agreement will allow the Company to make such required repurchases. See "Description of the Notes -- Change of Control." COMPETITION The Company's industry is highly competitive. A large number of actual or potential competitors exist, some of which are larger than the Company and have substantially greater resources than the Company. See "Business -- Competition." There can be no assurance that the Company's business will not be adversely affected by increased competition in the markets in which it currently operates or in markets in which it will operate in the future, or that the Company will be able to improve or maintain its profit margins. In addition, the Company principally competes for new business both at the beginning of the development of new models and upon the redesign of existing models by its major customers. New model development generally begins two to four years prior to the marketing of such models to the public. OEMs have increasingly stressed the need for suppliers with global capabilities. There can be no assurance that by further expanding into international markets the Company will be successful either in competing with other suppliers, domestic or foreign, or in maintaining its relationship with various OEMs, such that its international operations will be profitable. ENVIRONMENTAL MATTERS The Company's operations are subject to various foreign, federal, state and local environmental laws, and regulations, including, but not limited to, those governing discharges into the air and water, the storage, handling and disposal of solid and hazardous wastes, the remediation of soil and groundwater contaminated by petroleum products or hazardous substances or wastes, and the health and safety of employees. Compliance with environmental laws, stricter interpretations of or amendments to such laws, or more vigorous enforcement policies by regulatory agencies may require material expenditures by the Company. The nature of the Company's current and former operations and the history of industrial uses at some of its facilities expose the Company to the risk of liabilities or claims with respect to environmental and worker health and safety matters. In addition, under certain environmental laws, a current or previous owner or operator of property may be jointly and severally liable for the costs of investigation, removal or remediation of certain substances on, under or in such property, without regard to negligence or fault. The presence of, or failure to remediate properly such substances may adversely affect the ability to sell or rent such property or to borrow using such property as collateral. In addition, persons who generate, arrange for the disposal or treatment of, or dispose of hazardous substances may be jointly and severally liable for the costs of investigation, remediation or removal of such hazardous substances at or from the disposal or treatment facility, regardless of whether the such facility is owned or operated by such person. Responsible parties also may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site. See "Business -- Environmental Regulation." 21 24 LACK OF A PUBLIC MARKET FOR THE NEW NOTES The New Notes will constitute a new class of securities with no established trading market. The Company does not intend to list the New Notes on any national securities exchange or to seek the admission thereof to trading in the Nasdaq National Market. The Old Notes are designated for trading in the Private Offerings, Resale and Trading through Automatic Linkages ("PORTAL") market. The Company has been advised by CSI that CSI currently intends to make a market in the New Notes. CSI is not obligated to do so, however, and any market-making activities with respect to the New Notes may be discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act, and may be limited during the Exchange Offer and the pendency of any Shelf Registration Statement (as defined). Accordingly, no assurance can be given that an active public or other market will develop for the New Notes or as to the liquidity of the trading market for the New Notes. If a trading market does not develop or is not maintained, holders of the New Notes may experience difficulty in reselling the New Notes or may be unable to sell them at all. If a market develops for the New Notes, future trading prices of the New Notes will depend on many factors, including among other things, prevailing interest rates, the Company's financial condition and results of operations, and the market for similar notes. Depending on those and other factors, the New Notes may trade at a discount from their principal amount. 22 25 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Old Notes were sold by the Issuers on September 25, 1997 to the Initial Purchasers, who resold the Old Notes to qualified institutional investors in reliance on Rule 144A under the Securities Act. In connection therewith, the Issuers, the Guarantors and the Initial Purchasers entered into the Registration Rights Agreement, which provides that (i) the Issuers will file an Exchange Offer Registration Statement with the Commission within 210 days after the date of the original issuance of the Old Notes (the "Issue Date"), (ii) the Issuers will use their best efforts to have the Exchange Offer Registration Statement declared effective by the Commission within 270 days after the Issue Date (the "Target Effectiveness Date"), (iii) the Issuers will consummate the Exchange Offer within 300 days after the Issue Date (the "Target Consummation Date") and (iv) if obligated to file the Shelf Registration Statement (as described below), the Issuers will use their best efforts to file the Shelf Registration Statement with the Commission promptly after such filing obligation arises and to cause the Shelf Registration to become effective by the Commission as promptly as possible after such obligation arises. Promptly after the effectiveness of the Registration Statement, the Issuers will offer, pursuant to this Prospectus, to the Holders of the Old Notes the opportunity to exchange their Old Notes for a like principal amount of New Notes, to be issued without a restrictive legend and which may, generally, be reoffered and resold by the holder without restrictions or limitations under the Securities Act. The term "Holder" with respect to the Exchange Offer means any person in whose name Old Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder. The Issuers have not requested, and do not intend to request, an interpretation by the staff of the Commission with respect to whether the New Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for sale, resold or otherwise transferred by any holder without compliance with the registration and prospectus delivery provisions of the Securities Act. Instead, based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Issuers believe that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder of such New Notes (other than any such holder that is an "affiliate" of the Issuers within the meaning of Rule 405 promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holder's business, such Holder has no arrangement or understanding with any person to participate in the distribution of such New Notes and neither such Holder nor any other such person is engaging in or intends to engage in a distribution of such New Notes. Because the Commission has not considered the Exchange Offer in the context of a no-action letter, there can be no assurance that the staff of the Commission would make a similar determination with respect to the Exchange Offer. Any Holder who is an affiliate of the Issuers or who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes cannot rely on such interpretations by the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale transaction. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities (other than Old Notes acquired directly from the Issuers). The Issuers have agreed that, for a period of 180 days after the date of this Prospectus, they will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." If (i) because of any change in law or in currently prevailing interpretations of the staff of the Commission, the Company reasonably determines in good faith, after consultation with counsel, that it is not 23 26 permitted to effect the Exchange Offer, (ii) the Exchange Offer is not commenced on or prior to the Target Effectiveness Date, (iii) the Exchange Offer is, for any reason, not consummated on or prior to the fifth day after the Target Consummation Date, (iv) any Holder of Private Exchange Securities (as defined) so requests, or (v) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive New Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (the occurrence of any such event set forth in the foregoing clauses (i) through (v), a "Shelf Registration Event"), then, in the case of such events, the Company shall promptly deliver to the Holders and the Trustee notice thereof (the "Shelf Notice") and thereafter the Issuers shall file an Initial Shelf Registration Statement (as defined) pursuant to the Registration Rights Agreement. SHELF REGISTRATION. If a Shelf Registration Event has occurred (and whether or not an Exchange Offer Registration Statement has been filed with the Commission or has become effective, or the Exchange Offer has been consummated), then: Initial Shelf Registration Statement. The Issuers shall promptly prepare and file with the Commission a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Old Notes (the "Initial Shelf Registration Statement"). The Issuers shall file with the Commission the Initial Shelf Registration Statement on or prior to the Filing Date. The Initial Shelf Registration Statement shall be on Form S-1 or another appropriate form, if available, permitting registration of such Registrable Securities for resale by such holders in the manner designated by them (including, without limitation, in one or more underwritten offerings). The Issuers shall not permit any securities other than the Registrable Securities to be included in the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement (as defined below). Each of the Issuers shall use their best efforts to cause the Initial Shelf Registration Statement to be declared effective under the Securities Act on or prior to the Effectiveness Date, and to keep the Initial Shelf Registration Statement continuously effective under the Securities Act until the date which is 24 months from the Closing Date, or such shorter period ending when (i) all Registrable Securities covered by the Initial Shelf Registration Statement have been sold in the manner set forth and as contemplated in the Initial Shelf Registration Statement or (ii) a Subsequent Shelf Registration Statement covering all of the Registrable Securities has been declared effective under the Securities Act (such 24 month or shorter period, the "Effectiveness Period"). Subsequent Shelf Registration Statements. If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), each of the Issuers shall use their best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event the Issuers shall within 30 days of such cessation of effectiveness amend the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Securities (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration Statement is filed, each of the Issuers shall use their best efforts to cause the Subsequent Shelf Registration Statement to be declared effective as soon as reasonably practicable after such filing and to keep such Registration Statement continuously effective until the end of the Effectiveness Period. As used herein the term "Shelf Registration Statement" means the Initial Shelf Registration Statement and any Subsequent Shelf Registration Statement. Supplements and Amendments. The Issuers shall promptly supplement and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration Statement, if required by the Securities Act, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Securities covered by such Registration Statement or by any underwriter of such Registrable Securities. 24 27 ADDITIONAL INTEREST (a) The Issuers agree to pay, as liquidated damages, additional interest on the Notes ("Additional Interest") under the circumstances and to the extent set forth below (each of which shall be given independent effect): if either the Exchange Offer Registration Statement or the Initial Shelf Registration Statement has not been filed on or prior to the Filing Date (unless, with respect to the Exchange Offer Registration Statement, a Shelf Registration Event described in clause (i) of the last paragraph of "-- Purpose and Effect of the Exchange Offer" shall have occurred prior to the Filing Date), Additional Interest shall accrue on the Notes over and above the stated interest in an amount equal to $0.192 per week (or any part thereof) per $1,000 principal amount of Old Notes: (i) if either the Exchange Offer Registration Statement or the Initial Shelf Registration Statement is not declared effective by the Commission on or prior to the Effectiveness Date (unless, with respect to the Exchange Offer Registration Statement, a Shelf Registration Event described in clause (i) of the last paragraph of "-- Purpose and Effect of the Exchange Offer" shall have occurred), Additional Interest shall accrue on the Notes over and above the stated interest in an amount equal to $0.192 per week (or any part thereof) per $1,000 principal amount of Old Notes; and (ii) if (A) the Issuers have not exchanged New Notes for all Old Notes validly tendered and not withdrawn in accordance with the terms of the Exchange Offer on or prior to the fifth day after the Expiration Date, or (B) the Exchange Offer Registration Statement ceases to be effective at any time prior to the Expiration Date, or (C) if applicable, any Shelf Registration Statement has been declared effective and such Shelf Registration Statement ceases to be effective at any time during the Effectiveness Period, then Additional Interest shall accrue on the Old Notes over and above the stated interest in an amount equal to $0.192 per week (or any part thereof) per $1,000 principal amount of the Old Notes for the first 90 days commencing on (x) the sixth day after the Expiration Date, in the case of (A) above, or (y) the day the Exchange Offer Registration Statement ceases to be effective in the case of (B) above, or (z) the day such Shelf Registration Statement ceases to be effective in the case of (C) above; provided, however, that (1) upon the filing of the Exchange Offer Registration Statement or a Shelf Registration Statement as required hereunder (in the case of clause (i) of this paragraph), (2) upon the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement as required hereunder (in the case of clause (ii) of this paragraph) or (3) upon the exchange of New Notes for all Old Notes validly tendered and not withdrawn (in the case of clause (ii)(A) of this paragraph), or upon the effectiveness of the Exchange Offer Registration Statement which had ceased to remain effective (in the case of clause (ii)(B) of this paragraph), or upon the effectiveness of the Shelf Registration Statement which had ceased to remain effective (in the case of clause (ii)(C) of this paragraph, Additional Interest on the Old Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue (but any accrued amount shall be payable). Holders of Old Notes will be required to make certain representations to the Issuers (as described in the Registration Rights Agreement) in order to participate in the Exchange Offer and will be required to deliver information to be used in connection with the Shelf Registration Statement and to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their Old Notes included in the Shelf Registration Statement and benefit from the provisions set forth above. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, all of the provisions of the Registration Rights Agreement, a copy of which has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The Old Notes are designated for trading in the PORTAL market. To the extent Old Notes are tendered and accepted in the Exchange Offer, the principal amount of outstanding Old Notes will decrease with a resulting decrease in the liquidity in the market therefor. Following the consummation of the Exchange Offer, 25 28 Holders of Old Notes who were eligible to participate in the Exchange Offer but who did not tender their Old Notes will not be entitled to certain rights under the Registration Rights Agreement and such Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for the Old Notes could be adversely affected. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal, the Issuers will accept any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time on the Expiration Date. The Issuers will issue $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of outstanding Old Notes accepted in the Exchange Offer. Holders may tender some or all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in integral multiples of $1,000. The form and terms of the New Notes will be identical in all material respects to the form and terms of the Old Notes, except that the New Notes have been registered under the Securities Act and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of additional interest on the Old Notes under certain circumstances relating to the Registration Rights Agreement, which provisions will terminate upon the consummation of the Exchange Offer. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture under which the Old Notes were, and the New Notes will be, issued. As of the date of this Prospectus, $125,000,000, aggregate principal amount of the Old Notes are outstanding. The Issuers have fixed the close of business on , 1998 as the record date for the Exchange Offer for purposes of determining the persons to whom this Prospectus, together with the Letter of Transmittal, will initially be sent. As of such date, there were registered Holders of the Old Notes. Holders of the Old Notes do not have any appraisal or dissenters' rights under the Delaware General Corporation Law (the "DGCL") or the Indenture in connection with the Exchange Offer. The Issuers intend to conduct the Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder. The Issuers shall be deemed to have accepted validly tendered Old Notes when, as and if the Issuers have given oral notice (confirmed in writing) or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering Holders for the purpose of the exchange of Old Notes. If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, any such unaccepted Old Notes will be returned, without expense, to the tendering Holder thereof as promptly as practicable after the Expiration Date. Holders who tender Old Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant to the Exchange Offer. The Issuers will pay all charges and expenses, other than certain applicable taxes, in connection with the Exchange Offer. See "-- Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1998 unless the Issuers, in their sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. In order to extend the Exchange Offer, the Issuers will notify the Exchange Agent of any extension by oral notice (confirmed in writing) or written notice and will make a public announcement thereof prior to 9:00 a.m., New York City time, on the next business day after each previously scheduled expiration date. The Issuers reserve the right, in their sole discretion, (i) to delay accepting any Old Notes, to extend the Exchange Offer or, if any of the conditions set forth below under "The Exchange Offer -- Conditions" shall not have been satisfied, to terminate the Exchange Offer, by giving oral notice (confirmed in writing) or 26 29 written notice of such delay, extension or termination to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a public announcement thereof. If the Exchange Offer is amended in a manner determined by the Issuers to constitute a material change, the Issuers will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered Holders, and the Issuers will extend the Exchange Offer for a period of five to 10 business days, depending upon the significance of the amendment and the manner of disclosure to the registered Holders, if the Exchange Offer would otherwise expire during such five- to 10-business-day period. Without limiting the manner in which the Issuers may choose to make public announcement of any delay, extension, termination or amendment of the Exchange Offer, the Issuers shall have no obligation to publish, advertise or otherwise communicate any such public announcement, other than by making a timely release to the Dow Jones News Service. INTEREST ON THE NEW NOTES The New Notes will bear interest from April 1, 1998. Interest will be paid on the Old Notes accepted for exchange to, but not including, April 1, 1998. PROCEDURES FOR TENDERING The tender of Old Notes by a holder thereof pursuant to one of the procedures set forth below and the acceptance thereof by the Issuers will constitute a binding agreement between such Holder and the Issuers in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. This Prospectus, together with the Letter of Transmittal, will first be sent on or about , 1998, to all Holders of Old Notes known to the Issuers and the Exchange Agent. Only a Holder of the Old Notes may tender such Old Notes in the Exchange Offer. A Holder who wishes to tender any Old Notes for exchange pursuant to the Exchange Offer must transmit a properly completed and duly executed Letter of Transmittal, or a facsimile thereof, including any other required documents, to the Exchange Agent prior to 5:00 p.m, New York City time, on the Expiration Date. In addition, either (i) certificates for such Old Notes must be received by the Exchange Agent along with the Letter of Transmittal or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date or (iii) the Holder must comply with the guaranteed delivery procedures described below. To be tendered effectively, the Old Notes, Letter of Transmittal and other required documents must be received by the Exchange Agent at the address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IF SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED AND PROPER INSURANCE BE OBTAINED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered Holder promptly and instruct such registered Holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such beneficial owner's own behalf, such beneficial owner must, prior to completing and executing the Letter of Transmittal and delivering such beneficial owner's Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such beneficial owner's name or obtain a properly completed bond power from the registered Holder. The transfer of registered ownership may take considerable time. 27 30 Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined herein) unless the Old Notes tendered pursuant thereto are tendered (i) by a registered Holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 promulgated under the Exchange Act (an "Eligible Institution"). If the Letter of Transmittal is signed by a person other than the registered Holder of any Old Notes listed therein, such Old Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered Holder as such registered Holder's name appears on such Old Notes. If the Letter of Transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Issuers, evidence satisfactory to the Issuers of their authority to so act must be submitted with the Letter of Transmittal. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Old Notes will be determined by the Issuers in their sole discretion, which determination will be final and binding. The Issuers reserve the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Issuers' acceptance of which would, in the opinion of counsel for the Issuers, be unlawful. The Issuers also reserve the right to waive any defects, irregularities or conditions of tender as to particular Old Notes. The interpretation by the Issuers of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Issuers shall determine. Although the Issuers intend to notify Holders of defects or irregularities with respect to tenders of Old Notes, neither the Issuers, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that the Issuers determine are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering Holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. By tendering, each Holder will represent to the Issuers, among other things, that (i) the New Notes acquired by the Holder and any beneficial owners of Old Notes pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, (ii) neither the Holder nor such beneficial owner has an arrangement with any person to participate in the distribution of such New Notes, (iii) neither the Holder nor such beneficial owner nor any such other person is engaging in or intends to engage in a distribution of such New Notes and (iv) neither the Holder nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Issuers. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities (other than Old Notes acquired directly from the Issuers), may participate in the Exchange Offer but may be deemed an "underwriter" under the Securities Act and, therefore, must acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "Plan of Distribution." BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Old Notes at the Book-Entry Transfer Facility for purposes of the Exchange Offer within two business days after the date of 28 31 this Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Old Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Old Notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the Exchange Agent at one of the addresses set forth below under "-- Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, the Letter of Transmittal or any other required documents to the Exchange Agent prior to the Expiration Date may effect a tender if: (a) the tender is made through an Eligible Institution; (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the Holder, the certificate number(s) of such Old Notes and the principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) together with the certificate(s) representing the Old Notes, or a Book-Entry Confirmation, and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal (or facsimile thereof), as well as the certificate(s) representing all tendered Old Notes in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS To withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate number or numbers and principal amount of such Old Notes), (iii) be signed by the Holder in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Old Notes register the transfer of such Old Notes into the name of the persons withdrawing the tender and (iv) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. If certificates for Old Notes have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates, the withdrawing Holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such Holder is an Eligible Institution. If Old Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Issuers in their sole discretion, which determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange 29 32 Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered by following one of the procedures described above under "-- Procedures for Tendering" at any time prior to the Expiration Date. Any Old Notes which have been tendered but which are not accepted for payment due to withdrawal, rejection of tender or termination of the Exchange Offer will be returned as soon as practicable to the Holder thereof without cost to such Holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such Old Notes will be credited to an account maintained with such Book-Entry Transfer Facility for the Old Notes). CONDITIONS Notwithstanding any other term of the Exchange Offer, the Issuers shall not be required to accept for exchange, or exchange New Notes for, any Old Notes, and may terminate the Exchange Offer as provided herein before the acceptance of such Old Notes, if: (a) the Exchange Offer shall violate applicable law or any applicable interpretation of the staff of the Commission; or (b) any action or proceeding is instituted or threatened in any court or by any governmental agency that might materially impair the ability of the Issuers to proceed with the Exchange Offer or any material adverse development has occurred in any existing action or proceeding with respect to the Issuers; or (c) any governmental approval has not been obtained, which approval the Issuers shall deem necessary for the consummation of the Exchange Offer. If the Issuers determine in their sole discretion that any of the conditions are not satisfied, the Issuers may (i) refuse to accept any Old Notes and return all tendered Old Notes to the tendering Holders (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such Old Notes will be credited to an account maintained with such Book-Entry Transfer Facility), (ii) extend the Exchange Offer and retain all Old Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of Holders to withdraw such Old Notes (see "-- Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Old Notes which have not been withdrawn. If such waiver constitutes a material change to the Exchange Offer, the Issuers will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered Holders, and the Issuers will extend the Exchange Offer for a period of five to 10 business days, depending upon the significance of the waiver and the manner of disclosure to the registered Holders, if the Exchange Offer would otherwise expire during such five- to 10-business-day period. EXCHANGE AGENT First Union National Bank has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: First Union National Bank 230 S. Tryon Street, 9th Floor Charlotte, North Carolina 28288-1179 Attention: Corporate Trust Administration Telecopier: (704) 383-7316 30 33 FEES AND EXPENSES The expenses of soliciting tenders will be borne by the Issuers. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telephone or in person by officers and regular employees of the Issuers and their affiliates. The Issuers have not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The Issuers, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The cash expenses to be incurred in connection with the Exchange Offer will be paid by the Issuers. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. The Issuers will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates representing New Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered Holder of the Old Notes tendered, or if tendered Old Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. ACCOUNTING TREATMENT The New Notes will be recorded at the same carrying value as the Old Notes, which is face value less unamortized discount, as reflected in the Company's accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized. The expenses of the Exchange Offer and the unamortized expenses related to the issuance of the Old Notes will be amortized over the term of the New Notes. USE OF PROCEEDS The Company will not receive any proceeds from the Exchange Offer, as it will be an even exchange of the Old Notes. The net proceeds to the Company from the Old Notes were approximately $119.6 million, after deducting the Initial Purchasers' discounts and fees and expenses of the Offering. The Company used such net proceeds to (i) repay approximately $90.0 million outstanding under the Amended and Restated Credit Agreement (the "Credit Agreement Debt"), (ii) repay approximately $20.0 million of senior subordinated indebtedness (the "Senior Subordinated Debt") incurred in connection with the Brink Acquisition and to refinance then existing debt, (iii) repay approximately $6.3 million of subordinated indebtedness incurred in connection with the Brink Acquisition (the "Junior Subordinated Guilder Note"), (iv) pay approximately $1.9 of accrued interest and (v) pay prepayment penalties of $1.4 million on the Senior Subordinated Debt. 31 34 PRO FORMA CAPITALIZATION The following table sets forth the actual capitalization of the Company as of December 31, 1997 and, as adjusted to give effect to the 1998 Transactions. The information set forth below should be read in conjunction with the "Summary Consolidated Historical and Pro Forma Financial Data," "Unaudited Pro Forma Financial Information," "Management Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of the Company, and the notes thereto, included elsewhere in this Prospectus.
AS OF DECEMBER 31, 1997 -------------------------- AS ADJUSTED FOR THE 1998 ACTUAL TRANSACTIONS ------ ------------ (IN THOUSANDS) Cash and cash equivalents(1)........................... $ 27,348 $ 6,589 ======== ======== Long-term debt (including current maturities): Amended and Restated Credit Agreement(2): Revolving Credit Facility(3)...................... $ 1,900 $ 2,737 Tranche A Term Loan............................... 17,065 17,065 Tranche B Term Loan............................... 15,883 15,883 Acquisition Facility(1)........................... 21,000 21,000 Canadian Credit Agreement(2)(3)...................... Term Note......................................... 13,952 13,952 Revolving Note.................................... 2,790 2,790 Notes (4)............................................ 124,536 124,536 -------- -------- Total long-term debt.............................. 197,126 197,963 Mandatorily redeemable warrants(5)..................... 3,507 3,507 Members' equity........................................ 16,193 16,193 -------- -------- Total capitalization.............................. $216,826 $217,663 ======== ========
- ------------------------- (1) On December 31, 1997 the Company borrowed $21.0 million under its Acquisition Facility, the proceeds of which are included in cash and cash equivalents. On January 2, 1998 these proceeds were used to make the Ellebi Acquisition. (2) See "Description of the Credit Facilities." (3) The Company has up to $25.0 million available under the Revolving Credit Facility. Borrowings by SportRack International under the revolving note of the Canadian Credit Agreement (as defined) are counted against availability under the Revolving Credit Facility. (4) The principal amount of the Notes is $125.0 million. The Notes are presented net of unamortized discount of $464,000. (5) Represents the value assigned to certain warrants associated with the Senior Subordinated Debt. The Senior Subordinated Debt was repaid with proceeds from the Notes. The warrants are being accreted to their redemption value through periodic charges to members' equity. 32 35 UNAUDITED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma financial information of the Company is based on the audited financial statements of the Company, Valley Industries, and Ellebi S.p.A. included elsewhere in this Prospectus, and the unaudited financial statements of the Sport Rack division of Bell, Nomadic and Transfo-Rakzs. The unaudited pro forma statement of operations for the year ended December 31, 1997 gives effect to the Valley Acquisition, the SportRack International Acquisition, the 1998 Transactions and the Offering as if such transactions had occurred on January 1, 1997. The pro forma balance sheet as of December 31, 1997 gives effect to the Ellebi Acquisition and the Transfo-Rakzs Acquisition as if such transactions had occurred at such date. The Exchange Offer has no effect on the unaudited pro forma financial information. The pro forma financial information gives effect to pro forma adjustments that are based upon available information and certain assumptions that the Company believes are reasonable. The Ellebi Acquisition and the Transfo-Rakzs Acquisition have been accounted for using the purchase method of accounting. The purchase price in excess of the fair value of net assets acquired for Ellebi and Transfo-Rakzs has been allocated to goodwill. The pro forma financial information should be read in conjunction with the historical financial statements of the Company, Valley Industries, Ellebi S.p.A. and, in each case, the related notes thereto, included elsewhere in this Prospectus. The pro forma financial information does not purport to be indicative of the results that would have been obtained had such transactions been completed as of the assumed dates and for the periods presented or that may be obtained in the future. 33 36 ADVANCED ACCESSORY SYSTEMS, LLC UNAUDITED PRO FORMA BALANCE SHEET AS OF DECEMBER 31, 1997
ELLEBI AND TRANSFO-RAKZS ACQUISITIONS AND PRO FORMA COMPANY ADJUSTMENTS(1) PRO FORMA ------- -------------- --------- (IN THOUSANDS) ASSETS Current assets Cash................................................... $ 27,348 $(20,759)(2) $ 6,589 Accounts receivable, net............................... 43,523 4,229 47,752 Inventories............................................ 34,408 11,303 45,711 Other current assets................................... 6,469 378 6,847 -------- -------- -------- Total current assets................................ 111,748 (4,849) 106,899 Property and equipment, net.............................. 55,928 7,503 63,431 Goodwill, net............................................ 85,889 4,157 90,046 Intangible assets, net................................... 7,595 -- 7,595 Deferred income taxes and other noncurrent assets........ 4,323 1,080 5,403 -------- -------- -------- Total assets........................................ $265,483 $ 7,891 $273,374 ======== ======== ======== LIABILITIES AND MEMBERS' EQUITY Current liabilities Current maturities of long-term debt................... $ 3,746 $ -- $ 3,746 Accounts payable....................................... 23,479 2,329 25,808 Accrued liabilities.................................... 20,148 2,620 22,768 -------- -------- -------- Total current liabilities........................... 47,373 4,949 52,322 Deferred income taxes.................................... 3,545 830 4,375 Other noncurrent liabilities............................. 1,234 1,275 2,509 Long-term debt, less current maturities.................. 193,380 837(3) 194,217 Mandatorily redeemable warrants.......................... 3,507 -- 3,507 Minority interest........................................ 251 -- 251 Members' equity.......................................... 16,193 -- 16,193 -------- -------- -------- Total liabilities and members' equity............... $265,483 $ 7,891 $273,374 ======== ======== ========
See accompanying notes to Unaudited Pro Forma Balance Sheet. 34 37 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO UNAUDITED PRO FORMA BALANCE SHEET (1) Historical balance sheet data of Ellebi and Transfo-Rakzs as of December 31, 1997 have been translated at the closing exchange rate on such date, or 1,686 and 1.43 Italian lira and Canadian dollars, respectively, to one United States dollar. The balance sheets and the related acquisition adjustments follow:
HISTORICAL ELLEBI AND ------------------------ ACQUISITION TRANSFO-RAKZS ELLEBI TRANSFO-RAKZS ADJUSTMENTS(A) ACQUISITIONS ------ ------------- -------------- ------------- (IN THOUSANDS) ASSETS Current assets Cash.............................. $ 6 $ -- $(20,765)(b) $(20,759) Accounts receivable, net.......... 4,219 10 -- 4,229 Inventories....................... 9,446 127 1,730 11,303 Other current assets.............. 372 6 -- 378 ------- ---- -------- -------- Total current assets........... 14,043 143 (19,035) (4,849) Property and equipment, net......... 2,807 52 4,644 7,503 Goodwill, net....................... -- -- 4,157 4,157 Deferred income taxes and other assets............................ 143 -- 937 1,080 ------- ---- -------- -------- Total assets................... $16,993 $195 $ (9,297) $ 7,891 ======= ==== ======== ======== LIABILITIES AND EQUITY Current liabilities Current maturities of long-term debt........................... $ -- $ -- $ -- $ -- Accounts payable.................. 2,299 30 -- 2,329 Accrued liabilities............... 2,544 26 50(c) 2,620 ------- ---- -------- -------- Total current liabilities...... 4,843 56 50 4,949 Deferred income taxes............... -- -- 830 830 Other noncurrent liabilities........ 1,275 -- -- 1,275 Long-term debt, less current maturities........................ -- -- 837 837 Equity.............................. 10,875 139 (11,014) -- ------- ---- -------- -------- Total liabilities and equity... $16,993 $195 $ (9,297) $ 7,891 ======= ==== ======== ========
35 38 - ------------------------- (a) Adjustment reflects management's preliminary allocation of purchase price related to the Ellebi Acquisition and the Transfo-Rakzs Acquisition in accordance with the purchase method of accounting, summarized as follows:
ACQUISITION ELLEBI TRANSFO-RAKZS ADJUSTMENTS ------ ------------- ----------- (IN THOUSANDS) Purchase price: Cash consideration...................... $ 20,759 $ 837 $21,596 Estimated fees and expenses............. 365 -- 365 Obligations to sellers.................. 1,000 210 1,210(i) -------- ------ ------- Total purchase price................. $ 22,124 $1,047 $23,171 ======== ====== ======= Allocated as follows: Historical book value of net assets..... $ 10,875 $ 139 $11,014 Excluded (assets) and liabilities: Cash................................. (6) -- (6) Accrued liabilities.................. 1,525 -- 1,525 -------- ------ ------- Historical book value of net assets acquired............................. 12,394 139 12,533 Estimated increase (decrease): Inventory............................ 1,730 -- 1,730(ii) Property and equipment............... 4,644 -- 4,644 Goodwill............................. 3,249 908 4,157 Deferred income taxes and other...... 937 -- 937 Deferred income taxes................ (830) -- (830) -------- ------ ------- Total..................................... $ 22,124 $1,047 $23,171 ======== ====== =======
(i) Represents additional purchase price resulting from an increase in net assets determined at the closing date. (ii) The reversal of the increase in inventory is not reflected in the Unaudited Pro Forma Statement of Operations. - ------------------------- (b) Adjustment reflects:
(IN THOUSANDS) -------------- Cash used to purchase Ellebi S.p.A. assets.............................. $(20,759) Excluded cash at Ellebi S.p.A......... (6) -------- $(20,765) ========
(c) Adjustment reflects:
(IN THOUSANDS) -------------- Estimated fees and expenses........... $ 365 Obligations to sellers................ 1,210 Excluded accrued liabilities.......... (1,525) -------- $ 50 ========
(2) Adjustment represents cash used to finance the Ellebi Acquisition. The acquisition was financed with the borrowing of $21.0 million under the Company's Acquisition Facility. The borrowing and related debt issuance costs of $330,000 are recorded in the Company's balance sheet at December 31, 1997. (3) Adjustment reflects the Company's borrowings under its U.S. Revolving Credit Facility used to finance the Transfo-Rakzs Acquisition. 36 39 ADVANCED ACCESSORY SYSTEMS, LLC UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997
ADJUSTMENTS ------------------------------------------------ VALLEY AND ELLEBI SPORTRACK INITIAL AND INTERNATIONAL OFFERING OF TRANSFO-RAKZS COMPANY ACQUISITIONS(1) OLD NOTES(2) ACQUISITIONS(3) PRO FORMA ------- --------------- ------------ --------------- --------- (IN THOUSANDS) Net sales.......................... $188,678 $57,991 $ -- $21,820 $268,489 Cost of sales...................... 135,556 45,003 -- 13,614 194,173 -------- ------- ------- ------- -------- Gross profit..................... 53,122 12,988 -- 8,206 74,316 Selling, administrative and product development expenses............. 31,350 11,169 -- 4,209 46,728 Amortization of intangible assets........................... 2,336 973 -- 139 3,448 -------- ------- ------- ------- -------- Operating income................. 19,436 846 -- 3,858 24,140 Interest expense................... 12,627 3,570 1,160 2,270 19,627 Foreign currency loss.............. 6,097 -- -- -- 6,097 Other (income) expense, net........ -- 103 -- 22 125 -------- ------- ------- ------- -------- Income (loss) before minority interest and income taxes..... 712 (2,827) (1,160) 1,566 (1,709) Provision (benefit) for income taxes............................ (2,856) (575) -- 870 (2,561) -------- ------- ------- ------- -------- Income (loss) before minority interest...................... 3,568 (2,252) (1,160) 696 852 Minority interest.................. 97 -- -- -- 97 -------- ------- ------- ------- -------- Net income (loss)................ $ 3,471 $(2,252) $(1,160) $ 696 $ 755 ======== ======= ======= ======= ======== EBITDA............................. $ 27,916 $ 2,928 $ -- $ 5,447 $ 36,291 ======== ======= ======= ======= ========
See accompanying notes to Unaudited Pro Forma Statement of Operations. 37 40 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (1) Pro forma adjustments to reflect the operations of Valley for the seven month period ended August 5, 1997 and SportRack International for the six month period through July 2, 1997. Subsequent to August 5, 1997, the operating results of Valley are included in the Company's historical results. Subsequent to July 2, 1997, the operating results of SportRack International are included in the Company's historical results.
HISTORICAL ------------------------ SPORTRACK VALLEY INTERNATIONAL ADJUSTMENTS PRO FORMA ------ ------------- ----------- --------- (IN THOUSANDS) Net sales................................... $53,510 $4,481 $ -- $57,991 Cost of sales............................... 41,630 3,225 148(a) 45,003 ------- ------ ------- ------- Gross profit.............................. 11,880 1,256 (148) 12,988 Selling, administrative and product development expenses...................... 9,598 1,571 -- 11,169 Amortization of intangible assets........... -- 171 802(a) 973 ------- ------ ------- ------- Operating income (loss)................... 2,282 (486) (950) 846 Interest expense............................ 587 25 2,958(b) 3,570 Foreign currency loss....................... -- -- -- -- Other (income) expense, net................. 125 (22) -- 103 ------- ------ ------- ------- Income (loss) before minority interest and income taxes........................... 1,570 (489) (3,908) (2,827) Provision (benefit) for income taxes........ (11) -- (564)(c) (575) ------- ------ ------- ------- Income (loss) before minority interest.... 1,581 (489) (3,344) (2,252) Minority interest........................... -- -- -- -- ------- ------ ------- ------- Net income (loss)......................... $ 1,581 $ (489) $(3,344) $(2,252) ======= ====== ======= =======
- ------------------------- (a) Adjustments reflect the estimated increase in depreciation expense after giving effect to an approximate $2.5 million increase in fair value over historical cost and differences in useful lives of property and equipment, amortization expense related to approximately $34.5 million of goodwill (over 30 years) and approximately $3.3 million of other intangible assets (over 5-10 years) for the Valley Acquisition and the SportRack International Acquisition. The estimated increases are as follows:
(IN THOUSANDS) -------------- Depreciation of property and equipment...................... $148 ==== Amortization of goodwill.................................... $660 Amortization of other intangible assets..................... 142 ---- Amortization of intangible assets........................... $802 ====
38 41 (b) Adjustment reflects the increase in interest expense for borrowings outstanding under the Tranche B Term Loan and the Canadian Term Note after completion of the Valley Acquisition and the SportRack International Acquisition as if the borrowings had been outstanding at the beginning of the period. Historical and pro forma interest expense are as follows:
(IN THOUSANDS) Tranche B Term Loan -- $55.0 million at 8.90% (7 months).... $2,855 Canadian Term Note -- $14.5 million at 7.25% (6 months)..... 523 Amortization of debt issuance costs......................... 192 ------ 3,570 Elimination of historical interest expense.................. (612) ------ Net increase in interest expense............................ $2,958 ======
(c) Adjustment reflects the pro forma income tax benefit of adjustments made above. No benefit for federal income tax has been included for Valley because, for federal income tax purposes, Valley's results of operations accrue to the unitholders. (2) Adjustment reflects the net impact on interest expense as if the issuance of the Old Notes had been consummated on January 1, 1997:
(IN THOUSANDS) Issuance of Old Notes(a) -- $124.5 million at 9.75%......... $ 9,141 Repayment of: Revolving Credit Facility -- $7.5 million at 6.10%........ (341) Tranche A Term Loan(b) -- $43.5 million at 8.00%.......... (2,682) Tranche B Term Loan(b) -- $39.0 million at 8.87%.......... (2,656) Senior Subordinated Debt(c) -- $16.8 million at 12.50%.... (2,210) Junior Subordinated Guilder Note -- $6.4 million at 7.00%.................................................. (336) Amortization of discount and debt issuance cost (over 10 years)(d)................................................. 244 ------- Net increase in interest expense............................ $ 1,160 =======
- ------------------------- (a) The Notes are reflected net of discount of $471,000. Interest is calculated on the principal amount of $125.0 million. (b) Includes amortization of debt issuance cost for Tranche A Term Loan and Tranche B Term Loan of $76,000 and $62,000, respectively. (c) The Senior Subordinated Debt is reflected net of discount of approximately $3.2 million and pro forma interest includes $335,000 of amortization. Interest is calculated on the principal amount of $20.0 million. (d) Adjustment reflects the amortization of discount and deferred debt issuance costs associated with the Old Notes as if the Offering had been consummated as of the beginning of the period. These costs are amortized over the term of the Old Notes using the effective interest method. 39 42 (3) Pro forma adjustments to reflect the operations of Ellebi and Transfo-Rakzs for the year ended December 31, 1997 translated at the average month end exchange rate for the year, or 1,706 and 1.37 Italian lira and Canadian dollars, respectively, to one United States dollar. Ellebi was acquired on January 2, 1998 and Transfo-Rakzs was acquired on February 7, 1998.
HISTORICAL ----------------------- ELLEBI TRANSFO-RAKZS ADJUSTMENTS PRO FORMA ------ ------------- ----------- --------- (IN THOUSANDS) Net sales..................................... $21,322 $498 $ -- $21,820 Cost of sales................................. 12,414 239 961(a) 13,614 ------- ---- ------- ------- Gross profit................................ 8,908 259 (961) 8,206 Selling, administrative and product development expenses........................ 4,096 113 -- 4,209 Amortization of intangible assets............. -- -- 139(a) 139 ------- ---- ------- ------- Operating income (loss)..................... 4,812 146 (1,100) 3,858 Interest expense.............................. -- 8 2,262(b) 2,270 Foreign currency loss......................... -- -- -- -- Other (income) expense, net................... 22 -- -- 22 ------- ---- ------- ------- Income (loss) before minority interest and income taxes............................. 4,790 138 (3,362) 1,566 Provision (benefit) for income taxes.......... 2,614 24 (1,768)(c) 870 ------- ---- ------- ------- Income (loss) before minority interest...... 2,176 114 (1,594) 696 Minority interest............................. -- -- -- -- ------- ---- ------- ------- Net income (loss)........................... $ 2,176 $114 $(1,594) $ 696 ======= ==== ======= =======
- ------------------------- (a) Adjustments reflect the estimated increase in depreciation expense after giving effect to an approximate $4.6 million increase in fair value over historical cost and differences in useful lives of property and equipment, amortization expense related to approximately $4.2 million of goodwill (over 30 years) assuming the Ellebi Acquisition and Transfo-Rakzs Acquisition had been consummated on January 1, 1997. The estimated increases are as follows:
(IN THOUSANDS) Depreciation of property and equipment...................... $961 ==== Amortization of goodwill.................................... $139 ====
(b) Adjustment reflects the increase in interest expense for borrowings outstanding under the Acquisition Facility and the increase in the Canadian revolving line of credit note after completion of the Ellebi Acquisition and the Transfo-Rakzs Acquisition as if the borrowings had been outstanding at the beginning of the period. Historical and pro forma interest expense are as follows:
(IN THOUSANDS) Acquisition Facility -- $21.0 million at 10.25%............. $2,153 Canadian revolving line of credit -- $.8 million at 7.50%... 62 Amortization of debt issuance costs......................... 55 ------ 2,270 Elimination of historical interest expense.................. (8) ------ Net increase in interest expense............................ $2,262 ======
(c) Adjustment reflects the pro forma income tax benefit of adjustments made above. 40 43 SELECTED HISTORICAL FINANCIAL DATA The information below presents historical financial data of the MascoTech Division ("Predecessor") for the years ended December 31, 1993 and 1994 and the period from January 1, 1995 through September 27, 1995 (the period prior to the acquisition of the net assets of MascoTech Division by the Company). The data as of and for the years ended December 31, 1993 and 1994 have been derived from the unaudited financial statements of the MascoTech Division and the data for the period from January 1, 1995 through September 27, 1995 have been derived from the audited financial statements included elsewhere in this Prospectus. The data as of and for the period from September 28, 1995 through December 31, 1995 and for the years ended December 31, 1996 and 1997 represent consolidated financial data of the Company subsequent to the acquisition of the MascoTech Division, and include (i) the operations of Brink subsequent to the Brink Acquisition on October 30, 1996; (ii) the operations of the SportRack division of Bell and Nomadic subsequent to the SportRack International Acquisition on July 2, 1997 and July 24, 1997, respectively, (iii) the operations of Valley subsequent to the Valley Acquisition on August 5, 1997, and have been derived from the audited financial statements included elsewhere in this Prospectus. The following table should be read in conjunction with the financial statements of the Company and notes thereto, "Unaudited Pro Forma Financial Information", and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
PREDECESSOR COMPANY --------------------------------- -------------------------------------- YEAR ENDED PERIOD FROM PERIOD FROM YEAR ENDED DECEMBER 31, JANUARY 1 TO SEPTEMBER 28, TO DECEMBER 31, ----------------- SEPTEMBER 27, DECEMBER 31, ------------------- 1993 1994 1995 1995 1996(1) 1997(2) ---- ---- ------------- ---------------- ------- ------- (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net sales.............................. $59,081 $60,882 $48,698 $16,299 $ 81,466 $188,678 Cost of sales.......................... 48,369 47,716 38,645 12,458 53,607 135,556 ------- ------- ------- ------- -------- -------- Gross profit......................... 10,712 13,166 10,053 3,841 27,859 53,122 Selling, administrative and product development expenses................. 6,585 7,313 6,107 1,472 13,413 31,350 Amortization of intangible assets...... -- -- -- 546 2,475 2,336 ------- ------- ------- ------- -------- -------- Operating income..................... 4,127 5,853 3,946 1,823 11,971 19,436 Other (income) expense Interest expense(3).................. -- -- -- 975 4,312 12,627 Foreign currency loss(4)............. -- -- -- -- 1,330 6,097 Other, net........................... 665 (105) 65 (22) (80) -- ------- ------- ------- ------- -------- -------- Income before minority interest, extraordinary charge and income taxes.............................. 3,462 5,958 3,881 870 6,409 712 Provision (benefit) for income taxes(5)............................. 1,247 2,114 1,324 -- (491) (2,856) ------- ------- ------- ------- -------- -------- Income before minority interest and extraordinary charge............... 2,215 3,844 2,557 870 6,900 3,568 Minority interest...................... -- -- -- 9 69 97 ------- ------- ------- ------- -------- -------- Income before extraordinary charge............................. 2,215 3,844 2,557 861 6,831 3,471 Extraordinary charge(6)................ -- -- -- -- 1,970 7,416 ------- ------- ------- ------- -------- -------- Net income (loss).................... $ 2,215 $ 3,844 $ 2,557 $ 861 $ 4,861 $ (3,945) ======= ======= ======= ======= ======== ======== OTHER DATA: Cash flows from operating activities... $ 8,683 $ 1,165 $ 3,741 $ 1,390 $ 9,917 $ 6,982 EBITDA(7).............................. 4,890 6,773 4,735 2,651 16,448 27,916 Depreciation........................... 763 920 789 282 2,002 6,144 Capital expenditures................... 2,213 1,392 2,079 491 3,124 7,751 Ratio of EBITDA to interest expense....................................... 2.72x 3.81x 2.21x Ratio of earnings to fixed charges(8)..................................... 1.89x 2.43x 1.06x BALANCE SHEET DATA (AT END OF PERIOD): Cash...................................................................... $ 1,637 $ 2,514 $ 27,348 Working capital........................................................... 3,960 14,368 64,375 Total assets.............................................................. 59,979 148,359 265,483 Total debt, including current maturities.................................. 34,900 93,142 197,126 Mandatorily redeemable warrants........................................... 200 3,498 3,507 Members' equity........................................................... 14,221 18,463 16,193
(footnotes on following page) 41 44 - ------------------------- (1) In October 1996, the Company acquired Brink. The Brink Acquisition has been accounted for in accordance with the purchase method of accounting. Accordingly, the operating results of Brink are included in the consolidated operating results of the Company subsequent to October 30, 1996. (2) The Company acquired Bell on July 2, 1997, Nomadic on July 24, 1997, and Valley on August 5, 1997. The SportRack International Acquisition and Valley Acquisition have been accounted for in accordance with the purchase method of accounting. Accordingly, the operating results of SportRack International and Valley are included in the consolidated operating results of the Company subsequent to the respective acquisition dates. (3) Prior to its acquisition by the Company on September 28, 1995, the Predecessor was a division of MascoTech and, accordingly, had no outstanding indebtedness. (4) Represents net currency loss on indebtedness, incurred in connection with the Brink Acquisition, which is currently denominated in U.S. dollars. (5) The Predecessor, as a division of MascoTech, was allocated a portion of the consolidated income tax provision, which approximated the division's federal income tax provision on a stand-alone basis. The Company is a limited liability corporation and, as such, the earnings of the Company and its domestic subsidiaries are included in the taxable income of the Company's unitholders and no federal income tax provision is required. The Company's foreign subsidiaries provide for income taxes on their results of operations. (6) In connection with the indebtedness extinguished as a result of the Brink Acquisition, a prepayment penalty of $220,000 and unamortized deferred debt issuance costs of $1.8 million were charged to operations during 1996. In connection with indebtedness extinguished as a result of issuing the Old Notes, a prepayment penalty of $1.4 million, $3.1 million of unamortized debt discount, and unamortized deferred debt issuance costs of $3.2 million were charged to operations during 1997. The debt extinguishment charges in 1997 were reduced by $365,000 representing the income tax benefit recognized by Brink. (7) EBITDA is defined as operating income plus depreciation and amortization. EBITDA is presented because it is generally accepted as providing useful information regarding a company's ability to service and/or incur indebtedness. However, EBITDA should not be considered in isolation from or as an alternative to net income, cash flows from operating activities and other consolidated income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. See "Description of the Notes -- Certain Definitions" for the definition of EBITDA for purposes of the Indenture. (8) For purposes of determining the ratio of earnings to fixed charges, "earnings" are defined as income (loss) before minority interest, extraordinary charge and income taxes, plus fixed charges. "Fixed charges" consist of interest expense on all indebtedness (including amortization of deferred debt issuance costs) and the component of operating lease rental expense that management believes is representative of the interest component of rent expense. 42 45 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL CCP and certain members of the Company's management formed the Company in September 1995 to make strategic acquisitions of automotive exterior accessory manufacturers and to integrate those acquisitions into a global enterprise that would be a preferred supplier to the automotive industry. In September 1995, the Company, through its SportRack subsidiary, acquired substantially all of the net assets of the MascoTech Division, a North American supplier of rack systems and accessories to the automotive OEM market and aftermarket. The MascoTech Division was a division of MascoTech. For comparative purposes, the financial information for the year ended December 31, 1995 represents the combination of the results of operations of the MascoTech Division for the period from January 1, 1995 to September 27, 1995 together with the results of operations of the Company from September 28, 1995 to December 31, 1995 (the period subsequent to the acquisition of the MascoTech Division by the Company). The financial statements of the MascoTech Division and the Company in the two combined periods are not comparable in certain respects due to differences between the cost bases of certain assets held by the Company versus that of the MascoTech Division, changes in accounting policies at the acquisition date, and certain incremental costs, such as interest expense, that the Company incurred as a stand-alone company subsequent to September 27, 1995. ACQUISITIONS In October 1996, the Company consummated the Brink Acquisition by acquiring the outstanding capital stock of Brink B.V., a European supplier of towing systems to the automotive OEM and aftermarket. In July 1997, the Company consummated the SportRack International Acquisition by acquiring from Bell substantially all of the net assets of its SportRack division, a Canadian supplier of rack systems and accessories to the automotive aftermarket, and acquiring the capital stock of Nomadic, a Canadian supplier of rack systems and accessories to the automotive OEM and aftermarket. In August 1997, the Company consummated the Valley Acquisition by acquiring substantially all of the net assets of Valley Industries, Inc., a North American supplier of towing systems to the automotive OEM market and aftermarket. In each instance, the acquisition was accounted for in accordance with the purchase method of accounting and the operating results of the acquired company have been included in the Company's consolidated financial statements since the date of the respective acquisition. 43 46 SUMMARY RESULTS OF OPERATIONS The following table presents the major components of the statement of operations together with percentages of each component as a percentage of net sales.
YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 1995(1) 1996 1997 ------- ---- ---- (DOLLARS IN THOUSANDS) Net sales................................ $64,997 100.0% $81,466 100.0% $188,678 100.0% Gross profit........................... 13,894 21.4% 27,859 34.2% 53,122 28.2% Selling, administrative and product development expenses................... 7,579 11.7% 13,413 16.5% 31,350 16.6% Amortization of intangible assets........ 546 .8% 2,475 3.0% 2,336 1.2% Operating income....................... 5,769 8.9% 11,971 14.7% 19,436 10.3% Interest expense......................... 975 1.5% 4,312 5.3% 12,627 6.7% Foreign currency loss.................... -- -- 1,330 1.6% 6,097 3.2% Income before minority interest, extraordinary charge and income taxes.................................. 4,751 7.3% 6,409 7.9% 712 .4%
- ------------------------- (1) Represents the combination of the historical results of operations for the MascoTech Division for the period January 1, 1995 to September 27, 1995 together with the results of operations of the Company from September 28, 1995 to December 31, 1995 (the period subsequent to the acquisition of the MascoTech Division by the Company). RESULTS OF OPERATIONS 1997 COMPARED TO 1996 Net sales. Net sales for 1997 were $188.7 million, representing an increase of $107.2 million, or 131.6% over net sales for 1996. The increase was due primarily to the Valley Acquisition in August 1997 ($37.9 million), the SportRack International Acquisition in July 1997 ($2.5 million), and the full year sales of Brink in 1997 as compared to two months in 1996 ($54.8 million). In addition, sales for SportRack increased $12.0 million because of increased sales of rack systems to OEM's for installation on new light truck models and increased OEM production of certain light truck models which use SportRack's systems. On a pro forma basis, if the net sales of Valley and Sportrack International were included with those of the Company for 1996 and 1997, and Brink sales were included with those of the Company for 1996, net sales for 1997 would have been $246.7 million, as compared to net sales of $233.5 million for 1996, an increase of $13.2 million, or 5.7%. Gross profit. Gross profit for 1997 was $53.1 million, representing an increase of $25.3 million, or 90.7%, over the gross profit for 1996. This increase resulted from the increase in net sales offset by a decrease in the gross margin. Gross profit as a percentage of net sales was 28.2% in 1997 compared to 34.2% in 1996. The decrease in gross margin resulted from a lower gross margin on sales contributed by Valley and a lower gross margin on sales of rack systems to the OEM's due to (i) launch costs related to new programs, (ii) lower margins on certain newly launched programs, and (iii) price givebacks on certain OEM programs. Selling, administrative and product development expenses. Selling, administrative and product development expenses for 1997 were $31.4 million, representing an increase of $17.9 million, or 133.7% over selling, administrative and product development expenses for 1996, reflecting the increase in net sales. Selling, administrative and product development expenses as a percentage of net sales increased to 16.6% in 1997 from 16.5% in 1996. Certain selling, administrative and product development expenses are relatively fixed and do not increase proportionately with sales. The effect of these fixed expenses has been offset by higher expenses associated with the Company's European expansion and new corporate headquarters. In addition, selling, administrative and product development expenses are higher as a percentage of net sales for Brink, which was acquired in October 1996, and SportRack International, which was acquired in July 1997, than for the Company. 44 47 Operating income. Operating income for 1997 was $19.4 million, an increase of $7.5 million, or 62.4%, over operating income for 1996. The increase was due primarily to inclusion of Brink operating results for the full year in 1997 as compared to two months in 1996 together with the increases from the SportRack International and Valley Acquisitions in July and August of 1997, respectively. Operating income as a percentage of net sales decreased to 10.3% in 1997 from 14.7% in 1996 reflecting a decrease in gross margins offset by reduced amortization of intangible assets as a result of changing the goodwill amortization period from 15 years to 30 years in 1997. Interest expense. Interest expense for 1997 was $12.6 million, an increase of $8.3 million, or 192.8%, over interest expense for 1996. The increase was primarily due to additional borrowings to finance (i) the Brink Acquisition in October 1996, (ii) the Sportrack International Acquisition in July 1997, (iii) the Valley Acquisition in August 1997, and (iv) the effect of the issuance of the Old Notes, of which a portion of the proceeds were used to repay debt from the Valley Acquisition and the Brink Acquisition. Foreign currency loss. Foreign currency loss in 1997 was $6.1 million. The Company acquired Brink in October 1996 and the related Brink Acquisition indebtedness is denominated in U.S. dollars. During 1997, the U.S. dollar strengthened significantly in relation to the Dutch Guilder, the functional currency of Brink. At December 31, 1996, the exchange rate of the Dutch Guilder to the U.S. dollar was 1.75:1, whereas at December 31, 1997 the exchange rate was 2.02:1, or a 15.4% decline in the relative value of the Dutch Guilder. 1996 COMPARED TO 1995 Net sales. Net sales for 1996 were $81.5 million, representing an increase of $16.5 million, or 25.3% over net sales for 1995. The increase was due to the Brink Acquisition in October 1996 ($7.6 million) and increased sales of rack systems to OEM's for installation on new light truck models and increased OEM production of certain light truck models which use the Company's rack systems. Gross profit. Gross profit for 1996 was $27.9 million, representing an increase of $14.0 million, or 100.5% over gross profit for 1995. This increase resulted from the increase in net sales and an increase in the gross margin. Gross profit as a percentage of net sales was 34.2% in 1996 compared to 21.4% in 1995. The increase was primarily a result of (i) increased sales of higher margin rack systems for installation on new light truck models, (ii) expanded margins on certain rack systems resulting from engineering changes and manufacturing improvements, and (iii) the effect of higher net sales on fixed overhead costs. Selling, administrative and product development costs. Selling, administrative and product development expenses for 1996 were $13.4 million, representing an increase of $5.8 million, or 77.0%, over selling, administrative and product development costs for 1995. Selling, administrative and product development costs as a percentage of net sales increased to 16.5% in 1996 compared to 11.7% in 1995. These increases resulted primarily from the Brink Acquisition in October 1996 and increased costs associated with the MascoTech Division becoming a stand-alone company in September 1995. Operating income. Operating income for 1996 was $12.0 million, an increase of $6.2 million, or 107.5%, over operating income for 1995. Operating income as a percentage of net sales increased to 14.7% in 1996 from 8.9% in 1995 primarily as a result of higher gross margins partially offset, as a percentage of net sales, by increased selling, administrative and product development costs and increased amortization of intangible assets. Interest expense. Interest expense for 1996 was $4.3 million, an increase of $3.3 million, or 342.3%, over interest expense for 1995 representing, in 1996, a full year of interest cost associated with the acquisition of the MascoTech Division in September 1995. The MascoTech Division, as a matter of policy, was not charged interest on intercompany balances by MascoTech, Inc. during 1995. Foreign currency loss. Foreign currency loss in 1996 was $1.3 million. The Company acquired Brink in October 1996 and the related Brink Acquisition debt ($65.0 million) was denominated in U.S. dollars whereas the functional currency of Brink is the Dutch Guilder. During 1996, the U.S. dollar strengthened in relation to the Dutch Guilder, the functional currency of Brink. On October 31, 1996 (the Brink Acquisition date) the 45 48 exchange rate of the Dutch Guilder to the U.S. dollar was 1.70:1, whereas, at December 31, 1996 the exchange rate was 1.75:1 or a 2.9% decline in the relative value of the Dutch Guilder. LIQUIDITY AND CAPITAL RESOURCES The Company's principal liquidity requirements are to service its debt under the Amended and Restated Credit Agreement, the Canadian Credit Agreement and the Notes and working capital needs and capital expenditures. The Company's indebtedness at December 31, 1997 was $197.1 million. Borrowings under the Amended and Restated Credit Agreement and the Canadian Credit Agreement bear interest at floating rates which require interest payments on varying dates depending on the interest rate option selected by the Company. Under the terms of the Amended and Restated Credit Agreement and the Canadian Credit Agreement, the Company will be required to make principal payments totaling approximately $3.7 million in 1998, $4.7 million in 1999, $11.2 million in 2000, and $11.9 million in 2001. Also under the terms of the Amended and Restated Credit Agreement, the Company is required to purchase and maintain interest rate protection with respect to a portion of the term loans for three years. The Notes bear interest at 9.75% which is payable semiannually in arrears. The Company's capital expenditures were $.5 million, $3.1 million, and $7.8 million for the years ended December 31, 1995, 1996, and 1997, respectively. On a pro forma basis for 1997, capital expenditures were $10.3 million. Capital expenditures for 1998 are limited to $10.0 million under the Terms of the Amended and Restated Credit Agreement. The Company estimates that capital expenditures for 1998 will be primarily for the expansion of capacity, productivity and process improvements and maintenance. The Company's 1998 capital expenditures are anticipated to include approximately $4.0 million for replacing and upgrading existing equipment. The Company's ability to make capital expenditures is subject to restrictions in the Amended and Restated Credit Agreement. See "Description of the Credit Facilities." The Company's European and Canadian subsidiaries have income tax net operating loss carryforwards ("NOLs") of approximately $8.0 million and $1.1 million, respectively, at December 31, 1997. The European NOLs have no expiration date and the Canadian NOLs expire primarily in 2004. The Company expects that its primary sources of cash will be from operating activities and borrowings under the Revolving Credit Facility. As of December 31, 1997, the Company has $4.7 million borrowed under its U.S. Revolving Credit Facility and Canadian Revolving Note and has $20.3 million available borrowing capacity. As part of the Amended and Restated Credit Agreement, Chase and NBD (as defined) committed to provide the $22.0 million Acquisition Facility to finance acquisitions. On December 31, 1997, the Company borrowed $21.0 million under the revolving credit facility and used such proceeds to acquire the net operating assets of the towbar segment of Ellebi S.p.A. on January 2, 1998. Future acquisitions, if any, may require additional third party financing and there can be no assurances that such funds would be available on terms satisfactory to the Company, if at all. The Company's ability to pay principal and interest on the Notes and to satisfy its other debt obligations will depend upon its future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, certain of which are beyond its control, as well as the availability of revolving credit borrowings under the Amended and Restated Credit Agreement or a successor facility. The Company anticipates that, based on current and expected levels of operations, its operating cash flow, together with borrowings under the Amended and Restated Credit Agreement, should be sufficient to meet its debt service, working capital and capital expenditure requirements for the foreseeable future, although no assurances can be given in this regard, including as to the ability to increase revenues or profit margins. If the Company is unable to service its indebtedness, it will be forced to take actions such as reducing or delaying acquisitions and/or capital expenditures, selling assets, restructuring or refinancing its indebtedness (which could include the Notes), or seeking additional equity capital. There is no assurance that any of these remedies can be effected on satisfactory terms, if at all, including, whether, and on what terms, the Company could raise equity capital. See "Forward Looking Statements" and "Risk Factors" for more information that may effect the Company's results of operations. 46 49 INTERNATIONAL OPERATIONS The Company conducts operations in several foreign countries including Canada, The Netherlands, Denmark, the United Kingdom, Sweden, France, Germany, and, with the Ellebi Acquisition in January 1998, Italy. On a pro forma basis, net sales from international operations during 1997 were approximately $92.7 million, or 34.5% of the Company's net sales. At December 31, 1997, on a pro forma basis, assets associated with these operations were approximately 44.8% of total assets, and the Company had indebtedness denominated in currencies other than the U.S. dollar of approximately $16.7 million. The Company's international operations may be subject to volatility because of currency fluctuations, inflation and changes in political and economic conditions in these countries. Most of the revenues and costs and expenses of the Company's operations in these countries are denominated in the local currencies. The financial position and results of operations of the Company's foreign subsidiaries are measured using the local currency as the functional currency. The Company may periodically use foreign currency forward option contracts to offset the effects of exchange rate fluctuations on cash flows denominated in foreign currencies. The balance of these contracts as of December 31, 1997 was not material, and the Company does not use derivative financial instruments for trading or speculative purposes. 47 50 BUSINESS THE COMPANY The Company is one of the world's largest designers, manufacturers and suppliers of towing and rack systems and related accessories for the automotive original equipment manufacturer ("OEM") market and the automotive aftermarket. The Company's products include a complete line of towing systems including accessories such as trailer balls, ball mounts, electrical harnesses, safety chains and locking hitch pins. The Company's broad offering of rack systems includes fixed and detachable racks and accessories which can be installed on vehicles to carry items such as bicycles, skis, luggage, surfboards and sailboards. The Company's products are sold as standard accessories or options for a variety of light vehicles. In 1997, on a pro forma basis, the Company estimates that approximately 49% of its net sales were generated from products sold for light trucks. The Company is the sole Tier 1 OEM supplier of towing or rack systems for eight of the top ten light trucks produced in North America, including the GM C/K Pickup and Blazer, the Chrysler Grand Cherokee (towing systems and rack systems), T-3000 Pickup and Caravan and the Ford Explorer, Ranger and Windstar. On a pro forma basis for the year ended December 31, 1997, the Company's net sales and EBITDA would have been $268.5 million and $36.3 million, respectively. COMPETITIVE ADVANTAGES Leading Global Market Position. The Company is the world's largest designer, manufacturer and supplier of towing systems and one of the world's largest designers, manufacturers and suppliers of rack systems. The Company is the largest supplier of towing systems in Europe, the largest supplier of towing systems to automotive OEMs in North America and the second largest supplier of towing systems to the aftermarket in North America. The Company is also one of the two largest suppliers of rack systems sold to automotive OEMs in the North America. The Company has 19 engineering, manufacturing and distribution facilities strategically located in the United States, Canada, The Netherlands, Denmark, Germany, the United Kingdom, Sweden, Italy and France. By virtue of its size and global presence, the Company believes it benefits from several competitive advantages, including the ability to (i) satisfy local design, production, quality and timing requirements of global OEMs; (ii) provide "one-stop shopping" for customers' product and service requirements; (iii) optimize plant production; (iv) maximize its raw material purchasing power; (v) spread its selling, administrative and product development expenses over a large base of net sales; and (vi) develop and maintain state-of-the-art production facilities. Strong Relationships with Diverse Customer Base. The Company has an established position as a Tier 1 supplier of towing and/or rack systems to most of the OEMs manufacturing in North America and Europe including Chrysler, General Motors, Toyota, Opel, Volvo, Isuzu, Ford, Mercedes, BMW, Subaru, Fiat, Mitsubishi, Nissan, Volkswagen, SEAT, Skoda and Kia. The Company supplies Chrysler with substantially all its towing systems and rack systems and accessories. The Company also supplies approximately 50% of the towing and rack system requirements of General Motors. Tier 1 status and strong customer relationships are important elements in achieving continued profitable growth because, as OEMs narrow their supplier bases, well regarded, existing suppliers have an advantage in gaining new contracts. The evolution of OEM relationships into strategic partnerships provides a significant advantage to Tier 1 suppliers with system integration capabilities (such as the Company) in retaining existing contracts as well as in participating during the design phase for new vehicles, which is integral to becoming a supplier for such new platforms. The Company is also a leading supplier of towing and rack systems to automotive aftermarket wholesalers, retailers and installers, such as U-Haul, Pep Boys, Balkamp, Advance Auto Parts, Coast Distribution System, Discount Auto Parts, Ace Hardware and Canadian Tire. Comprehensive Product Line. The Company continues to position itself as a leading supplier to its customers for a growing range of products and services. Through its offering of over 2,000 towing system models, the Company's products fit virtually every light vehicle produced in North America and Europe. The Company is one of a limited number of European manufacturers with such a broad product line that also satisfies European Community ("EC") regulatory safety standards, even though such standards have not yet been adopted by each EC member country. Competitors whose products do not satisfy such standards face 48 51 substantial design and testing costs to offer a comparable product line that meets these safety standards. The Company has provided OEMs with fixed rack systems for approximately half of the light truck models produced in North America that utilize vehicle-specific fixed racks. The Company's innovative Mondial(R) product line of detachable rack systems, which consists of only 14 SKUs, is able to fit substantially all the light vehicles produced in North America and Europe, while some competitors' comparable product lines consist of more than 200 SKUs. The Company believes that its broad product offerings also facilitate strategic partnerships with automotive aftermarket wholesalers, retailers and installers. Design and Engineering Expertise. The Company has an engineering and research and development staff that develops new products and processing technologies. The Company works directly with OEM designers to create innovative solutions that simplify vehicle assembly and reduce vehicle cost and weight. For example, the Company developed a roll formed, aluminum cross rail which substantially reduced the weight of the Chrysler minivan rack at a competitive cost. Additionally, the Company is responsible for many industry innovations, including lighter, less obtrusive, round tube towing hitches as well as push button and pull lever stanchions on fixed rack systems. The Company believes its design and engineering capabilities provide significant value to its customers by (i) shortening OEM new product development cycles; (ii) lowering OEM manufacturing costs; (iii) providing technical expertise; and (iv) permitting aftermarket customers to maintain lower inventory levels. The Company also believes that its design innovations have created value for end users by providing products that are durable and easy to install and that enhance vehicle utility and appearance. High Quality, Low Cost Manufacturing Position. The Company believes that it is one of the highest quality, lowest cost suppliers of towing and rack systems in North America and Europe. The Company has received numerous quality and performance awards, including Chrysler's Gold Pentastar Award, Ford's Q-1 Award, Toyota's Distinguished Supplier Award and Nissan's Superior Supplier Performance Award. Supplier quality systems are currently being standardized across OEMs through the ISO-9000 and QS-9000 programs. The Company has achieved ISO-9000 or QS-9000 certification for ten of its 17 manufacturing and engineering facilities and is in the process of obtaining certification for the rest of its facilities. The Company's low cost position is a result of its strict cost controls and continuous improvement programs designed to enhance productivity. OEMs typically prefer stable suppliers who can generate productivity gains that can be shared to reduce OEM costs. The Company's cost controls are closely integrated with its quality driven manufacturing operations, thereby allowing it to profitably deliver high quality, easy to install and competitively-priced components on a just-in-time basis. The Company's focus on low cost manufacturing also provides benefits when selling products to the less price sensitive aftermarket. BUSINESS STRATEGY The Company's objective is to strengthen its position as a leading global supplier of automotive exterior accessories, thereby increasing revenue and cash flow. In order to accomplish its goal, the Company intends to pursue the following strategies. Increase Global Market Share. The Company intends to capitalize on its expanded presence in North America and Europe by marketing products to its global automotive OEM customers. Through its past acquisitions of complementary product lines, the Company is able to offer an expanded range of products and services to its extended customer base. The Company also expects to secure new customers by virtue of its expanded market presence and broad product and service offerings. The Company believes its continued emphasis on new technology (both product and process), will result in the development of more innovative, high margin towing and rack system products which it expects to market to its expanding customer base. Maintain and Enhance Strong Customer Relationships. The Company intends to strengthen and expand its relationships with global automotive OEMs and aftermarket customers by (i) continuing its commitment to innovative design and development of products during the early stages of vehicle design and redesign; (ii) building on its position as a low cost supplier of quality accessory products; (iii) offering new products in existing and new geographic areas by taking advantage of existing OEM relationships; and (iv) working with 49 52 aftermarket customers to develop new products and marketing strategies. The Company has recently obtained orders from Mercedes Benz, BMW, SEAT and Chrysler to supply products for new SUVs. Increase Operating Efficiencies. The Company believes there are significant opportunities for improvement in margins and cash flow through intercompany cooperation among its various acquired business units, including (i) realizing economies of scale from the combined purchasing power of a larger company; (ii) achieving production and other operating efficiencies through the implementation of a "best practices" program; (iii) reducing certain selling, general and administrative and product development expenses; and (iv) reducing capital and operating expenditures from coordinated use of manufacturing resources. Pursue Strategic Acquisitions. In response to the trend in the OEM market toward systems suppliers, the Company is focused on making strategic acquisitions that will enhance its ability to provide integrated systems (such as a towing or rack system) or otherwise leverage its existing business by providing additional product, manufacturing and service capabilities. The Company also intends to pursue acquisitions which will expand its customer base by providing an entree to new customers, including expansion into selected geographic areas. The Company believes that such acquisitions should provide additional opportunities for increased net sales and cash flow by enhancing the Company's manufacturing and marketing capabilities. INDUSTRY OVERVIEW In 1996, the North American exterior accessories market for light vehicles was approximately $3.3 billion. In 1996, in the first year of ownership, North American consumers spent approximately $1.4 billion on exterior accessories for their light trucks as compared to approximately $0.8 billion in 1986, representing a compound annual growth rate of 5.9%. Growth in this market, and in towing systems and rack systems in particular, resulted in large part from the increased production and sale of light trucks, which in 1996 accounted for approximately 46% of total light vehicle production in North America as compared to 32% in 1986. According to DRI/McGraw-Hill Ward's Global Automotive Group, production of light trucks in North America and Western Europe has outpaced overall production in the light vehicle market (ten-year compound annual growth rate of 1.3% in North America and 1.4% in Western Europe), resulting primarily from the growth in minivans (ten-year compound annual growth rate of 8.6% in North America and 30.8% in Western Europe) and SUVs (ten-year compound annual growth rate of 11.6% in North America and 13.7% in Western Europe), although no assurance can be given that such production rates of light trucks will continue or will continue to outpace overall production. Strong growth in production of light trucks is attributable to several factors, including (i) the more sizable and comfortable interiors and aesthetically pleasing modern designs offered by light trucks; (ii) the changing lifestyle of the population, which is aging and therefore devoting more time to recreational activities; (iii) the versatile product offerings targeted toward both the luxury and economy market sectors; (iv) the increasing acceptance of light truck use for everyday transportation; and (v) the durability and special performance capabilities (e.g. four-wheel drive) of light trucks. Automotive OEM and Aftermarket Trends As automobile and light truck manufacturers have faced increased global competition, they have sought to significantly improve quality, reduce costs and shorten the development time required for new vehicle models. These changes have altered the OEM/supplier relationship and benefited larger suppliers that have strong product engineering and development capabilities, superior quality products, lower unit costs and the ability to deliver products on a timely basis. As a result, the Company believes that it has benefited and will continue to benefit from the following automotive OEM and aftermarket trends: Consolidation of Supplier Base by OEMs. Since the 1980's, OEMs have significantly consolidated their supplier base in an effort to reduce their procurement-related costs, ensure high quality and accelerate new model development. As a result, many smaller, poorly capitalized suppliers with limited product lines and engineering and design capabilities have either been eliminated as suppliers to OEMs or tiered (i.e., they supply other suppliers). Consequently, larger suppliers with broad product lines, in-house design and 50 53 engineering capabilities and the ability to effectively manage their own supplier bases, have been able to significantly increase their market share. The consolidation by OEMs has altered the typical structure of supplier contracts. In the past, OEMs supplied all design, development and manufacturing expertise for accessory parts and were responsible for consistency of quality and reliability of delivery. On newer models, however, there has been a trend toward involving potential suppliers earlier in the design and development process to encourage suppliers to share design and development responsibility. In some cases, sole-source supply contracts which cover the life of a vehicle or platform are awarded. Both OEMs and suppliers benefit from the consolidation trend. Suppliers are able to devote the resources necessary for proprietary product development with the expectation that they will have the opportunity to profit on such investment over the multi-year life of a contract. OEMs benefit from shared manufacturing cost savings attributable to long, multi-year production runs at high capacity utilization levels. Emergence of European Community Safety Standards. Trends within the European towing systems market result primarily from emerging EC safety standards and the corresponding legislative framework. Such standards provide that a towing system must fit all the vehicle manufacturer's recommended fitting points, must not interfere with the vision of the number plate when not in use and must meet strict testing criteria for durability and safety. These standards have been adopted by The Netherlands, Germany, Sweden, Italy and Scandinavia. Other EC countries are expected to adopt the legislation within two years. All of the Company's approximately 2,000 towing systems sold in Europe currently undergo rigorous safety testing in order to satisfy these EC regulatory standards. In addition, all of the Company's detachable roof rack systems are designed and tested to meet and exceed strict German standards. Increased Levels of Manufacturing in North America by Transplants. As a result of the relative cost advantage of producing vehicles in North America, many transplants have increased their share of North American vehicle production from approximately 6% in 1986 to approximately 20% in 1996. Industry sources forecast that this trend will continue. For example, both Mercedes Benz and BMW commenced manufacturing in the U.S. in 1996. In addition, Toyota has announced plans to build its T-100 pickup truck in Indiana by 1998, Honda has announced plans to build its Odyssey minivan in North America by 1999, and BMW has announced plans to build its E-53 SUV in North America by 1999. The Company believes that increased levels of manufacturing of light trucks in North America by transplants will benefit full service, high quality suppliers with North American operations such as the Company. Outsourcing by OEMs. In an effort to facilitate and enhance product design, reduce costs and simplify manufacturing processes, automotive OEMs are increasingly outsourcing the manufacture of many components that were previously manufactured internally. This trend results from independent suppliers being generally able to design, manufacture and deliver components at a lower cost than OEMs as a result of (i) their significantly lower direct labor, fringe benefit and overhead costs; (ii) their ability to spread research and development and engineering costs over products provided to multiple OEMs; and (iii) the economies of scale inherent in product specialization. Independent suppliers such as the Company have benefited from outsourcing because the aggregate number, complexity and value of components that they manufacture have increased dramatically. OEMs, in turn, have benefited because outsourcing has allowed them to reduce costs and to focus on overall vehicle design and consumer marketing. PRODUCTS The principal product lines of the Company are towing systems and rack systems and accessories. On a pro forma basis in 1997, towing systems constituted approximately 62% and rack systems and accessories constituted approximately 38% of the Company's net sales, respectively. The Company believes it offers a more comprehensive product line than any of its competitors. The Company has devoted considerable resources to the engineering and designing of its products and, as a result, considers itself a market leader in the research and new product development of towing systems and rack systems. Towing Systems. The Company designs, manufactures and supplies towing systems to automotive OEMs and the automotive aftermarket which fit virtually every light vehicle produced in North America and Europe. 51 54 In the aggregate, the Company supplies over 2,000 different towing systems, including a complete line of towing accessories. The Company's towing systems sold in Europe are installed primarily on passenger cars. The Company's primary product within the European market is the fixed ball towbar that is specifically designed to be mounted on a particular car model in accordance with the OEM's specified mounting points. The Company also markets sophisticated detachable ball systems which are popular with owners of more expensive cars or cars on which the license plate would otherwise be blocked by a fixed ball towbar. All of the Company's towing system products sold in Europe currently undergo rigorous safety testing in order to satisfy EC regulatory standards. Competitors whose products do not satisfy such standards face substantial design and testing costs to offer a comparable product line that meets the safety standards. The Company's towing systems sold in North America are installed primarily on light trucks. Two of the Company's most innovative product designs have been the tubular trailer hitch which is lighter in weight, less obtrusive and stronger than the conventional hitch, and a device which ensures secure attachment of a towing product to the vehicle. These product innovations have enabled the Company to improve the functionality and safety of towing systems while, at the same time, enhancing the overall appearance of vehicles utilizing these towing products. The Company offers a complete line of towing accessories, including trailer balls, ball mounts, electrical harnesses, safety chains and locking hitch pins. To capitalize on the strong growth trend in light trucks, the Company has recently expanded its product line to include other products designed specifically for this market, such as grille guards, brush guards and tire carriers. Fixed Rack Systems. The Company designs, manufactures and supplies fixed roof rack systems for individual vehicle models that are generally sold to the automotive OEMs for installation at the factory or dealership. These rack systems typically remain on a model for the life of its design, which generally ranges from four to six years. The Company has been an industry leader in developing designs which not only complement the styling themes of a particular vehicle, but also increase the utility and functionality of the rack system. Most of the fixed rack systems sold by the Company are composed of side rails which run along both sides of the vehicle's roof, feet which mount the side rails to the vehicle's roof, and cross rails which run between the side rails. Cross rails, which are attached to the side rails with stanchions, are typically movable and can be used to carry a load. The Company uses advanced materials such as lightweight, high strength plastics and roll formed aluminum to develop durable rack systems that optimize vehicle performance. Many of these products incorporate innovative features such as push button and pull lever stanchions, which allow easy movement of the cross rails to accommodate various size loads. These rack systems are utilized on a large number of light trucks, including Jeep Grand Cherokee and Cherokee, Chrysler minivans, GM Suburban, Tahoe and Yukon and Mercedes Benz ML320. Detachable Rack Systems. The Company designs, manufactures and supplies detachable roof and rear mount rack systems for distribution in both the automotive and sporting accessory aftermarkets. A detachable rack system typically consists of cross rails which are attached to the roof of a vehicle by removable mounting clips. The Company offers a full line of detachable rack systems, including the SportRack(R), SnapRack(TM) and Mondial(R) rack systems. The Company's innovative Mondial(R) product line of detachable rack systems consists of only 14 SKUs that are able to fit substantially all passenger vehicles sold in North America and Europe while some competitors' comparable product lines consist of more than 200 SKUs. In addition, the Mondial(R) line of detachable rack systems is designed to meet and exceed strict international performance standards, and is noted for its flexibility, ease of attachment and minimal SKU requirements. Rack System Accessories. The Company designs and manufactures lifestyle accessories for distribution in both the automotive and sporting accessory aftermarkets. These accessories typically attach to the Company's rack systems and are used for carrying items such as bicycles, skis, luggage, surfboards and sailboards. 52 55 CUSTOMERS AND MARKETING Management believes that the Company's strong and diverse industry relationships are based on its reputation for high service levels, strong technical support, innovative product development, high quality and competitive pricing. On a pro forma basis, sales to OEM and aftermarket customers represented approximately 65% and 35% of the Company's net sales, respectively, in 1997. Automotive OEMs. The Company obtains most of its new orders through a presourcing process by which the customer invites one or a few preferred suppliers to manufacture and design a component or system that meets certain price, timing, functional and aesthetic parameters. Upon selection at the development stage, the Company and the customer typically agree to cooperate in developing the product to meet the specified parameters. Upon completion of the development stage and the award of the manufacturing business, the Company receives a purchase order that covers parts to be supplied for a particular car model. Such supply arrangements typically involve annual renewals of the purchase order over the life of the model, which is generally four to six years. In addition, the Company enters into long-term contracts with certain OEM customers which require the Company to make annual price reductions. The Company also competes to supply parts for successor models even though the Company may currently supply parts on the predecessor model. Sales to OEMs and Tier 1 suppliers are made directly by the Company's internal sales staff of 29 individuals and 23 outside sales representatives. The Company sells its products to most of the automotive OEMs selling light vehicles in North America and Europe, including Chrysler, General Motors, Toyota, Opel, Volvo, Isuzu, Ford, Mercedes, BMW, Subaru, Fiat, Mitsubishi, Nissan, Volkswagen, SEAT, Skoda and Kia. The Company supplies Chrysler with substantially all of its towing systems and rack systems and accessories. The Company also supplies approximately 50% of the towing system and rack system requirements of General Motors, for which it has been a supplier for over 20 years. The following chart sets forth information regarding vehicle models on which the Company's automotive products are used or for which the Company has been awarded business (including Ellebi, which was acquired on January 2, 1998).
AWARDED BUSINESS ON PRODUCT OEM CUSTOMER 1997 PRODUCTION(A) FUTURE PRODUCTION(B) ------- ------------ ------------------ -------------------- Towing Systems Chrysler Cherokee, Grand Cherokee, Caravan, Cherokee, Grand Cherokee, Plymouth Voyager, Town & Country, Ram Pick-up, Prowler, Ram Van Dakota, Wrangler, Durango General Motors Suburban, Yukon, Tahoe, Astro, Frontera, Corsa, Arena (van) Safari, CK Pick-up, ML Van, S-10 Blazer, APV Vans, Bravada Jimmy, Geo Tracker, Blazer, Corsa, Astra (hatchback), Astra (Sedan), Astra (Station wagon), Calibra, Vectra (Hatchback), Vectra (Sedan), Vectra (Station wagon), Omega (Sedan), Omega (Station wagon), Campo, Frontera, Monterey, Zafira Ford Expedition, Explorer, Ranger, Escort, Explorer Aerostar Minivan, Mercury Villager, Windstar Minivan, Navigator, Fiesta, Escort (all models), Mondeo, Mondeo (Wagon), Scorpio (Sedan), Scorpio (Wagon), Maverick, Transit Renault Laguna (Station wagon), Laguna, Twingo, Laguna, Clio Megane, Twingo, Espace Isuzu Rodeo, Trooper Toyota 4-Runner, Land Cruiser, RAV4, Lexus, Corolla, Lexus LS200, Carina, 646T, 477T, 860T, Corolla, Carina, Carina Wagon, Yaris Camry, Hi-Lux, Picnic, Previa, Hi-Ace, Celica Nissan Pathfinder, Pick-up, Quest, Infiniti Almera, Primera Wagon, Micra, vehicle, QW Truck, Micra, Sunny, Patrol Almera, Primera, Maxima, King Cab, Terrano, Patrol Mazda 121, MPV, Xedos-9, Xedos-6, 626, 323 626 Wagon, 323
53 56
AWARDED BUSINESS ON PRODUCT OEM CUSTOMER 1997 PRODUCTION(A) FUTURE PRODUCTION(B) ------- ------------ ------------------ -------------------- Towing Systems (cont.) Honda Passport PF Van, CRV Mitsubishi Montero Spacestar, Challenger FIAT Almost all models Alpha Romeo Almost all models Lancia Almost all models Subaru Outback 79V Range Rover Range Rover, Land Rover Volvo 900 series (Sedan), 900 series 900 series, S/V 70 series (Station wagon), 850 (Sedan), 850 (Station wagon) SAAB 9000 series, 900 series 900 series, 9000 series, 9000 station wagon, small car 9-3, small car 9-5, small station wagon Peugeot 106, 306, 406 (Sedan), 406 (Station 206 Sport, 306 Break wagon), 406 (Coupe), 605, 806, J5 (Van), Boxer (Van) Suzuki Wagon R. Grand Vitara Daihatsu Sirion, More, Charade SEAT Toledo Skoda SK240 Volkswagen Gold Combi, Vento Daewoo LD100 Rack Systems Chrysler Cherokee, Grand Cherokee, Caravan, Cherokee, Grand Cherokee, Caravan, Voyager, Town & Country, Durango Voyager, Town & Country, Neon PT, BW 72 General Motors Suburban, Yukon, Tahoe, Astro, Safari Suburban, Yukon, Tahoe, Jimmy, Blazer, Bravada Honda Accord Mitsubishi Montero Mercedes ML320 Subaru Outback, Impreza, Legacy KIA Sportage SEAT Vario GP99 Opel Astra BMW E-53 (SUV)
- ------------------------- (a) Represents models for which the Company produced products in 1997. (b) The amount of products produced under these awards is dependent on the number of vehicles manufactured by the OEMs. Many of the models are versions of vehicles not yet in production. See "Risk Factors -- The OEM Supplier Industry." There can be no assurance that any of these vehicles will be produced or that the Company will generate certain revenues under these awards even if the models are produced. Automotive Aftermarket. The Company sells its products directly into the automotive aftermarket through a number of channels, including wholesalers, retailers and installers, through its internal sales force and outside sales representatives. The largest of the Company's aftermarket customers include U-Haul, Pep Boys, Balkamp, Advance Auto Parts, Coast Distribution System, Discount Auto Parts, Ace Hardware and Canadian Tire. The Company believes that it has established a reputation as a highly reliable aftermarket supplier able to meet its customers' requirements for on-time deliveries while minimizing the carrying levels of inventory. For example, the Company began supplying towing systems to U-Haul (the largest installer of towing systems in the United States) in 1994 and for the year ended December 31, 1997, supplied approximately 50% of U-Haul's towing system requirements. The Company believes aftermarket customers such as U-Haul represent opportunities to cross-sell existing products such as rack systems and accessories. 54 57 MANUFACTURING PROCESS The Company's manufacturing operations are directed toward achieving ongoing quality improvements, reducing manufacturing and overhead costs, realizing efficiencies and adding flexibility. The manufacturing operations utilized by the Company include metal cutting, bending, cold forming, roll forming, stamping, welding, plastic injection molding, painting, assembly and packaging. The Company performs most manufacturing operations in-house but outsources certain processes depending on the capabilities and capacities of individual plants and cost considerations. For example, while some of the Company's towing systems manufacturing facilities have painting capabilities, the Company has chosen to outsource the painting of its rack systems. The Company develops new tooling used in the manufacture of its products. Once a customer accepts such tooling, the tooling becomes the property of the customer and the Company is reimbursed by the customer for the cost of the tooling, or in certain instances, recovers all or a portion of such costs through incremental increases in unit selling prices. In some cases, the Company has also developed special machinery to meet its particular needs. For example, the hardware that accompanies certain towing systems is selected automatically by special equipment and is then weighed and transferred into the final package without human intervention. The Company has developed specialized, computer operated machinery to enable it to efficiently perform this operation. The Company has organized its production process to minimize the number of manufacturing functions and the frequency of material handling, thereby improving quality and reducing costs. In addition, the Company uses cellular manufacturing which improves scheduling flexibility, productivity and quality while reducing work in process and costs. The Company has established quality procedures at each of its facilities and strives to manufacture the highest quality product possible. The Company has achieved ISO-9000 or QS-9000 certification for ten of its seventeen manufacturing and engineering facilities and is in the process of obtaining certification for the rest of its facilities. The Company has received numerous quality and performance awards from its OEM customers, including Chrysler's Gold Pentastar Award, Ford Q-1 Award, Toyota's Distinguished Supplier Award and the Nissan Superior Supplier Performance Award. PRODUCT DESIGN, DEVELOPMENT AND TESTING The Company believes that it is a leader in the design of towing systems and rack systems and accessories. The Company believes it offers products that possess greater quality, reliability and performance than the products sold by many of its competitors. The 84 members of the Company's engineering and design staff possess strong technical skills. The Company currently holds more than 150 U.S. and foreign patents, and has numerous patent applications pending. The expiration of such patents are not expected to have a material adverse effect on the Company's operations. On a pro forma basis, the Company spent $6.9 million on research and development in 1997. The Company works closely with OEMs to constantly improve design and manufacturing technology and product functionality. When an OEM is in the process of developing a new model, it typically approaches an established or incumbent supplier with a request to supply the required towing system or rack system. The Company is typically contacted two to four years prior to the start of production of the new model. The Company's product development engineers then work closely with the OEM to develop a product that satisfies the OEM's aesthetic and functional requirements. This relationship also provides the Company with a competitive advantage in the aftermarket because the Company already possesses the knowledge to create a system compatible with new model vehicles prior to release. The Company has extensive testing capabilities which enable it to test and certify its products. The Company subjects its products to tests which it believes are more demanding than conditions which would occur during normal use. The Company has specialized equipment which it has purchased or developed for use in its testing laboratories. 55 58 Since May 1994, six European countries enacted the new EC regulatory standards which require that towing systems undergo significant safety testing prior to gaining approval for sale. This safety testing requires that a towing system be extensively tested for fatigue and includes subjecting a towing system to upwards of two million high load pulses. The Company does its testing in its own laboratory under the control of an independent institute that is authorized by the EC to approve the towing systems for sale. The quality assurance system is regularly audited by an independent institute and by the automotive OEMs themselves. The Company has continually been awarded the highest distinction of achievement by the independent institute. RAW MATERIALS The principal raw material used in the Company's products is steel, which is purchased in sheets, rolls, bars or tubes and represents approximately 50% of the Company's raw material costs. The Company also purchases significant amounts of aluminum and plastics. The Company has various suppliers globally and has not had difficulties in procuring raw materials nor does it expect to have any problems in the future. The Company is committed to supplier development and long-term supplier relationships. However, most of the Company's raw material demands are for commodities and, as such, can be purchased on the open market on an as needed basis. The Company selects among available suppliers by comparing cost, consistent quality and timely delivery as well as compliance with QS-9000 and ISO-9000 standards. The Company customarily obtains its supplies through individual purchase orders. In some instances, the Company will enter into short-term contracts with its suppliers which generally run one year or less. However, in the Company's sole outsourcing relationship, it has signed a long-term supply agreement which terminates in 2004 with one of its painting suppliers, Crown Group, Inc. ("Crown"), under which Crown opened a state-of-the-art paint line in a facility adjacent to the Company's Port Huron facility. COMPETITION The Company's industry is highly competitive. A large number of actual or potential competitors exist, some of which are larger than the Company and have substantially greater resources than the Company. The Company competes primarily on the basis of product quality, cost, timely delivery, customer service, engineering and design capabilities and new product innovation in both the OEM market and the automotive aftermarket. The Company believes that as OEMs continue to strive to reduce new model development cost and time, innovation and design and engineering capabilities will become more important as a basis for distinguishing competitors. The Company believes it has an outstanding reputation in both of these areas. In the automotive aftermarket, the Company believes that its wide range of product applications is a competitive advantage. For example, the Company has developed towing systems to fit substantially all the light vehicles produced in North America and Europe. The Company believes its competitive advantage in the aftermarket is enhanced by its close relationship with OEMs, allowing the Company access to automobile design at an earlier time than its competitors. In the towing systems market, the Company competes with Draw-Tite Inc. and Reese Products Inc., both of which are subsidiaries of TriMas Corp., Bosal Holding B.V., The Oris Group, Production Stamping Inc. and numerous smaller competitors. In the rack systems and accessories market, the Company's competitors include JAC Holding Corp., Thule, which is a wholly-owned subsidiary of Eldon AB (a Swedish company), Yakima Products Inc., Barrecrafters, Graber Products Inc. and several smaller competitors. EMPLOYEES At December 31, 1997, the Company had approximately 1,600 employees of whom approximately 1,100 are hourly employees and approximately 500 are salaried personnel. Approximately 150 of the Company's employees in the United States at the Port Huron, Michigan facility are represented by the Teamsters Union. Collective bargaining agreements with the Teamsters Union affecting these employees expire in April 1999. As is common in many European jurisdictions, substantially all of the Company's employees in Europe are 56 59 covered by country-wide collective bargaining agreements. The Company believes that its relations with its employees are good. FACILITIES The Company's executive offices are located in approximately 14,550 square feet of leased space in Sterling Heights, Michigan. The Company has 19 engineering, manufacturing and distribution facilities with a total of approximately 1,973,350 square feet of space. The Company believes that substantially all of its property and equipment is in good condition and that it has sufficient capacity to meet its current and projected manufacturing and distribution needs. The Company's facilities are as follows:
SQUARE OWNED/ LEASE LOCATION FUNCTION FEET LEASED EXPIRATION** -------- -------- ------ ------ ------------ North America Shelby Township, Michigan* Manufacturing 42,800 Owned -- Port Huron, Michigan* Manufacturing 200,000 Owned -- Sterling Heights, Michigan* Administration and engineering 14,550 Leased 2003 Mt. Clemens, Michigan Warehousing 25,000 Leased 1998 Lodi, California Administration, manufacturing and 150,000 Owned -- engineering Auburn Hills, Michigan Warehousing 49,000 Leased 2006 Madison Heights, Michigan* Administration and manufacturing 90,000 Leased 2002 Madison Heights, Michigan* Engineering 18,000 Leased 2002 Granby, Quebec Administration, manufacturing and 62,000 Leased 2001 warehousing Bromptonville, Quebec Manufacturing 2,000 Leased 1999 Europe Sandhausen, Germany Administration and engineering 5,000 Leased Month to Month Staphorst, The Netherlands* Administration, manufacturing, 405,000 Owned -- warehousing and engineering Hoogeveen, The Netherlands* Manufacturing and warehousing 185,000 Owned -- Fensmark, Denmark* Manufacturing and warehousing 95,000 Owned -- Nuneaton, United Kingdom* Manufacturing and warehousing 75,000 Owned -- Vanersborg, Sweden* Manufacturing, warehousing and 160,000 Leased 2004 engineering Reims, France Manufacturing and warehousing 115,000 Owned -- Reggio Emilia, Italy Administration, manufacturing, 170,000 Leased 2003 warehousing and engineering Reggio Emilia, Italy Manufacturing and warehousing 110,000 Leased 2003
- ------------------------- * QS 9000 and/or ISO 9000 certification. ** Gives effect to all renewal options. ENVIRONMENTAL REGULATION The Company's operations are subject to foreign federal, state and local environmental laws and regulations that limit the discharges into the environment and establish standards for the handling, generation, emission, release, discharge, treatment, storage and disposal of certain materials, substances and wastes. In many jurisdictions, these laws are complex, change frequently, and have tended to become stronger over time. In jurisdictions such as the United States, such obligations, including but not limited to those under the Comprehensive Environmental Response, Compensation & Liability Act ("CERCLA") may be joint and several and may apply to conditions at properties presently or formerly owned or operated by an entity or its predecessors, as well as to conditions at properties at which waste or other contamination attributable to an entity or its predecessors have been sent or otherwise come to be located. The Company believes that its operations are in substantial compliance with the terms of all applicable environmental laws and regulations as currently interpreted. In addition, to the best of the Company's knowledge, there are no existing or potential environmental claims against the Company nor has the Company received any notification or have any current investigation regarding, the disposal, release, or threatened release at any location of any hazardous substance generated or transported by the Company. However, the Company cannot predict with any certainty that it 57 60 will not in the future incur liability under environmental laws and regulations with respect to contamination of sites currently or formerly owned or operated by the Company (including contamination caused by prior owners and operators of such sites), or the off-site disposal of hazardous substances. While historically the Company has not had to make significant capital expenditures for environmental compliance, the Company cannot predict with any certainty its future capital expenditures for environmental compliance because of continually changing compliance standards and technology. Future events, such as changes in existing environmental laws and regulations or unknown contamination of sites owned or operated by the Company (including contamination caused by prior owners and operators of such sites), may give rise to additional compliance costs which could have a material adverse effect on the Company's financial condition. Furthermore, actions by foreign, federal, state and local governments concerning environmental matters could result in laws or regulations that could increase the cost of producing the products manufactured by the Company or otherwise adversely affect the demand for its products. Additionally, the Company does not currently have any insurance coverage for environmental liabilities and does not anticipate obtaining such coverage in the future. See "Risk Factors -- Environmental Matters." LEGAL PROCEEDINGS From time to time, the Company is subject to legal proceedings and other claims arising in the ordinary course of its business. The Company believes that it is not presently a party to any litigation the outcome of which would have a material adverse effect on its financial condition or results of operations. The Company maintains insurance coverage against claims in an amount which it believes to be adequate. MANAGEMENT BOARD OF MANAGERS, EXECUTIVE OFFICERS AND OTHER SIGNIFICANT EMPLOYEES The following table sets forth the names and ages of each of the individuals that currently serves as a member (each, a "Board Member") of the Company's board of managers (the "Board of Managers"), executive officer and other significant employee of the Company.
NAME AGE POSITION ---- --- -------- F. Alan Smith........................ 66 Chairman of the Board of Managers of the Company Marshall D. Gladchun................. 50 President and Chief Executive Officer of the Company and SportRack; Board Member Roger T. Morgan...................... 53 President and Chief Executive Officer of Valley; Board Member Gerrit de Graaf...................... 34 General Manager and Chief Executive Officer of Brink Terence C. Seikel.................... 41 Vice President of Finance and Administration and Chief Financial Officer of the Company Richard E. Borghi.................... 51 Executive Vice President and Chief Operating Officer of SportRack Jean M. Maynard...................... 43 President of SportRack International J. Wim Rengelink..................... 43 Managing Director of Brink Gary K. Houston...................... 44 Vice President of OEM Operations of Valley Bryan A. Fletcher.................... 38 Vice President of Aftermarket Operations of Valley Donald J. Hofmann, Jr................ 40 Board Member, Vice President and Secretary of the Company Barry Banducci....................... 62 Board Member Gerard J. Brink...................... 54 Board Member
F. Alan Smith has served in the automotive industry for 36 years and has been Chairman of the Board of Managers of the Company since its formation in September 1995. He served in various assignments at 58 61 General Motors from 1956 to 1992, including President of GM Canada from 1978 to 1980. He was a member of the Board of Directors of General Motors from 1981 to 1992 and Chief Financial Officer of General Motors from 1981 to 1988. Mr. Smith is a director of The Minnesota Mining and Manufacturing Corporation ("3M") and TransPro, Inc. ("TransPro"), a supplier of automotive components. Marshall D. Gladchun has served in the automotive industry for 24 years and has been President and Chief Executive Officer of the Company and SportRack since September 1995. From 1986 to 1995, he held various senior management positions with MascoTech, and was President and Chief Operating Officer of the MascoTech Division at the time of its acquisition by the Company. Roger T. Morgan has served in the automotive industry for 35 years and has been President and Chief Executive Officer of Valley since June 1990. Prior to joining Valley, he worked for General Motors for 12 years and Rockwell International Automotive Group as Vice President -- Operations for 14 years. Gerrit de Graaf has been General Manager and Chief Executive Officer of Brink since November 1996. From 1989 to 1996, Mr. de Graaf worked for Philips Medical Systems as a consultant and most recently as Philips' Marketing Manager in the United States. Terence C. Seikel has served in the automotive industry for 14 years and has been Vice President of Finance and Administration and Chief Financial Officer of the Company since January 1996. From 1985 to 1996, Mr. Seikel was employed by Larizza Industries, a publicly held supplier of interior trim to the automotive industry, in various capacities including Chief Financial Officer. Richard E. Borghi has served in the automotive industry for 30 years and has been Executive Vice President of Operations and Chief Operating Officer of SportRack since 1995. From 1988 to 1995, Mr. Borghi held various senior management positions with MascoTech, and was the Executive Vice President of Operations of the MascoTech Division at the time of its acquisition by the Company. Jean M. Maynard has served in the automotive industry for 18 years and has been President of SportRack International or its predecessor since prior to 1992. J. Wim Rengelink has served in the automotive industry for 11 years and has been Managing Director of Brink since 1995. From 1988 to 1995 he worked in Brink's internal audit department. Gary K. Houston has served in the automotive industry for 24 years and has been Vice President of OEM Operations of Valley since 1995. From 1991 to 1995 he was Vice President of Manufacturing of Valley. Prior thereto, Mr. Houston worked for Rockwell International for 18 years, most recently as a manufacturing manager. Bryan A. Fletcher has served in the automotive industry for 9 years and has been Vice President of Aftermarket Operations of Valley since 1991. Donald J. Hofmann, Jr. has been a Board Member, Vice President and Secretary of the Company since October 1995. Mr. Hofmann has been a General Partner of CCP since 1992. Barry Banducci has been a Board Member of the Company since October 1995. Since September 1995, Mr. Banducci has been the Chairman of TransPro. Prior thereto, Mr. Banducci served in various capacities at Equion Corporation, a supplier of automotive components, from 1983 to 1995, including President, Chief Executive Officer and Vice Chairman. Mr. Banducci is a director of TransPro and Aristotle Corporation. Gerard J. Brink has been a Board Member of the Company since October 1996. Mr. Brink was General Manager of Brink from 1965 to 1996. BOARD MEMBER COMPENSATION The Board Members do not currently receive compensation for their service on the Board of Managers or any committee thereof but are reimbursed for their out-of-pocket expenses. 59 62 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Board of Managers has an Audit Committee consisting of Messrs. Banducci and Brink, and a Compensation Committee consisting of Messrs. Hofmann and Smith. The Audit Committee reviews the scope and results of audits and internal accounting controls and all other tasks performed by the independent public accountants of the Company. The Compensation Committee determines compensation for executive officers of the Company and administers the Company's 1995 Option Plan. COMPENSATION OF EXECUTIVE OFFICERS The following table sets forth information concerning the compensation for 1997 for the chief executive officer of the Company and the four next most highly compensated executive officers of the Company. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS -------------------------------- ------------ OTHER ANNUAL SECURITIES ALL OTHER FISCAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS(#) ($) --------------------------- ------ ------ ----- ------------ ------------ ------------ F. Alan Smith........................... 1997 200,000 100,000 -- -- -- Chairman of the Company Marshall D. Gladchun.................... 1997 362,500 195,000 -- -- -- President and Chief Executive Officer of the Company and SportRack Terence C. Seikel....................... 1997 200,600 94,000 -- -- -- Vice President of Finance and Administration and Chief Financial Officer of the Company Roger T. Morgan*........................ 1997 107,220 73,000 -- 178 -- President and Chief Executive Officer of Valley Richard E. Borghi....................... 1997 206,500 94,000 -- -- -- Executive Vice President and Chief Operating Officer of SportRack
- ------------------------- * August 5, 1997 to December 31, 1997 OPTION GRANTS IN 1997 The following table sets forth information with respect to stock options pursuant to the 1995 Option Plan granted to the named executive officers of the Company during 1997. All options were granted at an exercise price equal to the fair market value per share of Common Stock on the date of grant.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE ----------------------------------------------------- AT ASSUMED ANNUAL RATES NUMBER OF OF STOCK PRICE SECURITIES PERCENT OF TOTAL EXERCISE APPRECIATION FOR OPTION UNDERLYING OPTIONS GRANTED OR BASE TERM($)(1) OPTIONS TO EMPLOYEES IN PRICE EXPIRATION -------------------------- NAME GRANTED(#) 1997(%) ($/SH) DATE 5% 10% ---- ---------- ---------------- -------- ---------- -- --- F. Alan Smith....................... -- -- -- -- -- -- Marshall D. Gladchun................ -- -- -- -- -- -- Terence C. Seikel................... -- -- -- -- -- -- Roger T. Morgan..................... 178 47.1 5,610 8/5/12 $1,077,000 $3,173,000 Richard E. Borghi................... -- -- -- -- -- --
- ------------------------- (1) Potential realizable value is based on the assumption that the price of the Company's common stock appreciates at the annual rate shown, compounded annually, from the date of grant until the end of the 15-year option term. The values are calculated in accordance with rules promulgated by the Securities and Exchange Commission and do not reflect the Company's estimate of future common stock price appreciation. 60 63 EMPLOYMENT AGREEMENTS Each of Marshall D. Gladchun, Roger T. Morgan, Terence C. Seikel, Richard E. Borghi and Gerrit de Graaf has entered into an employment agreement (collectively, the "Employment Agreements") with the Company. Mr. Gladchun's Employment Agreement provides for an annual base salary of $277,304, subject to increases at the sole discretion of the Board of Managers, a bonus in the range of 50-70% of his base salary, and a one-time bonus of $400,000 on the earlier of (i) September 20, 2002, (ii) his termination date, and (iii) a sale of the Company (any such bonus an "Ending Bonus"). Mr. Morgan's Employment Agreement provides for an annual base salary of $250,000, subject to increases at the sole discretion of the Board of Managers, and a bonus in the range of 50% to 70% of his base salary. Mr. Seikel's Employment Agreement provides for an annual base salary of $165,000 and a bonus in the range of 30-50% of his base salary. Mr. Borghi's Employment Agreement provides for an annual base salary of $161,200, subject to increases at the sole discretion of the Board of Managers, a bonus in the range of 30-50% of his base salary, and an Ending Bonus of $100,000. Mr. de Graaf's Employment Agreement provides for an annual base salary of NLG 170,000, subject to increases at the sole discretion of the Board of Managers, and a bonus in the range of 30% to 50% of his base salary. The Employment Agreements also provide for twelve months of severance pay to the executive officer in the event such officer is terminated without cause (as defined in the Employment Agreement.) The Employment Agreements expire at various times between June 30, 2000 and December 31, 2000 (except that Gerrit de Graaf's Employment Agreement may be terminated by either party upon three month's prior written notice) but automatically extend for successive two-year terms unless terminated by the Company upon 30 days notice prior to the expiration of the current term. Each Employment Agreement prohibits the executive officer from disclosing non-public information about the Company. The Employment Agreements also require the executive officers to assign to the Company any designs, inventions and other related items and intellectual property rights developed or acquired by the executive officer during the term of his employment. In addition, for a period of five years after termination of employment (two years if the termination is without cause) each executive officer has agreed, in his respective Employment Agreement, not to (i) engage in any Competitive Business (as defined in the Employment Agreements), (ii) interfere with or disrupt any relationship between the Company and its customers, suppliers and employees and (iii) induce any employee of the Company to terminate his or her employment with the Company or engage in any Competitive Business. CONSULTING AGREEMENTS F. Alan Smith and Barry Banducci have each entered into consulting agreements (the "Consulting Agreements") with the Company dated as of September 28, 1995. Mr. Smith's Consulting Agreement provides for an annual consulting fee of $150,000 subject to increases at the sole discretion of the Board of Managers, and a performance based bonus in the range of 30-50% of the annual consulting fee. Mr. Banducci's Consulting Agreement provides for an annual consulting fee of $50,000. The initial term of the Consulting Agreements expired on March 28, 1997. The Consulting Agreements automatically extend for successive six-month periods unless terminated by the Company upon 30 days notice prior to the expiration of the then current term. The Consulting Agreements prohibit Messrs. Smith and Banducci from disclosing non-public information about the Company. MEMBERS' AGREEMENT Pursuant to the Second Amended and Restated Members' Agreement dated as of August 5, 1997 (the "Members' Agreement") among the Company and certain of the holders of outstanding units (the "Units") of the Company, affiliates of CCP have the ability to appoint a majority of the members of the Company's Board of Managers. 61 64 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of March 15, 1998, the outstanding membership interests of the Company consisted of 16,271 Units. The following table sets forth certain information regarding the beneficial ownership of the Units by (i) each person known by the Company to own more than 5% of the Units, (ii) each named director, (iii) each named executive officer and (iv) all of the Company's directors and executive officers treated as a group. To the knowledge of the Company, each of such holders of Units has sole voting and investment power as to the Units owned unless otherwise noted.
PERCENTAGE NAME AND ADDRESS(1) UNITS OWNED OWNERSHIP(2) ------------------- ----------- ------------ CB Capital Investors, L.P.(3)......................... 10,111 60.28% 380 Madison Avenue, 12th Floor New York, New York 10017 MascoTech, Inc........................................ 1,500 9.22 275 Rex Boulevard Auburn Hills, Michigan 48326 Celerity Partners..................................... 1,500 9.22 c/o Mark Benham 300 Sand Hill Road Building 4, Suite 230 Menlo Park, California 94025 F. Alan Smith(4)...................................... 429 2.62 Marshall D. Gladchun(5)............................... 915 5.48 Roger T. Morgan....................................... 89 0.55 c/o Valley Industries, LLC 32501 Dequindre Madison Heights, Michigan 48071 Terence C. Seikel(6).................................. 360 2.19 Richard E. Borghi(7).................................. 366 2.23 Barry Banducci(8)..................................... 357 2.18 59 Old Quarry Road Guildford, Connecticut 06437 Gerard J. Brink....................................... 410 2.52 Lijsterbeslaan 10 B-2950 Kapellen Belgium All directors and executive officers as a group (9 persons)............................................ 2,926 16.96
- ------------------------- (1) Unless otherwise indicated, address is c/o Advanced Accessory Systems, LLC, 12900 Hall Road, Suite 200, Sterling Heights, Michigan 48313. (2) Beneficial ownership is determined in accordance with the rules of the Commission and includes voting and investment power with respect to the Units. Units subject to options or warrants currently exercisable or exercisable within 60 days of March 15, 1998 are deemed outstanding for purposes of computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person. (3) CB Capital Investors, L.P. is an affiliate of CCP. Includes 501 Units subject to warrants exercisable within 60 days. (4) Includes 129 Units subject to options exercisable within 60 days. 300 Units are owned by the F. Alan Smith Family Limited Partnership. 62 65 (5) Includes 415 Units subject to options exercisable within 60 days. (6) Includes 160 Units subject to options exercisable within 60 days. (7) Includes 166 Units subject to options exercisable within 60 days. (8) Includes 107 Units subject to options exercisable within 60 days. All Units are owned by the Banducci Family, LLC. LIMITED LIABILITY COMPANY AGREEMENT The Company, Valley and SportRack are each limited liability companies organized under the Delaware Limited Liability Company Act (the "LLC Act"). Valley's equity securities are held 99% by the Company and 1% by SportRack. SportRack's equity securities are held 99% by the Company and 1% by CB Capital Investors, L.P. ("CBC"), an affiliate of CCP. The Company controls the policies and operations of Valley and SportRack. The Company's operations are governed by a Second Amended and Restated Operating Agreement (the "LLC Agreement") among the Company, CBC, certain members of the Company's management and the investors defined therein (each a "Member" and collectively the "Members"). The LLC Agreement governs the relative rights and duties of the Members. Units. The Company is authorized to issue up to 25,000 Class A Units and up to 2,000 Class B Units. As of March 15, 1998, 16,271 Class A Units are issued and outstanding, 4,200 Class A Units have been duly reserved for issuance to employees, directors and independent consultants and contractors of the Company or any subsidiary thereof pursuant to the 1995 Option Plan of the Company, and no Class B Units have been issued or reserved for issuance. Management. The Board of Managers of the Company consists of up to 11 members as designated pursuant to the Members Agreement. The Board of Managers is selected by a majority of the Members holding Class A units (each a "Class A Member"). Under the Members Agreement, CBC is entitled at all times to hold a seat on the Board of Managers and has the ability to appoint a majority of the Members of the Board of Managers. A majority of the Chase Members (as defined in the Members Agreement) may hold a seat on the Board of Managers through their representative. Any Board Member of the Company may be removed without cause by the vote of a majority of the Class A Members so long as the Members entitled to appoint such Board Member have consented. If a vacancy on the Board of Managers is not filled by a majority of the Class A Members within 60 days after such vacancy occurs such vacancy may be filled by a vote of the majority of the Board Members then in office or, if none, by a vote of all Members. Distributions. Both the Amended and Restated Credit Agreement and the Indenture generally limit the Company's ability to make cash distributions to Members other than distributions to cover the income tax liabilities of the Members. Specifically, within 90 days of the end of each fiscal year, the Company will distribute to each Member an amount (if any) equal to 44% of the excess of Net Profits over Net Losses (each as defined in the LLC Agreement) to such Member's capital account less any distributions previously made in that year. Restriction on Transfer. No Member may transfer its interest without having obtained the prior written consent of a majority of the Board Members who hold in the aggregate more than 50% of the profits and capital interest of the Company, which consent may be withheld in their sole discretion. Dissolution. The Company will be dissolved upon the earliest to occur of (a) December 31, 2025; (b) the determination of the Board of Managers and a majority of Class A Members to dissolve the Company; or (c) the occurrence of an event of withdrawal of a Board Member or any other dissolution event under Section 18-801 of the LLC Act. An event of withdrawal of any Member will not dissolve the Company if within 90 days of such event the business of the Company is continued by a majority of its remaining Members. 63 66 CERTAIN TRANSACTIONS Chase Securities Inc. ("CSI"), The Chase Manhattan Bank ("Chase"), The Chase Manhattan Bank of Canada ("Chase Canada") and CCP are affiliates of CB Capital Investors, L.P., which owns approximately 47.7% of the Company's issued and outstanding voting securities on a fully diluted basis and the 1.0% minority interest in SportRack. CSI acted as an Initial Purchaser in connection with the Offering, for which it received customary fees. Chase is agent bank and a lender to the Company under the Amended and Restated Credit Agreement and has received customary fees and reimbursement of expenses in such capacities. Chase Canada is agent bank and a lender to the Company under the Canadian Credit Agreement and has received customary fees and reimbursement of expenses in such capacities. Chase received its proportionate share, $6.0 million, of the repayment by the Company of $90.0 million under the Amended and Restated Credit Agreement from the proceeds of the Offering. An affiliate of CCP and CSI held a portion of the Senior Subordinated Debt and received its proportionate share, $10.7 million, including prepayment penalties of $700,000, of the repayment by the Company of such debt from the proceeds of the Offering. As a result of the Offering, such affiliate was relieved of its obligation to provide up to an additional $20.0 million of senior subordinated debt financing. In addition, an affiliate of CSI and CCP purchased a portion of the Old Notes in connection with the Offering and will not be participating in the Exchange Offer. Donald J. Hofmann, Jr., a general partner of CCP, is a member of the Board of Managers of the Company. In addition, CSI, Chase and their affiliates participate on a regular basis in various investment banking and commercial banking transactions for the Company and its affiliates. The Company is a party to the Consulting Agreements with F. Alan Smith, the Chairman of the Company, and Barry Banducci, a Board Member of the Company. See "Management -- Consulting Agreements." In connection with the acquisition of the MascoTech Division by the Company, the Company loaned Messrs. Gladchun and Borghi $400,000 and $100,000, respectively, to enable them to make their initial equity investments in the Company. The loans bear interest at 6.2% and mature in September 2002. DESCRIPTION OF THE CREDIT FACILITIES CANADIAN CREDIT AGREEMENT To finance the SportRack International Acquisition and provide working capital financing in Canada, Chase Canada, First Chicago NBD Bank, Canada, and Bank of Nova Scotia (collectively, the "Canadian Lenders") have provided to SportRack International a C$20 million (approximately $14.5 million) term loan and a C$4.0 million (approximately $2.8 million) working capital revolving credit facility under a First Amended and Restated Credit Agreement dated as of March 19, 1998 (the "Canadian Credit Agreement"). The Canadian Credit Agreement is scheduled to mature on October 31, 2003 and the term loan portion amortizes in quarterly installments. The Canadian Credit Agreement is guaranteed by the Company and SportRack and is secured by a pledge of 100% of the stock and assets of SportRack International. The guarantees of the Company and SportRack are secured by substantially the same collateral that secures the obligations of those companies under the Amended and Restated Credit Agreement described below. The interest margins under the Canadian Credit Agreement are comparable to those under the Revolving Credit Facility and the Tranche A Term Loan described below. AMENDED AND RESTATED CREDIT AGREEMENT In connection with the Valley Acquisition, the Company entered into the Second Amended and Restated Credit Agreement, dated as of August 5, 1997 (as amended, the "Amended and Restated Credit Agreement"), with certain of its subsidiaries, the lenders party thereto, Chase as Co-Administrative Agent and Syndication Agent and First Chicago NBD Bank ("NBD") as Administrative Agent, Documentation Agent and Collateral Agent. The Amended and Restated Credit Agreement amended the Company's existing credit agreement and provided for (i) a Tranche A Term Loan in the aggregate principal amount of $65 million (the "Tranche A Term Loan"), (ii) a Tranch B Term Loan in the aggregate principal amount of $55 million (the 64 67 "Tranche B Term Loan" and together with the Tranche A Term Loan, collectively, the "Term Loan Facilities") and (iii) a revolving credit facility in the aggregate principal amount of $25 million (the "Revolving Credit Facility"), which includes a $2 million swing line sub facility and a $10 million letter of credit sub facility. Borrowings by SportRack International under the revolving credit facility of the Canadian Credit Agreement count against availability under the Revolving Credit Facility. The outstanding principal amounts of the Tranche A Term Loan and the Tranche B Term Loan were reduced to $17.5 million and $16.0 million through prepayments from the proceeds of the sale of the Old Notes. Subsequent to the sale of the Old Notes, the Amended and Restated Credit Agreement was further amended to provide a $22 million acquisition facility to finance future acquisitions (the "Acquisition Facility"). The Tranche A Term Loan, the Tranche B Term Loan, the Revolving Credit Facility and the Acquisition Facility are referred to collectively as the "Domestic Facilities". The following information relating to the Amended and Restated Credit Agreement is qualified in its entirety by reference to the complete text of the documents entered into in connection therewith. The following is a description of the general terms of the Amended and Restated Credit Agreement: Use of Proceeds; Maturity. The proceeds of the Term Loan Facilities were used to finance the Valley Acquisition and to refinance existing debt. The proceeds of the Revolving Credit Facility were used to refinance existing debt, pay fees and expenses of the Valley Acquisition and for general corporate purposes. The proceeds of a $21.0 million borrowing under the Acquisition Facility were used to finance the acquisition of the assets of Ellebi. Prior to December 31, 1999 the Acquisition Facility may be repaid and reborrowed to finance future acquisitions. The Term Loan Facilities have maturity schedules as follows: (i) the Tranche A Term Loan matures on October 30, 2003 and amortizes in quarterly installments; and (ii) the Tranche B Term Loan matures on October 30, 2004 and amortizes in quarterly installments. The Revolving Credit Facility matures on October 30, 2003. The Acquisition Facility matures on October 30, 2003 and amortizes in quarterly installments commencing on December 31, 1999. Revolving Credit Facility. The availability of the commitments under the Revolving Credit Facility is subject to a borrowing base which generally equals specified percentages of the then Eligible Receivables or Eligible Inventory (each as defined in the Amended and Restated Credit Agreement) of the Company and certain of its Subsidiaries. As of December 31, 1997, $20.3 million of commitments under the Revolving Credit Facility is available to the Company. Prepayments; Reduction of Commitments. The Term Loan Facilities are required to be prepaid with (i) 100% of the net proceeds of any sale or issuance of equity or any incurrence of indebtedness for borrowed money, subject to certain exceptions; (ii) 100% of the net proceeds of any sale or other disposition of any material assets, except for the sale of inventory in the ordinary course of business, subject to certain exceptions; and (iii) 50% of excess cash flow for each fiscal year. Such mandatory prepayments are applied pro rata between the Tranche A Term Loans and the Tranche B Term Loans and, in each case, in the inverse order of maturity. Any Tranche B Term Loan lender may decline any mandatory prepayment prescribed in subsections (i) through (iii) above, in which case the amounts declined are applied as a mandatory prepayment pro rata to the Term Loan A Lenders in the inverse order of maturity. Interest. The Domestic Facilities bear interest at a rate per annum, at the option of the Company, equal to the adjusted eurocurrency base rate (the "Eurocurrency Base Rate") or the rate which is equal to the higher of (i) NBD's prime rate and (ii) the federal funds rate plus 1/2 of 1% ("ABR"), in each case plus an applicable margin based on the leverage ratio from time to time in effect. The applicable margins range from .50% to 1.75% for ABR Revolving Credit Facility advances and Tranche A Term Loans and from 1.00% to 2.25% for ABR Tranche B Term Loans. For Revolving Credit Facility advances and Tranche A Term Loans bearing interest based on the Eurocurrency Base Rate, the applicable margins range from 1.50% to 2.75%. For Tranche B Term Loans bearing interest at the Eurocurrency Base Rate, the applicable margins range from 2.00% to 3.25%. The rates for letter of credit fees are the same as the applicable margins for Eurocurrency Revolving Credit advances. 65 68 Collateral and Guarantees. The Domestic Facilities are guaranteed by the Company and substantially all of its existing U.S. subsidiaries. The Domestic Facilities are secured by a first priority lien on (i) all of the capital stock (or partnership or other membership interest) of the Company, SportRack and each of the material direct and indirect U.S. subsidiaries of the Company and 65% of the capital stock of first tier non-U.S. subsidiaries and (ii) substantially all tangible and intangible assets of the Company and each material direct and indirect U.S. subsidiary. With respect to certain of the loans made to non-U.S. subsidiaries, it is currently contemplated that all of the capital stock of certain non-U.S. subsidiaries and, to the extent permitted by applicable law, liens on the receivables and inventory of certain of the non-U.S. subsidiaries and mortgage liens of certain real estate owned by Brink will be pledged to secure the loans to Brink. The collateral also secures interest rate swaps, currency or other hedge obligations owning to any lender. Covenants. The Amended and Restated Credit Agreement contains covenants restricting the ability of the Company and its subsidiaries to, among other things, (i) declare dividends or redeem or repurchase capital stock; (ii) prepay, redeem or purchase debt; (iii) incur liens; (iv) make loans and investments; (v) issue additional debt; (vi) amend or otherwise alter debt and other material agreements; (vii) engage in mergers, acquisitions and asset sales; (viii) engage in transactions with affiliates; and (ix) alter the business it conducts. The Company has also provided certain customary indemnification of the Agents, lenders and their respective agents and is required to comply with financial covenants with respect to (i) maximum leverage ratio; (ii) minimum fixed charge coverage ratio; (iii) a minimum net worth; and (iv) capital expenditures; and (v) rentals. The Company must also comply with certain customary affirmative covenants. Events of Default. Events of default under the Amended and Restated Credit Agreement include but are not limited to (i) the Company's failure to pay principal when due or interest within three business days of the date when due; (ii) the Company's breach of certain covenants, representations or warranties contained in the loan documents; (iii) customary cross-default provisions; (iv) events of bankruptcy, insolvency or dissolution of the Company or its subsidiaries; (v) the levy of certain judgements against the Company, its subsidiaries, or their assets; (vi) the actual or asserted invalidity of security documents or guarantees of the Company or its subsidiaries; (vii) a Change of Control (as defined in the Amended and Restated Credit Agreement) of the Company; (viii) the occurrence of certain ERISA events; (ix) the subordination provisions evidencing subordinated debt shall cease to be valid or in full force and effect. DESCRIPTION OF THE NOTES The Old Notes were, and the New Notes will be, issued under an Indenture (the "Indenture") among the Company, Capital Corp., the Guarantors and First Union National Bank, as trustee (the "Trustee"). The terms of the New Notes are identical in all respects to the Old Notes, except that the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer and will not contain provisions providing for the payment of liquidated damages under certain circumstances relating to the Registration Rights Agreement, which provisions will terminate upon the consummation of the Exchange Offer. The following summary of certain provisions of the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and to all of the provisions of the Indenture, including the definitions of certain terms therein and those terms made a part of the Indenture by reference to the Trust Indenture Act, as in effect on the date of the Indenture. The definitions of certain capitalized terms used in the following summary are set forth below under "Certain Definitions." References in this "Description of the Notes" section to "the Company" mean only Advanced Accessory Systems, LLC and not any of its Subsidiaries. GENERAL The Notes are joint and several obligations of the Company and Capital Corp. The Notes are issued only in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. The Issuers have appointed the Trustee to serve as registrar and paying agent under the Indenture at its offices at 40 Broad Street, 5th Floor, Suite 550, New York, New York 10004. No service charge will be made for any registration 66 69 of transfer or exchange of the Notes, except for any tax or other governmental charge that may be imposed in connection therewith. RANKING The Notes rank junior to, and subordinate in right of payment to, all existing and future Senior Indebtedness of the Issuers, pari passu in right of payment with all senior subordinated Indebtedness of the Issuers and senior in right of payment to all Subordinated Indebtedness of the Issuers. At December 31, 1997, on a pro forma basis after giving effect to the 1998 Transactions the Company would have had approximately $74.3 million of Senior Indebtedness outstanding (exclusive of unused commitments). All debt incurred under the Credit Facilities will be Senior Indebtedness of the Company, will be guaranteed by each of the Guarantors on a senior basis and will be secured by substantially all of the assets of the Company and the Guarantors. MATURITY, INTEREST AND PRINCIPAL OF THE NOTES The Notes are limited to $125,000,000 aggregate principal amount and will mature on October 1, 2007. Interest on the Notes accrues at a rate of 9 3/4% per annum and is payable in cash semi-annually in arrears on each April 1 and October 1, commencing on October 1, 1998, to the holders of record of Notes at the close of business on March 15 and September 15, respectively, immediately preceding such interest payment date. Interest accrues from the most recent interest payment date to which interest has been paid or, if no interest has been paid, from April 1, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months. OPTIONAL REDEMPTION The Notes are redeemable at the option of the Issuers, in whole or in part, at any time on or after October 1, 2002, at the redemption prices (expressed as a percentage of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning on October 1 of the years indicated below:
REDEMPTION YEAR PRICE ---- ---------- 2002........................................................ 104.875% 2003........................................................ 103.250% 2004........................................................ 101.625% 2005 and thereafter......................................... 100.000%
In addition, at any time and from time to time on or prior to October 1, 2000, the Issuers may redeem in the aggregate up to 35% of the originally issued aggregate principal amount of the Notes with the net cash proceeds of one or more Public Equity Offerings by the Company at a redemption price in cash equal to 109.750% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that at least 65% of the aggregate principal amount of the Notes originally issued must remain outstanding immediately after giving effect to each such redemption (excluding any Notes held by the Company or any of its Affiliates). Notice of any such redemption must be given within 60 days after the date of the closing of the relevant Public Equity Offering of the Company. SELECTION AND NOTICE OF REDEMPTION In the event that less than all of the Notes are to be redeemed at any time pursuant to an optional redemption, selection of such Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not then listed on a national securities exchange, on a pro rata basis, by lot or by such method as the 67 70 Trustee shall deem fair and appropriate; provided, however, that no Notes of a principal amount of $1,000 or less shall be redeemed in part; provided further, however, that if a partial redemption is made with the net cash proceeds of a Public Equity Offering by the Company, selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to the procedures of The Depository Trust Company), unless such method is otherwise prohibited. Notice of redemption shall be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Company has deposited with the paying agent for the Notes funds in satisfaction of the applicable redemption price pursuant to the Indenture. SUBORDINATION OF THE NOTES The payment of the principal of, premium, if any, and interest on the Notes is subordinated in right of payment, to the extent and in the manner provided in the Indenture, to the prior payment in full in cash of all Senior Indebtedness. Upon any payment or distribution of assets or securities of the Issuers of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities and excluding any payment from the trust described under "Satisfaction and Discharge of Indenture; Defeasance" (a "Defeasance Trust Payment")), upon any dissolution or winding-up or total liquidation or reorganization of the Issuers, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all Senior Indebtedness then due shall first be paid in full in cash before the Holders of the Notes or the Trustee on behalf of such Holders shall be entitled to receive any payment by the Issuers of the principal of, premium, if any, or interest on the Notes, or any payment by the Issuers to acquire any of the Notes for cash, property or securities, or any distribution by the Issuers with respect to the Notes of any cash, property or securities (excluding any payment or distribution of Permitted Junior Securities and excluding any Defeasance Trust Payment). Before any payment may be made by, or on behalf of, the Issuers of the principal of, premium, if any, or interest on the Notes upon any such dissolution or winding-up or total liquidation or reorganization, or in bankruptcy, insolvency or receivership any payment or distribution of assets or securities of the Issuers of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities and excluding any Defeasance Trust Payment), to which the Holders of the Notes or the Trustee on their behalf would be entitled, but for the subordination provisions of the Indenture, shall be made by the Issuers or by any receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, directly to the holders of the Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders) or their representatives or to the trustee or trustees or agent or agents under any agreement or indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all such Senior Indebtedness then due in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Senior Indebtedness. No direct or indirect payment (excluding any payment or distribution of Permitted Junior Securities and excluding any Defeasance Trust Payment) by or on behalf of the Issuers of principal of, premium, if any, or interest on the Notes, whether pursuant to the terms of the Notes, upon acceleration, pursuant to an Offer to Purchase or otherwise, will be made if, at the time of such payment, there exists a default in the payment of all or any portion of the obligations on any Senior Indebtedness, whether at maturity, on account of mandatory redemption or prepayment, acceleration or otherwise, and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the holders of such Senior Indebtedness. In addition, during the continuance of any non-payment event of default with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may, in accordance with the terms of the agreement or other instrument under which such Designated Senior Indebtedness was created, be immediately accelerated, 68 71 and upon receipt by the Trustee of written notice (a "Payment Blockage Notice") from the holder or holders of such Designated Senior Indebtedness or the trustee or agent acting on behalf of the holders of such Designated Senior Indebtedness, then, unless and until such event of default has been cured or waived or has ceased to exist or such Designated Senior Indebtedness has been discharged or repaid in full in cash or the benefits of these provisions have been waived by the holders of such Designated Senior Indebtedness, no direct or indirect payment (excluding any payment or distribution of Permitted Junior Securities and excluding any Defeasance Trust Payment) will be made by or on behalf of the Issuers of principal of, premium, if any, or interest on the Notes, to such Holders, during a period (a "Payment Blockage Period") commencing on the date of receipt of such notice by the Trustee and ending 179 days thereafter. Notwithstanding anything in the subordination provisions of the Indenture or the Notes to the contrary, (x) in no event will a Payment Blockage Period extend beyond 179 days from the date the Payment Blockage Notice in respect thereof was given, (y) there shall be a period of at least 181 consecutive days in each 360-day period when no Payment Blockage Period is in effect and (z) not more than one Payment Blockage Period may be commenced with respect to the Notes during any period of 360 consecutive days. No event of default that existed or was continuing on the date of commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period (to the extent the holder of Designated Senior Indebtedness, or trustee or agent, giving notice commencing such Payment Blockage Period had knowledge of such existing or continuing event of default) may be, or be made, the basis for the commencement of any other Payment Blockage Period by the holder or holders of such Designated Senior Indebtedness or the trustee or agent acting on behalf of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such event of default has been cured or waived for a period of not less than 90 consecutive days. The failure to make any payment or distribution for or on account of the Notes by reason of the provisions of the Indenture described under this "Subordination of the Notes" heading will not be construed as preventing the occurrence of any Event of Default in respect of the Notes. See "Events of Default" below. By reason of the subordination provisions described above, in the event of insolvency of the Issuers, funds which would otherwise be payable to Holders of the Notes will be paid to the holders of Senior Indebtedness to the extent necessary to pay the Senior Indebtedness in full in cash, and the Issuers may be unable to meet fully their obligations with respect to the Notes. As of March 31, 1998 the United States/Canadian Credit Facility is the only outstanding Senior Indebtedness. Subject to the restrictions set forth in the Indenture, in the future the Company may issue additional Senior Indebtedness to refinance existing Indebtedness or for other corporate purposes. GUARANTEES OF THE NOTES The Indenture provides that each of the Guarantors unconditionally guarantees on a joint and several basis (the "Guarantees") all of the Issuers' obligations under the Notes, including its obligations to pay principal, premium, if any, and interest with respect to the Notes. The Guarantees are general unsecured obligations of the Guarantors. The obligations of each Guarantor under its Guarantee is subordinated and junior in right of payment to the prior payment in full of all existing and future Guarantor Senior Indebtedness of such Guarantor substantially to the same extent as the Notes are subordinated to all existing and future Senior Indebtedness of the Company. The Guarantors also guarantee all obligations under the Credit Facilities, and each Guarantor has granted a security interest in all or substantially all of its assets to secure the obligations under the Credit Facilities. The obligations of each Guarantor are limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under the Indenture, will result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under Federal or state law. Each Guarantor that makes a payment or distribution under a Guarantee shall be entitled to a contribution from each other Guarantor in a pro rata amount, based on the net assets of each Guarantor determined in accordance with GAAP. 69 72 The Indenture provides that the Company shall cause each Restricted Subsidiary issuing a Guarantee after the Issue Date pursuant to "Certain Covenants -- Limitation on Guarantees by Restricted Subsidiaries" to (i) execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall become a party to the Indenture and thereby unconditionally guarantee all of the Issuers' Obligations under the Notes and the Indenture on the terms set forth therein and (ii) deliver to the Trustee an Opinion of Counsel that such supplemental indenture has been duly authorized, executed and delivered by such Restricted Subsidiary and constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary (which opinion may be subject to customary assumptions and qualifications). Thereafter, such Restricted Subsidiary shall (unless released in accordance with the terms of this Indenture) be a Guarantor for all purposes of the Indenture. Each Guarantee is a continuing guarantee and will (a) remain in full force and effect until payment in full of all of the obligations covered thereby, (b) be binding upon each Guarantor and (c) inure to the benefit of and be enforceable by the Trustee, the Holders and their successors, transferees and assigns. The Indenture provides that if the Notes are defeased in accordance with the terms of the Indenture, or if, subject to the requirements of the first paragraph under "-- Certain Covenants -- Merger, Sale of Assets, etc." all or substantially all of the assets of any Guarantor or all of the Equity Interests of any Guarantor are sold (including by issuance or otherwise) by the Company in a transaction constituting an Asset Sale, and if (x) the Net Cash Proceeds from such Asset Sale are used in accordance with the covenant described under "Certain Covenants-Disposition of Proceeds of Asset Sales" or (y) the Company delivers to the Trustee an Officers' Certificate to the effect that the Net Cash Proceeds from such Asset Sale shall be used in accordance with the covenant described under "Certain Covenants -- Disposition of Proceeds of Asset Sales" and within the time limits specified by such covenant, then such Guarantor (in the event of a sale or other disposition of all of the Equity Interests of such Guarantor) or the corporation acquiring such assets (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) shall be released and discharged of its Guarantee obligations in respect of the Indenture and the Notes. In addition, if no Default or Event of Default has occurred and is continuing, upon the release of the guarantees of any Guarantor of amounts outstanding under the Credit Facilities, the Guarantee of such Guarantor shall be automatically released. Any Guarantor that is designated an Unrestricted Subsidiary pursuant to and in accordance with "Designation of Unrestricted Subsidiaries" below shall upon such Designation be released and discharged of its Guarantee obligations in respect of the Indenture and the Notes and any Unrestricted Subsidiary whose Designation is revoked pursuant to "Designation of Unrestricted Subsidiaries" below will be required to become a Guarantor in accordance with the procedure described in the third preceding paragraph. OFFER TO PURCHASE UPON CHANGE OF CONTROL Following the occurrence of a Change of Control (the date of such occurrence being the "Change of Control Date"), the Company shall notify the Holders of the Notes of such occurrence in the manner prescribed by the Indenture and shall, within 20 days after the Change of Control Date, make an Offer to Purchase all Notes then outstanding at a purchase price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). If a Change of Control occurs which also constitutes an event of default under the Credit Facilities, the lenders under the Credit Facilities would be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to the terms of the Credit Facilities. Accordingly, any claims of such lenders with respect to the assets of the Issuers will be prior to any claim of the Holders of the Notes with respect to such assets. Neither the Board of Managers of the Company nor the Trustee may waive the covenant relating to a Holder's right to redemption upon a Change of Control. Restrictions in the Indenture described herein on the ability of the Company and its Restricted Subsidiaries to incur additional Indebtedness, to grant Liens on their property, to make Restricted Payments and to make Asset Sales may also make more difficult or discourage a takeover of the Company, whether favored or opposed by the management of the Company. Consummation of 70 73 any such transaction in certain circumstances may require redemption or repurchase of the Notes, and there can be no assurance that the Company or the acquiring party will have sufficient financial resources to effect such redemption or repurchase. Such restrictions and the restrictions on transactions with Affiliates may, in certain circumstances, make more difficult or discourage any leveraged buyout of the Company or any of its Restricted Subsidiaries by the management of the Company. While such restrictions cover a wide variety of arrangements which have traditionally been used to effect highly leveraged transactions, the Indenture may not afford the Holders of Notes protection in all circumstances from the adverse aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Change of Control" provisions of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Change of Control" provisions of the Indenture by virtue thereof. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. CERTAIN COVENANTS Limitation on Indebtedness. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness (including Acquired Indebtedness), except for Permitted Indebtedness; provided, however,that the Company and any Domestic Restricted Subsidiary may Incur Indebtedness if, at the time of and immediately after giving pro forma effect to such Incurrence of Indebtedness and the application of the proceeds therefrom, the Consolidated Coverage Ratio would be greater than 2.0 to 1.0 if the Indebtedness is Incurred prior to December 31, 1999 and 2.25 to 1.0 if the Indebtedness is Incurred thereafter; and provided further, that any Foreign Restricted Subsidiary may incur Indebtedness in accordance with "-- Limitation on Foreign Indebtedness" below. Limitation on Foreign Indebtedness. The Company shall not cause or permit any Foreign Restricted Subsidiary of the Company to, directly or indirectly, Incur any Indebtedness (including Acquired Indebtedness) other than Permitted Indebtedness set forth in clauses (a) through (m) of the definition thereof unless (i) the Indebtedness is Incurred, denominated and payable in U.S. dollars or the local currencies of the jurisdictions of the operations of the Foreign Restricted Subsidiary Incurring such Indebtedness or of the business or the location of assets being acquired with the proceeds of such Indebtedness; provided, however, that any Indebtedness permitted to be Incurred in a Western European currency pursuant to this clause (i) may be Incurred in such Western European currency or, any other Western European currency, (ii) after giving effect to the Incurrence of such Indebtedness and the receipt of the application of the proceeds therefrom, (A) if, as a result of the Incurrence of such Indebtedness, such Restricted Subsidiary will be or become subject to any restriction or limitation on the payment of dividends or the making of other distributions, (I) the ratio of Foreign EBITDA to Foreign Interest Expense (determined on a pro forma basis for the last four fiscal quarters for which financial statements are available at the date of determination) is greater than 3.0 to 1.0 and (II) the Company's Consolidated Coverage Ratio (determined on a pro forma basis for the last four fiscal quarters of the Company for which financial statements are available at the date of determination) is greater than 2.0 to 1.0 if the Indebtedness is Incurred prior to December 31, 1999 and 2.25 to 1.0 if the Indebtedness is Incurred thereafter and (B) in any other case, the Company's Consolidated Coverage Ratio (determined on a pro forma basis for the last four fiscal quarters of the Company for which financial statements are available at the date of determination) is greater than 2.0 to 1.0 if the Indebtedness is Incurred prior to December 31, 1999 and 2.25 to 1.0 if the Indebtedness is Incurred thereafter, and (iii) no Default or Event of Default shall have occurred and be continuing at the time or as a consequence of the Incurrence of such Indebtedness. 71 74 Limitation on Senior Subordinated Indebtedness. The Company shall not, directly or indirectly, Incur any Indebtedness that by its terms would expressly rank senior in right of payment to the Notes and subordinate in right of payment to any other Indebtedness of the Company. The Company shall not permit any Guarantor to, and no Guarantor shall, directly or indirectly, Incur any Indebtedness that by its terms would expressly rank senior in right of payment to the Guarantee of such Guarantor and subordinate in right of payment to any Indebtedness of such Guarantor. Limitation on Restricted Payments. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, (i) declare or pay any dividend or any other distribution on any Equity Interests of the Company or any Restricted Subsidiary or make any payment or distribution to the direct or indirect holders (in their capacities as such) of Equity Interests of the Company or any Restricted Subsidiary (other than any dividends, distributions and payments made to the Company or any Restricted Subsidiary (and, in the case of SportRack, concurrent like dividends, distributions and payments made to the holder of the 1% minority interest in SportRack) and dividends or distributions payable to any Person solely in Qualified Equity Interests of the Company or in options, warrants or other rights to purchase Qualified Equity Interests of the Company); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any Restricted Subsidiary (other than any such Equity Interests owned by the Company or any Restricted Subsidiary); (iii) make any Investment in any Person (other than Permitted Investments); or (iv) designate any Subsidiary of the Company as an "Unrestricted Subsidiary" under the Indenture (a "Designation"); provided, however, that the Designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be deemed to include the Designation of all of the Subsidiaries of such Subsidiary. (any such payment or any other action (other than any exception thereto) described in (i), (ii), (iii) or (iv) each, a "Restricted Payment"), unless (a) no Default or Event of Default shall have occurred and be continuing at the time of or immediately after giving effect to such Restricted Payment; (b) immediately after giving effect to such Restricted Payment, the Company would be able to Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the "Limitation on Indebtedness" covenant above; and (c) immediately after giving effect to such Restricted Payment, the aggregate amount of all Restricted Payments declared or made on or after the Issue Date does not exceed an amount equal to the sum of (1) 50% of cumulative Consolidated Net Income determined for the period (taken as one period) from the beginning of the first fiscal quarter commencing on the Issue Date and ending on the last day of the most recent fiscal quarter immediately preceding the date of such Restricted Payment for which consolidated financial information of the Company is available (or if such cumulative Consolidated Net Income shall be a loss, minus 100% of such loss), plus (2) 100% of the aggregate net cash proceeds received by the Company either (x) as capital contributions to the Company after the Issue Date or (y) from the issue and sale (other than to a Restricted Subsidiary) of its Qualified Equity Interests after the Issue Date (excluding the net proceeds from any issuance and sale of Qualified Equity Interests financed, directly or indirectly, using funds borrowed from the Company or any Restricted Subsidiary until and to the extent such borrowing is repaid), plus (3) the principal amount (or accreted amount (determined in accordance with GAAP), if less) of any Indebtedness of the Company or any Restricted Subsidiary Incurred after the Issue Date which has been converted into or exchanged for Qualified Equity Interests of the Company (minus the amount of any cash or property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange), plus (4) so long as the Designation thereof was treated as a Restricted Payment made after the Issue Date, with respect to any Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary after the Issue Date in 72 75 accordance with "Designation of Unrestricted Subsidiaries" below, the Company's proportionate interest in an amount equal to the Fair Market Value of such Subsidiary, plus (5) in the case of the disposition or repayment of any Investment constituting a Restricted Payment made after the Issue Date (including the sale of an Unrestricted Subsidiary) or dividends, distributions or interest payments received in cash, an amount equal to 100% of the net cash proceeds received by the Company or its Restricted Subsidiaries therefrom. The foregoing provisions will not prevent (i) the payment of any dividend or distribution on, or redemption of, Equity Interests within 60 days after the date of declaration of such dividend or distribution or the giving of formal notice of such redemption, if at the date of such declaration or giving of such formal notice such payment or redemption would comply with the provisions of the Indenture; (ii) the purchase, redemption, retirement or other acquisition of any Equity Interests of the Company or its Restricted Subsidiaries that are not owned by the Company or its Restricted Subsidiaries in exchange for, or out of the net cash proceeds of the substantially concurrent issue and sale (other than to a Restricted Subsidiary) of, Qualified Equity Interests of the Company; provided, however, that any such net cash proceeds and the value of any Qualified Equity Interests issued in exchange for such retired Equity Interests are excluded from clause (c)(2) of the preceding paragraph (and were not included therein at any time) and are not used to redeem the Notes pursuant to "-- Optional Redemption" above; (iii) the purchase, redemption or other acquisition for value of Equity Interests of the Company (other than Disqualified Capital Stock) or options on such Equity Interests held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates) upon the death, disability, retirement or termination of employment of such current or former officers or employees pursuant to the terms of an employee benefit plan or any other agreement pursuant to which such shares of capital stock or options were issued or pursuant to a severance, buy-sell or right of first refusal agreement with such current or former officer or employee; provided, however, that the aggregate cash consideration paid, or distributions made, pursuant to this clause (iii) does not exceed $5.0 million; (iv) Investments constituting Restricted Payments made as a result of the receipt of non-cash consideration from any Asset Sale made pursuant to and in compliance with "-- Disposition of Proceeds of Asset Sales" below; (v) Tax Distributions; (vi) the payment of dividends on the Company's Common Stock, following the first Public Equity Offering of the Company's Common Stock after the Issue Date, of up to 6% per annum of the net proceeds received by the Company in such public offering; and (vii) the purchase, redemption, retirement or other acquisition prior to June 30, 1999 of Equity Interests of the Company from unaffiliated third parties; provided, however, that the aggregate cash consideration paid pursuant to this clause (vii) does not exceed $7.5 million; provided, however, that in the case of each of clauses (ii), (iii), (iv), (vi) and (vii) no Default or Event of Default shall have occurred and be continuing or would arise therefrom. In determining the amount of Restricted Payments permissible under this covenant, amounts expended pursuant to clauses (i), (iii), (iv), (vi) and (vii) of the immediately preceding paragraph shall be included as Restricted Payments. The amount of any non-cash Restricted Payment shall be deemed to be equal to the Fair Market Value thereof at the date of the making of such Restricted Payment. In determining the amount of any Restricted Payment made under clause (iv) of the first paragraph of this covenant, the amount of such Restricted Payment (the "Designation Amount") shall be equal to the Fair Market Value of the Company's proportionate interest in such Subsidiary on such date. Any such Designation shall be evidenced by a Board Resolution. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions to the Company or any other Restricted Subsidiary on its Equity Interests or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (b) make loans or advances to, or guarantee any Indebtedness or other obligations of, or make any Investment in, the Company or any other Restricted Subsidiary or (c) transfer any of its properties or assets to the Company or any other Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) the Credit Facilities, or any other agreement of the Company or the Restricted Subsidiaries outstanding on the Issue Date, in each case as in effect on the Issue Date, and any amendments, restatements, renewals, 73 76 replacements or refinancings thereof; provided, however, that any such amendment, restatement, renewal, replacement or refinancing is no more restrictive in the aggregate with respect to such encumbrances or restrictions than those contained in the agreement being amended, restated, reviewed, replaced or refinanced; (ii) applicable law; (iii) any instrument governing Indebtedness or Equity Interests of an Acquired Person acquired by the Company or any Restricted Subsidiary as in effect at the time of such acquisition (except to the extent such Indebtedness was Incurred by such Acquired Person in connection with, as a result of or in anticipation or contemplation of such acquisition); provided, however, that such encumbrances and restrictions are not applicable to the Company or any Restricted Subsidiary, or the properties or assets of the Company or any Restricted Subsidiary, other than the Acquired Person; (iv) customary non-assignment provisions in contracts or leases entered into in the ordinary course of business and consistent with past practices; (v) Purchase Money Indebtedness for property acquired in the ordinary course of business that only imposes encumbrances and restrictions on the property so acquired; (vi) any agreement for the sale or disposition of the Equity Interests or assets of any Restricted Subsidiary; provided, however, that such encumbrances and restrictions described in this clause (vi) are only applicable to such Restricted Subsidiary or assets, as applicable, and any such sale or disposition is made in compliance with Disposition of Proceeds of Asset Sales" below to the extent applicable thereto; (vii) secured Indebtedness otherwise permitted to be incurred pursuant to the covenants described under "Limitation on Indebtedness" and "Limitation on Liens" that limit the right of the debtor to dispose of the assets securing such Indebtedness; (viii) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business; (ix) an agreement governing Indebtedness incurred to refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clauses (i) through (viii) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such Indebtedness are no less restrictive in the aggregate than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clauses; (x) an agreement governing Senior Indebtedness permitted to be incurred pursuant to the "Limitation on Indebtedness" covenant; provided, however, that the provisions relating to such encumbrance or restriction contained in such Indebtedness are no less favorable to the Company in any material respect as determined by the Board of Managers of the Company in its reasonable and good faith judgment than the provisions contained in the Amended and Restated Credit Agreement as in effect on the Issue Date; or (xi) the Indenture. Designation of Unrestricted Subsidiaries. The Company shall not and shall not cause or permit any Restricted Subsidiary at any time to (x) provide credit support for, subject any of its property or assets (other than the Equity Interests of any Unrestricted Subsidiary) to the satisfaction of, or guarantee, any Indebtedness of any Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary, except for any non-recourse guarantee given solely to support the pledge by the Company or any Restricted Subsidiary of the capital stock of any Unrestricted Subsidiary. The Company may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") only if: (i) no Default or Event of Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if Incurred at such time, be permitted to be Incurred for all purposes of the Indenture. All Designations and Revocations must be evidenced by resolutions of the Board of Managers of the Company, delivered to the Trustee certifying compliance with the foregoing provisions. Limitation on Liens. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, Incur any Liens of any kind against or upon any of their respective properties or assets 74 77 now owned or hereafter acquired, or any proceeds therefrom or any income or profits therefrom, to secure any Indebtedness unless contemporaneously therewith effective provision is made, in the case of the Company, to secure the Notes and all other amounts due under the Indenture, and in the case of a Restricted Subsidiary which is a Guarantor, to secure such Restricted Subsidiary's Guarantee of the Notes and all other amounts due under the Indenture, equally and ratably with such Indebtedness (or, in the event that such Indebtedness is subordinated in right of payment to the Notes or such Restricted Subsidiary's Guarantee, prior to such Indebtedness) with a Lien on the same properties and assets securing such Indebtedness for so long as such Indebtedness is secured by such Lien, except for (i) Liens securing Senior Indebtedness and Guarantor Senior Indebtedness and (ii) Permitted Liens. Disposition of Proceeds of Asset Sales. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, make any Asset Sale, unless (i) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of and (ii) at least 75% of such consideration consists of (A) cash or Cash Equivalents; provided, however, that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets, and (y) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) shall be deemed to be cash for the purposes of this clause (A), or (B) properties and capital assets that replace the properties and assets that were the subject of such Asset Sale or in properties and capital assets that will be used in a Related Business ("Replacement Assets"); provided, however, that if such property or assets subject to such Asset Sale were directly owned by the Company or a Guarantor, such Replacement Assets shall also be directly owned by the Company or a Guarantor. The amount of any Indebtedness (other than any Subordinated Indebtedness) of the Company or any Restricted Subsidiary that is actually assumed by the transferee in such Asset Sale and from which the Company and the Restricted Subsidiaries are fully and unconditionally released shall be deemed to be cash for purposes of determining the percentage of cash consideration received by the Company or the Restricted Subsidiaries. The Company or such Restricted Subsidiary, as the case may be, may (i) apply the Net Cash Proceeds of any Asset Sale within 180 days of receipt thereof to repay Senior Indebtedness and permanently reduce any related commitment, or (ii) make an Investment in Replacement Assets; provided, however, that such Investment occurs or the Company or a Restricted Subsidiary enters into contractual commitments to make such Investment, subject only to customary conditions (other than the obtaining of financing), on or prior to the 180th day following the receipt of such Net Cash Proceeds and Net Cash Proceeds contractually committed are so applied within 270 days following the receipt of such Net Cash Proceeds. To the extent all or part of the Net Cash Proceeds of any Asset Sale are not applied as described in clause (i) or (ii) of the immediately preceding paragraph within the time periods set forth therein (the "Net Proceeds Utilization Date") (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"), the Company shall, within 20 days after such Net Proceeds Utilization Date, make an Offer to Purchase all outstanding Notes up to a maximum principal amount (expressed as a multiple of $1,000) of Notes equal to such Unutilized Net Cash Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date; provided, however, that the Offer to Purchase may be deferred until there are aggregate Unutilized Net Cash Proceeds equal to or in excess of $5 million, at which time the entire amount of such Unutilized Net Cash Proceeds, and not just the amount in excess of $5 million, shall be applied as required pursuant to this paragraph. With respect to any Offer to Purchase effected pursuant to this covenant, among the Notes, to the extent the aggregate principal amount of Notes tendered pursuant to such Offer to Purchase exceeds the Unutilized Net Cash Proceeds to be applied to the repurchase thereof, such Notes shall be purchased pro rata based on the aggregate principal amount of such Notes tendered by each Holder. To the extent the Unutilized Net Cash Proceeds exceed the aggregate amount of Notes tendered by the Holders of the Notes pursuant to such Offer to Purchase, the Company may retain and utilize any portion of the Unutilized Net Cash Proceeds not 75 78 applied to repurchase the Notes for any purpose consistent with the other terms of the Indenture and such Unutilized Net Cash Proceeds shall no longer be counted in determining the available amount of Unutilized Net Cash Proceeds for purposes of this covenant. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to an Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with the "Asset Sale" provisions of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Asset Sale" provisions of the Indenture by virtue thereof. Each Holder shall be entitled to tender all or any portion of the Notes owned by such Holder pursuant to the Offer to Purchase, subject to the requirement that any portion of a Note tendered must be tendered in an integral multiple of $1,000 principal amount and subject to any proration among tendering Holders as described above. Merger, Sale of Assets, etc. The Indenture provides that neither of the Issuers may consolidate with or merge with or into any other entity and the Company shall not and shall not cause or permit any Restricted Subsidiary to, sell, convey, assign, transfer, lease or otherwise dispose of all or substantially all of the Company's and the Restricted Subsidiaries' properties and assets (determined on a consolidated basis for the Company and the Restricted Subsidiaries) to any entity in a single transaction or series of related transactions, unless: (i) either (x) the Company shall be the Surviving Person or (y) the Surviving Person (if other than the Company) shall be a corporation or limited liability company organized and validly existing under the laws of the United States of America or any State thereof or the District of Columbia or, if any such Restricted Subsidiary was a Foreign Restricted Subsidiary, under the laws of the United States of America or any state thereof or the District of Columbia or the jurisdiction under which such Foreign Restricted Subsidiary was organized, and shall, in any such case, expressly assume by a supplemental indenture, the due and punctual payment of the principal of, premium, if any, and interest on all the Notes and the performance and observance of every covenant of the Indenture and the Registration Rights Agreement to be performed or observed on the part of the Company; (ii) immediately thereafter, no Default or Event of Default shall have occurred and be continuing; and (iii) immediately after giving effect to any such transaction involving the Incurrence by the Company or any Restricted Subsidiary, directly or indirectly, of additional Indebtedness (and treating any Indebtedness not previously an obligation of the Company or any Restricted Subsidiary in connection with or as a result of such transaction as having been Incurred at the time of such transaction), the Surviving Person could Incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the Consolidated Coverage Ratio of the first paragraph of "Limitation on Indebtedness" covenant described above. Notwithstanding the foregoing clause (iii) of the immediately preceding paragraph, any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or any Restricted Subsidiary that is a Guarantor. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all the properties and assets of one or more Restricted Subsidiaries the Equity Interest of which constitutes all or substantially all the properties and assets of the Company shall be deemed to be the transfer of all or substantially all the properties and assets of the Company. No Guarantor (other than a Guarantor whose Guarantee is to be released in accordance with the terms of its Guarantee and the Indenture as provided in the third paragraph under "Guarantees of the Notes" above) shall consolidate with or merge with or into another Person, whether or not such Person is affiliated with such Guarantor and whether or not such Guarantor is the Surviving Person, unless (i) the Surviving Person (if other than such Guarantor) is a corporation or limited liability company organized and validly existing under the laws of the United States, any State thereof or the District of Columbia; (ii) the Surviving Person (if other than such Guarantor) expressly assumes by a supplemental indenture all the obligations of such Guarantor under its Guarantee of the Notes and the performance and observance of every covenant of the 76 79 Indenture and the Registration Right Agreement to be performed or observed by such Guarantor; (iii) at the time of and immediately after such Disposition, no Default or Event of Default shall have occurred and be continuing; and (iv) immediately after giving effect to any such transaction involving the Incurrence by such Guarantor, directly or indirectly, of additional Indebtedness (and treating any Indebtedness not previously an obligation of such Guarantor in connection with or as a result of such transaction as having been Incurred at the time of such transaction), the Company could Incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the Consolidated Coverage Ratio of the first paragraph of the "Limitation of Indebtedness" covenant described above; provided, however, that this paragraph shall not be a condition to a merger or consolidation of a Guarantor if such merger or consolidation only involves the Company and/or one or more other Guarantors. In the event of any transaction (other than a lease) described in and complying with the conditions listed in the immediately preceding paragraphs in which the Company or a Guarantor, as the case may be, is not the Surviving Person and the Surviving Person is to assume all the Obligations of the Company under the Notes, the Indenture and the Registration Rights Agreement or of such Guarantor under its Guarantee, the Indenture and the Registration Rights Agreement, as the case may be, pursuant to a supplemental indenture, such Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Guarantor, as the case may be, and the Company, as the case may be, shall be discharged from its Obligations under the Indenture and the Notes or such Guarantor shall be discharged from its Obligations under the Indenture and its Guarantee. Transactions with Affiliates. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, conduct any business or enter into any transaction (or series of related transactions) with or for the benefit of any of their respective Affiliates (including, without limitation, any Unrestricted Subsidiary) or any officer, director or employee of the Company or any Subsidiary (each an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms which are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than could be available in a comparable transaction with an unaffiliated third party and (ii) if such Affiliate Transaction (or series of related Affiliate Transactions) involves aggregate payments or other consideration having a Fair Market Value in excess of $1.0 million, such Affiliate Transaction is in writing and a majority of the disinterested members of the Board of Managers of the Company shall have approved such Affiliate Transaction and determined that such Affiliate Transaction complies with the foregoing provisions. In addition, any Affiliate Transaction involving aggregate payments or other consideration having a Fair Market Value in excess of $5.0 million will also require a written opinion from an Independent Financial Advisor (filed with the Trustee) stating that the terms of such Affiliate Transaction are fair, from a financial point of view, to the Company or the Restricted Subsidiary involved in such Affiliate Transaction, as the case may be. Notwithstanding the foregoing, the restrictions set forth in this covenant shall not apply to (i) transactions with or among the Company and any Restricted Subsidiary or between or among Restricted Subsidiaries; (ii) reasonable fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees, consultants or agents of the Company or any Restricted Subsidiary of the Company as determined in good faith by the Company's Board of Managers; (iii) any transactions undertaken pursuant to any contractual obligations in existence on the Issue Date (as in effect on the Issue Date); (iv) any Restricted Payments made in compliance with "Limitation on Restricted Payments" above; (v) the provision by Persons who may be deemed Affiliates or stockholders of the Company of investment banking, commercial banking, trust, lending or financing, investment, underwriting, placement agent, financial advisory or similar services to the Company or its Subsidiaries; (vi) reasonable and customary loans to employees of the Company and its Subsidiaries which are approved by the Board of Managers of the Company in good faith; and (vii) transactions with customers, clients, suppliers or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of the Indenture, which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Managers of the Company or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party. 77 80 Limitation on the Sale or Issuance of Equity Interests of Restricted Subsidiaries. The Company shall not sell any Equity Interest of a Restricted Subsidiary, and shall not cause or permit any Restricted Subsidiary, directly or indirectly, to issue or sell or have outstanding any Equity Interests, except: (i) to the Company or a Wholly Owned Restricted Subsidiary; or (ii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary. Notwithstanding the foregoing, the Company is permitted to sell all the Equity Interests of a Restricted Subsidiary as long as the Company is in compliance with the terms of the covenants described under "Disposition of Proceeds of Asset Sales" and, if applicable, "Merger, Sale of Assets, etc." above. Guarantees by Restricted Subsidiaries. The Indenture provides that the Company will not create or acquire, nor cause or permit any of the Restricted Subsidiaries, directly or indirectly, to create or acquire, any Subsidiary other than (A) an Unrestricted Subsidiary in accordance with the other terms of the Indenture, (B) a Foreign Restricted Subsidiary or (C) a Domestic Restricted Subsidiary that, simultaneously with such creation or acquisition, executes and delivers a supplemental indenture to the Indenture pursuant to which it will become a Guarantor under the Indenture in accordance with "Guarantees of the Notes" above. Provision of Financial Information. Whether or not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, or any successor provision thereto, the Company shall file with the SEC (if permitted by SEC practice and applicable law and regulations) the annual reports, quarterly reports and other documents which the Issuers would have been required to file with the SEC pursuant to such Section 13(a) or 15(d) or any successor provision thereto if the Company were so subject, such documents to be filed with the SEC on or prior to the respective dates (the "Required Filing Dates") by which the Company would have been required so to file such documents if the Company were so subject. The Company shall also in any event (a) within 15 days of each Required Filing Date (whether or not permitted or required to be filed with the SEC) (i) transmit (or cause to be transmitted) by mail to all Holders, as their names and addresses appear in the Note register, without cost to such Holders, and (ii) file with the Trustee, copies of the annual reports, quarterly reports and other documents which the Company is required to file with the SEC pursuant to the preceding sentence, or, if such filing is not so permitted, information and data of a similar nature, and (b) if, notwithstanding the preceding sentence, filing such documents by the Issuers with the SEC is not permitted by SEC practice or applicable law or regulations, promptly upon written request supply copies of such documents to any Holder. In addition, for so long as any Notes remain outstanding and prior to the later of the consummation of the Exchange Offer and the filing of the Initial Shelf Registration Statement, if required, the Company will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, and, to any beneficial holder of Notes, if not obtainable from the SEC, information of the type that would be filed with the SEC pursuant to the foregoing provisions, upon the request of any such holder. EVENTS OF DEFAULT The occurrence of any of the following is defined as an "Event of Default" under the Indenture: (a) failure to pay principal of (or premium, if any, on) any Note when due (whether or not prohibited by the provisions of the Indenture described under "Subordination of the Notes" above); (b) failure to pay any interest on any Note when due, which failure continues for 30 days or more (whether or not prohibited by the provisions of the Indenture described under "Subordination of the Notes" above); (c) default in the payment of principal of or interest on any Note required to be purchased pursuant to any Offer to Purchase required by the Indenture when due and payable or failure to pay on the Purchase Date the Purchase Price for any Note validly tendered pursuant to any Offer to Purchase (whether or not prohibited by the provisions of the Indenture described under "Subordination of the Notes" above); (d) failure to perform any other covenant or agreement of the Company under the Indenture or in the Notes or of the Guarantors under the Indenture or in the Guarantees which failure continues for 30 days or more after written notice to the Company by the Trustee or Holders of at least 25% in aggregate principal amount of the outstanding Notes; (e) default or defaults under the terms of one or more instruments evidencing or securing Indebtedness of the Company or any of its Restricted Subsidiaries having an outstanding principal amount of $5.0 million or more individually or in the aggregate that has resulted in the acceleration of the payment of such Indebtedness or failure by the 78 81 Company or any of its Restricted Subsidiaries to pay principal when due at the stated maturity of any such Indebtedness and such default or defaults shall have continued after any applicable grace period and shall not have been cured or waived; (f) the rendering of a final judgment or judgments (not subject to appeal) against the Company or any of its Restricted Subsidiaries in an amount of $5.0 million or more (net of any amounts covered by insurance) which remains undischarged or unstayed for a period of 60 days after the date on which the right to appeal has expired; (g) certain events of bankruptcy, insolvency or reorganization affecting the Company or any of its Significant Restricted Subsidiaries; or (h) other than as provided in or pursuant to any Guarantee or the Indenture, any Guarantee of a Significant Restricted Subsidiary ceases to be in full force and effect or is declared null and void and unenforceable or found to be invalid or any Guarantor denies in writing its liability under its Guarantee (other than by reason of a release of such Guarantor from its Guarantee in accordance with the terms of the Indenture and such Guarantee). Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default shall occur and be continuing, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the Holders of Notes, unless such Holders shall have offered to the Trustee reasonable indemnity. Subject to such provisions for the indemnification of the Trustee, the Holders of a majority in aggregate principal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on such Trustee. If an Event of Default with respect to the Notes (other than an Event of Default with respect to the Company described in clause (g) of the preceding paragraph) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Notes, by notice in writing to the Company may declare the unpaid principal of (and premium, if any) and accrued interest to the date of acceleration on all the outstanding Notes to be due and payable immediately and, upon any such declaration, such principal amount (and premium, if any) and accrued interest, notwithstanding anything contained in the Indenture or the Notes to the contrary will become immediately due and payable. If an Event of Default specified in clause (g) of the preceding paragraph with respect to the Company occurs under the Indenture, the Notes will ipso facto become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder of the Notes. Any such declaration with respect to the Notes may be annulled by the Holders of a majority in aggregate principal amount of the outstanding Notes upon the conditions provided in the Indenture. For information as to waiver of defaults, see "Modification and Waiver" below. The Indenture provides that the Trustee shall, within 30 days after the occurrence of any Default or Event of Default with respect to the Notes outstanding, give the Holders of the Notes thereof notice of all uncured Defaults or Events of Default thereunder known to it; provided, however, that, except in the case of a Default or an Event of Default in payment with respect to the Notes or a Default or Event of Default in complying with "Certain Covenants -- Merger, Sale of Assets, etc." above, the Trustee shall be protected in withholding such notice if and so long as a committee of its trust officers in good faith determines that the withholding of such notice is in the interest of the Holders of the Notes. No Holder of any Note will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default thereunder and unless the Holders of at least 25% of the aggregate principal amount of the outstanding Notes shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as the Trustee, and the Trustee shall have not have received from the Holders of a majority in aggregate principal amount of such outstanding Notes a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted by a Holder of such a Note for enforcement of payment of the principal of and premium, if any, or interest on such Note on or after the respective due dates expressed in such Note. The Company is required to furnish to the Trustee annually a statement as to the performance by the Issuers of certain of their obligations under the Indenture and as to any default in such performance. 79 82 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATOR, MEMBERS, MANAGERS AND STOCKHOLDERS No director, officer, employee, incorporator, member, manager or stockholder of either of the Issuers or any of their Affiliates, as such, shall have any liability for any obligations of either of the Issuers or any of their Affiliates under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have its obligations and the obligations of the Guarantors discharged with respect to the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes, except for (i) the rights of Holders to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payments, (iii) the rights, powers, trust, duties and immunities of the Trustee and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or an Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, reorganization and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders cash in U.S. dollars, non-callable United States Government Obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or, insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, the Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an officers' certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; (vii) the Company shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance 80 83 or the Covenant Defeasance have been complied with; (viii) the Company shall have delivered to the Trustee an opinion of counsel to the effect that (A) the trust funds will not be subject to any rights of holders of Senior Indebtedness, including, without limitation, those arising under the Indenture, and (B) assuming no intervening bankruptcy of the Company between the date of deposit and the 91st day following the date of the deposit and that no Holder is an insider of the Company, after the 91st day following the date of the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (ix) certain other customary conditions precedent are satisfied. Notwithstanding the foregoing, the opinion of counsel required by clause (ii) above need not be delivered if all Notes not theretofore delivered to the Trustee for cancellation (x) have become due and payable, (y) will become due and payable on the maturity date within one year or (z) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. SATISFACTION AND DISCHARGE The Indenture will be discharged and will cease to be of further effect (except as to surviving rights of registration or transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when (i) either (a) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation or (b) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (ii) the Company has paid all other sums payable under the Indenture by the Company; and (iii) the Company has delivered to the Trustee an officers' certificate and an opinion of counsel stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with. GOVERNING LAW The Indenture, the Notes and the Guarantees are governed by the laws of the State of New York without regard to principles of conflicts of laws. MODIFICATION AND WAIVER Modifications and amendments of the Indenture may be made by the Issuers, the Guarantors, and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes); provided, however, that no such modification or amendment to the Indenture may, without the consent of the Holder of each Note affected thereby, (a) change the maturity of the principal of or any installment of interest on any such Note or alter the optional redemption or repurchase provisions of any such Note or the Indenture in a manner adverse to the Holders of the Notes; (b) reduce the principal amount (or the premium) of any such Note; (c) reduce the rate of or extend the time for payment of interest on any such Note; (d) change the place or currency of payment of principal of (or premium) or interest on any such Note; (e) modify any provisions of the Indenture relating to the waiver of past defaults (other than to add sections of the Indenture or the Notes subject thereto) or the right of the Holders of Notes to institute suit for the enforcement of any payment on or with respect to any such Note or any Guarantee in respect thereof or the modification and amendment provisions of the Indenture and the Notes (other than to add sections of the Indenture or the Notes which may not be amended, supplemented or waived without the consent of each Holder affected); (f) reduce the percentage of the principal amount of outstanding Notes necessary for amendment to or waiver of compliance with any provision of the Indenture or the Notes or for waiver of any Default in respect thereof; 81 84 (g) waive a default in the payment of principal of, interest on, or redemption payment with respect to, the Notes (except a rescission of acceleration of the Notes by the Holders thereof as provided in the Indenture and a waiver of the payment default that resulted from such acceleration); (h) modify the ranking or priority of any Note or the Guarantee in respect thereof of any Guarantor or modify the definition of Senior Indebtedness or Guarantor Senior Indebtedness or amend or modify the subordination provisions of the Indenture in any manner adverse to the Holders of the Notes; (i) modify the provisions of any covenant (or the related definitions) in the Indenture requiring the Company to make an Offer to Purchase in a manner materially adverse to the Holders of Notes affected thereby otherwise than in accordance with the Indenture; or (j) release any Guarantor from any of its obligations under its Guarantee or the Indenture otherwise than in accordance with the Indenture. The Holders of a majority in aggregate principal amount of the outstanding Notes, on behalf of all Holders of Notes, may waive compliance by the Issuers and the Guarantors with certain restrictive provisions of the Indenture. Subject to certain rights of the Trustee, as provided in the Indenture, the Holders of a majority in aggregate principal amount of the Notes, on behalf of all Holders, may waive any past default under the Indenture (including any such waiver obtained in connection with a tender offer or exchange offer for the Notes), except a default in the payment of principal, premium or interest or a default arising from failure to purchase any Notes tendered pursuant to an Offer to Purchase, or a default in respect of a provision that under the Indenture cannot be modified or amended without the consent of the Holder of each Note that is affected. THE TRUSTEE Except during the continuance of a Default, the Trustee will perform only such duties as are specifically set forth in the Indenture. During the existence of a Default, the Trustee will exercise such rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. The Indenture and provisions of the Trust Indenture Act incorporated by reference therein contain limitations on the rights of the Trustee, should it become a creditor of either of the Issuers, any Guarantor or any other obligor upon the Notes, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claim as security or otherwise. The Trustee is permitted to engage in other transactions with the Issuers or an Affiliate of the Issuers; provided, however, that if it acquires any conflicting interest (as defined in the Indenture or in the Trust Indenture Act), it must eliminate such conflict or resign. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full definition of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Acquired Indebtedness" means Indebtedness of a Person (a) assumed in connection with an Acquisition from such Person or (b) existing at the time such Person becomes a Restricted Subsidiary or is merged or consolidated with or into the Company or any Restricted Subsidiary. "Acquired Person" means, with respect to any specified Person, any other Person which merges with or into or becomes a Subsidiary of such specified Person. "Acquisition" means (i) any capital contribution (by means of transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise) by the Company or any Restricted Subsidiary to any other Person, or any acquisition or purchase of Equity Interests of any other Person by the Company or any Restricted Subsidiary, in either case pursuant to which such Person shall become a Restricted Subsidiary or shall be consolidated with or merged into the Company or any Restricted Subsidiary or (ii) any acquisition by the Company or any Restricted Subsidiary of the assets of any Person which constitute substantially all of an operating unit or line of business of such Person or which is otherwise outside of the ordinary course of business. 82 85 "Acquisition Facility" means a credit facility entered into by the Company and one or more commercial banks or other lenders pursuant to which the Company and/or its Restricted Subsidiaries may incur Indebtedness for the purpose of financing one or more acquisitions of assets or equity securities of any Related Business and paying related fees and expenses. "Affiliate" of any specified person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. "Asset Sale" means any direct or indirect sale, conveyance, transfer, lease (that has the effect of a disposition) or other disposition (including, without limitation, any merger, consolidation or sale-leaseback transaction) to any Person other than the Company or a Wholly Owned Restricted Subsidiary, in one transaction or a series of related transactions, of (i) any Equity Interest of any Restricted Subsidiary (other than directors' qualifying shares, to the extent mandated by applicable law); (ii) any assets of the Company or any Restricted Subsidiary which constitute substantially all of an operating unit or line of business of the Company or any Restricted Subsidiary; or (iii) any other property or asset of the Company or any Restricted Subsidiary outside of the ordinary course of business (including the receipt of proceeds paid on account of the loss of or damage to any property or asset and awards of compensation for any asset taken by condemnation, eminent domain or similar proceedings). For the purposes of this definition, the term "Asset Sale" shall not include (a) any transaction consummated in compliance with "Certain Covenants -- Merger, Sale of Assets, etc." above and the creation of any Lien not prohibited by "Certain Covenants -- Limitation on Liens" above; (b) sales of property or equipment that has become worn out, obsolete or damaged or otherwise unsuitable for use in connection with the business of the Company or any Restricted Subsidiary, as the case may be; (c) any transaction consummated in compliance with "Certain Covenants -- Limitation on Restricted Payments" above; and (d) any transfers of properties and assets to the Company, between the Company and Wholly Owned Restricted Subsidiaries that are Guarantors or between Wholly Owned Restricted Subsidiaries. In addition, solely for purposes of "Certain Covenants -- Disposition of Proceeds of Asset Sales" above, any sale, conveyance, transfer, lease or other disposition of any property or asset, whether in one transaction or a series of related transactions, involving assets with a Fair Market Value not in excess of $1.0 million in any fiscal year shall be deemed not to be an Asset Sale. "Attributable Indebtedness" in respect of a Sale and Lease-Back Transaction means, as at the time of determination, the present value (discounted according to GAAP at the cost of indebtedness implied in the lease) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Lease-Back Transaction (including any period for which such lease has been extended). "Board Resolution" means, with respect to any Person, a duly adopted resolution of the Board of Managers of such Person or a duly authorized committee of such Board of Managers. "Capitalized Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on the balance sheet in accordance with GAAP. "Cash Equivalents" means: (a) securities issued or directly and fully guaranteed or insured by the U.S. government or any agency or instrumentality thereof, the government of Canada or the government of any member of the European Union, in each case having maturities of not more than one year from the date of acquisition; (b) domestic and Eurocurrency certificates of deposit, time deposits and base rate certificates of deposit with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any commercial bank incorporated under the laws of the United States, any state thereof, the District of Columbia or its branches or agencies or under the laws of Canada or the laws of any member of the European Union and having capital and surplus in excess of $250 million and whose long-term debt is rated at least "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the 83 86 Act); (c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above entered into with any financial institution meeting the qualifications specified in clause (b) above; (d) commercial paper rated P-1, A-1 or the equivalent thereof by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P"), respectively, and in each case maturing within six months after the date of acquisition; (e) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's; (f) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (a) through (e) above; and (g) in the case of any Foreign Restricted Subsidiary, Investments: (i) in direct obligations of the sovereign nation (or any agency thereof) in which such Foreign Restricted Subsidiary is organized and is conducting business or in obligations fully and unconditionally guaranteed by such sovereign nation (or any agency thereof) or (ii) of the type and maturity described in clauses (a) and (b) above of foreign obligors, which Investments or obligors (of the parents of such obligors) have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies. "Change of Control" means the occurrence of any of the following events (whether or not approved by the Board of Managers of the Company): (i) any Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than one or more Permitted Holders, is or becomes the "beneficial owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time, upon the happening of an event or otherwise), directly or indirectly, of more than 35% of the total voting power of the then outstanding Voting Equity Interests of the Company; (ii) the Company consolidates with, or merges with or into, another Person (other than a Wholly Owned Restricted Subsidiary) or the Company or any of its Subsidiaries sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the assets of the Company and its Subsidiaries (determined on a consolidated basis) to any Person (other than the Company or any Wholly Owned Restricted Subsidiary), other than any such transaction where immediately after such transaction the Person or Persons that "beneficially owned" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time) immediately prior to such transaction, directly or indirectly, a majority of the total voting power of the then outstanding Voting Equity Interests of Holdings or the Company, as the case may be, "beneficially own" (as so determined), directly or indirectly, a majority of the total voting power of the then outstanding Voting Equity Interests of the surviving or transferee Person; (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Managers of the Company (together with any new directors whose election by such Board of Managers or whose nomination for election by the members of the Company was approved by a vote of a majority of the directors of the Company 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 Managers of the Company then in office; or (iv) the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with the provisions described under "--Merger, Sale of Assets, etc." "Consolidated Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of Consolidated EBITDA for the four quarter period of the most recent four consecutive fiscal quarters ending prior to the date of such determination (the "Four Quarter Period") to (ii) Consolidated Fixed Charges for such Four Quarter Period; provided, however, that (1) if the Company or any Restricted Subsidiary has incurred any Indebtedness since the beginning of such Four Quarter Period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such Four Quarter Period and the 84 87 discharge of any other Indebtedness repaid, repurchased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such Four Quarter Period, (2) if since the beginning of such Four Quarter Period the Company or any Restricted Subsidiary shall have made any Asset Sale described in clauses (i) or (ii) of the definition thereof, the Consolidated EBITDA for such Four Quarter Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Sale for such Four Quarter Period or increased by an amount equal to the Consolidated EBITDA (if negative) directly attributable thereto for such Four Quarter Period and Consolidated Fixed Charges for such Four Quarter Period shall be reduced by an amount equal to the Consolidated Fixed Charges directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Sale for such Four Quarter Period (or, if the Equity Interests of any Restricted Subsidiary are sold, the Consolidated Fixed Charges for such Four Quarter Period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if since the beginning of such Four Quarter Period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, Consolidated EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such Four Quarter Period and (4) if since the beginning of such Four Quarter Period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such Four Quarter Period) shall have made any Asset Sale or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Restricted Subsidiary during such Four Quarter Period, Consolidated EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be calculated after giving pro forma effect thereto as if such Asset Sale, Investment or acquisition of assets occurred on, with respect to any Investment or acquisition, the first day of such Four Quarter Period and, with respect to any Asset Sale, the day prior to the first day of such Four Quarter Period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Fixed Charges associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Company in accordance with Regulation S-X under the Securities Act as in effect on the Issue Date. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any agreement under which Interest Rate Protection Obligations are outstanding applicable to such Indebtedness if such agreement under which such Interest Rate Protection Obligations are outstanding has a remaining term as at the date of determination in excess of 12 months); provided, however, that the Consolidated Fixed Charges of the Company attributable to interest on any Indebtedness Incurred under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the Four Quarter Period. "Consolidated EBITDA" means, for any period, the Consolidated Net Income for such period, plus the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Income Tax Expense for such period; (ii) Consolidated Interest Expense for such period; and (iii) Consolidated Non-cash Charges for such period less (A) all non-cash items increasing Consolidated Net Income for such period and (B) all cash payments during such period relating to non-cash charges that were added back in determining Consolidated EBITDA in any prior period. "Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) Consolidated Interest Expense and (ii) the product of (x) the amount of all dividends on any series of Preferred Equity Interest (other than Qualified Equity Interests) of such Person and its Restricted Subsidiaries (other than dividends paid solely in Qualified Equity Interests) paid, accrued or 85 88 scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal. "Consolidated Income Tax Expense" means, with respect to the Company for any period, the provision for federal, state, local and foreign income taxes payable by the Company and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to the Company for any period, without duplication, the sum of (i) the interest expense of the Company and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount and amortization or write-off of deferred financing costs, (b) the net cost or benefit under Interest Rate Protection Obligations (including any amortization of discounts), (c) the interest portion of any deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (e) all capitalized interest and all accrued interest, (f) non-cash interest expense and (g) interest on Indebtedness of another Person that is guaranteed by the Company or any Restricted Subsidiary actually paid by the Company or any Restricted Subsidiary and (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by the Company and the Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" means, for any period, the consolidated net income (loss) of the Company and the Restricted Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (i) any net income (loss) of any Person if such person is not a Subsidiary, except (A) to the extent of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution and (B) the Company's equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period shall be included in determining such Consolidated Net Income; (ii) any net income (loss) of any person acquired by the Company or a Restricted Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any net income (but not loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company to the extent of such restrictions; (iv) any gain or loss realized upon the sale or other disposition of any asset of the Company or the Restricted Subsidiaries (including pursuant to any sale/leaseback transaction) outside of the ordinary course of business (including, without limitation, on or with respect to Investments) and there shall not be included dividends, distributions or interest thereon; (v) any extraordinary gain or loss and any foreign currency gains or losses; (vi) the cumulative effect of a change in accounting principles after the Issue Date; and (vii) any restoration to income of any contingency reserve of an extraordinary, non-recurring or unusual nature, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Issue Date. "Consolidated Non-cash Charges" means, with respect to any Person, for any period the sum of (A) depreciation, (B) amortization and (C) other non-cash expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding, for purposes of clause (C) only, such charges which require an accrual of or a reserve for cash charges or payments for any future period and excluding minority interest). "Credit Facilities" means (i) the Second Amended and Restated Credit Agreement, dated as of August 5, 1997, among the Company, the Subsidiaries of the Company identified on the signature pages thereof and any Restricted Subsidiary that is later added thereto, the lenders named therein, NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent, (ii) the Credit Agreement, dated as of July 2, 1997, among Advanced Accessory Systems Canada Inc., First Chicago NBD Bank, Canada, as Agent, First Chicago NBD Bank, Canada and The Chase Manhattan Bank of Canada, as lenders and the guarantors identified on the signature pages thereof and (iii) an Acquisition Facility, in each case, as amended, including any deferrals, 86 89 renewals, extensions, replacements, refinancings or refundings thereof, or amendments, modifications or supplements thereto and any agreement providing therefor, whether by or with the same or any other lender, creditor, group of lenders or group of creditors, and including related notes, guarantee and note agreements and other instruments and agreements executed in connection therewith. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company against fluctuations in currency values. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Designated Senior Indebtedness" means (a) any Indebtedness outstanding under the Credit Facilities and (b) any other Senior Indebtedness which, at the time of determination, has an aggregate principal amount outstanding, together with any commitments to lend additional amounts, of at least $25.0 million, if the instrument governing such Senior Indebtedness expressly states that such Indebtedness is "Designated Senior Indebtedness" for purposes of the Indenture. "Disposition" means, with respect to any Person, any merger, consolidation or other business combination involving such Person (whether or not such Person is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of such Person's assets. "Disqualified Equity Interest" means any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable, at the option of the holder thereof (except, in each case, upon the occurrence of a Change of Control), in whole or in part, or exchangeable into Indebtedness on or prior to the final maturity date of the Notes. "Domestic" with respect to any Person shall mean a Person whose jurisdiction of incorporation or formation is the United States, any state thereof or the District of Columbia. "Equity Interest" in any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) corporate stock or other equity participations, including partnership interests, whether general or limited, in such Person, including any Preferred Equity Interests. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder. "Existing Management Holder" means each of F. Alan Smith, Marshall D. Gladchun, Roger T. Morgan, Terence C. Seikel, Richard E. Borghi, Barry Banducci and Gerard J. Brink. "Fair Market Value" means, with respect to any asset, the price (after taking into account any liabilities relating to such assets) which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction; provided, however, that the Fair Market Value of any such asset or assets shall be determined conclusively by the Board of Managers of the Company acting in good faith, and shall be evidenced by resolutions of the Board of Managers of the Company delivered to the Trustee. "Foreign EBITDA" means, for any period, the aggregate of the Consolidated EBITDA of each of the Company's Foreign Restricted Subsidiaries. "Foreign Interest Expense" means, for any period, the aggregate of the Consolidated Interest Expense of each of the Company's Foreign Restricted Subsidiaries. "Foreign Restricted Subsidiary" means a Restricted Subsidiary other than a Domestic Restricted Subsidiary. 87 90 "GAAP" means, at any date of determination, generally accepted accounting principles in effect in the United States which are applicable at the date of determination and which are consistently applied for all applicable periods. "Guarantee" means, as applied to any obligation, (i) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit. "Guarantee" means the guarantee of the Notes by each Guarantor under the Indenture. "Guarantor" means (i) each Domestic Subsidiary of the Company existing on the Issue Date and (ii) each other Domestic Restricted Subsidiary, formed, created or acquired before or after the Issue Date, required to become a Guarantor after the Issue Date. "Guarantor Senior Indebtedness" means, with respect to any Guarantor, at any date, (a) all Obligations of such Guarantor under the Credit Facilities; (b) all Interest Rate Protection Obligations of such Guarantor; (c) all Obligations of such Guarantor under letters of credit; and (d) all other Indebtedness of such Guarantor, including principal, premium, if any, and interest (including Post-Petition Interest) on such Indebtedness unless the instrument under which such Indebtedness of such Guarantor is Incurred expressly provides that such Indebtedness is not senior or superior in right of payment to such Guarantor's Guarantee of the Notes, and all renewals, extensions, modifications, amendments or refinancings thereof. Notwithstanding the foregoing, Guarantor Senior Indebtedness shall not include (a) to the extent that it may constitute Indebtedness, any Obligation for federal, state, local or other taxes; (b) any Indebtedness among or between such Guarantor and any Subsidiary of such Guarantor or any Affiliate of such Guarantor or any of such Affiliate's Subsidiaries; (c) to the extent that it may constitute Indebtedness, any Obligation in respect of any trade payable Incurred for the purchase of goods or materials, or for services obtained, in the ordinary course of business; (d) Indebtedness evidenced by such Guarantor's Guarantee of the Notes; (e) Indebtedness of such Guarantor that is expressly subordinate or junior in right of payment to any other Indebtedness of such Guarantor; (f) to the extent that it may constitute Indebtedness, any obligation owing under leases (other than Capitalized Lease Obligations) or management agreements; and (g) any obligation that by operation of law is subordinate to any general unsecured obligations of such Guarantor. "Holders" means the registered holders of the Notes. "Income Tax Liabilities" means with respect to any member or, in the event such member is a flow-through entity, such direct or indirect owner or owners of such member as is or are subject to income taxes on income of the Company or any of its Restricted Subsidiaries that are limited liability companies for any calendar year, an amount determined by multiplying (a) such Person's allocable share of all taxable income and gains of such limited liability company by (b) forty four percent (44%). "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (including by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings correlative to the foregoing). Indebtedness of any Acquired Person or any of its Subsidiaries existing at the time such Acquired Person becomes a Restricted Subsidiary (or is merged into or consolidated with the Company or any Restricted Subsidiary), whether or not such Indebtedness was Incurred in connection with, as a result of, or in contemplation of, such Acquired Person becoming a Restricted Subsidiary (or being merged into or consolidated with the Company or any Restricted Subsidiary), shall be deemed Incurred at the time any such Acquired Person becomes a Restricted Subsidiary or merges into or consolidates with the Company or any Restricted Subsidiary. "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (a) every obligation of such Person for 88 91 money borrowed; (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable incurred in the ordinary course of business and payable in accordance with industry practices, or other accrued liabilities arising in the ordinary course of business); (e) every Capital Lease Obligation of such Person; (f) every net obligation under Interest Rate Protection Obligations or similar agreements or Currency Agreements of such Person; (g) Attributable Indebtedness; (h) every obligation of the type referred to in clauses (a) through (g) of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor, guarantor or otherwise; and (i) any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a) through (h) above. Indebtedness (i) shall not include obligations of any Person (x) arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business, provided that such obligations are extinguished within five Business Days of their incurrence, (y) resulting from the endorsement of negotiable instruments for collection in the ordinary course of business and consistent with past business practices and (z) under stand-by letters of credit to the extent collateralized by cash or Cash Equivalents; (ii) which provides that an amount less than the principal amount thereof shall be due upon any declaration of acceleration thereof shall be deemed to be incurred or outstanding in an amount equal to the accreted value thereof at the date of determination; (iii) shall include the liquidation preference and any mandatory redemption payment obligations in respect of any Disqualified Equity Interests of the Company or any Restricted Subsidiary; and (iv) shall not include obligations under performance bonds, performance guarantees, surety bonds and appeal bonds, letters of credit or similar obligations, incurred in the ordinary course of business. "Independent Financial Advisor" means a nationally recognized, accounting, appraisal or investment banking firm or consultant (i) which does not, and whose directors, officers and employees or Affiliates do not, have a direct or indirect financial interest in the Company and (ii) which, in the judgment of the Board of Managers of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "Insolvency or Liquidation Proceeding" means, with respect to any Person, any liquidation, dissolution or winding up of such Person, or any bankruptcy, reorganization, insolvency, receivership or similar proceeding with respect to such Person, whether voluntary or involuntary. "interest" means, with respect to the Notes, the sum of any cash interest and any Additional Interest (as defined under "Registration Rights" below) on the Notes. "Interest Rate Protection Obligations" means, with respect to any Person, the Obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Investment" means, with respect to any Person, any direct or indirect loan, advance, guarantee or other extension of credit or capital contribution to (by means of transfers of cash or other property or assets to others or payments for property or services for the account or use of others, or otherwise), or purchase or acquisition of capital stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person. For purposes of the "Limitation on Restricted Payments" covenant above, the amount of any Investment shall be the original cost of such Investment, plus the cost of all additions thereto, but without any other adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment; reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided, however, that no such payment of dividends or distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. In determining the amount of any Investment involving a transfer of any property or asset other than cash, such property shall be valued at its Fair Market Value at the time of such transfer, as determined in 89 92 good faith by the Board of Managers (or comparable body) of the Person making such transfer. If the Company or any Restricted Subsidiary sells or otherwise disposes of any Voting Equity Interests of any direct or indirect Restricted Subsidiary such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, greater than 50% of the outstanding Voting Equity Interests of such Restricted Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of Voting Equity Interests of such former Restricted Subsidiary not sold or disposed of. "Issue Date" means the original issue date of the Notes. "Lien" means any lien, mortgage, charge, security interest, hypothecation, assignment for security or encumbrance of any kind (including any conditional sale or capital lease or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "Maturity Date" means the date, which is set forth on the face of the Notes, on which the Notes will mature. "Net Cash Proceeds" means the aggregate proceeds in the form of cash or Cash Equivalents received by the Company or any Restricted Subsidiary in respect of any Asset Sale, including all cash or Cash Equivalents received upon any sale, liquidation or other exchange of proceeds of Asset Sales received in a form other than cash or Cash Equivalents, net of (a) the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof; (b) taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements); (c) amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale (including payments made to obtain or avoid the need for the consent of any holder of such Indebtedness); (d) amounts deemed, in good faith, appropriate by the Board of Managers of the Company to be provided as a reserve, in accordance with GAAP, against any liabilities associated with such assets which are the subject of such Asset Sale; including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an officers' certificate delivered to the Trustee (provided that the amount of any such reserves shall be deemed to constitute Net Cash Proceeds at the time such reserves shall have been reversed or are not otherwise required to be retained as a reserve); and (e) with respect to Asset Sales by Restricted Subsidiaries, the portion of such cash payments attributable to Persons holding a minority interest in such Restricted Subsidiary. "Obligations" means any principal, interest (including, without limitation, Post-Petition Interest), penalties, fees, indemnifications, reimbursement obligations, damages and other liabilities payable under the documentation governing any Indebtedness. "Offer to Purchase" means a written offer (the "Offer") sent by or on behalf of the Company by first-class mail, postage prepaid, to each holder at his address appearing in the register for the Notes on the date of the Offer offering to purchase up to the principal amount of Notes specified in such Offer at the purchase price specified in such Offer (as determined pursuant to the Indenture). Unless otherwise required by applicable law, the Offer shall specify an expiration date (the "Expiration Date") of the Offer to Purchase, which shall be not less than 30 days nor more than 60 days after the date of such Offer, and a settlement date (the "Purchase Date") for purchase of Notes to occur no later than five Business Days after the Expiration Date. The Company shall notify the Trustee at least 15 days (or such shorter period as is acceptable to the Trustee) prior to the mailing of the Offer of the Company's obligation to make an Offer to Purchase, and the Offer shall be mailed by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. The Offer shall also contain information concerning the business of the Company and its Subsidiaries which the Company in good faith believes will enable such Holders to make an informed decision with respect to the Offer to Purchase (which at a minimum will include (i) the most recent annual and quarterly financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the documents required to be filed with the Trustee pursuant to the Indenture (which requirements may be satisfied by delivery of such documents together with the Offer), (ii) a 90 93 description of material developments in the Company's business subsequent to the date of the latest of such financial statements referred to in clause (i) (including a description of the events requiring the Company to make the Offer to Purchase), (iii) if applicable, appropriate pro forma financial information concerning the Offer to Purchase and the events requiring the Company to make the Offer to Purchase and (iv) any other information required by applicable law to be included therein). The Offer shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Offer to Purchase. The Offer shall also state: (1) the Section of the Indenture pursuant to which the Offer to Purchase is being made; (2) the Expiration Date and the Purchase Date; (3) the aggregate principal amount of the outstanding Notes offered to be purchased by the Company pursuant to the Offer to Purchase (including, if less than 100%, the manner by which such amount has been determined pursuant to the Section of the Indenture requiring the Offer to Purchase) (the "Purchase Amount"); (4) the purchase price to be paid by the Company for each $1,000 aggregate principal amount of Notes accepted for payment (as specified pursuant to the Indenture) (the "Purchase Price"); (5) that the Holder may tender all or any portion of the Notes registered in the name of such Holder and that any portion of a Note tendered must be tendered in an integral multiple of $1,000 principal amount; (6) the place or places where Notes are to be surrendered for tender pursuant to the Offer to Purchase; (7) that interest on any Note not tendered or tendered but not purchased by the Company pursuant to the Offer to Purchase will continue to accrue; (8) that on the Purchase Date the Purchase Price will become due and payable upon each Note being accepted for payment pursuant to the Offer to Purchase and that interest thereon shall cease to accrue on and after the Purchase Date; (9) that each Holder electing to tender all or any portion of a Note pursuant to the Offer to Purchase will be required to surrender such Note at the place or places specified in the Offer prior to the close of business on the Expiration Date (such Note being, if the Company or the Trustee so requires, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing); (10) that each Holder will be entitled to withdraw all or any portion of any Notes tendered by such Holder if the Company (or its Paying Agent) receives, not later than the close of business on the fifth Business Day next preceding the Expiration Date, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of the Note such Holder tendered, the certificate number of the Note such Holder tendered and a statement that such Holder is withdrawing all or a portion of his tender; (11) that (a) if Notes in an aggregate principal amount less than or equal to the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase all such Notes and (b) if Notes in an aggregate principal amount in excess of the Purchase Amount are tendered and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase Notes having an aggregate principal amount equal to the Purchase Amount on a pro rata basis (with such adjustments as may be deemed appropriate so that only Notes in denominations of $1,000 principal amount or integral multiples thereof shall be purchased); and (12) that in the case of any Holder whose Note is purchased only in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unpurchased portion of the Note so tendered. An Offer to Purchase shall be governed by and effected in accordance with the provisions above pertaining to any Offer. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holder" means each of (i) CCP and its affiliates, (ii) the Existing Management Holders and (iii) any corporation, a majority of the outstanding Voting Equity Interests of which are owned, directly or indirectly, by persons listed in clauses (i) and (ii) of this definition, and no more than 35% of the outstanding Voting Equity Interests of which are beneficially owned, directly or indirectly, by any Person (other than Permitted Holders) or group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-15d(b)(1) under the Exchange Act. 91 94 "Permitted Indebtedness" means the following, each of which shall be given independent effect: (a) Indebtedness under the Notes; (b) Indebtedness of the Company or any Restricted Subsidiary Incurred under the Credit Facilities in an aggregate principal amount at any one time outstanding not to exceed the greater of (i) $25.0 million and (ii) the sum of 85% of the total book value of accounts receivable and 50% of the total book value of inventory, in each case as reflected on the Company's most recent consolidated financial statements prepared in accordance with GAAP; (c) Indebtedness of any Restricted Subsidiary owed to and held by the Company or any other Restricted Subsidiary, and Indebtedness of the Company owed to and held by any Restricted Subsidiary which is unsecured and subordinated in right of payment to the payment and performance of the Company's obligations under any Senior Indebtedness, the Indenture and the Notes; provided, however, that an Incurrence of Indebtedness that is not permitted by this clause (c) shall be deemed to have occurred upon (i) any sale or other disposition of any Indebtedness of the Company or any Restricted Subsidiary referred to in this clause (c) to a Person (other than the Company or a Restricted Subsidiary), (ii) any sale or other disposition of Equity Interests of any Restricted Subsidiary which holds Indebtedness of the Company or another Restricted Subsidiary such that such Restricted Subsidiary ceases to be a Subsidiary and (iii) the Designation of a Restricted Subsidiary that holds Indebtedness of the Company or any other Restricted Subsidiary as an Unrestricted Subsidiary; (d) the Guarantees and guarantees by any Guarantor of Indebtedness of the Company or its Restricted Subsidiaries and the guarantees by the Company of Indebtedness of the Restricted Subsidiaries; provided, however, that if such guarantee is of Subordinated Indebtedness, then the Guarantee of such Guarantor or the Company's obligations under the Notes, as the case may be; shall be senior to such Guarantor's or the Company's, as the case may be, guarantee of such Subordinated Indebtedness; (e) Interest Rate Protection Obligations relating to Indebtedness of the Company (which Indebtedness (i) bears interest at fluctuating interest rates and (ii) is otherwise permitted to be Incurred under the "Limitation on Indebtedness" covenant); provided, however, that (i) such Interest Rate Protection Obligations have been entered into for bona fide business purposes and not for speculation and (ii) the notional principal amount of such Interest Rate Protection Obligations, at the time of the incurrence thereof, does not exceed the principal amount of the Indebtedness to which such Interest Rate Protection Obligations relate; (f) Purchase Money Indebtedness and Capitalized Lease Obligations which, at the time of the incurrence thereof, do not, in the aggregate with all such other Indebtedness incurred pursuant to this clause (f), exceed 5.0% of the total assets of the Company and its Restricted Subsidiaries, on a consolidated basis determined consistent with the Company's most recent balance sheet prepared in accordance with GAAP at any one time outstanding; (g) Indebtedness under Currency Agreements; provided, however, that in the case of Currency Agreements which relate to Indebtedness, such Currency Agreements do not increase the principal amount of Indebtedness of the Company and its Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (h) Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date, reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereof; (i) Indebtedness of the Company or any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or such Restricted Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business in an amount not to exceed $3.0 million in the aggregate at any time outstanding; 92 95 (j) Indebtedness arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price or similar obligations, in each case incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; provided, however, that (i) such Indebtedness is not reflected on the balance sheet of the Company or any Restricted Subsidiary of the Company (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (i)) and (ii) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including noncash proceeds (the fair market value of such noncash proceeds being measured at the time it is received and without giving effect to any subsequent changes in value) actually received by the Company and its Restricted Subsidiaries in connection with such disposition; (k) Obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary of the Company in the ordinary course of business; (l) Indebtedness of the Company or any Restricted Subsidiary Incurred under an Acquisition Facility in an aggregate principal amount at any one time outstanding not to exceed $22.0 million, reduced by any required permanent repayments (which are accompanied by corresponding permanent commitment reduction thereunder); (m) Indebtedness to the extent representing a replacement, renewal, defeasance, refinancing or extension (collectively, a "refinancing") of outstanding Indebtedness Incurred in compliance with the "Limitation on Indebtedness" covenant or clauses (a), (h) or (l) of this definition; provided, however, that (i) any such refinancing shall not exceed the sum of the principal amount (or accreted amount (determined in accordance with GAAP), if less) of the Indebtedness being refinanced, plus the amount of accrued interest thereon, plus the amount of any reasonably determined prepayment premium necessary to accomplish such refinancing and such reasonable fees and expenses incurred in connection therewith, (ii) Indebtedness representing a refinancing of Indebtedness other than Senior Indebtedness shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being refinanced; and (iii) Indebtedness that is pari passu with the Notes may only be refinanced with Indebtedness that is made pari passu with or subordinate in right of payment to the Notes and Subordinated Indebtedness may only be refinanced with Subordinated Indebtedness; and (n) in addition to the items referred to in clauses (a) through (m) above, Indebtedness of the Company (including any Indebtedness under the Credit Facilities that utilizes this clause (m)) having an aggregate principal amount not to exceed $10.0 million at any one time outstanding. "Permitted Investments" means (a) cash and Cash Equivalents; (b) Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and workers' compensation, performance and other similar deposits; (c) Interest Rate Protection Obligations and Currency Agreements; (d) Investments received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers, in each case arising in the ordinary course of business; (e) Investments in the Company and Investments in Restricted Subsidiaries or Persons that, as a result of or in connection with any such Investment, become Restricted Subsidiaries or are merged with or into or consolidated with the Company or another Restricted Subsidiary; (f) Investments paid for in Qualified Equity Interests of the Company; (g) loans or advances to officers or employees of the Company and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes of the Company and its Restricted Subsidiaries (including, but not limited to, travel and moving expenses) not in excess of $1 million in the aggregate at any one time outstanding; (h) Investments in Replacement Assets made in compliance with the "Limitation on Asset Sales" covenant; (i) Investments of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time such Person merges or consolidates with the Company or any of its Restricted Subsidiaries, in either case in compliance with the Indenture; provided that such Investments were not made by such Person in connection 93 96 with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such merger or consolidation; and (j) Investments (including, without limitation, in the form of joint ventures with unaffiliated third parties) in Related Businesses not in excess of $10 million in the aggregate at any one time outstanding. "Permitted Junior Securities" means any securities of the Company or any other Person that are (i) equity securities without special covenants or (ii) debt securities expressly subordinated in right of payment to all Senior Indebtedness that may at the time be outstanding, to substantially the same extent as, or to a greater extent than, the Notes are subordinated as provided in the Indenture, in any event pursuant to a court order so providing and as to which (a) the rate of interest on such securities shall not exceed the effective rate of interest on the Notes on the date of the Indenture, (b) such securities shall not be entitled to the benefits of covenants or defaults materially more beneficial to the holders of such securities than those in effect with respect to the Notes on the date of the Indenture and (c) such securities shall not provide for amortization (including sinking fund and mandatory prepayment provisions) commencing prior to the date six months following the final scheduled maturity date of the Senior Indebtedness (as modified by the plan of reorganization of readjustment pursuant to which such securities are issued). "Permitted Liens" means (a) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Restricted Subsidiary; provided, however, that such Liens were in existence prior to the contemplation of such merger or consolidation and do not secure any property or assets of the Company or any Restricted Subsidiary other than the property or assets subject to the Liens prior to such merger or consolidation; (b) Liens imposed by law such as carriers', warehousemen's, mechanics', suppliers', materialmen's, landlords' and repairmen's Liens and other similar Liens arising in the ordinary course of business which secure payment of obligations not more than 30 days past due or which are being contested in good faith and by appropriate proceedings; (c) Liens existing on the Issue Date; (d) Liens securing only the Notes or the Guarantees; (e) Liens in favor of the Company or any Restricted Subsidiary; (f) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings; provided, however, that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (g) easements, reservation of rights of way, restrictions (including, but not limited to, zoning and building restrictions) and other similar easements, licenses, restrictions on the use of properties, or minor imperfections of title that in the aggregate are not material in amount and do not in any case materially detract from the properties subject thereto or interfere with the ordinary conduct of the business of the Company and the Restricted Subsidiaries; (h) Liens resulting from the deposit of cash or notes in connection with contracts, bids, sales or tenders or expropriation proceedings, or to secure workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practices in connection therewith, surety, appeal and performance bonds, costs of litigation when required by law and public and statutory obligations or obligations under franchise arrangements entered into in the ordinary course of business; (i) Liens securing Indebtedness consisting of Capitalized Lease Obligations, Purchase Money Indebtedness, mortgage financings, industrial revenue bonds or other monetary obligations, in each case incurred solely for the purpose of financing all or any part of the purchase price or cost of construction or installation of assets used in the business of the Company or the Restricted Subsidiaries, or repairs, additions or improvements to such assets, provided, however, that (I) such Liens secure Indebtedness in an amount not in excess of the original purchase price or the original cost of any such assets or repair, addition or improvement thereto (plus an amount equal to the reasonable fees and expenses in connection with the incurrence of such Indebtedness), (II) such Liens do not extend to any other assets of the Company or the Restricted Subsidiaries (and, in the case of repair, addition or improvements to any such assets, such Lien extends only to the assets (and improvements thereto or thereon) repaired, added to or improved), (III) the Incurrence of such Indebtedness is permitted by "Certain Covenants -- Limitation on Indebtedness" above and (IV) such Liens attach within 120 days of such purchase, construction, installation, repair, addition or improvement; (j) any interest or title of a lessor under any Capitalized Lease Obligation; provided, however, that such Liens do not extend to any property or assets which are not leased property subject to such Capitalized Lease Obligation; (k) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' 94 97 acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (l) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (m) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (n) Liens securing Interest Swap Obligations and Currency Agreements which Obligations and agreements are otherwise permitted under the Indenture; (o) Liens by reason of judgments, attachments or decree not otherwise resulting in an Event of Default; (p) Liens securing Indebtedness of non-Guarantor Restricted Subsidiaries Incurred in compliance with the Indenture; and (q) Liens to secure any refinancings, renewals, extensions, modifications or replacements (collectively, "refinancing") (or successive refinancings), in whole or in part, of any Indebtedness secured by Liens referred to in the clauses above so long as such Lien does not extend to any other property (other than improvements thereto). "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, limited liability partnership, trust, unincorporated organization or government or any agency or political subdivision thereof. "Post-Petition Interest" means, with respect to any Indebtedness of any Person, all interest accrued or accruing on such Indebtedness after the commencement of any Insolvency or Liquidation Proceeding against such Person in accordance with and at the contract rate (including, without limitation, any rate applicable upon default) specified in the agreement or instrument creating, evidencing or governing such Indebtedness, whether or not, pursuant to applicable law or otherwise, the claim for such interest is allowed as a claim in such Insolvency or Liquidation Proceeding. "Preferred Equity Interest," in any Person, means an Equity Interest of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Equity Interests of any other class in such Person. "principal" of a debt security means the principal of the security plus, when appropriate, the premium, if any, on the security. "Public Equity Offering" means, with respect to the Company, an underwritten public offering of Qualified Equity Interests of the Company pursuant to an effective registration statement filed under the Securities Act (excluding registration statements filed on Form S-8). "Purchase Money Indebtedness" means Indebtedness of the Company or any Restricted Subsidiary Incurred for the purpose of financing all or any part of the purchase price or the cost of installation, construction or improvement of any property; provided, however, that the aggregate principal amount of such Indebtedness does not exceed the lesser of the fair market value of such property or such purchase price or cost, including any refinancing of such Indebtedness that does not increase the aggregate principal amount (or accreted amount, if less) thereof as of the date of refinancing. "Qualified Equity Interest" in any Person means any Equity Interest in such Person other than any Disqualified Equity Interest. "Related Business" means any business related, ancillary or complementary (as determined in good faith by the Board of Managers) to the business of the Company and the Restricted Subsidiaries on the Issue Date. "Restricted Subsidiary" means any Subsidiary of the Company that has not been designated by the Board of Managers of the Company, by a resolution of the Board of Managers of the Company delivered to the Trustee, as an Unrestricted Subsidiary pursuant to "Certain Covenants -- Designation of Unrestricted Subsidiaries" above. Any such designation may be revoked by a resolution of the Board of Managers of the Company delivered to the Trustee, subject to the provisions of such covenant. "Sale and Lease-Back Transaction" means any arrangement with any Person providing for the leasing by the Company or any Restricted Subsidiary of the Company of any real or tangible personal Property, which 95 98 property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person in contemplation of such leasing. "SEC" means the Securities and Exchange Commission. "Senior Indebtedness" means, at any date, (a) all Obligations under the Credit Facilities; (b) all Interest Rate Protection Obligations of the Company; (c) all Obligations of the Company under letters of credit; and (d) all other Indebtedness of the Company, including principal, premium, if any, and interest (including Post-Petition Interest) on such Indebtedness, unless the instrument under which such Indebtedness of the Company is Incurred expressly provides that such Indebtedness is not senior or superior in right of payment to the Notes, and all renewals, extensions, modifications, amendments or refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness shall not include (a) to the extent that it may constitute Indebtedness, any Obligation for Federal, state, local or other taxes; (b) any Indebtedness among or between the Company and any Subsidiary of the Company; (c) to the extent that it may constitute Indebtedness, any Obligation in respect of any trade payable Incurred for the purchase of goods or materials, or for services obtained, in the ordinary course of business; (d) Indebtedness evidenced by the Notes; (e) Indebtedness of the Company that is expressly subordinate or junior in right of payment to any other Indebtedness of the Company; (f) to the extent that it may constitute Indebtedness, any obligation owing under leases (other than Capitalized Lease Obligations) or management agreements; and (g) any obligation that by operation of law is subordinate to any general unsecured obligations of the Company. "Significant Restricted Subsidiary" means, at any date of determination, (a) any Restricted Subsidiary that, together with its Subsidiaries that constitute Restricted Subsidiaries (i) for the most recent fiscal year of the Company accounted for more than 10.0% of the consolidated revenues of the Company and the Restricted Subsidiaries or (ii) as of the end of such fiscal year, owned more than 10.0% of the consolidated assets of the Company and the Restricted Subsidiaries, all as set forth on the consolidated financial statements of the Company and the Restricted Subsidiaries for such year prepared in conformity with GAAP, and (b) any Restricted Subsidiary which, when aggregated with all other Restricted Subsidiaries that are not otherwise Significant Restricted Subsidiaries and as to which any event described in clause (h) of "Events of Default" above has occurred, would constitute a Significant Restricted Subsidiary under clause (a) of this definition. "Stated Maturity" means, when used with respect to any Note or any installment of interest thereon, the date specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable. "Subordinated Indebtedness" means, with respect to the Issuers or any Guarantor, any Indebtedness of the Issuers or such Guarantor, as the case may be, which is expressly subordinated in right of payment to the Notes or such Guarantor's Guarantee, as the case may be. "Subsidiary" means, with respect to any Person, (a) any corporation of which the outstanding Voting Equity Interests having at least a majority of the votes entitled to be cast in the election of directors shall at the time be owned, directly or indirectly, by such Person, or (b) any other Person of which at least a majority of Voting Equity Interests are at the time, directly or indirectly, owned by such first named Person. "Surviving Person" means, with respect to any Person involved in or that makes any Disposition, the Person formed by or surviving such Disposition or the Person to which such Disposition is made. "Tax Distribution" means, as of the time of determination thereof, any distribution by the Company and any of its Restricted Subsidiaries that are limited liability companies to their respective members (or in each case, if such member is a flow-through entity, such direct or indirect owner or owners of such member as is or are subject to income taxes on income of such limited liability company) which (i) with respect to quarterly estimated tax payments due in each calendar year shall be equal to twenty-five percent (25%) of the relevant member's Income Tax Liabilities for such calendar year as estimated in writing by the chief financial officer of the Company and (ii) with respect to tax payments to be made with income tax returns filed for a full calendar year or with respect to adjustments to such returns imposed by the Internal Revenue Service or other taxing authority, shall be equal to the Income Tax Liabilities of such member for such calendar year minus the aggregate amount distributed to such member for such calendar year as provided in clause (i) above. In the 96 99 event the amount determined under clause (ii) is negative amount, the amount of any distributions to the relevant member in the succeeding calendar year (or, if necessary, any subsequent calendar years) shall be reduced by such negative amount. "United States Government Obligations" means direct non-callable obligations of the United States of America for the payment of which the full faith and credit of the United States is pledged. "Unrestricted Subsidiary" means any Subsidiary of the Company designated as such pursuant to the "Designation of Unrestricted Subsidiaries" covenant. Any such designation may be revoked by a resolution of the Board of Managers of the Company delivered to the Trustee, subject to the provisions of such covenant. "Voting Equity Interests" means Equity Interests in a corporation or other Person with voting power under ordinary circumstances entitling the holders thereof to elect the Board of Managers or other governing body of such corporation or Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required scheduled payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding aggregate principal amount of such Indebtedness. "Western Europe" means, with respect to any jurisdictional matter, any of the twelve current member states of the European Community and Switzerland, Norway, Sweden, Finland, Austria and the Czech Republic (and "Western European" shall have a meaning correlative to the foregoing). "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of which at least 99.0% of the outstanding Voting Equity Interests (other than qualifying shares or other Equity Interests owned by directors or other members of any comparable governing body) of which are owned, directly or indirectly, by the Company and/or one or more Wholly Owned Restricted Subsidiaries. PLAN OF DISTRIBUTION Based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Issuers believe that the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Issuers within the meaning of Rule 405 promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business, such holder has no arrangement with any person to participate in the distribution of such New Notes and neither such holder nor any such other person is engaging in or intends to engage in a distribution of such New Notes. Accordingly, any holder who is an affiliate of the Issuers or any holder using the Exchange Offer to participate in a distribution of the New Notes will not be able to rely on such interpretations by the staff to the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale transaction. Notwithstanding the foregoing, each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with any resale of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities (other than Old Notes acquired directly from the Issuers.) The Issuers have agreed that, for a period of 180 days from the date of this Prospectus, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 1998 (90 days from the date of this Prospectus), all dealers effecting transactions in the New Notes may be required to deliver a prospectus. 97 100 The Issuers will not receive any proceeds from any sale of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker-dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver, and by delivering, a prospectus as required, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days from the date of this Prospectus, the Issuers will send a reasonable number of additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Issuers will pay all the expenses incident to the Exchange Offer (which shall not include the expenses of any holder in connection with resales of the New Notes). The Issuers have agreed to indemnify the Initial Purchasers and any broker-dealers participating in the Exchange Offer against certain liabilities, including liabilities under the Securities Act. This Prospectus has been prepared for use in connection with the Exchange Offer and may be used by CSI in connection with offers and sales related to market-making transactions in the Notes. CSI may act as principal or agent in such transactions. Such sales will be made at prices related to prevailing market prices at the time of sale. The Company will not receive any of the proceeds of such sales. CSI has no obligation to make a market in the Notes and may discontinue its market-making activities at any time without notice, at its sole discretion. The Company has agreed to indemnify CSI against certain liabilities, including liabilities under the Securities Act of 1933, and to contribute to payments which CSI might be required to make in respect thereof. For a description of certain relationships between the Company and CSI and its affiliates, see "Certain Transactions." LEGAL MATTERS The validity of the Notes offered hereby will be passed upon for the Issuers by O'Sullivan Graev & Karabell, LLP, New York, New York. EXPERTS The financial statements of the Predecessor for the period from January 1, 1995 through September 27, 1995, included in this Prospectus have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The consolidated financial statements of the Company as of and for the period from September 28, 1995 through December 31, 1995 and as of and for the years ended December 31, 1996 and 1997, included in this Prospectus, have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The consolidated financial statements of Brink B.V. as of and for the year ended December 31, 1995 and as of and for the period from January 1, 1996 through October 30, 1996, included in this Prospectus have been so included in reliance on the report of Coopers & Lybrand N.V., independent accountants, given on the authority of said firm as experts in auditing and accounting. 98 101 The financial statements of Valley Industries, Inc. as of and for the period from December 29, 1996 through August 5, 1997, included in this Prospectus have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The financial statements of Valley Industries, Inc. at December 28, 1996 and December 31, 1995, and for each of two years in the period ended December 28, 1996, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The financial statements of the towbar segment of Ellebi S.p.A. as of and for the years ended December 31, 1995, 1996 and 1997, included in this Prospectus, have been so included in reliance on the report of AXIS S.r.l., independent accountants, given on the authority of said firm as experts in auditing and accounting. 99 102 ADVANCED ACCESSORY SYSTEMS, LLC INDEX TO FINANCIAL STATEMENTS
PAGE ---- ADVANCED ACCESSORY SYSTEMS, LLC AND SUBSIDIARIES Reports of Independent Accountants.......................... F-2 Consolidated Balance Sheets -- December 31, 1996 and 1997... F-4 Consolidated Statements of Operations -- Period from January 1, 1995 through September 27, 1995 for the Predecessor and Period from September 28, 1995 through December 31, 1995, and Years Ended December 31, 1996 and 1997 for the Company................................................... F-5 Consolidated Statements of Cash Flows -- Period from January 1, 1995 through September 27, 1995 for the Predecessor and Period from September 28, 1995 through December 31, 1995, and Years Ended December 31, 1996 and 1997 for the Company................................................... F-6 Consolidated Statements of Changes in Divisional and Members' Equity -- Period from January 1, 1995 through September 27, 1995 for the Predecessor and Period from September 28, 1995 through December 31, 1995, and Years Ended December 31, 1996 and 1997 for the Company.......... F-7 Notes to Consolidated Financial Statements.................. F-8 BRINK B. V. Report of Independent Accountants........................... F-29 Consolidated Balance Sheets -- December 31, 1995 and October 30, 1996.................................................. F-30 Consolidated Profit and Loss Account -- Year Ended December 31, 1995 and Ten Months Ended October 30, 1996............ F-30 Consolidated Cash Flows Statement -- Year Ended December 31, 1995 and Ten Months Ended October 30, 1996................ F-31 Notes to Consolidated Financial Statements.................. F-31 VALLEY INDUSTRIES, INC. Report of Independent Accountants........................... F-41 Report of Independent Auditors.............................. F-42 Balance Sheets -- December 31, 1995, December 28, 1996 and August 5, 1997............................................ F-43 Statements of Operations -- Years Ended December 31, 1995, December 28, 1996 and the Period Ended August 5, 1997..... F-44 Statements of Shareholders' Equity -- Years Ended December 31, 1995, December 28, 1996 and the Period Ended August 5, 1997...................................................... F-45 Statements of Cash Flows -- Years Ended December 31, 1995, December 28, 1996 and the Period Ended August 5, 1997..... F-46 Notes to Financial Statements............................... F-47 ELLEBI S.P.A. Report of Independent Accountants........................... F-53 Balance Sheets -- December 31, 1995, 1996 and 1997.......... F-54 Statements of Operations -- Years Ended December 31, 1995, 1996 and 1997............................................. F-55 Statements of Cash Flows -- Years ended December 31, 1995, 1996 and 1997............................................. F-56 Statements of Changes in Ellebi S.p.A. Investment -- Years ended December 31, 1995, 1996 and 1997.................... F-57 Notes to Financial Statements............................... F-58
F-1 103 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Managers and Members of Advanced Accessory Systems, LLC In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows and of changes in members' equity present fairly, in all material respects, the financial position of Advanced Accessory Systems, LLC (formerly AAS Holdings, LLC) and its subsidiaries (the "Company") at December 31, 1996 and 1997 and the results of their operations and their cash flows for the period from September 28, 1995 through December 31, 1995 and for the years ended December 31, 1996 and 1997, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Bloomfield Hills, Michigan March 15, 1998 F-2 104 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Managers and Members of Advanced Accessory Systems, LLC In our opinion, the accompanying statements of income, of cash flows and of changes in divisional equity of MascoTech Accessories (the "Predecessor"), a division of MascoTech, Inc. present fairly, in all material respects, the results of its operations and its cash flows for the period from January 1, 1995 through September 27, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Predecessor's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. The Predecessor was a division of MascoTech, Inc. and, as disclosed in Note 5 to the financial statements, had extensive transactions and relationships with affiliated entities. Because of these relationships, the terms of these transactions may differ from those that would result from transactions among wholly unrelated parties. As discussed in Note 1, on September 28, 1995, certain of the net assets of the Predecessor were purchased by Advanced Accessory Systems, LLC (formerly AAS Holdings, LLC). The accompanying financial statements for the period from January 1, 1995 through September 27, 1995 do not give effect to the purchase transaction. Price Waterhouse LLP Bloomfield Hills, Michigan August 25, 1997 F-3 105 ADVANCED ACCESSORY SYSTEMS, LLC CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ----------------------------- 1996 1997 ---- ---- (DOLLAR AMOUNTS IN THOUSANDS EXCEPT UNIT-RELATED DATA) ASSETS Current assets Cash...................................................... $ 2,514 $ 27,348 Accounts receivable, less reserves of $605 and $1,699, respectively........................................... 18,807 43,523 Inventories............................................... 20,652 34,408 Other current assets...................................... 4,083 6,469 -------- -------- Total current assets................................. 46,056 111,748 Property and equipment, net................................. 41,828 55,928 Goodwill, net............................................... 56,799 85,889 Intangible assets, net...................................... 2,635 7,595 Deferred income taxes....................................... 856 3,626 Other noncurrent assets..................................... 185 697 -------- -------- $148,359 $265,483 ======== ======== LIABILITIES AND MEMBERS' EQUITY Current liabilities Current maturities of long-term debt...................... $ 5,500 $ 3,746 Accounts payable.......................................... 13,668 23,479 Accrued liabilities....................................... 11,228 18,815 Deferred income taxes..................................... 1,292 1,333 -------- -------- Total current liabilities............................ 31,688 47,373 -------- -------- Noncurrent liabilities Deferred income taxes..................................... 4,613 3,545 Other noncurrent liabilities.............................. 2,271 1,234 Long-term debt, less current maturities................... 87,642 193,380 -------- -------- Total noncurrent liabilities......................... 94,526 198,159 -------- -------- Commitments and contingencies (Note 10) Mandatorily redeemable warrants............................. 3,498 3,507 -------- -------- Minority interest........................................... 184 251 -------- -------- Members' equity Class A Units 25,000 authorized, 15,369 and 16,271 issued at December 31, 1996 and 1997, respectively............ 17,922 22,912 Class B Units, 2,000 units authorized, no Units issued at December 31, 1996 and 1997............................. -- -- Currency translation adjustment........................... (89) (490) Retained earnings (deficit)............................... 630 (6,229) -------- -------- 18,463 16,193 -------- -------- $148,359 $265,483 ======== ========
See accompanying notes to consolidated financial statements. F-4 106 ADVANCED ACCESSORY SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
PREDECESSOR COMPANY ------------------ --------------------------------------- PERIOD FROM PERIOD FROM YEAR ENDED JANUARY 1, 1995 SEPTEMBER 28, 1995 DECEMBER 31, THROUGH THROUGH ------------------ SEPTEMBER 27, 1995 DECEMBER 31 1995 1996 1997 ------------------ ------------------ ---- ---- (DOLLAR AMOUNTS IN THOUSANDS) Net sales................................ $48,698 $16,299 $81,466 $188,678 Cost of sales............................ 38,645 12,458 53,607 135,556 ------- ------- ------- -------- Gross profit........................... 10,053 3,841 27,859 53,122 Selling, administrative and product development expenses................... 6,107 1,472 13,413 31,350 Amortization of intangible assets........ -- 546 2,475 2,336 ------- ------- ------- -------- Operating income....................... 3,946 1,823 11,971 19,436 ------- ------- ------- -------- Other (income) expense Interest expense....................... -- 975 4,312 12,627 Foreign currency loss.................. -- -- 1,330 6,097 Other (income) expense................. 65 (22) (80) -- ------- ------- ------- -------- Income before minority interest, extraordinary charge and income taxes.................................. 3,881 870 6,409 712 Provision (benefit) for income taxes..... 1,324 -- (491) (2,856) ------- ------- ------- -------- Income before minority interest and extraordinary charge................... 2,557 870 6,900 3,568 Minority interest........................ -- 9 69 97 Extraordinary charge resulting from debt extinguishment......................... -- -- 1,970 7,416 ------- ------- ------- -------- Net income (loss)........................ $ 2,557 $ 861 $ 4,861 $ (3,945) ======= ======= ======= ========
See accompanying notes to consolidated financial statements. F-5 107 ADVANCED ACCESSORY SYSTEMS, LLC CONSOLIDATED STATEMENTS OF CASH FLOWS
PREDECESSOR COMPANY ------------- ------------------------------------ PERIOD FROM PERIOD FROM JANUARY 1, SEPTEMBER 28, YEAR ENDED 1995 THROUGH 1995 THROUGH DECEMBER 31, SEPTEMBER 27, DECEMBER 31, -------------------- 1995 1995 1996 1997 ------------- ------------- ---- ---- (DOLLAR AMOUNTS IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss).............................. $ 2,557 $ 861 $ 4,861 $ (3,945) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization................ 789 890 4,689 9,360 Deferred taxes............................... -- -- (363) (3,146) Foreign currency loss........................ -- -- 1,118 5,500 Loss on disposal of assets................... -- -- 10 -- Extraordinary charge resulting from debt extinguishment............................ -- -- 1,970 7,416 Changes in assets and liabilities Accounts receivable....................... 947 488 (118) (8,661) Inventories............................... 133 412 (3,736) 582 Other current assets...................... (569) (193) (1,742) 378 Other noncurrent assets................... (13) -- (67) (482) Accounts payable.......................... 467 (1,679) 1,995 (2,719) Accrued liabilities....................... (653) 484 3,144 2,819 Other noncurrent liabilities.............. 83 118 (1,913) (217) Minority interest in consolidated subsidiaries............................ -- 9 69 97 ------- -------- -------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES........................... 3,741 1,390 9,917 6,982 ------- -------- -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of machinery and equipment......... (2,079) (491) (3,124) (7,751) Amount due from sellers of Valley Industries, Inc.......................................... -- -- -- (1,150) Acquisition of subsidiaries, net of cash acquired..................................... -- (46,047) (54,339) (70,832) ------- -------- -------- --------- NET CASH USED FOR INVESTING ACTIVITIES........................... (2,079) (46,538) (57,463) (79,733) ------- -------- -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of debt................. -- 30,800 88,842 215,050 Proceeds from issuance of warrants............. -- 200 3,498 -- Increase in revolving loan..................... -- 4,100 4,300 504 Extinguishment of warrants..................... -- -- (1,600) -- Repayment of debt.............................. -- -- (44,628) (113,248) Divisional activity............................ (1,666) -- -- -- Debt issuance costs............................ -- (1,815) (2,643) (7,280) Issuance of membership units................... -- 13,500 4,562 4,999 Distributions to members....................... -- -- (3,726) (2,945) ------- -------- -------- --------- NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES................. (1,666) 46,785 48,605 97,080 ------- -------- -------- --------- Effect of exchange rate changes................ -- -- (182) 505 Net increase (decrease) in cash................ (4) 1,637 877 24,834 Cash at beginning of period.................... 7 -- 1,637 2,514 ------- -------- -------- --------- Cash at end of period.......................... $ 3 $ 1,637 $ 2,514 $ 27,348 ======= ======== ======== ========= Cash paid for interest......................... $ -- $ 746 $ 4,215 $ 8,302 ======= ======== ======== ========= Cash paid for income taxes..................... $ -- $ -- $ -- $ 581 ======= ======== ======== =========
See accompanying notes to consolidated financial statements. F-6 108 ADVANCED ACCESSORY SYSTEMS, LLC CONSOLIDATED STATEMENTS OF CHANGES IN DIVISIONAL AND MEMBERS' EQUITY (DOLLAR AMOUNTS IN THOUSANDS)
PREDECESSOR ----------- DIVISIONAL EQUITY ---------- Balance at January 1, 1995.................................. $14,903 Net income for the period from January 1, 1995 through September 27, 1995........................................ 2,557 Divisional activity......................................... (1,666) ------- Balance at September 27, 1995............................... $15,794 =======
- --------------------------------------------------------------------------------
COMPANY ------------------------------------------------ CURRENCY RETAINED TOTAL MEMBERS' TRANSLATION EARNINGS MEMBERS' CAPITAL ADJUSTMENT (DEFICIT) EQUITY -------- ----------- --------- -------- Sale of membership interest on September 28, 1995..... $13,860 $ -- $ -- $13,860 Notes receivable for unit purchase.................... (500) -- -- (500) ------- ----- ------- ------- 13,360 -- -- 13,360 Net income for the period from September 28, 1995 through December 31, 1995........................... -- -- 861 861 ------- ----- ------- ------- Balance at December 31, 1995.......................... 13,360 -- 861 14,221 Issuance of additional units.......................... 4,562 -- -- 4,562 Accretion of membership warrants...................... -- -- (1,400) (1,400) Distributions to members, net of minority interest.... -- -- (3,692) (3,692) Currency translation adjustment....................... -- (89) -- (89) Net income for 1996................................... -- -- 4,861 4,861 ------- ----- ------- ------- Balance at December 31, 1996.......................... 17,922 (89) 630 18,463 Issuance of additional units.......................... 4,999 -- -- 4,999 Accretion of membership warrants...................... (9) -- -- (9) Distributions to members, net of minority interest.... -- -- (2,914) (2,914) Currency translation adjustment....................... -- (401) -- (401) Net (loss) for 1997................................... -- -- (3,945) (3,945) ------- ----- ------- ------- Balance at December 31, 1997.......................... $22,912 $(490) $(6,229) $16,193 ======= ===== ======= =======
See accompanying notes to consolidated financial statements. F-7 109 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES BUSINESS ACTIVITIES Advanced Accessory Systems, LLC (formerly AAS Holdings, LLC) (the "Company") is engaged in the design, manufacture and supply of towing and rack systems and accessories for the automotive original equipment manufacturer ("OEM") market and the automotive aftermarket. The Company's business commenced on September 28, 1995, with the acquisition of certain of the net assets of MascoTech Accessories (the "Predecessor"), a division of MascoTech, Inc., through the Company's majority-owned subsidiary, SportRack, LLC. As described in Note 2, in October 1996 the Company acquired Brink B.V. and in July and August of 1997 acquired the SportRack division of Bell Sports Corporation, Nomadic Sports, Inc. and Valley Industries, Inc. The Company has two significant customers in the automotive OEM industry. Sales to these customers represented 62% and 22%, for the period from January 1, 1995 through September 27, 1995 for the Predecessor; 72% and 22% for the period from September 28, 1995 through December 31, 1995, 60% and 21% for the year ended December 31, 1996 and 29% and 13% for the year ended December 31, 1997 for the Company. Accounts receivable from these customers represented 57% and 24% of the Company's trade accounts receivable at December 31, 1996, and 33% and 8% at December 31, 1997, respectively. Although the Company is directly affected by the economic well being of the industries and customers referred to above, management does not believe significant credit risk exists at December 31, 1997. Consistent with industry practice, the Company does not require collateral to reduce such credit risk. BASIS OF PRESENTATION The financial statements for the period from January 1, 1995 through September 27, 1995 are those of the Predecessor. The consolidated financial statements as of December 31, 1996 and 1997, for the period from September 28, 1995 through December 31, 1995 and for the years ended December 31, 1996 and 1997 are those of the Company and its subsidiaries. The financial statements of the Company and the Predecessor are not comparable in certain respects due to differences between the cost bases of certain assets held by the Company versus that of the Predecessor, resulting in increased depreciation and amortization charges subsequent to September 27, 1995, changes in accounting policies and the recording of certain liabilities at the date of acquisition in connection with the purchase of the Predecessor by the Company, as well as the Company's acquisitions as discussed further in Note 2. F-8 110 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) PRINCIPLES OF CONSOLIDATION The Company includes the accounts of the following: SportRack, LLC............................ 99% owned by Advanced Accessory Systems, LLC and 1% owned by Chase Capital Partners SportRack Automotive GmbH............... A German corporation, 100% owned by SportRack, LLC SportRack International, Inc............ A Canadian corporation, 100% owned by SportRack, LLC AAS Holdings, Inc......................... 100% owned by Advanced Accessory Systems, LLC Brink International B.V................. A Dutch corporation, 100% owned by AAS Holdings, Inc. Valley Industries, LLC.................... 99% owned by Advanced Accessory Systems, LLC and 1% owned by SportRack, LLC Valtek, LLC............................... 99% owned by Advanced Accessory Systems, LLC and 1% owned by SportRack, LLC AAS Capital Corporation................... 100% owned by Advanced Accessory Systems, LLC
All intercompany transactions have been eliminated in consolidation. REVENUE RECOGNITION Revenue and related cost of goods sold are recognized upon shipment of the product to the customer. Sales allowances, discounts, rebates and other adjustments are recorded or accrued in the period of the sale. SIGNIFICANT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the fiscal period. Actual results could differ from those estimates. CHANGE IN ESTIMATE On a periodic basis, the Company reviews the estimated useful lives of its long-lived assets. In connection with the Company's most recent review, the Company determined that the remaining period of benefit relating to its goodwill from the SportRack, LLC and Brink acquisitions was 29 years. Based upon the Company's assessment of the period of benefit as well as the amortization periods utilized by other companies operating within the automotive industry, the Company began amortizing the unamortized value of its goodwill at January 1, 1997 over a remaining 29 year period. The changes in the amortization period resulted in a decrease in amortization expense of approximately $2,080 for the year ended December 31, 1997. FINANCIAL INSTRUMENTS Financial instruments at December 31, 1996 and 1997, including cash, accounts receivable and accounts payable, are recorded at cost, which approximates fair value due to the short-term maturities of these assets and liabilities. The carrying value of the obligations under the bank agreements are considered to approximate fair value as the agreements provide for interest rate revisions based on changes in prevailing market rates or were entered into at rates that approximate market rates at December 31, 1996 and 1997. The Company is exposed to certain market risks which exist as a part of its ongoing business operations. Primary exposures include fluctuations in the value of foreign currency investments in subsidiaries, volatility in the translation of foreign currency earnings to U.S. Dollars and movements in Federal Funds rates and the F-9 111 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) London Interbank Offered Rate (LIBOR). The Company uses derivative financial instruments, where appropriate, to manage these risks. The Company, as a matter of policy, does not engage in trading or speculative transactions. CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all highly-liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents. CURRENCY TRANSLATION The functional currency for the Company's foreign subsidiaries is the applicable local currency. Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet date; translation adjustments are reported as a separate component of members' equity. Revenues, expenses and cash flows for foreign subsidiaries are translated at average exchange rates during the period; foreign currency transaction gains and losses are included in current earnings. The accompanying consolidated statement of operations for the years ended December 31, 1996 and 1997 includes net currency losses of $1,330 and $6,097 relating primarily to debt at Brink International B.V., which is denominated in U.S. dollars. INVENTORIES Inventories are stated at the lower of cost or market, with cost being determined on the first-in, first-out (FIFO) method. Inventories are periodically reviewed and reserves established for excess and obsolete items. CUSTOMER TOOLING The Company incurs costs to develop new tooling used in the manufacture of products sold to OEM's. In certain instances, the tooling becomes the property of the OEM and the Company is reimbursed by the OEM for the cost of the tooling, or in certain instances, recovers all or a portion of such costs through incremental increases in unit selling prices. Management makes periodic estimates of the total costs to be incurred for customer tooling projects and makes provisions for tooling costs which will not be recovered, if any, when such amounts are known. Customer tooling in-process is included in other current assets in the accompanying consolidated balance sheets. PROPERTY AND EQUIPMENT Property and equipment is stated at acquisition cost, which reflects the fair market value of assets acquired at the acquisition date for all subsidiaries. Property and equipment purchased other than through the acquisitions described in Note 2 is stated at cost. Expenditures for normal repairs and maintenance are charged to operations as incurred. Depreciation is computed using the straight-line method over the following estimated useful lives:
YEARS ---------------------- PREDECESSOR COMPANY ----------- ------- Buildings and improvements................................ 10-40 5-50 Machinery, equipment and tooling.......................... 3-15 2-10 Furniture and fixtures.................................... 10 5-7
F-10 112 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) GOODWILL AND INTANGIBLE ASSETS Goodwill of $56,799 and $85,889 (net of accumulated amortization of $3,021 and $5,251) at December 31, 1996 and 1997, respectively, represents the costs in excess of net assets acquired and was amortized using the straight line method over 15 years in 1996. Due to a change in accounting estimate, the Company began amortizing goodwill over a remaining 29 year period in 1997. Debt issuance costs of $2,635 and $6,467, net of accumulated amortization at December 31, 1996 and 1997, respectively, are amortized over the terms of the loan agreements, which are six to ten years. Debt issuance cost amortization of $60, $212 and $551 for 1995, 1996 and 1997, respectively, has been included in interest expense. IMPAIRMENT OF LONG-LIVED ASSETS The Company accounts for long-lived assets in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This Statement requires that long-lived assets and certain identifiable intangibles to be held and used by the company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company determines the impairment of long-lived assets by comparing the undiscounted future cash flows to be generated by the assets to their carrying value. Management believes that there are no impairments as of December 31, 1996 and 1997. INCOME TAXES The Company and certain of its domestic subsidiaries have elected to be taxed as limited liability companies for federal income tax purposes. As a result of this election, the Company's domestic taxable income accrues to the individual members. Distributions are made to the members in amounts sufficient to meet the tax liability on the Company's domestic taxable income accruing to the individual members. No distributions were made in the period from September 28, 1995 through December 31, 1995. Distributions to members, net of minority interest, of $3,692 and $2,914 were made during 1996 and 1997, respectively. Certain of the Company's domestic subsidiaries and foreign subsidiaries are subject to income taxes in their respective jurisdictions. Income tax provisions for these entities are based on the U.S. Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Deferred tax assets and liabilities are provided for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of such entities' assets and liabilities. The Company does not provide for U.S. income taxes or foreign withholding taxes on the undistributed earnings of foreign subsidiaries because of management's intent to permanently reinvest in such operations. The Company and certain subsidiaries are subject to taxes, including Michigan Single Business Tax and Canadian capital tax, which are based primarily on factors other than income. As such, these amounts are included in selling, administrative and product development expenses in the accompanying consolidated statements of income. Deferred taxes related to Michigan Single Business Tax are provided on the temporary differences resulting from capital acquisitions and depreciation. Prior to September 28, 1995, the Predecessor was a division of a C corporation. In preparing its financial statements, the Predecessor has determined its tax provision substantially on a separate return basis in accordance with the provisions of Statement of Accounting Standards No. 109, "Accounting for Income Taxes". F-11 113 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) RESEARCH, DEVELOPMENT AND ENGINEERING Research, development and engineering costs are expensed as incurred and aggregated approximately $1,993 for the period from January 1, 1995 through September 27, 1995 for the Predecessor, $672 for the period from September 28, 1995 through December 31, 1995 and $3,548 and $5,860 for the years ended December 31, 1996 and 1997, respectively, for the Company. RECLASSIFICATIONS Certain amounts from the 1996 financial statements have been reclassified to conform with the 1997 financial statement presentation. 2. ACQUISITIONS Acquisitions of the Company from inception through December 31, 1997 are as follows:
PURCHASE GOODWILL ACQUIRED COMPANY ACQUISITION DATE PRICE RECORDED ---------------- ---------------- -------- -------- Predecessor............................. September 28, 1995 $46,050 $32,781 Brink B.V............................... October 30, 1996 54,339 27,730 SportRack Division of Bell Sports....... July 2, 1997 13,505 1,198 Nomadic Sports, Inc..................... July 24, 1997 849 433 Valley Industries, Inc.................. August 5, 1997 56,478 32,891
The above acquisitions have each been accounted for in accordance with the purchase method of accounting. Accordingly, the respective purchase price of each acquisition has been allocated to assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date. The excess of the aggregate purchase price over the estimated fair market value of the net assets acquired has been recorded as goodwill. The operating results of these entities have been included in the Company's consolidated financial statements since the date of each acquisition. Predecessor SportRack, LLC (formerly "Predecessor") is a designer, manufacturer and distributor of rack systems and accessories to the automotive OEM market and aftermarket. The Company was acquired from MascoTech, Inc. through an Asset Purchase Agreement (the "Agreement") which contains indemnification provisions relating to certain business activities prior to September 28, 1995. Brink B.V. The Company acquired all of the outstanding shares of Brink B.V. ("Brink"), a designer, manufacturer and distributor of towing systems and related products in Europe. The purchase price of $54,339, including acquisition costs, was comprised of $45,801 of cash and a 12,500 Junior Subordinated Note ($7,340), denominated in Dutch guilders, to Brink Holdings, B.V. Through a statutory reorganization, the operations of Brink B.V. were transferred to Brink International B.V. SportRack Division of Bell Sports and Nomadic Sports, Inc. The Company acquired the nets assets of the SportRack Division of Bell Sports and the outstanding shares of Nomadic Sports, Inc. (together SportRack International, Inc.), which are designers, manufacturers F-12 114 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. ACQUISITIONS -- (CONTINUED) and distributors of rack systems and accessories to the OEM market and automotive aftermarket in Canada and the U.S. Valley Industries, Inc. The Company acquired the net assets of Valley Industries, Inc. ("Valley"), which is a North American supplier of towing systems and related products to the automotive OEM market and aftermarket. Pro Forma Data The following unaudited pro forma consolidated results of operations have been prepared as if the Valley and SportRack International, Inc. acquisitions had occurred on January 1, 1996.
1996 1997 ---- ---- Net sales................................................ $233,480 $246,669 Income before extraordinary charge....................... 2,724 1,319 Net income (loss)........................................ 754 (6,097)
The pro forma data is not intended to be a projection of future results. The pro forma data included above includes adjustments to historical results of operations for increased depreciation expense, intangible asset amortization and interest expense, net of the related tax benefits. 3. LONG-TERM DEBT Long-term debt is comprised of the following:
OUTSTANDING AT INTEREST RATE AT DECEMBER 31, DECEMBER 31, ------------------- 1997 1996 1997 ---------------- ---- ---- Senior Subordinated Notes, less discount of $464........... 9.75% $ -- $124,536 Second Amended and Restated Credit Agreement (U.S. Credit Facility) Term note A........................................... 8.66% 65,000 17,065 Term note B........................................... 9.02% -- 15,883 Revolving line of credit note......................... 9.50% 4,300 1,900 Acquisition revolving note............................ 10.25% -- 21,000 First Amended and Restated Credit Agreement (Canadian Credit Facility) Canadian term note.................................... 7.50% -- 13,952 Canadian revolving line of credit note................ 7.50% -- 2,790 Senior Subordinated Loans, less discount of $3,498......... 16,502 -- Junior Subordinated Note................................... 7,340 -- -------- -------- 93,142 197,126 Less -- current portion.................................... 5,500 3,746 -------- -------- $ 87,642 $193,380 ======== ========
In connection with the acquisition of Valley on August 5, 1997, as described in Note 2, the Company borrowed $55,000, under its Second Amended and Restated Credit Agreement ("U.S. Credit Facility"), Term note B. In July 1997, the Company borrowed C$20,000 ($13,952 at December 31, 1997) under its First F-13 115 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 3. LONG-TERM DEBT -- (CONTINUED) Amended and Restated Credit Agreement ("Canadian Credit Facility") to purchase SportRack International, Inc. On October 1, 1997 the Company together with its subsidiary, AAS Capital Corporation, issued $125,000 in Senior Subordinated Notes (the "Notes"). The proceeds of the offering totaling $124,529, net of discount, were used to reduce or repay outstanding debt including borrowings under the U.S. Credit Facility, the Senior Subordinated Loans and the Junior Subordinated Note, and to pay costs of the transaction totaling $4,950. SENIOR SUBORDINATED NOTES Borrowings under the Notes, due October 1, 2007, are unsecured and are subordinated in right of payment to all existing and future senior indebtedness of the Company, including the loans under the U.S. and Canadian Credit Agreements described below. The Company, at its option, may redeem the Notes, in whole or in part, together with accrued and unpaid interest subsequent to October 1, 2002 at certain redemption prices as set forth by the indenture, under which the Notes have been issued. In addition, at any time the Company may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of one or more public equity offerings at a redemption price equal to 109.75% of the principal amount to be redeemed. Upon the occurrence of a change of control of the Company, as defined by the indenture, the Company is required to make an offer to repurchase the Notes at a price equal to 101% of the principal amount of the notes. The indenture places certain limits on the Company, the most restrictive of which include, the incurrence of additional indebtedness by the Company, the payment of dividends on, and redemption of capital of the Company, the redemption of certain subordinated obligations, investments, sales of assets and stock of certain subsidiaries, transactions with affiliates, consolidations, mergers and transfers of all or substantially all of the Company's assets. The indenture also requires the Company to file a registration statement during 1998 with respect to an offer to exchange the Notes for a series of notes of the Company with terms substantially identical to the Notes. Interest on the Notes is payable semi-annually in arrears on April 1 and October 1 of each year. SECOND AMENDED AND RESTATED CREDIT AGREEMENT (U.S. CREDIT FACILITY) The company's U.S. Credit Facility, which is administrated by the First Chicago NBD Bank ("NBD") and The Chase Manhattan Bank ("Chase"), is secured by substantially all the assets of the Company and places certain restrictions on the Company related to indebtedness, sales of assets, investments, capital expenditures, dividend payments, management fees, and members' equity transactions. In addition, the agreement subjects the Company to certain restrictive covenants, including the attainment of designated operating ratios and minimum net worth levels. The Company, at its election, may make prepayments of the term notes under the credit agreement on a pro-rata basis. A mandatory prepayment of the term notes was made on October 1, 1997 as a result of the issuance of the Company's Notes. Additionally, mandatory prepayments of the term notes are required in the event of sales of assets meeting certain criteria, as set forth by the agreement, or based upon periodic calculations of excess cash flows, as defined by the agreement. The agreement provides for two term notes (Term note A and Term note B), a revolving line of credit note and an acquisitions revolving note. Loans under each of the term notes and the revolving note can be converted, at the election of the Company, in whole or in part, into Base Rate Loans or Eurocurrency Loans. Interest is payable in arrears quarterly on Base Rate Loans, and in arrears in one, two, three or six months on Eurocurrency Loans, as determined by the length of the Eurocurrency Loan, as selected by the Company. Interest is charged at an adjustable rate plus the applicable margin. The applicable margin is based upon the Company's Senior Debt Ratio, as defined by the Credit Agreement. Eurocurrency Loans can be made in U.S. dollars or certain other currencies, at the option of the Company. The agreement also provides for a Letter of Credit Facility. At December 31, 1997, no letters of credit were outstanding. F-14 116 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 3. LONG-TERM DEBT -- (CONTINUED) Term note A On October 30, 1996 the Company borrowed $65,000 under Term note A. The applicable margin for Term note A ranges from .5% to 1.75% for Base Rate Loans and from 1.5% to 2.75% for Eurocurrency Loans. Repayments under the note, after giving effect to the mandatory prepayment totaling $43,475 made on October 1, 1997 as discussed above, are required in the following installments:
QUARTERLY --------- March 31, 1998 through September 30, 1998................... $441 December 31, 1998 through September 30, 1999................ 552 December 31, 1999 through September 30, 2000................ 736 December 31, 2000 through June 30, 2003..................... 883 Final installment on October 30, 2003....................... 877
Term note B On August 5, 1997, the Company borrowed $55,000 under Term note B. The applicable margin for Term B note ranges from 1.0% to 2.25% for Base Rate Loans and from 2.0% to 3.25% for Eurocurrency Loans. Repayments under Term note B, after giving effect to the mandatory prepayment totaling $39,044 made on October 1, 1997, as discussed above, are required in the following installments: March 31, 1998 through September 30, 2003 (quarterly)....... $ 73 December 31, 2003........................................... 2,912 March 30, 2004, June 30, 2004 and October 30, 2004.......... 3,764
Revolving line of credit note The Company has the ability to borrow up to $25,000 under the revolving line of credit which expires on October 30, 2003. Available borrowings, however, are limited to a defined borrowing base amount equal to 85% eligible domestic accounts receivables and 80% of certain eligible foreign accounts receivables. The base borrowing amount is increased by the lesser of the sum of 50% of domestic eligible inventory and 40% to 50% of certain eligible foreign inventory or $10,000. Available borrowings are reduced by amounts outstanding under the Canadian revolving line of credit note described below. A commitment fee of .375% to .5% is charged on the unused balance based on the Company's Senior Leverage Ratio, as defined. At December 31, 1997, $20,300 was available under the facility. Acquisition revolving note On December 31, 1997, the Company borrowed $21,000 under its $22,000 acquisition revolving note. The proceeds are included in cash at December 31, 1997 and were used to acquire the assets of the towbar segment of Ellebi S.p.A on January 2, 1998, as discussed further in Note 12. The note is available to the Company on a revolving credit basis until September 24, 1999 at which time the outstanding principal balance will convert to a term loan which will amortize in sixteen equal quarterly installments with a final maturity of October 30, 2003. The applicable margin for the acquisition revolving note ranges from .5% to 1.75% for Base Rate Loans and from 1.0% to 2.75% for Eurocurrency Loans. A commitment fee of .375% to .5% is charged on the unused balance based on the Company's Senior Leverage Ratio, as defined. At December 31, 1997, the acquisition revolving note was a Base Rate Loan with interest accruing at the rate of 10.25% per annum. On January 1, 1998, the Company converted the Loan to a Eurocurrency Loan with an interest rate of 8.46%. F-15 117 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 3. LONG-TERM DEBT -- (CONTINUED) FIRST AMENDED AND RESTATED CREDIT AGREEMENT (CANADIAN CREDIT FACILITY) The Company's First Amended and Restated Credit Agreement, which is administered by the NBD and Chase, is secured by substantially of all the assets of the Company's Canadian subsidiaries. The agreement provides for a C$20,000 term note and a C$4,000 revolving note, (U.S. $13,952 and U.S. $2,790) at December 31, 1997, respectively. Loans under each of the notes can be converted at the election of the company, in whole or in part, into Floating Rate advances, U.S. Base Rate advances or LIBOR advances. Floating rate advances are denominated in Canadian dollars and bear interest at a variable rate based on the bank's prime lending rate plus a variable margin. U.S. Base Rate advances are denominated in U.S. dollars and bear interest at the bank's prime lending rate plus a variable margin. LIBOR advances are denominated in U.S. dollars and bear interest at LIBOR plus a variable margin. The variable margin is based upon the Company's Senior Debt Ratio, as defined by the agreement and ranges from .5% to 1.75% for U.S. Base Rate advances and from 1.5% to 2.75% for LIBOR advances. Canadian term note Repayments under the Canadian term note are required in the following installments:
QUARTERLY --------- March 31, 1998 through September 30, 1998................... $373 December 31, 1998 through September 30, 1999................ 459 December 31, 1999 through September 30, 2000................ 602 December 31, 2000 through June 30, 2003..................... 716 Final installment on October 30, 2003....................... 717
Canadian revolving line of credit note A commitment fee of .5% is charged on the unused balance of the Canadian revolving line of credit note. At December 31, 1997, no additional borrowings were available under the facility. SENIOR SUBORDINATED LOANS On October 30, 1996, the Company borrowed $20,000 under its Senior Subordinated Note Purchase Agreement ("Senior Subordinated Loans") with CB Capital and International Mezzanine. The Senior Subordinated Loans were repaid in full on October 1, 1997 with the proceeds of the Notes discussed above. Interest on the Senior Subordinated Loans was payable in arrears semiannually and accrued at a rate of 12.5% per annum. The Senior Subordinated Loans provided for a prepayment penalty if the Senior Subordinated Loans were paid prior to October 30, 2002. Under this provision, a prepayment penalty totaling $1,400 was paid in 1997 and is included in the extraordinary charge resulting from debt extinguishment. In connection with the issuance of the Senior Subordinated Loans, the Company issued warrants to purchase 1,002 membership units. The warrants have an exercise price of one cent per warrant, are exercisable immediately, and expire October 30, 2004. As provided in the Warrant Agreement, the warrant holder can put the warrants and membership Units acquired through the exercise of the warrants back to the Company after October 30, 2001 or upon occurrence of a Triggering Event, as defined, but prior to the earlier of October 30, 2004 or the consummation of a Qualified Public Offering for an amount equal to Fair Market Value, as defined. Additionally, as provided in the Warrant Agreement, the Company may call the warrants and membership Units acquired through the exercise of the warrants at any time after the sixth anniversary of the Closing Date, but prior to the earlier of October 30, 2004 or a Qualified Public Offering for an amount equal to Fair Market Value, as defined. F-16 118 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 3. LONG-TERM DEBT -- (CONTINUED) At the date of issuance, the proceeds from the Senior Subordinated Loans were allocated between the Senior Subordinated Loans and the warrants based upon their estimated relative fair market value; accordingly, the Senior Subordinated Loans were recorded at a discount of $3,498, which was partially amortized prior to repayment on October 1, 1997. The remaining unamortized balance of $3,145 was charged to 1997 operations as part of the extraordinary charge resulting from debt extinguishment. The warrants are being accreted to their redemption value through periodic charges against Members' Equity through the earlier of October 30, 2001 or the time redemption first becomes available. Thereafter the warrants will be recorded at redemption value. The aforementioned warrants have been presented as mandatorily redeemable warrants in the accompanying balance sheets. JUNIOR SUBORDINATED NOTE On October 30, 1996, the Company issued a 12,500 Junior Subordinated Note ("Junior Note"), denominated in Dutch guilders, to Brink Holdings B.V. as part of the consideration paid for the purchase of Brink B.V. The Junior Note was due April 30, 2005, but was repaid in full on October 1, 1997 with the proceeds of the Notes discussed above. The Junior Note accrued interest at a rate of 7% per annum, payable semi-annually in arrears. EXTINGUISHMENT OF DEBT 1997 Extinguishments As discussed above, on October 1, 1997 the Company repaid, in full, its Senior Subordinated Loans and Junior Note and prepaid a portion of the term notes under the U.S. Credit Facility. In connection with this extinguishment, the Company recorded an extraordinary charge of $7,416, net of a tax benefit of $365. The extinguishment charge is comprised of $1,400 prepayment penalties, $3,145 of unamortized debt discount and $3,236 of unamoritized debt issuance costs. 1996 Extinguishments On October 30, 1996, the Company prepaid all amounts outstanding under a $30,000 credit agreement and a prior $11,000 senior subordinated loan agreement. In connection with these extinguishments, the Company recorded an extraordinary charge of $1,970. The extinguishment charge is comprised of prepayment penalties totaling $220, unamortized debt discount totaling $150 and debt issuance costs of $1,600. In connection with the issuance of the prior senior subordinated loan, the Company issued warrants to purchase 617 membership units. The proceeds from the issuance were allocated based on the estimated relative fair market values; accordingly, the notes were recorded at a discount of $200. As part of the extinguishment of the prior senior subordinated loan, the Company paid $1,600 to redeem the warrants. INTEREST RATE RISK The Company is exposed to interest rate volatility with regard to variable rate debt. The Company uses interest rate swaps to reduce interest rate volatility. At December 31, 1996 and 1997, the notional value of interest rate swaps was $18,500. Under the terms of the interest rate swap agreements, the Company pays a fixed interest rate on debt equal to the notional value. The effects of interest rate swaps are reflected in interest expense. F-17 119 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 3. LONG-TERM DEBT -- (CONTINUED) SCHEDULED MATURITIES The aggregate scheduled annual principal payments due in each of the years ending December 31, is as follows: 1998........................................................ $ 3,746 1999........................................................ 4,661 2000........................................................ 11,153 2001........................................................ 11,938 2002 and thereafter......................................... 166,092 -------- 197,590 Less -- discount............................................ 464 -------- $197,126 ========
4. INCOME TAXES The Company's C corporation subsidiaries, taxable foreign subsidiaries and the Predecessor account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". The Company and certain domestic subsidiaries are limited liability corporations; as such, the Company's earnings are included in the taxable income of the Company's members. Income (loss) before minority interest, income taxes and the pre-tax charge resulting from debt extinguishment were attributable to the following sources:
PREDECESSOR COMPANY ------------- ---------------------------------- PERIOD FROM PERIOD FROM JANUARY 1, SEPTEMBER 28, YEAR ENDED 1995 THROUGH 1995 THROUGH DECEMBER 31, SEPTEMBER 27, DECEMBER 31, ----------------- 1995 1995 1996 1997 ------------- ------------- ------ ------- United States...................................... $3,881 $870 $6,283 $ 2,872 Foreign............................................ -- -- (1,844) (9,941) ------ ---- ------ ------- $3,881 $870 $4,439 $(7,069) ====== ==== ====== =======
F-18 120 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. INCOME TAXES -- (CONTINUED) The provision (benefit) for income taxes, including $365 of income tax benefit allocated to the extraordinary charge in 1997, is comprised of the following:
PREDECESSOR COMPANY ------------------ ------------------ PERIOD FROM YEAR ENDED JANUARY 1, 1995 DECEMBER 31, THROUGH ------------------ SEPTEMBER 27, 1995 1996 1997 ------------------ ---- ---- Currently payable (refundable) United States............................................. $1,234 $ -- $ -- Foreign................................................... -- (128) 290 ------ ----- ------- 1,234 (128) 290 ------ ----- ------- Deferred United States............................................. 90 -- -- Foreign................................................... -- (363) (3,511) ------ ----- ------- 90 (363) (3,511) ------ ----- ------- $1,324 $(491) $(3,221) ====== ===== =======
The effective tax rates differ from the U.S. federal income tax rate as follows:
PREDECESSOR COMPANY ------------------ ---------------------------------------- PERIOD FROM PERIOD FROM YEAR ENDED JANUARY 1, SEPTEMBER 28, DECEMBER 31, 1995 THROUGH 1995 THROUGH -------------------- SEPTEMBER 27, 1995 DECEMBER 31, 1995 1996 1997 ------------------ ----------------- ---- ---- Income tax provision (benefit) at U. S. statutory rate (35%)........................ $1,358 $ 305 $ 1,554 $(2,474) U. S. income taxes attributable to members.... -- (305) (2,200) (1,005) Nondeductible foreign goodwill................ -- -- 102 229 Other, net.................................... (34) -- 53 29 ------ ----- ------- ------- $1,324 $ -- $ (491) $(3,221) ====== ===== ======= =======
F-19 121 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. INCOME TAXES -- (CONTINUED) Deferred tax assets and liabilities, related primarily to the Company's foreign subsidiaries, comprise the following:
DECEMBER 31, ----------------- 1996 1997 ------- ------- DEFERRED TAX ASSETS Net operating loss carryforwards........................... $ 608 $ 3,255 Fixed assets............................................... 248 296 Other...................................................... -- 75 ------- ------- 856 3,626 ------- ------- DEFERRED TAX LIABILITIES Fixed assets............................................... (4,282) (3,296) Inventory.................................................. (1,292) (1,244) Employee benefits and other................................ (331) (176) Other...................................................... -- (162) ------- ------- (5,905) (4,878) ------- ------- Net deferred tax (liability)............................... $(5,049) $(1,252) ======= =======
The net operating loss carryforwards of the Company's European subsidiaries approximate $8,000 at December 31, 1997 and have no expiration date. The net operating loss carryforwards of the Company's Canadian subsidiaries approximate $1,100 at December 31, 1997 and expire primarily in 2004. Management believes that it is more likely than not that the related deferred tax assets will be realized and no valuation allowance has been provided against such amounts as of December 31, 1997. If certain substantial changes in the Company's ownership should occur, there could be an annual limit on the amount of the carryforwards which can be utilized. 5. RELATED PARTY TRANSACTIONS AND ALLOCATIONS In connection with the acquisition of Brink B.V., the Company entered into the Junior Note Agreement, with Brink Holdings B.V., as described in Note 3 to the financial statements. Concurrent with this acquisition, owners of Brink Holdings B.V. purchased 1,230 membership units of the Company for cash of $4,286 ($3,485 per unit). A portion of the Company's U.S. Credit Facility and $20,000 Senior Subordinated Loans, as described in Note 3, is with Chase and CB Capital Investors, Inc., respectively, affiliates of certain members of the Company. Charges to operations related to consulting services provided to the Company by certain members of the Company aggregated approximately $70 for the period from September 28, 1995 through December 31, 1995, $243 and $350 for the years ended December 31, 1996 and 1997, respectively. Certain employees of the Company are also members of the Company. The Predecessor was a division of MascoTech, Inc. Accordingly, certain corporate and divisional general and administrative costs were allocated to the Predecessor from MascoTech, Inc. and certain of its subsidiaries. Allocated costs include insurance, pensions, profit sharing, accounting and finance, information systems and corporate overhead costs. Corporate overhead costs relate to such functions as the corporate office, executive management, investor relations and legal. Allocated costs, other than corporate overhead, were charged to the division generally using an effort-based approach or based on the division's actual F-20 122 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. RELATED PARTY TRANSACTIONS AND ALLOCATIONS -- (CONTINUED) experience or headcount, depending upon the nature of the cost. Allocated corporate overhead costs were charged to the division based primarily on divisional sales. Corporate overhead costs allocated to the Predecessor aggregated approximately $1,000 for the period from January 1, 1995 through September 27, 1995. It was MascoTech, Inc.'s policy not to charge the Predecessor interest on the intercompany balance. Management believes that the methods utilized to allocate costs to the division, as discussed above, are reasonable. However, the terms of transactions between the division and MascoTech, Inc., including allocated costs, may differ from those that would result from transactions with unrelated parties. 6. OPTION PLAN At September 28, 1995, the Company adopted the 1995 Option Plan (the "Plan"). Under the Plan, certain directors and employees of the Company and its subsidiaries may be granted options to purchase membership units (limited to up to a total of 3,525 units as of December 31, 1996 and 3,903 units as of December 31, 1997). Of the options granted, 2,925 were granted in 1995, 600 were granted in January 1996 and 378 were granted in 1997. All options granted in 1995 and the January 1996 options were granted at an exercise price of $1,000, which equaled the fair value of a membership unit on the date of grant. Of the options granted in 1997, 178 were granted at an exercise price of $5,610 and 200 were granted at an exercise price of $5,000, both of which exceeded the fair value of a membership unit on the date of grant. Of the total options granted, 275 vest based upon the results of a Liquidity Event, as defined in the plan, and 739 vest based upon the achievement of certain operating results of the Company. The remaining options granted under the Plan vest over periods, generally up to ten years, as determined by the Option Committee. The vesting can be accelerated in certain instances based on the future operating results of the Company, or the occurrence of a Liquidity Event, as defined in the Plan. At December 31, 1996 and 1997, 480 units and 938 units, respectively, were exercisable by their terms. There were no options available for future grant at December 31, 1997. No options were exercised, cancelled or expired during the period from September 28, 1995 through December 31, 1995 or for the years ended December 31, 1996 and 1997. The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for stock options. Compensation cost was $332 and $263 for the years ended December 31, 1996 and 1997, respectively. If compensation cost had been determined based upon the fair value method in accordance with Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", the pro forma net income (loss) from September 28, 1995 through December 31, 1995 and for the years ended December 31, 1996 and 1997 would not have been materially different than that calculated under the provisions of APB 25. For pro forma purposes, the fair value of each stock option grant was estimated using the Black-Scholes option pricing model with the following assumptions: weighted average risk free interest rates of 6.33%, 6.21%, and 6.12% for the period from September 28, 1995 through December 31, 1995 and the years ended December 31, 1996 and 1997, respectively, an expected option life of eight years and no cash dividends. 7. PENSION PLAN The Company has a defined benefit pension plan covering substantially all of SportRack, LLC's domestic employees covered under a collective bargaining agreement. An employee's monthly pension benefit is determined by multiplying a defined dollar amount by the years of credited service earned. Plan assets are comprised principally of marketable equity securities and short-term investments. The Company's funding policy is to contribute annually the amounts necessary to comply with ERISA funding requirements. F-21 123 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. PENSION PLAN -- (CONTINUED) The following table sets forth the plan's funded status and amounts recognized in the Company's consolidated balance sheet at December 31, 1996 and 1997.
DECEMBER 31, ----------------- 1996 1997 ---- ---- Actuarial present value of: Vested benefit............................................. $ 1,417 $ 1,731 Nonvested benefit obligation............................... 220 198 ------- ------- Accumulated benefit obligation............................. $ 1,637 $ 1,929 ======= ======= Projected benefit obligation............................... $ 1,637 $ 1,929 Plan assets at fair value.................................. (1,308) (1,586) Unrecognized net gain...................................... 166 122 ------- ------- Unfunded pension liability................................. $ 495 $ 465 ======= =======
The components of the Company's domestic pension expense are as follows:
DECEMBER 31, ------------- 1996 1997 ---- ---- Benefits earned during the year............................. $ 76 $ 76 Interest on projected benefit obligation.................... 118 124 Actual return on plan assets................................ (100) (303) Net amortization, deferral, and other....................... (13) 174 ----- ----- Net periodic domestic pension cost.......................... $ 81 $ 71 ===== =====
The weighted average discount rate used in determining the actuarial present value of the accumulated benefit obligation was 7.75% and 7.00% at December 31, 1996 and 1997, respectively. The expected long-term rate of return on plan assets was 9.00% at December 31, 1996 and 1997. Net periodic pension cost for 1995 was approximately $100, of which $75 was included in the operations of the Predecessor for the period from January 1, 1995 through September 27, 1995. The Company has various defined contribution retirement plans for its domestic and certain foreign subsidiaries, including 401(k) plans, whereby participants can contribute a portion of their salary up to certain maximums established by the related plan documents. The Company makes matching contributions, which are based upon the amounts contributed by employees. The Company's matching contributions charged to operations aggregated $130 and $229 in 1996 and 1997, respectively. Substantially all of the employees of Brink International B.V. are covered by a union-sponsored, collectively-bargained, multi-employer defined benefit plan. Pension expense was $118 and $660 for the two-month period from November 1, 1996 through December 31, 1996 and for the year ended December 31, 1997, respectively. F-22 124 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 8. OPERATING LEASES The Company leases certain equipment under leases expiring on various dates through 2004. Future minimum annual lease payments required under leases that have a noncancellable lease term in excess of one year at December 31, 1997 are as follows: 1998........................................................ $1,996 1999........................................................ 1,500 2000........................................................ 1,066 2001........................................................ 770 2002........................................................ 474 2003 and thereafter......................................... 118 ------ $5,924 ======
Rental expense charged to operations was approximately $434 for the period from January 1, 1995 through September 27, 1995 for the Predecessor and $34 for the period September 28, 1995 through December 31, 1995 and $669 and $2,252 for the years ended December 31, 1996 and 1997, respectively for the Company. 9. ACCOUNT BALANCES Account balances included in the consolidated balance sheets are comprised of the following:
DECEMBER 31, ----------------- 1996 1997 ---- ---- INVENTORIES Raw materials.............................................. $ 3,474 $13,744 Work-in-process............................................ 7,715 5,040 Finished goods............................................. 9,463 15,624 ------- ------- $20,652 $34,408 ======= ======= PROPERTY AND EQUIPMENT Land, buildings and improvements........................... $18,531 $20,966 Furniture, fixtures and computer hardware.................. 3,417 8,930 Machinery, equipment and tooling........................... 20,565 32,458 Construction-in-progress................................... 1,582 1,985 ------- ------- 44,095 64,339 Less -- accumulated depreciation........................... (2,267) (8,411) ------- ------- $41,828 $55,928 ======= ======= ACCRUED LIABILITIES Compensation and benefits.................................. $ 5,398 $ 8,900 Interest................................................... 60 3,154 Income taxes............................................... 1,300 646 Other taxes................................................ 417 478 Other...................................................... 4,053 5,637 ------- ------- $11,228 $18,815 ======= =======
F-23 125 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 10. COMMITMENTS AND CONTINGENCIES The Company is party to various claims, lawsuits and administrative proceedings related to matters arising out of the normal course of business. Management believes that the resolution of these matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company. 11. SEGMENT INFORMATION The Company operates in one industry segment and all sales are to unaffiliated customers. Revenues by geographic area, accumulated by the country where the revenue originated, and long-lived assets, which include net property and equipment and net goodwill and debt issuance costs, by geographic area are as follows:
PREDECESSOR COMPANY ------------- ------------------------------------- PERIOD FROM PERIOD FROM JANUARY 1, SEPTEMBER 28, YEAR ENDED 1995 THROUGH 1995 THROUGH DECEMBER 31, SEPTEMBER 27, DECEMBER 31, -------------------- 1995 1995 1996 1997 ------------- ------------- -------- -------- Revenues United States................................. $48,698 $16,299 $ 73,895 $122,294 The Netherlands............................... -- -- 2,791 36,268 Other foreign................................. -- -- 4,780 30,116 ------- ------- -------- -------- $48,698 $16,299 $ 81,466 $188,678 ======= ======= ======== ========
DECEMBER 31, -------------------- 1996 1997 ---- ---- Long-lived assets United States............................................. $ 45,460 $ 94,931 The Netherlands........................................... 39,712 32,508 Other foreign............................................. 16,090 20,845 -------- -------- $101,262 $148,284 ======== ========
12. SUBSEQUENT EVENT (UNAUDITED) In January 1998, the Company through Brink International B.V., acquired the net assets of the towbar segment of Ellebi S.p.A. for an aggregate purchase price of approximately $22,000, including estimated costs of the transaction. Ellebi S.p.A. is a manufacturer and distributor of towing systems to the automotive OEM market and aftermarket. The acquisition will be accounted for under the purchase method of accounting. The excess of the aggregate purchase price over the estimated fair market value of the net assets acquired was approximately $3,250. The acquisition was financed primarily through the Company's Acquisition revolving note. In February 1998, the Company through SportRack International, Inc., acquired the net assets of Transfo-Rakzs, Inc. for an aggregate purchase price of approximately $1,100, including estimated costs of the transaction. Transfo-Rakzs is a designer, manufacturer and distributor of rear hitch rack carrying systems and related products to Canada and the U.S. The acquisition will be accounted for under the purchase method of accounting. The excess of the aggregate purchase price over the estimated fair market value of the net assets acquired was approximately $900. F-24 126 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. CONDENSED CONSOLIDATING INFORMATION The Notes have been issued by the Company and its wholly-owned subsidiary, AAS Capital Corporation and are guaranteed, jointly and severally, by all of the Company's domestic subsidiaries. The following condensed consolidating financial information for 1997 presents the financial position, results of operations and cash flows of (i) the Company, as parent, together with its domestic subsidiaries; and (ii) the foreign subsidiaries, as non-guarantor subsidiaries. The financial position and operating results of the non-guarantor subsidiaries do not include any allocation of overhead or similar charges except that certain foreign subsidiaries are charged interest on their intercompany debt balance. The Company acquired Brink, a non-guarantor subsidiary, on October 30, 1996. Consolidated results of operations for 1996 include Brink for the two months ended December 31, 1996 and reflect Brink's net sales of $7,571 and a net loss of $1,353. At December 31, 1996, Brink's total assets were $86,285. Other than Brink, the Company had no non-guarantor subsidiaries during 1996, and had no non-guarantor subsidiaries as of and for the period ended December 31, 1995. F-25 127 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 1997
PARENT AND GUARANTOR NON-GUARANTOR ELIMINATIONS/ SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ------------ ------------- ------------- ------------ (DOLLAR AMOUNTS IN THOUSANDS) ASSETS Current assets Cash............................................ $ 2,217 $ 25,131 $ -- $ 27,348 Accounts receivable............................. 31,649 11,874 -- 43,523 Inventories..................................... 14,835 19,573 -- 34,408 Other current assets............................ 4,912 1,557 -- 6,469 -------- -------- -------- -------- Total current assets....................... 53,613 58,135 -- 111,748 -------- -------- -------- -------- Property and equipment, net....................... 28,009 27,919 -- 55,928 Goodwill, net..................................... 62,576 23,313 -- 85,889 Intangible assets, net............................ 6,280 1,315 -- 7,595 Deferred income taxes and other noncurrent assets.......................................... 384 3,939 -- 4,323 Investment in subsidiaries........................ 9,955 -- (9,955) -- Intercompany notes receivable..................... 25,838 -- (25,838) -- -------- -------- -------- -------- Total Assets............................... $186,655 $114,621 $(35,793) $265,483 ======== ======== ======== ======== LIABILITIES AND MEMBER'S EQUITY Current liabilities Current maturities of long-term debt............ $ -- $ 3,746 $ -- $ 3,746 Accounts payable................................ 19,053 4,426 -- 23,479 Accrued liabilities and deferred income taxes... 11,382 8,766 -- 20,148 -------- -------- -------- -------- Total current liabilities.................. 30,435 16,938 -- 47,373 -------- -------- -------- -------- Deferred income taxes and other non current liabilities..................................... 1,318 3,461 -- 4,779 Long-term debt, less current maturities........... 126,436 66,944 -- 193,380 Intercompany debt................................. -- 25,838 (25,838) -- Mandatorily redeemable warrants................... 3,507 -- -- 3,507 Minority interest................................. 251 -- -- 251 Members' equity................................... 24,708 1,440 (9,955) 16,193 -------- -------- -------- -------- Total liabilities and members' equity...... $186,655 $114,621 $(35,793) $265,483 ======== ======== ======== ========
F-26 128 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997
PARENT AND GUARANTOR NON-GUARANTOR ELIMINATIONS/ SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ------------ ------------- ------------- ------------ (DOLLAR AMOUNTS IN THOUSANDS) Net sales.................................... $122,294 $66,384 $ -- $188,678 Cost of sales................................ 89,647 45,909 -- 135,556 -------- ------- ------- -------- Gross profit............................... 32,647 20,475 -- 53,122 Selling, administrative and product development expenses....................... 15,406 15,944 -- 31,350 Amortization of intangible assets............ 1,624 712 -- 2,336 -------- ------- ------- -------- Operating income........................... 15,617 3,819 -- 19,436 Interest expense............................. 7,108 5,519 -- 12,627 Foreign currency (gain) loss................. (1,041) 7,138 -- 6,097 -------- ------- ------- -------- Income (loss) before minority interest and income taxes............................... 9,550 (8,838) -- 712 Provision (benefit) for income taxes......... -- (2,856) -- (2,856) -------- ------- ------- -------- Income (loss) before minority interest..... 9,550 (5,982) -- 3,568 Minority interest............................ 97 -- -- 97 Extraordinary charge resulting from debt extinguishment............................. 6,678 738 -- 7,416 -------- ------- ------- -------- Net income (loss)............................ $ 2,775 $(6,720) $ -- $ (3,945) ======== ======= ======= ========
F-27 129 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997
PARENT AND GUARANTOR NON-GUARANTOR ELIMINATIONS/ SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ------------ ------------- ------------- ------------ (DOLLAR AMOUNTS IN THOUSANDS) Net cash provided by (used in) operating activities................................. $ 8,614 $ (1,632) $ -- $ (6,982) -------- -------- ------- --------- Cash flows from investing activities: Acquisition of machinery and equipment..... (6,005) (1,746) -- (7,751) Amount due from sellors of Valley Industries, Inc......................... (1,150) -- -- (1,150) Acquisition of subsidiaries, net of cash acquired................................ (56,478) (14,354) -- (70,832) -------- -------- ------- --------- Net cash used for investing activities....... (63,633) (16,100) -- (79,733) -------- -------- ------- --------- Cash flows from financing activities Change in intercompany debt................ (23,559) 23,559 -- -- Proceeds from issuance of debt............. 179,529 35,521 -- 215,050 Increase (decrease) in revolving loan...... (2,400) 2,904 -- 504 Repayment of debt.......................... (91,199) (22,049) -- (113,248) Debt issuance costs........................ (7,280) -- -- (7,280) Issuance of membership units............... 4,999 -- -- 4,999 Distributions to members................... (2,945) -- -- (2,945) -------- -------- ------- --------- Net cash provided by financing activities.... 57,145 39,935 -- 97,080 -------- -------- ------- --------- Effect of exchange rate changes.............. -- 505 -- 505 Net increase (decrease) in cash.............. 2,126 22,708 -- 24,834 Cash at beginning of period.................. 91 2,423 -- 2,514 -------- -------- ------- --------- Cash at end of period........................ $ 2,217 $ 25,131 $ -- $ 27,348 ======== ======== ======= =========
F-28 130 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders of Brink B.V.: We have audited the accompanying consolidated balance sheets of Brink B.V. as of October 31, 1996 and December 31, 1995, and the related statements of consolidated income and cash flows for the ten month period ended October 31, 1996 and the year ended December 31, 1995. 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. The financial statements have been prepared in accordance with accounting principles generally accepted in The Netherlands. We conducted our audits in accordance with auditing standards generally accepted in The Netherlands, which are substantially similar to those followed in the United States. These 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Brink B.V. at October 31, 1996 and December 31, 1995, and the consolidated results of their operations and their cash flows for the ten month period ended October 31, 1996 and the year ended December 31, 1995 in conformity with accounting principles generally accepted in The Netherlands. Accounting principles generally accepted in The Netherlands vary in certain respects from accounting principles generally accepted in the United States. The application of the latter would have affected the determination of net income for the ten months ended October 31, 1996 and the year ended December 31, 1995 and the shareholders' equity as of October 31, 1996 and December 31, 1995 to the extent summarized in Note 1.7 to the consolidated financial statements. Coopers & Lybrand N.V. Zwolle, The Netherlands September 4, 1997 F-29 131 BRINK B.V. 1.1 CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995 AND OCTOBER 31, 1996 (AFTER PROFIT APPROPRIATION)
DECEMBER 31, 1995 OCTOBER 31, 1996 --------------------- --------------------- NLG 1,000 NLG 1,000 NLG 1,000 NLG 1,000 FIXED ASSETS Tangible fixed assets............................... 30,099 30,662 Financial fixed assets.............................. 141 -- ------ ------ 30,240 30,662 CURRENT ASSETS Stocks.............................................. 29,233 25,087 Accounts receivable................................. 14,532 22,107 Cash on hand and at bank............................ 657 3,517 ------ ------ 44,422 50,711 ------ ------ Total assets...................................... 74,662 81,373 ------ ------ GROUP EQUITY........................................ 28,039 33,294 DEFERRED INVESTMENT GRANTS.......................... 1,335 1,334 PROVISIONS.......................................... 3,056 3,395 LONG-TERM LIABILITIES............................... 18,487 20,118 CURRENT LIABILITIES................................. 23,745 23,232 ------ ------ 74,662 81,373 ------ ------
1.2 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE TEN MONTHS ENDED OCTOBER 31, 1996
FOR THE TEN MONTHS FOR THE YEAR ENDED ENDED DECEMBER 31, 1995 OCTOBER 31, 1996 --------------------- --------------------- NLG 1,000 NLG 1,000 NLG 1,000 NLG 1,000 NET TURNOVER........................................ 102,527 98,393 Costs of raw materials and supplies................. 38,031 36,872 Work contracted out and other external costs........ 4,695 5,082 Personnel expenses.................................. 29,346 28,088 Depreciation........................................ 5,321 4,363 Other operating expenses............................ 13,288 14,090 ------ ------ TOTAL OF OPERATING EXPENSES......................... 90,681 88,495 ------ ------ OPERATING RESULT.................................... 11,846 9,898 Interest income..................................... 44 17 Interest expense.................................... (2,782) (1,788) ------ ------ Financial income and expense........................ (2,738) (1,771) ------ ------ Result from ordinary activities before income tax... 9,108 8,127 Income tax.......................................... 3,292 2,871 ------ ------ GROUP RESULT........................................ 5,816 5,256 ------ ------
F-30 132 BRINK B.V. -- (CONTINUED) 1.3 CONSOLIDATED CASH FLOWS STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE TEN MONTHS ENDED OCTOBER 31, 1996
FOR THE TEN MONTHS FOR THE YEAR ENDED ENDED DECEMBER 31, 1995 OCTOBER 31, 1996 --------------------- --------------------- NLG 1,000 NLG 1,000 NLG 1,000 NLG 1,000 CASH FLOWS FROM OPERATING ACTIVITIES Net result.......................................... 5,816 5,256 Depreciation........................................ 5,425 4,394 ------ ------ 11,241 9,650 Changes in: Stocks............................................ (4,276) 4,146 Accounts receivable............................... (2,864) (7,575) Current liabilities............................... 688 2,669 Provisions and other changes...................... 580 337 ------ ------ (5,872) (423) ------ ------ Cash flows from operating activities................ 5,369 9,227 CASH FLOWS FROM INVESTING ACTIVITIES Net additions to tangible fixed assets.............. 2,977 4,957 ------ ------ Cash flows from investing activities................ (2,977) (4,957) CASH FLOWS FROM FINANCING ACTIVITIES Change in loans..................................... (2,169) 1,631 Change in credit institutions....................... (1,711) (3,182) Change in financial assets.......................... -- 141 ------ ------ Cash flows from financing activities................ (3,880) (1,410) ------ ------ Total cash flows.................................... (1,488) 2,860 Cash on hand and at bank January 1.................. 2,145 657 ------ ------ CASH ON HAND AND AT BANK AT END OF PERIOD........... 657 3,517 ------ ------
1.4 GENERAL NOTES 1.4.1 General Activities The activities of Brink B.V. and its subsidiaries mainly comprise the development, manufacture and sale of towbars and accessories. Group structure Brink B.V. forms part of the Brink Group. The ultimate parent company of the group is Brink Holding B.V. As of November 1, 1996 Brink Holding B.V. sold the shares in Brink B.V. to Advanced Accessory Systems, LLC, (formerly AAS Holdings, LLC), in the United States of America. Advanced Accessory Systems, LLC subsequently established Brink International B.V. in The Netherlands. The shares of Brink B.V. have been transferred from Advanced Accessory Systems, LLC to Brink International B.V. in December 1996. At that time, Brink B.V. transferred the shares of its foreign subsidiaries to Brink International B.V. F-31 133 BRINK B.V. -- (CONTINUED) The consolidated financial statements for the year ended December 31, 1995 and for the ten month period ended October 31, 1996 comprise the financial information of Brink B.V. and the following wholly-owned subsidiaries: - - Brink Trekhaken B.V. Hoogeveen, The Netherlands - - Nordisk Komponent Holding A/S Naestved, Denmark - - Brink A/S Naestved, Denmark - - Brink UK Ltd. Nuneaton, England - - Brink Sverige AB Vanersborg, Sweden - - Brink France Sarl Paris, France - - SCI l'Elmontaise Aiglemont, France - - Societe de Fabrication d'Equipements et d'Accessoires SA (SFEA) Betheny, France
The information stated in the financial statements of the consolidated investments are included for 100% in the consolidation. Outstanding intercompany accounts between group companies, as well as intercompany supplies and other costs charged between group companies have been eliminated in the consolidation. Profits on intercompany supplies which have not yet been delivered to third parties are eliminated in the consolidation. 1.4.2 Accounting principles and determination of result Comparison with the previous year The accounting principles and determination of result remained unchanged compared with the previous year. General Assets and liabilities are carried at face value, unless indicated otherwise. If deemed necessary, a provision is deducted from accounts receivable. Foreign currency translation a. Transactions in foreign currencies Assets and liabilities denominated in foreign currencies are translated at the rate of exchange prevailing on the balance sheet date. The resulting translation differences are included in the profit and loss account, except for those on long-term loans, which relate to the financing of foreign investments. The exchange differences on these loans are directly added to or charged against equity. Transactions in foreign currencies during the reporting period have been processed in the financial statements at the rate at transaction date. b. Investments in group companies The financial statements denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. The exchange difference on the opening balance of investments and the changes during the year are directly added to or charged against shareholders' equity. F-32 134 BRINK B.V. -- (CONTINUED) Tangible fixed assets Valuation occurs at historical cost less depreciation, being a fixed percentage of cost in accordance with the estimated useful life. The depreciation period commences at the moment the asset is put into use. In connection with the acquisition of Brink B.V. by Advanced Accessory Systems, LLC, the fair value of the tangible fixed assets of Brink B.V. and its subsidiaries was required to be determined. The fair value of such assets at November 1997 was approximately NLG 50,000. Stocks Stocks consist of raw materials and supplies, work in progress and finished goods and trade goods. - Raw materials and supplies are valued at purchase prices. - Work in progress is valued at the processed raw materials and supplies, direct labor costs incurred as well as an uplift for indirect manufacturing costs. - Installments invoiced to customers are deducted from work in progress. - Foreseeable losses are provided for and deducted from work in progress. - Finished goods and trade goods are valued at manufacturing cost (direct costs of materials and labor, with an uplift for indirect costs) and the last known purchase price respectively. A provision is included for possible obsolescence. Deferred investment grants The rights to investment grants are recognized in the year in which they arise as deferred income. The grants are amortized in the result over the depreciation period of the assets concerned. PROVISIONS Deferred tax liabilities: This concerns liabilities resulting from the differences in valuation of assets and liabilities for the financial statements and those for tax purposes. They are included at nominal value, based on the prevailing tax rate in the countries concerned. Deferred tax debits are carried if it can reasonably be assumed that realization will take place in due course. Long-term liabilities Long-term liabilities are debts with a remaining term of more than one year. Determination of result The result represents the difference between the proceeds from goods supplied or services rendered and the costs and other charges for the year. Results on transactions are recognized in the year in which they are realized; losses are taken when foreseeable. F-33 135 BRINK B.V. -- (CONTINUED) Depreciation takes place according to the straight-line method on the basis of the estimated useful lives. a. Net turnover Net turnover represents the amounts charged to third parties for the goods, supplies and services rendered less discounts and excluding VAT, as well as the changes in the added value in the stock of work in progress and of finished goods. b. Costs of raw materials and supplies Costs of raw materials and supplies represent the use of raw materials and supplies in the production by the manufacturing companies. c. Work contracted out and other external costs Costs of work contracted out and other external costs represent the costs, except for the use of raw materials and supplies, that can directly be allocated to the manufactured goods and services rendered in the current financial year. d. Other operating expenses Costs are allocated to the reporting year to which they relate. e. Taxation Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns, and are determined annually based on the difference between financial statement and tax bases using enacted tax laws and rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. The provision for taxes on income is the tax payable for the year plus the change in deferred tax assets and liabilities during the year. 1.5 NOTES TO THE CONSOLIDATED BALANCE SHEET 1.5.1 Tangible fixed assets The changes in tangible fixed assets can be summarized as follows (x NLG 1,000):
1995 1996 ---- ---- BALANCE JANUARY 1 Cost..................................................... 60,999 62,847 Cumulative depreciation.................................. (28,452) (32,748) -------- -------- Book value............................................... 32,547 30,099 -------- -------- CHANGE IN BOOK VALUE Additions................................................ 4,245 5,120 Disposals................................................ (1,100) (550) Depreciation............................................. (5,425) (4,394) Exchange rate adjustments................................ (168) 387 -------- -------- (2,448) 563 -------- -------- BALANCE DECEMBER 31, 1995/OCTOBER 31, 1996 Cost..................................................... 62,847 67,804 Cumulative depreciation.................................. (32,748) (37,142) -------- -------- Book value............................................... 30,099 30,662 -------- --------
F-34 136 BRINK B.V. -- (CONTINUED) Tangible fixed assets can be specified by category as follows:
DECEMBER 31, OCTOBER 31, DEPRECIATION 1995 1996 RATES ------------ ----------- ------------ Land and buildings.......................... 20,069 19,892 0-10% Machinery and equipment..................... 9,750 7,564 20-25% Other....................................... 280 3,206 20-50% ------ ------ 30,099 30,662 ------ ------
Tangible fixed assets also include the investment commitments of NLG 237,000 (1995: NLG 203,000). Tangible fixed assets contain land and buildings, machinery and equipment with a book value of NLG 1,550,000 (1995: NLG 510,000), financed by means of financial lease. The lease commitments for the buildings run until 2000, after which year the buildings will be in the group's ownership. 1.5.2 Stocks The stocks of raw materials and supplies, work in progress, finished goods and trade goods within the group can be detailed as follows (x NLG 1,000):
DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ----------- Towbars and accessories................................ 29,156 24,749 Other stock............................................ 77 338 ------ ------ 29,233 25,087 ------ ------
On account of article 410 sub 2, Book 2 of the Dutch Civil Code, Title 9, stocks are not broken down. 1.5.3 Accounts receivable
DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ----------- NLG 1,000 NLG 1,000 Trade debtors.......................................... 12,752 18,334 Group companies........................................ 6 -- Taxes and social security premiums..................... 974 274 Other debtors, prepayments and accrued income.......... 800 3,499 ------ ------ 14,532 22,107 ------ ------
1.5.4 Group equity; shareholders' equity a. Issued and paid-up capital The authorized capital amounts to NLG 50,000. The issued and paid-up capital at October 31, 1996 amounts to NLG 50,000, consisting of 200 shares of NLG 250 nominal each. There were no changes during the ten month period ended October 30, 1996. b. Share premium reserve This concerns the share premium received upon the share issue in 1985. No changes took place during the ten months' period ended October 31, 1996. F-35 137 BRINK B.V. -- (CONTINUED) c. Legal reserve A statutory reserve has been formed for income from investments, the payment of which income cannot be realized without restriction. At October 31, 1996, this reserve amounted to NLG 0 (1995: NLG 450,000). d. Other reserves
DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ----------- NLG 1,000 NLG 1,000 Balance as of January 1................................ 21,824 28,039 Profit appropriation................................... 5,816 5,256 Equity movement investment............................. 359 -- Exchange rate adjustments.............................. 40 (1) ------ ------ Balance at end of period............................... 28,039 33,294 ------ ------
1.5.5 Deferred investment grants
DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ----------- NLG 1,000 NLG 1,000 Balance as of January 1................................ 1,082 1,335 Exchange rate adjustments.............................. (18) 30 Received grants to be offset........................... 375 -- Release to the result.................................. (104) (31) ----- ----- Balance at end of period............................... 1,335 1,334 ----- -----
1.5.6 Provisions
DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ----------- Deferred tax liabilities............................... 3,056 3,395 ----- -----
The provisions are mainly of a long-term nature. 1.5.7 Long-term liabilities
DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ----------- NLG 1,000 NLG 1,000 Medium-term credits.................................... 4,710 -- Mortgage loan.......................................... 2,069 -- Roll-over loan......................................... 2,300 -- Private loan credit institution........................ 4,309 -- Loan from parent....................................... 4,400 19,588 Lease commitments...................................... 699 530 ------ ------ 18,487 20,118 ------ ------
Redemption liabilities due within 12 months after year end have not been included in the above amounts but are accounted for under current liabilities. F-36 138 BRINK B.V. -- (CONTINUED) Foreign currencies a. Medium-term credits have been raised in Dutch guilders. The other long-term liabilities have been raised in the local currencies, being DKK, GBP and FFR. b. The medium-term credits were raised with credit institutions; the interest rate ranges from 8.75% to 9.5%. As collateral for the loans granted, the real estate in The Netherlands has been mortgaged up to an amount of NLG 13.5 million. c. The mortgage loan concerns a loan denominated in DKK at a 7% interest rate. As collateral for the credit granted, the real estate in Denmark has been mortgaged up to an amount of DKK 7.5 million (NLG 2.2 million). d. The roll-over loan concerns a loan originally amounting to GBP 1.5 million. As collateral, a credit guarantee of Brink B.V. has been given and a negative pledge regarding the assets of Brink UK Ltd. The interest on the loan is 6.9375%. e. The private loan of the credit institution concerns a loan for an amount of FFR 14.5 million. No redemption commitments or securities have been agreed. The interest rate is 7.25%. f. This concerns a loan from Advanced Accessory Systems LLC at an average interest rate of 6.5%. No redemption schedules or securities have been agreed. g. Lease commitments: this concerns the capitalized financial lease agreements, denominated in FFR. The assets concerned have been given as collateral for the lease commitments. 1.5.8 Current liabilities
DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ----------- NLG 1,000 NLG 1,000 Redemptions on long-term loans......................... 2,230 175 Credit institutions.................................... 4,187 1,005 Creditors.............................................. 8,962 12,271 Group companies........................................ 1,075 -- Income tax............................................. 177 297 Other taxes and social premiums........................ 2,805 2 Other debts, accruals and deferred income.............. 4,309 9,482 ------ ------ 23,745 23,232 ------ ------
In addition to the securities given for credits received, recognized under long-term liabilities, a chattel mortgage has been given to credit institutions by the Swedish subsidiary. 1.5.9 Contingent liabilities Liability The company and its Dutch subsidiary are severally liable for each other's total commitments vis-a-vis the Dutch credit institution. Lease commitments The annual amount of lease commitments entered into with third parties totals approximately NLG 2,400,000. The operating lease commitments have a term of two to four years. F-37 139 BRINK B.V. -- (CONTINUED) 1.6 NOTES TO THE CONSOLIDATED PROFIT AND LOSS ACCOUNT 1.6.1 Net turnover The turnover can be broken down into geographical area as follows (x NLG 1,000):
TEN MONTH YEAR ENDED PERIOD ENDED DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ------------ The Netherlands....................................... 31,750 22,816 Foreign countries..................................... 70,777 75,577 ------- ------ 102,527 98,393 ------- ------
1.6.2 Personnel expenses (x NLG 1,000)
TEN MONTH YEAR ENDED PERIOD ENDED DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ------------ Wages and salaries.................................... 24,635 23,838 Social charges........................................ 4,316 3,920 Pension charges....................................... 1,204 1,067 ------ ------ 30,155 28,825 Charged on by maintenance service..................... (809) (737) ------ ------ 29,346 28,088 ------ ------
Pension Plan Approximately 98% of the Company's employees are covered by a union sponsored collective bargaining, multiemployer defined benefit pension plan. 1.6.3 Employees During the year, the group employed on average 563 persons (1995: 551), spread over geographical areas as follows:
TEN MONTH YEAR ENDED PERIOD ENDED DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ------------ The Netherlands....................................... 293 277 Other European countries.............................. 258 286 --- --- 551 563 --- ---
F-38 140 BRINK B.V. -- (CONTINUED) 1.6.4 Depreciation (x NLG 1,000)
TEN MONTH YEAR ENDED PERIOD ENDED DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ------------ Buildings............................................. 726 629 Plant, machinery and equipment........................ 4,498 3,375 Other fixed assets.................................... 201 390 ----- ----- 5,425 4,394 Release of investment grants.......................... (104) (31) ----- ----- 5,321 4,363 ----- -----
1.6.5 Income taxes (x NLG 1,000) The income tax for the period ended October 31, 1996 consists of the following: Deferred taxes.............................................. 339 Current taxes............................................... 2,532 ----- 2,871 -----
1.7 SUMMARY OF DIFFERENCES BETWEEN DUTCH AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Brink's consolidated financial statements have been prepared in accordance with Dutch GAAP which differs in certain significant respects from U.S. GAAP. These differences relate principally to the following items, and the effect of the adjustments to group result and group equity which would be required under U.S. GAAP are set out in the tables below. 1.7.1 Purchase accounting Under Dutch GAAP, goodwill arising upon acquisition represents the difference between the book value of assets acquired and consideration paid, and is immediately written off against reserves. Under U.S. GAAP, goodwill represents the difference between fair value of assets acquired and consideration paid. Resulting goodwill is held as an intangible asset in the balance sheet and amortized over its estimated useful life, not to exceed 40 years. Group Result
TEN MONTH YEAR ENDED PERIOD ENDED DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ------------ NLG 1,000 NLG 1,000 Group result reported under Dutch GAAP................ 5,816 5,256 ----- ----- U.S. GAAP adjustments Depreciation........................................ (361) (301) Amortization of goodwill............................ (262) (218) ----- ----- Pre-tax effect of U.S. GAAP adjustments............... (623) (519) Tax effect of U.S. GAAP adjustments................... 125 105 ----- ----- Net effect of U.S. GAAP adjustments................... (498) (414) ----- ----- Group result under U.S. GAAP.......................... 5,318 4,842 ----- -----
F-39 141 BRINK B.V. -- (CONTINUED) Group equity
YEAR TEN MONTHS ENDED ENDED DECEMBER 31, OCTOBER 31, 1995 1996 ------------ ----------- NLG 1,000 NLG 1,000 Group equity under Dutch GAAP.......................... 28,039 33,294 ------ ------ U.S. GAAP adjustments: Goodwill............................................. 3,929 3,929 Accumulated amortization............................. (262) (480) Fixed assets......................................... 2,563 2,563 Accumulated depreciation............................. (805) (1,106) Deferred tax......................................... (611) (506) ------ ------ Net U.S. GAAP adjustments......................... 4,814 4,400 ------ ------ Group equity under U.S. GAAP........................... 32,853 37,694 ------ ------
2 OTHER INFORMATION 2.1 REPORT OF INDEPENDENT ACCOUNTANTS The report of the independent accountants is enclosed on page F-29 of this report. 2.2 PROVISIONS IN THE ARTICLES OF ASSOCIATION RE PROFIT APPROPRIATION Article 19 The profit available for distribution is at the disposal of the general meeting of shareholders. The general meeting of shareholders can allocate this profit in full or in part to the (general) reserves or other reserves, for the payment of bonuses and/or distribution of dividend. The company is only allowed to make payments to shareholders and other persons entitled to the profit available for distribution, insofar as the shareholders' equity exceeds the paid-up and called-in capital increased by the statutory reserves. 2.3 PROPOSED PROFIT APPROPRIATION It is proposed to the general meeting of shareholders that the profit for the period January 1 - October 31, 1996 of NLG 5,256 be added to the other reserves. In anticipation of the approval of the general meeting of shareholders, this proposal has already been processed in the financial statements. 2.4 EVENTS OCCURRED AFTER BALANCE SHEET DATE In August 1997, the Company executed a nonbinding letter of intent to acquire a manufacturer of towing systems. F-40 142 REPORT OF INDEPENDENT ACCOUNTANTS The Board of Directors and Shareholders Valley Industries, Inc. In our opinion, the accompanying balance sheet and the related statements of operations and shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Valley Industries, Inc. at August 5, 1997 and the results of its operations and its cash flows for the period then ended in conformity with generally accepted accounting principles. Those financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. As discussed in Note 7, on August 5, 1997, Valley Industries, Inc. sold certain net operating assets to Advanced Accessory Systems, LLC. The accompanying financial statements do not give effect to this transaction. Price Waterhouse LLP Bloomfield Hills, Michigan December 5, 1997 F-41 143 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Valley Industries, Inc. We have audited the accompanying balance sheets of Valley Industries, Inc. as of December 31, 1995 and December 28, 1996, and the related statements of operations, shareholders' equity, and cash flows for each of the two years in the period ended December 28, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Valley Industries, Inc. at December 31, 1995, and December 28, 1996, and the results of its operations and its cash flows for each of the two years in the period ended December 28, 1996, in conformity with generally accepted accounting principles. Ernst & Young LLP Sacramento, California March 10, 1997 F-42 144 VALLEY INDUSTRIES, INC. BALANCE SHEETS
DECEMBER 31, DECEMBER 28, AUGUST 5, 1995 1996 1997 ------------ ------------ --------- (DOLLARS IN THOUSANDS) ASSETS Current assets: Cash..................................................... $ 6 $ 34 $ 2,328 Accounts and notes receivable, less allowance of $216, $288 and $246, respectively........................... 8,271 13,304 12,673 Receivable from shareholders............................. -- -- 93 Inventories: Raw materials......................................... 5,904 5,007 5,599 Work in progress...................................... 1,382 2,463 1,965 Finished products..................................... 4,145 4,038 4,823 ------- ------- ------- 11,431 11,508 12,387 Less LIFO reserve..................................... 853 706 706 ------- ------- ------- 10,578 10,802 11,681 Prepaid expenses and other current assets................ 753 849 1,151 ------- ------- ------- Total current assets................................ 19,608 24,989 27,926 Property, plant and equipment: Land..................................................... 428 428 428 Buildings and improvements............................... 2,470 2,588 2,596 Machinery and equipment.................................. 8,396 10,245 11,218 Furniture and office equipment........................... 1,777 2,221 2,654 Construction in progress................................. 1,477 701 901 ------- ------- ------- 14,548 16,183 17,797 Less accumulated depreciation and amortization........... 7,690 8,707 9,300 ------- ------- ------- 6,858 7,476 8,497 Other assets............................................... 638 621 871 ------- ------- ------- $27,104 $33,086 $37,294 ======= ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Note payable to bank..................................... $ 6,815 $ 8,709 $13,721 Accounts payable......................................... 8,494 9,996 11,952 Accrued compensation..................................... 447 1,174 959 Other accrued liabilities................................ 701 749 860 Current portion of long-term debt........................ 691 777 692 ------- ------- ------- Total current liabilities........................... 17,148 21,405 28,184 Long-term debt............................................. 2,523 1,500 1,480 Note payable to shareholder................................ 5,046 5,046 5,046 Commitments (Note 6) Shareholders' equity: Common stock, no par value; 1,000 shares authorized, 555 shares issued and outstanding......................... 443 443 -- Class A voting common stock, no par value; 2,775 shares authorized, issued and outstanding.................... -- -- 22 Class B non-voting common stock, no par value; 52,725 shares authorized, issued and outstanding............. -- -- 421 Shareholder note receivable................................ (200) (117) -- Retained earnings.......................................... 2,144 4,809 2,141 ------- ------- ------- Total shareholders' equity.......................... 2,387 5,135 2,584 ------- ------- ------- $27,104 $33,086 $37,294 ======= ======= =======
See accompanying notes to the financial statements. F-43 145 VALLEY INDUSTRIES, INC. STATEMENTS OF OPERATIONS
PERIOD FROM YEAR ENDED YEAR ENDED DECEMBER 29, DECEMBER 31, DECEMBER 28, 1996 TO 1995 1996 AUGUST 5, 1997 ------------ ------------ -------------- (DOLLARS IN THOUSANDS) Net sales.............................................. $65,277 $85,721 $53,510 Cost of products sold.................................. 54,605 68,876 41,630 Selling and distribution expenses...................... 4,828 5,559 4,560 General and administrative expenses.................... 5,422 6,453 4,686 Product development costs.............................. 479 301 352 ------- ------- ------- Operating income (loss)................................ (57) 4,532 2,282 Other income (expense): Interest expense..................................... (897) (892) (587) Other, net........................................... (9) (5) (125) ------- ------- ------- Income (loss) before provision (benefit) for income taxes................................................ (963) 3,635 1,570 Provision (benefit) for income taxes................... (163) 133 (11) ------- ------- ------- Net income (loss)...................................... $ (800) $ 3,502 $ 1,581 ======= ======= =======
See accompanying notes to the financial statements. F-44 146 VALLEY INDUSTRIES, INC. STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1995, DECEMBER 28, 1996, AND THE PERIOD FROM DECEMBER 29, 1996 TO AUGUST 5, 1997
SHAREHOLDER TOTAL COMMON NOTE RETAINED SHAREHOLDERS' STOCK RECEIVABLE EARNINGS EQUITY ------ ----------- -------- ------------- (DOLLARS IN THOUSANDS) Balance at December 31, 1994........................ $151 $ -- $ 3,867 $ 4,018 Issuance of common stock for note receivable........ 292 (292) -- -- Dividends........................................... -- -- (923) (923) Payments received on note receivable................ -- 92 -- 92 Net loss............................................ -- -- (800) (800) ---- ----- ------- ------- Balance at December 31, 1995........................ 443 (200) 2,144 2,387 Dividends........................................... -- -- (837) (837) Payments received on note receivable................ -- 83 -- 83 Net income.......................................... -- -- 3,502 3,502 ---- ----- ------- ------- Balance at December 28, 1996........................ 443 (117) 4,809 5,135 Dividends........................................... -- -- (4,249) (4,249) Payments received on note receivable................ -- 117 -- 117 Net income.......................................... -- -- 1,581 1,581 ---- ----- ------- ------- Balance at August 5, 1997........................... $443 $ -- $ 2,141 $ 2,584 ==== ===== ======= =======
See accompanying notes to the financial statements. F-45 147 VALLEY INDUSTRIES, INC. STATEMENTS OF CASH FLOWS
PERIOD FROM YEAR ENDED YEAR ENDED DECEMBER 29, DECEMBER 31, DECEMBER 28, 1996 TO 1995 1996 AUGUST 5, 1997 ------------ ------------ -------------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net income (loss)...................................... $ (800) $ 3,502 $ 1,581 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization........................ 929 1,153 775 Deferred income tax expense (benefit)................ (167) 135 (23) Net changes in operating assets and liabilities: Accounts, notes and shareholder receivable........ (550) (5,033) 538 Inventories....................................... (386) (224) (879) Prepaid expenses and other current assets......... (160) (231) (529) Accounts payable.................................. 1,815 1,502 1,956 Accrued compensation.............................. 59 727 (215) Other accrued liabilities......................... 53 48 111 ------- ------- ------- Net cash provided by operating activities......... 793 1,579 3,315 ------- ------- ------- INVESTING ACTIVITIES Purchases of property, plant and equipment............. (2,262) (1,771) (1,844) Other, net............................................. 5 17 48 ------- ------- ------- Net cash used in investing activities............. (2,257) (1,754) (1,796) ------- ------- ------- FINANCING ACTIVITIES Net proceeds from notes payable to bank................ 2,616 1,894 5,012 Proceeds of long-term debt............................. -- 2,650 251 Payments of long-term debt............................. (327) (3,587) (356) Payments received on note receivable from shareholder.......................................... 92 83 117 Dividends paid......................................... (923) (837) (4,249) ------- ------- ------- Net cash provided by financing activities.............. 1,458 203 775 ------- ------- ------- Net increase (decrease) in cash........................ (6) 28 2,294 Cash at beginning of period............................ 12 6 34 ------- ------- ------- Cash at end of period.................................. $ 6 $ 34 $ 2,328 ======= ======= =======
See accompanying notes to the financial statements. F-46 148 VALLEY INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 1. SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Valley Industries, Inc. (the "Company") is engaged in the manufacture and marketing of automotive vehicle products (primarily trailer hitches and towing products) and sells to original equipment manufacturers and automotive aftermarket customers principally within the United States. FISCAL YEAR The Company operates with a 52/53 week fiscal year ending on the last Saturday in December. The fiscal years ended December 28, 1996 and December 31, 1995 included 52 and 53 weeks, respectively. INVENTORIES Inventories for the Company's Western division are carried at the lower of cost, as determined by the last-in, first-out (LIFO) method, or market. The current costs of LIFO inventories exceed their balance sheet carrying amount by $853, $706 and $706 at December 31, 1995, December 28, 1996, and August 5, 1997, respectively. In 1996, inventory quantities at the Western division were reduced. This reduction resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with current year costs. The effect of this liquidation was to increase net income by approximately $80 for the year ended December 28, 1996. Inventories for the Company's Eastern division are carried at the lower of cost, as determined by the first-in, first-out (FIFO) method, or market. RECEIVABLE FROM SHAREHOLDERS Shareholder receivables represent costs associated with the sale of Valley Industries, Inc. of $93 which the Shareholders have agreed to pay. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost and depreciated or amortized on a straight-line basis over the estimated useful lives of the assets or the capital lease term, whichever is less. The estimated useful lives range from 5 to 20 years. Amortization of equipment recorded under capital leases is included in depreciation expense. INCOME TAXES The Company has elected S corporation status for federal and state income tax purposes except for California income tax purposes for which the Company files its tax return as a C corporation. No provision has been made for federal income taxes in the accompanying financial statements because the federal income tax consequences of the Company's operations are the responsibility of the individual shareholders. The Company provided for income taxes in California and is subject to the Michigan Single Business Tax (MSBT). MSBT is based primarily on factors other than income, and accordingly, is classified as general and administrative expense. The liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. F-47 149 VALLEY INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) REVENUE RECOGNITION Revenues are recognized when the product is shipped to the customer. ADVERTISING COSTS The Company accounts for advertising costs as expense in the period in which incurred. Advertising expense for the years ended December 31, 1995 and December 28, 1996 was $499 and $622, respectively. Advertising expense for the period ended August 5, 1997 was $428. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS The Company manufactures and sells automotive vehicle products to companies in the automotive industry. The Company performs periodic credit evaluations of its customers and generally does not require collateral. At December 31, 1995, December 28, 1996, and August 5, 1997, primarily all of the Company's accounts receivable were from customers in the automotive industry. The Company believes that adequate provision for uncollectible accounts receivable has been made in the accompanying financial statements. Three customers accounted for approximately 21%, 15% and 11% of net sales for fiscal 1995, and approximately 22%, 16% and 14% of net sales for fiscal 1996. Three customers accounted for approximately 21%, 17% and 17% of net sales for the period ended August 5, 1997. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2. FINANCING ARRANGEMENTS NOTE PAYABLE TO BANK The Company has a revolving credit agreement with a bank that expires in April 1998. Pursuant to an amendment on March 10, 1997, the agreement provides for borrowings of up to $14,000 based upon specified percentages of eligible accounts receivable and inventory. Under the agreement, borrowings bear interest at either the bank's prime rate or a defined Eurodollar-based rate. At August 5, 1997, the outstanding borrowings of $13,721 bear interest at the bank's prime rate of 8.5%. The Company is subject to certain restrictive covenants under the revolving credit agreement, including, among other things, the maintenance of certain financial ratios, and restrictions on repayment of the note payable to shareholder, payment of dividends (except for tax distributions to the Company's shareholders), the sale or redemption of the Company's common stock and the incurrence of additional indebtedness. Substantially all of the Company's assets are pledged as collateral for borrowings under the revolving credit agreement. The term note payable to a bank (see "Long-Term Debt" below) is subject to the restrictive covenants and security arrangements discussed above. As explained in Note 7, the Company's outstanding debt at August 5, 1997 was repaid from the proceeds of the sale of certain of the Company's net operating assets. NOTE PAYABLE TO SHAREHOLDER The note payable to shareholder is secured by the Company's Lodi facilities including land and building with a net book value at August 5, 1997 of approximately $1,365. Payments of principal on the note payable to F-48 150 VALLEY INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 2. FINANCING ARRANGEMENTS -- (CONTINUED) shareholder were not made through August 4, 1997 due to the restrictive covenants under the Company's current and former revolving credit agreements. While the agreements with the Company's principal bank permit the payment of interest on the note payable to shareholder, the Company and the note holder have agreed to forego the payment or accrual of interest. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, DECEMBER 28, AUGUST 5, 1995 1996 1997 ------------ ------------ --------- Term note payable to a bank due in quarterly installments of principal of $194 through March 1998, and quarterly installments of principal of $113 from June 1998 to April 2001; with interest at the bank's prime rate (8.5% at August 5, 1997).......................................... $ -- $2,107 $2,032 Term note payable to a bank (refinanced in 1996)........... 1,800 -- -- Refinancing of previous revolving credit agreement......... 850 -- -- Capitalized lease obligation due in monthly installments of $6, including principal and interest imputed at 10.6%, through December 1999.................................... 221 170 140 Other notes payable and capitalized lease obligations...... 343 -- -- ------ ------ ------ 3,214 2,277 2,172 Less current portion....................................... 691 777 692 ------ ------ ------ $2,523 $1,500 $1,480 ====== ====== ======
On March 10, 1997, the Company executed an amendment to the term note payable to a bank with an outstanding balance of $2,032 at August 5, 1997. In addition, the Company obtained a new term credit facility which provides for borrowings of up to $900 to fund a portion of certain planned capital expenditures. Borrowings under the new term equipment note are due in eight equal quarterly installments commencing September 1997. No borrowings have been made under the new term equipment note through August 5, 1997. The term note payable of $2,032 was repaid from the proceeds of the sale of certain of the Company's net operating assets as described in Note 7. Interest paid during 1995 and 1996 was $881 and $889, respectively. Interest paid during the period ended August 5, 1997 was $628. 3. SHAREHOLDERS' EQUITY On January 1, 1995, the Company sold 55 shares of common stock to its President in exchange for a note receivable in the amount of $292. The note receivable is due in ten annual installments of $29 commencing January 1, 2000, and bears interest payable annually at a variable rate of interest (approximately 6% at December 28, 1996). In addition, any cash dividend distributions on the related common stock are to be applied as a reduction of the note receivable balance. For 1995, 1996 and 1997, cash dividends of $92, $83 and $117, respectively, were applied against the note receivable balance. In connection with the issuance of common stock, the Company and the President have entered into an agreement which provides the Company the right of first refusal in the event the President attempts to sell or dispose of such shares. The Company's purchase option allows the Company to acquire the shares at the lesser of adjusted book value or a bona fide offer from a third party. Adjusted book value is defined as book value per F-49 151 VALLEY INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 3. SHAREHOLDERS' EQUITY -- (CONTINUED) share adjusted for the per share difference, if any, between the net book value and fair value of certain of the Company's real estate. In July 1997, the Company's Board of Directors approved an amendment to the Company's certificate of incorporation to create two new classes of common stock. Pursuant to the amendment, each existing share of common stock was exchanged for five shares of Class A voting common stock and ninety-five shares of Class B nonvoting common stock. 4. INCOME TAXES The income tax provision (benefit), which relates solely to California state taxes, consists of the following components (in thousands):
YEAR ENDED PERIOD --------------------------- ENDED DECEMBER 31, DECEMBER 28, AUGUST 5, 1995 1996 1997 ------------ ------------ --------- Current expense.............................. $ 4 $ (2) $103 Deferred expense (benefit) before benefit of net operating loss and California manufacturers' investment tax credit....... (8) 215 (23) Benefit of net operating loss carryforward... (30) -- -- California manufacturers' investment tax credit..................................... (129) (80) (91) ----- ---- ---- $(163) $133 $(11) ===== ==== ====
The components of deferred tax assets are as follows:
DECEMBER 31, DECEMBER 28, AUGUST 5, 1995 1996 1997 ------------ ------------ --------- Inventory.................................... $ 53 $ 50 $ 82 Accounts receivable.......................... 20 14 12 California manufacturers' investment tax credit..................................... 128 23 -- Net operating loss carryforward.............. 30 -- -- Accrued liabilities and other................ 12 21 40 ---- ---- ---- $243 $108 $134 ==== ==== ====
Cash paid for income taxes was $92 in 1995. There were no tax payments made during the year ended December 28, 1996, or the period ended August 5, 1997. 5. PENSION PLANS DEFINED BENEFIT PENSION PLAN Effective December 31, 1995, the Company terminated its Defined Benefit Pension Plan (the "Benefit Plan") and settled the Benefit Plan's obligations through the purchase of annuity contracts and lump sum payments. The Benefit Plan was previously amended in August 1993 to freeze benefit accruals and restrict further participation in the Benefit Plan. The net effect of the termination of the Benefit Plan in 1995 was not significant, as a settlement gain of $56 was substantially offset by estimated special benefit distributions and F-50 152 VALLEY INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 5. PENSION PLANS -- (CONTINUED) expected plan expenses. In addition, the termination of the Benefit Plan did not have a significant effect on the Company's results of operations for the year ended December 28, 1996. Net pension income recognized for 1995, excluding the settlement gain described above, included the following components: Service cost (benefits earned during the year).............. $ -- Interest cost on projected benefit obligation............... 70 Actual (return) on plan assets.............................. (327) Net amortization and deferral............................... 242 ----- Net pension (income)........................................ $ (15) =====
The expected long-term rate of return used in determining net pension income was 8.5% for 1995. DEFINED CONTRIBUTION PLAN Effective January 1, 1993, substantially all employees became eligible to participate in a tax deferred investment plan (the "401(k) Plan") established by the Company. Effective November 1, 1995, the Company's former profit sharing plan was merged into the 401(k) Plan. The 401(k) Plan permits each participant to contribute up to 15% of compensation on a pre-tax basis, to a specified maximum amount per year. The Company, at its discretion, may make matching contributions. Matching contributions were approximately $31, $32 and $16 for 1995, 1996 and 1997 respectively. 6. LEASE COMMITMENTS In May 1993, the Company sold the land and building relating to its principal operating facility in Michigan for $1,450 cash to Valley Industries Realty, L.P. (the "Partnership"), a related party. Concurrent with the sale, the Company leased the facilities back from the Partnership through December 31, 2002. The lease requires minimum monthly rentals of approximately $15, with escalations in certain circumstances. At August 5, 1997, the Company is obligated to pay minimum lease payments of approximately $84 for the remaining period of 1997, and approximately $180 in each of the five years ending December 31, 2002. The lease arrangement has been accounted for as an operating lease. The Company also leases certain machinery, equipment and facilities under agreements which expire at various dates through 2002. At August 5, 1997, annual minimum lease and rental payments for all capital leases and noncancellable operating leases are as follows:
CAPITAL OPERATING LEASES LEASES ------- --------- 1997........................................................ $ 28 $ 274 1998........................................................ 68 634 1999........................................................ 64 527 2000........................................................ -- 473 2001........................................................ -- 401 Thereafter.................................................. -- 290 ---- ------ 160 $2,599 ====== Less amount representing interest........................... (20) ---- Present value of net minimum lease payments................. $140 ====
F-51 153 VALLEY INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 6. LEASE COMMITMENTS -- (CONTINUED) During 1995, the Company capitalized equipment of $88, which represents the present value of the net minimum lease payments on capitalized lease obligations (none in 1996 or 1997). Rental expense for 1995 and 1996 was approximately $468 and $453, respectively. Rental expense for the period ended August 5, 1997 was $295. 7. SUBSEQUENT EVENTS On August 5, 1997, the net operating assets of the Company were acquired by Advanced Accessory Systems, LLC. The Company's outstanding debt at August 5, 1997 was repaid from the proceeds of the sale. In conjunction with the sale of the Company, in July 1997 management and other bonuses aggregating approximately $900 were paid. The associated expense is included within general and administrative expenses for the period ended August 5, 1997. F-52 154 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Ellebi S.p.A. In our opinion, the accompanying balance sheets and the related statements of operations and of cash flows present fairly, in all material respects, the financial position of the towbar segment of Ellebi S.p.A. (the Company), at December 31, 1997, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with U.S. generally accepted accounting principles. These financial statements are the responsibility of the management of the Company; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with U.S. generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. The Company, as disclosed in Note 1 to the accompanying financial statements, is a division of Ellebi S.p.A. and has extensive transactions and relationships with Ellebi S.p.A. Because of these relationships, it is possible that the terms of these transactions are not the same as those that would result from transactions among wholly unrelated parties. As discussed in Note 9, on January 2, 1998, Ellebi S.p.A. sold certain net assets of the Company to Brink International B.V. The accompanying financial statements do not give effect to this purchase transaction. AXIS S.r.1. Reggio Emilia, Italy March 13, 1998 F-53 155 TOWBAR SEGMENT OF ELLEBI S.P.A. BALANCE SHEETS (AMOUNTS IN MILLIONS OF ITALIAN LIRA)
DECEMBER 31, ------------------------ 1995 1996 1997 ---- ---- ---- ASSETS Current assets Cash and cash equivalents................................. 1,781 558 10 Trade receivables, less allowance of 147, 248 and 248 at December 31, 1995, 1996 and 1997, respectively......... 6,471 6,337 7,113 Other receivables, less allowance of 142 at December 31, 1995, 1996 and 1997, respectively...................... 554 482 627 Inventories............................................... 14,308 17,015 15,926 ------ ------ ------ Total current assets................................... 23,114 24,392 23,676 Property, plant and equipment, net.......................... 3,221 4,632 4,733 Receivables from associated company......................... -- 71 71 Other receivables........................................... 4 4 113 Intangible assets........................................... 22 103 57 ------ ------ ------ TOTAL ASSETS........................................... 26,361 29,202 28,650 ====== ====== ====== LIABILITIES AND ELLEBI S.P.A. INVESTMENT Current liabilities Trade payables............................................ 8,281 5,913 3,876 Tax payable............................................... 1,336 1,796 2,707 Social Security payable................................... 300 311 345 Other payables............................................ 1,603 1,104 1,237 ------ ------ ------ Total current liabilities.............................. 11,520 9,124 8,165 Agents severance fund....................................... 421 462 380 Termination indemnity....................................... 1,551 1,780 1,769 ------ ------ ------ TOTAL LIABILITIES...................................... 13,492 11,366 10,314 ------ ------ ------ Ellebi S.p.A. investment.................................... 12,869 17,836 18,336 ------ ------ ------ TOTAL LIABILITIES AND ELLEBI S.P.A. INVESTMENT......... 26,361 29,202 28,650 ====== ====== ======
See accompanying notes to the financial statements. F-54 156 TOWBAR SEGMENT OF ELLEBI S.P.A. STATEMENTS OF OPERATIONS (AMOUNTS IN MILLIONS OF ITALIAN LIRA)
YEAR ENDED DECEMBER 31, ------------------------ 1995 1996 1997 ---- ---- ---- Net sales................................................... 31,301 32,541 36,378 Cost of sales............................................... 20,521 20,547 21,180 ------ ------ ------ Gross profit.............................................. 10,780 11,994 15,198 Selling, general and product development expenses........... 6,517 6,187 6,988 ------ ------ ------ Operating income.......................................... 4,263 5,807 8,210 Other income (expense)...................................... 2 (173) (37) ------ ------ ------ Income before provision for income taxes.................. 4,265 5,634 8,173 Taxes on income............................................. 2,270 3,130 4,460 ------ ------ ------ Net income................................................ 1,995 2,504 3,713 ====== ====== ======
See accompanying notes to the financial statements. F-55 157 TOWBAR SEGMENT OF ELLEBI S.P.A. STATEMENTS OF CASH FLOWS (AMOUNTS IN MILLIONS OF ITALIAN LIRA)
YEAR ENDED DECEMBER 31, ------------------------ 1995 1996 1997 ---- ---- ---- Net income.................................................. 1,995 2,504 3,713 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization............................. 1,306 1,141 823 Termination indemnity provision........................... 330 322 323 Changes in assets and liabilities Trade receivables...................................... 74 134 (776) Other receivables...................................... 146 72 (145) Inventories............................................ (5,432) (2,707) 1,089 Trade, tax and social security payables................ 1,335 (1,897) (1,092) Other payables......................................... 282 (499) 133 Agents severance fund.................................. (40) 41 (82) Other, net............................................. (87) (93) (282) ------ ------ ------ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES.... (91) (982) 3,704 ------ ------ ------ CASH FLOW FROM INVESTING ACTIVITIES Intangible asset additions.................................. -- (147) (22) Property, plant and equipment additions..................... (2,658) (2,486) (909) Other....................................................... -- (71) (108) ------ ------ ------ NET CASH USED IN INVESTING ACTIVITIES.................. (2,658) (2,704) (1,039) ------ ------ ------ CASH FLOW FROM FINANCING ACTIVITIES Dividends paid.............................................. (797) (227) -- Increase (decrease) in Ellebi S.p.A. investment............. 707 2,690 (3,213) ------ ------ ------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES....... (90) 2,463 (3,213) ------ ------ ------ Net decrease in cash........................................ (2,839) (1,223) (548) Cash at beginning of year................................... 4,620 1,781 558 ------ ------ ------ Cash at end of year......................................... 1,781 558 10 ====== ====== ======
See accompanying notes to the financial statements. F-56 158 TOWBAR SEGMENT OF ELLEBI S.P.A. STATEMENT OF CHANGES IN ELLEBI S.P.A. INVESTMENT (AMOUNTS IN MILLIONS OF ITALIAN LIRA)
YEAR ENDED DECEMBER 31, ------------------------ 1995 1996 1997 ---- ---- ---- BEGINNING ELLEBI S.P.A. INVESTMENT.......................... 10,964 12,869 17,836 Net income.................................................. 1,995 2,504 3,713 Intercompany activity....................................... 707 2,690 (3,213) Dividends paid.............................................. (797) (227) -- ------ ------ ------ ENDING ELLEBI S.P.A. INVESTMENT............................. 12,869 17,836 18,336 ====== ====== ======
See accompanying notes to the financial statements. F-57 159 TOWBAR SEGMENT OF ELLEBI S.P.A. NOTES TO FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF ITALIAN LIRA) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The towbar segment of Ellebi S.p.A. (the "Company"), is a manufacturer and distributor of trailers, towbars, accessories and spare parts. The financial statements have been prepared on a carve-out basis and present the historical financial position, results of operations and cash flows of the Company previously included in the financial statements of Ellebi S.p.A. The Company's financial information included herein is not necessarily indicative of its financial position, results of operations and cash flows in the future, or of the results which would have been reported if the Company had operated as an unaffiliated enterprise. SIGNIFICANT ESTIMATES The preparation of combined financial statements on a carve-out basis in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. REVENUE RECOGNITION Revenue from product sales is recognized at the time of shipment to the customer, which represents the moment when ownership passes. CONCENTRATION OF CREDIT RISK Financial instruments, which potentially expose the Company to a concentration of credit risk, consist primarily of accounts receivable. The Company does not require collateral from its customers. To minimize this risk, ongoing credit evaluations of customers' financial condition are performed. At December 31, 1995, 1996 and 1997, approximately 29%, 41% and 41%, respectively, of trade accounts receivable were from the Company's ten major customers. For the same years the major customer (Fiat Auto S.p.A.) represented 19%, 28% and 25%, respectively, of trade accounts receivable. FINANCIAL INSTRUMENTS The carrying value of the Company's financial instruments, comprising cash, accounts receivable, accounts payable and accrued liabilities, approximate their fair values. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand and on deposit. RECEIVABLES Receivables are stated at face value reduced to their estimated realizable value by the allowance for doubtful accounts. INVENTORIES Inventories are carried at the lower of cost, as determined per item by the last-in-first-out (LIFO) method, or market. Inventories are periodically reviewed and reserves established for excess and obsolete items. F-58 160 TOWBAR SEGMENT OF ELLEBI S.P.A. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) ALLOWANCE FOR DOUBTFUL ACCOUNTS The allowance for doubtful trade receivables is provided for based on specific identification. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost and depreciated using estimated useful lives. Depreciation is computed on the straight-line method. Maintenance and repairs costs are charged to expense as incurred. Plant and equipment additions and improvements are capitalized. Yearly depreciation rates are as follows: Plant and machinery......................................... 10% Equipment and tools (molds)................................. 25% Cars........................................................ 25% Furniture................................................... 12% Computers................................................... 20% Vans........................................................ 20%
Management believes that there are no impairments of property, plant and equipment or other long-lived assets at December 31, 1997. INTANGIBLE ASSETS Intangible assets are carried at cost and amortized on the straight-line method over their estimated useful lives. RESEARCH, DEVELOPMENT AND ENGINEERING Research, development and engineering costs are charged to expense as incurred. These costs for the years ended December 31, 1995, 1996 and 1997 were 1,110, 1,150 and 1,350, respectively. DEFERRED COMPENSATION All employees are covered by a plan required under Italian law and labor contracts which grants a termination indemnity based on compensation and years of service. The Company accrues the amount due to each employee, based on the relevant factors at year-end. TRANSACTIONS IN FOREIGN CURRENCIES Transactions in foreign currencies are recorded using the exchange rates in effect at the transaction dates. Exchange gains or losses realized during the year are included in the statement of income. The effect of translation of foreign currency receivables and payables using year-end rates are reported as other payables in the balance sheet. INCOME TAXES The Company is included in the income tax return of Ellebi S.p.A. In preparing its financial statements, the Company has determined its tax provision on a separate return basis and the resulting liability is settled on an intercompany basis. There are no temporary differences that give rise to deferred taxes. F-59 161 TOWBAR SEGMENT OF ELLEBI S.P.A. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 2. INTERCOMPANY TRANSACTIONS AND ALLOCATIONS The profit and loss accounts are prepared based upon an allocation of costs between Ellebi S.p.A. and the Company. The allocation of costs has been prepared taking into account the activities of the Company and of Ellebi S.p.A. and also under the assumption that the segments were separate and that each segment should carry its own direct operating costs. Management believes that the methods utilized to allocate costs to the Company, as discussed above, are reasonable. However, the terms of transactions between the Company and Ellebi S.p.A., including allocated costs, may differ from those that would result from transactions with unrelated parties. 3. NET SALES Classification of net sales is as follows:
YEAR ENDED DECEMBER 31, -------------------------- 1995 1996 1997 ---- ---- ---- Towbars -- aftermarket................................ 13,915 15,610 16,946 Towbars -- OEM........................................ 3,876 4,844 5,939 Trailers.............................................. 10,126 9,381 10,894 Accessories and spare parts........................... 3,769 3,178 3,106 Other................................................. 287 96 233 Bonuses to customer................................... (672) (568) (740) ------ ------ ------ 31,301 32,541 36,378 ====== ====== ======
4. TAXES ON INCOME Current income tax expense for the three years ended December 31, 1997 was calculated at a rate of 53.2% on taxable income. Current income tax expense included in the statements of operations are as follows:
YEAR ENDED DECEMBER 31, ----------------------- 1995 1996 1997 ---- ---- ---- Income before taxes...................................... 4,265 5,634 8,173 Non deductible costs..................................... -- 252 207 ----- ----- ----- 4,265 5,886 8,380 ----- ----- ----- Tax charge............................................... 2,270 3,130 4,460 ===== ===== =====
5. INVENTORIES The difference between LIFO and current valuation as of December 31, 1997, 1996 and 1995 is 2,770, 3,670 and 3,690, respectively. F-60 162 TOWBAR SEGMENT OF ELLEBI S.P.A. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. ACCOUNT BALANCES Account balances included in the balance sheet are comprised of the following:
DECEMBER 31, ----------------------------- 1995 1996 1997 ---- ---- ---- CASH AND CASH EQUIVALENTS Banks and postal deposit.................................... 1,761 550 -- Cash on hand................................................ 20 8 10 ------- ------- ------- 1,781 558 10 ======= ======= ======= OTHER RECEIVABLES Due from personnel.......................................... 4 20 6 Due from sales agents....................................... 329 266 397 Due from freight forwarders................................. 214 167 209 Due from suppliers.......................................... 7 23 10 Other....................................................... 142 148 147 Allowance for doubtful accounts............................. (142) (142) (142) ------- ------- ------- 554 482 627 ======= ======= ======= INVENTORIES VALUED AT LIFO Raw materials and supplies.................................. 5,561 4,664 2,846 Work-in-process............................................. 4,052 6,133 6,491 Finished goods and merchandise.............................. 4,965 6,425 6,793 Allowance for obsolescence and slow-moving items............ (270) (207) (204) ------- ------- ------- 14,308 17,015 15,926 ======= ======= ======= PROPERTY, PLANT AND EQUIPMENT Plant and machinery......................................... 7,966 9,198 10,050 Molds, jigs and other tools................................. 8,738 9,282 9,476 Other fixed assets.......................................... 2,137 2,180 2,283 Assets under construction and advances...................... 136 44 8 Accumulated depreciation.................................... (15,756) (16,072) (17,084) ------- ------- ------- 3,221 4,632 4,733 ======= ======= ======= TAXES PAYABLE Income taxes................................................ 1,107 1,483 2,325 Tax on equity............................................... 63 57 30 V.A.T. tax.................................................. -- 55 150 Withholding tax............................................. 166 201 202 ------- ------- ------- 1,336 1,796 2,707 ======= ======= ======= OTHER PAYABLES Due to customers............................................ 671 567 740 Due to workers.............................................. 440 478 444 Other....................................................... 492 59 53 ------- ------- ------- 1,603 1,104 1,237 ======= ======= =======
7. ELLEBI S.P.A. INVESTMENT The Ellebi S.p.A. investment balance represents the cumulative activity from transactions between the Company and Ellebi S.p.A. F-61 163 TOWBAR SEGMENT OF ELLEBI S.P.A. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 8. LEASE COMMITMENTS The Company leases certain buildings under operating lease agreements. Rent charged from Ellebi S.p.A. to the Company approximates 750 annually. 9. SUBSEQUENT EVENT (UNAUDITED) On January 2, 1998, Ellebi S.p.A. sold substantially all of the net assets of the Company to Brink International B.V. for approximately 35,000, subject to certain post-closing adjustments. The accompanying financial statements do not give effect to this transaction. F-62 164 ========================================================= NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. ------------------------ TABLE OF CONTENTS
PAGE ---- Available Information................... 3 Prospectus Summary...................... 4 Risk Factors............................ 17 The Exchange Offer...................... 23 Use of Proceeds......................... 31 Pro Forma Capitalization................ 32 Unaudited Pro Forma Financial Information........................... 33 Selected Historical Financial Data...... 41 Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 43 Business................................ 48 Management.............................. 58 Security Ownership of Certain Beneficial Owners and Management................. 62 Limited Liability Company Agreement..... 63 Certain Transactions.................... 64 Description of the Credit Facilities.... 64 Description of the Notes................ 66 Plan of Distribution.................... 97 Legal Matters........................... 98 Experts................................. 98 Index to Financial Statements........... F-1
========================================================= ========================================================= $125,000,000 ADVANCED ACCESSORY SYSTEMS, LLC AAS CAPITAL CORPORATION 9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007 ------------------------ PROSPECTUS ------------------------ , 1998 ========================================================= 165 ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the General Corporation Law of the State of Delaware provides for the indemnification of officers and directors under certain circumstances against expenses incurred in successfully defending against a claim and authorizes Delaware corporations to indemnify their officers and directors under certain circumstances against expenses and liabilities incurred in legal proceedings involving such persons because of their being or having been an officer or director. Pursuant to Section 102(b)(7) of the General Corporation Law of the State of Delaware, the Certificate of Incorporation of Capital Corp and AAS Holdings, Inc. provide that the directors of Capital Corp and AAS Holdings, Inc., individually or collectively, shall not be held personally liable to Capital Corp or AAS Holdings, Inc. (as the case may be) or their respective stockholders for monetary damages for breaches of fiduciary duty as directors, except that any director shall remain liable (1) for any breach of the director's fiduciary duty of loyalty to Capital Corp or AAS Holdings, Inc. (as the case may be) or their respective stockholders, (2) for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, (3) for liability under Section 174 of the General Corporation Law of the State of Delaware or (4) for any transaction from which the director derived an improper personal benefit. The by-laws of Capital Corp and AAS Holdings, Inc. provide for indemnification of their respective officers and directors to the full extent authorized by law. Section 18-108 of the Delaware Limited Liability Company Act (the "Act") provides that, subject to such standards and restrictions, if any, as are set forth in a limited liability company's operating agreement, a limited liability company may, and shall have the power to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever. The Bylaws of AAS, SportRack, LLC and Valley Industries, LLC provide that AAS, SportRack, LLC and Valley Industries, LLC shall, to the fullest extent authorized under the Act, indemnify and hold harmless against all expense, liability and loss (including attorneys' fees, judgments, fines, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered, any manager or officer of AAS, SportRack, LLC or Valley Industries, LLC, as the case may be, including indemnification for negligence or gross negligence but excluding indemnification (i) for acts or omissions involving actual fraud or willful misconduct or (ii) with respect to any transaction from which the indemnitee derived an improper personal benefit. I-1 166 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (A) EXHIBITS. 3.1 Amended and Restated Certificate of Formation of AAS 3.2 Second Amended and Restated Operating Agreement of AAS 3.3 Amended Bylaws of AAS 3.4 Certificate of Incorporation of Capital Corp. 3.5 Bylaws of Capital Corp. 4.1 Indenture dated as of October 1, 1997 for the Notes (including the form of New Note attached as Exhibit B thereto) among the Issuers, the Guarantors named therein and First Union National Bank, as Trustee *5.1 Opinion of O'Sullivan Graev & Karabell, LLP 10.1 Asset Purchase Agreement among MascoTech Automotive Systems Group, Inc., MascoTech Accessories, Inc. and Advanced Accessory Systems, LLC dated as of September 28, 1995 10.2 Agreement for the Sale and Purchase of Shares in Brink BV dated October 30, 1996 among AAS Holdings, Inc., AAS Holdings, LLC, Brink Holding BV and Brink BV 10.3 Asset Purchase Agreement among Bell Sports Corp., Bell Sports Canada, Inc. and Advanced Accessory Systems Canada Inc./Les Systemes d'Accessoire Advanced Canada Inc. dated as of July 2, 1997 10.4 Stock Purchase Agreement dated July 24, 1997 among Robert Boulard and Alan Hamer and Advanced Accessory Systems Canada Inc. / Les Systems d'Accessoire Advanced Canada Inc. 10.5 Asset Purchase Agreement among Valley Industries, LLC, Valley Industries, Inc., certain affiliates of Valley Industries, Inc., Robert L. Fisher and Roger T. Morgan dated as of August 5, 1997 10.6 Preliminary Agreement for the Transfer of a Business dated December 16, 1997 between Ellebi S.p.A. and Brink Italia S.r.1. and Brink International B.V. 10.7 Second Amended and Restated Credit Facility among AAS, SportRack, LLC, Brink International BV, Brink BV and Valley Industries, LLC, as Borrowers, NBD Bank as Administrative Agent and Documentation and Collateral Agent and The Chase Manhattan Bank as Co-Administrative Agent and Syndication Agent dated August 5, 1997. 10.8 First Amended and Restated Credit Agreement among SportRack International, Inc. and First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of Nova Scotia dated as of March 19, 1998. 10.9 Employment Agreement between AAS and Richard Borghi dated September 28, 1995. 10.10 Employment Agreement between AAS and Marshall Gladchun dated September 28, 1995. 10.11 Management Consulting Agreement between AAS and Barry Banducci dated September 28, 1995. 10.12 Management Consulting Agreement between AAS and F. Alan Smith dated September 28, 1995. 10.13 Employment Agreement between AAS and Terence C. Seikel dated January 22, 1996. 10.14 Employment Agreement between AAS and Roger T. Morgan dated August 5, 1997. 10.15 Employment Agreement between Brink B.V. and Gerrit de Graaf dated November 1, 1996. 10.16 Management Consulting Agreement between AAS and Les Placements Jean Maynard Inc. dated July 2, 1997. 10.17 Lease dated as of January 24, 1997 between Valley Industries Realty, L.P. and Valley Industries, Inc. 10.18 Addendum to Sublease dated as of July 2, 1997 between Bell Sports Canada, Inc. and SportRack International, Inc. (formerly known as Advanced Accessory Systems Canada Inc./Les Systems d'Accessoire Advanced Canada Inc.).
I-2 167 10.19 Lease dated May 25, 1994 between VBG Towbars AB and VBG Produkter AB. 10.20 Lease Agreement for commercial use between Ellebi S.p.A. and Brink Italia S.r.l. 10.21 Registration Rights Agreement dated September 25, 1997 by and among Advanced Accessory Systems, LLC, AAS Capital Corporation, the Guarantors named therein and Chase Securities, Inc. and First Chicago Capital Markets, Inc. 12.1 Statement re: computation of ratios 21.1 Subsidiaries of the Registrant 23.1 Consent of O'Sullivan Graev & Karabell, LLP (included in Exhibit 5.1) 23.2 Consent of Price Waterhouse LLP 23.3 Consent of Price Waterhouse LLP 23.4 Consent of Price Waterhouse LLP 23.5 Consent of Coopers & Lybrand N.V. 23.6 Consent of Ernst & Young LLP 23.7 Consent of AXIS S.r.l. 24.1 Powers of Attorney (included on the signature pages) 25.1 Statement of Eligibility and Qualifications under the Trust Indenture Act of 1939 of First Union National Bank as Trustee 27.1 Financial Data Schedule 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees 99.4 Form of Letter to Clients
- ------------------------- * To be filed by Amendment. (B) FINANCIAL STATEMENT SCHEDULES: SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS All other schedules for which provision is made in the applicable accounting regulations of the Commission are not required under the related instructions, are inapplicable or not material, or the information called for thereby is otherwise included in the financial statements and therefore have been omitted. ITEM 22. UNDERTAKINGS. (a) The undersigned registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a) (3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. I-3 168 (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") may be permitted to directors, officers and controlling persons of the registrants pursuant to the DGCL, the Act, the Certificate of Incorporation and Bylaws of Capital Corp., the Certificate of Formation, Operating Agreement and Bylaws of AAS, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of any registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (c) The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (d) The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. I-4 169 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 30th day of March, 1998. ADVANCED ACCESSORY SYSTEMS, LLC By: /s/ TERENCE C. SEIKEL ------------------------------------ Name: Terence C. Seikel Title: Vice President of Finance and Administration POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS DONALD J. HOFMANN AND TERENCE C. SEIKEL, AND EACH OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS AND EACH OF THEM FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-4 has been signed as of the 30th day of March, 1998 by the following persons in the capacity indicated.
SIGNATURE TITLE --------- ----- /s/ MARSHALL D. GLADCHUN President and Manager (principal executive - ----------------------------------------------------- officer) Marshall D. Gladchun /s/ TERENCE C. SEIKEL Vice President of Finance and Administration - ----------------------------------------------------- and Chief Financial Officer (principal Terence C. Seikel financial and accounting officer) /s/ F. ALAN SMITH Chairman of the Board of Managers - ----------------------------------------------------- F. Alan Smith /s/ BARRY BANDUCCI Manager - ----------------------------------------------------- Barry Banducci /s/ GERARD JACOBUS BRINK Manager - ----------------------------------------------------- Gerard Jacobus Brink /s/ DONALD J. HOFMANN Manager - ----------------------------------------------------- Donald J. Hofmann /s/ ROGER T. MORGAN Manager - ----------------------------------------------------- Roger T. Morgan
170 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 30th day of March, 1998. AAS CAPITAL CORPORATION By: /s/ TERENCE C. SEIKEL ------------------------------------ Name: Terence C. Seikel Title: Treasurer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS DONALD J. HOFMANN AND TERENCE C. SEIKEL, AND EACH OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS AND EACH OF THEM FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-4 has been signed as of the 30th day of March, 1998 by the following persons in the capacity indicated.
SIGNATURE TITLE --------- ----- /s/ DONALD J. HOFMANN President (principal executive officer) - ----------------------------------------------------- Donald J. Hofmann /s/ TERENCE C. SEIKEL Treasurer and Director (principal financial - ----------------------------------------------------- and accounting officer) Terence C. Seikel /s/ JOHN J. DAILEADER Director - ----------------------------------------------------- John J. Daileader
171 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 30th day of March, 1998. AAS HOLDINGS, INC. By: /s/ TERENCE C. SEIKEL ------------------------------------ Name: Terence C. Seikel Title: Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS DONALD J. HOFMANN AND TERENCE C. SEIKEL, AND EACH OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS AND EACH OF THEM FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-4 has been signed as of the 30th day of March, 1998 by the following persons in the capacity indicated.
SIGNATURE TITLE --------- ----- /s/ MARSHALL D. GLADCHUN President and Director (principal executive - ----------------------------------------------------- officer) Marshall D. Gladchun /s/ TERENCE C. SEIKEL Chief Financial Officer (principal financial - ----------------------------------------------------- and accounting officer) Terence C. Seikel /s/ F. ALAN SMITH Chairman of the Board of Managers - ----------------------------------------------------- F. Alan Smith /s/ BARRY BANDUCCI Director - ----------------------------------------------------- Barry Banducci /s/ DONALD J. HOFMANN Director - ----------------------------------------------------- Donald J. Hofmann
172 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 30th day of March, 1998. SPORTRACK, LLC By: /s/ TERENCE C. SEIKEL ------------------------------------ Name: Terence C. Seikel Title: Vice President of Finance and Administration POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS DONALD J. HOFMANN AND TERENCE C. SEIKEL, AND EACH OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS AND EACH OF THEM FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-4 has been signed as of the 30th day of March, 1998 by the following persons in the capacity indicated.
SIGNATURE TITLE --------- ----- /s/ MARSHALL D. GLADCHUN President (principal executive officer) - ----------------------------------------------------- Marshall D. Gladchun /s/ TERENCE C. SEIKEL Vice President of Finance and Administration - ----------------------------------------------------- Chief Financial Officer (principal financial Terence C. Seikel and accounting officer) /s/ F. ALAN SMITH Chairman of the Board of Managers - ----------------------------------------------------- F. Alan Smith /s/ BARRY BANDUCCI Manager - ----------------------------------------------------- Barry Banducci /s/ DONALD J. HOFMANN Manager - ----------------------------------------------------- Donald J. Hofmann
173 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 30th day of March, 1998. VALLEY INDUSTRIES, LLC By: /s/ TERENCE C. SEIKEL ------------------------------------ Name: Terence C. Seikel Title: Vice President of Finance and Administration POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS DONALD J. HOFMANN AND TERENCE C. SEIKEL, AND EACH OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS AND EACH OF THEM FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-4 has been signed as of the 30th day of March, 1998 by the following persons in the capacity indicated.
SIGNATURE TITLE --------- ----- /s/ ROGER T. MORGAN President (principal executive officer) - ----------------------------------------------------- Roger T. Morgan /s/ TERENCE C. SEIKEL Vice President of Finance and Administration - ----------------------------------------------------- and Chief Financial Officer (principal Terence C. Seikel financial and accounting officer) /s/ F. ALAN SMITH Chairman of the Board of Managers - ----------------------------------------------------- F. Alan Smith /s/ BARRY BANDUCCI Manager - ----------------------------------------------------- Barry Banducci /s/ GERARD JACOBUS BRINK Manager - ----------------------------------------------------- Gerard Jacobus Brink /s/ MARSHALL GLADCHUN Manager - ----------------------------------------------------- Marshall Gladchun /s/ DONALD J. HOFMANN Manager - ----------------------------------------------------- Donald J. Hofmann /s/ ROGER T. MORGAN Manager - ----------------------------------------------------- Roger T. Morgan
174 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.1 Amended and Restated Certificate of Formation of AAS 3.2 Second Amended and Restated Operating Agreement of AAS 3.3 Amended Bylaws of AAS 3.4 Certificate of Incorporation of Capital Corp. 3.5 Bylaws of Capital Corp. 4.1 Indenture dated as of October 1, 1997 for the Notes (including the form of New Note attached as Exhibit B thereto) among the Issuers, the Guarantors named therein and First Union National Bank, as Trustee *5.1 Opinion of O'Sullivan Graev & Karabell, LLP 10.1 Asset Purchase Agreement among MascoTech Automotive Systems Group, Inc., MascoTech Accessories, Inc. and Advanced Accessory Systems, LLC dated as of September 28, 1995 10.2 Agreement for the Sale and Purchase of Shares in Brink BV dated October 30, 1996 among AAS Holdings, Inc., AAS Holdings, LLC, Brink Holding BV and Brink BV 10.3 Asset Purchase Agreement among Bell Sports Corp., Bell Sports Canada, Inc. and Advanced Accessory Systems Canada Inc./Les Systemes d'Accessoire Advanced Canada Inc. dated as of July 2, 1997 10.4 Stock Purchase Agreement dated July 24, 1997 among Robert Boulard and Alan Hamer and Advanced Accessory Systems Canada Inc. / Les Systems d'Accessoire Advanced Canada Inc. 10.5 Asset Purchase Agreement among Valley Industries, LLC, Valley Industries, Inc., certain affiliates of Valley Industries, Inc., Robert L. Fisher and Roger T. Morgan dated as of August 5, 1997 10.6 Preliminary Agreement for the Transfer of a Business dated December 16, 1997 between Ellebi S.p.A. and Brink Italia S.r.1. and Brink International B.V. 10.7 Second Amended and Restated Credit Facility among AAS, SportRack, LLC, Brink International BV, Brink BV and Valley Industries, LLC, as Borrowers, NBD Bank as Administrative Agent and Documentation and Collateral Agent and The Chase Manhattan Bank as Co-Administrative Agent and Syndication Agent dated August 5, 1997. 10.8 First Amended and Restated Credit Agreement among SportRack International, Inc. and First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of Nova Scotia dated as of March 19, 1998. 10.9 Employment Agreement between AAS and Richard Borghi dated September 28, 1995. 10.10 Employment Agreement between AAS and Marshall Gladchun dated September 28, 1995. 10.11 Management Consulting Agreement between AAS and Barry Banducci dated September 28, 1995. 10.12 Management Consulting Agreement between AAS and F. Alan Smith dated September 28, 1995. 10.13 Employment Agreement between AAS and Terence C. Seikel dated January 22, 1996. 10.14 Employment Agreement between AAS and Roger T. Morgan dated August 5, 1997. 10.15 Employment Agreement between Brink B.V. and Gerrit de Graaf dated November 1, 1996. 10.16 Management Consulting Agreement between AAS and Les Placements Jean Maynard Inc. dated July 2, 1997. 10.17 Lease dated as of January 24, 1997 between Valley Industries Realty, L.P. and Valley Industries, Inc.
175
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.18 Addendum to Sublease dated as of July 2, 1997 between Bell Sports Canada, Inc. and SportRack International, Inc. (formerly known as Advanced Accessory Systems Canada Inc./ Les Systems d'Accessoire Advanced Canada Inc.). 10.19 Lease dated May 25, 1994 between VBG Towbars AB and VBG Produkter AB. 10.20 Lease Agreement for commercial use between Ellebi S.p.A. and Brink Italia S.r.l. 10.21 Registration Rights Agreement dated September 25, 1997 by and among Advanced Accessory Systems, LLC, AAS Capital Corporation, the Guarantors named therein and Chase Securities, Inc. and First Chicago Capital Markets, Inc. 12.1 Statement re: computation of ratios 21.1 Subsidiaries of the Registrant 23.1 Consent of O'Sullivan Graev & Karabell, LLP (included in Exhibit 5.1) 23.2 Consent of Price Waterhouse LLP 23.3 Consent of Price Waterhouse LLP 23.4 Consent of Price Waterhouse LLP 23.5 Consent of Coopers & Lybrand N.V. 23.6 Consent of Ernst & Young LLP 23.7 Consent of AXIS S.r.l. 24.1 Powers of Attorney (included on the signature pages) 25.1 Statement of Eligibility and Qualifications under the Trust Indenture Act of 1939 of First Union National Bank as Trustee 27.1 Financial Data Schedule 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees 99.4 Form of Letter to Clients
- ------------------------- * To be filed by Amendment. 176 ADVANCED ACCESSORY SYSTEMS, LLC SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996, AND FOR THE PERIOD FROM SEPTEMBER 28, 1995 THROUGH DECEMBER 31, 1995
ADDITIONS ------------------------- BALANCE AT CHARGED TO CHARGED TO BEGINNING OF COSTS AND OTHER BALANCE AT YEAR EXPENSES ACCOUNTS(1) WRITE-OFFS END OF YEAR ------------ ---------- ----------- ---------- ----------- ALLOWANCE FOR DOUBTFUL ACCOUNTS For the year ended December 31, 1997............................. $ 605,000 $458,000 $ 734,000 $ 98,000 $1,699,000 1996............................. 368,000 54,000 268,000 85,000 605,000 For the period from September 28, 1995 through December 31, 1995... 354,000 14,000 -- -- 368,000 ALLOWANCE FOR INVENTORY OBSOLESCENCE AND LOWER OF COST OR MARKET RESERVE For the year ended December 31, 1997............................. $1,579,000 $423,000 $1,303,000 $715,000 $2,590,000 1996............................. 564,000 70,000 1,173,000 228,000 1,579,000 For the period from September 28, 1995 through December 31, 1995... 456,000 108,000 -- -- 564,000 ALLOWANCE FOR REIMBURSABLE TOOLING For the year ended December 31, 1997............................. $ 368,000 $195,000 $ 493,000 $166,000 $ 890,000 1996............................. 257,000 300,000 -- 189,000 368,000 For the period from September 28, 1995 through December 31, 1995... 257,000 134,000 -- 134,000 257,000
- ------------------------- (1) Charges to other accounts includes amounts related to acquired companies and the effects of changing foreign currency exchange rates for the Company's foreign subsidiaries. EX-3.1 2 EX-3.1 1 EXHIBIT 3.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF FORMATION OF AAS HOLDINGS, LLC The undersigned authorized officer of AAS Holdings, LLC, a Delaware domestic limited liability company (the "Company") hereby certifies on behalf of the Company as follows: 1. The name of the Company is "AAS Holdings, LLC." The Company's original Certificate of Formation was filed with the Secretary of State of the State of Delaware on August 28, 1995. The Company's amended Certificate of Formation was filed with the Secretary of State of the State of Delaware on September 13, 1995. 2. The Certificate of Formation of the Company is hereby amended (the "Amendment") by deleting, in its entirety, Article 1 thereof and inserting in place thereof a new Article 1 to read as follows: "Name. The name of the limited liability company is Advanced Accessory Systems, LLC" 3. The Amendment was duly adopted in accordance with Section 18-202(a) of the Limited Liability Company Act of the State of Delaware. IN WITNESS WHEREOF, this Certificate has been duly executed as of this 31st day of August 1997. By: /s/ Terence Seikel -------------------------- Name: Terence Seikel Title: Vice President of Finance and Administration EX-3.2 3 EX-3.2 1 EXHIBIT 3.2 ========================================================================== AAS HOLDINGS, LLC (a Delaware Limited Liability Company) ----------------------------------------------- SECOND AMENDED AND RESTATED OPERATING AGREEMENT ----------------------------------------------- August 5, 1997 ========================================================================== 2 Table of Contents
Page ---- 1. Definitions; Rules of Construction.................................. 1 2. Name; Formation; Issuance of Units.................................. 4 3. Purpose............................................................. 5 4. Offices............................................................. 5 5. Management of the Company........................................... 5 6. Members............................................................. 7 7. Capital Contributions; Issuance of Units; Capital Accounts........................................................... 8 8. Distributions...................................................... 10 9. Liability for Return of Capital..................................... 10 10. Administrative Matters............................................. 10 11. Transfers of Units and Interests................................... 10 12. Withdrawal......................................................... 11 13. Additional Members................................................. 11 14. Dissolution........................................................ 11 15. Continuation of the Company........................................ 13 16. Limitation on Liability............................................ 13 17. Amendments......................................................... 13 18. Governing Law...................................................... 13
3 OPERATING AGREEMENT dated as of August 5, 1997 of AAS HOLDINGS, LLC, a Delaware limited liability company (the "Company"), among the parties listed on SCHEDULE I. The parties, other than the Valley Investors, Gerard Jacobus Brink, Koop Brink, Jan Willem Brink, CB Capital Investors, Inc. and International Mezzanine Capital B.V., originally entered into an Operating Agreement dated as of September 28, 1995 (the "Original Agreement") for the purpose of forming a limited liability company pursuant to the provisions of the Delaware Limited Liability Company Act, 6 Del. C. ss. 18-101 et seq. (the "Delaware Act"). The parties, other than the Valley Investors entered into an Amended and Restated Operating Agreement dated as of October 30, 1996 (the "Amended and Restated Agreement") for the purpose of amending and restating the Original Agreement. The parties wish to amend and restate the Amended and Restated Agreement as set forth herein and to add certain parties hereto. ACCORDINGLY, in consideration of the mutual covenants and agreements contained in this Agreement, the sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Definitions; Rules of Construction. (a) When used in this Agreement, the following capitalized terms have the meanings ascribed to them below: "Affiliate" means, with respect to any Person, (i) a director or executive officer of such Person, (ii) a spouse, parent, sibling or descendant of such Person (or a spouse, parent, sibling or descendant of any director or executive officer of such Person), and (iii) any other Person that, directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with such Person. The term "control" means and includes the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Amendment" has the meaning ascribed to such term in Section 2(b). "Board of Managers" means the board of managers designated pursuant to Section 5. "Bylaws" means the Bylaws of the Company as amended from time to time, which are expressly incorporated by reference into this Agreement and the initial form of which is -1- 4 attached hereto as EXHIBIT A and are hereby adopted and approved by the Members. "Capital Contribution" means, with respect to any Member, the amount of capital contributed by such Member to the Company, as determined in accordance with Section 7. "CB" means CB Capital Investors, Inc. "CB Warrant" means the warrant issued on October 30, 1996, to CB to purchase up to 501 Class A Units (as modified in accordance with the terms thereof). "Certificate" has the meaning ascribed to such term in Section 2(b). "Class A Member" means a Member who owns Class A Units. "Class A Unit" means one Class A Unit of the Company entitling the holder thereof to the rights provided by this Agreement. "Class B Unit" means one Class B Unit of the Company entitling the holder thereof to the rights designated by the Board of Managers as provided by an amendment to this Agreement approved by the Board of Managers. "Delaware Act" has the meaning ascribed to such term in the first paragraph. "Event of Withdrawal of a Member" means the death, insanity, retirement, resignation, expulsion, bankruptcy or dissolution of a Member or the occurrence of any other event that terminates the continued membership of a Member in the Company. "IMC" means International Mezzanine Capital B.V. "IMC Warrant" means the warrant issued on October 30, 1996, to IMC to purchase up to 501 Class A Units (as modified in accordance with the terms thereof). "Interest" means the ownership interest of a Member in the Company, consisting of (i) such Member's ownership of Units and right to receive a portion of distributions, (ii) such Member's right to vote or grant or withhold consents with respect to Company matters as provided herein or in the Delaware Act and (iii) such Member's other rights and privileges as herein provided. -2- 5 "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. "Majority in Interest of Chase Members" shall have the meaning set forth in the Members' Agreement. "Managing Member" means a Member who is a Manager. "Manager" means a member of the Board of Managers as designated in, or selected pursuant to, Section 5. "Majority in Interest of Class A Members" means, at any time, the Class A Members who hold in the aggregate greater than 50% of the number of Units outstanding at such time. "Majority in Interest of Managing Members" means, at any time, the Managing Members who hold in the aggregate greater than 50% of the profits and capital interest of the Company held by all Managing Members. "Majority in Interest of Members" means, at any time, the Members who hold in the aggregate greater than 50% of the profits and capital interest of the Company. "Members" shall mean any Person holding a Unit or who shall be admitted as additional or substituted Members pursuant to this Agreement, so long as they remain Members. "Members' Agreement" means the Second Amended and Restated Members' Agreement dated as of the date hereof, among the Company and certain holders of Units. "Net Profits and Net Losses" means the net taxable income or net taxable loss of the Company, respectively, as determined for federal income tax purposes, for each fiscal year of the Company, plus any income that is exempt from federal income tax and minus expenditures that are not deductible in computing federal taxable income and not properly chargeable to capital accounts, in each case to the extent such items are not otherwise taken into account in computing Net Profits or Net Losses. "Person" shall be construed broadly and shall include an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal law then in force. -3- 6 "Sub Debt Warrants" shall mean the CB Warrant and the IMC Warrant. "Sub Debt Units" shall mean the Units issued upon exercise of the Sub Debt Warrants. "Subsidiary" means with respect to any Person, any corporation of which the shares of stock having a majority of the general voting power in electing the board of directors of such corporation are, at the time as of which any determination is being made, owned by such Person either directly or indirectly through Subsidiaries. "Systems" means Advanced Accessory Systems, LLC, a Delaware limited liability company and a Subsidiary of the Company. "Transfer" shall have the meaning set forth in Section 11. "Units" means collectively or individually, the Class A Units and the Class B Units. "Valley Investors" has the meaning ascribed to such term in Section 7(a) hereof. "Warrant Agreement" shall have the meaning set forth in the Members' Agreement. (b) The title of and the section and paragraph headings in this Agreement are for convenience of reference only and shall not govern the interpretation of any of the terms or provisions of this Agreement. (c) The use herein of the masculine, feminine or neuter forms shall also denote the other forms, as in each case the context may require. 2. Name; Formation; Issuance of Units. (a) The name of the Company shall be "AAS Holdings, LLC," or such other name as the Board of Managers may from time to time hereafter designate. (b) The Company was formed upon the execution and filing by Paul Mitrokostas (such Person being hereby authorized to take such action) with the Secretary of State of the State of Delaware of a certificate of formation of the Company (the "Certificate") in the form attached hereto as EXHIBIT B on August 28, 1995, as amended by a certificate of amendment of the Company (the "Amendment") in the form attached hereto as EXHIBIT C on September 13, 1995. -4- 7 (c) The Company shall be authorized to issue from time to time up to 25,000 Class A Units and up to an additional 2,000 Class B Units, which Units may be issued pursuant to such agreements as the Board or a committee thereof shall approve, including pursuant to options on warrants. The Class B Units shall entitle the holders thereof to such rights as shall be designated by the Board of Managers upon the original issuance of any Class B Unit; provided, however, that the rights of the holders of the Class B Units shall not be senior in right (i) as to allocations of Net Profits or (ii) as to distributions, nor shall the rights of the holders of the Class B Units adversely affect the rights of the holders of Class A Units without the consent of a Majority in Interest of Class A Members. The Board of Managers shall have the right and authority to amend this Agreement to reflect the admission of holders of Class B Units and to reflect the rights of such holders hereunder. (d) The parties hereto ratify and confirm the filing of the Certificate and the Amendment. 3. Purpose. (a) The purpose of the Company shall be to engage in any lawful business that may be engaged in by a limited liability company organized under the Delaware Act, as such business activities may be determined by the Board of Managers from time to time. 4. Offices. (a) The principal office of the Company, and such additional offices as the Board of Managers may determine to establish, shall be located at such place or places inside or outside the State of Delaware as the Board of Managers may designate from time to time. (b) The registered office of the Company in the State of Delaware is located at 32 Loockerman Square, Suite L-100, Dover, Delaware 19904. The registered agent of the Company for service of process at such address is The Prentice-Hall Corporation System, Inc. 5. Management of the Company. (a) Subject to the delegation of rights and powers provided for herein and in the Bylaws, the Board of Managers shall have the sole right to manage the business of the Company and shall have all powers and rights necessary, appropriate or advisable to effectuate and carry out the purposes and business of the Company. The Board of Managers shall consist of up to eleven (11) members as designated from time to time in accordance with the Members' Agreement. Subject to the provisions of the Members' Agreement, the Board of Managers shall be selected by a Majority in Interest of Class A Members. CB shall at all times be a member of the Board of Managers for so long as CB shall own any Units. A Majority in Interest of the Chase Members may act through its duly authorized representative as a member of the Board of Managers. Any or all -5- 8 Managers may be removed as Managers without cause by the vote of a Majority in Interest of Class A Members, provided, however, that no Manager may be removed without the consent of Members who are entitled to designate such person as a Manager pursuant to the Members' Agreement. (b) No Member, by reason of such Member's status as such, shall have any authority to act for or bind the Company but shall have only the right to vote on or approve the actions herein specified to be voted on or approved by such Member. (c) The officers of the Company shall be, and shall be elected, removed and perform such functions, as are provided in the Bylaws. The Board of Managers may appoint, employ, or otherwise contract with such other Persons for the transaction of the business of the Company or the performance of services for or on behalf of the Company as it shall determine in its sole discretion. The Board of Managers may delegate to any officer of the Company or to any such other Person such authority to act on behalf of the Company as the Board of Managers may from time to time deem appropriate in its sole discretion. (d) Except as otherwise provided by the Board of Managers or in the Bylaws, when the taking of such action has been authorized by the Board of Managers, any Manager or officer of the Company or any other Person specifically authorized by the Board of Managers may execute any contract or other agreement or document on behalf of the Company and may execute and file on behalf of the Company with the Secretary of State of the State of Delaware any certificates of amendment to the Company's certificate of formation, one or more restated certificates of formation and certificates of merger or consolidation and, upon the dissolution and completion of winding up of the Company, at any time when there are fewer than two Members, or as otherwise provided in the Delaware Act, a certificate of cancellation canceling the Company's certificate of formation. (e) If a vacancy on the Board of Managers is not filled within 60 days after such vacancy occurs by a Majority in Interest of Class A Members, such vacancy may thereafter be filled by a majority of the Managers then in office, or, if there be none, by a vote of a Majority in Interest of the Members. Managers shall serve until they resign, die, become incapacitated or are removed. Any Manager, except CB, can be removed with or without cause by the vote of a Majority in Interest of Class A Members. Determinations to be made by the Managers in connection with the conduct of the business of the Company shall be made in the manner provided in the Bylaws, unless otherwise specifically provided herein. Notwithstanding the foregoing provisions of this paragraph (e), any member of the Board of Managers may be removed by the party entitled to elect such member under the Members' Agreement, and the vacancy created by any former member -6- 9 of the Board of Managers may be filled by the party entitled to elect such former member under the Members' Agreement. 6. Members; Representations of Members; Representations of Company. (a) The name and business, mailing or residence address of the Members of the Company are set forth on SCHEDULE I. Schedule I shall be amended from time to time to reflect the names and business, mailing or residence address of each of Persons who shall become Members after the date hereof. (b) Upon the acquisition of a Unit, each Member makes the following representations and warranties to the Company with respect to such Unit: (i) Such Member has such knowledge and expertise in financial and business matters that he or it is capable of utilizing the information made available to the undersigned, to evaluate the merits and risks of an investment in the Company and to make an informed investment decision with respect thereto. The undersigned is aware that his or its purchase of a Unit is highly speculative and he or it is able, without impairing his or its financial condition, to hold the Interest for an indefinite period of time and to suffer a complete loss of its or his or its investment. (ii) Such Member understands and acknowledges that the offering of the Units has not been considered or approved by any governmental or other entity. (iii) Such Member recognizes that an investment in the Company involves certain risks, and has taken full cognizance of, and understands all of, the risk factors related to the purchase of the Units. Such Member has consulted with his or its professional, tax and legal advisors with respect to the Federal, state, local and foreign income tax consequences of the undersigned's participation as a Member of the Company. (iv) The execution and delivery of this Agreement by such Member and has been duly authorized. (v) Such Member understands that there is no public market for the Units and that the transferability of the Units is restricted. (vi) The Units are being purchased by such Member for his or its own account only for investment and is not being purchased with a view towards its resale or further distribution. Such Member understands that the Units are not registered for sale under the Securities Act or otherwise and that the Units cannot be offered for sale or sold by such Member or by anyone acting for the -7- 10 undersigned's account or on the undersigned's behalf without the registration of the Units and/or the fulfillment of other regulatory requirements. 7. Capital Contributions; Issuance of Units; Capital Accounts. (a) The Members have contributed to the Company on or prior to October 30, 1996 $1,000 per Class A Unit by payment of cash in such amount or by the delivery of a promissory note. Gerard Jacobus Brink, Koop Brink and Jan Willem Brink have contributed an aggregate of $4,286,478 in exchange for the 1,230 Class A Units acquired by them on October 30, 1996 (or $3,484.941 per Unit). Pursuant to the adjustment requirements of Section 704 of the Internal Revenue Code, each of the capital accounts of the Members in effect immediately prior to the acquisition of the foregoing 1,230 Units was revalued and increased to an amount equal to $3,484.941 per Unit owned by such Member. Pursuant to Subscription Agreements, each between the Company and Roger T. Morgan and Robert L. Fisher (together, the "Valley Investors") dated as of the date hereof, the Valley Investors have purchased certain Class A Units and contributed an aggregate of $4,499,298.01 in exchange for the 802 Class A Units being acquired by them on the date hereof (or $5,610.09 per Class A Unit). Pursuant to the adjustment requirements of Section 704 of the Internal Revenue Code, each of the capital accounts of the Members in effect immediately prior to the acquisition of the foregoing 802 Class A Units shall be revalued and increased to an amount equal to $5,610.09 per Unit owned by such Member. (b) A separate capital account shall be maintained on the books of the Company for each Member, which shall be adjusted (1) as of December 31 of each year, (2) immediately prior to the acquisition of any Unit by any Person, (3) effective as of the date of sale of the Company (whether by way of asset sale, stock sale or merger in which the Members immediately prior to such stock sale or merger shall cease to own a majority of all Units owned by all Members) and (4) the date of dissolution of the Company as follows: (i) the amount of money and the fair market value of property (net of any liabilities secured by such property that the Company assumes or takes subject to) contributed by such Member to the Company shall be credited to such Member's capital account; (ii) the amount of any distributions (including the fair market value (as determined by the Board of Managers in good faith) of property other than cash (net of any liabilities that such Member assumes or takes subject to) distributed to such Member shall be debited from such Member's capital account; and -8- 11 (iii) Net Profits incurred by the Company since the last date on which Net Profits or Net Losses shall have been allocated to the Members shall be credited to such Member's capital account and Net Losses incurred by the Company since the last date on which Net Losses or Net Profits shall have been allocated to the Members shall be debited to such Member's capital account, which allocations shall be made ratably among the holders of Class A Units according to their respective holdings of such Class A Units. (c) Notwithstanding any provision of this Agreement to the contrary, upon the date of each exercise of each warrant or option issued by the Company, each Member's (including the optionholder's or warrantholder's) capital account shall be reallocated (a "Capital Shift") such that after such Capital Shift the ratio of each Member's (including the optionholder's or warrantholder's) capital account to the aggregate of all Members' capital account balances shall be the same as the ratio of the number of Units owned by each such Member (including the optionholder or warrantholder) to the aggregate number of all Units outstanding. (d) Notwithstanding any provision of this Agreement to the contrary, each Member's capital account shall be maintained and adjusted in accordance with the Code, including (i) the adjustments permitted or required by Code Section 704(b) and, to the extent applicable, the principles expressed in Internal Revenue Code Section 704(c) and the regulations promulgated thereunder and (ii) adjustments required to maintain capital accounts in accordance with the "substantial economic effect test" set forth in the regulations promulgated under Internal Revenue Code Section 704(b). (e) Any Member, including any substitute Member, who shall receive any Units by means of a transfer to him of Units of another Member shall have a capital account that reflects the capital account associated with the transferred Units. (f) Anything contained in this Agreement to the contrary notwithstanding, (i) the aggregate interest of the Managing Members in each material item of Company income, gain, loss, deduction or credit shall be equal to at least 1% of each such item at all times during the existence of the Company, unless otherwise required by the Code, and (ii) the aggregate balance in the capital accounts of the Managing Members shall be equal to at least 1% of the aggregate positive balances in the capital accounts of all the Members at all times. 8. Distributions. (a) Within 90 days following the end of each fiscal year, the Company will distribute to each Member an amount (if any) equal to 44% of the excess of Net Profits over Net Losses previously allocated to such Member's -9- 12 capital account for such fiscal year and all prior fiscal years pursuant to Section 7, less any distributions made during such fiscal year pursuant to Section 8(b). (b) All distributions not made pursuant to Section 8(a) of other assets of the Company, whether in cash or in kind, shall be made at such times and in such amounts as the Board of Managers may determine, and shall be allocated among and made to the Members ratably in accordance with their respective holdings of Class A Units at the date of distribution. 9. Liability for Return of Capital. No Member or Manager shall have any liability for the return of any Member's Capital Contribution, which Capital Contribution shall be payable solely from the assets of the Company at the absolute discretion of the Board of Managers, subject to the requirements of the Delaware Act. 10. Administrative Matters. (a) The Company hereby designates CB as the "Tax Matters Partner" for purposes of Code Section 6231 and the regulations promulgated thereunder. The Tax Matters Partner shall promptly advise each Member of any audit proceedings proposed to be conducted with respect to the Company. (b) It is the intention of the Members that the Company shall be taxed as a "partnership" for federal, state, local and foreign income tax purposes. The Members shall take all reasonable actions, including the amendment of this Agreement and the execution of other documents, as may reasonably be required in order for the Company to qualify for and receive "partnership" treatment for federal, state, local and foreign income tax purposes. (c) The fiscal year of the Company shall be the calendar year. The books and records of the Company shall be maintained in accordance with generally accepted accounting principles and Code Section 704(b) and the regulations promulgated thereunder. 11. Transfers of Units and Interests. No Member may sell, assign, pledge or otherwise transfer or encumber (collectively, "Transfer") all or any part of its Units or other part of its Interest, and no transferees of all or any part of the Units of a Member shall be admitted as a substituted Member, without, in either event, having obtained the prior written consent of a Majority in Interest of the Managing Members (excluding Managing Members that are transferring Units), which consent may be withheld in their sole discretion, and without complying with the applicable provisions of the Members' Agreement applicable to such Interest to which such Member is a party (each, a "Members' Agreement"), among the Company and the Members. Any Transfer or attempted Transfer of any Interest in -10- 13 the Company in violation of any the provisions of this Section 11 shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Units as the owner of such Units for any purpose. The Board of Managers shall amend SCHEDULE I hereto from time to time to reflect Transfers made in accordance with, and as permitted under, this Section 11 and the applicable Members' Agreement. Notwithstanding the foregoing, (a) the transfer of the Sub Debt Warrants and the Sub Debt Units shall not be subject to the restrictions set forth in this Section 11 but shall be subject to the transfer restrictions set forth in the Warrant Agreement and (b) the transfer of the Units acquired by Gerard Jacobus Brink, Koop Brink and Jan Willem Brink on October 30, 1996 and Robert L. Fisher and Roger T. Morgan on the date hereof shall not be subject to the restrictions set forth in this Section 11 but shall be subject to the transfer restrictions set forth in the Members' Agreement. 12. Withdrawal. No Member shall have the right to withdraw from the Company except with the consent of the Board of Managers and upon such terms and conditions as may be specifically agreed upon between the Company and the withdrawing Member. The provisions hereof with respect to distributions upon withdrawal are exclusive, and no Member shall be entitled to claim any further or different distribution upon withdrawal under Section 18-604 of the Delaware Act or otherwise. 13. Additional Members. The Board of Managers shall have the right to cause the Company to issue additional Units and to admit additional Members upon the acquisition of such Units upon such terms and conditions, at such time or times, and for such Capital Contributions as shall be determined by the Board of Managers. In connection with the admission of an additional Member, the Board of Managers shall amend SCHEDULE I hereof to reflect the name and address of the additional Member. Prior to the admission of any Person as a Member, such Person shall execute a counterpart to this Agreement and shall agree to be bound by the terms hereof. Any person who shall exercise the Sub Debt Warrants or options to purchase Units shall automatically be admitted as a Member upon such person's execution and delivery of a counterpart to this Agreement. 14. Dissolution. (a) Subject to the provisions of Section 15, the Company shall be dissolved and its affairs wound up and terminated upon the first to occur of the following: (i) December 31, 2025; (ii) the determination of the Board of Managers and a Majority in Interest of Class A Members to dissolve the Company; or -11- 14 (iii) the occurrence of an Event of Withdrawal of a Managing Member or any other event causing a dissolution of the Company under Section 18-801 of the Delaware Act. (b) Upon dissolution of the Company, the Company's affairs shall be promptly wound up in accordance with the provisions of this Section 14. The Company shall engage in no further business except as may be necessary, in the reasonable discretion of the Board of Managers, to preserve the value of the Company's assets during the period of dissolution and liquidation. (c) Distributions to the Members in liquidation may be made in cash or in kind, or partly in cash and partly in kind, as determined by the Board of Managers. With respect to distributions in kind, the capital account of each Member receiving such distribution shall be adjusted as if such distributed property had been sold at fair market value and the gain or loss on such sale had been allocated to such Member. (d) The Net Profits and Net Losses of the Company during the period of dissolution and liquidation shall be allocated among the Members in accordance with the provisions of Section 7. (e) The assets of the Company (including, without limitation, proceeds from the sale or other disposition of any assets during the period of dissolution and liquidation) shall be applied as follows: (i) First, to repay any indebtedness of the Company, whether to third parties or the Members, in the order of priority required by law; (ii) Next, to any reserves which the Board of Managers reasonably deems necessary for contingent or unforeseen liabilities or obligations of the Company (which reserves when they become unnecessary shall be distributed in accordance with the provisions of (iii), below); and (iii) Next, to the Members in proportion to their respective positive capital account balances (after taking into account all adjustments to the Members' capital accounts required under Section 14(d)). 15. Continuation of the Company. Notwithstanding the -12- 15 provisions of Section 14, the occurrence of an Event of Withdrawal of a Member shall not dissolve the Company if within 90 days after the occurrence of such Event of Withdrawal of a Member the business of the Company is continued by a Majority in Interest of Members remaining after such Event of Withdrawal. 16. Limitation on Liability. The debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member or Manager of the Company shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member or Manager. 17. Amendments. Subject to the right of the Board of Managers to amend this Agreement in accordance with the provisions of Section 2(c) to set forth the terms of Class B Units, this Agreement may be amended only upon the written consent of the Board of Managers and a Majority in Interest of Class A Members. 18. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Delaware without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the state of Delaware. -13- 16 IN WITNESS WHEREOF, the undersigned have duly executed this Operating Agreement as of the date first written above. AAS HOLDINGS, LLC By: Terence C. Seikel -------------------------------- Name: Terence C. Seikel Title: Vice-President CB CAPITAL INVESTORS, INC. By: Donald J. Hofmann ------------------------------------------ Name: Donald J. Hofmann Title: The F. Alan Smith Family Limited Partnership ---------------------------------------------- The F. Alan Smith Family Limited Partnership F. Alan Smith, General Partner IPA MTECH INVESTORS, LLC By: [SIG] ------------------------------------------ Name: [SIG] Title: Partner MASCOTECH, INC. By: ---------------------------------------- Name: Title: THE BANDUCCI FAMILY, LLC By: Barry Banducci ---------------------------------------- Name: Barry Banducci Title: Manager Marshall Gladchun ---------------------------------------- Marshall Gladchun -14- 17 Richard Borghi 5/3/97 ----------------------------------- Richard Borghi Gerard Jacobus Brink ----------------------------------- Gerard Jacobus Brink K. Brink ----------------------------------- Koop Brink J.W. Brink ----------------------------------- Jan Willem Brink LAVERNE A. FARRIS TRUST By: LaVerne A. Farris -------------------------------- Name: LaVerne A. Farris Title: Trustee ----------------------------------- Craig A. Stapleton Barbara A. Rushing ----------------------------------- Barbara A. Rushing David A. Koslosky ----------------------------------- David A. Koslosky Winston P. Fowler 8/2/97 ----------------------------------- Winston P. Fowler Joseph A. DiLuca 8-1-97 ----------------------------------- Joseph A. DiLuca Paul J. Biegansky 8-1-97 ----------------------------------- Paul J. Biegansky Terence Seikel ----------------------------------- Terence Seikel -15- 18 Robert L. Fisher ----------------------------------- Robert L. Fisher Roger T. Morgan ----------------------------------- Roger T. Morgan -16- EX-3.3 4 EX-3.3 1 EXHIBIT 3.3 BYLAWS OF AAS HOLDINGS, LLC A DELAWARE LIMITED LIABILITY COMPANY Adopted as of September 28, 1995 As Amended As of August 5, 1997 2 TABLE OF CONTENTS -----------------
Page ---- ARTICLE I MEETINGS OF MEMBERS ................................. 1 Section 1. Place of Meetings and Meetings by Telephone.......... 1 Section 2. Call of Meetings..................................... 1 Section 3. Notice of Meetings of Members........................ 1 Section 4. Manner of Giving Notice.............................. 2 Section 5. Adjourned Meeting; Notice............................ 2 Section 6. Quorum; Voting....................................... 2 Section 7. Waiver of Notice by Consent of Absent Members........ 2 Section 8. Member Action by Written Consent Without a Meeting... 3 Section 9. Record Date for Member Notice, Voting and Giving Consents......................................... 3 Section 10. Proxies.............................................. 3 ARTICLE II Managers and Meetings of Managers.................... 4 Section 1. Powers............................................... 4 Section 2. Number of Managers................................... 4 Section 3. Vacancies............................................ 4 Section 4. Place of Meetings and Meetings by Telephone.......... 4 Section 5. Regular Meetings..................................... 4 Section 6. Special Meetings..................................... 4 Section 7. Quorum; Chairman..................................... 5 Section 8. Waiver of Notice..................................... 5 Section 9. Adjournment.......................................... 5 Section 10. Action Without a Meeting............................. 5 Section 11. Delegation of Power.................................. 6 ARTICLE III Officers............................................. 6 Section 1. Officers............................................. 6 Section 2. Election of Officers................................. 6 Section 3. Additional Officers.................................. 6 Section 4. Removal and Resignation of Officers.................. 6 Section 5. Vacancies in Offices................................. 7 Section 6. Chief Executive Officer.............................. 7 Section 7. President............................................ 7 Section 8. Secretary............................................ 7 Section 9. Treasurer............................................ 8 ARTICLE IV Maintenance and Inspection of Records................ 8 Section 1. Member List.......................................... 8 Section 2. Bylaws............................................... 8 Section 3. Other Records........................................ 8
-i- 3
Page ---- Section 4 Inspection by Managers.......................................... 9 ARTICLE V General Matters................................................. 9 Section 1. Checks, Drafts, Evidence of Indebtedness........................ 9 Section 2. Representation of Shares of Other Entities Held by Company...... 9 Section 3. Seal............................................................ 9 ARTICLE VI Amendments and Incorporation by Reference....................... 10 Section 1. Amendment....................................................... 10 Section 2. Incorporation by Reference of Bylaws into Operating Agreement... 10 ARTICLE VII Indemnification................................................. 10 Section 1. Indemnification of Managers, Officers, Employees and Agents..... 10
4 BYLAWS OF AAS HOLDINGS, LLC INTRODUCTION A. Agreement. These Bylaws are subject to the Second Amended and Restated Operating Agreement dated as of August 5, 1997, as the same may from time to time be amended and in effect (the "Operating Agreement"), of AAS Holdings, LLC, a Delaware limited liability company (the "Company"). In the event of any inconsistency between the terms hereof and the terms of the Operating Agreement, the terms of the Operating Agreement shall control. B. Definitions. Capitalized terms used and not defined in these Bylaws have the meanings ascribed to them in the Operating Agreement. ARTICLE I MEETINGS OF MEMBERS Section 1. Place of Meetings and Meetings by Telephone. Meetings of Members shall be held at any place designated by the Board of Managers. In the absence of any such designation, meetings of Members shall be held at the principal place of business of the Company. Any meeting of the Members may be held by conference telephone or similar communication equipment so long as all Members participating in the meeting can hear one another, and all Members participating by telephone or similar communication equipment shall be deemed to be present in person at the meeting. Section 2. Call of Meetings. Meetings of the Members may be called at any time by the Board of Managers for the purpose of taking action upon any matter requiring the vote or authority of the Members as provided herein or in the Operating Agreement or upon any other matter as to which such vote or authority is deemed by the Board of Managers to be necessary or desirable. Section 3. Notice of Meetings of Members. All notices of meetings of Members shall be sent or otherwise given in accordance with Section 4 of this Article I not less then five nor more than 60 days before the date of the meeting. The notice shall specify the place, date and hour of the meeting and the general nature of the business to be transacted. Section 4. Manner of Giving Notice. Notice of any meeting of Members shall be given personally or by telephone to each Member or sent by first class mail, by 5 telegram or telecopy (or similar electronic means) or by a nationally recognized overnight courier, charges prepaid, addressed to the Member at the address of that Member appearing on the books of the Company or given by the Member to the Company for the purpose of notice. Notice shall be deemed to have been given at the time when delivered either personally or by telephone, or at the time when deposited in the mail or with a nationally recognized overnight courier, or when sent by telegram or telecopy (or similar electronic means). Section 5. Adjourned Meeting; Notice. Any meeting of Members, whether or not a quorum is present, may be adjourned from time to time by the vote of a Majority in Interest of Class A Members represented at that meeting, either in person or by proxy. When any meeting of Members is adjourned to another time or place, notice need not be given of the adjourned meeting, unless a new record date of the adjourned meeting is fixed or unless the adjournment is for more than 30 days from the date set for the original meeting, in which case the Board of Managers shall set a new record date and shall give notice in accordance with the provisions of Sections 3 and 4 of this Article I. At any adjourned meeting, the Company may transact any business that might have been transacted at the original meeting. Section 6. Quorum; Voting. At any meeting of the Members, a Majority in Interest of Class A Members present, in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of Members holding a higher aggregate Percentage Interest is required by the Operating Agreement or applicable law. Except as otherwise required by the Operating Agreement, these Bylaws or applicable law, all matters shall be determined by a Majority in Interest of the Class A Members. Section 7. Waiver of Notice by Consent of Absent Members. The transactions of a meeting of Members, however called and noticed and wherever held, shall be as valid as though taken at a meeting duly held after regular call and notice if a quorum is present either in person or by proxy and if either before or after the meeting, each person entitled to vote who was not present in person or by proxy signs a written waiver of notice or a consent to a holding of the meeting or an approval of the minutes. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any meeting of Members. Attendance by a person at a meeting shall also constitute a waiver of notice of that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice of the meeting if that objection is expressly made at the beginning of the meeting. Section 8. Member Action by Written Consent Without a Meeting. Any action that may be taken at any meeting of Members may be taken without a meeting and without prior notice if a consent in writing setting forth the action so taken is signed by a Majority in Interest of Class A Members (or Members holding such higher -2- 6 aggregate Percentage Interest as is required to authorize or take such action under the terms of the Operating Agreement, these Bylaws or applicable law). Any such written consent may be executed and given by telecopy or similar electronic means. Such consents shall be filed with the Secretary of the Company and shall be maintained in the Company's records. Section 9. Record Date for Member Notice, Voting and Giving Consents. (a) For purposes of determining the Members entitled to vote or act at any meeting or adjournment thereof, the Board of Managers may fix in advance a record date which shall not be greater than 60 days nor fewer than five days before the date of any such meeting. If the Board of Managers does not so fix a record date, the record date for determining Members entitled to notice of or to vote at a meeting of Members shall be at the close of business on the business day immediately preceding the day on which notice is given, or if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. (b) The record date for determining the Members entitled to give consent to action in writing without a meeting, (a) when no prior action of the Board of Managers has been taken, shall be the day on which the first written consent is given, or (b) when prior action of the Board of Managers has been taken, shall be such date as determined for that purpose by the Board of Managers, which record date shall not precede the date upon which the resolution fixing it is adopted by the Board of Managers and shall not be more than 20 days after the date of such resolution. (c) Only Members of record on the record date as herein determined shall have any right to vote or to act at any meeting or give consent to any action relating to such record date, provided that no Member who transfers all or part of such Member's Interest after a record date (and no transferee of such Interest) shall have the right to vote or act with respect to the transferred Interest as regards the matter for which the record date was set. Section 10. Proxies. Every Member entitled to vote or act on any matter at a meeting of Members shall have the right to do so either in person or by proxy, provided that an instrument authorizing such a proxy to act is executed by the Member in writing and dated not more than 11 months before the meeting, unless the instrument specifically provides for a longer period. A proxy shall be deemed executed by a Member if the Member's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the Member or the Member's attorney-in-fact. A valid proxy that does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it before the vote pursuant to that proxy by a writing delivered to the Company stating that the proxy is revoked, by a subsequent proxy executed by, or by attendance at the meeting and voting in person by, the person executing that proxy or (ii) written notice of the death or incapacity of the maker of that proxy is received by the Company before the vote pursuant to that proxy is counted. A proxy purporting to be executed by or on behalf of -3- 7 a Member shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. Except to the extent inconsistent with the provisions hereof, the General Corporation Law of the State of Delaware, and judicial construction thereof by the Courts of the State of Delaware, shall be applicable to proxies granted by any Member. ARTICLE II MANAGERS AND MEETINGS OF MANAGERS Section 1. Powers. The powers of the Managers shall be as provided in the Operating Agreement. Section 2. Number of Managers. The Board of Managers shall consist of up to eleven (11) managers as shall be designated in accordance with the Operating Agreement. Section 3. Vacancies. Vacancies in the authorized number of Managers may be filled as provided in the Operating Agreement. Section 4. Place of Meetings and Meetings by Telephone. All meetings of the Board of Managers may be held at any place that has been designated from time to time by resolution of the Board of Managers. In the absence of such a designation, regular meetings shall be held at the principal place of business of the Company. Any meeting, regular or special, may be held by conference telephone or similar communication equipment so long as all Managers participating in the meeting can hear one another, and all Managers participating by telephone or similar communication equipment shall be deemed to be present in person at the meeting. Section 5. Regular Meetings. Regular meetings of the Board of Managers shall be held at such times and at such places as shall be fixed by unanimous approval of the Managers. Such regular meetings may be held without notice. Section 6. Special Meetings. Special meetings of the Board of Managers for any purpose or purposes may be called at any time by CB. Notice of the time and place of a special meeting shall be delivered personally or by telephone to each Manager and sent by first-class mail, by telegram or telecopy (or similar electronic means) or by nationally recognized overnight courier, charges prepaid, addressed to each Manager at that Manager's address as it is shown on the records of the Company. If the notice is mailed, it shall be deposited in the United States mail least five calendar days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or by telegram, telecopy (or similar electronic means) or overnight courier, it shall be given at least 24 hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the Manager or to a -4- 8 person at the office of the Manager who the person giving the notice has reason to believe will promptly communicate it to the Manager. The notice need not specify the purpose of the meeting. Section 7. Quorum; Chairman. A majority of the authorized number of Managers shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 9 of this Article II. Every act or decision done or made by the affirmative vote of a majority of the Managers present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Managers, except to the extent that the vote of a higher number of Managers is required by the Operating Agreement, these Bylaws or applicable law. The Board of Managers may from time to time appoint any Manager to serve as Chairman of the Board of Managers, who shall preside at all meetings of the Board of Managers and of the Members. If at the time of any such meeting, there shall not be a Chairman of the Board, then the Board of Managers shall appoint a person to preside at such meeting. Section 8. Waiver of Notice. Notice of any meeting need not be given to any Manager who either before or after the meeting signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents, and approvals shall be filed with the records of the Company or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any Manager who attends the meeting without protesting at or prior to its commencement the lack of notice to that Manager. Section 9. Adjournment. A majority of the Managers present at any meeting, whether or not constituting a quorum, may adjourn any meeting to another time and place. Notice of the time and place of holding an adjourned meeting need not be given unless the meeting is adjourned for more than 48 hours, in which case notice of the time and place shall be given before the time of the adjourned meeting in the manner specified in Section 6 of this Article II. Section 10. Action Without a Meeting. Any action to be taken by the Board of Managers at a meeting may be taken without such meeting by the written consent of a majority of the Managers then in office (or such higher number of Managers as is required to authorize or take such action under the terms of the Operating Agreement, these Bylaws or applicable law). Any such written consent may be executed and given by telecopy or similar electronic means. Such written consents shall be filed with the minutes of the proceedings of the Board of Managers. If any action is so taken by the Board of Managers by the written consent of less than all of the Managers, prompt notice of the taking of such action shall be furnished to each Manager who did not execute such written consent, provided that the effectiveness of such action shall not be impaired by any delay or failure to furnish such notice. -5- 9 Section 11. Delegation of Power. Any Manager may, by power of attorney, delegate his power to any other Manager or Managers; provided, however, that in no case shall fewer than two Managers personally exercise the powers granted to the Managers, except as otherwise provided by resolution of the Board of Managers. A Manager represented by another Manager pursuant to such power of attorney shall be deemed to be present for purposes of establishing a quorum and satisfying any voting requirements. The Board of Managers may, by resolution, delegate any or all of their powers and duties granted hereunder or under the Operating Agreement to one or more committees of the Board of Managers, each consisting of one or more Managers, or to one or more officers, employees or agents (including, without limitation, Members), and to the extent any such powers or duties are so delegated, action by the delegate or delegates shall be deemed for all purposes to be action by the Board of Managers. All such delegates shall serve at the pleasure of the Board of Managers. To the extent applicable, notice shall be given to, and action may be taken by, any delegate of the Board of Managers as herein provided with respect to notice to, and action by, the Board of Managers. ARTICLE III OFFICERS Section 1. Officers. The officers of the Company shall be a Chief Executive Officer, a President, a Secretary and a Treasurer. The Company may also have, at the discretion of the Board of Managers, such other officers as may be appointed in accordance with the provisions of Section 3 of this Article III. Any number of offices may be held by the same person. Officers may, but need not, be Managers. Section 2. Election of Officers. The officers of the Company shall be chosen by the Board of Managers, and each shall serve at the pleasure of the Board of Managers, subject to the rights, if any, of an officer under any contract of employment. Section 3. Additional Officers. The Board of Managers may appoint and may empower the Chief Executive Officer or the President to appoint such additional officers as the business of the Company may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these Bylaws or as the Board of Managers (or, to the extent the power to prescribe authorities and duties of additional officers is delegated to him or her, the Chief Executive Officer or the President) may from time to time determine. Section 4. Removal and Resignation of Officers. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, with or without cause, by the Board of Managers at any regular or special meeting of the Board of Managers or by such officer, if any, upon whom such power of removal may be conferred by the Board of Managers. Any officer may resign at any time by giving -6- 10 written notice to the Company. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice, and unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the officer is a party. Section 5. Vacancies in Offices. A vacancy in any office because of death, resignation, removal, disqualification or other cause shall be filled by the Board of Managers. The Chief Executive Officer or the President may make temporary appointments to a vacant office reporting to the Chief Executive Officer or the President pending action by the Board of Managers. Section 6. Chief Executive Officer. The Chief Executive Officer shall, subject to the control of the Board of Managers, share with the President the general supervision, direction and control of the business and the offices of the Company. He or she shall have the general power and duties of management usually vested in the office of Chief Executive Officer of a corporation and shall have such other powers and duties as may be prescribed by the Board of Mangers, the Operating Agreement or these Bylaws. Section 7. President. The President shall, subject to the control of the Board of Managers, share with the Chief Executive Officer the general supervision, direction and control of the business and the officers of the Company. He or she shall have the general powers and duties of management usually vested in the office of President of a corporation and shall have such other powers and duties as may be prescribed by the Board of Managers, the Operating Agreement or these Bylaws. Section 8. Secretary. The Secretary shall keep or cause to be kept at the principal place of business of the Company or such other place as the Board of Managers may direct a book of minutes of all meetings and actions of the Board of Managers, committees or other delegates of the Board of Managers and the Members. The Secretary shall keep or cause to be kept at the principal place of business of the Company a register or a duplicate register showing the names of all Members and their addresses, the class and percentage interests in the Company held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall give or cause to be given notice of all meetings of the Members and of the Board of Managers (or committees or other delegates thereof) required to be given by these Bylaws or by applicable law and shall have such other powers and perform such other duties as may be prescribed by the Board of Managers, the Chief Executive Officer or the President or by these Bylaws. Section 9. Treasurer. The Treasurer shall be the chief financial officer of the Company and shall keep and maintain or cause to be kept and maintained adequate and correct books and records of accounts of the properties and business transactions of -7- 11 the Company. The books of account shall at all reasonable times be open to inspection by any Manager. The Treasurer shall deposit all monies and other valuables in the name and to the credit of the Company with such depositaries as may be designated by the Board of Managers. He or she shall disburse the funds of the Company as may be ordered by the Board of Managers, shall render to the Chief Executive Officer, the President and the Board of Managers, whenever they request it, an account of all of his or her transactions as chief financial officer and of the financial condition of the Company and shall have other powers and perform such other duties as may be prescribed by the Board of Managers, the Chief Executive Officer or the President or these Bylaws. ARTICLE IV MAINTENANCE AND INSPECTION OF RECORDS Section 1. Member List. The Company shall maintain at its principal place of business a record of its Members, giving the names and addresses of all Members and the class and percentage interests in the Company held by each Member. Subject to such reasonable standards (including standards governing what information and documents are to be furnished and at whose expense) as may be established by the Board of Managers from time to time, each Member has the right to obtain from the Company from time to time upon reasonable demand for any purpose reasonably related to the Member's interest as a Member of the Company a record of the Company's Members. Section 2. Bylaws. The Company shall keep at its principal place of business the original or a copy of these Bylaws as amended to date, which shall be open to inspection by the Members at all reasonable times during office hours. Section 3. Other Records. The accounting books and records, minutes of proceedings of the Members and the Board of Managers and any committees or delegates of the Board of Managers and all other information pertaining to the Company that is required to be made available to the Members under the Delaware Act shall be kept at such place or places designated by the Board of Managers or in the absence of such designation, at the principal place of business of the Company. The minutes shall be kept in written form and the accounting books and records and other information shall be kept either in written form or in any other form capable of being converted into written form. The books of account and records of the Company shall be maintained in accordance with generally accepted accounting principles consistently applied during the term of the Company, wherein all transactions, matters and things relating to the business and properties of the Company shall be currently entered. Subject to such reasonable standards (including standards, governing what information and documents are to be furnished and at whose expense) as may be established by the Board of Managers from time to time, minutes, accounting books and records and other -8- 12 information shall be open to inspection upon the written demand of any Member at any reasonable time during usual business hours for purposes reasonably related to the Member's interests as a Member. Any such inspection may be made in person or by an agent or attorney and shall include the right to copy and make extracts. Notwithstanding the foregoing, the Board of Managers shall have the right to keep confidential from Members for such period of time as the Board of Managers deems reasonable any information which the Board of Managers reasonably believes to be in the nature of trade secrets or other information the disclosure of which the Board of Managers in good faith believes is not in the best interests of the Company or could damage the Company or its business or which the Company is required by law or by agreement with a third party to keep confidential. Section 4. Inspection by Managers. Every Manager shall have the right at any reasonable time to inspect all books, records and documents of every kind and the physical properties of the Company for a purpose reasonably related to his position as Manager. This inspection by a Manager may be made in person or by an agent or attorney and the right of inspection includes the right to copy and make extracts of documents. ARTICLE V GENERAL MATTERS Section 1. Checks, Drafts, Evidence of Indebtedness. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness issued in the name of or payable by the Company shall be signed or endorsed in such manner and by such person or persons as shall be designated from time to time in accordance with the resolution of the Board of Managers. Section 2. Representation of Shares of Other Entities Held by Company. The Chief Executive Officer, the President or any other person authorized by the Board of Managers or by any of the foregoing designated officers is authorized to vote or represent on behalf of the Company any and all shares of any corporation, partnership, limited liability company, trusts or other entities, foreign or domestic, standing in the name of the Company. Such authority may be exercised in person or by a proxy duly executed by such designated person. Section 3. Seal. The Board of Managers may approve and adopt an official seal of the Company, which may be altered by them at any time. Unless otherwise requiredby the Board of Managers, any seal so adopted shall not be necessary to be placed on, and its absence shall not impair the validity of, any document, instrument or other paper executed and delivered by or on behalf of the Company. -9- 13 ARTICLE VI AMENDMENTS AND INCORPORATION BY REFERENCE Section 1. Amendment. These Bylaws may be restated, amended, supplemented or repealed only by the Board of Managers or a Majority in Interest of Class A Members. Section 2. Incorporation by Reference of Bylaws into Operating Agreement. These Bylaws and any amendments hereto shall be deemed incorporated by reference in the Operating Agreement. ARTICLE VII INDEMNIFICATION Section 1. Indemnification of Managers, Officers, Employees and Agents. (a) Each Person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter, a "proceeding") by reason of the fact that he or she is or was a Manager or an officer of the Company, or is or was serving at the request of the Company as a manager, director, officer, employee or agent of another limited liability company or of a corporation, partnership, joint venture, trust or other enterprise, including a service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such a proceeding is alleged action in an official capacity as a Manager, officer, employee or agent or in any other capacity while serving as a Manager, officer, employee or agent, shall be indemnified and held harmless by the Company to the fullest extent authorized by the Delaware Act (including indemnification for negligence or gross negligence but excluding indemnification (i) for acts or omissions involving actual fraud or willful misconduct or (ii) with respect to any transaction from which the indemnitee derived an improper personal benefit), against all expense, liability and loss (including attorneys' fees, judgments, fines, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith. (b) The right to indemnification conferred in paragraph (a) shall include the right to be paid by the Company the expenses (including attorneys' fees) incurred in defending any proceeding in advance of its final disposition (hereinafter an "advancement of expenses"). The rights to indemnification and to the advancement of expenses conferred in paragraph (a) and this paragraph (b) shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a Manager, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators. -10- 14 (c) The rights to indemnification and to the advancement of expenses conferred in this Section 1 shall not be exclusive of any other right that any Person may have or hereafter acquire under any statute, agreement, vote of the Managers or otherwise. (d) The Company may maintain insurance, at its expense, to protect itself and any Manager, officer, employee or agent of the Company or another limited liability company, consultant, corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Company would have the power to indemnify such Person against such expense, liability or loss under the Delaware Act. (e) The Company may, to the extent authorized from time to time by the Board of Managers, grant rights to indemnification and to advancement of expenses to any employee or agent of the Company to the fullest extent of the provisions of this Section 1 with respect to the indemnification and advancement of expenses of Managers and officers of the Company. -11- EX-3.4 5 EX-3.4 1 EXHIBIT 3.4 CERTIFICATE OF INCORPORATION OF AAS CAPITAL CORPORATION ---------------------------- ARTICLE I The name of the corporation (herein called the "Corporation") is AAS Capital Corporation. ARTICLE II The address of the registered office of the Corporation in the State of Delaware is 9 East Loockerman Street, City of Dover, County of Kent. The name of the registered agent of the Corporation at such address is National Registered Agents, Inc. ARTICLE III The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE IV The total number of shares of all classes of stock which the Corporation shall have authority to issue is One Thousand (1000) shares, all of which shall be of one class, shall be designated Common Stock and shall have a par value of one cent ($.01) per share. ARTICLE V The name and mailing address of the incorporator is as follows: Name Mailing Address c/o O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza Sharon M. Goodman 41st Floor New York, New York 10112 2 ARTICLE VI The number of directors of the Corporation shall be such as from time to time shall be fixed in the manner provided in the By-laws of the Corporation. The election of directors of the Corporation need not be by ballot unless the By-laws so require. ARTICLE VII A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. If the Delaware General Corporation Law is amended after the date of incorporation of the Corporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. ARTICLE VIII For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders, it is further provided: (a) In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized and empowered: (i) to make, alter, amend or repeal the By-laws in any manner not inconsistent with the laws of the State of Delaware or this Certificate of Incorporation; (ii) without the assent or vote of the stockholders, to authorize and issue securities and obligations of the Corporation, secured or unsecured, and to include therein such provisions as to redemption, conversion or other terms thereof as the Board of Directors in its sole discretion may determine, and to authorize the mortgaging or pledging, as security therefor, of any property of the Corporation, real or personal, including after-acquired property; (iii) to determine whether any, and if any, what part, of the net profits of the Corporation or of its surplus shall be declared in dividends and paid to the 2 3 stockholders, and to direct and determine the use and disposition of any such net profits or such surplus; and (iv) to fix from time to time the amount of net profits of the Corporation or of its surplus to be reserved as working capital or for any other lawful purpose. In addition to the powers and authorities herein or by statute expressly conferred upon it, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the laws of the State of Delaware, of this Certificate of Incorporation and of the By-laws of the Corporation. (b) Any director or any officer elected or appointed by the stockholders or by the Board of Directors may be removed at any time in such manner as shall be provided in the By-laws of the Corporation. (c) From time to time any of the provisions of this Certificate of Incorporation may be altered, amended or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Certificate of Incorporation are granted subject to the provisions of this paragraph (c). ARTICLE IX Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of the Delaware General Corporation Law or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of the Delaware General Corporation Law order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree on any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation. 3 4 IN WITNESS WHEREOF, I, the undersigned, being the sole incorporator hereinabove named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, DO HEREBY CERTIFY, under penalties of perjury, that this is my act and deed and that the facts hereinabove stated are truly set forth and, accordingly, I have hereunto set my hand as of the 4th day of September, 1997. __________________________ Sharon M. Goodman Sole Incorporator 4 EX-3.5 6 EX-3.5 1 EXHIBIT 3.5 ============================================== AAS CAPITAL CORPORATION INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE --------------------------- BY-LAWS --------------------------- AS ADOPTED ON SEPTEMBER 5, 1997 ============================================== 2
TABLE OF CONTENTS ----------------- Page ---- ARTICLE I OFFICES.................................................................................................1 1.1 Registered Office.......................................................................................1 1.2 Other Offices...........................................................................................1 ARTICLE II MEETING OF STOCKHOLDERS; STOCKHOLDERS' CONSENT IN LIEU OF MEETING......................................1 2.1 Annual Meetings.........................................................................................1 2.2 Special Meetings........................................................................................1 2.3 Notice of Meetings......................................................................................2 2.4 Quorum..................................................................................................2 2.5 Organization............................................................................................2 2.6 Order of Business.......................................................................................3 2.7 Voting..................................................................................................3 2.8 Inspection..............................................................................................4 2.9 List of Stockholders....................................................................................4 2.10 Stockholders' Consent in Lieu of Meeting................................................................4 ARTICLE III BOARD OF DIRECTORS....................................................................................5 3.1 General Powers..........................................................................................5 3.2 Number and Term of Office...............................................................................5 3.3 Election of Directors...................................................................................5 3.4 Resignation, Removal and Vacancies......................................................................5 3.5 Meetings................................................................................................5 3.6 Directors' Consent in Lieu of Meeting...................................................................6 3.7 Action by Means of Conference Telephone or Similar Communications Equipment.............................7 3.8 Committees..............................................................................................7 ARTICLE IV OFFICERS...............................................................................................7 4.1 Executive Officers......................................................................................7 4.2 Authority and Duties....................................................................................7 4.3 Other Officers..........................................................................................7 4.4 Term of Office, Resignation and Removal.................................................................8 4.5 Vacancies...............................................................................................8 4.6 The Chairman............................................................................................8 4.7 The President...........................................................................................8 4.8 The Secretary...........................................................................................9 4.9 The Treasurer...........................................................................................9 ARTICLE V CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC...........................................................9 5.1 Execution of Documents..................................................................................9 5.2 Deposits...............................................................................................10 5.3 Proxies with Respect to Stock or Other Securities of Other Corporations................................10 ARTICLE VI SHARES AND THEIR TRANSFER; FIXING RECORD DATE.........................................................10 6.1 Certificates for Shares................................................................................10
3 6.2 Record.................................................................................................10 6.3 Transfer and Registration of Stock.....................................................................11 6.4 Addresses of Stockholders..............................................................................11 6.5 Lost, Destroyed and Mutilated Certificates.............................................................11 6.6 Regulations............................................................................................11 6.7 Fixing Date for Determination of Stockholders of Record................................................11 ARTICLE VII SEAL.................................................................................................12 ARTICLE VIII FISCAL YEAR.........................................................................................12 ARTICLE IX INDEMNIFICATION AND INSURANCE.........................................................................13 9.1 Indemnification........................................................................................13 9.2 Insurance..............................................................................................14 ARTICLE X AMENDMENT..............................................................................................15
ii 4 BY-LAWS OF AAS CAPITAL CORPORATION ARTICLE I OFFICES 1.1 REGISTERED OFFICE. The registered office of AAS Capital Corporation (the "Corporation"), in the State of Delaware shall be at 9 East Loockerman Street, City of Dover, County of Kent 19901, and the registered agent in charge thereof shall be National Registered Agents, Inc. 1.2 OTHER OFFICES. The Corporation may also have an office or offices at any other place or places within or outside the State of Delaware. ARTICLE II MEETING OF STOCKHOLDERS; STOCKHOLDERS' CONSENT IN LIEU OF MEETING 2.1 ANNUAL MEETINGS. The annual meeting of the stockholders for the election of directors, and for the transaction of such other business as may properly come before the meeting, shall be held at such place, date and hour as shall be fixed by the Board of Directors (the "Board") and designated in the notice or waiver of notice thereof, except that no annual meeting need be held if all actions, including the election of directors, required by the General Corporation Law of the State of Delaware (the "Delaware Statute") to be taken at a stockholders' annual meeting are taken by written consent in lieu of meeting pursuant to Section 10 of this Article II. 2.2 SPECIAL MEETINGS. A special meeting of the stockholders for any purpose or purposes may be called by the Board, the Chairman, the President or the record holders of at least a majority of the issued and outstanding shares of Common Stock of the Corporation, to be held at such place, date and hour as shall be designated in the notice or waiver of notice thereof. 5 2.3 NOTICE OF MEETINGS. Except as otherwise required by statute, the Certificate of Incorporation of the Corporation (the "Certificate") or these By-laws, notice of each annual or special meeting of the stockholders shall be given to each stockholder of record entitled to vote at such meeting not less than 10 nor more than 60 days before the day on which the meeting is to be held, by delivering written notice thereof to him personally, or by mailing a copy of such notice, postage prepaid, directly to him at his address as it appears in the records of the Corporation, or by transmitting such notice thereof to him at such address by telegraph, cable or other telephonic transmission. Every such notice shall state the place, the date and hour of the meeting, and, in case of a special meeting, the purpose or purposes for which the meeting is called. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy, or who shall, in person or by attorney thereunto authorized, waive such notice in writing, either before or after such meeting. Except as otherwise provided in these By-laws, neither the business to be transacted at, nor the purpose of, any meeting of the stockholders need be specified in any such notice or waiver of notice. Notice of any adjourned meeting of stockholders shall not be required to be given, except when expressly required by law. 2.4 QUORUM. At each meeting of the stockholders, except where otherwise provided by the Certificate or these By-laws, the holders of a majority of the issued and outstanding shares of Common Stock of the Corporation entitled to vote at such meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business. In the absence of a quorum, a majority in interest of the stockholders present in person or represented by proxy and entitled to vote, or, in the absence of all the stockholders entitled to vote, any officer entitled to preside at, or act as secretary of, such meeting, shall have the power to adjourn the meeting from time to time, until stockholders holding the requisite amount of stock to constitute a quorum shall be present or represented. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally called. 2.5 ORGANIZATION. (a) Unless otherwise determined by the Board, at each meeting of the stockholders, one of the following shall act as chairman of the meeting and preside thereat, in the following order of precedence: (i) the Chairman; (ii) the President; (iii) any director, officer or stockholder of the Corporation designated by the Board to act as chairman of such meeting and to preside thereat if the Chairman or the President shall be absent from such meeting; or 2 6 (iv) a stockholder of record who shall be chosen chairman of such meeting by a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat. (b) The Secretary or, if he shall be presiding over such meeting in accordance with the provisions of this Section 5 or if he shall be absent from such meeting, the person (who shall be an Assistant Secretary, if an Assistant Secretary has been appointed and is present) whom the chairman of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof. 2.6 ORDER OF BUSINESS. The order of business at each meeting of the stockholders shall be determined by the chairman of such meeting, but such order of business may be changed by a majority in voting interest of those present in person or by proxy at such meeting and entitled to vote thereat. 2.7 VOTING. Except as otherwise provided by law, the Certificate or these By-laws, at each meeting of the stockholders, every stockholder of the Corporation shall be entitled to one vote in person or by proxy for each share of Common Stock of the Corporation held by him and registered in his name on the books of the Corporation on the date fixed pursuant to Section 7 of Article VI as the record date for the determination of stockholders entitled to vote at such meeting. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. A person whose stock is pledged shall be entitled to vote, unless, in the transfer by the pledgor on the books of the Corporation, he has expressly empowered the pledgee to vote thereon, in which case only the pledgee or his proxy may represent such stock and vote thereon. If shares or other securities having voting power stand in the record of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary shall be given written notice to the contrary and furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (i) if only one votes, his act binds all; (ii) if more than one votes, the act of the majority so voting binds all; and (iii) if more than one votes, but the vote is evenly split on any particular matter, such shares shall be voted in the manner provided by law. If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even-split for the purposes of this Section 7 shall be a majority or even-split in interest. The Corporation shall not vote directly or indirectly any share of its own capital stock. Any vote of stock may be given by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized, delivered to the secretary of the meeting; provided, however, that no proxy 3 7 shall be voted after three years from its date, unless said proxy provides for a longer period. At all meetings of the stockholders, all matters (except where other provision is made by law, the Certificate or these By-laws) shall be decided by the vote of a majority in interest of the stockholders present in person or by proxy at such meeting and entitled to vote thereon, a quorum being present. Unless demanded by a stockholder present in person or by proxy at any meeting and entitled to vote thereon, the vote on any question need not be by ballot. Upon a demand by any such stockholder for a vote by ballot upon any question, such vote by ballot shall be taken. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and shall state the number of shares voted. 2.8 INSPECTION. The chairman of the meeting may at any time appoint one or more inspectors to serve at any meeting of the stockholders. Any inspector may be removed, and a new inspector or inspectors appointed, by the Board at any time. Such inspectors shall decide upon the qualifications of voters, accept and count votes, declare the results of such vote, and subscribe and deliver to the secretary of the meeting a certificate stating the number of shares of stock issued and outstanding and entitled to vote thereon and the number of shares voted for and against the question, respectively. The inspectors need not be stockholders of the Corporation, and any director or officer of the Corporation may be an inspector on any question other than a vote for or against his election to any position with the Corporation or on any other matter in which he may be directly interested. Before acting as herein provided, each inspector shall subscribe an oath faithfully to execute the duties of an inspector with strict impartiality and according to the best of his ability. 2.9 LIST OF STOCKHOLDERS. It shall be the duty of the Secretary or other officer of the Corporation who shall have charge of its stock ledger to prepare and make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to any such meeting, during ordinary business hours, for a period of at least 10 days prior to such meeting, either at a place within the city where such meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. Such list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. 2.10 STOCKHOLDERS' CONSENT IN LIEU OF MEETING. Any action required by the Delaware Statute to be taken at any annual or special meeting of the stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, by a consent in writing, as permitted by the Delaware Statute. 4 8 ARTICLE III BOARD OF DIRECTORS 3.1 GENERAL POWERS. The business, property and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate directed or required to be exercised or done by the stockholders. 3.2 NUMBER AND TERM OF OFFICE. The number of directors shall be fixed from time to time by the Board. Directors need not be stockholders. Each director shall hold office until his successor is elected and qualified, or until his earlier death or resignation or removal in the manner hereinafter provided. 3.3 ELECTION OF DIRECTORS. At each meeting of the stockholders for the election of directors at which a quorum is present, the persons receiving the greatest number of votes, up to the number of directors to be elected, of the stockholders present in person or by proxy and entitled to vote thereon shall be the directors; provided, however, that for purposes of such vote no stockholder shall be allowed to cumulate his votes. Unless an election by ballot shall be demanded as provided in Section 7 of Article II, election of directors may be conducted in any manner approved at such meeting. 3.4 RESIGNATION, REMOVAL AND VACANCIES. (a) Any director may resign at any time by giving written notice to the Board, the Chairman, the President or the Secretary. Such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. (b) Any director or the entire Board may be removed, with or without cause, at any time by vote of the holders of a majority of the shares then entitled to vote at an election of directors or by written consent of the stockholders pursuant to Section 10 of Article II. (c) Vacancies occurring on the Board for any reason may be filled by vote of the stockholders or by the stockholders' written consent pursuant to Section 10 of Article II, or by vote of the Board or by the directors' written consent pursuant to Section 6 of this Article III. If the number of directors then in office is less than a quorum, such vacancies may be filled by a vote of a majority of the directors then in office. 3.5 MEETINGS. (a) Annual Meetings. As soon as practicable after each annual election of directors, the Board shall meet for the purpose of organization and the transaction of other 5 9 business, unless it shall have transacted all such business by written consent pursuant to Section 6 of this Article III. (b) Other Meetings. Other meetings of the Board shall be held at such times and places as the Board, the Chairman, the President or any director shall from time to time determine. (c) Notice of Meetings. Notice shall be given to each director of each meeting, including the time, place and purpose of such meeting. Notice of each such meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least two days before the date on which such meeting is to be held, or shall be sent to him at such place by telegraph, cable, wireless or other form of recorded communication, or be delivered personally or by telephone not later than the day before the day on which such meeting is to be held, but notice need not be given to any director who shall attend such meeting. A written waiver of notice, signed by the person entitled thereto, whether before or after the time of the meeting stated therein, shall be deemed equivalent to notice. (d) Place of Meetings. The Board may hold its meetings at such place or places within or outside the State of Delaware as the Board may from time to time determine, or as shall be designated in the respective notices or waivers of notice thereof. (e) Quorum and Manner of Acting. A majority of the total number of directors then in office shall be present in person at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting, and the vote of a majority of those directors present at any such meeting at which a quorum is present shall be necessary for the passage of any resolution or act of the Board, except as otherwise expressly required by law or these By-laws. In the absence of a quorum for any such meeting, a majority of the directors present thereat may adjourn such meeting from time to time until a quorum shall be present. (f) Organization. At each meeting of the Board, one of the following shall act as chairman of the meeting and preside thereat, in the following order of precedence: (i) the Chairman; (ii) the President (if a director); or (iii) any director designated by a majority of the directors present. The Secretary or, in the case of his absence, an Assistant Secretary, if an Assistant Secretary has been appointed and is present, or any person whom the chairman of the meeting shall appoint shall act as secretary of such meeting and keep the minutes thereof. 3.6 DIRECTORS' CONSENT IN LIEU OF MEETING. Any action required or permitted to be taken at any meeting of the Board may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth 6 10 the action so taken, shall be signed by all the directors then in office and such consent is filed with the minutes of the proceedings of the Board. 3.7 ACTION BY MEANS OF CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT. Any one or more members of the Board may participate in a meeting of the Board by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. 3.8 COMMITTEES. The Board may, by resolution or resolutions passed by a majority of the whole Board, designate one or more committees, each such committee to consist of one or more directors of the Corporation, which to the extent provided in said resolution or resolutions shall have and may exercise the powers of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it, such committee or committees to have such name or names as may be determined from time to time by resolution adopted by the Board. A majority of all the members of any such committee may determine its action and fix the time and place of its meetings, unless the Board shall otherwise provide. The Board shall have power to change the members of any such committee at any time, to fill vacancies and to discharge any such committee, either with or without cause, at any time. ARTICLE IV OFFICERS 4.1 EXECUTIVE OFFICERS. The principal officers of the Corporation shall be a Chairman, if one is appointed (and any references to the Chairman shall not apply if a Chairman has not been appointed), a President, a Secretary, and a Treasurer, and may include such other officers as the Board may appoint pursuant to Section 3 of this Article IV. Any two or more offices may be held by the same person. 4.2 AUTHORITY AND DUTIES. All officers, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these By-laws or, to the extent so provided, by the Board. 4.3 OTHER OFFICERS. The Corporation may have such other officers, agents and employees as the Board may deem necessary, including one or more Assistant Secretaries, one or more Assistant Treasurers and one or more Vice Presidents, each of whom shall hold office for such period, have such 7 11 authority, and perform such duties as the Board, the Chairman, or the President may from time to time determine. The Board may delegate to any principal officer the power to appoint and define the authority and duties of, or remove, any such officers, agents, or employees. 4.4 TERM OF OFFICE, RESIGNATION AND REMOVAL. (a) All officers shall be elected or appointed by the Board and shall hold office for such term as may be prescribed by the Board. Each officer shall hold office until his successor has been elected or appointed and qualified or until his earlier death or resignation or removal in the manner hereinafter provided. The Board may require any officer to give security for the faithful performance of his duties. (b) Any officer may resign at any time by giving written notice to the Board, the Chairman, the President or the Secretary. Such resignation shall take effect at the time specified therein or, if the time be not specified, at the time it is accepted by action of the Board. Except as aforesaid, the acceptance of such resignation shall not be necessary to make it effective. (c) All officers and agents elected or appointed by the Board shall be subject to removal at any time by the Board or by the stockholders of the Corporation with or without cause. 4.6 VACANCIES. If the office of Chairman, President, Secretary or Treasurer becomes vacant for any reason, the Board shall fill such vacancy, and if any other office becomes vacant, the Board may fill such vacancy. Any officer so appointed or elected by the Board shall serve only until such time as the unexpired term of his predecessor shall have expired, unless reelected or reappointed by the Board. 4.7 THE CHAIRMAN. The Chairman shall give counsel and advice to the Board and the officers of the Corporation on all subjects concerning the welfare of the Corporation and the conduct of its business and shall perform such other duties as the Board may from time to time determine. Unless otherwise determined by the Board, he shall preside at meetings of the Board and of the Stockholders at which he is present. 4.8 THE PRESIDENT. The President shall be the chief executive officer of the Corporation. The President shall have general and active management and control of the business and affairs of the Corporation subject to the control of the Board and shall see that all orders and resolutions of the Board are carried into effect. The President shall from time to time make such reports of the affairs of the Corporation as the Board of Directors may require and shall perform such other duties as the Board may from time to time determine. 8 12 4.8 THE SECRETARY. The Secretary shall, to the extent practicable, attend all meetings of the Board and all meetings of the stockholders and shall record all votes and the minutes of all proceedings in a book to be kept for that purpose. He may give, or cause to be given, notice of all meetings of the stockholders and of the Board, and shall perform such other duties as may be prescribed by the Board, the Chairman or the President, under whose supervision he shall act. He shall keep in safe custody the seal of the Corporation and affix the same to any duly authorized instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the Treasurer or, if appointed, an Assistant Secretary or an Assistant Treasurer. He shall keep in safe custody the certificate books and stockholder records and such other books and records as the Board may direct, and shall perform all other duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board, the Chairman or the President. 4.9 THE TREASURER. The Treasurer shall have the care and custody of the corporate funds and other valuable effects, including securities, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, shall render to the Chairman, President and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation and shall perform all other duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board, the Chairman or the President. ARTICLE V CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. 5.1 EXECUTION OF DOCUMENTS. The Board shall designate, by either specific or general resolution, the officers, employees and agents of the Corporation who shall have the power to execute and deliver deeds, contracts, mortgages, bonds, debentures, checks, drafts and other orders for the payment of money and other documents for and in the name of the Corporation, and may authorize such officers, employees and agents to delegate such power (including authority to redelegate) by written instrument to other officers, employees or agents of the Corporation; unless so designated or expressly authorized by these By-laws, no officer, employee or agent shall have any power or authority to bind the Corporation by any contract or engagement, to pledge its credit or to render it liable pecuniarily for any purpose or amount. 9 13 5.2 DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board or Treasurer, or any other officer of the Corporation to whom power in this respect shall have been given by the Board, shall select. 5.3 PROXIES WITH RESPECT TO STOCK OR OTHER SECURITIES OF OTHER CORPORATIONS. The Board shall designate the officers of the Corporation who shall have authority from time to time to appoint an agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have as the holder of stock or other securities in any other corporation, and to vote or consent with respect to such stock or securities. Such designated officers may instruct the person or persons so appointed as to the manner of exercising such powers and rights, and such designated officers may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal or otherwise, such written proxies, powers of attorney or other instruments as they may deem necessary or proper in order that the Corporation may exercise its powers and rights. ARTICLE VI SHARES AND THEIR TRANSFER; FIXING RECORD DATE 6.1 CERTIFICATES FOR SHARES. Every owner of stock of the Corporation shall be entitled to have a certificate certifying the number and class of shares owned by him in the Corporation, which shall be in such form as shall be prescribed by the Board. Certificates shall be numbered and issued in consecutive order and shall be signed by, or in the name of, the Corporation by the Chairman, the President or any Vice President, and by the Treasurer (or an Assistant Treasurer, if appointed) or the Secretary (or an Assistant Secretary, if appointed). In case any officer or officers who shall have signed any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate had not ceased to be such officer or officers of the Corporation. 6.2 RECORD. A record in one or more counterparts shall be kept of the name of the person, firm or corporation owning the shares represented by each certificate for stock of the Corporation issued, the number of shares represented by each such certificate, the date thereof and, in the case of cancellation, the date of cancellation. Except as otherwise expressly required by law, the person in whose name shares of stock stand on the stock record of the Corporation shall be deemed the owner thereof for all purposes regarding the Corporation. 10 14 6.3 TRANSFER AND REGISTRATION OF STOCK. (a) The transfer of stock and certificates which represent the stock of the Corporation shall be governed by Article 8 of Subtitle 1 of Title 6 of the Delaware Code (the Uniform Commercial Code), as amended from time to time. (b) Registration of transfers of shares of the Corporation shall be made only on the books of the Corporation upon request of the registered holder thereof, or of his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and upon the surrender of the certificate or certificates for such shares properly endorsed or accompanied by a stock power duly executed. 6.4 ADDRESSES OF STOCKHOLDERS. Each stockholder shall designate to the Secretary an address at which notices of meetings and all other corporate notices may be served or mailed to him, and, if any stockholder shall fail to designate such address, corporate notices may be served upon him by mail directed to him at his post-office address, if any, as the same appears on the share record books of the Corporation or at his last known post-office address. 6.5 LOST, DESTROYED AND MUTILATED CERTIFICATES. The holder of any shares of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of the certificate therefor, and the Board may, in its discretion, cause to be issued to him a new certificate or certificates for such shares, upon the surrender of the mutilated certificates or, in the case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction, and the Board may, in its discretion, require the owner of the lost or destroyed certificate or his legal representative to give the Corporation a bond in such sum and with such surety or sureties as it may direct to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate. 6.6 REGULATIONS. The Board may make such rules and regulations as it may deem expedient, not inconsistent with these By-laws, concerning the issue, transfer and registration of certificates for stock of the Corporation. 6.7 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall be not more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting 11 15 is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which date shall be not more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board. If no record date has been fixed by the Board, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board is required by the Delaware Statute, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board and prior action by the Board is required by the Delaware Statute, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board adopts the resolution taking such prior action. (c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. ARTICLE VII SEAL The Board may provide a corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation, the year of incorporation of the Corporation and the words and figures "Corporate Seal -- Delaware." ARTICLE VIII FISCAL YEAR The fiscal year of the Corporation shall be the calendar year unless otherwise determined by the Board. 12 16 ARTICLE IX INDEMNIFICATION AND INSURANCE INDEMNIFICATION. (a) As provided in the Charter, to the fullest extent permitted by the Delaware Statute as the same exists or may hereafter be amended, a director of this Corporation shall not be liable to the Corporation or its stockholders for breach of fiduciary duty as a director. (b) Without limitation of any right conferred by paragraph (a) of this Section 1, each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer or employee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity while serving as a director, officer or employee or in any other capacity while serving as a director, officer or employee, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware Statute, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys' fees, judgments, fines, excise taxes or amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer or employee and shall inure to the benefit of the indemnitee's heirs, testators, intestates, executors and administrators; provided, however, that such person acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and with respect to a criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; provided further, however, that no indemnification shall be made in the case of an action, suit or proceeding by or in the right of the Corporation in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such director, officer, employee or agent is liable to the Corporation, unless a court having jurisdiction shall determine that, despite such adjudication, such person is fairly and reasonably entitled to indemnification; provided further, however, that, except as provided in Section 1(c) of this Article IX with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) initiated by such indemnitee was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Article IX shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the Delaware Statute requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) 13 17 shall be made only upon delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise. (c) If a claim under Section (b) of this Article IX is not paid in full by the Corporation with 60 days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of any undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met the applicable standard of conduct set forth in the Delaware Statute. Neither the failure of the Corporation (including the Board, independent legal counsel, or the stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware Statute, nor an actual determination by the Corporation (including the Board, independent legal counsel, or the stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Section or otherwise shall be on the Corporation. (d) The rights to indemnification and to the advancement of expenses conferred in this Article IX shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Charter, agreement, vote of stockholders or disinterested directors or otherwise. 9.2 INSURANCE. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any person who is or was a director, officer, employee or agent of the Corporation or any person who is or was serving at the request of the Corporation as a director, officer, employer or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware Statute. 14 18 ARTICLE X AMENDMENT Any by-law (including these By-laws) may be adopted, amended or repealed by the vote of the holders of a majority of the shares then entitled to vote or by the stockholders' written consent pursuant to Section 10 of Article II, or by the vote of the Board or by the directors' written consent pursuant to Section 6 of Article III. * * * * * * * * * 15 EX-4.1 7 EX-4.1 1 EXHIBIT 4.1 ============================================================================= INDENTURE Dated as of October 1, 1997 Among ADVANCED ACCESSORY SYSTEMS, LLC and AAS CAPITAL CORPORATION, as Issuers, the GUARANTORS named herein and First Union National Bank, as Trustee ------------------ $125,000,000 9 3/4% Senior Subordinated Notes due 2007, Series A 9 3/4% Senior Subordinated Notes due 2007, Series B ============================================================================= 2 CROSS-REFERENCE TABLE
Trust Indenture Indenture Act Section Section ----------- ------- Section. 310(a)(1).................................................................... 7.10 (a)(2)........................................................................ 7.10 (a)(3)........................................................................ N.A. (a)(4)........................................................................ N.A. (a)(5)........................................................................ 7.08, 7.10. (b)........................................................................... 7.08; 7.10; 13.02 (c)........................................................................... N.A. Section. 311(a)....................................................................... 7.11 (b)........................................................................... 7.11 (c)........................................................................... N.A. Section. 312(a)........................................................................ 2.05 (b)........................................................................... 11.03 (c)........................................................................... 11.03 Section. 313(a)........................................................................ 7.06 (b)(1)........................................................................ N.A. (b)(2)........................................................................ 7.06 (c)........................................................................... 7.06; 13.02 (d)........................................................................... 7.06 Section. 314(a)........................................................................ 4.11; 4.12; 13.02 (b)........................................................................... N.A. (c)(1)........................................................................ 13.04 (c)(2)........................................................................ 13.04 (c)(3)........................................................................ N.A. (d)........................................................................... N.A. (e)........................................................................... 13.05 (f)........................................................................... N.A. Section. 315(a)........................................................................ 7.01(b) (b)........................................................................... 7.05; 13.02 (c)........................................................................... 7.01(a) (d)........................................................................... 7.01(c) (e)........................................................................... 6.11 Section. 316(a)(last sentence)......................................................... 2.09 (a)(1)(A)..................................................................... 6.05 (a)(1)(B)..................................................................... 6.04 (a)(2)........................................................................ N.A. (b)........................................................................... 6.07 (c)........................................................................... 10.04 Section. 317(a)(1)..................................................................... 6.08 (a)(2)........................................................................ 6.09 (b)........................................................................... 2.04 Section. 318(a)........................................................................ 13.01
- ---------------- N.A. means Not Applicable. NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. 3 TABLE OF CONTENTS
Page ---- ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions...............................................................................1 SECTION 1.02. Incorporation by Reference of Trust Indenture Act........................................22 SECTION 1.03. Rules of Construction....................................................................22 ARTICLE TWO THE SECURITIES SECTION 2.01. Form and Dating..........................................................................23 SECTION 2.02. Execution and Authentication.............................................................24 SECTION 2.03. Registrar and Paying Agent...............................................................25 SECTION 2.04. Paying Agent To Hold Assets in Trust.....................................................25 SECTION 2.05. Holder Lists.............................................................................25 SECTION 2.06. Transfer and Exchange....................................................................26 SECTION 2.07. Replacement Securities...................................................................26 SECTION 2.08. Outstanding Securities...................................................................27 SECTION 2.09. Treasury Securities......................................................................27 SECTION 2.10. Temporary Securities.....................................................................27 SECTION 2.11. Cancellation.............................................................................28 SECTION 2.12. Defaulted Interest.......................................................................28 SECTION 2.13. CUSIP Number.............................................................................28 SECTION 2.14. Deposit of Moneys........................................................................28 SECTION 2.15. Book-Entry Provisions for Global Securities..............................................29 SECTION 2.16. Registration of Transfers and Exchanges..................................................30 ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee.......................................................................34 SECTION 3.02. Selection of Securities To Be Redeemed...................................................34 SECTION 3.03. Notice of Redemption.....................................................................34 SECTION 3.04. Effect of Notice of Redemption...........................................................35 SECTION 3.05. Deposit of Redemption Price..............................................................35 SECTION 3.06. Securities Redeemed in Part..............................................................36 ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Securities....................................................................36
-i- 4
Page ---- SECTION 4.02. Maintenance of Office or Agency..........................................................36 SECTION 4.03. Transactions with Affiliates.............................................................37 SECTION 4.04. Limitation on Indebtedness...............................................................37 SECTION 4.05. Limitation on Foreign Indebtedness.......................................................38 SECTION 4.06. Limitation on Senior Subordinated Indebtedness...........................................38 SECTION 4.07. Disposition of Proceeds of Asset Sales...................................................38 SECTION 4.08. Limitation on Restricted Payments........................................................40 SECTION 4.09. Limitation on the Sale or Issuance of Equity Interests of Restricted Subsidiaries...........................................................................42 SECTION 4.10. Notice of Defaults.......................................................................42 SECTION 4.11. Limitation on Liens......................................................................42 SECTION 4.12. Provision of Financial Information.......................................................43 SECTION 4.13. Limitations on Dividend and Other Payment Restrictions Affecting Subsidiaries...........................................................................43 SECTION 4.14. Guarantees by Restricted Subsidiaries....................................................44 SECTION 4.15. Designation of Unrestricted Subsidiaries.................................................44 SECTION 4.16. Offer to Purchase upon Change of Control.................................................45 SECTION 4.17. Compliance Certificate...................................................................46 SECTION 4.18. Corporate Existence......................................................................46 ARTICLE FIVE MERGERS; SUCCESSOR CORPORATION SECTION 5.01. Mergers, Sale of Assets, etc.............................................................47 SECTION 5.02. Successor Corporation Substituted........................................................48 ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default........................................................................48 SECTION 6.02. Acceleration.............................................................................50 SECTION 6.03. Other Remedies...........................................................................50 SECTION 6.04. Waiver of Past Default...................................................................51 SECTION 6.05. Control by Majority......................................................................51 SECTION 6.06. Limitation on Suits......................................................................51 SECTION 6.07. Rights of Holders To Receive Payment.....................................................52 SECTION 6.08. Collection Suit by Trustee...............................................................52 SECTION 6.09. Trustee May File Proofs of Claim.........................................................52 SECTION 6.10. Priorities...............................................................................53 SECTION 6.11. Undertaking for Costs....................................................................53 ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee........................................................................53 SECTION 7.02. Rights of Trustee........................................................................55 SECTION 7.03. Individual Rights of Trustee.............................................................56
-ii- 5
Page ---- SECTION 7.04. Trustee's Disclaimer.....................................................................56 SECTION 7.05. Notice of Defaults.......................................................................56 SECTION 7.06. Reports by Trustee to Holders............................................................57 SECTION 7.07. Compensation and Indemnity...............................................................57 SECTION 7.08. Replacement of Trustee...................................................................58 SECTION 7.09. Successor Trustee by Merger, etc.........................................................59 SECTION 7.10. Eligibility; Disqualification............................................................59 SECTION 7.11. Preferential Collection of Claims Against Issuers........................................59 ARTICLE EIGHT SUBORDINATION OF SECURITIES SECTION 8.01. Securities Subordinated to Senior Indebtedness...........................................60 SECTION 8.02. Payment Over of Proceeds upon Dissolution, etc...........................................60 SECTION 8.03. No Payment on Securities in Certain Circumstances........................................61 SECTION 8.04. Subrogation..............................................................................62 SECTION 8.05. Obligations of Issuers Unconditional.....................................................63 SECTION 8.06. Notice to Trustee........................................................................63 SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating Agent...........................64 SECTION 8.08. Trustee's Relation to Senior Indebtedness................................................64 SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of the Issuers or Holders of Senior Indebtedness.........................................................64 SECTION 8.10. Holders Authorize Trustee To Effectuate Subordination of Securities......................65 SECTION 8.11. This Article Not To Prevent Events of Default............................................65 SECTION 8.12. Trustee's Compensation Not Prejudiced....................................................65 SECTION 8.13. No Waiver of Subordination Provisions....................................................65 SECTION 8.14. Subordination Provisions Not Applicable to Money Held in Trust for Holders; Payments May Be Paid Prior to Dissolution.....................................66 SECTION 8.15. Acceleration of Securities...............................................................66 ARTICLE NINE DISCHARGE OF INDENTURE; DEFEASANCE SECTION 9.01. Termination of the Issuers' Obligations..................................................66 SECTION 9.02. Legal Defeasance and Covenant Defeasance.................................................67 SECTION 9.03. Conditions to Legal Defeasance or Covenant Defeasance....................................68 SECTION 9.04. Application of Trust Money; Trustee Acknowledgment and Indemnity.........................69 SECTION 9.05. Repayment to Company.....................................................................70 SECTION 9.06. Reinstatement............................................................................70 ARTICLE TEN AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 10.01. Without Consent of Holders...............................................................70 SECTION 10.02. With Consent of Holders..................................................................71 SECTION 10.03. Compliance with Trust Indenture Act......................................................73 SECTION 10.04. Record Date for Consents and Effect of Consents..........................................73
-iii- 6
Page ---- SECTION 10.05. Notation on or Exchange of Securities....................................................73 SECTION 10.06. Trustee To Sign Amendments, etc..........................................................74 ARTICLE ELEVEN GUARANTEE SECTION 11.01. Unconditional Guarantee..................................................................74 SECTION 11.02. Severability.............................................................................75 SECTION 11.03. Release of a Guarantor...................................................................75 SECTION 11.04. Limitation of Guarantor's Liability......................................................75 SECTION 11.05. Contribution.............................................................................76 SECTION 11.06. Execution of Security Guarantee..........................................................76 SECTION 11.07. Subordination of Subrogation and Other Rights............................................76 ARTICLE TWELVE SUBORDINATION OF GUARANTEE SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Indebtedness......................77 SECTION 12.02. No Payment on Guarantees in Certain Circumstances........................................77 SECTION 12.03. Payment Over of Proceeds upon Dissolution, Etc...........................................78 SECTION 12.04. Subrogation..............................................................................79 SECTION 12.05. Obligations of Guarantors Unconditional..................................................80 SECTION 12.06. Notice to Trustee........................................................................80 SECTION 12.07. Reliance on Judicial Order or Certificate of Liquidating Agent...........................81 SECTION 12.08. Trustee's Relation to Guarantor Senior Indebtedness......................................81 SECTION 12.09. Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Holders of Guarantor Senior Indebtedness............................................82 SECTION 12.10. Holders Authorize Trustee To Effectuate Subordination of Guarantee.......................82 SECTION 12.11. This Article Not To Prevent Events of Default............................................82 SECTION 12.12. Trustee's Compensation Not Prejudiced....................................................82 SECTION 12.13. No Waiver of Guarantee Subordination Provisions..........................................82 SECTION 12.14. Payments May Be Paid Prior to Dissolution................................................83 ARTICLE THIRTEEN MISCELLANEOUS SECTION 13.01. Trust Indenture Act Controls.............................................................83 SECTION 13.02. Notices..................................................................................83 SECTION 13.03. Communications by Holders with Other Holders.............................................85 SECTION 13.04. Certificate and Opinion as to Conditions Precedent.......................................85 SECTION 13.05. Statements Required in Certificate.......................................................85 SECTION 13.06. Rules by Trustee, Paying Agent, Registrar................................................86 SECTION 13.07. Governing Law............................................................................86 SECTION 13.08. No Recourse Against Others...............................................................86 SECTION 13.09. Successors...............................................................................86 SECTION 13.10. Counterpart Originals....................................................................86 SECTION 13.11. Severability.............................................................................86
-iv- 7 SECTION 13.12. No Adverse Interpretation of Other Agreements............................................87 SECTION 13.13. Legal Holidays...........................................................................87 SIGNATURES..................................................................................................S-1 EXHIBIT A Form of Series A Security.................................................................A-1 EXHIBIT B Form of Series B Security.................................................................B-1 EXHIBIT C Form of Legend for Global Securities......................................................C-1 EXHIBIT D Form of Transfer Certificate..............................................................D-1 EXHIBIT E Form of Transfer Certificate for Institutional Accredited Investors.......................E-1
- ----------------- NOTE: This Table of Contents shall not, for any purpose, be deemed to be a part of the Indenture. -v- 8 INDENTURE dated as of October 1, 1997, among ADVANCED ACCESSORY SYSTEMS, LLC, a Delaware limited liability company (the "Company"), AAS CAPITAL CORPORATION, a Delaware corporation ("Capital Corp." and, together with the Company, the "Issuers"), the GUARANTORS named herein and FIRST UNION NATIONAL BANK, as trustee (the "Trustee"). Each party hereto agrees as follows for the benefit of each other party and for the equal and ratable benefit of the Holders of the Securities: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Acquired Indebtedness" means Indebtedness of a Person (a) assumed in connection with an Acquisition from such Person or (b) existing at the time such Person becomes a Restricted Subsidiary or is merged or consolidated with or into the Company or any Restricted Subsidiary. "Acquired Person" means, with respect to any specified Person, any other Person which merges with or into or becomes a Subsidiary of such specified Person. "Acquisition" means (i) any capital contribution (by means of transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise) by the Company or any Restricted Subsidiary to any other Person, or any acquisition or purchase of Equity Interests of any other Person by the Company or any Restricted Subsidiary, in either case pursuant to which such Person shall become a Restricted Subsidiary or shall be consolidated with or merged into the Company or any Restricted Subsidiary, or (ii) any acquisition by the Company or any Restricted Subsidiary of the assets of any Person which constitute substantially all of an operating unit or line of business of such Person or which is otherwise outside of the ordinary course of business. "Acquisition Facility" means a credit facility entered into by the Company and one or more commercial banks or other lenders pursuant to which the Company and/or its Restricted Subsidiaries may incur Indebtedness for the purpose of financing one or more acquisitions of assets or equity securities of any Related Business and paying related fees and expenses. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. "Affiliate Transaction" has the meaning provided in Section 4.03. "Agent" means any Registrar, Paying Agent or co-Registrar. 9 -2- "Asset Sale" means any direct or indirect sale, conveyance, transfer, lease (that has the effect of a disposition) or other disposition (including, without limitation, any merger, consolidation or sale-leaseback transaction) to any Person other than the Company or a Wholly Owned Restricted Subsidiary, in one transaction or a series of related transactions, of (i) any Equity Interest of any Restricted Subsidiary (other than directors' qualifying shares, to the extent mandated by applicable law); (ii) any assets of the Company or any Restricted Subsidiary which constitute substantially all of an operating unit or line of business of the Company or any Restricted Subsidiary; or (iii) any other property or asset of the Company or any Restricted Subsidiary outside of the ordinary course of business (including the receipt of proceeds paid on account of the loss of or damage to any property or asset and awards of compensation for any asset taken by condemnation, eminent domain or similar proceedings). For the purposes of this definition, the term "Asset Sale" shall not include (a) any transaction consummated in compliance with Section 5.01 and the creation of any Lien not prohibited by Section 4.11; (b) sales of property or equipment that has become worn out, obsolete or damaged or otherwise unsuitable for use in connection with the business of the Company or any Restricted Subsidiary, as the case may be; (c) any transaction consummated in compliance with Section 4.08; and (d) any transfers of properties and assets to the Company, between the Company and Wholly Owned Restricted Subsidiaries that are Guarantors or between Wholly Owned Restricted Subsidiaries. In addition, solely for purposes of Section 4.07, any sale, conveyance, transfer, lease or other disposition of any property or asset, whether in one transaction or a series of related transactions, involving assets with a Fair Market Value not in excess of $1.0 million in any fiscal year shall be deemed not to be an Asset Sale. "Attributable Indebtedness" in respect of a Sale and Lease-Back Transaction means, as at the time of determination, the present value (discounted according to GAAP at the cost of indebtedness implied in the lease) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Lease-Back Transaction (including any period for which such lease has been extended). "Bankruptcy Law" has the meaning provided in Section 6.01. "Board Resolution" means, with respect to any Person, a duly adopted resolution of the Board of Managers of such Person or a duly authorized committee of such Board of Managers. "Business Day" means any day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York or Charlotte, North Carolina are not required to be open. "Capital Corp." means the Person named as "Capital Corp." in the first paragraph of this Indenture until a successor shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Capital Corp." shall mean such successor. "Capitalized Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on the balance sheet in accordance with GAAP. "Cash Equivalents" means: (a) securities issued or directly and fully guaranteed or insured by the U.S. government or any agency or instrumentality thereof, the government of Canada or the government of any member of the European Union, in each case having maturities of not more than one year from the date of acquisition; (b) domestic and Eurocurrency certificates of deposit, time deposits and base rate certificates of deposit with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any commercial bank in- 10 -3- corporated under the laws of the United States, any state thereof, the District of Columbia or its branches or agencies or under the laws of Canada or the laws of any member of the European Union and having capital and surplus in excess of $250 million and whose long-term debt is rated at least "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Act); (c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above entered into with any financial institution meeting the qualifications specified in clause (b) above; (d) commercial paper rated P-1, A-1 or the equivalent thereof by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P"), respectively, and in each case maturing within six months after the date of acquisition; (e) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's; (f) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (a) through (e) above; and (g) in the case of any Foreign Restricted Subsidiary, Investments: (i) in direct obligations of the sovereign nation (or any agency thereof) in which such Foreign Restricted Subsidiary is organized and is conducting business or in obligations fully and unconditionally guaranteed by such sovereign nation (or any agency thereof) or (ii) of the type and maturity described in clauses (a) and (b) above of foreign obligors, which Investments or obligors (or the parents of such obligors) have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies. "Change of Control" means the occurrence of any of the following events (whether or not approved by the Board of Managers of the Company): (i) any Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than one or more Permitted Holders, is or becomes the "beneficial owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time, upon the happening of an event or otherwise), directly or indirectly, of more than 35% of the total voting power of the then outstanding Voting Equity Interests of the Company; (ii) the Company consolidates with, or merges with or into, another Person (other than a Wholly Owned Restricted Subsidiary) or the Company or any of its Subsidiaries sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the assets of the Company and its Subsidiaries (determined on a consolidated basis) to any Person (other than the Company or any Wholly Owned Restricted Subsidiary), other than any such transaction where immediately after such transaction the Person or Persons that "beneficially owned" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time) immediately prior to such transaction, directly or indirectly, a majority of the total voting power of the then outstanding Voting Equity Interests of Holdings or the Company, as the case may be, "beneficially own" (as so determined), directly or indirectly, a majority of the total voting power of the then outstanding Voting Equity Interests of the surviving or transferee Person; (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Managers of the Company (together with any new directors whose election by such Board of Managers or whose nomination for election by the members of the Company was approved by a vote of a majority of the directors of the Company 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 Managers of the Company then in office; or (iv) the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with the provisions described under Section 5.01. 11 -4- "Change of Control Date" has the meaning provided in Section 4.16. "Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of Consolidated EBITDA for the four quarter period of the most recent four consecutive fiscal quarters ending prior to the date of such determination (the "Four Quarter Period") to (ii) Consolidated Fixed Charges for such Four Quarter Period; provided, however, that (1) if the Company or any Restricted Subsidiary has incurred any Indebtedness since the beginning of such Four Quarter Period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such Four Quarter Period and the discharge of any other Indebtedness repaid, repurchased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such Four Quarter Period, (2) if since the beginning of such Four Quarter Period the Company or any Restricted Subsidiary shall have made any Asset Sale described in clause (i) or (ii) of the definition thereof, the Consolidated EBITDA for such Four Quarter Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Sale for such Four Quarter Period or increased by an amount equal to the Consolidated EBITDA (if negative) directly attributable thereto for such Four Quarter Period and Consolidated Fixed Charges for such Four Quarter Period shall be reduced by an amount equal to the Consolidated Fixed Charges directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Sale for such Four Quarter Period (or, if the Equity Interests of any Restricted Subsidiary are sold, the Consolidated Fixed Charges for such Four Quarter Period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if since the beginning of such Four Quarter Period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, Consolidated EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such Four Quarter Period and (4) if since the beginning of such Four Quarter Period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such Four Quarter Period) shall have made any Asset Sale or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Restricted Subsidiary during such Four Quarter Period, Consolidated EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be calculated after giving pro forma effect thereto as if such Asset Sale, Investment or acquisition of assets occurred on, with respect to any Investment or acquisition, the first day of such Four Quarter Period and, with respect to any Asset Sale, the day prior to the first day of such Four Quarter Period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Fixed Charges associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Company in accordance with Regulation S-X under the Securities Act as in effect on the Issue Date. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect 12 -5- on the date of determination had been the applicable rate for the entire period (taking into account any agreement under which Interest Rate Protection Obligations are outstanding applicable to such Indebtedness if such agreement under which such Interest Rate Protection Obligations are outstanding has a remaining term as at the date of determination in excess of 12 months); provided, however, that the Consolidated Fixed Charges of the Company attributable to interest on any Indebtedness Incurred under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the Four Quarter Period. "Consolidated EBITDA" means, for any period, the Consolidated Net Income for such period, plus the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Income Tax Expense for such period; (ii) Consolidated Interest Expense for such period; and (iii) Consolidated Non-cash Charges for such period less (A) all non-cash items increasing Consolidated Net Income for such period and (B) all cash payments during such period relating to non-cash charges that were added back in determining Consolidated EBITDA in any prior period. "Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) Consolidated Interest Expense and (ii) the product of (x) the amount of all dividends on any series of Preferred Equity Interest (other than Qualified Equity Interests) of such Person and its Restricted Subsidiaries (other than dividends paid solely in Qualified Equity Interests) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal. "Consolidated Income Tax Expense" means, with respect to the Company for any period, the provision for federal, state, local and foreign income taxes payable by the Company and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to the Company for any period, without duplication, the sum of (i) the interest expense of the Company and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount and amortization or write-off of deferred financing costs, (b) the net cost or benefit under Interest Rate Protection Obligations (including any amortization of discounts), (c) the interest portion of any deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (e) all capitalized interest and all accrued interest, (f) non-cash interest expense and (g) interest on Indebtedness of another Person that is guaranteed by the Company or any Restricted Subsidiary actually paid by the Company or any Restricted Subsidiary and (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by the Company and the Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" means, for any period, the consolidated net income (loss) of the Company and the Restricted Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (i) any net income (loss) of any Person if such Person is not a Subsidiary, except (A) to the extent of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution and (B) the Company's equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period shall be included in determining such Consolidated Net Income; (ii) any net income (loss) of any Person acquired by the Company or a Restricted Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any net income (but not 13 -6- loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company to the extent of such restrictions; (iv) any gain or loss realized upon the sale or other disposition of any asset of the Company or the Restricted Subsidiaries (including pursuant to any sale/leaseback transaction) outside of the ordinary course of business (including, without limitation, on or with respect to Investments) and there shall not be included dividends, distributions or interest thereon; (v) any extraordinary gain or loss and any foreign currency gains or losses; (vi) the cumulative effect of a change in accounting principles after the Issue Date; and (vii) any restoration to income of any contingency reserve of an extraordinary, non-recurring or unusual nature, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Issue Date. "Consolidated Non-cash Charges" means, with respect to any Person, for any period the sum of (A) depreciation, (B) amortization and (C) other non-cash expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding, for purposes of clause (C) only, such charges which require an accrual of or a reserve for cash charges or payments for any future period and excluding minority interest). "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 13.02 or such other address as the Trustee may give notice to the Company. "Credit Facilities" means (i) the Second Amended and Restated Credit Agreement, dated as of August 5, 1997, among the Company, the Subsidiaries of the Company identified on the signature pages thereof and any Restricted Subsidiary that is later added thereto, the lenders named therein, NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent, (ii) the Credit Agreement, dated as of July 2, 1997, among Advanced Accessory Systems Canada Inc., First Chicago NBD Bank, Canada, as Agent, First Chicago NBD Bank, Canada and The Chase Manhattan Bank of Canada, as lenders and the guarantors identified on the signature pages thereof and (iii) an Acquisition Facility, in each case, as amended, including any deferrals, renewals, extensions, replacements, refinancings or refundings thereof, or amendments, modifications or supplements thereto and any agreement providing therefor, whether by or with the same or any other lender, creditor, group of lenders or group of creditors, and including related notes, guarantee and note agreements and other instruments and agreements executed in connection therewith. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company against fluctuations in currency values. "Custodian" has the meaning provided in Section 6.01. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Defeasance Trust Payment" has the meaning provided in Section 8.02. "Depository" means, with respect to the Securities issued in the form of one or more Global Securities, The Depository Trust Company or another Person designated as Depository by the Company, which must be a clearing agency registered under the Exchange Act. 14 -7- "Designated Senior Indebtedness" means (a) any Indebtedness outstanding under the Credit Facilities and (b) any other Senior Indebtedness which, at the time of determination, has an aggregate principal amount outstanding, together with any commitments to lend additional amounts, of at least $25.0 million, if the instrument governing such Senior Indebtedness expressly states that such Indebtedness is "Designated Senior Indebtedness" for purposes of this Indenture. "Designation" has the meaning provided in Section 4.08. "Designation Amount" has the meaning provided in Section 4.11. "Disposition" means, with respect to any Person, any merger, consolidation or other business combination involving such Person (whether or not such Person is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of such Person's assets. "Disqualified Equity Interest" means any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable, at the option of the holder thereof (except, in each case, upon the occurrence of a Change of Control), in whole or in part, or exchangeable into Indebtedness on or prior to the final maturity date of the Securities. "Domestic" with respect to any Person shall mean a Person whose jurisdiction of incorporation or formation is the United States, any state thereof or the District of Columbia. "Equity Interest" in any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) corporate stock or other equity participations, including partnership interests, whether general or limited, in such Person, including any Preferred Equity Interests. "Event of Default" has the meaning provided in Section 6.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder. "Exchange Securities" means the 9 3/4% Senior Subordinated Notes due 2007, Series B, to be issued in exchange for the Initial Securities pursuant to the Registration Rights Agreement. "Existing Management Holder" means each of F. Alan Smith, Marshall D. Gladchun, Roger T. Morgan, Terence C. Seikel, Richard E. Borghi, Barry Banducci and Gerard J. Brink. "Expiration Date" has the meaning set forth in the definition of "Offer to Purchase." "Fair Market Value" means, with respect to any asset, the price (after taking into account any liabilities relating to such assets) which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction; provided, however, that the Fair Market Value of any such asset or assets shall be determined conclusively by the Board of Managers of the Company acting in good faith, and shall be evidenced by resolutions of the Board of Managers of the Company delivered to the Trustee. 15 -8- "Final Maturity Date" means October 1, 2007. "Foreign EBITDA" means, for any period, the aggregate of the Consolidated EBITDA of each of the Company's Foreign Restricted Subsidiaries. "Foreign Interest Expense" means, for any period, the aggregate of the Consolidated Interest Expense of each of the Company's Foreign Restricted Subsidiaries. "Foreign Restricted Subsidiary" means a Restricted Subsidiary other than a Domestic Restricted Subsidiary. "Four Quarter Period" has the meaning set forth in the definition of "Consolidated Coverage Ratio." "Funding Guarantor" has the meaning provided in Section 11.05. "GAAP" means, at any date of determination, generally accepted accounting principles in effect in the United States which are applicable at the date of determination and which are consistently applied for all applicable periods. "Global Securities" means one or more 144A Global Securities or IAI Global Securities. "Guarantee" means, as applied to any obligation, (i) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit. "Guarantee" means the guarantee of the Securities by each Guarantor under this Indenture. "Guarantor" means (i) each Domestic Subsidiary of the Company existing on the Issue Date and (ii) each other Domestic Restricted Subsidiary, formed, created or acquired before or after the Issue Date, required to become a Guarantor after the Issue Date. "Guarantor Blockage Period" has the meaning provided in Section 12.02(a). "Guarantor Payment Blockage Notice" has the meaning provided in Section 12.02(a). "Guarantor Senior Indebtedness" means, with respect to any Guarantor, at any date, (a) all Obligations of such Guarantor under the Credit Facilities; (b) all Interest Rate Protection Obligations of such Guarantor; (c) all Obligations of such Guarantor under letters of credit; and (d) all other Indebtedness of such Guarantor, including principal, premium, if any, and interest (including Post-Petition Interest) on such Indebtedness unless the instrument under which such Indebtedness of such Guarantor is Incurred expressly provides that such Indebtedness is not senior or superior in right of payment to such Guarantor's Guarantee of the Securities, and all renewals, extensions, modifications, amendments or refinancings thereof. Notwithstanding the foregoing, Guarantor Senior Indebtedness shall not include (a) to the extent that it may constitute Indebtedness, any Obligation for federal, state, local or other taxes; (b) any Indebtedness among or between such Guarantor 16 -9- and any Subsidiary of such Guarantor or any Affiliate of such Guarantor or any of such Affiliate's Subsidiaries; (c) to the extent that it may constitute Indebtedness, any Obligation in respect of any trade payable Incurred for the purchase of goods or materials, or for services obtained, in the ordinary course of business; (d) Indebtedness evidenced by such Guarantor's Guarantee of the Securities; (e) Indebtedness of such Guarantor that is expressly subordinate or junior in right of payment to any other Indebtedness of such Guarantor; (f) to the extent that it may constitute Indebtedness, any obligation owing under leases (other than Capitalized Lease Obligations) or management agreements; and (g) any obligation that by operation of law is subordinate to any general unsecured obligations of such Guarantor. "Holders" means the registered holders of the Securities. "IAI Global Security" means a permanent global security in registered form representing the aggregate principal amount of Securities transferred after the Issue Date to Institutional Accredited Investors. "Income Tax Liabilities" means with respect to any member or, in the event such member is a flow-through entity, such direct or indirect owner or owners of such member as is or are subject to income taxes on income of the Company or any of its Restricted Subsidiaries that are limited liability companies for any calendar year, an amount determined by multiplying (a) such Person's allocable share of all taxable income and gains of such limited liability company by (b) forty-four percent (44%). "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (including by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings correlative to the foregoing). Indebtedness of any Acquired Person or any of its Subsidiaries existing at the time such Acquired Person becomes a Restricted Subsidiary (or is merged into or consolidated with the Company or any Restricted Subsidiary), whether or not such Indebtedness was Incurred in connection with, as a result of, or in contemplation of, such Acquired Person becoming a Restricted Subsidiary (or being merged into or consolidated with the Company or any Restricted Subsidiary), shall be deemed Incurred at the time any such Acquired Person becomes a Restricted Subsidiary or merges into or consolidates with the Company or any Restricted Subsidiary. "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (a) every obligation of such Person for money borrowed; (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable incurred in the ordinary course of business and payable in accordance with industry practices, or other accrued liabilities arising in the ordinary course of business; (e) every Capitalized Lease Obligation of such Person; (f) every net obligation under Interest Rate Protection Obligations or similar agreements or Currency Agreements of such Person; (g) Attributable Indebtedness; (h) every obligation of the type referred to in clauses (a) through (g) of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor, guarantor or otherwise; and (i) any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a) through (h) above. Indebtedness (i) shall not include obligations of any Person (x) arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business, provided 17 -10- that such obligations are extinguished within five Business Days of their incurrence, (y) resulting from the endorsement of negotiable instruments for collection in the ordinary course of business and consistent with past business practices and (z) under stand-by letters of credit to the extent collateralized by cash or Cash Equivalents; (ii) which provides that an amount less than the principal amount thereof shall be due upon any declaration of acceleration thereof shall be deemed to be incurred or outstanding in an amount equal to the accreted value thereof at the date of determination; (iii) shall include the liquidation preference and any mandatory redemption payment obligations in respect of any Disqualified Equity Interests of the Company or any Restricted Subsidiary; and (iv) shall not include obligations under performance bonds, performance guarantees, surety bonds and appeal bonds, letters of credit or similar obligations incurred in the ordinary course of business. "Indenture" means this Indenture, as amended or supplemented from time to time. "Independent Financial Advisor" means a nationally recognized accounting, appraisal or investment banking firm or consultant (i) which does not, and whose directors, officers and employees or Affiliates do not, have a direct or indirect financial interest in the Company and (ii) which, in the judgment of the Board of Managers of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "Initial Purchasers" means Chase Securities Inc. and First Chicago Capital Markets, Inc. "Initial Securities" means the 9 3/4% Senior Subordinated Notes due 2007, Series A, of the Issuers. "Insolvency or Liquidation Proceeding" means, with respect to any Person, any liquidation, dissolution or winding up of such Person, or any bankruptcy, reorganization, insolvency, receivership or similar proceeding with respect to such Person, whether voluntary or involuntary. "Institutional Accredited Investor" means an institution that is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "interest" means, with respect to the Securities, the sum of any cash interest and any Additional Interest (as defined under "Registration Rights") on the Securities. "Interest Payment Date" means each semiannual interest payment date on April 1 and October 1 of each year, commencing on April 1, 1998. "Interest Rate Protection Obligations" means, with respect to any Person, the Obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Interest Record Date" for the interest payable on any Interest Payment Date (except a date for payment of defaulted interest) means the March 15 or September 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. "Investment" means, with respect to any Person, any direct or indirect loan, advance, guarantee or other extension of credit or capital contribution to (by means of transfers of cash or other property or assets to others or payments for property or services for the account or use of others, or otherwise), or pur- 18 -11- chase or acquisition of capital stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person. For purposes of Section 4.08, the amount of any Investment shall be the original cost of such Investment, plus the cost of all additions thereto, but without any other adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment, reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided, however, that no such payment of dividends or distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. In determining the amount of any Investment involving a transfer of any property or asset other than cash, such property shall be valued at its Fair Market Value at the time of such transfer, as determined in good faith by the Board of Managers (or comparable body) of the Person making such transfer. If the Company or any Restricted Subsidiary sells or otherwise disposes of any Voting Equity Interests of any direct or indirect Restricted Subsidiary such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, greater than 50% of the outstanding Voting Equity Interests of such Restricted Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of Voting Equity Interests of such former Restricted Subsidiary not sold or disposed of. "Issue Date" means the original issue date of the Securities. "Issuer Request" or "Issuer Order" means a written request or order signed in the name of each of the Issuers by its respective Chairman of the Board, its Vice Chairman of the Board, its President, a Vice President or its Treasurer, and by its respective Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Issuers" means collectively, the Company and Capital Corp. "Lien" means any lien, mortgage, charge, security interest, hypothecation, assignment for security or encumbrance of any kind (including any conditional sale or capital lease or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "Maturity Date" means the date, which is set forth on the face of the Securities, on which the Securities will mature. "Net Cash Proceeds" means the aggregate proceeds in the form of cash or Cash Equivalents received by the Company or any Restricted Subsidiary in respect of any Asset Sale, including all cash or Cash Equivalents received upon any sale, liquidation or other exchange of proceeds of Asset Sales received in a form other than cash or Cash Equivalents, net of (a) the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof; (b) taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements); (c) amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale (including payments made to obtain or avoid the need for the consent of any holder of such Indebtedness); (d) amounts deemed, in good faith, appropriate by the Board of Managers of the Company to be provided as a reserve, in accordance with GAAP, against any liabilities associated with such assets which are the subject of such Asset Sale; including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an officers' certificate delivered to the Trustee (provided that the amount of any such reserves shall be deemed to constitute Net Cash Proceeds at the time such reserves shall have been re- 19 -12- versed or are not otherwise required to be retained as a reserve); and (e) with respect to Asset Sales by Restricted Subsidiaries, the portion of such cash payments attributable to Persons holding a minority interest in such Restricted Subsidiary. "Net Proceeds Utilization Date" has the meaning provided in Section 4.07. "Obligations" means any principal, interest (including, without limitation, Post-Petition Interest), penalties, fees, indemnifications, reimbursement obligations, damages and other liabilities payable under the documentation governing any Indebtedness. "Offer" has the meaning set forth in the definition of "Offer to Purchase." "Offer to Purchase" means a written offer (the "Offer") sent by or on behalf of the Company by first-class mail, postage prepaid, to each Holder at his address appearing in the register for the Securities on the date of the Offer offering to purchase up to the principal amount of Securities specified in such Offer at the purchase price specified in such Offer (as determined pursuant to this Indenture). Unless otherwise required by applicable law, the Offer shall specify an expiration date (the "Expiration Date") of the Offer to Purchase, which shall be not less than 30 days nor more than 60 days after the date of such Offer, and a settlement date (the "Purchase Date") for purchase of Securities to occur no later than five Business Days after the Expiration Date. The Company shall notify the Trustee at least 15 days (or such shorter period as is acceptable to the Trustee) prior to the mailing of the Offer of the Company's obligation to make an Offer to Purchase, and the Offer shall be mailed by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. The Offer shall also contain information concerning the business of the Company and its Subsidiaries which the Company in good faith believes will enable such Holders to make an informed decision with respect to the Offer to Purchase (which at a minimum will include (i) the most recent annual and quarterly financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the documents required to be filed with the Trustee pursuant to this Indenture (which requirements may be satisfied by delivery of such documents together with the Offer), (ii) a description of material developments in the Company's business subsequent to the date of the latest of such financial statements referred to in clause (i) (including a description of the events requiring the Company to make the Offer to Purchase), (iii) if applicable, appropriate pro forma financial information concerning the Offer to Purchase and the events requiring the Company to make the Offer to Purchase and (iv) any other information required by applicable law to be included therein). The Offer shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Offer to Purchase. The Offer shall also state: (1) the Section of this Indenture pursuant to which the Offer to Purchase is being made; (2) the Expiration Date and the Purchase Date; (3) the aggregate principal amount of the outstanding Securities offered to be purchased by the Company pursuant to the Offer to Purchase (including, if less than 100%, the manner by which such amount has been determined pursuant to this Section of this Indenture requiring the Offer to Purchase) (the "Purchase Amount"); (4) the purchase price to be paid by the Company for each $1,000 aggregate principal amount of Securities accepted for payment (as specified pursuant to this Indenture) (the "Purchase Price"); (5) that the Holder may tender all or any portion of the Securities registered in the name of such Holder and that any portion of a Security tendered must be tendered in an integral multiple of $1,000 principal amount; (6) the place or places where Securities are to be surrendered for tender pursuant to the Offer to Purchase; (7) that interest on any Security not tendered or tendered but not purchased by the Company pursuant to the Offer to Purchase will continue to accrue; (8) that on the Purchase Date the Purchase Price will become due and payable upon each Security being accepted for payment pursuant to the Offer to Purchase and that interest thereon shall cease to accrue on and after the Purchase Date; (9) that each Holder electing to tender all or any portion of a Security pursuant to the Offer to Purchase will be required to surren- 20 -13- der such Security at the place or places specified in the Offer prior to the close of business on the Expiration Date (such Security being, if the Company or the Trustee so requires, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing); (10) that each Holder will be entitled to withdraw all or any portion of any Securities tendered by such Holder if the Company (or its Paying Agent) receives, not later than the close of business on the fifth Business Day next preceding the Expiration Date, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of the Security such Holder tendered, the certificate number of the Security such Holder tendered and a statement that such Holder is withdrawing all or a portion of his tender; (11) that (a) if Securities in an aggregate principal amount less than or equal to the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase all such Securities and (b) if Securities in an aggregate principal amount in excess of the Purchase Amount are tendered and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase Securities having an aggregate principal amount equal to the Purchase Amount on a pro rata basis (with such adjustments as may be deemed appropriate so that only Securities in denominations of $1,000 principal amount or integral multiples thereof shall be purchased); and (12) that in the case of any Holder whose Security is purchased only in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unpurchased portion of the Security so tendered. "Officer" means, with respect to each of the Issuers, the Chairman, any Vice Chairman, the President, any Vice President, the Chief Financial Officer, the Treasurer or the Secretary of such Issuer, and, with respect to any Guarantor, the Chairman, any Vice Chairman, the President, any Vice President, the Chief Financial Officer, the Treasurer or the Secretary of such Guarantor. "Officers' Certificate" means a certificate signed by two Officers or by an Officer and an Assistant Treasurer or Assistant Secretary of each of the Issuers complying with Sections 13.04 and 13.05. "144A Global Security" means a permanent global security in registered form representing the aggregate principal amount of Securities sold in reliance on Rule 144A. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuers or the Trustee. "Participant" has the meaning provided in Section 2.15. "Paying Agent" has the meaning provided in Section 2.03. "Payment Blockage Notice" has the meaning provided in Section 8.03. "Payment Blockage Period" has the meaning provided in Section 8.03. "Permitted Holder" means each of (i) CCP and its affiliates, (ii) the Existing Management Holders and (iii) any corporation, a majority of the outstanding Voting Equity Interests of which are owned, directly or indirectly, by Persons listed in clauses (i) and (ii) of this definition, and no more than 35% of the outstanding Voting Equity Interests of which are beneficially owned, directly or indirectly, by any Person (other than Permitted Holders) or group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-15d(b)(1) under the Exchange Act. 21 -14- "Permitted Indebtedness" means the following, each of which shall be given independent effect: (a) Indebtedness under the Securities; (b) Indebtedness of the Company or any Restricted Subsidiary Incurred under the Credit Facilities in an aggregate principal amount at any one time outstanding not to exceed the greater of (i) $25.0 million and (ii) the sum of 85% of the total book value of accounts receivable and 50% of the total book value of inventory, in each case as reflected on the Company's most recent consolidated financial statements prepared in accordance with GAAP; (c) Indebtedness of any Restricted Subsidiary owed to and held by the Company or any other Restricted Subsidiary, and Indebtedness of the Company owed to and held by any Restricted Subsidiary which is unsecured and subordinated in right of payment to the payment and performance of the Company's obligations under any Senior Indebtedness, this Indenture and the Securities; provided, however, that an Incurrence of Indebtedness that is not permitted by this clause (c) shall be deemed to have occurred upon (i) any sale or other disposition of any Indebtedness of the Company or any Restricted Subsidiary referred to in this clause (c) to a Person (other than the Company or a Restricted Subsidiary), (ii) any sale or other disposition of Equity Interests of any Restricted Subsidiary which holds Indebtedness of the Company or another Restricted Subsidiary such that such Restricted Subsidiary ceases to be a Subsidiary and (iii) the designation of a Restricted Subsidiary that holds Indebtedness of the Company or any other Restricted Subsidiary as an Unrestricted Subsidiary; (d) the Guarantees and guarantees by any Guarantor of Indebtedness of the Company or its Restricted Subsidiaries and the guarantees by the Company of Indebtedness of the Restricted Subsidiaries; provided, however, that if such guarantee is of Subordinated Indebtedness, then the Guarantee of such Guarantor or the Company's obligations under the Securities, as the case may be; shall be senior to such Guarantor's or the Company's, as the case may be, guarantee of such Subordinated Indebtedness; (e) Interest Rate Protection Obligations relating to Indebtedness of the Company (which Indebtedness (i) bears interest at fluctuating interest rates and (ii) is otherwise permitted to be Incurred under this definition and Section 4.04); provided, however, that (i) such Interest Rate Protection Obligations have been entered into for bona fide business purposes and not for speculation and (ii) the notional principal amount of such Interest Rate Protection Obligations, at the time of the incurrence thereof, does not exceed the principal amount of the Indebtedness to which such Interest Rate Protection Obligations relate; (f) Purchase Money Indebtedness and Capitalized Lease Obligations which, at the time of the incurrence thereof, do not, in the aggregate with all such other Indebtedness incurred pursuant to this clause (f), exceed 5.0% of the total assets of the Company and its Restricted Subsidiaries, on a consolidated basis determined consistent with the Company's most recent balance sheet prepared in accordance with GAAP at any one time outstanding; (g) Indebtedness under Currency Agreements; provided, however, that in the case of Currency Agreements which relate to Indebtedness, such Currency Agreements do not increase the principal amount of Indebtedness of the Company and its Restricted Subsidiaries outstanding other than as 22 -15- a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (h) Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date, reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereof; (i) Indebtedness of the Company or any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or such Restricted Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business in an amount not to exceed $3.0 million in the aggregate at any time outstanding; (j) Indebtedness arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price or similar obligations, in each case incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; provided, however, that (i) such Indebtedness is not reflected on the balance sheet of the Company or any Restricted Subsidiary of the Company (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (i)) and (ii) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including noncash proceeds (the fair market value of such noncash proceeds being measured at the time it is received and without giving effect to any subsequent changes in value) actually received by the Company and its Restricted Subsidiaries in connection with such disposition; (k) Obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary of the Company in the ordinary course of business; (l) Indebtedness of the Company or any Restricted Subsidiary Incurred under an Acquisition Facility in an aggregate principal amount at any one time outstanding not to exceed $22.0 million, reduced by any required permanent repayments (which are accompanied by corresponding permanent commitment reduction thereunder); (m) Indebtedness to the extent representing a replacement, renewal, defeasance, refinancing or extension (collectively, a "refinancing") of outstanding Indebtedness Incurred in compliance with Section 4.04 clauses (a), (h) or (l) of this definition; provided, however, that (i) any such refinancing shall not exceed the sum of the principal amount (or accreted amount (determined in accordance with GAAP), if less) of the Indebtedness being refinanced, plus the amount of accrued interest thereon, plus the amount of any reasonably determined prepayment premium necessary to accomplish such refinancing and such reasonable fees and expenses incurred in connection therewith, (ii) Indebtedness representing a refinancing of Indebtedness other than Senior Indebtedness shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being refinanced; and (iii) Indebtedness that is pari passu with the Securities may only be refinanced with Indebtedness that is made pari passu with or subordinate in right of payment to the Securities and Subordinated Indebtedness may only be refinanced with Subordinated Indebtedness; and 23 -16- (n) in addition to the items referred to in clauses (a) through (m) above, Indebtedness of the Company (including any Indebtedness under the Credit Facilities that utilizes this clause (m)) having an aggregate principal amount not to exceed $10.0 million at any one time outstanding. "Permitted Investments" means (a) cash and Cash Equivalents; (b) Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and workers' compensation, performance and other similar deposits; (c) Interest Rate Protection Obligations and Currency Agreements; (d) Investments received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers, in each case arising in the ordinary course of business; (e) Investments in the Company and Investments in Restricted Subsidiaries or Persons that, as a result of or in connection with any such Investment, become Restricted Subsidiaries or are merged with or into or consolidated with the Company or another Restricted Subsidiary; (f) Investments paid for in Qualified Equity Interests of the Company; (g) loans or advances to officers or employees of the Company and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes of the Company and its Restricted Subsidiaries (including, but not limited to, travel and moving expenses) not in excess of $1 million in the aggregate at any one time outstanding; (h) Investments in Replacement Assets made in compliance with Section 4.07; (i) Investments of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time such Person merges or consolidates with the Company or any of its Restricted Subsidiaries, in either case in compliance with this Indenture; provided that such Investments were not made by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such merger or consolidation; and (j) Investments (including, without limitation, in the form of joint ventures with unaffiliated third parties) in Related Businesses not in excess of $10 million in the aggregate at any one time outstanding. "Permitted Junior Securities" means any securities of the Company or any other Person that are (i) equity securities without special covenants or (ii) debt securities expressly subordinated in right of payment to all Senior Indebtedness that may at the time be outstanding, to substantially the same extent as, or to a greater extent than, the Securities are subordinated as provided in this Indenture, in any event pursuant to a court order so providing and as to which (a) the rate of interest on such securities shall not exceed the effective rate of interest on the Securities on the date of this Indenture, (b) such securities shall not be entitled to the benefits of covenants or defaults materially more beneficial to the holders of such securities than those in effect with respect to the Securities on the date of this Indenture and (c) such securities shall not provide for amortization (including sinking fund and mandatory prepayment provisions) commencing prior to the date six months following the final scheduled maturity date of the Senior Indebtedness (as modified by the plan of reorganization of readjustment pursuant to which such securities are issued). "Permitted Liens" means (a) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Restricted Subsidiary; provided, however, that such Liens were in existence prior to the contemplation of such merger or consolidation and do not secure any property or assets of the Company or any Restricted Subsidiary other than the property or assets subject to the Liens prior to such merger or consolidation; (b) Liens imposed by law such as carriers', warehousemen's, mechanics', suppliers', materialmen's, landlords' and repairmen's Liens and other similar Liens arising in the ordinary course of business which secure payment of obligations not more than 30 days past due or which are being contested in good faith and by appropriate proceedings; (c) Liens existing on the Issue Date; (d) Liens securing only the Securities or the Guarantees; (e) Liens in favor of the Company or any Restricted Subsidiary; (f) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings; provided, however, that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (g) easements, 24 -17- reservation of rights of way, restrictions (including, but not limited to, zoning and building restrictions) and other similar easements, licenses, restrictions on the use of properties, or minor imperfections of title that in the aggregate are not material in amount and do not in any case materially detract from the properties subject thereto or interfere with the ordinary conduct of the business of the Company and the Restricted Subsidiaries; (h) Liens resulting from the deposit of cash or notes in connection with contracts, bids, sales or tenders or expropriation proceedings, or to secure workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practices in connection therewith, surety, appeal and performance bonds, costs of litigation when required by law and public and statutory obligations or obligations under franchise arrangements entered into in the ordinary course of business; (i) Liens securing Indebtedness consisting of Capitalized Lease Obligations, Purchase Money Indebtedness, mortgage financings, industrial revenue bonds or other monetary obligations, in each case incurred solely for the purpose of financing all or any part of the purchase price or cost of construction or installation of assets used in the business of the Company or the Restricted Subsidiaries, or repairs, additions or improvements to such assets, provided, however, that (I) such Liens secure Indebtedness in an amount not in excess of the original purchase price or the original cost of any such assets or repair, addition or improvement thereto (plus an amount equal to the reasonable fees and expenses in connection with the incurrence of such Indebtedness), (II) such Liens do not extend to any other assets of the Company or the Restricted Subsidiaries (and, in the case of repair, addition or improvements to any such assets, such Lien extends only to the assets (and improvements thereto or thereon) repaired, added to or improved), (III) the Incurrence of such Indebtedness is permitted by Section 4.04 and (IV) such Liens attach within 120 days of such purchase, construction, installation, repair, addition or improvement; (j) any interest or title of a lessor under any Capitalized Lease Obligation; provided, however, that such Liens do not extend to any property or assets which are not leased property subject to such Capitalized Lease Obligation; (k) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (l) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (m) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (n) Liens securing Interest Swap Obligations and Currency Agreements which Obligations and agreements are otherwise permitted under this Indenture; (o) Liens by reason of judgments, attachments or decree not otherwise resulting in an Event of Default; (p) Liens securing Indebtedness of non-Guarantor Restricted Subsidiaries Incurred in compliance with this Indenture; and (q) Liens to secure any refinancings, renewals, extensions, modifications or replacements (collectively, "refinancing") (or successive refinancings), in whole or in part, of any Indebtedness secured by Liens referred to in the clauses above so long as such Lien does not extend to any other property (other than improvements thereto). "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, limited liability partnership, trust, unincorporated organization or government or any agency or political subdivision thereof. "Physical Securities" means one or more certificated Securities in registered form. "Post-Petition Interest" means, with respect to any Indebtedness of any Person, all interest accrued or accruing on such Indebtedness after the commencement of any Insolvency or Liquidation Proceeding against such Person in accordance with and at the contract rate (including, without limitation, any rate applicable upon default) specified in the agreement or instrument creating, evidencing or governing such Indebt- 25 -18- edness, whether or not, pursuant to applicable law or otherwise, the claim for such interest is allowed as a claim in such Insolvency or Liquidation Proceeding. "Preferred Equity Interest," in any Person, means an Equity Interest of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Equity Interests of any other class in such Person. "principal" of a debt security means the principal of the security plus, when appropriate, the premium, if any, on the security. "Private Exchange Securities" has the meaning provided in Section 2(b) of the Registration Rights Agreement. "Private Placement Legend" means the legend initially set forth on the Initial Securities in the form set forth on Exhibit A hereto. "Public Equity Offering" means, with respect to the Company, an underwritten public offering of Qualified Equity Interests of the Company pursuant to an effective registration statement filed under the Securities Act (excluding registration statements filed on Form S-8). "Purchase Agreement" means the Purchase Agreement dated as of September 25, 1997 by and among the Issuers, the Guarantors and the Initial Purchasers. "Purchase Amount" has the meaning set forth in the definition of "Offer to Purchase." "Purchase Date" has the meaning set forth in the definition of "Offer to Purchase." "Purchase Money Indebtedness" means Indebtedness of the Company or any Restricted Subsidiary Incurred for the purpose of financing all or any part of the purchase price or the cost of installation, construction or improvement of any property; provided, however, that the aggregate principal amount of such Indebtedness does not exceed the lesser of the fair market value of such property or such purchase price or cost, including any refinancing of such Indebtedness that does not increase the aggregate principal amount (or accreted amount, if less) thereof as of the date of refinancing. "Purchase Price" has the meaning set forth in the definition of "Offer to Purchase." "Qualified Equity Interest" in any Person means any Equity Interest in such Person other than any Disqualified Equity Interest. "Qualified Institutional Buyer" or "QIB" means a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption pursuant to this Indenture. 26 -19- "redemption price," when used with respect to any Security to be redeemed, means the price fixed for such redemption pursuant to this Indenture as set forth in the form of Security annexed hereto as Exhibit A. "Registrar" has the meaning provided in Section 2.03. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the Issue Date by and among the Issuers, the Guarantors and the Initial Purchasers. "Registration" means a registered exchange offer for the Securities by the Company or other registration of the Securities under the Securities Act pursuant to and in accordance with the terms of the Registration Rights Agreement. "Related Business" means any business related, ancillary or complementary (as determined in good faith by the Board of Managers) to the business of the Company and the Restricted Subsidiaries on the Issue Date. "Replacement Assets" has the meaning provided in Section 4.07. "Required Filing Date" has the meaning provided in Section 4.11. "Restricted Investment" means any Investment other than a Permitted Investment. "Restricted Payment" has the meaning provided in Section 4.08. "Restricted Security" has the meaning set forth in Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee shall be entitled to request and conclusively rely upon an Opinion of Counsel with respect to whether any Security is a Restricted Security. "Restricted Subsidiary" means any Subsidiary of the Company that has not been designated by the Board of Managers of the Company, by a resolution of the Board of Managers of the Company delivered to the Trustee, as an Unrestricted Subsidiary pursuant to Section 4.15. Any such designation may be revoked by a resolution of the Board of Managers of the Company delivered to the Trustee, subject to the provisions of such Section. "Revocation" has the meaning provided in Section 4.15. "Rule 144A" means Rule 144A under the Securities Act. "Sale and Lease-Back Transaction" means any arrangement with any Person providing for the leasing by the Company or any Restricted Subsidiary of the Company of any real or tangible personal Property, which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person in contemplation of such leasing. "SEC" or "Commission" means the Securities and Exchange Commission. 27 -20- "Securities" means, collectively, the Initial Securities, the Private Exchange Securities and the Unrestricted Securities treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms of this Indenture. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder. "Security Guarantee" means the Form of Security Guarantee of each Guarantor to be endorsed on each of the Securities in the form of Exhibit A (in the case of an Initial Security) or Exhibit B (in the case of an Exchange Security) hereto. "Senior Indebtedness" means, at any date, (a) all Obligations under the Credit Facilities; (b) all Interest Rate Protection Obligations of the Company; (c) all Obligations of the Company under letters of credit; and (d) all other Indebtedness of the Company, including principal, premium, if any, and interest (including Post-Petition Interest) on such Indebtedness, unless the instrument under which such Indebtedness of the Company is Incurred expressly provides that such Indebtedness is not senior or superior in right of payment to the Securities, and all renewals, extensions, modifications, amendments or refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness shall not include (a) to the extent that it may constitute Indebtedness, any Obligation for Federal, state, local or other taxes; (b) any Indebtedness among or between the Company and any Subsidiary of the Company; (c) to the extent that it may constitute Indebtedness, any Obligation in respect of any trade payable Incurred for the purchase of goods or materials, or for services obtained, in the ordinary course of business; (d) Indebtedness evidenced by the Securities; (e) Indebtedness of the Company that is expressly subordinate or junior in right of payment to any other Indebtedness of the Company; (f) to the extent that it may constitute Indebtedness, any obligation owing under leases (other than Capitalized Lease Obligations) or management agreements; and (g) any obligation that by operation of law is subordinate to any general unsecured obligations of the Company. "Significant Restricted Subsidiary" means, at any date of determination, (a) any Restricted Subsidiary that, together with its Subsidiaries that constitute Restricted Subsidiaries (i) for the most recent fiscal year of the Company accounted for more than 10.0% of the consolidated revenues of the Company and the Restricted Subsidiaries or (ii) as of the end of such fiscal year, owned more than 10.0% of the consolidated assets of the Company and the Restricted Subsidiaries, all as set forth on the consolidated financial statements of the Company and the Restricted Subsidiaries for such year prepared in conformity with GAAP, and (b) any Restricted Subsidiary which, when aggregated with all other Restricted Subsidiaries that are not otherwise Significant Restricted Subsidiaries and as to which any event described in clause (h) of Section 6.01 has occurred, would constitute a Significant Restricted Subsidiary under clause (a) of this definition. "Stated Maturity" means, when used with respect to any Security or any installment of interest thereon, the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable. "Subordinated Indebtedness" means, with respect to the Issuers or any Guarantor, any Indebtedness of the Issuers or such Guarantor, as the case may be, which is expressly subordinated in right of payment to the Securities or such Guarantor's Guarantee, as the case may be. "Subsidiary" means, with respect to any Person, (a) any corporation of which the outstanding Voting Equity Interests having at least a majority of the votes entitled to be cast in the election of directors 28 -21- shall at the time be owned, directly or indirectly, by such Person, or (b) any other Person of which at least a majority of Voting Equity Interests are at the time, directly or indirectly, owned by such first named Person. "Surviving Person" means, with respect to any Person involved in or that makes any Disposition, the Person formed by or surviving such Disposition or the Person to which such Disposition is made. "Tax Distribution" means, as of the time of determination thereof, any distribution by the Company and any of its Restricted Subsidiaries that are limited liability companies to their respective members (or in each case, if such member is a flow-through entity, such direct or indirect owner or owners of such member as is or are subject to income taxes on income of such limited liability company) which (i) with respect to quarterly estimated tax payments due in each calendar year shall be equal to twenty-five percent (25%) of the relevant member's Income Tax Liabilities for such calendar year as estimated in writing by the chief financial officer of the Company and (ii) with respect to tax payments to be made with income tax returns filed for a full calendar year or with respect to adjustments to such returns imposed by the Internal Revenue Service or other taxing authority, shall be equal to the Income Tax Liabilities of such member for such calendar year minus the aggregate amount distributed to such member for such calendar year as provided in clause (i) above. In the event the amount determined under clause (ii) is negative amount, the amount of any distributions to the relevant member in the succeeding calendar year (or, if necessary, any subsequent calendar years) shall be reduced by such negative amount. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb), as amended, as in effect on the date of this Indenture (except as provided in Section 10.03) until such time as this Indenture is qualified under the TIA, and thereafter as in effect on the date on which this Indenture is qualified under the TIA. "Trust Officer" means any officer within the corporate trust department (or any successor group of the Trustee) including any vice president, assistant vice president, assistant secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at that time shall be such officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such trust matter is referred because of his knowledge of and familiarity with the particular subject. "Trustee" means the party named as such in the first paragraph of this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "United States Government Obligations" means direct non-callable obligations of the United States of America for the payment of which the full faith and credit of the United States is pledged. "Unrestricted Securities" means one or more Securities that do not and are not required to bear the Private Placement Legend in the form set forth in Exhibit A hereto, including, without limitation, the Exchange Securities and any Securities registered under the Securities Act pursuant to and in accordance with the Registration Rights Agreement. "Unrestricted Subsidiary" means any Subsidiary of the Company designated as such pursuant to Section 4.15. Any such designation may be revoked by a resolution of the Board of Managers of the Company delivered to the Trustee, subject to the provisions of such section. "Unutilized Net Cash Proceeds" has the meaning provided in Section 4.07. 29 -22- "Voting Equity Interests" means Equity Interests in a corporation or other Person with voting power under ordinary circumstances entitling the holders thereof to elect the Board of Managers or other governing body of such corporation or Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required scheduled payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding aggregate principal amount of such Indebtedness. "Western Europe" means, with respect to any jurisdictional matter, any of the twelve current member states of the European Community and Switzerland, Norway, Sweden, Finland, Austria and the Czech Republic (and "Western European" shall have a meaning correlative to the foregoing). "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of which at least 99.0% of the outstanding Voting Equity Interests (other than qualifying shares or other Equity Interests owned by directors or other members of any comparable governing body) are owned, directly or indirectly, by the Company and/or one or more Wholly Owned Restricted Subsidiaries. SECTION 1.02. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Holder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the Indenture securities means the Issuers or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; 30 -23- (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in effect from time to time, and any other reference in this Indenture to "generally accepted accounting principles" refers to GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and words in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. ARTICLE TWO THE SECURITIES SECTION 2.01. Form and Dating. The Initial Securities and the Trustee's certificate of authentication thereof shall be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities and the Trustee's certificate of authentication thereof shall be substantially in the form of Exhibit B hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. The Issuers and the Trustee shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its issuance and shall show the date of its authentication. Each Security shall have an executed Guarantee from each of the Guarantors endorsed thereon substantially in the form set forth in Exhibits A and B hereto. The terms and provisions contained in the Securities annexed hereto as Exhibits A and B shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Issuers, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Securities offered and sold in reliance on Rule 144A shall be issued initially in the form of one or more Global Securities, substantially in the form set forth in Exhibit A hereto, deposited with the Trustee, as custodian for the Depository, duly executed by the Issuers and authenticated by the Trustee as hereinafter provided and shall bear the legend set forth in Exhibit C hereto. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. 31 -24- SECTION 2.02. Execution and Authentication. Two Officers shall sign, or one Officer shall sign and one Officer (each of whom shall, in each case, have been duly authorized by all requisite corporate actions) of each of the Issuers shall attest to, the Securities for each of the Issuers, and the Guarantees for the Guarantors, by manual or facsimile signature. If an Officer whose signature is on a Security or a Guarantee, as the case may be, was an Officer at the time of such execution but no longer holds that office at the time the Trustee authenticates the Security or Guarantee, as the case may be, the Security or Guarantee, as the case may be, shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate (i) Initial Securities for original issue in an aggregate principal amount not to exceed $125,000,000, (ii) Private Exchange Securities from time to time only in exchange for a like principal amount of Initial Securities and (iii) Unrestricted Securities from time to time only in exchange for (A) a like principal amount of Initial Securities or (B) a like principal amount of Private Exchange Securities, in each case upon a written order of each of the Issuers in the form of an Officers' Certificate. Each such written order shall specify the amount of Securities to be authenticated and the date on which the Securities are to be authenticated, whether the Securities are to be Initial Securities, Private Exchange Securities or Unrestricted Securities and whether the Securities are to be issued as Physical Securities or Global Securities and such other information as the Trustee may reasonably request. The aggregate principal amount of Securities outstanding at any time may not exceed $125,000,000, except as provided in Sections 2.07 and 2.08. Notwithstanding the foregoing, all Securities issued under this Indenture shall vote and consent together on all matters (as to which any of such Securities may vote or consent) as one class and no series of Securities will have the right to vote or consent as a separate class on any matter. The Trustee may appoint an authenticating agent reasonably acceptable to each of the Issuers to authenticate Securities. Unless otherwise provided in the appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent shall have the same rights as an Agent to deal with either of the Issuers and Affiliates of either of the Issuers. The Securities shall be issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. SECTION 2.03. Registrar and Paying Agent. The Issuers shall maintain an office or agency, which may be in the Borough of Manhattan, The City of New York, where (a) Securities may be presented or surrendered for registration of transfer or for exchange (the "Registrar"), (b) Securities may be presented or surrendered for payment (the "Paying Agent") and (c) notices and demands in respect of the Securities and this Indenture may be served. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Issuers, upon notice to the Trustee, may appoint one or more co-Registrars and one or more additional Paying Agents. The term "Paying Agent" 32 -25- includes any additional Paying Agent. Except as provided herein, the Issuers may act as Paying Agent, Registrar or co-Registrar. The Issuers shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Issuers shall notify the Trustee of the name and address of any such Agent. If the Issuers fail to maintain a Registrar or Paying Agent, or fail to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 7.07. The Issuers initially appoint the Trustee as Registrar and Paying Agent until such time as the Trustee has resigned or a successor has been appointed. SECTION 2.04. Paying Agent To Hold Assets in Trust. The Issuers shall require each Paying Agent other than the Trustee to agree in writing that each Paying Agent shall hold in trust for the benefit of Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, or interest on, the Securities, and shall notify the Trustee of any Default by the Issuers in making any such payment. The Issuers at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Issuers to the Paying Agent (if other than the Issuers), the Paying Agent shall have no further liability for such assets. If the Issuers or any of their Affiliates acts as Paying Agent, it shall, on or before each due date of the principal of or interest on the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. SECTION 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Issuers shall furnish to the Trustee before each Interest Record Date and at such other times as the Trustee may request in writing a list as of such date and in such form as the Trustee may reasonably require of the names and addresses of Holders, which list may be conclusively relied upon by the Trustee. SECTION 2.06. Transfer and Exchange. Subject to the provisions of Sections 2.15 and 2.16, when Securities are presented to the Registrar or a co-Registrar with a request to register the transfer of such Securities or to exchange such Securities for an equal principal amount of Securities of other authorized denominations of the same series, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Securities surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Issuers and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Issuers shall execute and the Trustee shall authenticate Securities at the Registrar's or co-Registrar's written request. No service charge shall be made for any regis- 33 -26- tration of transfer or exchange, but the Issuers may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other governmental charge payable upon exchanges or transfers pursuant to Section 2.02, 2.10, 3.06, 4.07, 4.16, or 10.05). The Registrar or co-Registrar shall not be required to register the transfer or exchange of any Security (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Securities and ending at the close of business on the day of such mailing and (ii) selected for redemption in whole or in part pursuant to Article Three hereof, except the unredeemed portion of any Security being redeemed in part. Prior to the registration of any transfer by a Holder as provided herein, the Issuers, the Trustee and any Agent of the Issuers shall treat the person in whose name the Security is registered as the owner thereof for all purposes whether or not the Security shall be overdue, and none of the Issuers, the Trustee or any such Agent shall be affected by notice to the contrary. Any Holder of a beneficial interest in a Global Security shall, by acceptance of such beneficial interest in a Global Security, agree that transfers of beneficial interests in such Global Security may be effected only through a book-entry system maintained by the Depository (or its agent), and that ownership of a beneficial interest in a Global Security shall be required to be reflected in a book entry. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Trustee or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Issuers shall issue and the Trustee shall authenticate a replacement Security if the Trustee's requirements for replacement of Securities are met. If required by the Issuers or the Trustee, such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of both of the Issuers and the Trustee, to protect the Issuers, the Trustee and any Agent from any loss which any of them may suffer if a Security is replaced. The Issuers may charge such Holder for their reasonable out-of-pocket expenses in replacing a Security, including reasonable fees and expenses of counsel. Every replacement Security is an additional obligation of the Issuers. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all the Securities that have been authenticated by the Trustee except those canceled by it, those delivered to it for cancellation and those described in this Section 2.08 as not outstanding. Subject to Section 2.09, a Security does not cease to be outstanding because either of the Issuers or any Affiliates of either of the Issuers holds the Security. If a Security is replaced pursuant to Section 2.07 (other than a mutilated Security surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. A mutilated Security ceases to be outstanding upon surrender of such Security and replacement thereof pursuant to Section 2.07. If on a Redemption Date, Purchase Date or the Final Maturity Date the Paying Agent holds money sufficient to pay all of the principal and interest due on the Securities payable on that date, and is not prohibited from paying such money to the Holders pursuant to the terms of this Indenture, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. 34 -27- SECTION 2.09. Treasury Securities. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by either of the Issuers, the Guarantors or any of their respective Affiliates shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities that a Trust Officer of the Trustee actually knows are so owned shall be disregarded. The Issuers shall notify the Trustee, in writing, when either of them, any Guarantor, or any of their respective Affiliates repurchases or otherwise acquires Securities, of the aggregate principal amount of such Securities so repurchased or otherwise acquired. SECTION 2.10. Temporary Securities. Until definitive Securities are ready for delivery, the Issuers may prepare and the Trustee shall authenticate temporary Securities upon receipt of a written order of the Issuers in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of temporary Securities to be authenticated and the date on which the temporary Securities are to be authenticated. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Issuers consider appropriate for temporary Securities. Without unreasonable delay, the Issuers shall prepare and the Trustee shall authenticate upon receipt of a written order of the Issuers pursuant to Section 2.02 definitive Securities in exchange for temporary Securities. SECTION 2.11. Cancellation. The Issuers at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel, and at the written direction of the Issuers, dispose of and deliver evidence of such disposal of all Securities surrendered for transfer, exchange, payment or cancellation. Subject to Section 2.07, the Issuers may not issue new Securities to replace Securities that they have paid or delivered to the Trustee for cancellation. If the Issuers shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12. Defaulted Interest. The Issuers shall pay interest on overdue principal from time to time on demand at the rate of interest then borne by the Securities. The Issuers shall, to the extent lawful, pay interest on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the rate of interest then borne by the Securities. If the Issuers default in a payment of interest on the Securities, they shall pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest to the Persons who are Holders on a subsequent special record date, which date shall be the fifteenth day preceding the date fixed by the Issuers for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. At least 15 days before the subsequent special record date, the Issuers shall mail to each Holder, with a 35 -28- copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. Notwithstanding the foregoing, any interest which is paid prior to the expiration of the 30-day period set forth in Section 6.01(b) shall be paid to Holders as of the Interest Record Date for the Interest Payment Date for which interest has not been paid. SECTION 2.13. CUSIP Number. The Issuers in issuing the Securities will use a "CUSIP" number and the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. The Issuers shall promptly notify the Trustee of any changes in CUSIP numbers. SECTION 2.14. Deposit of Moneys. Prior to 12:00 noon New York City time on each Interest Payment Date, Redemption Date, Purchase Date and the Final Maturity Date, the Issuers shall deposit with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date, Redemption Date, Purchase Date or Final Maturity Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date, Redemption Date, Purchase Date or Final Maturity Date, as the case may be. SECTION 2.15. Book-Entry Provisions for Global Securities. (a) The Global Securities initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Exhibit C. Members of, or participants in, the Depository ("Participants") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Security, and the Depository may be treated by the Issuers, the Trustee and any agent of the Issuers or the Trustee as the absolute owner of the Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the Trustee or any agent of the Issuers or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and Participants, the operation of customary practices governing the exercise of the rights of a Holder of any Security. (b) Transfers of Global Securities shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Securities may be transferred or exchanged for Physical Securities in accordance with the rules and procedures of the Depository and the provisions of Section 2.16; provided, however, that Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Securities if (i) the Depository notifies the Issuers that it is unwilling or unable to continue as Depository for any Global Security and a successor Depository is not appointed by the Issuers within 90 days of such notice or (ii) an Event of Default 36 -29- has occurred and is continuing and the Registrar has received a request from the Depository to issue Physical Securities. (c) In connection with the transfer of Global Securities as an entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15, the Global Securities shall be deemed to be surrendered to the Trustee for cancellation, and the Issuers shall execute, and the Trustee shall upon written instructions from the Issuers authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in the Global Securities, an equal aggregate principal amount of Physical Securities of authorized denominations. (d) Any Physical Security constituting a Restricted Security delivered in exchange for an interest in a Global Security pursuant to paragraph (c) of this Section 2.15 shall, except as otherwise provided by Section 2.16, bear the Private Placement Legend. (e) The Holder of any Global Security may grant proxies and otherwise authorize any Person, including Participants and Persons that may hold interests through Participants, to take any action which a Holder is entitled to take under this Indenture or the Securities and the Trustee is entitled to rely upon any electronic instructions from beneficial owners to the Holder of any Global Security. SECTION 2.16. Registration of Transfers and Exchanges. (a) Transfer and Exchange of Physical Securities. When Physical Securities are presented to the Registrar or co-Registrar with a request: (i) to register the transfer of the Physical Securities; or (ii) to exchange such Physical Securities for an equal principal amount of Physical Securities of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if the requirements under this Indenture as set forth in this Section 2.16 for such transactions are met; provided, however, that the Physical Securities presented or surrendered for Registration of transfer or exchange: (I) shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (II) in the case of Physical Securities the offer and sale of which have not been registered under the Securities Act, such Physical Securities shall be accompanied, in the sole discretion of the Issuers, by the following additional information and documents, as applicable: (A) if such Physical Security is being delivered to the Registrar or co-Registrar by a Holder for Registration in the name of such Holder, without transfer, a certification from such Holder to that effect (substantially in the form of Exhibit D hereto); or (B) if such Physical Security is being transferred to a QIB in accordance with Rule 144A, a certification to that effect (substantially in the form of Exhibit D hereto); or 37 -30- (C) if such Physical Security is being transferred to an Institutional Accredited Investor, delivery of a certification to that effect (substantially in the form of Exhibit D hereto) and a transferee letter of representation (substantially in the form of Exhibit E hereto) and, at the option of the Issuers, an Opinion of Counsel reasonably satisfactory to the Issuers to the effect that such transfer is in compliance with the Securities Act; or (D) if such Physical Security is being transferred in reliance on Rule 144 under the Securities Act, delivery of a certification to that effect (substantially in the form of Exhibit D hereto) and, at the option of the Issuers, an Opinion of Counsel reasonably satisfactory to the Issuers to the effect that such transfer is in compliance with the Securities Act; or (E) if such Physical Security is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (substantially in the form of Exhibit D hereto) and, at the option of the Issuers, an Opinion of Counsel reasonably acceptable to the Issuers to the effect that such transfer is in compliance with the Securities Act. (b) Restrictions on Transfer of a Physical Security for a Beneficial Interest in a Global Security. A Physical Security the offer and sale of which has not been registered under the Securities Act may not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Registrar or co-Registrar of a Physical Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Registrar or co-Registrar, together with: (A) certification, substantially in the form of Exhibit D hereto, that such Physical Security is being transferred (I) to a QIB or (II) to an Accredited Investor and, with respect to (II), at the option of the Issuers, an Opinion of Counsel reasonably acceptable to the Issuers to the effect that such transfer is in compliance with the Securities Act; and (B) written instructions directing the Registrar or co-Registrar to make, or to direct the Depository to make, an endorsement on the applicable Global Security to reflect an increase in the aggregate amount of the Securities represented by the Global Security, then the Registrar or co-Registrar shall cancel such Physical Security and cause, or direct the Depository to cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar or co-Registrar, the principal amount of Securities represented by the applicable Global Security to be increased accordingly. If no 144A Global Security or IAI Global Security, as the case may be, is then outstanding, the Issuers shall, unless either of the events in the proviso to Section 2.15(b) have occurred and are continuing, issue and the Trustee shall, upon written instructions from the Issuers in accordance with Section 2.02, authenticate such a Global Security in the appropriate principal amount. (c) Transfer and Exchange of Global Securities. The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depository in accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of the Depository therefor. Upon 38 -31- receipt by the Registrar or Co-Registrar of written instructions, or such other instruction as is customary for the Depository, from the Depository or its nominee, requesting the Registration of transfer of an interest in a 144A Global Security or an IAI Global Security, as the case may be, to another type of Global Security, together with the applicable Global Securities (or, if the applicable type of Global Security required to represent the interest as requested to be obtained is not then outstanding, only the Global Security representing the interest being transferred), the Registrar or Co-Registrar shall reflect on its books and records (and the applicable Global Security) the applicable increase and decrease of the principal amount of Securities represented by such types of Global Securities, giving effect to such transfer. If the applicable type of Global Security required to represent the interest as requested to be obtained is not outstanding at the time of such request, the Issuers shall issue and the Trustee shall, upon written instructions from the Issuers in accordance with Section 2.02, authenticate a new Global Security of such type in principal amount equal to the principal amount of the interest requested to be transferred. (d) Transfer of a Beneficial Interest in a Global Security for a Physical Security. (i) If the Depository is at any time unwilling or unable to continue as a depositary for the Global Securities and a successor depositary is not appointed by the Issuers within 90 days, Physical Securities will be issued in exchange for the Global Securities. Upon receipt by the Registrar or co-Registrar of written instructions, or such other form of instructions as is customary for the Depository, from the Depository or its nominee on behalf of any Person (subject to the previous sentence) having a beneficial interest in a Global Security and upon receipt by the Trustee of a written order or such other form of instructions as is customary for the Depository or the Person designated by the Depository as having such a beneficial interest containing registration instructions and, in the case of any such transfer or exchange of a beneficial interest in Securities the offer and sale of which have not been registered under the Securities Act, the following additional information and documents: (A) if such beneficial interest is being transferred in reliance on Rule 144 under the Securities Act, delivery of a certification to that effect (substantially in the form of Exhibit D hereto) and, at the option of the Issuers, an Opinion of Counsel reasonably satisfactory to the Issuers to the effect that such transfer is in compliance with the Securities Act; or (B) if such beneficial interest is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (substantially in the form of Exhibit D hereto) and, at the option of the Issuers, an Opinion of Counsel reasonably satisfactory to the Issuers to the effect that such transfer is in compliance with the Securities Act, then the Registrar or co-Registrar will cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar or co-Registrar, the aggregate principal amount of the applicable Global Security to be reduced and, following such reduction, the Issuers will execute and, upon receipt of an authentication order in the form of an Officers' Certificate in accordance with Section 2.02, the Trustee will authenticate and deliver to the transferee a Physical Security in the appropriate principal amount. (ii) Securities issued in exchange for a beneficial interest in a Global Security pursuant to this Section 2.16(d) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct 39 -32- the Registrar or co-Registrar in writing. The Registrar or co-Registrar shall deliver such Physical Securities to the Persons in whose names such Physical Securities are so registered. (e) Restrictions on Transfer and Exchange of Global Securities. Notwithstanding any other provisions of this Indenture, a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (f) Private Placement Legend. Upon the transfer, exchange or replacement of Securities not bearing the Private Placement Legend, the Registrar or co-Registrar shall deliver Securities that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Securities bearing the Private Placement Legend, the Registrar or co-Registrar shall deliver only Securities that bear the Private Placement Legend unless, and the Trustee is hereby authorized to deliver Securities without the Private Placement Legend if, (i) there is delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the Issuers and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act;(ii) such Security has been sold pursuant to an effective registration statement under the Securities Act (including pursuant to a Registration); or (iii) the date of such transfer, exchange or replacement is two years after the later of (x) the Issue Date and (y) the last date that the Issuers or any affiliate (as defined in Rule 144 under the Securities Act) of the Issuers was the owner of such Securities (or any predecessor thereto). (g) General. By its acceptance of any Security bearing the Private Placement Legend, each Holder of such a Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Security only as provided in this Indenture. The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Participants or beneficial owners of interest in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.15 or this Section 2.16. The Issuers shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar 40 -33- ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee. If the Issuers want to redeem Securities pursuant to paragraph 5 or 6 of the Securities at the applicable redemption price set forth thereon, they shall notify the Trustee in writing of the Redemption Date and the principal amount of Securities to be redeemed. The Issuers shall give such notice to the Trustee at least 45 days before the Redemption Date (unless a shorter notice shall be agreed to by the Trustee in writing), together with an Officers' Certificate stating that such redemption will comply with the conditions contained herein. SECTION 3.02. Selection of Securities To Be Redeemed. If less than all of the Securities are to be redeemed pursuant to paragraph 5 of the Securities, the Trustee shall select the Securities to be redeemed in compliance with the requirements of the national securities exchange, if any, on which the Securities are listed or, if the Securities are not then listed on a national securities exchange, on a pro rata basis, by lot or in such other manner as the Trustee shall deem fair and appropriate. Selection of the Securities to be redeemed pursuant to paragraph 6 of the Securities shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to the procedures of the Depository) based on the aggregate principal amount of Securities held by each Holder. The Trustee shall make the selection from the Securities then outstanding, subject to redemption and not previously called for redemption. The Trustee may select for redemption pursuant to paragraph 5 or 6 of the Securities portions of the principal amount of Securities that have denominations equal to or larger than $1,000 principal amount. Securities and portions of them the Trustee so selects shall be in amounts of $1,000 principal amount or integral multiples thereof. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Issuers shall mail a notice of redemption by first-class mail to each Holder whose Securities are to be redeemed at such Holder's registered address; provided, however, that notice of a redemption pursuant to paragraph 6 of the Securities shall be mailed to each Holder whose Securities are to be redeemed no later than 60 days after the date of the Closing of the relevant Public Equity Offering of the Company. Each notice of redemption shall identify the Securities to be redeemed (including the CUSIP number thereon) and shall state: (1) the Redemption Date; (2) the redemption price; 41 -34- (3) the name and address of the Paying Agent to which the Securities are to be surrendered for redemption; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) that, unless the Issuers default in making the redemption payment, interest on Securities called for redemption ceases to accrue on and after the Redemption Date and the only remaining right of the Holders is to receive payment of the redemption price upon surrender to the Paying Agent; and (6) in the case of any redemption pursuant to paragraph 5 or 6 of the Securities, if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion thereof will be issued. At the Issuers' request, the Trustee shall give the notice of redemption on behalf of the Issuers, in the Issuers' name and at the Issuers' expense. SECTION 3.04. Effect of Notice of Redemption. Once a notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date and at the redemption price. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price, plus accrued interest thereon, if any, to the Redemption Date, but interest installments whose maturity is on or prior to such Redemption Date shall be payable to the Holders of record at the close of business on the relevant Interest Record Date. SECTION 3.05. Deposit of Redemption Price. At least one Business Day before the Redemption Date, the Issuers shall deposit with the Paying Agent (or if the either of the Issuers is its own Paying Agent, it shall, on or before the Redemption Date, segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest, if any, on all Securities to be redeemed on that date other than Securities or portions thereof called for redemption on that date which have been delivered by the Issuers to the Trustee for cancellation. If any Security surrendered for redemption in the manner provided in the Securities shall not be so paid on the Redemption Date due to the failure of the Issuers to deposit with the Paying Agent money sufficient to pay the redemption price thereof, the principal and accrued and unpaid interest, if any, thereon shall, until paid or duly provided for, bear interest as provided in Sections 2.12 and 4.01 with respect to any payment default. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Trustee shall authenticate for the Holder a new Security equal in principal amount to the unredeemed portion of the Security surrendered. 42 -35- ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Securities. The Issuers shall pay the principal of and interest on the Securities in the manner provided in the Securities and the Registration Rights Agreement. An installment of principal or interest shall be considered paid on the date due if the Trustee or Paying Agent (other than the Issuers or any Affiliates of the Issuers) holds on that date money designated for and sufficient to pay the installment in full and is not prohibited from paying such money to the Holders of the Securities pursuant to the terms of this Indenture. The Issuers shall pay cash interest on overdue principal at the same rate per annum borne by the Securities. The Issuers shall pay cash interest on overdue installments of interest at the same rate per annum borne by the Securities, to the extent lawful, as provided in Section 2.12. SECTION 4.02. Maintenance of Office or Agency. The Issuers shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuers shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in this Section 4.02. The Issuers hereby initially designate the Trustee at its address at: First Union National Bank, 40 Broad Street, 5th Floor, Suite 550, New York, NY 10004. SECTION 4.03. Transactions with Affiliates. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, conduct any business or enter into any transaction (or series of related transactions) with or for the benefit of any of their respective Affiliates (including, without limitation, any Unrestricted Subsidiary) or any officer, director or employee of the Company or any Subsidiary (each, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms which are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than could be available in a comparable transaction with an unaffiliated third party and (ii) if such Affiliate Transaction (or series of related Affiliate Transactions) involves aggregate payments or other consideration having a Fair Market Value in excess of $1.0 million, such Affiliate Transaction is in writing and a majority of the disinterested members of the Board of Managers of the Company shall have approved such Affiliate Transaction and determined that such Affiliate Transaction complies with the foregoing provisions. In addition, any Affiliate Transaction involving aggregate payments or other consideration having a Fair Market Value in excess of $5.0 million will also require a written opinion from an Independent Financial Advisor (filed with the Trustee) stating that the terms of such Affiliate Transaction are fair, from a financial point of view, to the Company or the Restricted Subsidiary involved in such Affiliate Transaction, as the case may be. Notwithstanding the foregoing, the restrictions set forth in this Section 4.03 shall not apply to (i) transactions with or among the Company and any Restricted Subsidiary or between or among Restricted Subsidiaries; (ii) reasonable fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees, consultants or agents of the Company or any Restricted Subsidiary of the Company as determined in good faith by the Company's Board of Managers; (iii) any transactions undertaken pursuant to any contractual 43 -36- obligations in existence on the Issue Date (as in effect on the Issue Date); (iv) any Restricted Payments made in compliance with Section 4.08; (v) the provision by Persons who may be deemed Affiliates or stockholders of the Company of investment banking, commercial banking, trust, lending or financing, investment, underwriting, placement agent, financial advisory or similar services to the Company or its Subsidiaries; (vi) reasonable and customary loans to employees of the Company and its Subsidiaries which are approved by the Board of Managers of the Company in good faith; and (vii) transactions with customers, clients, suppliers or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture, which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Managers of the Company or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party. SECTION 4.04. Limitation on Indebtedness. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness (including Acquired Indebtedness), except for Permitted Indebtedness; provided, however, that the Company and any Domestic Restricted Subsidiary may Incur Indebtedness if, at the time of and immediately after giving pro forma effect to such Incurrence of Indebtedness and the application of the proceeds therefrom, the Consolidated Coverage Ratio would be greater than 2.0 to 1.0 if the Indebtedness is Incurred prior to December 31, 1999 and 2.25 to 1.0 if the Indebtedness is Incurred thereafter; and provided, further, that any Foreign Restricted Subsidiary may Incur Indebtedness in accordance with Section 4.05. SECTION 4.05. Limitation on Foreign Indebtedness. The Company shall not cause or permit any Foreign Restricted Subsidiary of the Company to, directly or indirectly, Incur any Indebtedness (including Acquired Indebtedness) other than Permitted Indebtedness set forth in clauses (a) through (m) of the definition thereof unless (i) the Indebtedness is Incurred, denominated and payable in U.S. dollars or the local currencies of the jurisdictions of the operations of the Foreign Restricted Subsidiary Incurring such Indebtedness or of the business or the location of assets being acquired with the proceeds of such Indebtedness; provided, however, that any Indebtedness permitted to be Incurred in a Western European currency pursuant to this clause (i) may be Incurred in such Western European currency or any other Western European currency, (ii) after giving effect to the Incurrence of such Indebtedness and the receipt of the application of the proceeds therefrom, (A) if, as a result of the Incurrence of such Indebtedness, such Restricted Subsidiary will be or become subject to any restriction or limitation on the payment of dividends or the making of other distributions, (I) the ratio of Foreign EBITDA to Foreign Interest Expense (determined on a pro forma basis for the last four fiscal quarters for which financial statements are available at the date of determination) is greater than 3.0 to 1 and (II) the Company's Consolidated Coverage Ratio (determined on a pro forma basis for the last four fiscal quarters of the Company for which financial statements are available at the date of determination) is greater than 2.0 to 1 if the Indebtedness is Incurred prior to December 31, 1999 and 2.25 to 1.0 if the Indebtedness is Incurred thereafter and (B) in any other case, the Company's Consolidated Coverage Ratio (determined on a pro forma basis for the last four fiscal quarters of the Company for which financial statements are available at the date of determination) is greater than 2.0 to 1 if the Indebtedness is Incurred prior to December 31, 1999 and 2.25 to 1 if the Indebtedness is Incurred thereafter, and (iii) no Default or Event of Default shall have occurred and be continuing at the time or as a consequence of the Incurrence of such Indebtedness. 44 -37- SECTION 4.06. Limitation on Senior Subordinated Indebtedness. The Company shall not, directly or indirectly, Incur any Indebtedness that by its terms would expressly rank senior in right of payment to the Securities and subordinate in right of payment to any other Indebtedness of the Company. The Company shall not permit any Guarantor to, and no Guarantor shall, directly or indirectly, Incur any Indebtedness that by its terms would expressly rank senior in right of payment to the Guarantee of such Guarantor and subordinate in right of payment to any Indebtedness of such Guarantor. SECTION 4.07. Disposition of Proceeds of Asset Sales. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, make any Asset Sale, unless (i) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of and (ii) at least 75% of such consideration consists of (A) cash or Cash Equivalents; provided, however, that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Securities) that are assumed by the transferee of any such assets, and (y) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) shall be deemed to be cash for the purposes of this clause (A), or (B) properties and capital assets that replace the properties and assets that were the subject of such Asset Sale or in properties and capital assets that will be used in a Related Business ("Replacement Assets"), provided, however, that if such property or assets subject to such Asset Sale were directly owned by the Company or a Guarantor, such Replacement Assets shall also be directly owned by the Company or a Guarantor. The amount of any Indebtedness (other than any Subordinated Indebtedness) of the Company or any Restricted Subsidiary that is actually assumed by the transferee in such Asset Sale and from which the Company and the Restricted Subsidiaries are fully and unconditionally released shall be deemed to be cash for purposes of determining the percentage of cash consideration received by the Company or the Restricted Subsidiaries. The Company or such Restricted Subsidiary, as the case may be, may (i) apply the Net Cash Proceeds of any Asset Sale within 180 days of receipt thereof to repay Senior Indebtedness and permanently reduce any related commitment, or (ii) make an Investment in Replacement Assets; provided, however, that such Investment occurs or the Company or a Restricted Subsidiary enters into contractual commitments to make such Investment, subject only to customary conditions (other than the obtaining of financing), on or prior to the 180th day following the receipt of such Net Cash Proceeds and Net Cash Proceeds contractually committed are so applied within 270 days following the receipt of such Net Cash Proceeds. To the extent all or part of the Net Cash Proceeds of any Asset Sale are not applied as described in clause (i) or (ii) of the immediately preceding paragraph within the time periods set forth therein (the "Net Proceeds Utilization Date") (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"), the Company shall, within 20 days after such Net Proceeds Utilization Date, make an Offer to Purchase all outstanding Securities up to a maximum principal amount (expressed as a multiple of $1,000) of Securities equal to such Unutilized Net Cash Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date; provided, however, that the Offer to Purchase may be deferred until there are aggregate Unutilized Net Cash Proceeds equal to or in excess of $5 million, at which time the en- 45 -38- tire amount of such Unutilized Net Cash Proceeds, and not just the amount in excess of $5 million, shall be applied as required pursuant to this paragraph. With respect to any Offer to Purchase effected pursuant to this Section 4.07, among the Securities, to the extent the aggregate principal amount of Securities tendered pursuant to such Offer to Purchase exceeds the Unutilized Net Cash Proceeds to be applied to the repurchase thereof, such Securities shall be purchased pro rata based on the aggregate principal amount of such Securities tendered by each Holder. To the extent the Unutilized Net Cash Proceeds exceed the aggregate amount of Securities tendered by the Holders of the Securities pursuant to such Offer to Purchase, the Company may retain and utilize any portion of the Unutilized Net Cash Proceeds not applied to repurchase the Securities for any purpose consistent with the other terms of this Indenture and such Unutilized Net Cash Proceeds shall no longer be counted in determining the available amount of Unutilized Net Cash Proceeds for purposes of this Section 4.07. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Securities pursuant to an Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with this Section 4.07, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.07 by virtue hereof. Each Holder shall be entitled to tender all or any portion of the Securities owned by such Holder pursuant to the Offer to Purchase, subject to the requirement that any portion of a Security tendered must be tendered in an integral multiple of $1,000 principal amount and subject to any proration among tendering Holders as described above. SECTION 4.08. Limitation on Restricted Payments. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, (i) declare or pay any dividend or any other distribution on any Equity Interests of the Company or any Restricted Subsidiary or make any payment or distribution to the direct or indirect holders (in their capacities as such) of Equity Interests of the Company or any Restricted Subsidiary (other than any dividends, distributions and payments made to the Company or any Restricted Subsidiary (and, in the case of SportRack, concurrent like dividends, distributions and payments made to the holder of the 1% minority interest in SportRack) and dividends or distributions payable to any Person solely in Qualified Equity Interests of the Company or in options, warrants or other rights to purchase Qualified Equity Interests of the Company); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any Restricted Subsidiary (other than any such Equity Interests owned by the Company or any Restricted Subsidiary); (iii) make any Investment in any Person (other than Permitted Investments); or (iv) designate any Subsidiary of the Company as an "Unrestricted Subsidiary" under this Indenture (a "Designation"); provided, however, that the Designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be deemed to include the Designation of all of the Subsidiaries of such Subsidiary 46 -39- (any such payment or any other action (other than any exception thereto) described in (i), (ii), (iii) or (iv) each, a "Restricted Payment"), unless (a) no Default or Event of Default shall have occurred and be continuing at the time of or immediately after giving effect to such Restricted Payment; (b) immediately after giving effect to such Restricted Payment, the Company would be able to Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under Section 4.04; and (c) immediately after giving effect to such Restricted Payment, the aggregate amount of all Restricted Payments declared or made on or after the Issue Date does not exceed an amount equal to the sum of (1) 50% of cumulative Consolidated Net Income determined for the period (taken as one period) from the beginning of the first fiscal quarter commencing after the Issue Date and ending on the last day of the most recent fiscal quarter immediately preceding the date of such Restricted Payment for which consolidated financial information of the Company is available (or if such cumulative Consolidated Net Income shall be a loss, minus 100% of such loss), plus (2) 100% of the aggregate net cash proceeds received by the Company either (x) as capital contributions to the Company after the Issue Date or (y) from the issue and sale (other than to a Restricted Subsidiary) of its Qualified Equity Interests after the Issue Date (excluding the net proceeds from any issuance and sale of Qualified Equity Interests financed, directly or indirectly, using funds borrowed from the Company or any Restricted Subsidiary until and to the extent such borrowing is repaid), plus (3) the principal amount (or accreted amount (determined in accordance with GAAP), if less) of any Indebtedness of the Company or any Restricted Subsidiary Incurred after the Issue Date which has been converted into or exchanged for Qualified Equity Interests of the Company (minus the amount of any cash or property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange), plus (4) so long as the Designation thereof was treated as a Restricted Payment made after the Issue Date, with respect to any Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary after the Issue Date in accordance with Section 4.15 below, the Company's proportionate interest in an amount equal to the Fair Market Value of such Subsidiary, plus (5) in the case of the disposition or repayment of any Investment constituting a Restricted Payment made after the Issue Date (including the sale of an Unrestricted Subsidiary) or dividends, distributions or interest payments received in cash, an amount equal to 100% of the net cash proceeds received by the Company or its Restricted Subsidiaries therefrom. The foregoing provisions will not prevent (i) the payment of any dividend or distribution on, or redemption of, Equity Interests within 60 days after the date of declaration of such dividend or distribution or the giving of formal notice of such redemption, if at the date of such declaration or giving of such formal notice such payment or redemption would comply with the provisions of this Indenture; (ii) the purchase, redemption, retirement or other acquisition of any Equity Interests of the Company or its Restricted Subsidiaries that are not owned by the Company or its Restricted Subsidiaries in exchange for, or out of the net cash proceeds of the substantially concurrent issue and sale (other than to a Restricted Subsidiary) of, Qualified Equity Interests of the Company; provided, however, that any such net cash proceeds and the value of any Qualified Equity Interests issued in exchange for such retired Equity Interests are excluded from clause (c)(2) of the preceding paragraph (and were not included therein at any time) and are not used to redeem the Securities pursuant to paragraphs 5 or 6 of the Securities; (iii) the purchase, redemption or other acquisition for value of Equity Interests of the Company (other than Disqualified Capital Stock) or options on such Equity Interests held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates) upon the death, disability, retirement or termination of employment of such current or former officers or em- 47 -40- ployees pursuant to the terms of an employee benefit plan or any other agreement pursuant to which such shares of capital stock or options were issued or pursuant to a severance, buy-sell or right of first refusal agreement with such current or former officer or employee; provided, however, that the aggregate cash consideration paid, or distributions made, pursuant to this clause (iii) does not exceed $5.0 million; (iv) Investments constituting Restricted Payments made as a result of the receipt of non-cash consideration from any Asset Sale made pursuant to and in compliance with Section 4.07; (v) Tax Distributions; (vi) the payment of dividends on the Company's Common Stock, following the first Public Equity Offering of the Company's Common Stock after the Issue Date, of up to 6% per annum of the net proceeds received by the Company in such public offering; and (vii) the purchase, redemption, retirement or other acquisition prior to June 30, 1999 of Equity Interests of the Company from unaffiliated third parties; provided, however, that the aggregate cash consideration paid pursuant to this clause (vii) does not exceed $7.5 million; provided, however, that in the case of each of clauses (ii), (iii), (iv), (vi) and (vii) no Default or Event of Default shall have occurred and be continuing or would arise therefrom. In determining the amount of Restricted Payments permissible under this covenant, amounts expended pursuant to clauses (i), (iii), (iv), (vi) and (vii) of the immediately preceding paragraph shall be included as Restricted Payments. The amount of any non-cash Restricted Payment shall be deemed to be equal to the Fair Market Value thereof at the date of the making of such Restricted Payment. In determining the amount of any Restricted Payment made under clause (iv) of the first paragraph of this Section 4.07, the amount of such Restricted Payment (the "Designation Amount") shall be equal to the Fair Market Value of the Company's proportionate interest in such Subsidiary on such date. Any such Designation shall be evidenced by a Board Resolution. SECTION 4.09. Limitation on the Sale or Issuance of Equity Interests of Restricted Subsidiaries. The Company shall not sell any Equity Interest of a Restricted Subsidiary, and shall not cause or permit any Restricted Subsidiary, directly or indirectly, to issue or sell or have outstanding any Equity Interests, except (i) to the Company or a Wholly Owned Restricted Subsidiary; or (ii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would not longer constitute a Restricted Subsidiary. Notwithstanding the foregoing, the Company is permitted to sell all the Equity Interests of a Restricted Subsidiary so long as the Company is in compliance with Section 4.07 and, if applicable, Article Five. SECTION 4.10. Notice of Defaults. (a) In the event that any Indebtedness of the Company or any of its Subsidiaries is declared due and payable before its maturity because of the occurrence of any default (or any event which, with notice or lapse of time, or both, would constitute such a default) under such Indebtedness, the Company shall promptly give written notice to the Trustee of such declaration, the status of such default or event and what action the Company is taking or proposes to take with respect thereto. (b) Upon becoming aware of any Default or Event of Default, the Company shall promptly deliver an Officers' Certificate to the Trustee specifying the Default or Event of Default. SECTION 4.11. Limitation on Liens. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, Incur any Liens of any kind against or upon any of their respective properties or assets now owned or hereafter acquired, or any proceeds therefrom or any income or profits therefrom, to secure any Indebtedness unless contemporaneously therewith effective provision is made, in the case of the Company, to 48 -41- secure the Securities and all other amounts due under this Indenture, and in the case of a Restricted Subsidiary which is a Guarantor, to secure such Restricted Subsidiary's Guarantee of the Securities and all other amounts due under this Indenture, equally and ratably with such Indebtedness (or, in the event that such Indebtedness is subordinated in right of payment to the Securities or such Restricted Subsidiary's Guarantee, prior to such Indebtedness) with a Lien on the same properties and assets securing such Indebtedness for so long as such Indebtedness is secured by such Lien, except for (i) Liens securing Senior Indebtedness and Guarantor Senior Indebtedness and (ii) Permitted Liens. SECTION 4.12. Provision of Financial Information. Whether or not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, or any successor provision thereto, the Company shall file with the SEC (if permitted by SEC practice and applicable law and regulations) the annual reports, quarterly reports and other documents which the Company would have been required to file with the SEC pursuant to such Section 13(a) or 15(d) or any successor provision thereto if the Company were so subject, such documents to be filed with the SEC on or prior to the respective dates (the "Required Filing Dates") by which the Company would have been required so to file such documents if the Company were so subject. The Company shall also in any event (a) within 15 days of each Required Filing Date (whether or not permitted or required to be filed with the SEC) (i) transmit (or cause to be transmitted) by mail to all Holders, as their names and addresses appear in the Security Register, without cost to such Holders, and (ii) file with the Trustee, copies of the annual reports, quarterly reports and other documents which the Company is required to file with the SEC pursuant to the preceding sentence, or, if such filing is not so permitted, information and data of a similar nature, and (b) if, notwithstanding the preceding sentence, filing such documents by the Company with the SEC is not permitted by SEC practice or applicable law or regulations, promptly upon written request supply copies of such documents to any Holder. In addition, for so long as any Securities remain outstanding and prior to the later of the consummation of the Exchange Offer and the filing of the Initial Shelf Registration Statement, if required, the Company will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, and, to any beneficial holder of Securities, if not obtainable from the SEC, information of the type that would be filed with the SEC pursuant to the foregoing provisions, upon the request of any such Holder. SECTION 4.13. Limitations on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions to the Company or any other Restricted Subsidiary on its Equity Interests or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (b) make loans or advances to, or guarantee any Indebtedness or other obligations of, or make any Investment in, the Company or any other Restricted Subsidiary or (c) transfer any of its properties or assets to the Company or any other Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) the Credit Facilities, or any other agreement of the Company or the Restricted Subsidiaries outstanding on the Issue Date, in each case as in effect on the Issue Date, and any amendments, restatements, renewals, replacements or refinancings thereof; provided, however, that any such amendment, restatement, renewal, replacement or refinancing is no more restrictive in the aggregate with respect to such encumbrances or restrictions than those contained in the agreement being amended, restated, reviewed, replaced or refinanced; (ii) applicable law; (iii) any instrument governing Indebtedness or Equity Interests of an Acquired Person acquired by the Company or any Restricted Subsidiary as in effect at the time of such acquisition 49 -42- (except to the extent such Indebtedness was Incurred by such Acquired Person in connection with, as a result of or in anticipation or contemplation of such acquisition); provided, however, that such encumbrances and restrictions are not applicable to the Company or any Restricted Subsidiary, or the properties or assets of the Company or any Restricted Subsidiary, other than the Acquired Person; (iv) customary non-assignment provisions in contracts or leases entered into in the ordinary course of business and consistent with past practices; (v) Purchase Money Indebtedness for property acquired in the ordinary course of business that only imposes encumbrances and restrictions on the property so acquired; (vi) any agreement for the sale or disposition of the Equity Interests or assets of any Restricted Subsidiary; provided, however, that such encumbrances and restrictions described in this clause (vi) are only applicable to such Restricted Subsidiary or assets, as applicable, and any such sale or disposition is made in compliance with Section 4.07 below to the extent applicable thereto; (vii) secured Indebtedness otherwise permitted to be incurred pursuant to Section 4.04 and Section 4.11 that limit the right of the debtor to dispose of the assets securing such Indebtedness; (viii) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business; (ix) an agreement governing Indebtedness incurred to refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clauses (i) through (viii) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such Indebtedness are no less restrictive in the aggregate than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clauses; (x) an agreement governing Senior Indebtedness permitted to be incurred pursuant to Section 4.04; provided, however, that the provisions relating to such encumbrance or restriction contained in such Indebtedness are no less favorable to the Company in any material respect as determined by the Board of Managers of the Company in its reasonable and good faith judgment than the provisions contained in the Amended and Restated Credit Agreement as in effect on the Issue Date; or (xi) this Indenture. SECTION 4.14. Guarantees by Restricted Subsidiaries. The Company will not create or acquire, nor cause or permit any of the Restricted Subsidiaries, directly or indirectly, to create or acquire, any Subsidiary other than (A) an Unrestricted Subsidiary in accordance with the other terms of this Indenture, (B) a Foreign Restricted Subsidiary or (C) a Domestic Restricted Subsidiary that, simultaneously with such creation or acquisition, executes and delivers a supplemental indenture to this Indenture pursuant to which it will become a Guarantor under this Indenture in accordance with Article Twelve. SECTION 4.15. Designation of Unrestricted Subsidiaries. The Company shall not and shall not cause or permit any Restricted Subsidiary at any time to (x) provide credit support for, subject any of its property or assets (other than the Equity Interests of any Unrestricted Subsidiary) to the satisfaction of, or guarantee, any Indebtedness of any Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary, except for any non-recourse guarantee given solely to support the pledge by the Company or any Restricted Subsidiary of the capital stock of any Unrestricted Subsidiary. The Company may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") only if: 50 -43- (i) no Default or Event of Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if Incurred at such time, be permitted to be Incurred for all purposes of this Indenture. All Designations and Revocations must be evidenced by resolutions of the Board of Managers of the Company, delivered to the Trustee certifying compliance with the foregoing provisions. SECTION 4.16. Offer to Purchase upon Change of Control. (a) Following the occurrence of a Change of Control (the date of such occurrence being the "Change of Control Date"), the Company shall notify the Holders of the Securities of such occurrence in the manner prescribed by this Indenture and shall, within 20 days after the Change of Control Date, make an Offer to Purchase all Securities then outstanding at a purchase price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date (subject to the right of Holders of record on the relevant Interest Record Date to receive interest due on the relevant Interest Payment Date). Each Holder shall be entitled to tender all or any portion of the Securities owned by such Holder pursuant to the Offer to Purchase, subject to the requirement that any portion of a Security tendered must be tendered in an integral multiple of $1,000 principal amount. (b) On or prior to the Purchase Date specified in the Offer to Purchase, the Company shall (i) accept for payment all Securities or portions thereof validly tendered pursuant to the Offer, (ii) deposit with the Paying Agent or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 2.04, money sufficient to pay the Purchase Price of all Securities or portions thereof so accepted and (iii) deliver or cause to be delivered to the Trustee for cancellation all Securities so accepted together with an Officers' Certificate stating the Securities or portions thereof accepted for payment by the Company. The Paying Agent (or the Company, if so acting) shall promptly mail or deliver to Holders of Securities so accepted, payment in an amount equal to the Purchase Price for such Securities, and the Trustee shall promptly authenticate and mail or deliver to each Holder of Securities a new Security or Securities equal in principal amount to any unpurchased portion of the Security surrendered as requested by the Holder. Any Security not accepted for payment shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Offer on or as soon as practicable after the Purchase Date. (c) If the Company makes an Offer to Purchase, the Company will comply with all applicable tender offer laws and regulations, including, to the extent applicable, Section 14(e) and Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Securities pursuant of a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.16, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.16. SECTION 4.17. Compliance Certificate. The Issuers shall deliver to the Trustee within 120 days after the close of each fiscal year a certificate signed by the principal executive officer, principal financial officer or principal accounting officer stating that a review of the activities of the Issuers has been made under the supervision of the signing officers with a view to determining whether a Default or Event of Default has occurred and whether or not the signers 51 -44- know of any Default or Event of Default by the Company that occurred during such fiscal year. If they do know of such a Default or Event of Default, their status and the action the Company is taking or proposes to take with respect thereto. The first certificate to be delivered by the Issuers pursuant to this Section 4.17 shall be for the fiscal year ending December 31, 1998. SECTION 4.18. Corporate Existence. Subject to Article Five, each of the Issuers shall do or shall cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each Restricted Subsidiary in accordance with the respective organizational documents of each such Restricted Subsidiary and the rights (charter and statutory) and material franchises of Capital Corp., the Company and the Restricted Subsidiaries; provided, however, that the Company shall not be required to preserve any such right or franchise, or the corporate existence of any Restricted Subsidiary, if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and the Restricted Subsidiaries, taken as a whole; provided, further, however, that a determination of the Board of Directors of the Company shall not be required in the event of a merger of one or more Wholly Owned Restricted Subsidiaries of the Company with or into another Wholly Owned Restricted Subsidiary of the Company or another Person, if the surviving Person is a Wholly Owned Restricted Subsidiary of the Company organized under the laws of the United States or a State thereof or of the District of Columbia or, in the case of a Foreign Restricted Subsidiary, the jurisdiction of incorporation or organization of such Foreign Restricted Subsidiary. This Section 4.18 shall not prohibit either of the Issuers from taking any other action otherwise permitted by, and made in accordance with, the provisions of this Indenture. ARTICLE FIVE MERGERS; SUCCESSOR CORPORATION SECTION 5.01. Mergers, Sale of Assets, etc. (a) Neither of the Issuers shall consolidate with or merge with or into any other entity and the Company shall not, and shall not cause or permit any Restricted Subsidiary to, sell, convey, assign, transfer, lease or otherwise dispose of all or substantially all of the Company's and the Restricted Subsidiaries' properties and assets (determined on a consolidated basis for the Company and the Restricted Subsidiaries) to any entity in a single transaction or series of related transactions, unless: (i) either (x) the Company shall be the Surviving Person or (y) the Surviving Person (if other than the Company) shall be a corporation or limited liability company organized and validly existing under the laws of the United States of America or any State thereof or the District of Columbia or, if any such Restricted Subsidiary was a Foreign Restricted Subsidiary, under the laws of the United States of America or any state thereof or the District of Columbia or the jurisdiction under which such Foreign Restricted Subsidiary was organized, and shall, in any such case, expressly assume by a supplemental indenture, the due and punctual payment of the principal of, premium, if any, and interest on all the Securities and the performance and observance of every covenant of this Indenture and the Registration Rights Agreement to be performed or observed on the part of the Company; (ii) immediately thereafter, no Default or Event of Default shall have occurred and be continuing; and (iii) immediately after giving effect to any such transaction involving the Incurrence by the Company or any Restricted Subsidiary, directly or indirectly, of additional Indebtedness (and treating any Indebtedness not previously an obligation of 52 -45- the Company or any Restricted Subsidiary in connection with or as a result of such transaction as having been Incurred at the time of such transaction), the Surviving Person could Incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the Consolidated Coverage Ratio of the first paragraph of Section 4.04. (b) Notwithstanding the foregoing clause (iii) of the immediately preceding paragraph, any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or any Restricted Subsidiary that is a Guarantor. (c) For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all the properties and assets of one or more Restricted Subsidiaries the Equity Interest of which constitutes all or substantially all the properties and assets of the Company shall be deemed to be the transfer of all or substantially all the properties and assets of the Company. (d) No Guarantor (other than a Guarantor whose Guarantee is to be released in accordance with the terms of its Guarantee and this Indenture as provided in the third paragraph under Article Eleven above) shall consolidate with or merge with or into another Person, whether or not such Person is affiliated with such Guarantor and whether or not such Guarantor is the Surviving Person, unless (i) the Surviving Person (if other than such Guarantor) is a corporation or limited liability company organized and validly existing under the laws of the United States, any State thereof or the District of Columbia; (ii) the Surviving Person (if other than such Guarantor) expressly assumes by a supplemental indenture all the obligations of such Guarantor under its Guarantee of the Securities and the performance and observance of every covenant of this Indenture and the Registration Right Agreement to be performed or observed by such Guarantor; (iii) at the time of and immediately after such Disposition, no Default or Event of Default shall have occurred and be continuing; and (iv) immediately after giving effect to any such transaction involving the Incurrence by such Guarantor, directly or indirectly, of additional Indebtedness (and treating any Indebtedness not previously an obligation of such Guarantor in connection with or as a result of such transaction as having been Incurred at the time of such transaction), the Company could Incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the Consolidated Coverage Ratio of the first paragraph of Section 4.04; provided, however, that this paragraph shall not be a condition to a merger or consolidation of a Guarantor if such merger or consolidation only involves the Company and/or one or more other Guarantors. SECTION 5.02. Successor Corporation Substituted. In the event of any transaction (other than a lease) described in and complying with the conditions listed in Section 5.01 in which the Company or a Guarantor, as the case may be, is not the Surviving Person and the Surviving Person is to assume all the Obligations of the Company under the Securities, this Indenture and the Registration Rights Agreement or of such Guarantor under its Guarantee, this Indenture and the Registration Rights Agreement, as the case may be, pursuant to a supplemental indenture, such Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Guarantor, as the case may be, and the Company, as the case may be, shall be discharged from its Obligations under this Indenture and the Securities or such Guarantor shall be discharged from its Obligations under this Indenture and its Guarantee, as the case may be. 53 -46- ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default. Each of the following shall be an "Event of Default" for purposes of this Indenture: (a) failure to pay principal of (or premium, if any, on) any Security when due (whether or not prohibited by the provisions of Article Eight); (b) failure to pay any interest on any Security when due, which failure continues for 30 days or more (whether or not prohibited by the provisions of Article Eight); (c) default in the payment of principal of or interest on any Security required to be purchased pursuant to any Offer to Purchase required by this Indenture when due and payable or failure to pay on the Purchase Date the Purchase Price for any Security validly tendered pursuant to any Offer to Purchase (whether or not prohibited by the provisions of Article Eight); (d) failure to perform any other covenant or agreement of the Company under this Indenture or in the Securities or of the Guarantors under this Indenture or in the Guarantees which failure continues for 30 days or more after written notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Securities; (e) default or defaults under the terms of one or more instruments evidencing or securing Indebtedness of the Company or any of its Restricted Subsidiaries having an outstanding principal amount of $5.0 million or more individually or in the aggregate that has resulted in the acceleration of the payment of such Indebtedness or failure by the Company or any of its Restricted Subsidiaries to pay principal when due at the stated maturity of any such Indebtedness and such default or defaults shall have continued after any applicable grace period and shall not have been cured or waived; (f) the rendering of a final judgment or judgments (not subject to appeal) against the Company or any of its Subsidiaries in an amount of $5.0 million or more (net of any amounts covered by insurance) which remains undischarged or unstayed for a period of 60 days after the date on which the right to appeal has expired; (g) the Company or any of its Significant Restricted Subsidiaries pursuant to or within the meaning of any Bankruptcy Law: (i) admits in writing its inability to pay its debts generally as they become due; (ii) commences a voluntary case or proceeding; (iii) consents to the entry of an order for relief against it in an involuntary case or proceeding; (iv) consents or acquiesces in the institution of a bankruptcy or insolvency proceeding against it; (v) consents to the appointment of a Custodian of it or for all or substantially all of its property; or (vi) makes a general assignment for the benefit of its creditors, or any of them takes any action to authorize or effect any of the foregoing; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Significant Restricted Subsidiary of the Company in an involuntary case or proceeding; (ii) appoints a Custodian of the Company or any Significant Sub- 54 -47- sidiary of the Company for all or substantially all of its property; or (iii) orders the liquidation of the Company or any Significant Restricted Subsidiary of the Company; and in each case the order or decree remains unstayed and in effect for 60 days; provided, however, that if the entry of such order or decree is appealed and dismissed on appeal, then the Event of Default hereunder by reason of the entry of such order or decree shall be deemed to have been cured; (i) other than as provided in or pursuant to any Guarantee or this Indenture, any Guarantee of a Significant Restricted Subsidiary ceases to be in full force and effect or is declared null and void and unenforceable or found to be invalid or any Guarantor denies in writing its liability under its Guarantee (other than by reason of a release of such Guarantor from its Guarantee in accordance with the terms of this Indenture and such Guarantee). The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or foreign law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. SECTION 6.02. Acceleration. If an Event of Default with respect to the Securities (other than an Event of Default specified in clauses (g) or (h) of Section 6.01 with respect to the Company) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Securities, by notice in writing to the Company (and to the Trustee if given by the Holders) may declare the unpaid principal of (and premium, if any) and accrued interest to the date of acceleration on all outstanding Securities to be due and payable immediately and, upon any such declaration, such principal amount (and premium, if any) and accrued interest, notwithstanding anything contained in this Indenture or the Securities to the contrary, shall become immediately due and payable. If an Event of Default specified in clauses (g) or (h) of Section 6.01 with respect to the Company occurs, all unpaid principal of and accrued interest on all outstanding Securities shall ipso facto become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. Any such declaration with respect to the Securities may be rescinded and annulled by the Holders of a majority in aggregate principal amount of the outstanding Securities by written notice to the Trustee if all existing Events of Default (other than the nonpayment of principal of and interest on the Securities which has become due solely by virtue of such acceleration) have been cured or waived and if the rescission would not conflict with any judgment or decree. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy maturing upon an Event of Default shall not impair the right or remedy or consti- 55 -48- tute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Default. Subject to Sections 2.09, 6.07 and 10.02, prior to the declaration of acceleration of the Securities, the Holders of not less than a majority in aggregate principal amount of the outstanding Securities by written notice to the Trustee may waive an existing Default or Event of Default and its consequences, except a Default in the payment of principal of or interest on any Security as specified in clauses (a), (b) and (c) of Section 6.01 or a Default in respect of any term or provision of this Indenture that may not be amended or modified without the consent of each Holder affected as provided in Section 10.02. The Issuers shall deliver to the Trustee an Officers' Certificate stating that the requisite percentage of Holders have consented to such waiver and attaching copies of such consents. In case of any such waiver, the Issuers, the Trustee and the Holders shall be restored to their former positions and rights hereunder and under the Securities, respectively. This paragraph of this Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section. 316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the Securities, as permitted by the TIA. Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred for every purpose of this Indenture and the Securities, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. SECTION 6.05. Control by Majority. Subject to Section 2.09, the Holders of a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of another Holder, it being understood that the Trustee shall have no duty (subject to Section 7.01) to ascertain whether or not such actions or forebearances are unduly prejudicial to such holders, or that may involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. In the event the Trustee takes any action or follows any direction pursuant to this Indenture, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against any loss or expense caused by taking such action or following such direction. This Section 6.05 shall be in lieu of Section 316(a)(1)(A) of the TIA, and such Section 316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture and the Securities, as permitted by the TIA. SECTION 6.06. Limitation on Suits. A Holder may not pursue any remedy with respect to this Indenture or the Securities unless: (i) the Holder gives to the Trustee written notice of a continuing Event of Default; (ii) the Holders of at least 25% in aggregate principal amount of the outstanding Securities make a written request to the Trustee to pursue a remedy; (iii) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; 56 -49- (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (v) during such 60-day period the Holders of a majority in principal amount of the outstanding Securities do not give the Trustee a direction which, in the opinion of the Trustee, is inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding any other provision of this Indenture, but subject in any event to the provisions of Article Eight, the right of any Holder to receive payment of principal of or interest on a Security, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default in payment of principal or interest specified in Section 6.01(a), (b) or (c) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuers or any other obligor on the Securities for the whole amount of principal and accrued interest remaining unpaid, together with interest overdue on principal and to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum borne by the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Issuers (or any other obligor upon the Securities), its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and may be a member of the creditors' committee. SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article Six, it shall pay out the money or property in the following order: 57 -50- First: to the Trustee for amounts due under Section 7.07; Second: to Holders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and Third: to the Issuers. The Trustee, upon prior written notice to the Issuers, may fix a record date and payment date for any payment to the Holders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 shall not apply to a suit by the Trustee, a suit by a Holder or group of Holders of more than 10% in aggregate principal amount of the outstanding Securities, or to any suit instituted by any Holder for the enforcement or the payment of the principal or interest on any Securities on or after the respective due dates expressed in the Security. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. (a) If a Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of a Default: (1) The Trustee shall not be liable except for the performance of such duties as are specifically set forth herein; and (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions conforming to the requirements of this Indenture, however, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture. 58 -51- (c) The Trustee shall not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01; (2) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture or take any action at the request or direction of Holders if it shall have reasonable grounds for believing that repayment of such funds is not assured to it or it does not receive from such Holders an indemnity satisfactory to it in its sole discretion against such risk, liability, loss, fee or expense which might be incurred by it in compliance with such request or direction. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuers. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate and/or an Opinion of Counsel, which shall conform to the provisions of Section 13.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may act through attorneys and agents of its selection and shall not be responsible for the misconduct or negligence of any agent or attorney (other than an agent who is an employee of the Trustee) appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. (e) Before the Trustee acts or refrains from acting, it may consult with counsel and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and pro- 59 -52- tection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) Any request or direction of the Issuers mentioned herein shall be sufficiently evidenced by an Issuer Request or Issuer Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution. (g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (h) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuers, personally or by agent or attorney. (i) The Trustee shall not be deemed to have notice of any Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless the Trustee shall have received written notice thereof at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture. As used herein, the term "actual knowledge" means the actual fact or statement of knowing, without any duty to make any investigation with regard thereto. (j) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder. (k) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and the Trustee shall not be answerable for other than its gross negligence or willful misconduct. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Issuers or their Affiliates with the same rights it would have if it were not Trustee, subject to Section 7.10 hereof. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Issuers' use of the proceeds from the Securities, and it shall not be responsible for any statement of the Issuers in this Indenture or any document issued in connection with the sale of Securities or any statement in the Securities other than the Trustee's certificate of authentication. 60 -53- SECTION 7.05. Notice of Defaults. If a Default or an Event of Default occurs and is continuing and the Trustee has actual knowledge of such Defaults or Events of Default, the Trustee shall mail to each Holder notice of the Default or Event of Default within 30 days after the occurrence thereof. Except in the case of a Default or an Event of Default in payment of principal of or interest on any Security or a Default or Event of Default in complying with Section 5.01, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interest of Holders. This Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso to Section 315(b) of the TIA is hereby expressly excluded from this Indenture and the Securities, as permitted by the TIA. SECTION 7.06. Reports by Trustee to Holders. If required by TIA Section 313(a), as amended, within 60 days after each October 1 beginning with October 1, 1998, the Trustee shall mail to each Holder a report dated as of such October 1 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b), (c) and (d). A copy of each such report at the time of its mailing to Holders shall be filed with the SEC and each stock exchange, if any, on which the Securities are listed. The Issuers shall promptly notify the Trustee in writing if the Securities become listed on any stock exchange or of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Issuers shall pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as the Issuers and the Trustee shall from time to time agree in writing for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuers shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances, including all costs and expenses of collection (including reasonable fees, disbursements and expenses of its agents and outside counsel) incurred or made by it in addition to the compensation for its services except any such disbursements, expenses and advances as may be attributable to the Trustee's negligence or willful misconduct. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents, accountants, experts and outside counsel and any taxes or other expenses incurred by a trust created pursuant to Section 9.01 hereof. The Issuers shall indemnify the Trustee for, and hold it harmless against any and all loss, damage, claims, liability or expense, including taxes (other than franchise taxes imposed on the Trustee and taxes based upon, measured by or determined by the income of the Trustee), arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent that such loss, damage, claim, liability or expense is due to its own negligence or willful misconduct. The Trustee shall notify the Issuers promptly of any claim asserted against the Trustee for which it may seek indemnity. However, the failure by the Trustee to so notify the Issuers shall not relieve the Issuers of their obligations hereunder. The Issuers shall defend the claim and the Trustee shall cooperate in the defense (and may employ its own counsel) at the Issuers' expense; provided, however, that the Issuers' reimbursement obligation with respect to counsel employed by the Trustee will be limited to the reasonable fees and expenses of such counsel. 61 -54- The Issuers need not pay for any settlement made without their written consent, which consent shall not be unreasonably withheld. The Issuers need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee as a result of its own gross negligence or willful misconduct. To secure the Issuers' payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the Securities against all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal of or interest on particular Securities or the Purchase Price or redemption price of any Securities to be purchased pursuant to an Offer to Purchase or redeemed. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) occurs, the expenses (including the reasonable fees and expenses of its agents and counsel) and the compensation for the services shall be preferred over the status of the Holders in a proceeding under any Bankruptcy Law and are intended to constitute expenses of administration under any Bankruptcy Law. The Issuers' obligations under this Section 7.07 and any claim arising hereunder shall survive the resignation or removal of any Trustee, the discharge of the Issuers' obligations pursuant to Article Nine and any rejection or termination under any Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Issuers in writing. The Holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Trustee and the Issuers in writing and may appoint a successor Trustee with the Issuers' consent. The Issuers may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10; (b) the Trustee is adjudged bankrupt or insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or other public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Issuers shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Issuers. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuers. As promptly as practicable after that, the retiring Trustee shall transfer, after payment of all sums then owing to the Trustee pursuant to Section 7.07, all property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder. 62 -55- If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the Holders of at least 10% in principal amount of the outstanding Securities may petition, at the expense of the Issuers, any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuers' obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or banking corporation, the resulting, surviving or transferee corporation or banking corporation without any further act shall be the successor Trustee; provided, however, that such corporation shall be otherwise qualified and eligible under this Article Seven. SECTION 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee which shall be eligible to act as Trustee under TIA ss.ss. 310(a)(1) and 310(a)(2). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. If the Trustee has or shall acquire any "conflicting interest" within the meaning of TIA ss. 310(b), the Trustee and the Issuers shall comply with the provisions of TIA ss. 310(b); provided, however, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Issuers are outstanding if the requirements for such exclusion set forth in TIA ss. 310(b)(1) are met. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.10, the Trustee shall resign immediately in the manner and with the effect hereinbefore specified in this Article Seven. The provisions of TIA ss. 310 shall apply to the Company and any other obligor of the Securities. SECTION 7.11. Preferential Collection of Claims Against Issuers. The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. ARTICLE EIGHT SUBORDINATION OF SECURITIES SECTION 8.01. Securities Subordinated to Senior Indebtedness. The Issuers covenant and agree, and the Trustee and each Holder of the Securities by his acceptance thereof likewise covenant and agree, that all Securities shall be issued subject to the provisions of this 63 -56- Article Eight; and each person holding any Security, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees that all payments of the principal of and interest on the Securities by the Issuers shall, to the extent and in the manner set forth in this Article Eight, be subordinated and junior in right of payment to the prior payment in full in cash of all amounts payable under Senior Indebtedness. SECTION 8.02. Payment Over of Proceeds upon Dissolution, etc. (a) Upon any payment or distribution of assets or securities of the Issuers of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities and excluding any payment from funds held in trust for the benefit of Holders pursuant to Article Nine (a "Defeasance Trust Payment"), upon any dissolution or winding up or total liquidation or reorganization of the Issuers, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all Senior Indebtedness then due shall first be paid in full in cash before the Holders of the Securities or the Trustee on behalf of such Holders shall be entitled to receive any payment by the Issuers of the principal of, premium, if any, or interest on the Securities, or any payment by the Issuers to acquire any of the Securities for cash, property or securities, or any distribution by the Issuers with respect to the Securities of any cash, property or securities (excluding any payment or distribution of Permitted Junior Securities and excluding any Defeasance Trust Payment). Before any payment may be made by, or on behalf of, the Issuers of the principal of, premium, if any, or interest on the Securities upon any such dissolution or winding up or total liquidation or reorganization, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, any payment or distribution of assets or securities of the Issuers of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities and excluding any Defeasance Trust Payment), to which the Holders of the Securities or the Trustee on their behalf would be entitled, but for the subordination provisions of this Indenture, shall be made by the Issuers or by any receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, directly to the holders of the Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders) or their representatives or to the trustee or trustees or agent or agents under any agreement or indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all such Senior Indebtedness in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Senior Indebtedness. (b) In the event that, notwithstanding the foregoing provision prohibiting such payment or distribution, any payment or distribution of assets or securities of the Issuers of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities and excluding any Defeasance Trust Payment), shall be paid by the Issuers to the Trustee or any Holder of Securities at a time when such payment or distribution is prohibited by Section 8.02(a) and before all obligations then due in respect of Senior Indebtedness are paid in full in cash, such payment or distribution shall be received and held in trust for the benefit of, and shall be paid over or delivered by the Trustee (if the Notice required by Section 8.06 has been received by the Trustee) or the Holder to, the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders) or their respective representatives, or to the trustee or trustees or agent or agents under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of Senior Indebtedness remaining unpaid until all such Senior Indebtedness has been paid in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Senior Indebtedness. 64 -57- The consolidation of the Issuers with, or the merger of the Issuers with or into, another corporation or the liquidation or dissolution of the Issuers following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Article Five shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 8.02 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article Five. SECTION 8.03. No Payment on Securities in Certain Circumstances. (a) No direct or indirect payment (excluding any payment or distribution of Permitted Junior Securities and excluding any Defeasance Trust Payment) by or on behalf of the Issuers of principal of, premium, if any, or interest on the Securities, whether pursuant to the terms of the Securities, upon acceleration, pursuant to an Offer to Purchase or otherwise, shall be made if, at the time of such payment, there exists a default in the payment of all or any portion of the obligations on any Senior Indebtedness, whether at maturity, on account of mandatory redemption or prepayment, acceleration or otherwise, and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the holders of such Senior Indebtedness. In addition, during the continuance of any non-payment event of default with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be immediately accelerated, and upon receipt by the Trustee of written notice (a "Payment Blockage Notice" ) from the holder or holders of such Designated Senior Indebtedness or the trustee or agent acting on behalf of such Designated Senior Indebtedness, then, unless and until such non-payment event of default has been cured or waived or has ceased to exist or such Designated Senior Indebtedness has been discharged or repaid in full in cash or the benefits of these provisions have been waived by the holders of such Designated Senior Indebtedness, no direct or indirect payment (excluding any payment or distribution of Permitted Junior Securities and excluding any Defeasance Trust Payment) shall be made by or on behalf of the Issuers of principal of, premium, if any, or interest on the Securities, to such Holders, during a period (a "Payment Blockage Period") commencing on the date of receipt of such notice by the Trustee and ending 179 days thereafter. Notwithstanding anything in this Article Eight or in the Securities to the contrary, (x) in no event shall a Payment Blockage Period extend beyond 179 days from the date the Payment Blockage Notice in respect thereof was given, (y) there shall be a period of at least 181 consecutive days in each 360-day period when no Payment Blockage Period is in effect and (z) not more than one Payment Blockage Period may be commenced with respect to the Securities during any period of 360 consecutive days. No event of default that existed or was continuing on the date of commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period (to the extent the holder of Designated Senior Indebtedness, or trustee or agent, giving notice commencing such Payment Blockage Period had knowledge of such existing or continuing event of default) may be, or be made, the basis for the commencement of any other Payment Blockage Period by the holder or holders of such Designated Senior Indebtedness or the trustee or agent acting on behalf of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such event of default has been cured or waived for a period of not less than 90 consecutive days. (b) In the event that, notwithstanding the foregoing, the Issuers shall have made payment to the Trustee or any Holder when such payment is prohibited by Section 8.03(a), such payment shall be held in trust for the benefit of, and shall be paid over or delivered by the Trustee (if the Notice required by Section 8.06 has been received by the Trustee) or the Holder to, the holders of Designated Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Designated Senior Indebtedness may have been issued, as their respective interests may appear, but only to the 65 -58- extent that, upon notice from the Trustee to the holders of Designated Senior Indebtedness that such prohibited payment has been made, the holders of the Designated Senior Indebtedness (or their representative or representatives or a trustee or trustees) notify the Trustee in writing of the amounts then due and owing on the Designated Senior Indebtedness, if any, and only the amounts specified in such notice to the Trustee shall be paid to the holders of Designated Senior Indebtedness. SECTION 8.04. Subrogation. Upon the payment in full in cash of all Senior Indebtedness, or provision for payment, the Holders of the Securities shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Issuers made on such Senior Indebtedness until the principal of and interest on the Securities shall be paid in full in cash; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee on their behalf would be entitled except for the provisions of this Article Eight, and no payment over pursuant to the provisions of this Article Eight to the holders of Senior Indebtedness by Holders of the Securities or the Trustee on their behalf shall, as between the Issuers, their creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment by the Issuers to or on account of the Senior Indebtedness. It is understood that the provisions of this Article Eight are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Indebtedness, on the other hand. If any payment or distribution to which the Holders of the Securities would otherwise have been entitled but for the provisions of this Article Eight shall have been applied, pursuant to the provisions of this Article Eight, to the payment of all amounts payable under Senior Indebtedness, then and in such case, the Holders of the Securities shall be entitled to receive from the holders of such Senior Indebtedness any payments or distributions received by such holders of Senior Indebtedness in excess of the amount required to make payment in full in cash of such Senior Indebtedness. SECTION 8.05. Obligations of Issuers Unconditional. Nothing contained in this Article Eight or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Issuers and the Holders of the Securities, the obligation of the Issuers, which is absolute and unconditional, to pay to the Holders of the Securities the principal of and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Issuers other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Holder of any Security or the Trustee on their behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Eight of the holders of the Senior Indebtedness in respect of cash, property or securities of the Issuers received upon the exercise of any such remedy. Without limiting the generality of the foregoing, nothing contained in this Article Eight shall restrict the right of the Trustee or the Holders of Securities to take any action to declare the Securities to be due and payable prior to their stated maturity pursuant to Section 6.01 or to pursue any rights or remedies hereunder; provided, however, that all Senior Indebtedness then due and payable shall first be paid in full in cash before the Holders of the Securities or the Trustee are entitled to receive any direct or indirect payment from the Issuers of principal of or interest on the Securities. 66 -59- SECTION 8.06. Notice to Trustee. The Issuers shall give prompt written notice to the Trustee of any fact known to the Issuers which would prohibit the making of any payment to or by the Trustee in respect of the Securities pursuant to the provisions of this Article Eight. The Trustee shall not be charged with knowledge of the existence of any event of default with respect to any Senior Indebtedness or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing at its Corporate Trust Office to that effect signed by an Officer of each of the Issuers, or by a holder of Senior Indebtedness or trustee or agent therefor; and prior to the receipt of any such written notice, the Trustee shall, subject to Article Seven, be entitled to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 8.06 at least two Business Days prior to the date upon which by the terms of this Indenture any moneys shall become payable for any purpose (including, without limitation, the payment of the principal of or interest on any Security), then, regardless of anything herein to the contrary, the Trustee shall have full power and authority to receive any moneys from the Issuers and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such prior date. Nothing contained in this Section 8.06 shall limit the right of the holders of Senior Indebtedness to recover payments as contemplated by Section 8.03. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Indebtedness (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder. In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article Eight, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Eight, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets or securities referred to in this Article Eight, the Trustee and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders of the Securities for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Issuers, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Eight. SECTION 8.08. Trustee's Relation to Senior Indebtedness. The Trustee and any Paying Agent shall be entitled to all the rights set forth in this Article Eight with respect to any Senior Indebtedness which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee or any Paying Agent of any of its rights as such holder. 67 -60- With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Eight, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness (except as provided in Section 8.03(b)). The Trustee shall not be liable to any such holders if the Trustee shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Issuers or to any other person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article Eight or otherwise. SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of the Issuers or Holders of Senior Indebtedness. No right of any present or future holders of any Senior Indebtedness to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Issuers or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Issuers with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. The provisions of this Article Eight are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Indebtedness. SECTION 8.10. Holders Authorize Trustee To Effectuate Subordination of Securities. Each Holder of Securities by his acceptance of such Securities authorizes and expressly directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Eight, and appoints the Trustee his attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, total liquidation or reorganization of either of the Issuers (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of either of the Issuers, the filing of a claim for the unpaid balance of its or his Securities in the form required in those proceedings. SECTION 8.11. This Article Not To Prevent Events of Default. The failure to make a payment or distribution for or on account of the Securities by reason of any provision of this Article Eight shall not be construed as preventing the occurrence of an Event of Default in respect of the Securities. SECTION 8.12. Trustee's Compensation Not Prejudiced. Nothing in this Article Eight shall apply to amounts due to the Trustee pursuant to other sections in this Indenture. SECTION 8.13. No Waiver of Subordination Provisions. Without in any way limiting the generality of Section 8.09, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article Eight or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (a) change the manner, 68 -61- place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness; and (d) exercise or refrain from exercising any rights against either of the Issuers and any other Person. SECTION 8.14. Subordination Provisions Not Applicable to Money Held in Trust for Holders; Payments May Be Paid Prior to Dissolution. All money and United States Government Obligations deposited in trust with the Trustee pursuant to and in accordance with Article Nine shall be for the sole benefit of the Holders and shall not be subject to this Article Eight. Nothing contained in this Article Eight or elsewhere in this Indenture shall prevent (i) the Issuers, except under the conditions described in Section 8.02, from making payments of principal of and interest on the Securities or from depositing with the Trustee any moneys for such payments or from effecting a termination of the Issuers' and the Guarantors' obligations under the Securities and this Indenture as provided in Article Nine, or (ii) the application by the Trustee of any moneys deposited with it for the purpose of making such payments of principal of and interest on the Securities, to the holders entitled thereto unless at least two Business Days prior to the date upon which such payment becomes due and payable, the Trustee shall have received the written notice provided for in Section 8.02(b) or in Section 8.06. The Issuers shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of either of the Issuers. SECTION 8.15. Acceleration of Securities. If payment of the Securities is accelerated because of an Event of Default, the Issuers shall promptly notify holders of the Senior Indebtedness of the acceleration. ARTICLE NINE DISCHARGE OF INDENTURE; DEFEASANCE SECTION 9.01. Termination of the Issuers' Obligations. The Issuers may terminate their obligations under the Securities and this Indenture as well as the obligations of the Guarantors under their respective Guarantees, except those obligations referred to in the penultimate paragraph of this Section 9.01, if: (i) either (a) all the Securities theretofore authenticated and delivered (except lost, stolen or destroyed Securities which have been replaced or paid and Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuers and thereafter repaid to the Issuers or discharged from such trust) have been delivered to the Trustee for cancellation or (b) all Securities not theretofore delivered to the Trustee for cancellation have become due and payable and the Issuers have irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Securities not 69 -62- theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Securities to the date of deposit together with irrevocable instructions from the Issuers directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (ii) the Issuers have paid all other sums payable under this Indenture by the Issuers; and (iii) the Issuers have delivered to the Trustee an officers' certificate and an opinion of counsel stating that all conditions precedent under this Indenture relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the first paragraph of this Section 9.01, the Issuers' obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 4.18, 7.07, 9.05 and 9.06 shall survive until the Securities are no longer outstanding pursuant to the last paragraph of Section 2.08. After the Securities are no longer outstanding, the Issuers' obligations in Sections 7.07, 9.05 and 9.06 shall survive. After such delivery or irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Issuers' and Guarantors' obligations under the Securities and this Indenture except for those surviving obligations specified above. SECTION 9.02. Legal Defeasance and Covenant Defeasance (a) Subject to the provisions of Article Eight, the Company may terminate its obligations in respect of the Securities by delivering all outstanding Securities to the Trustee for cancellation and paying all sums payable by it on account of principal of and interest on all Securities or otherwise. In addition to the foregoing, the Company may, at its option, at any time elect to have either paragraph (b) or (c) below be applied to all outstanding Securities, subject in either case to compliance with the conditions set forth in Section 9.03. (b) Upon the Company's exercise under paragraph (a) hereof of the option applicable to this paragraph (b), the Company shall, subject to the satisfaction of the conditions set forth in Section 9.03, be deemed to have paid and discharged the entire indebtedness represented by the outstanding Securities, except for (i) the rights of Holders to receive payments in respect of the principal of, premium, if any, and interest on the Securities when such payments are due, (ii) the Company's obligations with respect to the Securities under Sections 2.02 through 2.07, inclusive, 2.10, 2.13, 4.02 and 4.18, (iii) the rights, powers, trust, duties and immunities of the Trustee under this Indenture and the Company's obligations in connection therewith and (iv) Article Nine of this Indenture (hereinafter, "Legal Defeasance"). Subject to compliance with this Article Nine, the Company may exercise its option under this paragraph (b) notwithstanding the prior exercise of its option under paragraph (c) hereof. (c) Upon the Company's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), the Company shall, subject to the satisfaction of the conditions set forth in Section 9.03, be released from its obligations under the covenants contained in Sections 4.03 through 4.17, inclusive, and Article Five with respect to the outstanding Securities (hereinafter, "Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or an Event of Default with respect to the Securities. In addition, upon the Company's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), subject to the satisfaction of the conditions set forth in Section 9.02, any failure or omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Securities. 70 -63- SECTION 9.03. Conditions to Legal Defeasance or Covenant Defeasance. In order to exercise either Legal Defeasance pursuant to Section 9.02(b) or Covenant Defeasance pursuant to Section 9.02(c): (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars or United States Government Obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of premium, if any, and interest on the Securities on the stated date for payment thereof or on the applicable redemption date, as the case may be; (b) in the case of an election under Section 9.02(b), the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 9.02(c), the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as Sections 6.01(g) and 6.01(h) are concerned, at any time in the period ending on the 91st day after the date of such deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of or constitute a Default under this Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; (g) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and (h) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that (i) the trust funds will not be subject to any rights of holders of Senior Indebtedness, including, with- 71 -64- out limitation, those arising under this Indenture, and (ii) assuming no intervening bankruptcy or insolvency of the Company between the date of deposit and the 91st day following the deposit and that no Holder is an insider of the Company, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar law affecting creditors' rights generally. Notwithstanding the foregoing, the opinion of counsel required by clause (b) above need not be delivered if all Securities not theretofore delivered to the Trustee for cancellation (x) have become due and payable, (y) will become due and payable on the maturity date within one year or (z) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. SECTION 9.04. Application of Trust Money; Trustee Acknowledgment and Indemnity. The Trustee shall hold in trust money or United States Government Obligations deposited with it pursuant to Section 9.03, and shall apply the deposited money and the money from United States Government Obligations in accordance with this Indenture solely to the payment of principal of and interest on the Securities. After such delivery or irrevocable deposit and delivery of an Officers' Certificate and Opinion of Counsel, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Securities and this Indenture except for those surviving obligations specified above. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the United States Government Obligations deposited pursuant to Section 9.03 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of outstanding Securities. SECTION 9.05. Repayment to Company. Subject to Sections 7.07 and 9.04, the Trustee shall promptly pay to the Company upon written request any excess money held by it at any time. The Trustee shall pay to the Company upon written request any money held by it for the payment of principal or interest that remains unclaimed for two years; provided, however, that the Trustee before being required to make any payment may at the expense of the Company cause to be published once in a newspaper of general circulation in The City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that, after a date specified therein which shall be at least 30 days from the date of such publication or mailing, any unclaimed balance of such money then remaining shall be repaid to the Company. After payment to the Company, Holders entitled to money must look solely to the Company for payment as general creditors unless an applicable abandoned property law designates another person and all liability of the Trustee or Paying Agent with respect to such money shall thereupon cease. SECTION 9.06. Reinstatement. If the Trustee is unable to apply any money or United States Government Obligations in accordance with Section 9.02 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit 72 -65- had occurred pursuant to Section 9.02 until such time as the Trustee is permitted to apply all such money or United States Government Obligations in accordance with Section 9.02; provided, however, that if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or United States Government Obligations held by the Trustee. ARTICLE TEN AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 10.01. Without Consent of Holders. The Issuers and the Guarantors, when authorized by a resolution of the Board of Directors, and the Trustee may amend or supplement this Indenture or the Securities without notice to or consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; provided, however, that such amendment or supplement does not adversely affect the rights of any Holder; (b) to effect the assumption by a successor Person of all obligations of the Company under the Securities and this Indenture in connection with any transaction complying with Article Five of this Indenture; (c) to provide for uncertificated Securities in addition to or in place of certificated Securities; (d) to comply with any requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (e) to make any change that would provide any additional benefit or rights to the Holders; (f) to make any other change that does not adversely affect the rights of any Holder under this Indenture; (g) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; (h) to add a Guarantor in accordance with Section 4.14 or otherwise; or (i) to secure the Securities pursuant to the requirements of Section 4.11 or otherwise; provided, however, that the Company has delivered to the Trustee an Opinion of Counsel stating that such amendment or supplement complies with the provisions of this Section 10.01. 73 -66- SECTION 10.02. With Consent of Holders. Subject to Section 6.07, the Issuers and the Guarantors, when authorized by a resolution of the Board of Directors, and the Trustee may modify, amend or supplement, or waive compliance by the Issuers with any provision of, this Indenture or the Securities with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. However, without the consent of each Holder affected, no such modification, amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may: (a) change the Stated Maturity of the principal of or any installment of interest on such Security or alter the optional redemption or repurchase provisions of any such Security or this Indenture in a manner adverse to the Holders of the Securities; (b) reduce the principal amount (or the premium) of any such Security; (c) reduce the rate of or extend the time for payment of interest on any such Security; (d) change the place or currency of payment of principal of (or premium) or interest on any such Security; (e) modify any provisions of Section 6.04 (other than to add sections of this Indenture or the Securities subject thereto) or 6.07 or this Section 10.02 (other than to add sections of this Indenture or the Securities which may not be modified, amended, supplemented or waived without the consent of each Holder affected); (f) reduce the percentage of the principal amount of outstanding Securities necessary for amendment to or waiver of compliance with any provision of this Indenture or the Securities or for waiver of any Default in respect thereof; (g) waive a Default in the payment of principal of, interest on, or redemption payment with respect to, the Securities (except a rescission of acceleration of the Securities by the Holders thereof as provided in Section 6.02 and a waiver of the payment default that resulted from such acceleration); (h) modify the ranking or priority of any Security or the Guarantee in respect thereof of any Guarantor or modify the definition of Senior Indebtedness or Guarantor Senior Indebtedness or amend or modify any of the provisions of Article Eight in any manner adverse to the Holders of the Securities; (i) modify the provisions of Section 4.07 or Section 4.16 (or the related definitions) in a manner materially adverse to the Holders of Securities affected thereby otherwise than in accordance with this Indenture; or (j) release any Guarantor from any of its obligations under its Guarantee or this Indenture otherwise than in accordance with this Indenture. An amendment under this Section 10.02 may not make any change under Article Eight hereof that adversely affects in any material respect the rights of any holder of Senior Indebtedness then out- 74 -67- standing unless the holders of such Senior Indebtedness (or any representative thereof authorized to give a consent) shall have consented to such change. It shall not be necessary for the consent of the Holders under this Section 10.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 10.02 becomes effective, the Issuers shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuers to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. SECTION 10.03. Compliance with Trust Indenture Act. Every amendment to or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 10.04. Record Date for Consents and Effect of Consents. The Issuers may, but shall not be obligated to, fix a record date for the purpose of determining the Holders of Securities entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then those persons who were Holders of Securities at such record date (or their duly designated proxies), and only those persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such persons continue to be Holders of such Securities after such record date. No such consent shall be valid or effective for more than 90 days after such record date. The Trustee is entitled to rely upon any electronic instruction from beneficial owners to the Holders of any Global Security. After an amendment, supplement or waiver becomes effective, it shall bind every Holder, unless it makes a change described in any of clauses (a) through (i) of Section 10.02. In that case the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security. SECTION 10.05. Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Issuers or the Trustee so determine, the Issuers in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 10.06. Trustee To Sign Amendments, etc. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Ten is authorized or permitted by this Indenture and that such amendment, supplement or waiver constitutes the legal, valid and binding obligation of the Issuers, enforceable in accordance with its terms 75 -68- (subject to customary exceptions). The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. In signing any amendment, supplement or waiver, the Trustee shall be entitled to receive an indemnity reasonably satisfactory to it. ARTICLE ELEVEN GUARANTEE SECTION 11.01. Unconditional Guarantee. Each Guarantor hereby unconditionally, jointly and severally, guarantees (each, a "Guarantee") to each Holder of a Security authenticated by the Trustee and to the Trustee and its successors and assigns that: the principal of and interest on the Securities will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration or otherwise, and interest on the overdue principal and interest on any overdue interest on the Securities, to the extent lawful, and all other obligations of the Issuers to the Holders or the Trustee hereunder or under the Securities will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; subject, however, to the limitations set forth in Section 12.04. Each Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Securities or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuers, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuers, any right to require a proceeding first against the Issuers, protest, notice and all demands whatsoever and covenants that the Guarantee will not be discharged except by complete performance of the obligations contained in the Securities, this Indenture and this Guarantee. If any Holder or the Trustee is required by any court or otherwise to return to the Issuers, any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Issuers or any Guarantor, any amount paid by the Issuers or any Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between each Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six for the purpose of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any acceleration of such obligations as provided in Article Six, such obligations (whether or not due and payable) shall forth become due and payable by each Guarantor for the purpose of this Guarantee. SECTION 11.02. Severability. In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 76 -69- SECTION 11.03. Release of a Guarantor. If the Securities are defeased in accordance with the terms of this Indenture, or if Section 5.01(b) is complied with, or if, subject to the requirements of Section 5.01(a), all or substantially all of the assets of any Guarantor or all of the Equity Interests of any Guarantor are sold (including by issuance or otherwise) by the Company in a transaction constituting an Asset Sale and (x) the Net Cash Proceeds from such Asset Sale are used in accordance with Section 4.07 or (y) the Company delivers to the Trustee an Officers' Certificate to the effect that the Net Cash Proceeds from such Asset Sale shall be used in accordance with Section 4.07 and within the time limits specified by Section 4.07, then each Guarantor (in the case of defeasance) or such Guarantor (in the case of compliance with Section 5.01(b) or in the event of a sale or other disposition of all of the Equity Interests of such Guarantor) or the corporation acquiring such assets (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) shall be released and discharged from all obligations under this Article Eleven without any further action required on the part of the Trustee or any Holder. Upon the designation of a Guarantor as an Unrestricted Subsidiary pursuant to and in accordance with Section 4.15, such Guarantor shall be released and discharged from all obligations under this Article Eleven without any further action required on the part of the Trustee or any Holder. In addition, if no Default or Event of Default has occurred and is continuing, upon release of the guarantees of any Guarantor of amounts outstanding under the Credit Facilities, the Guarantee of such Guarantor shall be released. The Trustee shall, at the sole cost and expense of the Issuers and upon receipt at the reasonable request of the Trustee of an Opinion of Counsel that the provisions of this Section 11.03 have been complied with, deliver an appropriate instrument evidencing such release upon receipt of a request by the Issuers accompanied by an Officers' Certificate certifying as to the compliance with this Section 11.03. Any Guarantor not so released remains liable for the full amount of principal of and interest on the Securities and the other obligations of the Issuers hereunder as provided in this Article Eleven. SECTION 11.04. Limitation of Guarantor's Liability. Each Guarantor, and by its acceptance hereof each Holder and the Trustee, hereby confirms that it is the intention of all such parties that the guarantee by such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of title 11 of the United States Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar U.S. Federal or state or other applicable law. To effectuate the foregoing intention, the Holders and each Guarantor hereby irrevocably agree that the obligations of each Guarantor under its Guarantee shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor (including any Guarantor Senior Indebtedness Incurred after the Issue Date) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to Section 11.05, result in the obligations of such Guarantor under its Guarantee not constituting such a fraudulent transfer or conveyance under Federal or State law. SECTION 11.05. Contribution. In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under the Guarantee, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a pro rata amount, based on the net assets of each Guarantor (including the Funding Guarantor), determined in accordance with GAAP, subject to Section 11.04, for all payments, damages and expenses incurred by such 77 -70- Funding Guarantor in discharging the Issuers' obligations with respect to the Securities or any other Guarantor's obligations with respect to the Guarantee. SECTION 11.06. Execution of Security Guarantee. To further evidence their Guarantee to the Holders, each of the Guarantors hereby agrees to execute a Security Guarantee to be endorsed on each Security ordered to be authenticated and delivered by the Trustee. Each Security Guarantee shall be substantially in the form set forth in Exhibits A and B hereto. Each Guarantor hereby agrees that its Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Security a Security Guarantee. Each such Security Guarantee shall be signed on behalf of each Guarantor by two Officers prior to the authentication of the Security on which it is endorsed, and the delivery of such Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of such Security Guarantee on behalf of such Guarantor. Such signature upon the Security Guarantee may be manual or facsimile signature of such officer and may be imprinted or otherwise reproduced on the Security Guarantee, and in case such officer who shall have signed the Security Guarantee shall cease to be such officer before the Security on which such Security Guarantee is endorsed shall have been authenticated and delivered by the Trustee or disposed of by the Issuers, such Security nevertheless may be authenticated and delivered or disposed of as though the Person who signed the Security Guarantee had not ceased to be such officer of such Guarantor. SECTION 11.07. Subordination of Subrogation and Other Rights. Each Guarantor hereby agrees that any claim against the Issuers that arises from the payment, performance or enforcement of such Guarantor's obligations under its Guarantee or this Indenture, including, without limitation, any right of subrogation, shall be subject and subordinate to, and no payment with respect to any such claim of such Guarantor shall be made before, the payment in full in cash of all outstanding Securities in accordance with the provisions provided therefor in this Indenture. ARTICLE TWELVE SUBORDINATION OF GUARANTEE SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Indebtedness. Each Guarantor covenants and agrees, and the Trustee and each Holder of the Securities by his acceptance thereof likewise covenant and agree, that the Guarantee of such Guarantor shall be issued subject to the provisions of this Article Twelve; and each person holding any Security, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees that all payments of the principal of and interest on the Securities pursuant to the Guarantee made by or on behalf of any Guarantor shall, to the extent and in the manner set forth in this Article Twelve, be subordinated and junior in right of payment to the prior payment in full in cash of all amounts payable under Guarantor Senior Indebtedness of such Guarantor. SECTION 12.02. No Payment on Guarantees in Certain Circumstances. (a) No direct or indirect payment (excluding any payment or distribution of Permitted Junior Securities) by or on behalf of any Guarantor of principal of or interest on the Securities pursuant to such Guar- 78 -71- antor's Guarantee, whether pursuant to the terms of the Securities, upon acceleration or otherwise, shall be made if, at the time of such payment, there exists a default in the payment of all or any portion of the obligations on any Designated Guarantor Senior Indebtedness of such Guarantor, whether at maturity, on account of mandatory redemption or prepayment, acceleration or otherwise, and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the holders of such Designated Guarantor Senior Indebtedness. In addition, during the continuance of any non-payment event of default with respect to any Designated Guarantor Senior Indebtedness pursuant to which the maturity thereof may be immediately accelerated, and upon receipt by the Trustee of written notice (the "Guarantor Payment Blockage Notice") from the holder or holders of such Designated Guarantor Senior Indebtedness or the trustee or agent acting on behalf of such Designated Guarantor Senior Indebtedness, then, unless and until such non-payment event of default has been cured or waived or has ceased to exist or such Designated Guarantor Senior Indebtedness has been discharged or paid in full in cash or the benefits of these provisions have been waived by the holders of such Designated Guarantor Senior Indebtedness, no direct or indirect payment (excluding any payment or distribution of Permitted Junior Securities) shall be made by or on behalf of such Guarantor of principal or interest on the Securities during a period (a "Guarantor Blockage Period") commencing on the date of receipt of such notice by the Trustee and ending 179 days thereafter. Notwithstanding anything herein or in the Securities to the contrary, (x) in no event shall a Guarantor Blockage Period extend beyond 179 days from the date the Guarantor Payment Blockage Notice in respect thereof was given, (y) there shall be a period of at least 181 consecutive days in each 360-day period when no Guarantor Blockage Period is in effect and (z) not more than one Guarantor Blockage Period may be commenced with respect to any Guarantor during any period of 360 consecutive days. No non-payment event of default that existed or was continuing on the date of commencement of any Guarantor Blockage Period with respect to the Designated Guarantor Senior Indebtedness initiating such Guarantor Blockage Period (to the extent the holder of Designated Guarantor Senior Indebtedness, or trustee or agent, giving notice commencing such Guarantor Blockage Period had knowledge of such existing or continuing event of default) may be, or be made, the basis for the commencement of any other Guarantor Blockage Period by the holder or holders of such Designated Guarantor Senior Indebtedness or the trustee or agent acting on behalf of such Designated Guarantor Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such non-payment event of default has been cured or waived for a period of not less than 90 consecutive days. (b) In the event that, notwithstanding the foregoing, any payment shall be made directly to the Trustee or any Holder when such payment is prohibited by Section 12.02(a), such payment shall be held in trust for the benefit of, and shall be paid over or delivered by the Trustee (if the Notice required by Section 12.06 has been received by the Trustee) or the Holder to, the holders of such Designated Guarantor Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Designated Guarantor Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that, upon notice from the Trustee to the holders of such Designated Guarantor Senior Indebtedness that such prohibited payment has been made, the holders of such Designated Guarantor Senior Indebtedness (or their representative or representatives or a trustee or trustees) notify the Trustee in writing of the amounts then due and owing on such Designated Guarantor Senior Indebtedness, if any, and only the amounts specified in such notice to the Trustee shall be paid to the holders of such Designated Guarantor Senior Indebtedness. SECTION 12.03. Payment Over of Proceeds upon Dissolution, Etc. (a) Upon any payment or distribution of assets or securities of any Guarantor of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior 79 -72- Securities), upon any dissolution or winding-up or total liquidation or reorganization of such Guarantor, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all Guarantor Senior Indebtedness of such Guarantor shall first be paid in full in cash before the Holders of the Securities or the Trustee on behalf of such Holders shall be entitled to receive any payment by such Guarantor of the principal of or interest on the Securities pursuant to such Guarantor's Guarantee, or any payment to acquire any of the Securities for cash, property or securities, or any distribution with respect to the Securities of any cash, property or securities (excluding any payment or distribution of Permitted Junior Securities). Before any payment may be made by, or on behalf of, any Guarantor of the principal of or interest on the Securities upon any such dissolution or winding-up or total liquidation or reorganization, any payment or distribution of assets or securities of such Guarantor of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), to which the Holders of the Securities or the Trustee on their behalf would be entitled, but for the subordination provisions of this Indenture, shall be made by such Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, directly to the holders of the Guarantor Senior Indebtedness of such Guarantor (pro rata to such holders on the basis of the respective amounts of such Guarantor Senior Indebtedness held by such holders) or their representatives or to the trustee or trustees or agent or agents under any agreement or indenture pursuant to which any of such Guarantor Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all such Guarantor Senior Indebtedness in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Guarantor Senior Indebtedness. (b) In the event that, notwithstanding the foregoing provision prohibiting such payment or distribution, any payment or distribution of assets or securities of any Guarantor of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), shall be made directly to the Trustee or any Holder of Securities at a time when such payment or distribution is prohibited by Section 12.03(a) and before all obligations in respect of the Guarantor Senior Indebtedness of such Guarantor are paid in full in cash, such payment or distribution shall be received and held in trust for the benefit of, and shall be paid over or delivered by the Trustee (if the Notice required by Section 12.06 has been received by the Trustee) or the Holder to, the holders of such Guarantor Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of such Guarantor Senior Indebtedness held by such holders) or their respective representatives, or to the trustee or trustees or agent or agents under any indenture pursuant to which any of such Guarantor Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of such Guarantor Senior Indebtedness remaining unpaid until all such Guarantor Senior Indebtedness has been paid in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Guarantor Senior Indebtedness. The consolidation of any Guarantor with, or the merger of any Guarantor with or into, another corporation or the liquidation or dissolution of any Guarantor following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Article Five shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 12.03 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article Five. SECTION 12.04. Subrogation. Upon the payment in full in cash of all Guarantor Senior Indebtedness of a Guarantor, or provision for payment, the Holders of the Securities shall be subrogated to the rights of the holders of such Guarantor Senior Indebtedness to receive payments or distributions of cash, property or securities of such 80 -73- Guarantor made on such Guarantor Senior Indebtedness until the principal of and interest on the Securities shall be paid in full in cash; and, for the purposes of such subrogation, no payments or distributions to the holders of such Guarantor Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee on their behalf would be entitled except for the provisions of this Article Twelve, and no payment over pursuant to the provisions of this Article Twelve to the holders of such Guarantor Senior Indebtedness by Holders of the Securities or the Trustee on their behalf shall, as between such Guarantor, its creditors other than holders of such Guarantor Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment by such Guarantor to or on account of such Guarantor Senior Indebtedness. It is understood that the provisions of this Article Twelve are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of Guarantor Senior Indebtedness of each Guarantor, on the other hand. If any payment or distribution to which the Holders of the Securities would otherwise have been entitled but for the provisions of this Article Twelve shall have been applied, pursuant to the provisions of this Article Twelve, to the payment of all amounts payable under Guarantor Senior Indebtedness, then and in such case, the Holders of the Securities shall be entitled to receive from the holders of such Guarantor Senior Indebtedness any payments or distributions received by such holders of Guarantor Senior Indebtedness in excess of the amount required to make payment in full in cash of such Guarantor Senior Indebtedness. SECTION 12.05. Obligations of Guarantors Unconditional. Nothing contained in this Article Twelve or elsewhere in this Indenture or in the Securities or the Guarantees is intended to or shall impair, as among each of the Guarantors and the Holders of the Securities, the obligation of each Guarantor, which is absolute and unconditional, to pay to the Holders of the Securities the principal of and interest on the Securities as and when the same shall become due and payable in accordance with the terms of the Guarantee of such Guarantor, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of any Guarantor other than the holders of Guarantor Senior Indebtedness of such Guarantor, nor shall anything herein or therein prevent the Holder of any Security or the Trustee on their behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Twelve of the holders of Guarantor Senior Indebtedness in respect of cash, property or securities of any Guarantor received upon the exercise of any such remedy. Without limiting the generality of the foregoing, nothing contained in this Article Twelve shall restrict the right of the Trustee or the Holders of Securities to take any action to declare the Securities to be due and payable prior to their stated maturity pursuant to Section 6.01 or to pursue any rights or remedies hereunder; provided, however, that all Guarantor Senior Indebtedness of any Guarantor then due and payable shall first be paid in full before the Holders of the Securities or the Trustee are entitled to receive any direct or indirect payment from such Guarantor of principal of or interest on the Securities pursuant to such Guarantor's Guarantee. SECTION 12.06. Notice to Trustee. The Issuers and each Guarantor shall give prompt written notice to the Trustee of any fact known to the Issuers or such Guarantor which would prohibit the making of any payment to or by the Trustee in respect of the Securities pursuant to the provisions of this Article Twelve. The Trustee shall not be charged with knowledge of the existence of any event of default with respect to any Guarantor Senior Indebtedness or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the 81 -74- Trustee shall have received notice in writing at its Corporate Trust Office to that effect signed by an Officer of either of the Issuers or such Guarantor, or by a holder of Guarantor Senior Indebtedness or trustee or agent therefor; and prior to the receipt of any such written notice, the Trustee shall, subject to Article Seven, be entitled to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 12.06 at least two Business Days prior to the date upon which by the terms of this Indenture any moneys shall become payable for any purpose (including, without limitation, the payment of the principal of or interest on any Security), then, regardless of anything herein to the contrary, the Trustee shall have full power and authority to receive any moneys from any Guarantor and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such prior date. Nothing contained in this Section 12.06 shall limit the right of the holders of Guarantor Senior Indebtedness to recover payments as contemplated by Section 12.03. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Guarantor Senior Indebtedness (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Guarantor Senior Indebtedness or a trustee or representative on behalf of any such holder. In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Guarantor Senior Indebtedness to participate in any payment or distribution pursuant to this Article Twelve, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Guarantor Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Twelve, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 12.07. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets or securities of a Guarantor referred to in this Article Twelve, the Trustee and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders of the Securities for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of Guarantor Senior Indebtedness of such Guarantor and other indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Twelve. SECTION 12.08. Trustee's Relation to Guarantor Senior Indebtedness. The Trustee and any Paying Agent shall be entitled to all the rights set forth in this Article Twelve with respect to any Guarantor Senior Indebtedness which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Guarantor Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee or any Paying Agent of any of its rights as such holder. With respect to the holders of Guarantor Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Twelve, and no implied covenants or obligations with respect to the holders of Guarantor Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary 82 -75- duty to the holders of Guarantor Senior Indebtedness (except as provided in Section 12.03(b)). The Trustee shall not be liable to any such holders if the Trustee shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Issuers or to any other person cash, property or securities to which any holders of Guarantor Senior Indebtedness shall be entitled by virtue of this Article Twelve or otherwise. SECTION 12.09. Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Holders of Guarantor Senior Indebtedness. No right of any present or future holders of any Guarantor Senior Indebtedness to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by any Guarantor with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. The provisions of this Article Twelve are intended to be for the benefit of, and shall be enforceable directly by, the holders of Guarantor Senior Indebtedness. SECTION 12.10. Holders Authorize Trustee To Effectuate Subordination of Guarantee. Each Holder of Securities by his acceptance of such Securities authorizes and expressly directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Twelve, and appoints the Trustee his attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, total liquidation or reorganization of any Guarantor (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of such Guarantor, the filing of a claim for the unpaid balance of its or his Securities in the form required in those proceedings. SECTION 12.11. This Article Not To Prevent Events of Default. The failure to make a payment on account of principal of or interest on the Securities by reason of any provision of this Article Twelve shall not be construed as preventing the occurrence of an Event of Default specified in clause (a), (b) or (c) of Section 6.01. SECTION 12.12. Trustee's Compensation Not Prejudiced. Nothing in this Article Twelve shall apply to amounts due to the Trustee pursuant to other sections in this Indenture. SECTION 12.13. No Waiver of Guarantee Subordination Provisions. Without in any way limiting the generality of Section 12.09, the holders of Guarantor Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article Twelve or the obligations hereunder of the Holders of the Securities to the holders of Guarantor Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Guarantor Senior Indebtedness or any instrument evidencing the same or any agreement under which Guarantor Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Guarantor Senior Indebtedness; (c) release any Person liable in any 83 -76- manner for the collection of Guarantor Senior Indebtedness; and (d) exercise or refrain from exercising any rights against any Guarantor and any other Person. SECTION 12.14. Payments May Be Paid Prior to Dissolution. Nothing contained in this Article Twelve or elsewhere in this Indenture shall prevent (i) a Guarantor, except under the conditions described in Section 12.02, from making payments of principal of and interest on the Securities, or from depositing with the Trustee any moneys for such payments, or (ii) the application by the Trustee of any moneys deposited with it for the purpose of making such payments of principal of and interest on the Securities, to the holders entitled thereto unless at least two Business Days prior to the date upon which such payment becomes due and payable, the Trustee shall have received the written notice provided for in Section 12.02(b) or in Section 12.06. The Guarantors shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of such Guarantor. ARTICLE THIRTEEN MISCELLANEOUS SECTION 13.01. Trust Indenture Act Controls. This Indenture is subject to the provisions of the TIA that are required to be a part of this Indenture, and shall, to the extent applicable, be governed by such provisions. If any provision of this Indenture modifies any TIA provision that may be so modified, such TIA provision shall be deemed to apply to this Indenture as so modified. If any provision of this Indenture excludes any TIA provision that may be so excluded, such TIA provision shall be excluded from this Indenture. The provisions of TIA ss.ss. 310 through 317 that impose duties on any Person (including the provisions automatically deemed included unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein. SECTION 13.02. Notices. Any notice or communication shall be sufficiently given if in writing and delivered in person, by facsimile and confirmed by overnight courier, or mailed by first-class mail addressed as follows: if to the Issuers: c/o Advanced Accessory Systems, LLC 12900 Hall Road, Suite 200 Sterling Heights, MI 48313 Attention: Chief Financial Officer Facsimile: (810) 997-2900 Telephone: (810) 997-6839 84 [FORM OF SECURITY GUARANTEE] SENIOR SUBORDINATED GUARANTEE For value received, the undersigned Guarantor (as defined in the Indenture referred to in the Security upon which this notation is endorsed) hereby unconditionally guarantees on a senior subordinated basis (such Guarantee by the Guarantor being referred to herein as the "Guarantee") the due and punctual payment of the principal of, premium, if any, and interest on the Securities, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal, premium and interest on the Securities, and the due and punctual performance of all other obligations of the Issuers to the Holders or the Trustee, all in accordance with the terms set forth in Article Eleven of the Indenture (as defined below). This Guarantee will become effective in accordance with Article Eleven of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Security. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture dated as of October 1, 1997, among Advanced Accessory Systems, LLC, AAS Capital Corporation, each of the Guarantors named therein and First Union National Bank, as trustee, as amended or supplemented (the "Indenture"). The obligations of the undersigned to the Holders of Securities and to the Trustee pursuant to this Guarantee and the Indenture are expressly set forth in Article Eleven of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee and all of the other provisions of the Indenture to which this Guarantee relates. The obligations of the Guarantor to the Holders of Securities and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth, and are expressly subordinated and subject in right of payment to the prior payment in full of all Guarantor Senior Indebtedness (as defined in the Indenture) of such Guarantor, to the extent and in the manner provided in Article Eleven and Article Twelve of the Indenture, and reference is hereby made to such Indenture for the precise terms of the Guarantee therein made. This Security Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Securities upon which this Security Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. This Security Guarantee shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws to the extent that the application of the laws of another jurisdiction would be required thereby. This Security Guarantee is subject to release upon the terms set forth in the Indenture. [LIST GUARANTORS] By: ___________________________ Name: Title: B-8 85 ASSIGNMENT FORM I or we assign and transfer this Security to - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Print or type name, address and zip code of assignee or transferee) - ------------------------------------------------------------------------------- (Insert Social Security or other identifying number of assignee or transferee) and irrevocably appoint________________________________________________________ agent to transfer this Security on the books of the Issuers. The agent may substitute another to act for him. Dated:___________________ Signed: ______________________________ (Signed exactly as name appears on the other side of this Security) Signature Guarantee: ______________________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) 86 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or Section 4.07 of the Indenture, check the appropriate box: Section 4.06 [ ] Section 4.07 [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or Section 4.07 of the Indenture, state the amount: $_____________ Dated:___________________ Your Signature:__________________________ (Signed exactly as name appears on the other side of this Security) Signature Guarantee: ______________________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) 87 EXHIBIT C FORM OF LEGEND FOR GLOBAL SECURITIES Any Global Security authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required in the case of a Restricted Security) in substantially the following form: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.16 OF THE INDENTURE. C-1 88 EXHIBIT D CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF SECURITIES Re: 9 3/4% Senior Subordinated Notes due 2007 (the "Securities") of Advanced Accessory Systems, LLC and AAS Capital Corporation This Certificate relates to $_______ principal amount of Securities held in the form of* ___ a beneficial interest in a Global Security or* _______ Physical Securities by ______ (the "Transferor"). The Transferor:* [ ] has requested by written order that the Registrar deliver in exchange for its beneficial interest in the Global Security held by the Depositary a Physical Security or Physical Securities in definitive, registered form of authorized denominations and an aggregate number equal to its beneficial interest in such Global Security (or the portion thereof indicated above); or [ ] has requested that the Registrar by written order exchange or register the transfer of a Physical Security or Physical Securities. In connection with such request and in respect of each such Security, the Transferor does hereby certify that the Transferor is familiar with the Indenture relating to the above captioned Securities and the restrictions on transfers thereof as provided in Section 2.16 of such Indenture, and that the transfer of the Securities does not require registration under the Securities Act of 1933, as amended (the "Act"), because*: [ ] Such Security is being acquired for the Transferor's own account, without transfer (in satisfaction of Section 2.16 of the Indenture). [ ] Such Security is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A. [ ] Such Security is being transferred to an institutional "accredited investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Act) which delivers a certificate to the Trustee in the form of Exhibit E to the Indenture. [ ] Such Security is being transferred in reliance on Rule 144 under the Act. [ ] Such Security is being transferred in reliance on and in compliance with an exemption from the registration requirements of the Act other than Rule 144A or Rule 144 under the Act to a person other than an institutional "accredited investor." [An Opinion of Counsel to the effect that such transfer does not require Registration under the Securities Act accompanies this certification.] _____________________________________ [INSERT NAME OF TRANSFEROR] By: _________________________________ [Authorized Signatory] Date: ______________________ *Check applicable box. D-1 89 EXHIBIT E Form of Transferee Letter of Representation Advanced Accessory Systems, LLC AAS Capital Corporation c/o [Address of Trustee] Dear Sirs: This certificate is delivered to request a transfer of $________ principal amount of the 9 3/4% Senior Subordinated Notes due 2007 (the "Notes") of Advanced Accessory Systems, LLC and AAS Capital Corp. (the "Issuers"). Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows: Name: __________________________________________ Address:________________________________________ Taxpayer ID Number:_____________________________ The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Notes, and we are acquiring the Notes not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Notes and we invest in or purchase securities similar to the Notes in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand that the Notes have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Notes to offer, sell or otherwise transfer such Notes prior to the date which is two years after the later of the date of original issue and the last date on which the Issuers or any affiliate of the Issuers was the owner of such Notes (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Issuers , (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act, to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor," in each case in a minimum principal amount of Notes of $250,000 or (e) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of E-1 90 law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Notes is proposed to be made pursuant to clause (d) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Issuers and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Notes for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Issuers and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Restriction Termination Date of the Notes pursuant to clause (d) or (e) above to require the delivery of an opinion of counsel, certificates and/or other information satisfactory to the Issuers and the Trustee. Dated: ______________________ TRANSFEREE:______________________________ By:______________________________________ E-2 EX-10.1 8 EX-10.1 1 EXHIBIT 10.1 - -------------------------------------------------------------------------------- ASSET PURCHASE AGREEMENT AMONG MASCOTECH AUTOMOTIVE SYSTEMS GROUP, INC., MASCOTECH ACCESSORIES, INC., AND ADVANCED ACCESSORY SYSTEMS, LLC Dated as of September 28, 1995 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS Page ---- ARTICLE I TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF LIABILITIES AND RELATED MATTERS......................................1 1.1 Transfer of Assets...................................................1 1.2 Assets Not Being Transferred.........................................4 1.3 Liabilities Being Assumed............................................5 1.4 Liabilities Not Being Assumed........................................6 1.5 Instruments of Conveyance and Transfer, Etc..........................7 1.6 Further Assurances, Etc..............................................7 1.7 Assignment of Contracts, Rights, Etc.................................8 1.8 Right of Endorsement, Etc............................................8 1.9 Subscription Agreement...............................................8 ARTICLE II PURCHASE PRICE; ALLOCATION..........................................8 2.1 Purchase Price.......................................................8 2.2 Payments at Closing..................................................9 2.3 Purchase Price Adjustment............................................9 2.4 Allocation of Purchase Price........................................11 ARTICLE III REPRESENTATIONS AND WARRANTIES....................................11 3.1 Representations and Warranties of the Sellers.......................11 3.2 Representations and Warranties of the Buyer.........................25 ARTICLE IV CLOSING............................................................26 ARTICLE V INDEMNIFICATION.....................................................26 5.1 Definitions.........................................................26 5.2 Indemnification Generally...........................................29 5.3 Notice and Defense of Third Party Claims............................30 5.4 Survival of Representations, Warranties, Agreements and Covenants...32 5.5 Remedies Cumulative.................................................32 5.6 Remediation.........................................................32 5.7 Product Distinguishment.............................................33 5.8 Stand-alone Costs...................................................33 ARTICLE VI ADDITIONAL POST-CLOSING AGREEMENTS.................................34 6.1 Access..............................................................34 6.2 Bulk Sales Laws.....................................................35 6.3 Brokers, Finders and Investment Bankers.............................35 6.4 Certain Employee Matters............................................35 6.5 Guaranties..........................................................36 6.6 Audited Financials..................................................37 ARTICLE VII MISCELLANEOUS.....................................................37 7.1 Expenses; Transfer Taxes, Etc.......................................37 3 7.2 Entire Agreement....................................................37 7.3 Related Documents...................................................37 7.4 Notices.............................................................37 7.5 Counterparts........................................................39 7.6 Governing Law; Consent to Jurisdiction..............................39 7.7 Benefits of Agreement; Assignment...................................39 7.8 Construction........................................................39 7.9 Pronouns............................................................39 7.10 Descriptive Headings................................................39 7.11 Severability........................................................39 7.12 Amendment...........................................................40 7.13 No Third Party Beneficiaries........................................40 ii 4 LIST OF EXHIBITS LIST OF SCHEDULES Schedule 1.3(c) - Customer And Purchase Orders Note Being Assumed Schedule 1.3(f) - Liabilities And Obligations Schedule 3.1(c) - Corporate Action; No Conflict Schedule 3.1(d) - Financial Information Schedule 3.1(e) - Undisclosed Liabilities Schedule 3.1(f) - Changes Schedule 3.1(g) - Real Property Schedule 3.1(h) - Title To Assets, Etc. Schedule 3.1(i) - Intellectual Property Rights Schedule 3.1(j) - Environmental Matters Schedule 3.1(k) - Contracts Schedule 3.1(l) - Litigation Schedule 3.1(m) - Compliance With Law Schedule 3.1(o) - Inventories Schedule 3.1(p) - Labor Relations; Employees Schedule 3.1(q) - Employee Benefits Schedule 3.1(s) - Brokers Employed By Sellers Schedule 3.1(t) - Transactions With Affiliates Schedule 3.1(u) - Principal Customers Schedule 3.1(v) - Best Knowledge iii 5 DEFINITIONS THE FOLLOWING TERMS WHICH MAY APPEAR IN MORE THAN ONE SECTION OF THIS AGREEMENT ARE DEFINED IN THE FOLLOWING SECTIONS: TERM SECTION OR OTHER LOCATION ---- ------------------------- Accountants' Determination 2.3(b) Actual Stand-Alone Costs 5.8(a) Additional Payment 2.3(c) Affiliate 3.1(t) Arbitrating Accountants 2.3(b) Assigned Contracts 1.1(a)(viii) Assumed Employee Plans 1.1(a)(xi) Assumed Obligations 1.3 Best Knowledge 3.1(w) Bill of Sale and Assumption Agreement 1.5(a) Business First Paragraph Business Day 7.4 Buyer Caption Buyer Indemnification Event 5.1(a) Buyer Indemnified Persons 5.1(b) Buyer's Accountants 2.3(b) By-Laws 3.1(a) Cash Payment 2.2 CERCLA 3.1(j)(iv) CERCLIS 3.1(j)(iv) Charter 3.1(a) Claim 5.1(c) Closing Article IV Closing Date Article IV Closing Net Working Capital 2.3(a) Closing Statement 2.3(a) Code 2.4 Contracts 3.1(k) Conveyance Instruments 1.5(a) Current Employees 3.1(p) Employee Plan 3.1(q)(i) Encumbrances 1.1(a) Environmental Laws 3.1(j)(i) ERISA 3.1(q)(i) ERISA Affiliate 3.1(q)(i) Excluded Assets 1.2 Excluded Obligations 1.4 Final Determination Date 2.3(e) Financial Statements 3.1(d) iv 6 GAAP 3.1(d) Governmental Authority 3.1(c) Hazardous Materials 3.1(j)(ii) Hired Employees 6.4(a) Holdings 1.9 HSR Act 3.1(c) Indemnified Persons 5.1(d) Indemnifying Person 5.1(e) Intellectual Property Rights 3.1(i)(iii) Interim Balance Sheet 3.1(d)(ii) Interim Balance Sheet Date 3.1(d)(ii) Leased Real Property 1.1(a)(iv) Leases 1.1(a)(iv) Legal Requirement 3.1(c) Liability Letter 5.3(b)(i) Losses 5.1(f) MAI Caption MascoTech 1.9 MASG Caption Net Working Capital Statement 2.3(a) NPL 3.1(j)(v) Objection Notice 2.3(b) Owned Real Property 1.1(a)(iii) Permits 3.1(m)(ii) Permitted Encumbrances 1.1(a) Permitted Owned Real Property Exceptions 3.1(g)(ii) Person 3.1(c) Principal Customers 3.1(u) Projected Working Capital Statement 3.1(d)(iii) Proprietary Technology 3.1(i)(iii) Purchase Price 2.1 Purchased Assets 1.1(a) Purchased Inventory 1.1(a)(v) Real Property 1.1(a)(iv) Related Documents 7.3 Release 3.1(j)(ii) Requisite Rights 3.1(i)(i) Seller Indemnification Event 5.1(g) Seller Indemnified Persons 5.1(h) Sellers Caption Sellers' Accountants 2.3(b) Sellers' Refund 2.3(c) Settlement Agreement 2.3(b) Stand-alone Costs Accountants' Determination 5.8(c) Stand-alone Costs Arbitrating Accountants 5.8(c) Stand-alone Costs Objection Notice 5.8(c) v 7 Stand-alone Costs Statement 5.8(b) Statement of Allocation 2.4 Subscription Agreement 1.9 Survival Date 5.4 Target Net Working Capital 2.3(a) Taxes 5.1(i) Third Party Claim 5.3 US EPA 3.1(j)(iv) vi 8 ASSET PURCHASE AGREEMENT dated as of September 28, 1995, among MASCOTECH AUTOMOTIVE SYSTEMS GROUP, INC., a Michigan corporation ("MASG"), MASCOTECH ACCESSORIES, INC., a California corporation ("MAI"; and together with MASG, the "Sellers"), and ADVANCED ACCESSORY SYSTEMS, LLC, a Delaware limited liability company (the "Buyer"). MASG, through its accessories group and MAI, is engaged in the business (the "Business") of designing, engineering, manufacturing, selling and distributing rack systems, vehicular lifestyle accessories (such as bike racks, ski racks, surfboard carriers, and roof-mounted spare tire carriers) and exterior decorative trim for automobiles, light trucks and other vehicles. The parties hereto desire that the Sellers sell, transfer, convey and assign to the Buyer all of the assets, properties, interests in properties and rights principally used in the Business and that the Buyer purchase and acquire the same, subject to the assumption by the Buyer of certain specified liabilities and obligations of the Sellers relating to the Business, upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows: ARTICLE I TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF LIABILITIES AND RELATED MATTERS 1.1 TRANSFER OF ASSETS. (a) On the terms and subject to the conditions set forth in this Agreement, at the Closing the Sellers shall sell, transfer, convey and assign to the Buyer, free and clear of all Encumbrances (other than Permitted Encumbrances), and the Buyer shall purchase and acquire from the Sellers, all of the Sellers' right, title and interest in, to and under the assets, properties, interests in properties and rights of the Sellers of every kind, nature and description, whether real, personal or mixed, tangible or intangible, principally used in or held for use in the Business (other than the Excluded Assets), wherever located, as the same shall exist immediately prior to the Closing, including, without limitation, the following: (i) all machinery and equipment, including, without limitation, all manufacturing, production, maintenance, packaging, testing and other machinery, equipment, molds, presses, rolling stock, motor vehicles, tractors and other vehicles, spare or replacement parts, computer equipment (including the A/S 4000 computer system used in the Business), furniture, fixtures, office equipment and software programs (including Sellers' interest in the software used on the A/S 4000 computer system), supplies and other items of tangible personal property; 9 (ii) all tooling owned by the Sellers and used in connection with the Business, including any tooling jointly owned with any customers or Affiliates of the Sellers; provided that in the case of tooling jointly owned with customers, Buyer shall only receive Sellers' rights and interest in such tooling; (iii) all real property listed on Schedule 3.1(g), together with all appurtenances to such real property and all structures, fixtures and improvements located thereon (the "Owned Real Property"); (iv) all real property leases listed on Schedule 3.1(g) (collectively, the "Leases"), together with all of the Seller's interest in all of the structures, fixtures and improvements located on the real property covered by such Leases (the "Leased Real Property"; and the Leased Real Property, together with the Owned Real Property, being collectively referred to herein as the "Real Property"); (v) all inventories of work-in-process, raw materials, finished products, returned goods, stores and supplies, spare parts, packaging, shipping containers and other materials (the "Purchased Inventory"); (vi) all prepaid expenses (other than prepaid Taxes), advances, deposits (including utility deposits) and accounts receivable; (vii) all insurance and indemnity claims against third parties relating to the Purchased Assets and the Assumed Obligations (including, without limitation, all insurance proceeds paid or payable by any insurance provider for any Purchased Asset that is destroyed or damaged after the Interim Balance Sheet Date and on or prior to the Closing Date) other than any of the foregoing to the extent that they relate to the Excluded Assets or Excluded Obligations; (viii) all contracts, agreements, licenses, personal property leases, commitments, purchase orders, sales orders and other agreements (collectively, the "Assigned Contracts"); (ix) all Requisite Rights, including, without limitation, the names "APPEND", "Huron/St. Clair" and all other names used or held for use in the Business and owned by Sellers or their Affiliates (excluding the name "MascoTech"); (x) all records of the Sellers, either in computer or original or photostatic form (except in the case of computer software, which must be in original form), whether or not in computer or machine readable format, including, without limitation, property records, plans, specifications, surveys, titles policies, production records, engineering records, purchasing and sales records, personnel and payroll records, accounting records, mailing lists, customer and vendor lists and records, and computer software and related licenses, manuals and other materials, in each case principally relating to the Purchased Assets or the Business; (xi) all telephone, telex and telecopier numbers and all listings in all telephone books and directories (excluding listings using the name "MascoTech"); 2 10 (xii) all interests in and to joint ventures, technology transfers or offshore businesses or ventures; (xiii) all warranties and guarantees received from vendors, suppliers or manufacturers with respect to the Purchased Assets or the Business to the extent assignable; (xiv) all stationery, purchase orders, forms, labels, shipping material, catalogs, brochures, art work, photographs and advertising material (subject to Buyer covering over the name "MascoTech" or any variation thereof on any such materials); (xv) all Permits to the extent assignable; (xvi) all rights which are transferable by the Sellers (including experience ratings) with respect to unemployment, workers' compensation and other similar insurance reserves, in each case relating to employees of the Sellers who become employees of the Buyer; (xvii) all rights, recoveries, refunds, counterclaims, rights to offset, other rights, choses in action and Claims (known or unknown, matured or unmatured, accrued or contingent) against third parties (including, but not limited to, all warranty and other contractual claims (express, implied or otherwise) against third parties), other than any of the foregoing to the extent that they relate to the Excluded Assets or Excluded Obligations; (xviii) all assets of MAI, excluding the Lease, dated August 20, 1993, between PSLC Limited Partnership II and Sport Rack Systems, Inc. and any sublets thereunder; (xix) all assets reflected on the Closing Statement other than assets identified as I/C MascoTech; (xx) the goodwill of the Sellers associated with the Business; and (xxi) control over all assets associated with the Huron/St. Clair Company Plant II Hourly Pension Plan, the Golden Dental Plan, the Plant II Hourly Employees Medical Benefit and Short-Term Disability Plans, and the Plant II Hourly Employees Life Insurance Plan (the "Assumed Employee Plans"). For convenience of reference, the assets, properties, interests in properties and rights that are to be sold, transferred, conveyed and assigned to the Buyer by the Sellers pursuant to this Section are collectively called the "Purchased Assets" in this Agreement. As used in this Agreement, the term "Encumbrances" means, collectively, all security interests, judgments, liens, pledges, charges, escrows, encumbrances, Claims, options, rights of first refusal, rights of first offer, mortgages, indentures, security agreements and other agreements, arrangements, contracts, commitments, understandings or obligations, whether written or oral and whether or not relating in any way to credit or the borrowing of money. As used in this Agreement, the term "Permitted Encumbrances" means, collectively, (i) Encumbrances for current taxes or other governmental assessments or charges not yet due and payable, (ii) Encumbrances granted under any of the 3 11 Assigned Contracts and any other Encumbrances being assumed by the Buyer pursuant to Section 1.3 and (iii), with respect to real property, any Encumbrance indicated on the title commitment for such property. (b) Anything contained in this Agreement to the contrary notwithstanding, but subject to the provisions of Section 1.2, to the extent that any asset, property, interest in property or right principally used in the conduct of the Business is owned by any Affiliate of the Sellers, such asset, property, interest in property or right shall be deemed to be a Purchased Asset for all purposes of this Agreement, and the Sellers shall do, and shall cause any such other Affiliate of any Seller to do, all things required to be done by the Sellers with respect thereto, including, but not limited to, those things set forth in Sections 1.5, 1.6, 1.7 and 1.8. 1.2 ASSETS NOT BEING TRANSFERRED. Anything contained in this Agreement to the contrary notwithstanding, there are expressly excluded from the Purchased Assets the following: (a) the consideration delivered to the Sellers pursuant to this Agreement; (b) all assets used primarily in connection with the Sellers' corporate functions (including, but not limited to, corporate charters, seals, minute books, stock transfer ledgers, taxpayer and other identification numbers, tax returns, tax information and tax records), whether or not used for the benefit of the Business; (c) rights to or claims for refunds or rebates of Taxes for periods ending on or prior to the Closing Date and the benefit of net operating loss carryforwards, carrybacks or other credits of any Seller; (d) claims or rights against third parties relating to any other Excluded Asset or Excluded Liability; (e) all records relating to pending lawsuits to which a Seller is a party and which involve the Business, provided that copies thereof shall have been furnished to the Buyer prior to or at the Closing; (f) all "MascoTech" and "Creative" marks, including any and all trademarks, service marks, trade names and service names; (g) all accounts receivable due from Affiliates of the Sellers; (h) except as provided in Section 1.1(xxi), all assets related to or owned by any "employee benefit plan" (as that term is defined in Section 3(3) of ERISA) sponsored or maintained by the Sellers, or any of its ERISA Affiliates; and (i) all assets identified on the Closing Statement as I/C MascoTech. 4 12 For convenience of reference, the assets, properties, interests in properties and rights of the Sellers which do not constitute Purchased Assets are collectively called the "Excluded Assets" in this Agreement. 1.3 LIABILITIES BEING ASSUMED. Subject to the terms and conditions of this Agreement, simultaneously with the sale, transfer, conveyance and assignment to the Buyer of the Purchased Assets, the Buyer shall assume, pay and perform when due the following, and only the following, liabilities and obligations of the Sellers: (a) accounts payable and accrued expenses of the Business (excluding accruals for (i) any Taxes other than Taxes to the extent accrued on the Closing Statement and (ii) any intercompany or other payments due to Affiliates of the Seller, including all items identified as I/C MascoTech on the Closing Statement) to the extent accrued or otherwise properly reflected on the Closing Statement; (b) all liabilities and obligations arising after the Closing under the Assigned Contracts in accordance with their respective terms; (c) all obligations under open customer orders and purchase orders (including any such orders placed with any Affiliate of the Sellers relating to products or services of the Business) included in the Assigned Contracts which arose in the ordinary course of business of the Business prior to the Closing Date; (d) accrued payroll and vacation expenses of the Sellers arising in the ordinary course of business of the Business and relating to the Hired Employees to the extent reflected on the Closing Statement; (e) warranty obligations of the Sellers with respect to the Business resulting from products manufactured, distributed or sold or services performed on or before the Closing Date, notwithstanding that the date on which the warranty obligation is asserted is after the Closing Date; provided, however, the Buyer shall assume no liability with respect to warranty claims for rack systems sold prior to the Closing for the "NS Minivan"; (f) liabilities and obligations relating to the Business and disclosed on Schedule 1.3(f); (g) the liabilities and obligations assumed by the Buyer under Section 6.4; (h) liabilities and obligations arising out of the operation of the Business after the Closing Date; and (i) l liabilities associated with the Assumed Employee Plans. For convenience of reference, the foregoing liabilities and obligations of the Sellers being assumed by the Buyer are collectively called the "Assumed Obligations" in this 5 13 Agreement. The Buyer hereby expressly agrees with the Sellers to pay and perform when due all of the Assumed Obligations. 1.4 LIABILITIES NOT BEING ASSUMED. Anything contained in this Agreement to the contrary notwithstanding, the Buyer is not assuming any liabilities or obligations (fixed or contingent, known or unknown, matured or unmatured) of the Sellers other than the Assumed Obligations, whether or not relating to the Purchased Assets or the Business, all of which liabilities and obligations shall at and after the Closing remain the exclusive responsibility of the Sellers. Without limiting the generality of the foregoing, the Buyer is not assuming any of the following liabilities and obligations: (a) except as provided in Section 1.3(a), all liabilities and obligations for Taxes of the Sellers and all liabilities and obligations for Taxes arising out of or in connection with the operation of the Business on or prior to the Closing Date (in each case regardless of whether arising as a result of or in connection with the transactions contemplated hereby or otherwise); (b) except as provided in Section 1.3(e) with respect to warranty obligations, all Claims, liabilities and obligations of any nature (including product liability claims) with respect to any products sold on or before the Closing Date, notwithstanding that the date on which the Claim, liability or obligation is asserted is after the Closing Date; (c) all liabilities and obligations of any nature whatsoever of the Sellers to any of their respective Affiliates (including any notes or accounts payable and the items identified on the Closing Statement as I/C MascoTech); (d) except as provided in Sections 1.3(d), (g) and (i), all Claims by and all liabilities and obligations to employees and independent contractors for periods prior to and including the Closing Date, including, without limitation, any Claims, liabilities and obligations arising out of workers' compensation, unemployment, any employee benefit plan (as that term is defined in Section 3(3) of ERISA) sponsored by the Sellers or their ERISA Affiliates, the Sellers' failure to deposit or fund any amounts withheld from employees pursuant to any retirement plan or arrangement or retiree medical plan or arrangement, any unfunded retirement plan or arrangement or retiree medical plan or arrangement, any obligations to current or former plan participants or beneficiaries under any plan or arrangement intended to provide benefits to current or former employees of the Sellers, or any stay bonuses required to be paid to any employee of the Business; (e) all liabilities and obligations of the Sellers to financial institutions or other Persons for borrowed money or with respect to indebtedness and obligations of others which any Seller has directly or indirectly guaranteed; (f) all liabilities and obligations of the Sellers relating to the Excluded Assets and all liabilities and obligations of the Sellers under or arising out of this Agreement and any Related Document or with respect to the transactions contemplated hereby and thereby, including, without limitation, legal and accounting fees, expenses and Taxes incurred by the Sellers; 6 14 (g) all cash overdrafts for any banking accounts maintained for the benefit of the Business; and (h) all liabilities identified on the Closing Statement as I/C MascoTech and all obligations to Hired Employees for stay bonuses. For convenience of reference, the liabilities and obligations of the Sellers which do not constitute Assumed Obligations are collectively called the "Excluded Obligations" in this Agreement. 1.5 INSTRUMENTS OF CONVEYANCE AND TRANSFER, ETC. (a) Simultaneously with the execution herewith, the Sellers are executing and delivering (or causing to be executed and delivered) to the Buyer, such deeds, bills of sale, endorsements, assignments and other good and sufficient instruments of sale, transfer, conveyance and assignment (collectively, the "Conveyance Instruments") as are necessary to sell, transfer, convey and assign to the Buyer, in accordance with the terms hereof, the Purchased Assets, free and clear of all Encumbrances (other than Permitted Encumbrances), including, without limitation, a bill of sale, assignment and assumption agreement (the "Bill of Sale and Assumption Agreement"). Simultaneously with the execution herewith, the Sellers shall relinquish to the Buyer possession and operating control of the Purchased Assets and shall take all other steps that may be required to pass title to the Purchased Assets to the Buyer. (b) Simultaneously with the execution herewith, the Buyer is executing and delivering (or causing to be executed and delivered) to the Sellers, such instruments of assumption as are necessary to assume, in accordance with the terms hereof, the Assumed Obligations, including, without limitation, the Bill of Sale and Assumption Agreement. 1.6 FURTHER ASSURANCES, ETC. (a) The Sellers shall promptly pay or deliver to the Buyer any amounts or items which may be received by any Seller after the Closing which constitute Purchased Assets and shall cause all customer orders and purchase orders placed with Affiliates of the Sellers and relating to the products or services of the Business to be assigned at the Closing to the Buyer. The Sellers shall, at any time and from time to time after the Closing, upon the reasonable request of the Buyer and at the expense of the Sellers, do, execute, acknowledge, deliver and file, or cause to be done, executed, acknowledged, delivered and filed, all such further acts, transfers, conveyances, assignments or assurances as may reasonably be required for better selling, transferring, conveying, assigning and assuring to the Buyer, or for aiding and assisting in the collection of or reducing to possession by the Buyer, any of the Purchased Assets. (b) The Buyer shall promptly pay or deliver to MascoTech on behalf of the Sellers any amounts or items which may be received by the Buyer after the Closing which constitute Excluded Assets. The Buyer shall, at any time and from time to time, after the Closing, upon the reasonable request of the Sellers and at the Buyer's expense, do, execute, acknowledge, deliver and file, or cause to be done, executed, acknowledged, delivered and filed, all such further acts, transfers, conveyances, assignments or assurances as may reasonably be required for better assuming the Assumed Obligations. 7 15 1.7 ASSIGNMENT OF CONTRACTS, RIGHTS, ETC. Anything contained in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement or attempted agreement to transfer, sublease or assign any contract, license, real or personal property lease, sales order, purchase order or other agreement, or any Claim or right with respect to any benefit arising thereunder or resulting therefrom, or any Permit, if an attempted transfer, sublease or assignment thereof, without the required consent of any other party thereto, would constitute a breach thereof or in any way affect the rights of the Buyer or the Sellers thereunder. The parties shall use commercially reasonable efforts to obtain the consent of any such third party to any of the foregoing to the transfer or assignment thereof to the Buyer in all cases in which such consent is required for such transfer or assignment. If such consent is not obtained, the parties shall cooperate in any arrangements necessary or desirable to provide for the Buyer the benefits thereunder, including, without limitation, enforcement by the Sellers for the benefit of the Buyer of any and all rights of the Sellers thereunder against the other party thereto. 1.8 RIGHT OF ENDORSEMENT, ETC. The Sellers hereby constitute and appoint the Buyer and its successors and assigns the true and lawful attorney of the Sellers with full power of substitution, in the name of the Buyer, or the name of the Sellers, on behalf of and for the benefit of the Buyer, to collect all accounts and notes receivable and other items being sold, transferred, conveyed and assigned to the Buyer as provided herein, to endorse, without recourse, checks, notes and other instruments constituting the Purchased Assets in the name of the Sellers, to institute and prosecute all proceedings which the Buyer may deem proper in order to collect, assert or enforce any claim, right or title of any kind in or to the Purchased Assets, to defend and compromise any and all actions, suits or proceedings in respect of any of the Purchased Assets or the Business (excluding any with respect to which Buyer makes a claim for indemnification hereunder) and to do all such acts and things in relation thereto as the Buyer may deem advisable. The foregoing powers are coupled with an interest and shall be irrevocable by the Sellers, directly or indirectly, whether by the dissolution of the Sellers or in any manner or for any reason. 1.9 SUBSCRIPTION AGREEMENT. Simultaneously with the execution herewith, MascoTech, Inc., a Delaware corporation ("MascoTech"), is executing and delivering to AAS Holdings, LLC, a Delaware limited liability company ("Holdings"), a Subscription Agreement (the "Subscription Agreement") to purchase 1,500 Units from Holdings for an aggregate of $1,500,000, receipt of which is hereby acknowledged. ARTICLE II PURCHASE PRICE; ALLOCATION 2.1 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price") to be paid for the Purchased Assets shall be an amount equal to the sum of (i) the Cash Payment plus any Additional Payment or less 8 16 any Sellers' Refund, as the case may be, pursuant to Section 2.3(c), plus (ii) the Assumed Obligations. 2.2 PAYMENTS AT CLOSING. Against delivery of the Conveyance Instruments by the Sellers to the Buyer at the Closing, the Buyer shall deliver to MascoTech on behalf of the Sellers (i) $46,000,000 (the "Cash Payment") by transfer of immediately available funds to an account or accounts designated by the Sellers to the Buyer, and (ii) the Bill of Sale and Assumption Agreement, duly executed by the Buyer. 2.3 PURCHASE PRICE ADJUSTMENT. (a) As soon as practicable, but in no event later than 60 calendar days, following the Closing Date, the Sellers shall prepare, and shall deliver to Buyer, a statement of total current assets, total current liabilities and intercompany accounts of the Business as of the Closing Date (the "Closing Statement"), which Closing Statement shall be prepared on a basis consistent with the preparation of the Projected Working Capital Statement utilizing the same line items, the same accounting methodologies, practices and procedures as used therein (including the accrual of intercompany payables and receivables in the ordinary course of business consistent with past practice), consistent with the basis used for determining reserves and all valuation methods and practices used therein, together with a statement (the "Net Working Capital Statement") setting forth the Sellers' computations of Closing Net Working Capital and the amount, if any, by which the Closing Net Working Capital is greater than or less than $4,700,000 (the "Target Net Working Capital"). All items designated as I/C MascoTech on the Projected Working Capital Statement shall be similarly designated on the Closing Statement. As used herein, the term "Closing Net Working Capital" means the current assets of the Business minus current liabilities of the Business in each case as of the Closing Date and as reflected on the Closing Statement. The Sellers shall bear all costs and expenses incurred in connection with the preparation of the Closing Statement. (b) The Sellers shall provide, and shall (if applicable) cause the Sellers' independent certified public accountants (the "Sellers' Accountants") to provide, the Buyer and the Buyer's independent certified public accountants (the "Buyer's Accountants") with timely access to the work papers, trial balances and similar materials used in connection with the preparation of the Closing Statement. The Buyer shall have 30 calendar days following its receipt of the Closing Statement and the Net Working Capital Statement within which to deliver to the Sellers a written notice of objection thereto (the "Objection Notice"), which Objection Notice shall (i) set forth the Buyer's determination of the Closing Net Working Capital and (ii) specify in reasonable detail the Buyer's basis for objection. Each individual item forming a basis for objection must be for an amount greater than $10,000 or shall not be considered as an item forming the basis for an objection; provided, however, that if the aggregate of all individual items forming a basis for objection exceeds $25,000, then all such items, including those for an amount less than $10,000, shall form a basis for objection. The failure by the Buyer to deliver the Objection Notice within such 30-calendar-day period shall constitute the Buyer's acceptance of the Closing Statement and the Sellers' calculation of the Closing Net Working Capital contained therein. The Buyer and the Sellers shall in good faith attempt to resolve their 9 17 differences, if any, with respect to the Closing Statement and the computation of the Closing Net Working Capital and reach a written agreement with respect thereto (the "Settlement Agreement") within 30 calendar days following delivery of the Objection Notice. If the Buyer and the Sellers are unable to resolve all of such differences within such 30-calendar-day period, the items in dispute will be referred for determination as promptly as practicable to Ernst & Young, LLP, or if such firm is unable or unwilling to serve, to another "Big 6" accounting firm independent of the Buyer and the Sellers selected by agreement between the Buyer and the Sellers or, if the Buyer and the Sellers cannot so agree within the 30-calendar-day period referred to above, by lot (the "Arbitrating Accountants"). The Arbitrating Accountants will make a determination (the "Accountants' Determination") as to each of the items in dispute, which Accountants' Determination will be (A) in writing, (B) furnished to the Buyer and the Sellers as soon as practicable after the items in dispute have been referred to the Arbitrating Accountants, (C) made in accordance with this Agreement and (D) conclusive and binding upon the Buyer and the Sellers. The Arbitrating Accountants will be entitled (but shall not be required) to rely on the work papers, trial balances and similar materials used in connection with the preparation of the Closing Statement. The reasonable fees and expenses of the Arbitrating Accountants shall be shared one-half by the Buyer and one-half by the Sellers. (c) Upon the final determination of Closing Net Working Capital in accordance with this Section 2.3, the following adjustments to the Purchase Price and the following payments will be made, as applicable, within three Business Days after the Final Determination Date: (i) if Closing Net Working Capital exceeds Target Net Working Capital by more than $250,000, the Buyer shall pay the Sellers an amount equal to (A) the amount by which Closing Net Working Capital exceeds Target Net Working Capital, minus (B) $250,000, and (ii) if Target Net Working Capital exceeds Closing Net Working Capital by more than $250,000, the Sellers shall pay the Buyer an amount equal to (A) the amount by which the Target Net Working Capital exceeds Closing Net Working Capital, minus (B) $250,000. Any payment made pursuant to clause (i) of the preceding sentence is called an "Additional Payment" in this Agreement. Any payment made pursuant to clause (ii) of the preceding sentence is called a "Sellers' Refund" in this Agreement. If Closing Net Working Capital is within $250,000 of Target Net Working Capital, no adjustment shall be made to the Purchase Price. (d) Any Additional Payment to be made to the Sellers pursuant to Section 2.3(c) shall be made by transfer of immediately available funds to the account or accounts designated by MascoTech, on behalf of the Sellers, in writing to the Buyer. The payment of any Sellers' Refund shall be made by transfer of immediately available funds to the account or accounts designated by the Buyer in writing to the Sellers. (e) For purposes of this Agreement, the "Final Determination Date" means the earliest to occur of (i) the 31st calendar day following the Buyer's receipt of the Closing Statement if, prior to such date, the Sellers shall not have received an Objection Notice, (ii) the date on which the Buyer receives a written notice from the Sellers stating that the Sellers have no objection to the Buyer's determination of the Closing Net Working Capital set forth in the Objection Notice, (iii) the date on which the Sellers and the Buyer shall have executed and delivered a Settlement Agreement and (iv) the dates on which the Buyer and the Sellers shall have received the Accountants' Determination. 10 18 2.4 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated to the Purchased Assets in a statement (the "Statement of Allocation") prepared by the Buyer's Accountants and approved by Sellers, which approval shall not be unreasonably withheld. The Buyer's Accountants shall deliver the Statement of Allocation to the Sellers within 90 days of the Closing Date. The Sellers shall (a) complete and execute a Form 8594 Asset Acquisition Statement Under Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"), promptly upon receipt of such allocation, in a manner consistent with the Statement of Allocation and (b) deliver a copy of such form to the Buyer and (c) file a copy of such form with the Sellers' tax returns, as the case may, for the period which includes the Closing. None of the parties shall take any action inconsistent with the Statement of Allocation prepared in accordance with this Section 2.4. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the Sellers, jointly and severally, represents and warrants to the Buyer as follows: (a) Organization; Corporate Authority; Good Standing. Each of the Sellers is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, to execute and deliver this Agreement and the Related Documents to which it is or will be a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. Each Seller has delivered to the Buyer a copy of its Charter and By-laws in effect on the date hereof. As used in this Agreement, the terms "Charter" and "By-laws" mean, respectively with respect to any corporation, those instruments that, among other things, (A) define its existence, as filed or recorded with the applicable Governmental Authority, including, without limitation, such corporation's Articles or Certificate of Incorporation, Organization or Association, and (B) govern its internal affairs, in each case as amended, supplemented, or restated. (b) Other Jurisdictions. Neither Seller is qualified to do business as a foreign corporation in any jurisdiction due to the operation of the Business. (c) Corporate Action; No Conflict. The execution, delivery and performance by each Seller of this Agreement and the Related Documents to which it is or will be a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of such Seller. This Agreement has been duly and validly executed and delivered by each Seller and is, and each of the Related Documents to which such Seller is or will be a party, when executed and delivered in accordance with its terms, will be, the valid and binding obligation of such Seller enforceable against it in accordance with the terms thereof, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws now or hereafter in effect relating to creditors' rights generally and 11 19 subject to limitations on the remedy of specific performance and injunctive and other forms of equitable relief. Except as set forth on Schedule 3.1(c), neither the execution, delivery or performance by any Seller of this Agreement or any Related Document to which it is or will be a party, nor the consummation by such Seller of the transactions contemplated hereby or thereby, nor compliance by such Seller with any provision hereof or thereof will (i) conflict with or result in a breach of any provision of the Charter or By-laws of such Seller, in each case as in effect on the date hereof, (ii) cause a default or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, lease, mortgage, indenture, license, agreement or other instrument or obligation to which such Seller is a party or by which it or its properties or assets may be bound or (iii) violate any law, statute, ordinance, rule, regulation, order, writ, judgment, injunction, award, decree, concession, grant, franchise, restriction or agreement (each, a "Legal Requirement") of, from or with any Governmental Authority applicable to such Seller or any of its properties or assets. Except as set forth on Schedule 3.1(c), no Permit, consent or approval of or by, or any notification of or filing with, any Person is required in connection with the execution, delivery or performance by each Seller of this Agreement and the Related Documents to which it is or will be a party, or the consummation of the transactions contemplated hereby or thereby, other than required filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). For the purposes of this Agreement, the term "Person" means any individual, corporation, association, partnership, joint venture, trust or other entity or organization, including a Governmental Authority, and "Governmental Authority" means any international or federal, state, local or regional (whether domestic or foreign) government, authority, instrumentality, department, commission, board, bureau, agency or court. (d) Financial Information. Schedule 3.1(d) contains a true and complete copy of the following: (i) the unaudited balance sheet of the Business as at December 31, 1994, and the related unaudited statements of income and retained earnings and cash flows for the fiscal year then ended; (ii) the unaudited balance sheet of the Business as at August 31, 1995 (the "Interim Balance Sheet"), and the related statements of income and retained earnings and cash flows for the eight-month period ended August 31, 1995 (the "Interim Balance Sheet Date"); and (iii) the unaudited projected working capital statement of total current assets, total current liabilities and intercompany accounts of the Business (the "Projected Working Capital Statement"), which was prepared by the Sellers. The financial statements described in the foregoing clauses (i) and (ii) are collectively referred to herein as the "Financial Statements." The Financial Statements (B) were prepared in accordance with the books and records of the Business (whether maintained by MascoTech or MASG or otherwise) and (B) fairly present the financial position of the Business in each case at and as of the dates indicated and the results of operations, retained earnings and cash flows of the Business for the periods indicated. Except as set forth on Schedule 3.1(d), the financial statements described in the foregoing clauses (i) and (ii) were prepared in accordance with generally 12 20 accepted accounting principles ("GAAP") consistently applied throughout the periods covered thereby. (e) Absence of Undisclosed Liabilities. Except for liabilities incurred in the ordinary course of the Business since the Interim Balance Sheet Date, there are no liabilities of any nature (matured or unmatured, fixed or contingent) affecting or relating to the Business which were not provided for or disclosed on the Interim Balance Sheet and which should have been provided for or disclosed thereon in accordance with GAAP, except as disclosed on Schedule 3.1(d). (f) Absence of Changes. Except as set forth on Schedule 3.1(f), since the Interim Balance Sheet Date the Business has been operated in the ordinary course and consistent with past practice, and there have not been any: (i) material adverse changes in the assets (including, without limitation, levels of working capital and the components thereof), properties, rights, liabilities, earnings, financial condition, operations, results of operations, earnings or business of the Business; (ii) occurrences resulting in the damage, destruction or loss (whether or not covered by insurance) affecting any tangible asset or property of the Business in excess of $50,000 in the aggregate; (iii) obligations or liabilities (whether absolute, accrued, contingent or otherwise and whether due or to become due) created or incurred or entered into, or any transactions, contracts or commitments entered into, by the Business, other than in the ordinary course of the business of the Business and consistent with past practice; (iv) licenses, sales, transfers, pledges, mortgages or other hypothecations or dispositions of any tangible or intangible assets of the Business, other than in the ordinary course of the business of the Business and consistent with past practice; (v) agreements or contracts entered into by or on behalf of the Business which require the delivery by any Seller of a performance bond; (vi) any amendments, terminations or waivers of any rights of material value to the Business; (vii) increases in, or changes in the method of computing, the compensation of employees of MascoTech or MASG who are employed in the Business (including, without limitation, increases pursuant to or change in method under any bonus, pension, profit sharing, deferred compensation arrangement or other plan or commitment), or increase in compensation payable to any officer, employee, consultant or agent of MascoTech or MASG who are employed in the Business, or entering into of any employment contract with or making of any loan to, or engagement in any transaction with, any officer or employee of MascoTech or MASG who are employed in the Business, in each case other than in the ordinary course of the business of the Business and consistent with past practice; 13 21 (viii) material changes in the manner in which the Business extends discounts or credits to customers or otherwise deals with customers; (ix) changes in the accounting methods or practices followed by or with respect to the Business, or any changes in depreciation or amortization policies or rates theretofore adopted; (x) forward purchase commitments in excess of normal operating inventories or at prices higher than current market prices; (xi) termination of employment of any key employee of MascoTech or MASG employed in the Business, or any expression of intention by any key employee of MascoTech or MASG employed in the Business to terminate his employment; (xii) cancellation or termination of any insurance policy maintained by or with respect to the Business; (xiii) any account receivable with a face amount in excess of $50,000 having (i) become past due in excess of 90 days in its payment, (ii) had asserted against it any claim, refusal to pay or right of set-off or (iii) to the best knowledge of any Seller, been placed in jeopardy by reason of its account debtor having become insolvent or bankrupt; (xiv) any material write-down or write-up of the value of any inventory of the Business, or any material write-off of any accounts receivable or notes receivable of the Business or any material portion thereof; (xv) any changes in the manner in which corporate overhead is allocated to the Business; or (xvi) agreements or understandings, whether in writing or otherwise, for any Seller to take any of the actions specified in items (i) through (xv) above. (g) Real Property -- Owned or Leased. (i) Schedule 3.1(g) sets forth a list of all Owned Real Property and all Leased Real Property. Except for the Real Property listed on Schedule 3.1(g), neither MASG nor MascoTech owns any real property or interest therein that is held for use in the Business. (ii) The Sellers are the owners of good and marketable fee title to the Owned Real Property, free and clear of all Encumbrances and other matters affecting title, except for the matters listed on Schedule 3.1(g) (collectively, the "Permitted Owned Real Property Exceptions"). To the Best Knowledge of the Sellers, the Sellers and the Owned Real Property are in compliance with any and all covenants and restrictions contained in all recorded deeds, resolutions, Declarations of Protective Covenants and similar recorded documents in any way applicable to the Owned Real Property. 14 22 (iii) (A) Each Lease is in full force and effect and all rent and other sums and charges payable thereunder are current, (B) no notice of default or termination under any Lease is outstanding, (C) no termination event or condition or uncured default under any Lease caused by Sellers exists, and to the Best Knowledge of Sellers, no such termination event or condition or uncured default caused by any other party exists or has occurred, (D) no event or condition caused by Sellers which, with the giving of notice or the lapse of time or both, would constitute a default or termination event or condition under any Lease exists or has occurred, and to the Best Knowledge of Sellers, no such event or condition caused by any other party exists or has occurred, and (E) no lessor under any Lease has any Encumbrance under any Lease or otherwise against the Purchased Assets. The Sellers' leasehold estate under and the Sellers' leasehold interest in each Lease is held free and clear of all Encumbrance and other matters affecting title thereto, which is claimed by or through the Sellers. The Sellers have delivered to the Buyer true and complete copies of all Leases. (iv) Except as set forth on Schedule 3.1(g), (A) all improvements on the Real Property conform in all material respects to all applicable Legal Requirements (including applicable environmental and occupational safety and health laws and regulations) and zoning and building ordinances of Governmental Authorities, and all of the Real Property is zoned for the various purposes for which such Real Property is presently being used, (B) all improvements on the Real Property are in good condition, normal wear and tear excepted, and there does not exist any condition which materially interferes with the present economic value or use thereof, (C) none of the buildings and structures located on the Real Property, the appurtenances thereto or the equipment therein or the operation or maintenance thereof violates any restrictive covenant or encroaches on any property owned by others or any easement, right of way or other encumbrance or restriction affecting such Real Property, nor does any building or structure of any third party encroach upon the Real Property or any easement or right of way benefitting the Real Property, and (D) no condemnation proceeding is pending or, to the Best Knowledge of the Sellers, threatened, which would preclude or materially impair the use of any Real Property for the uses for which it is intended. (h) Title to Assets, Properties, Interests in Properties and Rights and Related Matters. Except as set forth on Schedule 3.1(h), the Sellers have good, valid and marketable title to all of the Purchased Assets (other than the Owned Real Property), free and clear of all Encumbrances, other than Permitted Encumbrances. Except as disclosed on Schedule 3.1(h), no other Affiliate of any Seller owns any assets, properties, interests in properties or rights, of any kind or description, principally used in the Business. There does not exist any condition which materially interferes with the use of any tangible personal property included in the Purchased Assets. The Purchased Assets are, in the aggregate, in good operating condition, normal wear and tear excepted. Other than the Excluded Assets, the Purchased Assets include all assets and properties (real, personal and mixed, tangible and intangible), interests in properties and rights necessary to permit the Buyer to carry on the Business as presently conducted by the Sellers. Except as set forth on Schedule 3.1(h), each Seller has the complete and unrestricted power and the unqualified right to sell, transfer, convey and assign the Purchased Assets owned by it. 15 23 (i) Intellectual Property Rights. (i) Schedule 3.1(i)(i)(a) attached hereto, sets forth a list of all extant (a) patents, trademarks, service marks, and registrations thereof, trade names and copyrights, applications and registrations for the foregoing owned by Sellers and licenses of Intellectual Property granted to Seller that are used or held for use in the Business; and invention disclosures of the employees on Schedule 3.1(i)(ii), which invention disclosures relate to the Business and for which patent applications have not been filed. As used herein, the term "Requisite Rights" means the Intellectual Property Rights of Sellers listed on Schedule 3.1(i)(i)(a) together with all other Intellectual Property owned or possessed by Sellers that is used or held for use in the Business as presently conducted and as proposed to be conducted. Except as set forth or disclosed (or cross-referenced) in Schedule 3.1(i)(i)(b): (A) Sellers own, and possess all incidents of ownership of, the Requisite Rights; (B) no royalties or other such fees are payable by any Seller to other persons by reason of the ownership, sale, license or use of the Requisite Rights in the Business as presently conducted; (C) (x) to the Best Knowledge of the Sellers, no product or service manufactured, marketed or sold presently by the Business violates or infringes any Intellectual Property Rights of any other Person and (y) no Rack Product manufactured, marketed or sold presently by the Business violates or infringes any Intellectual Property Rights of any other Person; (D) there is no pending or, to the Best Knowledge of the Sellers, threatened claim or litigation against any Seller (nor, to the Best Knowledge of the Sellers, does there exist any basis therefor) contesting the validity of or the right to bring actions for infringement (to the extent any such right presently exists with any Seller) or the right to use in the Business as presently conducted any of the Requisite Rights, nor has any Seller received any notice that any of the Requisite Rights or the operation or proposed operation of the Business conflicts or will conflict with the asserted rights of any other Person; and (E) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not breach, violate or conflict with any instrument or agreement governing any Requisite Right and will not cause the forfeiture or termination or give rise to a right of forfeiture or termination of any Requisite Right or in any way impair the right of the Buyer to use, sell, license or dispose of or bring any action for the infringement (to the extent any such right presently exists) of any Requisite Right or portion thereof. (ii) Schedule 3.1(i)(ii) sets forth the form of an agreement entitled Proprietary Confidential Information And Invention Assignment Agreement and a list of the employees of the Sellers who have been engaged in the Business and have signed such an agreement or an Agreement substantially similar thereto which provides for such employees to assign or otherwise transfer to the respective Seller all of their respective right, title and interest in and to any Intellectual Property Rights relating to the Business. 16 24 (iii) As used herein, the term "Intellectual Property Rights" means all intellectual property rights including, without limitation, Proprietary Technology, patents, patent applications, patent rights, trademarks, trademark registrations, trademark applications, trade names, service marks, service mark registrations, service mark applications, logos, copyrights (statutory and common law), copyright applications, copyright registrations, know-how, licenses, trade secrets, proprietary processes and formulae, layouts, processes, inventions, development tools and all documentation and media constituting, describing or relating to any of the foregoing, including, without limitations, manuals, memoranda and records. As used herein, the term "Proprietary Technology" means all proprietary processes, formulae, inventions, trade secrets, know-how, development tools and other proprietary rights owned by any Seller pertaining to any product or service currently or previously manufactured, sold, distributed or marketed or proposed to be manufactured, sold, distributed or marketed (as the case may be), by the Business or used, employed or exploited in the development, manufacture, license, sale, distribution, marketing or maintenance of the business thereof, and all documentation and media constituting, describing or relating to the foregoing. As used herein, "Rack Product" shall mean any roof rack, deck rack (or component thereof) and other products which are functionally equivalent to a roof rack or deck rack. (j) Environmental Matters. Except as disclosed on Schedule 3.1(j)(i), (i) each Seller has obtained all Permits which are required to conduct the Business under all Legal Requirements existing as of the Closing Date relating to the environment and the release of any materials into the environment (collectively, "Environmental Laws"). Each Seller is as of the Closing Date and for the past five years has been in compliance with the terms and conditions of all such Permits and with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any Environmental Law applicable to the Business or in any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder. (ii) Except as disclosed on Schedule 3.1(j)(ii), no notice, notification, demand, request for information, citation, summons or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or, to the Best Knowledge of Sellers, threatened by any Governmental Authority with respect to any alleged failure by any Seller to comply with any Environmental Law or to have any Permit required in connection with the conduct of the Business or with respect to any generation, treatment, storage, recycling, transportation, release or disposal, or any release as defined in 42 U.S.C. Section 9601(22) ("Release") of any pollutants, contaminants, chemicals or industrial, hazardous or toxic substances or wastes of any kind regulated under Environmental Laws ("Hazardous Materials"). (iii) Except as disclosed on Schedule 3.1(j)(iii), in the conduct of the Business, (A) no Seller has handled any Hazardous Material so as to require a hazardous waste management permit, and no Seller has generated, recycled, treated, stored, disposed of or Released any Hazardous Material in violation of any 17 25 Environmental Law in the conduct of the Business; (B)no PCB is or has been present, in violation of any Environmental Law, at any property occupied by the Business; (C) no asbestos is or has been present, in violation of any Environmental Law, at any property occupied by the Business; (D) there are no underground storage tanks for Hazardous Materials, active or abandoned, in violation of any Environmental Law, at any property occupied by the Business; and (E) no Hazardous Materials have been Released in excess of a "reportable quantity" established by statute, ordinance, rule, regulation or order or in a quantity or manner that would support an order from any government agency or other legal obligation under Environmental Laws requiring Buyer to perform or pay for investigation, remediation, or other relief or response to such Release. (iv) Except as disclosed on Schedule 3.1(j)(iv), in the conduct of the Business, no Seller has transported or arranged for the transportation of any Hazardous Material to any location which is listed on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), listed on the Comprehensive Environmental Response Compensation and Liability and Information System ("CERCLIS") maintained by the U.S. Environmental Protection Agency ("US EPA"), or listed on any similar state list, or which, to the Best Knowledge of Sellers, may lead to any Claim under Environmental Laws against such Seller or the Business for or with respect to clean-up costs, remedial work, damages to natural resources or personal injury claims, including, but not limited to, Claims under CERCLA. (v) Except as disclosed on Schedule 3.1(j)(v), no oral or written notification of a Release of a Hazardous Material has been filed by or on behalf of any Seller in the conduct of the Business, and no property now or previously owned or leased by any Seller in the conduct of the Business is listed on the National Priorities List ("NPL") promulgated pursuant to CERCLA, on CERCLIS or on any similar state list of sites potentially requiring investigation or clean-up or formally proposed for listing by the US EPA on the NPL. (vi) Sellers have provided to Buyer a copy of all draft or final reports or studies in Sellers' possession or control relating to compliance of the Business with Environmental Laws or contamination of the Real Property or other environmental issues affecting the Business. (k) Contracts, Etc. Schedule 3.1(k) and, with respect to Intellectual Property Rights, Schedule 3.1(i) contains a list of all oral and written contracts, agreements and other instruments to which any Seller is a party and which relate solely or in significant part to the Business, which are outside the ordinary course of business or which are referred to in clauses (i) through (xvi) below (collectively, the "Contracts"). Except as set forth in Schedule 3.1(k), no Seller is, with respect to the Business, a party to any of the following: (i) distributor, dealer, sales, advertising, agency, manufacturer's representative, franchise or similar contract or any other contract requiring the payment of any commissions in excess of $25,000 per year; 18 26 (ii) continuing contract for the future purchase of inventory, material, supplies, equipment or services or for the future sale of products or services, in each case which is not immediately terminable without cost or other liability at the Closing or any other time thereafter; (iii) any license or other agreement or arrangement providing for the payment of a royalty or licensing fee to or by any Seller; (iv) any contract with or commitment for the employment or retention of any officer, employee or consultant or any other type of contract or understanding with any officer, employee or consultant for services rendered to any Seller; (v) any profit-sharing, bonus, stock option, pension, retirement, stock purchase, disability, hospitalization, insurance or similar plan or agreement, formal or informal, providing benefits to any current or former director, officer or employee of or consultant to any Seller employed in or retained with respect to the Business; (vi) any indenture, mortgage, promissory note, loan agreement or other agreement or commitment for the borrowing of money, for a line of credit or for any leasing transaction of a type required to be capitalized in accordance with Statement of Financial Accounting Standards No. 13 issued by the Financial Accounting Standards Board; (vii) any contract or commitment for capital expenditures involving more than $50,000 each or $200,000 in the aggregate; (viii) any lease, sublease or other agreement pursuant to which it is a lessee of or holds or operates any real or personal property owned by any third party; (ix) any option or other agreement to purchase or otherwise acquire or sell or otherwise dispose of any interest in real property; (x) any contract or commitment for charitable contributions involving more than $5,000 each or $25,000 in the aggregate; (xi) any agreement or contract with a "disqualified individual" (as defined in Section 280G(c) of the Code) which would result in a disallowance of the deduction for any "excess parachute payment" (as defined under Section 280G(b)(i) of the Code) if such Seller were subject to such provisions; (xii) any guaranty of the obligations of third parties; (xiii) any agreement which restricts it from conducting the Business anywhere in the world; (xiv) any agreement under which it has agreed to indemnify any third party with respect to, or to share, the tax liability of any third party; 19 27 (xv) any agreement or arrangement for the purchase or other acquisition of or sale or other disposition of any assets, properties or rights other than in the ordinary course of business; or (xvi) any other agreement or contract which is material to the Business or the Purchased Assets or Assumed Obligations (including, without limitation, levels of working capital and the components thereof), other than this Agreement, the Related Documents and any other agreement related to the transactions contemplated hereby and thereby. No Seller is or, to the Best Knowledge of the Sellers, has been alleged to be in default in any material respect, and each Seller has in all material respects performed all the obligations required to be performed by it to date and is not in default in any material respect under any Contract, and there exists no event, condition or occurrence which, with the giving of notice or lapse of time, or both, would constitute a default by any Seller under any Contract. No Seller has received from any party to any Contract notice of its intention to cancel or terminate such Contract. The Sellers have furnished to the Buyer true and complete copies of all of the Contracts or a description thereof as part of Schedule 3.1(k). (l) Litigation, Etc. Except as set forth on Schedule 3.1(i) or (l), there are no (i) claims (whether legal, administrative, arbitration or otherwise) pending or, to the Best Knowledge of the Sellers, threatened against any Seller affecting the Business or the Purchased Assets or Assumed Obligations, whether at law or in equity, or before or by any Governmental Authority or (ii) judgments, decrees, injunctions or orders of any Governmental Authority, or arbitrator against any Seller affecting the Business or the Purchased Assets or Assumed Obligations. The Sellers have delivered to the Buyer true and complete copies of all documents and correspondence relating to matters referred to in Schedule 3.1(l) which are included in the Assumed Obligations. (m) Compliance with Law; Governmental Authorizations. (i) No Seller is in violation in any material respect of any Legal Requirement applicable to the Business. (ii) (A) Each Seller has all licenses, permits, orders, approvals and other authorizations of or from all Governmental Authorities which are necessary in the conduct of the Business (collectively, the "Permits"), (B) such Permits are in full force and effect, (C) no violations are currently pending with respect to any such Permit, and (D) no proceeding is pending or, to the Best Knowledge of the Sellers, threatened to revoke or limit any such Permit. Schedule 3.1(m) contains a true and complete list of all of the Permits and the Sellers have furnished to the Buyer true and complete copies thereof. (iii) No studies have been conducted and to the Best Knowledge of Sellers no conditions exist which indicate the presence of any occupational health or safety problem relating to any of the manufacturing or research operations of any Seller. Within the past five years, neither the United States Occupational Safety and Health 20 28 Administration nor any other Governmental Authority has alleged or requested a correction of any such occupational health or safety problem. (n) Warranties of Products; Products Liability; Regulatory Compliance Regarding Products. (i) In the aggregate, the products manufactured, sold or distributed, by any Seller in connection with the Business are free from any significant defects in workmanship and materials, and conform in all material respects with all standards for products of such type. (ii) No Governmental Authority regulating the marketing, testing or advertising of any of the products manufactured, sold or distributed by the Business has requested that any such product be removed from the market, that substantial new product testing be undertaken as a condition to the continued manufacturing, selling or distribution of any such product or that such product be modified. (o) Inventories. Except as set forth on Schedule 3.1(o), the inventories of the Sellers with respect to the Business include no items which are obsolete, of below standard quality or of a quality or quantity not usable or salable in the normal course of business of the Business, the aggregate value of which has not been written down on the books of account of any Seller to realizable market value or with respect to which adequate reserves have not been provided. (p) Labor Relations; Employees. Schedule 3.1(p) contains a true and complete list of the persons employed by each Sellers in the Business as of the date hereof (the "Current Employees"). Except as set forth on Schedule 3.1(p), (i)no material grievance or problem exists between any Seller and any of the Current Employees; (ii)no Seller is delinquent in payments to any of the Current Employees for any wages, salaries, commissions, bonuses or other direct or indirect compensation for any services performed by them to the date hereof or for amounts required to be reimbursed to the Current Employees; (iii) upon termination of the employment of any of the Current Employees, none of the Sellers or the Buyer will by reason of anything done prior to the Closing, or by reason of the consummation of the transactions contemplated hereby, be liable for any excise taxes pursuant to Section 4980B of the Code or to any of the Current Employees for so-called "severance pay" or any other payments; (iv) each of the Sellers is in compliance in all material respects with all Legal Requirements respecting labor, employment and employment practices, terms and conditions of employment and wages and hours (including, without limitation, all Legal Requirements promulgated by the Equal Employment Opportunity Commission and the Department of Labor under the Occupational Safety Hazards Act and the Worker Adjustment and Retraining Notification Act); (v) there is no unfair labor practice complaint against any Seller relating to or arising out of the conduct of the Business pending or, to the Best Knowledge of the Sellers, threatened before the National Labor Relations Board or any comparable state, local or foreign agency; (vi) there is no labor strike, dispute, slowdown or stoppage pending or, to the Best Knowledge of the Seller, threatened against or involving any Seller affecting the Business; (vii) no representation question exists regarding the Current Employees; (viii) no grievance and no arbitration proceeding arising out of or under collective bargaining agreements is actually pending and no Claim therefor has been asserted; and (ix) no 21 29 collective bargaining agreement or other contract with or commitment to any labor union is in effect or currently being negotiated by any Seller. The Sellers have delivered to the Buyer true and complete copies of all handbooks, manuals and other policies describing the employment policies with respect to the Business. (q) Employee Plans. (i) Except as set forth on Schedule 3.1(q), no Seller has been within the past five years a party to, sponsors or maintains any Employee Plans. "Employee Plan" means any "employee benefit plan" (as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), as well as any other plan, program or arrangement involving direct and indirect compensation, under which the Sellers have any present or future obligations or liability on behalf of their employees or former employees, contractual employees or their dependents or beneficiaries. "ERISA Affiliate" means any entity that is a member of a "controlled group of corporations" with or is under "common control" with the Sellers as defined in Section 414(b) or (c) of the Code. (ii) Schedule 3.1(q) contains a true and complete list of all Employee Plans. (iii) No Employee Plan currently maintained by the Sellers is or was a "multiple employer plan" (within the meaning of Section 413 of the Code). (iv) No Seller is or has been for the past five years obligated to contribute to any "multiemployer plan" (within the meaning of Section 3(37) of ERISA. (v) No Seller, nor to the knowledge of the Sellers, any other "disqualified person" or "party in interest" (as defined in Section 4975 of the Code and Section 3(14) of ERISA, respectively) with respect to an Assumed Employee Plan has breached the fiduciary rules of ERISA or engaged in a prohibited transaction which could subject the Sellers to any tax or penalty imposed under Section 4975 of the Code or Section 502(i), (j) or (l) of ERISA. (vi) Each Assumed Employee Plan has been maintained and operated in accordance with its terms and are in substantial compliance with the requirements of ERISA and the Code and in accordance with the provisions of any applicable collective bargaining agreement. (vii) Each Assumed Employee Plan for which the Sellers have claimed a deduction under Section 404 of the Code, as if such Assumed Employee Plan were qualified under Section 401 of the Code, has received or has timely applied for a favorable determination letter from the Internal Revenue Service as to the qualification of such Assumed Employee Plan, and such favorable determination letter has not been modified, revoked or limited. (viii) All contributions due and payable on or before the Closing Date in respect of the Assumed Employee Plans will be made in full and in proper form, and adequate accruals have been provided for in the financial statements for all other 22 30 contributions or amounts in respect of the Assumed Employee Plans for periods ending on the Closing Date. (ix) The present value of all accrued benefits (whether or not vested) under each Assumed Employee Plan subject to Title IV of ERISA did not exceed, as of the Closing Date, the then current fair market value of the assets of such Assumed Employee Plan (for purposes of determining the present value of accrued benefits under the Assumed Employee Plans, the actuarial assumptions and methods used under each Assumed Employee Plan for the most recent plan valuation date shall be used) by more than $50,000. (x) No Assumed Employee Plan subject to Part (3) of Subtitle B of Title I of ERISA or Section 412 of the Code has incurred any "accumulated funding deficiency" (as defined in Section 412(a) of the Code), whether or not waived. (xi) No Seller has made nor agreed to make, nor is it required to make (in order to bring any of the Assumed Employee Plans into substantial compliance with ERISA or the Code), any change in benefits that would materially increase the costs of maintaining any of the Assumed Employee Plans. (xii) As of the Closing Date, there are no actions, suits, disputes, arbitration or claims pending (other than routine claims for benefits) or legal, administrative or other proceedings or governmental investigations pending or, to the knowledge of the Sellers, threatened against any Assumed Employee Plan or against the assets of any Assumed Employee Plan. (xiii) No Employee Plan subject to Title IV of ERISA has been terminated within the past four years, and no proceeding has been initiated, to the knowledge of the Sellers or their ERISA Affiliates, to terminate any Employee Plan. (xiv) Neither the Sellers nor their ERISA Affiliates nor any member of a controlled group including the Sellers and their ERISA Affiliates has incurred within the past five years, nor reasonably expects to incur, any liability in respect of any Employee Plan under Section 4064 or 4069 of ERISA. (xv) No "reportable event" (within the meaning of Section 4043 of ERISA) has occurred within the past five years with respect to any Employee Plan subject to ERISA. (xvi) Each Assumed Employee Plan which is a "group health plan" (as defined in Section 5000 of the Code) has been maintained in compliance with Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA and no tax payable on account of Section 4980B of the Code has been or is expected to be incurred. (xvii) No benefit payable or which may become payable by the Sellers pursuant to any Assumed Employee Plan shall constitute an "excess parachute payment" (within the meaning of Section 280G of the Code) which is subject to the imposition of 23 31 an excise tax under Section 4999 of the Code or which would not be deductible by reason of Section 280G of the Code. (xviii) No Employee Plan currently maintained by the Sellers provides any post-retirement health or life insurance benefits, and the Sellers do not maintain any obligations to provide any post-retirement benefits in the future. (xix) Prior to the Closing Date, Sellers have made contributions to the Huron/St. Clair Company Plant II Hourly Employees Pension Plan for the 1994 and/or 1995 plan years, in an amount of at least $500,000. (r) Tax Matters. (i) The Sellers have paid all Taxes required to be paid through the date hereof and will pay all Taxes required to be paid by them for periods ending on or prior to the Closing Date and have properly and timely filed and will, prior to the Closing, properly and timely file all returns, declarations of estimated Tax, Tax reports, information returns and statements required to be filed by either of them prior to the Closing (other than those for which extensions shall have been granted prior to Closing) relating to any Taxes with respect to any income, properties or operations of the Seller prior to the Closing and (ii) no tax liens have been filed with respect to any of the Purchased Assets, and there are no pending tax audits of any Returns of the Sellers relating to the Business. No Seller is a foreign person within the meaning of ss.1.1445-2(b) of the Regulations under Section 1445 of the Code. (s) Brokers. Except as set forth on Schedule 3.1(s), neither Seller nor any of their respective officers, directors, stockholders or employees has employed any investment banker, broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated hereby. (t) Distributions; Transactions with Affiliates. Except for the Excluded Assets and as set forth on Schedule 3.1(t), since the Interim Balance Sheet Date, no Affiliate of any Seller has purchased, acquired or leased any property or services from (or made any payments or incurred any indebtedness with respect thereto), or sold, transferred or leased any property or services to, or entered into any management, consulting or similar agreement or tax-sharing agreement with, the Business. For purposes of this Agreement, the term "Affiliate," as to any Person, means any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such Person. (u) Principal Customers. Schedule 3.1(u) sets forth a list of each customer of the Sellers to which either Seller, individually or in the aggregate, sold more than $900,000 in goods or services in connection with the Business in its most recent fiscal year (the "Principal Customers"). Except as set forth on Schedule 3.1(u), (1) no material disagreement or problem exists between the Sellers and any of the Principal Customers, (2) the business relationship between the Sellers and each of the Principal Customers is generally good and (3) to the Best Knowledge of the Sellers, no Principal Customer has threatened to terminate its relationship and dealings with the Business, whether as a result of the transactions contemplated by this Agreement or otherwise. 24 32 (v) Securities Act. The Sellers are purchasing the Units for their own account and not with a view to any distribution or resale of the Shares in any manner which would be in violation of the Securities Act of 1933, as amended. (w) Definition of Best Knowledge. As used in this Agreement, the term "Best Knowledge" of each of the Sellers means and includes actual knowledge of those employees of the Sellers listed on Schedule 3.1(w). 3.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Sellers as follows: (a) Organization; Corporate Authority; Good Standing. The Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Buyer has all requisite power and authority to execute and deliver this Agreement and the Related Documents to which it is or will be a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. (b) Capitalization. The authorized capital of the Buyer consists of 14,000 Units which are all issued and outstanding and owned by Holdings and Chemical Venture Capital Associates, A California Limited Partnership. Immediately after the Closing, all such issued and outstanding Units will be duly authorized and validly issued and outstanding. (c) Corporate Action; No Conflict. The execution, delivery and performance by the Buyer of this Agreement and the Related Documents to which the Buyer is or will be a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of the Buyer. This Agreement has been duly and validly executed and delivered by the Buyer and is, and each of the Related Documents to which the Buyer is or will be a party, when executed and delivered in accordance with its terms, will be, the valid and binding obligation of the Buyer, enforceable in accordance with the terms thereof. Neither the execution, delivery or performance by the Buyer of this Agreement or any of the Related Documents to which the Buyer is or will be a party, nor the consummation by the Buyer of the transactions contemplated hereby or thereby, nor compliance by the Buyer with any provision hereof or thereof will (i) conflict with or result in a breach of any provision of the Operating Agreement or By-laws of the Buyer, in each case as in effect on the date hereof, (ii) cause a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, lease, mortgage, indenture, license, agreement or other instrument or obligation to which the Buyer is a party or by which it or any of its properties or assets is or may be bound or (iii) violate any Legal Requirement of, from or with any Governmental Authority applicable to the Buyer or any of its properties or assets. No Permit, consent or approval of or by, or any notification of or filing with, any Person is required in connection with the execution, delivery or performance by the Buyer of this Agreement and the Related Documents to which the Buyer is or will be a party, or the consummation by the Buyer of the transactions contemplated hereby or thereby, other than required filings under the HSR Act. 25 33 (d) Brokers. Neither the Buyer nor Holdings nor any of their respective officers, managers or employees has employed any investment banker, broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated hereby. (e) No Prior Business. The Buyer and Holdings were formed for the purpose of acquiring the Business and have not conducted any business in the past, except in connection with the transactions contemplated by this Agreement and related activities. ARTICLE IV CLOSING The closing (the "Closing") for the consummation of the transactions contemplated by this Agreement is taking place at the offices of Sidley & Austin simultaneously with the execution herewith (the "Closing Date"). ARTICLE V INDEMNIFICATION 5.1 DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: (a) "Buyer Indemnification Event" means any of the following: (i) the untruthfulness, inaccuracy or breach of any representation or warranty of any Seller contained in this Agreement or any Related Document, any Schedule or Exhibit attached hereto or thereto or any certificate delivered by such Seller in connection herewith or therewith at or before the Closing; provided that for purposes of this Section 5.1(a)(i), the representation contained in Section 3.1(m)(i) shall be deemed to have been made as if the words "in all material respects" did not appear therein and the representation contained in Section 3.1(g)(ii) shall be deemed to have been made as if the words "To the Best Knowledge of Sellers" did not appear therein; (ii) the breach by any Seller of any agreement or covenant of such Seller contained in this Agreement or any Related Document; (iii) (Insert Title Here) (A) the assertion of any Claim against or the payment of any Loss by any Buyer Indemnified Person that arose in connection with, or is in any way related to any Excluded Obligations identified in Sections 1.4(b) or (d), regardless of whether or not any Seller had any knowledge of such Claim or Loss or the basis thereof; (B) the assertion of any Claim against or the payment of any Loss by any Buyer Indemnified Person that arose in connection with, or is in any way related 26 34 to any other Excluded Obligations, regardless of whether or not any Seller had any knowledge of such Claim or Loss or the basis thereof; (C) the assertion of any Claim against or the payment of any Loss of any Buyer Indemnified Person that arose in connection with, or is in any way related to the matters described on Schedule 4.1(l) (other than items 1 and 4 of such Schedule); (iv) the assertion against or payment by any Buyer Indemnified Person of any Claim or Loss as a result of non-compliance by any Seller or the Buyer with the "bulk sales laws" of any state or foreign jurisdiction which may be applicable to the transactions contemplated hereby; (v) the assertion of any Claim against or payment of any Loss by any Buyer Indemnified Person relating in any way to Taxes of any kind whatsoever, or expenses, interest or penalties relating thereto, with respect to periods ending on or prior to the Closing Date, other than Taxes relating to the conduct of the Business after the Closing Date and Taxes accrued on the Closing Statement; (vi) the assertion of any Claim against or the payment of any Loss by any Buyer Indemnified Person relating to or arising out of the environmental matters existing or occurring prior to the Closing Date described on Schedule 5.1(a)(vii) (except that Sellers shall not be required to indemnify any Buyer Indemnified Person to the extent that Buyer's actions exacerbate any such environmental matter by causing a Release or threatened Release of Hazardous Material); (vii) any amount paid under the Settlement Agreement dated September 2, 1992 among MascoTech, John A. Bott, The Bott Group, Inc., and JAC Products, Inc., to the extent such payment relates to periods prior to the Closing; (viii) any amount paid to or credited against receivables of Chrysler Corporation related to any credit or reimbursement obligation owed to Chrysler Corporation or any Affiliate thereof for periods prior to the Closing; and (ix) all reasonable fees, costs and expenses (including, without limitation, reasonable attorneys', accountants' and other professional fees and expenses) incurred by any Buyer Indemnified Person in connection with any action, suit, proceeding, demand, assessment or judgment incident to any of the matters indemnified against under this Article or in connection with the enforcement by any Buyer Indemnified Person of its rights under this Article; provided, however, that if such Buyer Indemnified Person is found partially liable in connection with any Buyer Indemnification Event, only the percentage of such fees, costs and expenses equal to the percentage of Sellers' liability in connection with such Buyer Indemnification Event shall be included pursuant hereto. (b) "Buyer Indemnified Persons" means and includes the Buyer and its officers, directors, stockholders (other than MascoTech), employees, agents, Affiliates, successors and assigns of all or any substantial portion of the Business. 27 35 (c) "Claim" means any claim, demand, assessment, action, suit, proceeding, investigation, cause of action, litigation, judgment, order or decree. (d) "Indemnified Persons" means the Buyer Indemnified Persons or the Seller Indemnified Persons, as the case may be. (e) "Indemnifying Person" means the Buyer, in the case of any Seller Indemnification Event, or the Sellers, jointly and severally, in the case of any Buyer Indemnification Event, as the case may be. (f) "Losses" means any and all losses, claims, shortages, damages, liabilities, obligations, expenses, assessments, tax deficiencies and Taxes, and fees, costs and expenses (including, without limitation, reasonable attorneys', accountants' and other professional fees and expenses) sustained, suffered or incurred by any Indemnified Person in connection with any Claim incident to or otherwise arising from any matter which is the subject of indemnification under this Article or in connection with the enforcement by the Indemnified Persons or any of them of their respective rights under this Article; provided, however, that in computing the amount of any Losses for purposes of determining the liability of any Indemnifying Party under Section 5.2, the amount of any insurance proceeds actually received by the Indemnified Party, less any deductibles and any resulting premium increases, shall be deducted from such Losses. (g) "Seller Indemnification Event" means the following: (i) the untruthfulness, inaccuracy or breach of any representation or warranty of the Buyer contained in this Agreement or any Related Document, any Schedule or Exhibit attached hereto or thereto or any certificate delivered by the Buyer in connection herewith or therewith at or before the Closing; (ii) the breach of any agreement or covenant of the Buyer contained in this Agreement or any Related Document; (iii) the assertion of any Claim against or payment of any Loss by any Seller which arose in connection with or is in any way related to any Assumed Obligation; (iv) the assertion of any Claim against or payment of any Loss by any Seller Indemnified Person relating in any way to Taxes of any kind whatsoever, or expenses, interest or penalties relating thereto, with respect to periods after the Closing Date or in connection with the conduct of the Business after the Closing Date; (v) all reasonable fees, costs and expenses (including, without limitation, reasonable attorneys', accountants' and other professional fees and expenses) incurred by any Seller Indemnified Person in connection with any action, suit, proceeding, demand, assessment or judgment incident to any of the matters indemnified against under this Article or in connection with the enforcement by any Seller Indemnified Person of its rights under this Article; provided, however, that if such Seller Indemnified Person is found partially liable in connection with any Seller Indemnification Event, only the percentage of such fees, costs and expenses equal to the percentage of Buyer's liability in connection with such Seller Indemnification Event shall be included pursuant hereto; and 28 36 (vi) the assertion of any Claim against or payment of any Loss by any Seller Indemnified Person related to the conduct of the Business or the ownership of the Purchased Assets after the Closing Date and with respect to which Seller has no indemnification obligation to any Buyer Indemnified Person hereunder. (h) "Seller Indemnified Persons" means and includes the Sellers and their respective officers, directors, stockholders, employees, agents, Affiliates and successors. (i) "Taxes" means, with respect to any Person, (A) all income taxes (including any tax on or based upon net income, or gross income, or income as specially defined, or earnings, or profits, or selected items of income, earnings or profits) and all gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property or windfall profits taxes, real property tax, alternative or add-on minimum taxes, customs duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any Governmental Authority and (B) any liability for the payment of any amount of the type described in the immediately preceding clause (A) as a result of being a "transferee" (within the meaning of Section 6901 of the Code or any other applicable law) of another Person or a member of an affiliated or combined group. 5.2 INDEMNIFICATION GENERALLY. (a) Buyer Indemnification. The Sellers shall, jointly and severally, indemnify the Buyer Indemnified Persons for, and hold each of them harmless from and against, any and all Losses resulting from any Buyer Indemnification Event (other than a Buyer Indemnification Event described in clause (vi) of Section 5.1(a)); provided, however, that: (i) the Sellers shall have no obligation or liability to indemnify and hold harmless the Buyer Indemnified Persons from and against Losses resulting from a Buyer Indemnification Event described in Section 5.1(a)(i) (unless such Buyer Indemnification Event relates to a breach of the representation set forth in Section 3.1(q)(xix)), Section 5.1(a)(iii)(A) and Section 5.1(a)(ix) (in the case of (ix), only to the extent such fees, costs and expenses arise from a Buyer Indemnification Event described in clause (i) and (iii)(A) of Section 5.1(a)) unless and until the aggregate amount of all such Losses shall exceed $450,000 and then only to the extent of such Losses in excess of $450,000 and the aggregate liability of the Sellers under this Section 5.2(a) for such Losses shall not exceed, when aggregated with any other payment by the Sellers to the Buyer Indemnified Persons under this Agreement, the Purchase Price; and (ii) the Buyer Indemnified Persons shall not be entitled to indemnification for any Losses resulting from a Buyer Indemnification Event described in clause (i) of Section 5.1(a) which is based upon a breach of the representation and warranty set forth in Section 3.1(i)(i)(C)(y) which result from sales of Rack Products after the Buyer has knowledge that such Rack Product infringes the Intellectual Property Rights of another Person. 29 37 The Sellers shall, jointly and severally, indemnify the Buyer Indemnified Persons for, and hold each of them harmless from and against, any and all Losses resulting from any Buyer Indemnification Event described in clause (vi) of Section 5.1(a); provided, however, that the Sellers shall have no obligation or liability to indemnify and hold harmless the Buyer Indemnified Persons from and against 50% of the first $450,000 of Losses (other than Losses arising from the first item described under Section III of Schedule 5.1(a)(vii) as to which no basket shall apply) resulting from a Buyer Indemnified Event described in clause (vi) of Section 5.1(a) (after the Buyer Indemnified Persons have incurred 50% of the first $450,000 of Losses all Losses above $450,000 shall be indemnified by the Sellers) and the aggregate liability of the Sellers under this Section 5.2(a) for such Losses shall not exceed, when aggregated with any other payment by the Sellers to the Buyer Indemnified Persons under this Agreement, the Purchase Price. (b) Seller Indemnification. The Buyer shall indemnify the Seller Indemnified Persons for, and hold each of them harmless from and against, any and all Losses resulting from any Seller Indemnification Event. 5.3 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS. The obligations and liabilities of the Indemnifying Persons with respect to Claims resulting from the assertion of liability by third parties (each, a "Third Party Claim") shall be subject to the following terms and conditions: (a) The Indemnified Persons shall give prompt written notice to the Indemnifying Persons of any Third Party Claim which might give rise to a Claim by the Indemnified Persons against the Indemnifying Persons based on the indemnity agreements contained in Section 5.2, stating the nature and basis of said Third Party Claim, and the amount thereof to the extent known. Such notice shall be accompanied by copies of all relevant documentation with respect to such Third Party Claim, including, without limitation, any summons, complaint or other pleading which may have been served or written demand, or other document or other instrument. Failure to give notice within the terms of this Section 5.3(a) shall serve to excuse the Indemnifying Person from its obligation under Section 5.2 only if and to the extent that the Indemnifying Person can establish that it was prejudiced or injured by the failure. (b) (Insert Title Here) (i) The Indemnifying Persons will have the right to participate in or, if the Indemnifying Persons shall acknowledge in a writing delivered to the Indemnified Persons that the Indemnifying Persons shall be obligated under the terms of their indemnity hereunder in connection with such Third Party Claim (a "Liability Letter"), then the Indemnifying Persons shall have the right to assume the defense of any Third Party Claim at their own expense and by their own counsel (reasonably satisfactory to the Indemnified Persons); provided, however, that the Indemnifying Persons shall not have the right to assume the defense of any Third Party Claim if (x) such Third Party Claim seeks an injunction, restraining order, declaratory relief or other non-monetary relief, (y) the named parties to any such action or proceeding (including any impleaded parties) include both the Indemnified Persons and the Indemnifying Persons and the former shall 30 38 have been advised in writing by counsel (with a copy to the Indemnifying Persons) that there are one or more legal or equitable defenses available to them which are different from or additional to those available to Indemnifying Persons or (z) such action or proceeding involves matters beyond the scope of the indemnification obligation of the Indemnifying Persons, and in such event under subsection (y) or (z) the suit or proceeding may, at the election of the Indemnifying Person, be defended jointly as provided in (ii) below. (ii) Notwithstanding the foregoing subsection (b)(i), if the Indemnifying Persons desire to participate in the defense of any Third Party Claim without delivering a Liability Letter to the Indemnified Persons, the Indemnifying Persons and the Indemnified Persons shall jointly assume the defense against such Third Party Claim under the following conditions: (A) a law firm will be selected by agreement between the Indemnifying Persons and the Indemnified Persons to represent the interests of both such parties in defending against the Third Party Claim; (B) if such law firm determines at any time that a conflict of interest exists between the Indemnifying Persons and the Indemnified Persons for any reason and that such law firm can not adequately represent the interests of both parties, then such law firm shall promptly notify the Indemnified Persons and the Indemnifying Persons in writing of such determination and the Indemnified Persons and Indemnifying Persons shall decide by agreement, based upon which party is more likely to be more liable for the Third Party Claim, which party the law firm will continue to represent; (C) if the party which is no longer represented by the law firm as a result of subclause (B) desires to continue to participate in the defense of the Third Party Claim, such party may do so and may retain its own counsel at its own expense; provided, however, that if such party is found to have no liability in connection with such Third Party Claim, its reasonable fees and expenses in connection with this subclause (C) shall be reimbursed by the other party. (c) (Insert Title Here) (i) If the Indemnifying Persons exercise their right to assume the defense of a Third Party Claim pursuant to subsection (b)(i) or (b)(ii) above, they shall not make any settlement of any claims other than settlements consisting solely of monetary awards without the prior written consent of the Indemnified Persons, which consent shall not be unreasonably withheld. (ii) If the Indemnifying Persons do not exercise their right to assume the defense of a Third Party Claim, the Indemnified Persons shall not make any settlement of any claims for which they may seek indemnification hereunder unless (A) they first provide written notice to the Indemnifying Persons describing the material terms of the settlement and (B) the Indemnifying Persons fail to deliver a Liability Letter within ten days of receiving such notice. 31 39 5.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS. The representations and warranties of the Sellers in Section 3.1 and the representations and warranties of the Buyer contained in Section 3.2 shall survive the Closing and remain in full force and effect for a period of 24 months and thereafter shall terminate; provided, however, that (a) the representations and warranties of the Sellers set forth in Section 3.1(j) shall survive the Closing and remain in full force and effect for a period of four years from the Closing Date, (b) the representations and warranties of the Sellers set forth in Section 3.1(r) shall survive the Closing and remain in full force and effect for the applicable statute of limitations, and (c) the representations and warranties of the Sellers set forth in Sections 3.1(a), (c) and (e), shall survive the Closing and remain in full force and effect without time limit. Except as otherwise expressly provided in this Agreement, all agreements and covenants requiring future performance contained in this Agreement shall survive the Closing and remain in full force and effect without time limit. For convenience of reference, the date upon which any representation, warranty, agreement or covenant shall terminate, if any, shall be referred to herein as the "Survival Date." No Claim under Section 5.2 for indemnification based on (a) the untruthfulness, inaccuracy or breach of any representation or warranty or (b) any Losses resulting from a Buyer Indemnification Event identified in Section 5.1(a)(iii)(A) shall be brought by an Indemnified Person against an Indemnifying Person, and an Indemnified Person shall not be entitled to receive any payment with respect thereto, unless the Indemnified Persons, or any of them, at any time prior to in the case of subclause (a), the applicable Survival Date and in the case of subclause (b), seven years from the Closing Date, give the Indemnifying Persons written notice of the existence of any such Claim, specifying in such notice the nature and amount of such Claim together with the applicable provisions of this Agreement to the extent known by the Indemnified Persons based on then available information. Upon the giving of such written notice as aforesaid, the Indemnified Persons, or any of them, shall have the right to commence legal proceedings (whether before or after the applicable Survival Date or the end of the seven year period, as the case may be) for the enforcement of their rights under Section 5.2. 5.5 REMEDIES CUMULATIVE. The rights of the Indemnified Persons to indemnification under this Article shall be cumulative and the pursuit thereof shall not preclude the assertion of any other right or remedy by the Indemnified Persons in connection with any Losses arising from or in connection with this Agreement; provided, however, with respect to any Claim arising or asserted by any Buyer Indemnified Person or any third party (including any governmental agency) at any time under any statute or the common law, the rights of any Indemnified Person shall be limited to the indemnification remedy provided under this Agreement, and provided, further, that to the extent any provision of this Agreement limits or excludes Sellers' liability or indemnification obligation for certain matters, Sellers shall have no liability or indemnification obligation for such matters under any other provisions of this Agreement or the Related Documents. 5.6 REMEDIATION. Sellers shall, at their sole expense and in the manner determined by Sellers consistent with applicable law, conduct or direct any environmental cleanup or remediation which is required by law after the date of Closing for which Sellers are responsible hereunder; provided, 32 40 however, that Sellers will consult with Buyer with respect to such matters, and will provide Buyer with a complete copy of any governmental filing or submission at the time it is made. Buyer agrees to cooperate with Sellers (including, without limitation, by making relevant personnel and records available to Sellers at all reasonable times free of charge) in connection with any such cleanup or remediation. Notwithstanding the foregoing, Sellers shall not take any action which will materially interfere with the ability of Buyer to carry on its business in the ordinary course; provided, however, if the Sellers are required by law to effect any environmental cleanup or remediation that will so disrupt the business of the Buyer, the Sellers and the Buyer shall use their best efforts to conduct such cleanup and remediation in a manner that will minimize the disruption to the business of the Buyer. 5.7 PRODUCT DISTINGUISHMENT. Buyer will use commercially reasonable efforts after the Closing to distinguish products manufactured after the Closing Date from products manufactured before the Closing Date. 5.8 STAND-ALONE COSTS. (a) Beginning with fiscal year 1996 and ending with fiscal year 1999, the Sellers agree to pay to the Buyer an amount equal to 50% of the difference between (i) the lower of the Actual Stand-alone Costs for such fiscal year and $866,000 and (ii) $516,000. As used herein, the term "Actual Stand-alone Costs" shall mean all costs and expenses incurred by the Buyer in connection with workers compensation insurance, commercial and business insurance (including general product liability, automobile, property, boiler and machinery and umbrella insurance), and administration of any pension or profit sharing plans adopted by Buyer in replacement of the plans currently covering the Hired Employers (including 401(k) plans), all as reflected on the Buyer's audited financial statements for such fiscal year; provided, however, if at any time after the Closing the Buyer materially increases the level of any type of insurance coverage included in the calculation of Actual Stand-alone Costs, Actual Stand-alone Costs shall be calculated on a pro forma basis as if the level of such insurance coverage was substantially the same as the level of insurance coverage in effect on the Closing Date. (b) For any fiscal year for which the Buyer seeks reimbursement pursuant to Section 5.8(a), the Buyer shall prepare, and shall deliver to the Sellers, a statement setting forth its computation of the Actual Stand-alone Costs for such fiscal year (the "Stand-alone Costs Statement"). (c) The Buyer shall provide, and shall (if applicable) cause the Buyer's Accountants to provide, the Sellers and the Sellers' Accountants with timely access to the work papers, trial balances and similar materials used in connection with the preparation of the Stand-alone Costs Statement. The Sellers shall have 30 calendar days following its receipt of the Stand-alone Costs Statement within which to deliver to the Buyer a written notice of objection thereto (the "Stand-alone Costs Objection Notice"), which Stand-alone Costs Objection Notice shall (i) set forth the Sellers' determination of the Actual Stand-alone Costs and (ii) specify in reasonable detail the Sellers' basis for objection. The failure by the Sellers to deliver the Stand-alone Costs Objection Notice within such 30-calendar-day period shall constitute the Sellers' acceptance of the Stand-Alone Costs Statement and the Buyer's calculation of the Actual Stand-alone Costs contained therein. The Buyer and the Sellers shall in good faith attempt to resolve their differences, if any, with respect to the Stand-alone Costs Statement and the computation of the Actual Stand- 33 41 alone Costs and reach a written agreement with respect thereto within 30 calendar days following delivery of the Stand-alone Costs Objection Notice. If the Buyer and the Sellers are unable to resolve all of such differences within such 30-calendar-day period, the items in dispute will be referred for determination as promptly as practicable to Ernst & Young, LLP, or if such firm is unable or unwilling to serve, to another "Big 6" accounting firm independent of the Buyer and the Sellers selected by agreement between the Buyer and the Sellers or, if the Buyer and the Sellers cannot so agree within the 30-calendar-day period referred to above, by lot (the "Stand-alone Costs Arbitrating Accountants"). The Stand-alone Costs Arbitrating Accountants will make a determination (the "Stand-alone Costs Accountants' Determination") as to each of the items in dispute, which Stand-alone Costs Accountants' Determination will be (A) in writing, (B) furnished to the Buyer and the Sellers as soon as practicable after the items in dispute have been referred to the Stand-alone Costs Arbitrating Accountants, (C) made in accordance with this Agreement and (D) conclusive and binding upon the Buyer and the Sellers. The Stand-alone Costs Arbitrating Accountants will be entitled (but shall not be required) to rely on the work papers, trial balances and similar materials used in connection with the preparation of the Stand-alone Costs Statement. The reasonable fees and expenses of the Stand-alone Costs Arbitrating Accountants shall be shared one-half by the Buyer and one-half by the Sellers. (d) Within 2 business days of the final determination of the Actual Stand-alone Costs in accordance with Section 5.8(c), the Sellers shall make any payment required by Section 5.8(a) to the Buyer by wire transfer of immediately available funds to an account designated by Buyer. (e) The provisions of this Section 5.8 shall terminate upon a public offering of Class A Units of Holdings with net proceeds to the Company of at least $25,000,000 or upon a sale of all or substantially all of the assets of the Buyer to an unaffiliated third party of the Buyer or Holdings. ARTICLE VI ADDITIONAL POST-CLOSING AGREEMENTS 6.1 ACCESS. In connection with any financial audit of the Sellers or any tax audit or other governmental investigation of the Sellers for any matter relating to any period prior to the Closing, or for any other reasonable and lawful purpose, the Buyer shall, upon request, permit the Sellers and their respective representatives to have access, at reasonable times during normal business hours and in a manner which is not disruptive to the operations of the Buyer, to the work papers, books and records of the Buyer relating to the Sellers and their conduct of the Business prior to the Closing which shall have been in the possession of the Buyer as of the Closing and which remain in the possession of the Buyer. The Buyer shall not dispose of such work papers, books and records during the six-year period beginning with the Closing without the Sellers' consent, which consent shall not be unreasonably withheld. Following the expiration 34 42 of such six-year period, the Buyer may dispose of such work papers, books and records at any time upon giving 30 days' prior written notice to the Sellers, unless the Sellers agree to take possession of such work papers, books and records within such 30 days at no expense to the Buyer. 6.2 BULK SALES LAWS. Each of the parties waives compliance by the other parties with the provisions of the "bulk sales laws" of any jurisdiction which may be applicable to the transactions contemplated by this Agreement. 6.3 BROKERS, FINDERS AND INVESTMENT BANKERS. The Sellers and the Buyer shall be responsible for any compensation payable to any broker, finder or investment banker which such party has retained in connection with this Agreement, the Related Documents and the transactions contemplated hereby and thereby. 6.4 CERTAIN EMPLOYEE MATTERS. (a) On the Closing Date the Buyer intends to offer employment to the employees of the Sellers who are actively employed by the Sellers in the Business on the Closing Date, and the employees identified on Schedule 6.4 (any such employees who accept such offer of employment being referred to herein as the "Hired Employees"); provided, however, that the Buyer shall offer the Hired Employees employee benefit plans that are similar to those offered by other companies that are of the same size as the Buyer after the Closing Date; except for Hired Employees, the Buyer shall have no liability to any employees of the Sellers who, on the Closing Date, are not actively employed or are on disability, leave of absence, military service leave or lay-off (whether or not with recall rights), or whose employment has been terminated (voluntarily or involuntarily) or who have retired prior to the Closing Date. Nothing contained in this Agreement shall confer upon any Hired Employee any rights or remedies of any nature or kind whatsoever under or by reason of this Agreement, including, without limitation, any right to employment or continued employment or to any benefits that may be provided, directly or indirectly, under any employee benefit plan, policy or arrangement of the Buyer, nor shall anything contained in this Agreement constitute a limitation on or restriction against the right of the Buyer to amend, modify or terminate any such plan, policy or arrangement or the terms or conditions of employment. The Sellers shall retain all liabilities and obligations arising from the termination or severance of all employees of the Business who do not become Hired Employees on the Closing Date. The Buyer shall bear the cost of any liability to Hired Employees under the Worker Adjustment and Retraining Notification Act which arises as a consequence of actions of the Buyer after the Closing. (b) The Sellers shall cause all Current Employees to be fully vested as of the Closing Date under each defined benefit pension plan (except for the Huron/St. Clair Company Plant II Hourly Employees Pension Plan), profit sharing plan, benefit restoration programs, savings plan and other employee pension benefit plan and retirement arrangements of the Sellers covering such employees. 35 43 (c) Buyer shall adopt and assume the assets, liabilities and obligations to maintain the Huron/St. Clair Company Plant II Hourly Employees Pension Plan, effective as of the Closing Date. (d) The Buyer shall provide that (i) any amount paid by Sellers' employees through the Closing Date for medical expenses that are treated as deductible or co-insurance payments under the Sellers' health plan shall reduce the amount of any deductible or co-insurance payment required to be paid for a similar period under the Buyer's health plan; provided, however, that the Sellers provide a list of all current and former employees participating in the Sellers' health plan along with a listing of each employee's deductible and co-insurance payments through the Closing Date, and (ii) Sellers' employees shall receive credit towards satisfying the eligibility requirements for participation in the Buyer's health plan to the extent such employees satisfied eligibility requirements under the Sellers' health plan. The transfer of assets from the trust maintained by the Sellers for the Huron/St. Clair Company Plant II Hourly Employees Pension Plan will take place on or after the Closing Date, but as soon as administratively possible, and the amount of such transfer shall be reduced by the amount of required benefit payments due on or about October 1, 1995. 6.5 GUARANTIES. (a) MascoTech hereby irrevocably and unconditionally guarantees to Buyer the prompt and complete payment and performance of all obligations of the Sellers under this Agreement. The obligations of MascoTech (i) are absolute and unconditional and shall continue in full force and effect until the payment and performance of all of the obligations of the Sellers that are guaranteed hereunder, (ii) other than a good faith demand for payment or performance against the Sellers, are not conditioned upon any event or contingency, or upon any attempt to enforce the Sellers' performance under this Agreement or any other right or remedy against the Sellers or to collect from the Sellers through the commencement of legal proceedings or otherwise, and (iii) shall be binding upon and enforceable in full against MascoTech without regard to any circumstance which might otherwise constitute a legal defense available to, or a discharge of, MascoTech in respect of the obligations guaranteed hereby; provided, however, that MascoTech shall be entitled to assert any rights or defenses which any Seller may have against the Buyer or its assigns and the Buyer's and its assigns rights hereunder shall be subject thereto (excluding any defenses based upon the insolvency of such Seller). In no event shall MascoTech's liability under this guarantee exceed the liability it would have had if MascoTech were the primary obligor under this Agreement. (b) Holdings hereby irrevocably and unconditionally guarantees to Sellers the prompt and complete payment and performance of all obligations of the Buyer under this Agreement. The obligations of Holdings (i)are absolute and unconditional and shall continue in full force and effect until the payment and performance of all of the obligations of the Buyer that are guaranteed hereunder, (ii) other than a good faith demand for payment or performance against the Buyer, are not conditioned upon any event or contingency, or upon any attempt to enforce the Buyer's performance under this Agreement or any other right or remedy against the Buyer or to collect from the Buyer through the commencement of legal proceedings or otherwise, and (ii) shall be binding upon and enforceable in full against Holdings without regard to any circumstance which might otherwise constitute a legal defense available to, or a discharge 36 44 of, Holdings in respect of the obligations guaranteed hereby; provided however, that Holdings shall be entitled to assert any rights or defenses which the Buyer may have against the Sellers or their assigns and the Sellers' and their assigns rights hereunder shall be subject thereto (excluding any defenses based upon the insolvency of Buyer). In no event shall Holdings liability under this guarantee exceed the liability it would have had if Holdings were the primary obligor under this Agreement. 6.6 AUDITED FINANCIALS. Upon the request of the Buyer, the Sellers shall use their best efforts to cause Sellers' Accountants to prepare at Buyer's expense audited financial statements for any period preceding the Closing Date. ARTICLE VII MISCELLANEOUS 7.1 EXPENSES; TRANSFER TAXES, ETC. All fees, costs and expenses incurred by any party to this Agreement in connection with, relating to or arising out of the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including, without limitation, attorneys', accountants' and other professional fees and expenses, shall be borne by such party. The Sellers shall pay all sales, use, gains and excise taxes and all registration, or transfer taxes which may be payable in connection with the transactions contemplated by this Agreement and the Related Documents. The Buyer shall pay all recording fees which may be payable in connection with the transactions contemplated by this Agreement and the Related Documents. 7.2 ENTIRE AGREEMENT. This Agreement and the Related Documents (including the Schedules and the Exhibits attached hereto and thereto) and the other documents, instruments and certificates referred to herein and therein contain the entire agreement among the parties hereto with respect to the transactions contemplated hereby and thereby and supersede all prior agreements or understandings between the parties with respect hereto and thereto, other than the Confidentiality Agreement dated as of April 25, 1995 between MascoTech and Chemical Venture Partners. 7.3 RELATED DOCUMENTS. As used in this Agreement, the term "Related Documents" means, collectively, the Bill of Sale and Assumption Agreement and the other Conveyance Instruments. 7.4 NOTICES. All notices or other communications which are required or permitted hereunder shall be in writing and shall be deemed to have been given if (a) personally delivered or sent by telecopier, (b) sent by nationally-recognized overnight courier or (c) sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: 37 45 if to the Buyer, to: Advanced Accessory Systems, LLC c/o Chemical Venture Partners 270 Park Avenue, 5th Floor New York, New York 10017 Attention: Don Hofmann Telephone: (212) 270-3220 Telecopier: (212) 270-2327 with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Attention: John J. Suydam, Esq. Telephone: 212-408-2400 Telecopier: 212-408-2467; and if to the Sellers, to: MascoTech, Inc. 21001 Van Born Road Taylor, MI 48180 Attention: President Telephone: (313) 274-7400 Telecopier: (313) 374-6135 with a copy to: MascoTech, Inc. 21001 Van Born Road Taylor, MI 48180 Attention: General Counse Telephone: (313) 274-7400 Telecopier: (313) 374-6430 or to such other address as the party to whom notice is to be given may have furnished to each other party in writing in accordance herewith. Any such communication shall be deemed to have been received (i) when delivered, if personally delivered or sent by telecopier, (ii) on the Business Day after dispatch, if sent by nationally recognized, overnight courier and (iii) on the fifth Business Day following the date on which the piece of mail containing such communication is posted, if sent by mail. As used herein, the term "Business Day" means a day that is not a Saturday, Sunday or a day on which banking institutions in New York City are not required to be open. 38 46 7.5 COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement; provided, however, that in proving this Agreement, it shall not be necessary to produce or account for more than one counterpart hereof. 7.6 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of laws. 7.7 BENEFITS OF AGREEMENT; ASSIGNMENT. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Anything contained herein to the contrary notwithstanding, this Agreement shall not be assignable by any party hereto without the consent of the other parties hereto; provided, however, that (a) the Buyer may transfer or assign, in whole or from time to time in part, to one or more of its Affiliates, any of its rights in, to and under this Agreement, including, without limitation, the right to purchase all or any part of the Purchased Assets, but in no event shall any such transfer or assignment relieve the Buyer of its obligations under this Agreement, (b)the Buyer may assign its rights to indemnification hereunder to or for the benefit of any Person and (c) the Sellers may assign their rights to indemnification hereunder to or for the benefit of any Affiliate. 7.8 CONSTRUCTION. The provisions of this Agreement shall be construed according to their fair meaning and neither for nor against any party hereto irrespective of which party caused such provisions to be drafted. Each of the parties acknowledges that it has been represented by an attorney in connection with the preparation and execution of this Agreement. 7.9 PRONOUNS. As used herein, all pronouns shall include the masculine, feminine, neuter, singular and plural thereof whenever the context and facts require such construction. 7.10 DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provisions of this Agreement. 7.11 SEVERABILITY. It is the desire and intent of the parties that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any provision of this Agreement shall be adjudicated to be invalid, illegal or unenforceable in any respect in any jurisdiction, such 39 47 provision shall be automatically deemed amended, but only to the extent necessary to render such provision valid, legal and enforceable in such jurisdiction, such amendment to apply only with respect to the operation of such provision in such jurisdiction, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 7.12 AMENDMENT. This Agreement may not be amended except by an instrument in writing signed by the Buyer and the Sellers. 7.13 NO THIRD PARTY BENEFICIARIES. Nothing in the Agreement shall confer any rights upon any Person other than the parties hereto and their respective heirs, successors and permitted assigns. 40 48 IN WITNESS WHEREOF, each of the parties hereto has caused this Asset Purchase Agreement to be executed on its behalf as of the day and year first above written. MASCOTECH AUTOMOTIVE SYSTEMS GROUP, INC. By:___________________________ Name: Title: MASCOTECH ACCESSORIES, INC. By:___________________________ Name: Title: ADVANCED ACCESSORY SYSTEMS, LLC By:___________________________ Name: Title: Only with respect to the guaranty in Section 6.5(a): MASCOTECH, INC. By:___________________________ Name: Title: Only with respect to the guaranty in Section 6.5(b): AAS HOLDINGS, LLC By:___________________________ Name: Title: EX-10.2 9 EX-10.2 1 EXHIBIT 10.2 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES IN BRINK BV between AAS HOLDINGS, INC. AAS HOLDINGS, LLC BRINK HOLDING BV and BRINK BV CLIFFORD CHANCE Apollolaan 171 1077 AS AMSTERDAM Telephone: (+31-20)5777-111 Telefax: (+31-20)5777-222 ref: JF/MBS 2 TABLE OF CONTENTS ARTICLE 1: SALE AND PURCHASE, CONSIDERATION............................... 2 ARTICLE 2: INTERCOMPANY INDEBTEDNESS...................................... 3 ARTICLE 3: ACTION PENDING COMPLETION...................................... 3 ARTICLE 4: CONDITIONS PRECEDENT........................................... 3 ARTICLE 5: COMPLETION..................................................... 4 ARTICLE 6: POST-COMPLETION MATTERS........................................ 6 ARTICLE 7: REPRESENTATIONS AND WARRANTIES................................. 7 ARTICLE 8: INDEMNIFICATION................................................ 7 ARTICLE 9: LIMITATION OF LIABILITY........................................ 9 ARTICLE 10: ENVIRONMENTAL INDEMNITY....................................... 10 ARTICLE 11: RESTRICTIVE COVENANTS......................................... 10 ARTICLE 12: COSTS AND EXPENSES............................................ 12 ARTICLE 13: PRESS ANNOUNCEMENTS........................................... 12 ARTICLE 14: NOTICES....................................................... 12 ARTICLE 15: JOINT AND SEVERAL LIABILITY................................... 14 ARTICLE 16: MISCELLANEOUS PROVISIONS...................................... 14 SCHEDULE 1: SUBSIDIARIES.................................................. 16 SCHEDULE 2: CASH, FUNDED AND INTERCOMPANY INDEBTEDNESS.................... 17 SCHEDULE 3: REPRESENTATIONS AND WARRANTIES OF VENDOR...................... 18 SCHEDULE 4: REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............... 28 SCHEDULE 5: KEY OFFICERS.................................................. 29 SCHEDULE 6: VENDOR'S CERTIFICATE.......................................... 30 (1) 3 SCHEDULE 7: FORM OF DEED OF TRANSFER OF SHARES............................ 31 SCHEDULE 8: FORM OF TRADE NAME AND LOGO AGREEMENT......................... 32 SCHEDULE 9: FORM OF NON-COMPETE LETTER.................................... 33 EXHIBITS: 2.1 4 5.1 5.2 6.4 9.3 10.3 10.4 (2) 4 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES IN BRINK BV This Agreement is made the 30th day of October 1996 BETWEEN: 1. AAS HOLDINGS, INC., a limited liability company incorporated under the laws of the State of Delaware and having its principal place of business at Sterling Town Center, 12900 Hall Road, Suite 200, Sterling Heights, Michigan, U.S.A., (the "PURCHASER"); 2. AAS HOLDINGS, LLC, a limited liability company incorporated under the laws of the State of Delaware and having its principal place of business at Sterling Town Center, 12900 Hall Road, Suite 200, Sterling Heights, Michigan, U.S.A., ("AHL"); 3. BRINK HOLDING BV, a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of The Netherlands and having its registered office at Industrieweg 5, 7951 CX Staphorst, The Netherlands (the "VENDOR"); and 4. BRINK BV, a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of The Netherlands and having its registered office at Industrieweg 5, 7951 CX Staphorst, The Netherlands (the "COMPANY"); WHEREAS: (A) The Company has an issued share capital of NLG 50,000, consisting of 200 shares with a nominal value of NLG 250 each (the "SHARES"); (B) All of the Shares are owned by the Vendor; (C) The Company is the owner of the entire share capitals of the companies listed in SCHEDULE 1 (the "SUBSIDIARIES"); (D) The Company and the Subsidiaries are engaged in the business of the design, production, sale and marketing of car and van towing systems and related products (the "BUSINESS"); (E) The consultation procedures under the Merger Code (SER-besluit Fusiegedragsregels 1975) and the Works Council Act (Wet op de Ondernemingsraden) with respect to the transactions contemplated in this Agreement have been concluded to the satisfaction of the Vendor and the Purchaser; (F) The Vendor has agreed to sell the Shares and the Purchaser has agreed to purchase the Shares, 1 5 subject to the terms and conditions contained in this Agreement; NOW IT IS HEREBY AGREED AS FOLLOWS: ARTICLE 1: SALE AND PURCHASE, CONSIDERATION 1.1 The Vendor hereby sells to the Purchaser and the Purchaser hereby purchases from the Vendor the Shares, free from all liens, charges and encumbrances and together with all accrued benefits and rights attached thereto. 1.2 Subject to Articles 1.3, 1.4 and 1.5, the consideration due by the Purchaser to the Vendor for the sale of the Shares shall be a total amount of one hundred and seven million five hundred thousand Dutch Guilders (NLG 107,500,000) (the "CONSIDERATION"). 1.3 The Consideration shall be subject to the following adjustments: (a) there shall be added an amount, if any, by which Cash at Completion is greater than Funded Indebtedness at Completion; and (b) there shall be deducted an amount, if any, by which Cash at Completion is less than Funded Indebtedness at Completion. For the purposes of the above, the parties have in SCHEDULE 2 hereto described the items constituting "Cash" and the items constituting "Funded Indebtedness" as at 28 October 1996. The corresponding adjustment to the Consideration is reflected in the amount payable on Completion set out in Article 5.2(d)(i). 1.4 The Consideration shall be subject to a guilder for guilder reduction by the amount of any dividend payments, contributions or distributions of whatever nature made or declared to be made outside of the ordinary course of business by the Company and the Subsidiaries to the Vendor or for the Vendor's benefit between 1 January 1996 and Completion. 1.5 The Consideration shall be subject to a guilder for guilder reduction by the net amount of Intercompany Indebtedness due by the Company to the Vendor and any group companies of the Vendor other than the Subsidiaries as at Completion. For the purposes of the above, the parties have in SCHEDULE 2 specified such net Intercompany Indebtedness as at 28 October 1996. The corresponding adjustment to the Consideration is reflected in the amount payable on Completion set out in Article 5.2(d)(i). 1.6 The sale and purchase of the Shares shall be completed at the date and place and in the manner 2 6 set forth in Article 5 ("COMPLETION"). ARTICLE 2: INTERCOMPANY INDEBTEDNESS 2.1 At Completion, the Vendor shall arrange for the repayment of all amounts due to the Company and the Subsidiaries by the Vendor and any group companies of the Vendor (but, for the avoidance of doubt, excluding the Subsidiairies), and the Company shall arrange for repayment of all amounts due to the Vendor and any group companies of the Vendor (other than the Subsidiaries) by the Company and the Subsidiaries, together with interest accrued, but excluding any amounts originated in the ordinary course of the relevant parties' business (the "INTERCOMPANY INDEBTEDNESS"). 2.2 The payments referred to in Article 2.1 shall be made in the manner set forth in Article 5. ARTICLE 3: ACTION PENDING COMPLETION 3.1 The Company shall not and shall procure that the Subsidiaries shall not without the prior written consent of the Purchaser (such consent not to be unreasonably withheld) prior to Completion: (a) operate the Business other than in the ordinary course, consistent with past practice, with the aim to preserve its business organisation, including the services of its officers and employees, and its business relationships with customers, suppliers and others having business dealings with it; for the avoidance of doubt, any act or thing as a consequence of which the statements in SCHEDULE 3 would be rendered untrue, incomplete, inaccurate or misleading in any material respect shall be considered to be outside the ordinary course; (b) make any expenditure which is not within the ordinary course of the business of the Company and its Subsidiaries; or (c) increase any borrowings of the Company or any of its Subsidiaries other than within the ordinary course of their business. 3.2 The Vendor shall not knowingly do or refrain from doing any act or thing which would render the statements in SCHEDULE 3 untrue, incomplete, inaccurate or misleading in any material respect. ARTICLE 4: CONDITIONS PRECEDENT 4.1 The obligations of the Purchaser under this Agreement are conditional upon the following conditions precedent (opschortende voorwaarden) being fulfilled on or prior to Completion or, 3 7 as the case may be, waived by the Purchaser by written notice to the Vendor: (a) the Vendor and the Company having complied in all respects with their respective obligations under this Agreement and under any ancillary documents entered into pursuant hereto; (b) satisfactory terms of the employment agreements to be entered into by the persons listed in SCHEDULE 5 having been agreed between the Purchaser and such persons; and (c) Messrs Gerard, Wim and Koo Brink having signed the non-compete letter in the form attached hereto as SCHEDULE 9. 4.2 The parties shall use their best efforts to procure that the conditions mentioned under paragraph (b) and (c) of Article 4.1 shall be fulfilled as soon as possible and in any event on or prior to Completion. ARTICLE 5: COMPLETION 5.1 Completion shall take place on 30 October 1996 at the offices of Caron & Stevens, Leidseplein 29, Amsterdam, unless otherwise agreed between the parties hereto. 5.2 The following shall take place (or, to the extent that any of the documents referred to below shall have been executed before Completion, shall be deemed to have taken place) at Completion in the following order: (a) unless Completion takes place on the date hereof, the Vendor shall submit to the Purchaser a certificate to the effect that (i) the statements contained in paragraphs 1, 7, 13.1, 13.4, 13.5 and 14 of SCHEDULE 3 are true, complete, correct in all respects and not misleading at Completion, and (ii) the Vendor and the Company have complied in all respects with their respective obligations under this Agreement and under any ancillary documents entered into pursuant hereto; such certificate shall be substantially in the form set forth in SCHEDULE 6; (b) the Vendor, the Purchaser and the Company shall sign a Share Transfer Deed in respect of the Shares substantially in the form set forth in SCHEDULE 7; (c) the Vendor shall submit to the Purchaser evidence of the release and discharge of each guarantee, mortgage and charge given by the Company and the Subsidiaries in favour of any bank or other financial institution being conditional only on the repayment of all Funded Indebtedness (including all pre-payment penalties in respect thereof); the Purchaser shall be responsible for all pre-payment penalties payable in connection therewith up to a maximum of NLG 100,000; any pre-payment penalties in excess of this amount shall be for the account of the Vendor; (d) the Purchaser shall pay the Consideration due to the Vendor as follows: 4 8 (i) by transferring by telephone transfer an amount of seventy-one million two hundred and sixty-five thousand Dutch Guilders (NLG 71,265,000.00) to bank account number 54.31.72.201 at ABN AMRO Bank N.V in the name of Stichting Derdengelden notariaat Caron & Stevens; (ii) by crediting on behalf of the Vendor an amount of twelve million five hundred thousand Dutch guilders (NLG 12,500,00) against the obligation of the Vendor to make to AHL an interest bearing loan for an equivalent amount (the "VENDOR LOAN") in respect of which AHL has issued a promissory note to the Vendor of even date herewith (the "JUNIOR SUBORDINATED PROMISSORY NOTE"); (iii) by crediting on behalf of the Vendor an amount of seven million three hundred thousand Dutch Guilders (NLG 7,300,000) against the obligations of Messrs Gerard, Wim and Ko Brink to pay up certain stock in AHL pursuant to a subscription agreement of even date herewith. In addition, the Purchaser shall on behalf of the Company and the Subsidiaries settle the net Intercompany Indebtedness as at 28 October 1996, by transferring to the Vendor by telephone transfer an amount of two million five hundred thousand Dutch (NLG 2,500,000) to bank account number 54.31.72.201 at ABN AMRO Bank N.V. in the name of Stichting Derdengelden Notariaat Caron & Stevens. (e) the Vendor, the Company and AHL shall sign a confirmation of receipt of the monies referred to in paragraph (d); (f) the Vendor and AHL shall execute the Junior Subordinated Promissory Note; (g) the Vendor shall sign and deliver to Purchaser a letter in which it resigns as managing director of the Company and confirms that it has no claims for compensation for loss of such office; (h) the Purchaser shall, in its capacity as shareholder of the Company, adopt a written Shareholders' Resolution to accept the resignation referred to in paragraph (g) and to appoint Messrs J.W. Rengelink and G. de Graaf as managing directors of the Company; (i) the Vendor shall produce a duly signed stock transfer form in respect of the transfer to the Company of one nominee share held by the Vendor in the capital of Brink UK Ltd (a Subsidiary); (j) the Vendor, the Purchaser and the Company shall enter into the Trade Name and Logo Agreement in the form of SCHEDULE 8; (k) the Vendor shall provide the Purchaser with the Insurance Statement (as defined in Article 6.6); (l) the Purchaser shall produce to the Vendor a letter in respect of the appointment of Mr. 9 Gerard Brink as supervisory director of the new Dutch holding company upon its incorporation as set out in Article 6.7; and (m) the Vendor and the Company shall do all such further acts and execute all such further documents as shall in the reasonable opinion of the Purchaser be necessary to fully effect the transfer of the Shares to the Purchaser and to vest the ownership thereof in the Purchaser. ARTICLE 6: POST-COMPLETION MATTERS 6.1 The Vendor and the Purchaser shall within 15 days of Completion jointly determine the further adjustment to the Consideration pursuant to Articles 1.3, 1.4 and 1.5 for the period between 28 October 1996 up to and including Completion, using in respect of the adjustment pursuant to Article 1.3 the definitions of "Cash" and "Funded Indebtedness" as per SCHEDULE 2. 6.2 If the Vendor and the Purchaser cannot agree the amounts of Cash at Completion and Funded Indebtedness at Completion and Intercompany Indebtedness as at Completion in accordance with Article 6.1, either party may refer the matter to an independent firm of registered accountants agreed by the parties or, in default of agreement within 14 days, an independent firm of registered accountants nominated by the Chairman for the time being of the Dutch Institute of Registered Accountants (the "EXPERT"), on the basis that the Expert is to make a decision on the matter in dispute within 30 days starting on the day after receiving the reference. In a reference, the Expert shall act as an expert and not as an arbitrator. The decision of the Expert is, without prejudice to section 7:904 of the Dutch Civil Code, final and binding on both parties. The Vendor and the Purchaser shall each pay one half of the Expert's costs in respect of a reference. The necessary balancing payment (if any) shall be made within seven days after the date on which the parties reach agreement or the date of notification of the Expert's decision. 6.3 The Vendor as and when requested by the Purchaser and the Purchaser as and when requested by the Vendor after Completion shall execute and do or procure to be executed and done all such further documents, forms, assignments, transfers, assurances and other things as may be requisite for giving full effect to this Agreement. 6.4 The Vendor shall provide or procure to be provided to the Purchaser all information relevant to the Purchaser in its possession or under its control that the Purchaser shall from time to time reasonably require (both before and after Completion) directly relating to the business and affairs of the Company or the Subsidiaries and will give or procure to be given to the Purchaser and its advisers such access (including the right to take copies) to such documents containing such information relevant to the Purchaser as the Purchaser may from time to time reasonably require. 6.5 The Purchaser shall (i) submit the requisite K2 notification form to the Swedish competition authority in accordance with the Swedish Competition Act (1993:20), and (ii) submit such further information to the Bundes Kartelambt in Germany as it may require in connection with 6 10 the pre-notification of the transaction contemplated by this Agreement. 6.6 The Vendor shall ensure that the Company and the Subsidiaries will for a period of three months after Completion continue to be insured under the Insurance Policies (as defined in paragraph 4 of Schedule 3). The Company shall at the Vendor's first request reimburse the Vendor such part of the insurance premium payable under the Insurance Policies as shall be attributable to the insurance cover provided to the Company and the Subsidiaries. On Completion, the Vendor shall produce a statement from its insurers confirming that the Companies and the Subsidiaries shall continue to be insured as set out in this Article 6.6 (the "INSURANCE STATEMENT"). 6.7 The Purchaser shall (i) procure that the articles of association of the new Dutch holding company to be incorporated as part of the proposed reorganisation shall provide for a board of supervisory directors, and (ii) appoint Mr Gerard Brink as supervisory director of such company. ARTICLE 7: REPRESENTATIONS AND WARRANTIES 7.1 The Vendor hereby represents and warrants (staat er voor in) to the Purchaser that each of the statements contained in SCHEDULE 3 hereto is true, complete, accurate in all respects and not misleading as at the date of this Agreement and that the statements contained in paragraphs 1, 7, 13.1, 13.4, 13.5 and 14 of SCHEDULE 3 will be true, complete, accurate in all respects and not misleading on Completion and on each day between the date hereof and Completion. The Vendor acknowledges that the said representations and warranties are material and that the accuracy in all respects of these representations and warranties is essential for the Purchaser's decision to enter into this Agreement on the terms herein contained. 7.2 The Purchaser confirms that it has carried out investigations into the state of affairs of the Company and the Subsidiaries, and that the results of such investigations were satisfactory to the Purchaser. However, the Vendor and the Purchaser agree that any such investigations carried out by the Purchaser or by representatives or advisers of the Purchaser shall not relieve the Vendor of its obligations under any warranty or representation made herein, except in the event that the Vendor can demonstrate that the Purchaser on the date hereof or on Completion was actually aware of an obvious breach by the Vendor of any such obligations. The Purchaser hereby confirms that it is not on the date hereof actually aware of an obvious breach by the Vendor of any of its obligations under any warranty or representation made by the Vendor herein. 7.3 The Purchaser hereby represents and warrants (staat er voor in) to the Vendor that each of the statements contained in SCHEDULE 4 hereto is true, complete, accurate in all respects and not misleading as at the date of this Agreement and will be true, complete, accurate in all respects and not misleading on Completion and on each day between the date hereof and Completion. The Purchaser acknowledges that the said representations and warranties are material and that the accuracy in all respects of these representations and warranties is essential for the Vendor's 7 11 decision to enter into this Agreement on the terms herein contained. ARTICLE 8: INDEMNIFICATION 8.1 In the event that there will be or will appear to be any misrepresentation, breach of warranty or non-fulfilment of any agreement on the part of the Vendor contained in this Agreement the Vendor shall: (a) indemnify and hold harmless the Purchaser (or, at the Purchaser's option, the Company or one of the Subsidiaries) from and against any and all damages, liabilities, actions, legal proceedings, costs and expenses (including but not limited to legal and other advisers' fees and expenses) incurred by the Purchaser, the Company or one of the Subsidiaries, resulting, directly or indirectly, from any such misrepresentation, breach of warranty or non-fulfilment of any agreement, if and insofar as not specifically provided for in the Accounts (as defined in paragraph 2 of SCHEDULE 3); and (b) at the request of the Purchaser take whatever steps are required for the Purchaser, the Company and the Subsidiaries to be brought in the financial position they would have been in if such misrepresentation, breach of warranty or non-fulfilment would not have occurred. 8.2 If the Purchaser or the Company becomes aware of any matter which will result in the Vendor being liable pursuant to Article 8.1, the Purchaser and the Company shall: (a) as soon as possible give written notice thereof to the Vendor; (b) provide to the Vendor and its advisers reasonable access to the relevant premises, assets, documents and records; (c) take such action as the Vendor may reasonably request to avoid, dispute or mitigate any claim or matter which would give rise to a claim under this Agreement on the basis that the Purchaser and the Company shall be fully indemnified by the Vendor as to all costs and expenses which they may incur by reason of such action; (d) take such action as may in the reasonable opinion of the Purchaser be required to avoid or diminish an adverse effect on the financial position or the business of the Purchaser, the Company or the Subsidiaries. 8.3 Without prejudice to its other rights and remedies, the Purchaser shall be entitled (but shall not at any time be required) to elect that all or part of the amount of any liability of the Vendor arising pursuant to this Article 8 or any other provision of this Agreement be satisfied by the 8 12 Purchaser's obligation to repay the Vendor Loan being reduced by an equivalent amount, regardless of whether the Vendor Loan or such part thereof shall at that time be due and payable. 8.4 Neither the Purchaser nor the Company or any Subsidiary shall settle or compromise any potential claim without the prior consent of the Vendor (such consent not to be unreasonably withheld), provided that such consent shall no longer be required if timely requested by the Purchaser or the Company and not received within fourteen days after receipt by the Vendor of a notice given by the Purchaser pursuant to Article 8.2(a), or so much sooner as the third party with whom a settlement or compromise is to be made shall require a response. 8.5 The Vendor shall be entitled, if it so elects within fourteen days after receipt of a notice given by the Purchaser pursuant to Article 8.2(a), to take control of the defense, settlement, negotiation or other resolution of any claim or other event giving rise to any liability for indemnification hereunder and to employ and engage lawyers of its own choice to handle and defend such matter, at its cost, risk and expense; and the Purchaser and the Company shall cooperate in all reasonable respects with the Vendor in such matter; provided, however, (i) that the Purchaser and the Company may participate in such matter at its own cost, (ii) that the Purchaser and the Company shall on a timely basis receive full information of any action to be taken by the Vendor, and (iii) that the Vendor shall in its handling of the matter not act in an unreasonable manner. If the Vendor does not or not timely notify the Purchaser in writing that the Vendor has elected to assume the defense of a matter, the Purchaser shall be entitled to take control of that matter at the Vendor's cost and expense. 8.6 For the purposes of this Article 8, in calculating the Vendor's liability for any claim for indemnification hereunder, such liability shall be reduced by the sum of the following economic benefits, if any, pertaining to that particular claim: (i) any amount actually recovered under an insurance policy by the Purchaser, the Company or one of the Subsidiaries, with respect to the matter to which such claim relates; and (ii) the net present value of any payment actually received or certain to be received or any reduction of an amount due and payable actually obtained or certain to be obtained, pursuant to any tax laws. In the event that the Purchaser, the Company or one of the Subsidiaries pays a claim covered by insurance for which it is entitled to indemnification by the Vendor hereunder, the Purchaser shall procure that all relevant rights with respect to such insurance cover are assigned to the Vendor. ARTICLE 9: LIMITATION OF LIABILITY 9.1 The Vendor shall not be liable to the Purchaser or, as the case may be, to the Company or one of its Subsidiaries pursuant to Article 8 for any amounts claimed by notice to the Vendor sent 9 13 after: (a) 31 December 2002, to the extent that claims are based on any matter relating to taxation (which term shall include social security charges (both the employer's part and the employee's part) and any penalties or interest payable to the relevant authorities); (b) four years after Completion, to the extent that claims are based on environmental matters; and (c) two years after Completion in respect of any other claims. 9.2 The Vendor shall be liable pursuant to Article 8 only if the amounts claimed exceed NLG 750,000 in total, at which time the Vendor shall be liable for the full amount claimed. Individual claims of less than NLG 100,000 will not be taken into account. The total liability of the Vendor pursuant to Article 8 shall not exceed an amount of NLG 20,000,000. ARTICLE 10: ENVIRONMENTAL INDEMNITY 10.1 The Vendor shall, subject to the limitations set out in Article 10.3, indemnify and hold harmless the Purchaser (or at the Purchasers' option, the Company or any of the Subsidiaries) from and against any and all damage, liability, action, legal proceedings, governmental orders, costs and expenses (including but limited to legal and other advisers' fees and expenses) incurred by the Purchaser, the Company or one of the Subsidiaries and resulting directly or indirectly from any soil or groundwater contamination at the site located in Betheny, France and currently occupied by SFEA S.A.. 10.2 The Purchaser, or as the case may be, the Company or one of it Subsidiaries, shall claim any amounts due by the Vendor by notice in writing. The Vendor shall not be liable for any amount claimed by notice to the Vendor sent after 31 December 1999. 10.3 The total liability of the Vendor pursuant to this Article 10 shall not exceed an amount of NLG 1,000,000. Save for Article 8.3, the provisions of Article 8 and 9 do not apply to this Article 10. ARTICLE 11: RESTRICTIVE COVENANTS 11.1 The Vendor hereby covenants and undertakes with the Purchaser that neither it nor any of its subsidiaries will: (a) at any time after Completion disclose or use for any purpose any information concerning the Company or the Subsidiaries, except: (i) to the extent required by law or any competent authority, after prior consultation with the Purchaser; (ii) to its professional advisers under circumstances of confidentiality and only to the extent 10 14 necessary for any lawful purpose of the Vendor; (iii) to the extent that such information is at the date hereof or hereafter becomes public knowledge otherwise than through improper disclosure by any person; or (b) at any time prior to the expiry of three years from the date of Completion, either alone or jointly with others, directly or indirectly, do any of the following without the Purchaser's prior written consent: (i) directly or indirectly incorporate, establish or engage in any business competing with any of the businesses now carried on by the Company and the Subsidiaries ("AAS COMPETING BUSINESS"); (ii) acquire or hold a controlling interest in any company or business which is itself or through any company or business directly or indirectly controlled by it is engaged in any AAS Competing Business, unless such AAS Competing Business accounts for not more than 10% of the gross turnover of such company or business, in which case the Vendor shall use its reasonable efforts to ensure that such AAS Competing Business is offered for sale to the Company at its fair market value; (iii) participate in a joint venture or other co-operative arrangement aimed at generating AAS Competing Business; and (iv) employ or solicit the employment of any person earning an annual salary of more than NLG 75,000 who is on the date hereof or has during the month prior to the date hereof been an employee of the Company or one of the Subsidiaries. 11.2 The Purchaser hereby covenants and undertakes with the Vendor that neither it nor any of its subsidiaries will: (a) at any time after Completion disclose or use for any purpose any information concerning the Vendor, except: (i) to the extent required by law or any competent authority, after prior consultation with the Vendor; (ii) to its professional advisers under circumstances of confidentiality and only to the extent necessary for any lawful purpose of the Purchaser; (iii) to the extent that such information is at the date hereof or hereafter becomes public knowledge otherwise than through improper disclosure by any person; or (b) at any time prior to the expiry of three years from the date of Completion, either alone or jointly with others, directly or indirectly, do any of the following without the Vendor's prior written consent: 11 15 (i) directly or indirectly incorporate, establish or engage in any business competing with any of the businesses now carried on by the Vendor and its subsidiaries (excluding the Company and the Subsidiaries), such businesses being the production and sales of air heating equipment and office furniture ("VENDOR COMPETING BUSINESS"); (ii) acquire or hold a controlling interest in any company or business which is itself or through any company or business directly or indirectly controlled by it is engaged in any Vendor Competing Business, unless such Vendor Competing Business accounts for not more than 10% of the gross turnover of such company or business, in which case the Purchaser shall use its reasonable efforts to ensure that such Vendor Competing Business is offered for sale to the Vendor at its fair market value; (iii) participate in a joint venture or other co-operative arrangement aimed at generating Vendor Competing Business; and (iv) employ or solicit the employment of any person earning an annual salary of more than NLG 75,000 who is on the date hereof or has during the month prior to the date hereof been an employee of the Vendor. 11.3 AHL hereby covenants and undertakes with the Vendor that for as long as either Mr Gerard Brink, Mr Koo Brink or Mr Wim Brink either directly or indirectly invest in AHL, it will conduct all towbar related production and trading activities through companies and other entities directly or indirectly controlled by AHL. 11.4 The Purchaser, the Company and the Vendor shall on Completion, and the Vendor and the Purchaser shall procure that within 14 days after Completion the Subsidiairies, Brink Luchtverwarming B.V., Brink Plaattechniek B.V. and Brink Beheer B.V. shall enter into the Trade Name and Logo Agreement in the form of Schedule 8. ARTICLE 12: COSTS AND EXPENSES The costs incurred by the Vendor, the Company and the Subsidiaries in relation to the Purchaser's due diligence investigations shall be paid by the Company, up to a maximum of NLG 50,000. All other costs and expenses incurred by the Vendor, the Company or the Subsidiaries in connection with the preparation of this Agreement and the transactions contemplated hereby, including (without limitation) legal, fiscal and auditing fees and expenses, will be paid by the Vendor, and all such costs and expenses incurred by the Purchaser will be paid by the Purchaser. ARTICLE 13: PRESS ANNOUNCEMENTS Neither of the parties hereto shall make any press release or public announcement relating to the transactions contemplated by this Agreement without the other party's prior written consent, unless there is a statutory obligation to make a press release or public announcement and the other party's consent is unreasonably delayed or withheld. 12 16 ARTICLE 14: NOTICES 14.1 All notices, requests, claims, demands and other communications hereunder shall be delivered to the parties in person or sent to the addresses set out in the heading hereof by registered letter, postage prepaid and return receipt requested or by telefax as follows: if to the Vendor, to: Brink Holding B.V. C/o Caron & Attn: Stevens Telefax: Mr. M. van Bremen Address: # 31 (0) 20 626 7919 Hirsch Gebouw Leidseplein 29 1017 PS Amsterdam The Netherlands if the to AHL, to: AAS Holdings, LLC Attn: Chief Financial Officer Telefax: # (1)810 997 6839 Address: Sterling Town Center 12900 Hall Road, Suite 200 Sterling Heights, MI 48313 United States of America with a copy to: Clifford Chance Attn: Mr. J. Fleury Telefax: # 31 (0) 20-5777222 Address: Apollolaan 171 1077 AS Amsterdam The Netherlands if the to the Purchaser, to: AAS Holdings, Inc. Attn: Chief Financial Officer Telefax: # (1) 810 997 6839 Address: c/o AAS Holdings, LLC Sterling Town Center 12900 Hall Road, Suite 200 Sterling Heights, MI 48313 United States of America with a copy to: Clifford Chance Attn: Mr. J. Fleury Telefax: # 31 (0) 20-5777222 Address: Apollolaan 171 1077 AS Amsterdam The Netherlands if to the Company, to: Brink B.V. Attn: Financial Director Telefax: # (31) (0) 522-469722 13 17 Address: Industrieweg 5 7951 CX Staphorst The Netherlands with a copy to: Clifford Chance Attn: Mr. J. Fleury Telefax: # 31 (0) 20-5777222 Address: Apollolaan 171 1077 AS Amsterdam The Netherlands 14.2 Either party may change its address for the purpose of this Agreement by giving notice of such change to the other pursuant to the provisions of this Article. 14.3 Any notice, demand or other communication sent by mail shall be deemed to have been received by the party to whom it was sent at the end of the day shown as the day of receipt on the return receipt sent with the same. Any notice, demand or other communication sent by telefax shall be deemed, in the absence of proof to the contrary, to have been received by the party to whom it was sent on the date of despatch, provided that the report generated by the sender's telefax machine shows that all pages of such notice, demand or other communication were properly transmitted to the recipient's telefax number. ARTICLE 15: JOINT AND SEVERAL LIABILITY AHL shall be jointly and severally liable for the due performance of the obligations of the Purchaser under this Agreement. ARTICLE 16: MISCELLANEOUS PROVISIONS 16.1 This Agreement shall be governed by and construed in accordance with the laws of The Netherlands. 16.2 The Schedules and Exhibits hereto form an integral part hereof. 16.3 This Agreement supersedes all prior written and oral agreements and arrangements between the parties hereto with regard to the subject matter hereof. 16.4 None of the parties may assign or agree to assign any of its rights and obligations under this Agreement without the prior written consent of the other parties, except that the Purchaser shall be entitled without such written consent to assign to any third party the benefit of the warranties and the associated obligations of the Vendor pursuant to Articles 7, 8 and 10. 16.5 Any dispute arising under or in connection with this Agreement shall be settled by the competent courts in Amsterdam, The Netherlands, subject to appeal and appeal in the second instance (cassatie). 14 18 IN WITNESS WHEREOF this Agreement has been executed by the parties hereto in Amsterdam in two counterparts on the date first above written for and on behalf of AAS HOLDINGS, INC. - ----------------------------------- Terence C. Seikel, Duly authorised representative for and on behalf of AAS HOLDINGS, LLC - ----------------------------------- Terence C. Seikel Vice President Finance and Administration/Chief Financial Officer for and on behalf of BRINK HOLDING BV - ----------------------------------- Brink Beheer B.V. represented by its director: Gerard J. Brink 15 19 for and on behalf of BRINK BV - ----------------------------------- Brink Holding B.V. represented by its director: Brink Beheer B.V. represented by by its director: Gerard J. Brink 16 20 SCHEDULE 1: SUBSIDIARIES
NAME COUNTRY OF INCORPORATION SHARES HELD BY 1. Brink Trekhaken BV The Netherlands Brink BV (100%) 2. Brink Sverige AB Sweden Brink BV (100%) 3. Brink U.K. Limited England Brink BV (100%) 4. Nordisk Komponent Holding A/S Denmark Brink BV (100%) 5. Brink France SarL France Brink BV (100%) 6. Brink A/S Denmark Nordisk Komponent Holding A/S (100%) 7. Financiere J&JCG SarL France Brink France SarL (100%) 8. SFEA SA France Brink France SarL (977 shares) Financiere J&JCG SarL (2017 shares) Brink B.V. (1 share)* Mr Gerard Brink (1 share)* Mr Bonnefant (1 share)* Mr Foldes (1 share)* Mr Rengelink (1 share)* Mr Van Kesteren (1 share)* 9. SCI L'Elmontaise France Brink France SarL (33.7%) Financiere J&JCG SarL (66.3%)
* nominee shares only 17 21 SCHEDULE 2: CASH, FUNDED AND INTERCOMPANY INDEBTEDNESS 19 22 SCHEDULE 3: REPRESENTATIONS AND WARRANTIES OF VENDOR 1. ORGANISATION, TITLE TO SHARES 1.1 The Company is duly incorporated and existing as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) under the laws of The Netherlands and has the power to own its property and to carry on its business as presently conducted. Each of the Subsidiaries is duly incorporated and existing as a company with limited liability in the jurisdiction set forth against its name in SCHEDULE 1. 1.2 The Shares represent the whole of the issued share capital of the Company. Except for the Shares, the Company has not issued, and no obligation (certain or contingent) exists for it to issue to anyone at any time, any shares, debentures, options, warrants, subscription rights, founders certificates, profit sharing certificates or other securities of any kind. 1.3 The Shares have been fully paid up and no obligation exists for anyone to make further contributions to the equity capital (whether by subscription for further shares, by payment of share premium or otherwise) or to provide loan financing to the Company. 1.4 The Vendor has full legal and beneficial title to all of the Shares free and clear of any pledges, liens, encumbrances and restrictions of every kind or nature and with full right and capacity for the Vendor to transfer and sell the same. 1.5 Except as set forth in SCHEDULE 1, the Company has full legal and (where such concept is relevant) beneficial title to the entire issued share capital of each of the Subsidiaries, free and clear of any pledges, liens, encumbrances and restrictions of every kind or nature. Paragraphs 1.2, 1.3 and 1.4 apply mutatis mutandis to the shares in such capital. Other than the Subsidiaries, the Company has no direct or indirect subsidiary or any interest in any other company, partnership or enterprise. Except for the branch office of the Company at Hollandstrasse 9, 44309 Dortmund, Germany neither the Company nor any of the Subsidiaries has any branch offices outside its country of incorporation. 1.6 After 31 December 1995 the Company has not declared or paid any dividends and has not made any other distributions to shareholders or third parties, except as referred to in this Agreement. 2. FINANCIAL STATEMENTS 2.1 EXHIBIT 2.1 contains copies of the audited consolidated financial statements of the Company and the Subsidiaries for the financial years ended on 31 December 1994 and 31 December 1995 (the "AUDITED ACCOUNTS") and the management accounts of the Company and the Subsidiaries for the period between 1 January 1996 and 4 October 1996 (the "MANAGEMENT ACCOUNTS", together with the Audited Accounts referred to as the "ACCOUNTS"), in each case comprising a consolidated balance sheet of the Company, balance sheets of each of the Company and the Subsidiaries, a consolidated profit and loss statement of the Company, and profit and loss statements of each of the Company and the Subsidiaries, together with notes and ancillary 20 23 documentation. The Accounts: (a) have been prepared in accordance with applicable statutory requirements and with applicable accounting principles and practices generally accepted in The Netherlands, or (in the case of the balance sheets and profit and loss statements of the Subsidiaries) in the country in which the relevant Subsidiary has been incorporated, and, save in respect of the Management Accounts, have been prepared on a basis consistent with previous years; and (b) are true, complete and accurate in all material respects and fairly represent: (i) each of the items separately specified in the balance sheets and profit and loss statements therein comprised; (ii) the consolidated financial position of the Company and each of the Subsidiaries as at 31 December 1994, 31 December 1995 and 4 October 1996, respectively, and the financial position of the Company and of each of the Subsidiaries as at such dates, respectively; and (iii) the results of operations of the Company and the Subsidiaries on a consolidated basis and of the Company and of each of the Subsidiaries respectively during the financial periods to which they relate; (c) reserve or provide in full for all material commitments and liabilities of the Company and the Subsidiaries, whether actual or contingent, due or to become due, whether or not known at the time the financial information was prepared, or at 31 December 1994, 31 December 1995, or 4 October 1996, respectively. 2.2 Except as disclosed in the Accounts there are no: (a) mortgages, charges, liens or other encumbrances on the assets of the Company or the Subsidiaries; (f) guarantees, securities or other liabilities of the Company or the Subsidiaries (certain or contingent) for any present or future debt of any member of the Vendor's group or any third party. 3. TAX MATTERS 3.1 All taxes, duties, levies and social security charges, whether direct or indirect, for which the Company or the Subsidiaries at 31 December 1995 or at any time thereafter may have become or may hereafter become liable to be assessed in respect of any period ending on or before 4 October 1996 have either been paid in full or adequate provision therefor has been made in the Management Accounts. With respect to all such taxes assessed and paid prior to the date hereof, no further payments or penalties or interest charges are or will become due with respect thereto, 21 24 save to the extent provided for in the Accounts. The Company and the Subsidiaries are not and will not on the basis of any events having occurred during the period up to and including the date hereof be liable to repay any investment premiums or subsidies granted to it or enjoyed by them prior to the date hereof. 3.2 All amounts properly due for payment to the relevant authorities in respect of value added tax on goods sold or services rendered prior to the date hereof, wage tax to be withheld prior to the date hereof and social security contributions (both the employers' and the employees' part) due in respect of employees of the Company or the Subsidiaries have been duly withheld and paid. 3.3 There are no agreements with or with respect to the Company or the Subsidiaries for the extension of time for the assessment or payment of any tax, whether direct or indirect. 3.4 All documents required to be filed on or before the date of the date hereof on behalf of or relating to the Company or the Subsidiaries in respect of all taxes have been timely filed and all such documents (and all other information supplied to the fiscal authorities for any purpose) have been accurate and complete and filed on a proper basis. 3.5 Neither the Company nor any of the Subsidiaries is involved or to the best of the knowledge of the Vendor is likely to be involved in any dispute with the tax authorities or others concerning any matter likely to affect any liability of the Company or the Subsidiaries to taxation. 3.6 From 1985 up to Completion the Vendor formed a fiscal unity with the Company and certain other companies for the purposes of corporate income tax. During the same period the Vendor filed all necessary consolidated returns, except in so far as extension has been granted in the ordinary course and paid all taxes on behalf of and otherwise acted in such a way as representative of the fiscal unity as to ensure that insofar as relevant the warranties contained in paragraphs 3.1 through 3.5 above are also satisfied in so far as that fiscal unity concerned the Company, and the Company shall not be liable for any taxes due with respect to the activities or results of any other person, firm or entity. 3.7 There are no "tainted transactions" involving the Company (as referred to in the sixteenth standard condition to the fiscal unity provisions) that have occurred within the financial year 1996 and the preceding six financial years. 3.8 To the best of the knowledge, information and belief of the Vendor, the execution of this Agreement will not give rise to any material adverse tax consequences for the Company or the Subsidiaries. 4. INSURANCE The Company and the Subsidiaries have taken out insurance in respect of all risks normally insured against by persons carrying on the same type of business as that carried on by the Company (the "INSURANCE POLICIES") and the Subsidiaries and the Company and the Subsidiaries is and has for at least five (5) years prior to the date hereof been adequately covered against accident, third party liability and 22 25 other risks normally insured against by persons carrying on the same type of business as carried on by the Company and the Subsidiaries and nothing has been done or omitted which would make any insurance policy relating to the Company or the Subsidiaries void or voidable. Except as set forth in EXHIBIT 4, there are no claims outstanding under any such insurance policy. The Company and the Subsidiaries have not failed to give any notice or to present any claim under any such policy in due and timely fashion. 5. PREMISES 5.1 EXHIBIT 5.1 contains a list of all land, buildings and other real property owned, used or occupied by the Company and the Subsidiaries (the "PREMISES"), together with a description of the tenure thereof. The occupation and use of each of the Premises by the Company and the Subsidiaries is in all material respects in accordance with all applicable laws, permits and planning regulations and in the case of property leased or rented by the Company or the Subsidiaries complies in all material respects with the agreements entered into with the owners of the Premises with respect to such occupation and use. All permits, licenses, consents and approvals requisite for the occupation and use of the Premises have been obtained and are valid and subsisting. 5.2 The Company and the Subsidiaries have (where applicable) good and marketable title to each of the Premises. No person other than the Company and the Subsidiaries possesses, occupies or uses the Premises, or has a right to possess, occupy or use them, otherwise than pursuant to a valid lease or sublease agreement entered into with the Company or the relevant Subsidiary on an arm's length basis and on customary terms. Exhibit 5.2 sets forth details of all such lease and sub-lease arrangements. 5.3 There are no circumstances to the Vendor's knowledge which would entitle or require a lessor or superior lessor of the Premises or any other person to exercise any power of entry upon or of taking possession of the Premises or which would otherwise restrict or terminate the continued possession or occupation of the Premises. 5.4 All permissions, consents and approvals have been obtained and are valid and subsisting for all developments, alterations or additions to or other works on or in relation to the Premises and all conditions or restrictions imposed in or by any such permissions, consents or approvals have been complied with and nothing further remains to be done thereunder. 5.5 There is no material physical defect in any part of the Premises or any structure thereon and all structures thereon are in good and substantial repair and condition and fit for the purpose for which they are currently used. 5.6 The Premises are not subject to any mortgage, option, restriction, easement (which affects the operation of the business or materially detracts from the value of the Company), third party interest or other encumbrance or security interest of any kind and no person claims or is, to the best of the knowledge, information and belief of the Vendor, entitled to claim any of the aforesaid. 23 26 5.7 Save in relation to the Premises, there is no liability on the part of the Company or the Subsidiaries relating to land or any interest in land. 5.8 In the case of any of the Premises which are held by the Company or the Subsidiaries under a lease or rental agreement: (a) no person has a right to terminate that lease or rental agreement before it is due to expire (other than as a result of breach of its terms by the Company or the Subsidiaries); (b) nothing (other than the need to obtain the consent of the relevant authority in relation to planning) can restrict or terminate the possession, occupation or use of, or prevent or restrict the development of the Premises by, the Company or the Subsidiaries. 6. CONTRACTS 6.1 There are no long term (i.e. with a duration in excess of one (1) year) or unusual or onerous contracts, or contracts not concluded on an arm's length basis binding upon the Company or the Subsidiaries. 6.2 None of the Company and the Subsidiaries is in material default under any contract to which it is a party and this Agreement will not of itself result in such default or change any terms of any such contract or permit the termination or cancellation thereof. For the avoidance of doubt, the Company shall not be considered in material default if it is under the obligation to conduct repairs in the ordinary course of its business, pursuant to customary warranty provisions contained in agreements with its customers. 6.3 There is not in force any agreement restricting the freedom of the Company and the Subsidiaries to carry on their business in the manner presently conducted. 6.4 Except as set forth in EXHIBIT 6.4, no written agreements or arrangements, and, to the best knowledge, information and belief of the Vendor, no oral agreements or arrangements, exist between the Company or one of the Subsidiaries on the one hand and a member of the Vendor's group on the other hand. 7. ABSENCE OF ADVERSE CHANGES After 31 December 1995: (a) there has not been any damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the business or assets of the Company or the Subsidiaries; (b) the business of the Company and the Subsidiaries has been carried on in the ordinary course and so as to maintain the same as a going concern; 24 27 (c) the Company and the Subsidiaries have not disposed of any assets or incurred any liabilities (including contingent liabilities) other than in the ordinary course of their business, and they have not encumbered or created any security interest in any of their respective assets; and (d) the business, profitability or prospects of the Company and the Subsidiaries have, to the best of the knowledge, information and belief of the Vendor not been adversely affected by the loss of any important customer or source of supply. 8. LITIGATION Neither the Company, nor the Subsidiaries, nor any person for whose acts or defaults the Company or the Subsidiaries may be liable is, to the best of the knowledge, information and belief of the Vendor involved in any civil, criminal or arbitral proceedings, no such proceedings are pending or threatened against the Company, any of the Subsidiaries or any such person and to the best of the knowledge, information and belief of the Vendor there are no facts likely to give rise to any such proceedings against the Company, any of the Subsidiaries or any such person. 9. EMPLOYEES 9.1 The basis of remuneration or other terms of employment payable to the directors, employees and agents (if any) of the Company and the Subsidiaries is the same as that in force at 31 December 1995 and none of the Company and the Subsidiaries is under any contractual or other obligation to make any increase in the rates of remuneration of or to make any bonus or incentive or other similar payments to any of its directors, employees or agents (if any) at any future date, except to the extent that (i) any increase in remuneration resulting from the promotion of any individual employee, where such promotion is in the ordinary course and consistent with past policies, or (ii) any collective labour agreement binding on the Company or any of the Subsidiaries requires an increase in base salary by no more than the average rate of wage increases in the relevant industry for the year concerned. 9.2 The employment agreements with or terms of employment applicable to any of the employees of the Company and the Subsidiaries do not contain any provision which is unusual for a relationship of the kind concerned or provide for a notice period on termination in excess of the statutory minimum or for other arrangements applicable as at termination exceeding statutory requirements. 9.3 Except as described in EXHIBIT 9.3, there are no pension, stock option, share saving or profit sharing schemes, whether legally enforceable or not, relating to all or part of the employees or directors of the Company and the Subsidiaries in operation, proposed or promised. 9.4 All pension contributions made by the Company and the Subsidiaries for the benefit of any director or employee of the Company or the Subsidiaries which have fallen due have been paid 25 28 and have been made in accordance with the applicable laws and regulations to a duly authorised insurance company or private pension fund. The Company and the Subsidiaries have complied with any statutory obligation to participate in any state or branch of industry pension fund in respect of all employees subject to such obligation, save for such exceptions as statute allows. Each of the pension schemes and other comparable benefit schemes operated by the Company or the Subsidiaries (the "PENSION SCHEMES") have been designed to comply with and have been operated in accordance with all applicable laws, including but only in relation to The Netherlands the provisions of Article 119 of the E.C. Treaty, and with any decision of the European Court of Justice or any Court relating to the application of this Article 119 on pension schemes and regulations and articles of association applicable to the Pension Schemes. Each of the Pension Schemes which provides benefits on a defined benefits basis is sufficiently and effectively funded on an ongoing basis using the actuarial assumptions contained in the last actuarial valuation of each such scheme, respectively, to secure all benefits currently, prospectively and contingently payable under each such scheme, respectively, at least to the extent to which they have accrued at the date hereof. To the best of the knowledge, information and belief of the Vendor, there are no factors which have caused or contributed to any substantial deterioration in the level of funding of any such scheme since the date of such valuation. All employees and former employees of the Company and the Subsidiaries who are (or were) eligible or entitled to a pension have participated in the Pension Schemes. 26 29 10. ENVIRONMENTAL MATTERS 10.1 On Completion all environmental permits necessary for the Company and the Subsidiaries to conduct the Business as conducted up to Completion have been obtained, are in full force and effect, and will apply for the benefit of the Purchaser as from Completion, provided that the Purchaser is aware that, in relation to the Company, a "Revisievergunning" has to be applied for by the Purchaser. No works or investments are or will be necessary to obtain the "Revisievergunning" and to the best of the Vendor's knowledge there are no facts or circumstances indicating that any other environmental permit would or might be revoked, suspended, cancelled, varied or not renewed and: (a) all appropriate or necessary action in connection with the renewal or extension of any environmental permit has been taken; (b) neither the execution nor the performance of this Agreement will of itself cause any environmental permit to be withdrawn or modified; and (c) none of the conditions to which any environmental permit is subject is personal to the Vendor. 10.2 Each of the Company and the Subsidiaries has complied in all respects with all environmental laws, regulations, and orders applicable to it. 10.3 Except as disclosed in EXHIBIT 10.3, to the best of the knowledge, information and belief of the Vendor, neither the Company nor the Subsidiaries has or will have under existing laws any liability resulting from the release or discharge into the environment of any dangerous, radioactive, toxic or hazardous substance either (a) by the Company or one of the Subsidiaries, or (b) onto any land, building or other property now or in the past owned, used or occupied by the Company or one of the Subsidiaries. 10.4 Except as disclosed in EXHIBIT 10.4, there have not been any complaints, whether official or not, against the Company or the Subsidiaries about noise, smells, pollution or other inconveniences caused by the Company or the Subsidiaries, nor is it to the best of the knowledge, information and belief of the Vendor likely that such complaints will be made in respect of any period prior to Completion. 11. COMPLIANCE WITH LAWS 11.1 Each of the Company and the Subsidiaries has complied in all material respects with all laws, regulations, and orders applicable to it. 11.2 All permits, licenses and approvals required by the Company and the Subsidiaries for the conduct of their respective businesses have been obtained and are valid and subsisting. The Company and the Subsidiaries have complied with all material conditions imposed by such permits, licences and approvals and, to the best of the Vendor's knowledge, information and 27 30 belief, no circumstances exist which are likely to result in the revocation or amendment of any such permit, licence or approval. The execution and performance of this Agreement will not of itself adversely affect the continued validity of any of such permits, licenses and approvals. 12. INDUSTRIAL PROPERTY RIGHTS 12.1 All patents, service marks, trademarks, tradenames, copyrights, registered designs and similar industrial property rights (whether registered or not) (the "INDUSTRIAL PROPERTY RIGHTS") used or proposed to be used by the Company or the Subsidiaries in connection with their business are either (a) the property of the Company or one of the Subsidiaries, or (b) the subject of a valid license permitting the use thereof by the Company and the Subsidiaries. 12.2 Industrial Property Rights owned by the Company or one of the Subsidiaries are registered in the name of the Company or one of the Subsidiaries (where registration is possible), are valid and subsisting, have been properly maintained and (where necessary) renewed, are (to the best of the knowledge, information and belief of the Vendor) not being infringed, are not subject to any licence or authority in favour of another and the execution and performance of this Agreement will not of itself adversely affect the continued validity of any of such Industrial Property Rights. 12.3 Where Industrial Property Rights have been licensed to the Company and the Subsidiaries, the Company and the Subsidiaries have, to the best knowledge, information and belief of the Vendor, at all times complied with all material conditions of the applicable license agreements. 12.4 To the best of the knowledge, information and belief of the Vendor, the Company and the Subsidiaries do not and have not at any time prior to the date hereof in any way infringed the industrial property rights of any third party. The Company and the Subsidiaries are not using any industrial property right owned by or licensed to any member of the Vendor's group. 13. FULL DISCLOSURE 13.1 All material information and facts as to the condition (financial or otherwise), assets, liabilities, earnings, business and affairs of the Company and the Subsidiaries material for disclosure to an intending purchaser of the Shares have been disclosed to the Purchaser. 13.2 The representations and warranties made by the Vendor herein and any disclosures made in qualification thereof do not contain any untrue or inaccurate statement of material fact nor do they omit to state any material fact necessary to keep these representations and warranties or disclosures from being misleading or inaccurate. 13.3 All written information which has been given by the Vendor or any of its directors, auditors or advisers to the Purchaser, or the Purchaser's legal or financial advisers in the course of negotiations leading to this Agreement was when given and is true, complete and accurate in all material respects. 28 31 13.4 The facts set out in this Agreement, including the Recitals, Schedules and Exhibits, are true and accurate in all material respects. 13.5 No agreements (whether oral or written) or arrangements exist between any of the directors and employees of the Company and the Subsidiaries on the one hand and any member of the Vendor's group on the other hand, including without limitation agreements or arrangements regarding future profit sharing or bonus payments and agreements or arrangements whereby the Vendor could seek recourse against any such director or employee with respect to any liability incurred under this Agreement or in connection herewith. 14. VALIDITY OF SALE 14.1 Neither the execution of this Agreement or any agreement in connection herewith by the Vendor nor the consummation by the Vendor of the transactions contemplated hereby or thereby will constitute a violation of, or be in conflict with, or constitute or create a default under any agreement or arrangement binding upon the Company, one of the Subsidiaries or the Vendor, or result in the creation of any mortgage, lien, pledge, charge, security interest or any encumbrance of any nature whatsoever. 14.2 No statutory or regulatory rule or order of a Court or a governmental body and no agreement between the Vendor and any such governmental body is in effect which restrains or prohibits the sale by the Vendor to the Purchaser of the Shares as reflected in this Agreement nor is there to the best of the Vendor's knowledge, information and belief pending, threatened or any basis for any action, suit, proceeding or investigation by any person, entity or governmental body which questions or might jeopardise the validity of this Agreement or challenges any of the transactions contemplated hereby. 14.3 No consent, approval, or authorisation of or registration, designation, declaration or filing with any governmental authority on the part of the Vendor, the Company or the Subsidiaries is required in connection with the sale or transfer of the Shares pursuant to this Agreement or the consummation of any other transaction contemplated hereby except as set out in this Agreement. 15. NO BROKERS' FEES No finder's fee or brokerage commission is payable to any person by the Purchaser, by the Company or by any of the Subsidiaries as a result of any action by the Vendor or any action known to the Vendor by any other person, in connection with the transactions contemplated by this Agreement. 29 32 SCHEDULE 4: REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 1. No statutory or regulatory rule or order of a court or governmental body and no agreement between the Purchaser and any such governmental body is in effect which restrains or prohibits the purchase by the Purchaser of the Shares as reflected in this Agreement nor is there to the best of the Purchaser's knowledge, information and belief pending threatened or any basis for any action, suit, proceeding or investigation by any person, entity or governmental body which questions or might jeopardize the validity of this Agreement or challenges any of the transactions contemplated hereby. 2. No consent, approval, or authorization of or registration designated, declaration or filing with any governmental authority on the part of the Purchaser is required in connection with the sale or transfer of the Shares pursuant to this Agreement or the consummation of any other transaction contemplated hereby except as set out in this Agreement. 30 33 SCHEDULE 5: KEY OFFICERS - - Jan Willem Rengelink - - Gerrit de Graaf 31 34 SCHEDULE 6: VENDOR'S CERTIFICATE [DELIBERATELY LEFT BLANK] 32 35 SCHEDULE 7: FORM OF DEED OF TRANSFER OF SHARES 33 36 SCHEDULE 8: FORM OF TRADE NAME AND LOGO AGREEMENT 34 37 SCHEDULE 9: FORM OF NON-COMPETE LETTER AAS Holdings, LLC AAS Holdings, Inc. Sterling Town Center 12900 Hall Road Suite 200, Sterling Heights Michigan 48313 United States of America 30 October 1996 Dear Sirs, We refer to the Sale and Purchase Agreement dated 30 October 1996 between Brink Holding B.V., Brink B.V. and yourselves (the "AGREEMENT"). In connection with the Agreement, we agree as ultimate beneficiaries of Brink Holding B.V. and having either directly or indirectly been involved in the towbar production and trading activities of the Company and certain of its Subsidiaries (as defined in the Agreement), to be bound by certain restrictive covenants. Each of the undersigned hereby covenants and undertakes with each of you that they will not: (a) at any time after Completion (as defined in the Agreement) disclose or use for any purpose any information concerning the Company or the Subsidiaries, except: (i) to the extent required by law or any competent authority, after prior consultation with yourselves; (ii) to our professional advisers under circumstances of confidentiality and only to the extent necessary for any lawful purpose of either one of us; (iii) to the extent that such information is at the date hereof or hereafter becomes public knowledge otherwise than through improper disclosure by any person; or (b) at any time prior to the expiry of three years from the date of Completion,either alone or jointly with others, directly or indirectly, do any of the following without your prior written consent: (i) directly or indirectly incorporate, establish or engage in any business competing with 35 38 any of the businesses now carried on by the Company and the Subsidiaries ("AAS COMPETING BUSINESS"); (ii) acquire or hold a controlling interest in any company or business which is itself or through any company or business directly or indirectly controlled by it, engaged in any AAS Competing Business, unless such AAS Competing Business accounts for not more than 10% of the gross turnover of such company or business, in which case we shall use our reasonable efforts to ensure that such AAS Competing Business is offered for sale to the Company at its fair market value; (iii) participate in a joint venture or other co-operative arrangement aimed at generating AAS Competing Business; and (iv) employ or solicit the employment of any person earning an annual salary of more than NLG 75,000 who is on the date hereof or has during the month prior to the date hereof been an employee of the Company or one of the Subsidiaries. Yours faithfully, - ------------------ ------------------ ------------------ Gerard Brink Wim Brink Koo Brink For acceptance for and on behalf of AAS HOLDINGS, LLC AND AAS HOLDINGS, INC. - ------------------ Terry Seikel Chief Financial Officer 36 EX-10.3 10 EX-10.3 1 ================================================================================ EXHIBIT 10.3 ASSET PURCHASE AGREEMENT AMONG BELL SPORTS CORP., BELL SPORTS CANADA INC. AND ADVANCED ACCESSORY SYSTEMS CANADA INC./ LES SYSTEMES D'ACCESSOIRE ADVANCED CANADA INC. Dated as of July 2, 1997 ================================================================================ 2 LIST OF SCHEDULES Schedule 1.1(i) - Tangible Personal Property Schedule 1.1(ii) - Tooling Schedule 1.1(iv) - Purchased Inventory Schedule 1.1(vii) - Assigned Contracts Schedule 1.1(viii) - Requisite Rights Schedule 1.1(x) - Telephone, Telex and Telecopier Numbers Schedule 1.1(xiv) - Permits Schedule 1.3(c) - Open Customer Orders Schedule 3.1(b) - Consents Schedule 3.1(c) - Financial Information Schedule 3.1(d) - Undisclosed Liabilities Schedule 3.1(e) - Changes to the Business Schedule 3.1(f) - Improvements Schedule 3.1(g) - Exceptions to Title Schedule 3.1(h)(i)(a) - Intellectual Property Rights Schedule 3.1(h)(i)(b) - Exceptions to Intellectual Property Rights Schedule 3.1(h)(ii) - Employee Invention Disclosures Schedule 3.1(i)(i) - Environmental Permit Exceptions Schedule 3.1(i)(ii) - Environmental Notice Exceptions Schedule 3.1(i)(iii) - Hazardous Materials Schedule 3.1(i)(iv) - CERCLA Claims Schedule 3.1(j) - Contracts Schedule 3.1(k) - Litigation Schedule 3.1(l) - Permits Schedule 3.1(n) - Inventories Schedule 3.1(o) - Employees Schedule 3.1(p) - Employee Plans Schedule 3.1(r) - Brokers Schedule 3.1(s) - Transactions with Affiliates Schedule 3.1(t) - Principal Customers Schedule 3.1(u) - Bank Accounts Schedule 3.1(y) - Individuals with Knowledge Schedule 6.3 - Additional Employee Offerees 3 DEFINITIONS The following terms which may appear in more than one Section of this Agreement are defined in the following Sections: Term Section or Other Location - ---- ------------------------- Accountants' Determination 2.2(b)(ii) Affiliate 3.1(s) Arbitrating Accountants 2.2(b)(ii) Assigned Contracts 1.1(a)(vii) Assumed Obligations 1.3 Bill of Sale and Assumption Agree 1.5(a) Business Preamble Business Day 7.4 Buyer Preamble Buyer Indemnification Event 5.1(a) Buyer Indemnified Persons 5.1(b) CERCLA 3.1(i)(iv) CERCLIS 3.1(i)(iv) Charter 3.1(a) Claim 5.1(c) Closing Article IV Closing Balance Sheet 2.2(a) Closing Date Article IV Competitive Businesses 6.5 Confidential Information 6.6(c) Contracts 3.1(j) Conveyance Instruments 1.5(a) Covered Persons 6.6(a) CSST 1.4(l) Current Employees 3.1(o) Employee Plan 3.1(p)(i) Encumbrances 1.1(a) Environmental Law 3.1(i)(i) ERISA Affiliate 3.1(p)(i) ERISA 3.1(p)(i) Excluded Assets 1.2 Excluded Earnout Liabilities 1.3(b) Excluded Obligations 1.4 Final Determination Date 2.2(b)(iii) Final Net Book Value 2.2(a) Final Net Book Value Statement 2.2(a) Financial Statements. 3.1(c) First 30 Day Period 2.2(b)(ii) GAAP 2.2(a) Governmental Authority 3.1(b) 4 Term Section or Other Location - ---- ------------------------- GST 5.1(i) GST Legislation 5.1(i) Hazardous Materials 3.1(i)(i) Hired Employees 6.3(a) HSR Act 3.1(b) Indemnified Persons 5.1(d) Indemnifying Person 5.1(e) Intellectual Property Rights 3.1(h)(iii) Interim Balance Sheet 3.1(c)(ii) Interim Balance Sheet Date 3.1(c)(ii) Knowledge 3.1(x) Leased Real Property 3.1(iii) Leases 3.1(iii) Legal Requirement 3.1(b) Liability Letter 5.3(b)(i) Losses 5.1(f) NPL 3.1(i) Objection Notice 2.2(b)(ii) Original Purchase Agreement 1.3(b) Overpayment Amount 2.2(c)(iii) Parent Preamble Patent License 1.1(a)(viii) Permits 3.1(l)(ii) Permitted Encumbrances 1.1 Person 3.1(b) Principal Customers 3.1(t) Proprietary Technology 3.1(h)(iii) Purchase Price 2.1 Purchased Assets 1.1(a) Purchased Inventory 1.1(a)(iv) QST 5.1(i) QST Legislation 5.1(i) Related Documents 7.3 Related Person 3.1(q) Requisite Rights 3.1(h)(i) Returns 3.1(a) Restricted Party 6.5 Seller Preamble Seller Indemnification Event 5.1(g) Seller Indemnified Persons 5.1(h) Seller's Accountants 2.2(a) Seller's Bulk Sales Statement 6.2 Seller's Notice of Adjustment 2.2(b)(i) Settlement Agreement 2.2(b)(ii) 5 Term Section or Other Location - ---- ------------------------- Statement of Allocation 2.3 Survival Date 5.4(b) Taxes 5.1(i) Third Party Claim 5.3 Trademark License ? Underpayment Amount 2.2(c)(i) US EPA 3.1(i)(iv) 6 TABLE OF CONTENTS ARTICLE I TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF LIABILITIES AND RELATED MATTERS..................................................1 1.1 Transfer of Assets...................................................1 1.2 Assets Not Being Transferred.........................................4 1.3 Liabilities Being Assumed............................................5 1.4 Liabilities Not Being Assumed........................................6 1.5 Instruments of Conveyance and Transfer, Etc..........................8 1.6 Further Assurances, Etc..............................................8 1.7 Assignment of Contracts, Rights, Etc.................................8 1.8 Right of Endorsement, Etc............................................9 ARTICLE IIPURCHASE PRICE; ALLOCATION...........................................9 2.1 Acquisition Price....................................................9 2.2 Net Book Value Adjustment............................................9 2.3 Allocation of Purchase Price........................................11 ARTICLE III REPRESENTATIONS AND WARRANTIES....................................11 3.1 Representations and Warranties of the Seller........................11 3.2 Representations and Warranties of the Buyer.........................26 ARTICLE IV CLOSING............................................................27 ARTICLE V INDEMNIFICATION.....................................................27 5.1 Definitions.........................................................27 5.2 Indemnification Generally...........................................30 5.3 Notice and Defense of Third Party Claims............................31 5.4 Survival of Representations, Warranties, Agreements and Covenants...32 5.5 Indemnification Exclusive...........................................33 ARTICLE VI POST-CLOSING AGREEMENTS............................................33 6.1 Access..............................................................33 6.2 Bulk Sales Laws.....................................................33 6.3 Certain Employee Matters............................................33 6.4 Parent Guaranty.....................................................35 6.5 Non-Competition.....................................................35 6.6 Non-Disclosure......................................................36 6.7 Non-Solicitation of Employees and Customers.........................37 6.8 Usage of Tradenames.................................................37 6.9 Agreements in Respect of Inventory..................................37 6.10 Agreements Regarding Canadian Taxes.................................37 ARTICLE VII MISCELLANEOUS.....................................................37 7.1 Expenses; Transfer Taxes, Etc.......................................37 7.2 Entire Agreement....................................................38 7.3 Related Documents...................................................38 7 7.4 Notices...........................................................38 7.5 Counterparts......................................................40 7.6 GOVERNING LAW; CONSENT TO JURISDICTION............................40 7.7 Benefits of Agreement; Assignment.................................41 7.8 Construction......................................................41 7.9 Pronouns..........................................................41 7.10 Descriptive Headings..............................................41 7.11 Severability......................................................41 7.12 Disclaimer of Warranties..........................................41 7.13 Amendment.........................................................42 7.14 No Third Party Beneficiaries......................................42 ii 8 ASSET PURCHASE AGREEMENT dated as of July 2, 1997, among BELL SPORTS CORP., a Delaware corporation (the "Parent"), BELL SPORTS CANADA INC., a corporation existing under the laws of Canada (the "Seller"), and ADVANCED ACCESSORY SYSTEMS CANADA INC./LES SYSTEMES D'ACCESSOIRE ADVANCED CANADA INC., a corporation existing under the laws of Canada (the "Buyer"). The Seller is engaged, among other things, through its "SportRack" division in the business (the "Business") of designing, engineering, manufacturing, marketing, selling and distributing automotive roof rack systems, and vehicular accessories (such as bike racks, ski racks and surfboard carriers) and rear carriers and shuttles and related rear carrier and shuttle systems (to the extent comprising part of the "SportRack" division). The parties hereto desire that the Seller sell, transfer, convey and assign to the Buyer, and that Buyer purchase from Seller, substantially all of the assets, properties, interests in properties and rights of the Seller used primarily in the Business (other than the Excluded Assets) and that the Buyer purchase and acquire the same and assume certain specified liabilities and obligations of the Seller relating to the Business, in each case, upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows: ARTICLE I TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF LIABILITIES AND RELATED MATTERS 1.1 TRANSFER OF ASSETS. (a) On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Seller shall sell, transfer, convey and assign to the Buyer, free and clear of all Encumbrances (other than Permitted Encumbrances), and the Buyer shall purchase and acquire from the Seller, all of the Seller's right, title and interest in, to and under the assets, properties, interests in properties and rights of the Seller of every kind, nature and description, whether real, personal or mixed, movable or immovable, tangible or intangible, primarily used in or primarily held for use in the Business (other than the Excluded Assets), wherever located, as the same shall exist immediately prior to the Closing, including, without limitation, the following: (i) all machinery and equipment, including, without limitation, all manufacturing, production, maintenance, packaging, testing and other machinery, equipment, molds, presses, rolling stock, motor vehicles, tractors and other vehicles, spare or replacement parts, computer equipment (including all computers and computer systems used in the Business), furniture, fixtures, office equipment and software 9 programs (including Seller's interest in the software used on any computer systems), supplies and all other items of tangible personal property, all of which are listed on Schedule 1.1(i); (ii) all tooling owned by the Seller and used in connection with the Business, including any tooling jointly owned with any customers or Affiliates of the Seller and used primarily in connection with the Business; provided that in the case of tooling jointly owned with customers, Buyer shall only receive Seller's rights and interests in such tooling, all of which are listed on Schedule 1.1(ii); (iii) [intentionally ommitted]; (iv) all inventories of work-in-process, raw materials, finished products, returned goods, stores and supplies, spare parts, packaging, shipping containers and other materials in each case, to the extent primarily related to the Business, all of which are listed on Schedule 1.1 (iv)(the "Purchased Inventory"); (v) all prepaid expenses, advances, deposits (including utility deposits) and accounts receivable, to the extent primarily related to the Business; (vi) all insurance and indemnity claims against third parties relating to the Purchased Assets and the Assumed Obligations, to the extent primarily related to the Business (including, without limitation, all insurance proceeds paid or payable by any insurance provider for any Purchased Asset that is destroyed or damaged on or prior to the Closing Date) other than any of the foregoing to the extent that they relate to the Excluded Assets or Excluded Obligations; (vii) all contracts, agreements, licenses, personal property leases, commitments, purchase orders, sales orders and other agreements in each case, to the extent primarily related to the Business, all of which are listed on Schedule 1.1(vii) (collectively, the "Assigned Contracts"); (viii) (A) all Requisite Rights, including, without limitation, the names "SportRack", "Mondial", "SnapRack" and all other names primarily used or held for use in the Business and owned by Seller or its Affiliates, all of which are listed on Schedule 1.1(viii), (B) the rights to license the assets set forth in the Patent License, dated as of the date hereof between Bell Sports, Inc., a California corporation and the Buyer (the "Patent License") to the extent and in the manner set forth therein and (C) the rights to use the tradenames as set forth in Section 6.8 hereof to the extent and in the manner set forth therein; (ix) all records of the Seller, either in computer or original or photostatic form (except in the case of computer software, which must be in original form), whether or not in computer or machine readable format, including, without limitation, property records, plans, specifications, surveys, title policies, production records, engineering records, purchasing and sales records, personnel and payroll records, accounting records, mailing lists, customer and vendor lists and records, and computer software and related 2 10 licenses, manuals and other materials, in each case relating primarily to the Purchased Assets or the Business; (x) all telephone, telex and telecopier numbers and all listings of such numbers in all telephone books and directories, in each case, to the extent primarily related to the Business, all of which numbers are listed on Schedule 1.1(x); (xi) [intentionally omitted] (xii) all warranties and guarantees received from vendors, suppliers or manufacturers with respect to the Purchased Assets or the Business (other than to extent such warranties relate to product liability obligations of the Seller described in Section 1.4(b)); (xiii) all stationery, purchase orders, forms, labels, shipping material, catalogues, brochures, art work, photographs and advertising materials, related primarily to the Business; (xiv) all Permits, all of which are listed on Schedule 1.1(xiv); (xv) all rights (including experience ratings) with respect to unemployment, workers' compensation, occupational health and safety and other similar insurance reserves, in each case relating to employees of the Seller who become employees of the Buyer; (xvi) all rights (including rights in respect of QST or GST payable by any Governmental Authority), recoveries, refunds, counterclaims, rights to offset, other rights, choses in action and Claims (known or unknown, matured or unmatured, accrued or contingent) against third parties (including, but not limited to, all warranty and other contractual claims (express, implied or otherwise) against third parties), other than any of the foregoing to the extent that they relate to the Excluded Assets or Excluded Obligations; and (xvii) the goodwill and other intangible assets of the Seller associated with the Business. For convenience of reference, the assets, properties, interests in properties and rights described above that are to be sold, transferred, conveyed and assigned to the Buyer by the Seller pursuant to this Section are collectively called the "Purchased Assets" in this Agreement. Notwithstanding the foregoing, the terms "Purchased Assets" and "Business" specifically exclude and the Buyer is not acquiring (except, in each case, to the extent specifically constituting part of the SportRack division of the Seller); (i) any business, properties or assets of Bell Sports, Inc., Giro Ireland Limited, Giro Sport Design International, Inc., American Recreation Company Holdings, Inc., Euro Bell S.A., American Recreation Company, Inc., Bell Sports Australia Pty. Limited (other than as may be licensed to Buyer under the Related Documents and other than as set forth in Section 6.8) including without limitation the business of designing, developing, manufacturing, distributing, marketing, sourcing and selling bicycle, in-line skate, ski, auto racing car, any other helmets, bicycle parts and accessories, shuttles and rear 3 11 rack carrier system in each case, under the "Bell", "Giro", "Rhode Gear", "Vistalite", "Blackburn", "BSI", "Bike Star", "Copper Canyon", "Cycle Products", "Bike Xtras", "Cycle Tech" or "Spoke Hedz" brand names or names licensed from third parties, (ii) any business conducted through the IBD and Mass Merchant/Sporting Goods divisions of the Seller and (iii) any rights to the "Rhode Gear" patented hub system currently utilized by the Seller (other than as may be licensed to Buyer under the Patent License). As used in this Agreement, the term "Encumbrances" means, collectively, all security interests, hypothecs, judgments, liens, pledges, charges, escrows, encumbrances, Claims, options, rights of first refusal, rights of first offer, mortgages, indentures, loan agreements, credit agreements, security agreements and other agreements, arrangements, contracts, commitments, understandings or obligations, whether written or oral and whether or not relating in any way to credit or the borrowing of money. As used in this Agreement, the term "Permitted Encumbrances" means, collectively, (i) Encumbrances arising under applicable law for current taxes or other governmental assessments or charges not yet due and payable, (ii) Encumbrances granted under any of the Assigned Contracts and any other Encumbrances being assumed by the Buyer pursuant to Section 1.3 and (iii), with respect to real property leased to the Seller (the "Leased Real Property"), any Encumbrance indicated on the title commitment for such Leased Real Property. (b) Anything contained in this Agreement to the contrary notwithstanding, but subject to the provisions of Section 1.2, to the extent that any asset, property, interest in property or right, in each case, used primarily in the conduct of the Business is owned by any Affiliate of the Seller or the Parent, such asset, property, interest in property or right shall be deemed to be a Purchased Asset for all purposes of this Agreement, and the Seller and the Parent shall do, and shall cause any such other Affiliate to do, all things required to be done by the Seller with respect thereto, including, but not limited to, those things set forth in Sections 1.5, 1.6, 1.7 and 1.8. 1.2 ASSETS NOT BEING TRANSFERRED. Anything contained in this Agreement to the contrary notwithstanding, there are expressly excluded from the Purchased Assets the following: (a) the consideration delivered to the Seller pursuant to this Agreement; (b) all assets used primarily in connection with the Seller's corporate functions (including, but not limited to, corporate charters, seals, minute books, stock transfer ledgers, taxpayer and other identification numbers, tax returns, tax information and tax records), whether or not used for the benefit of the Business; (c) claims or rights against third parties relating to any Excluded Asset or Excluded Obligation; (d) all records relating to pending lawsuits to which the Seller is a party and which involve the Business; (e) all assets related to or owned by any Employee Plan; (f) all cash on hand or held on deposit on the Closing Date and owned by the Seller and related to the Business, to the extent not reflected on the Closing Balance Sheet; 4 12 (g) the Seller's rights, claims or causes of action relating hereto or any Related Document; (h) all refunds of any Tax for which the Seller is liable pursuant to this Agreement; (i) all liabilities or obligations under any contracts, agreements, licenses, personal property leases, commitments, purchase orders, sales orders, and other agreements not effectively assigned under this Agreement or under any Related Document; (j) any information or records of the Seller, including, without limitation, financial records, used by the Seller or its Affiliates in connection with the conduct of its, or their, respective businesses generally and not relating primarily to the Purchased Assets or the Business; and (k) any right or interest in the tradenames or brand names "Bell," "Giro," "Rhode Gear," "Vistalite," "Blackburn," "BSI," "Bike Star," "Copper Canyon," "Cycle Products," "Bike Xtras," "Cycle Tech" or "Spoke Hedz," other than as specifically contemplated by Section 6.8 hereof. For convenience of reference, the assets, properties, interests in properties and rights of the Seller which do not constitute Purchased Assets pursuant to Section 1.1 or Section 1.2 are collectively called the "Excluded Assets" in this Agreement. 1.3 LIABILITIES BEING ASSUMED. At the Closing, subject to the terms and conditions of this Agreement, simultaneously with the sale, transfer, conveyance and assignment to the Buyer of the Purchased Assets, the Buyer shall assume, pay and perform when due the following, and only the following, liabilities and obligations of the Seller: (a) accounts payable and accrued expenses of the Business (including with respect to QST or GST and excluding accruals for any other Taxes) to the extent accrued or otherwise properly reflected on the Closing Balance Sheet; (b) all liabilities and obligations arising after the Closing under the Assigned Contracts which are effectively assigned to the Buyer in accordance with their respective terms; provided, however, that all liabilities and obligations under Article III and Section 2.2(vi) of the Asset Purchase Agreement, dated May 12, 1995 among the Seller, SportRack Canada Inc., Jean Maynard, Richard Bedard, 2987988 Canada Inc. and Robert Choquette (as amended by the First Amendment thereto, dated April 4, 1996 among such parties) (the "Original Purchase Agreement") of the Seller to the extent arising out of or related to periods prior to and including the period ending on the date of the Closing Balance Sheet (the "Excluded Earnout Liabilities") shall not be assumed, paid or performed by the Buyer (it being understood that the Seller shall satisfy the Excluded Earnout Liabilities in full on or prior to the Closing); (c) all obligations under open customer orders and purchase orders relating to products or services of the Business included in the Assigned Contracts which arose in the 5 13 ordinary course of business of the Business prior to the Closing Date or are set forth on Schedule 1.3(c); (d) accrued payroll, sick leave and vacation expenses of the Seller arising in the ordinary course of business of the Business and relating to the Hired Employees to the extent reflected on the Closing Balance Sheet; (e) the liabilities and obligations assumed by the Buyer under Section 6.3; (f) liabilities and obligations arising out of the operation of the Business after the Closing Date; and (g) all Claims under warranties or product returns with respect to the sale of products of the Business which arose or may arise before or after the Closing Date; and (h) all Claims, liabilities and obligations relating to product liability claims with respect to any products sold by Buyer after the Closing Date. For convenience of reference, the foregoing liabilities and obligations of the Seller being assumed by the Buyer are collectively called the "Assumed Obligations" in this Agreement. The Buyer hereby expressly agrees to pay and perform when due all of the Assumed Obligations. 1.4 LIABILITIES NOT BEING ASSUMED. Anything contained in this Agreement to the contrary notwithstanding, the Buyer is not assuming any liabilities or obligations (fixed or contingent, known or unknown, matured or unmatured) of the Seller other than the Assumed Obligations, whether or not relating to the Purchased Assets or the Business, all of which liabilities and obligations shall at and after the Closing remain the exclusive responsibility of the Seller. Without limiting the generality of the foregoing, the Buyer is not assuming any of the following liabilities and obligations: (a) except as provided in Section 1.3(a), all liabilities and obligations for Taxes of the Seller and all liabilities and obligations for Taxes arising out of or in connection with the operation of the Business on or prior to the Closing Date (in each case regardless of whether arising as a result of or in connection with the transactions contemplated hereby or otherwise); (b) all Claims, liabilities and obligations of any nature (including product liability claims with respect to any products to the extent sold on or before the Closing Date) for any accidents, breach of contract, occupational health and safety violations, illnesses, or any other type of Claim (other then Claims under warranties or product returns as specified in Section 1.3(g)), liability or obligation connected with or arising out of any matter, incident, occurrence or set of facts or circumstances prior to the Closing Date; (c) all liabilities and obligations of any nature whatsoever of the Seller to any of its Affiliates; (d) except as provided in Sections 1.3(d) and (e), all Claims by and all liabilities and obligations to employees and independent contractors for periods prior to the Closing, 6 14 including, without limitation, any Claims, liabilities and obligations arising out of workers' compensation, unemployment, occupational health and safety, any Employee Plan sponsored by the Seller or its ERISA Affiliates, the Seller's failure to deposit or fund any amounts withheld from employees pursuant to any retirement plan or arrangement or retiree medical plan or arrangement, any unfunded retirement plan or arrangement or retiree medical plan or arrangement, any obligations to current or former plan participants or beneficiaries under any plan or arrangement intended to provide benefits to current or former employees of the Seller, or other remuneration required to be paid to any employee of the Business (including for wages, earned vacations, vacation pay and sick leave); (e) all liabilities and obligations of the Seller to financial institutions or other Persons for borrowed money or with respect to indebtedness and obligations of others which the Seller has directly or indirectly guaranteed; (f) all liabilities and obligations of the Seller to the extent relating to the Excluded Assets and all liabilities and obligations of the Seller under or arising out of this Agreement and any Related Document or with respect to the transactions contemplated hereby and thereby, including, without limitation, (but subject to Section 7.1) legal and accounting fees, expenses and Taxes incurred by the Seller; (g) all cash overdrafts for any banking accounts maintained for the benefit of the Business; (h) all obligations to Hired Employees for stay bonuses established by the Seller prior to Closing; (i) all Excluded Earnout Liabilities; (j) any liabilities or obligations which may arise under Article 1768 of the Civil Code of Quebec, as amended; (k) all Claims, liabilities or obligations under any Environmental Law arising directly or indirectly out of or in connection with the generation, use, release (including as defined in 42 U.S.C. 9601(22)), emission, deposit, discharge, treatment, storage, handling, recycling, disposal or transportation of any Hazardous Materials, to the extent that the same arose out of facts or circumstances commenced or occurring prior to the Closing Date; and (l) all liabilities and obligations of the Seller arising out of or relating to any Claims, adjustments, assessments or other charges (including relating to interest or penalties) relating to any applicable legislation on workers' compensation or occupational health and safety including with respect to Commission de la Sante et Securite au Travail ("CSST"), connected with or arising out of any matter, incident, occurrence or set of facts or circumstances to the extent that any such matter, incident, occurrence or set of facts of circumstances arose prior to the Closing, in each case, involving employees or former employees of the Seller. For convenience of reference, the liabilities and obligations of the Seller which do not constitute Assumed Obligations are collectively called the "Excluded Obligations" in this Agreement. 7 15 1.5 INSTRUMENTS OF CONVEYANCE AND TRANSFER, ETC. (a) Simultaneously with the execution herewith, the Seller is executing and delivering (or causing to be executed and delivered) to the Buyer, such deeds, bills of sale, endorsements, assignments and other good and sufficient instruments of sale, transfer, conveyance and assignment (collectively, the "Conveyance Instruments") as are necessary to sell, transfer, convey and assign to the Buyer, in accordance with the terms hereof, the Purchased Assets, free and clear of all Encumbrances (other than Permitted Encumbrances), including, without limitation, a bill of sale, assignment and assumption agreement in a form previously agreed upon by the Buyer and the Seller (the "Bill of Sale and Assumption Agreement"). Simultaneously with the execution herewith, the Seller shall relinquish to the Buyer possession and operating control of the Purchased Assets and shall take all other steps that may be required or desirable to pass title to the Purchased Assets to the Buyer. (b) Simultaneously with the execution herewith, the Buyer is executing and delivering to the Seller, such instruments of assumption as are necessary to assume, in accordance with the terms hereof, the Assumed Obligations, including, without limitation, the Bill of Sale and Assumption Agreement. 1.6 FURTHER ASSURANCES, ETC. (a) The Seller shall promptly pay or deliver to the Buyer any amounts or items which may be received by the Seller after the Closing which constitute Purchased Assets and shall cause all customer orders and purchase orders placed with Affiliates of the Seller and relating to the products or services of the Business to be assigned at the Closing to the Buyer. The Seller shall, at any time and from time to time after the Closing, upon the reasonable request of the Buyer and at the expense of the Seller, do, execute, acknowledge, deliver and file, or cause to be done, executed, acknowledged, delivered and filed, all such further acts, transfers, conveyances, assignments or assurances as may reasonably be required for better selling, transferring, conveying, assigning and assuring to the Buyer, or for aiding and assisting in the collection of or reducing to possession by the Buyer, any of the Purchased Assets. (b) The Buyer shall promptly pay or deliver to the Seller any amounts or items which may be received by the Buyer after the Closing which constitute Excluded Assets. The Buyer shall, at any time and from time to time, after the Closing, upon the reasonable request of the Seller and at the Buyer's expense, do, execute, acknowledge, deliver and file, or cause to be done, executed, acknowledged, delivered and filed, all such further acts, transfers, conveyances, assignments or assurances as may reasonably be required for better assuming the Assumed Obligations. 1.7 ASSIGNMENT OF CONTRACTS, RIGHTS, ETC. Anything contained in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement or attempted agreement to transfer, sublease or assign any contract, license, real or personal property lease, sales order, purchase order or other agreement, or any Claim or right with respect to any benefit arising thereunder or resulting therefrom, or any Permit, if an attempted transfer, sublease or assignment thereof, without the required consent of 8 16 any other party thereto, would constitute a breach thereof or in any material respect affect the rights of the Buyer or the Seller thereunder. The Seller shall use its commercially reasonable efforts to obtain the consent of any such third party to any of the foregoing to the transfer or assignment thereof to the Buyer in all cases in which such consent is required for such transfer or assignment. If such consent is not obtained, the Seller shall make any arrangements necessary or desirable to provide for the Buyer the benefits thereunder, including, without limitation, enforcement by the Seller for the benefit of the Buyer of any and all rights of the Seller thereunder against the other party thereto. 1.8 RIGHT OF ENDORSEMENT, ETC. The Seller hereby constitutes and appoints the Buyer and its successors and assigns the true and lawful attorney of the Seller with full power of substitution, in the name of the Buyer, or the name of the Seller (in such case only if the Buyer clearly indicates that it is the assignee of the Seller), on behalf of and for the benefit of the Buyer, to collect all accounts and notes receivable and other items being sold, transferred, conveyed and assigned to the Buyer to endorse, without recourse, checks, notes and other instruments constituting the Purchased Assets in the name of the Seller, to institute and prosecute all proceedings which the Buyer may deem proper in order to collect, assert or enforce any claim, right or title of any kind in or to the Purchased Assets, to defend and compromise any and all actions, suits or proceedings in respect of any of the Purchased Assets or the Business and to do all such acts and things in relation thereto as the Buyer may deem advisable. The foregoing powers are coupled with an interest and shall be irrevocable by the Seller, directly or indirectly, whether by the dissolution of the Seller or in any manner or for any reason. All costs and expenses incurred by Buyer in the exercise of its rights under this Section 1.8 shall be borne by Buyer. ARTICLE II PURCHASE PRICE; ALLOCATION 2.1 ACQUISITION PRICE. The aggregate consideration (the "Purchase Price") to be received by the Seller from the Buyer for the Purchased Assets shall be Cnd. $18,650,000 (such amount being subject to adjustment pursuant to Section 2.2 below), payable, subject to the conditions set forth herein, by the Buyer to the Seller. 2.2 NET BOOK VALUE ADJUSTMENT. (a) Preparation of Closing Balance Sheet and Final Book Value Statement. As promptly as practicable following the Closing Date (but in no event later than 30 days after the Closing Date), the Seller shall prepare, and cause Price Waterhouse LLP, the independent accountants of the Seller (the "Seller's Accountants"), to review a balance sheet (the "Closing Balance Sheet") of the Seller reflecting the financial position of the Business immediately prior to the Closing Date and a statement (the "Final Net Book Value Statement") setting forth the computation of the Final Net Book Value (as defined below) derived therefrom, which statement shall be prepared in accordance with generally accepted accounting principles in Canada as 9 17 recommended in the Handbook of the Canadian Institute of Chartered Accountants ("GAAP") consistently applied with the Financial Statements; provided, however, that (i) reserves shall be made for uncollectible (or doubtful) accounts receivable in an amount equal to Cnd. $150,000 and old, obsolete, unmerchantable or slow moving inventory, in an amount equal to Cnd. $265,156 whether or not consistent with past practices and (ii) any write-offs or write-downs of prepaid expenses which are reflected on the Interim Balance Sheet shall be made in accordance with GAAP, whether or not consistent with past practices. In preparing the Closing Balance Sheet, the amount of goodwill to be reflected from the payment on or before the Closing of the Excluded Earnout Liabilities by the Seller shall not exceed the amount of Excluded Earnout Liabilities actually paid by the Seller and shall be stated otherwise in accordance with GAAP. For purposes of preparing the Final Net Book Value Statement, "Final Net Book Value" shall mean total assets of the Business immediately prior to the Closing Date (other than Excluded Assets) less total liabilities of the Business immediately prior to the Closing Date (other than Excluded Liabilities); provided, however, that no effect shall given to any increase in property, plant, or equipment as a result of an "involuntary conversion" as defined by GAAP. (b) Review by the Buyer. (i) Upon completion of the Final Net Book Value Statement, the Seller shall promptly deliver the same to the Buyer with a notice ("Seller's Notice of Adjustment") of the Seller setting forth its proposed adjustment, if any, of the Purchase Price as contemplated hereby. During and after the preparation of the Final Net Book Value Statement until the Final Determination Date (as defined below), the Seller shall provide the Buyer and its advisors with reasonable and timely access to the employees and records of the Seller and the work papers, trial balances and similar materials used in connection with the preparation of the Final Net Book Value Statement. (ii) Following receipt of the Seller's Notice of Adjustment, the Buyer will be afforded a period of 30 Business Days (the "First 30 Day Period") to review the Seller's Notice of Adjustment. At or before the end of the First 30 Day Period, the Buyer will either (A) accept the Final Net Book Value (as set forth in the Seller's Notice of Adjustment) in its entirety, in which case the Final Net Book Value will be as set forth in the Seller's Notice of Adjustment or (B) deliver to the Seller a written notice (the "Objection Notice") containing a written explanation of those items in the Final Net Book Value Statement (as set forth in the Seller's Notice of Adjustment) which the Buyer disputes, in which case the items identified by the Buyer shall be deemed to be in dispute. The failure by the Buyer to deliver the Objection Notice within the First 30 Day Period shall constitute the Buyer's acceptance of the Final Book Value as set forth in the Seller's Notice of Adjustment. If the Buyer delivers the Objection Notice in a timely manner, then, within a further period of 20 Business Days from the end of the First 30 Day Period the parties and, if mutually desired, their accountants will attempt to resolve in good faith any disputed items and reach a written agreement (the "Settlement Agreement") with respect thereto. Failing such resolution, the unresolved disputed items will be referred for final binding resolution to an independent recognized firm of certified public accountants mutually acceptable to the Seller and the Buyer (the "Arbitrating Accountants"), the fees and expenses of which shall be borne equally by the Seller, on the one hand, and the Buyer, on the other hand. The Final Net Book Value will be deemed to 10 18 be as determined by the Arbitrating Accountants in accordance with Section 2.2(a). Such determination (the "Accountants' Determination") shall be (A) in writing, (B) furnished to the Seller and the Buyer as soon as practicable after the items in dispute have been referred to the Arbitrating Accountants, (C) made in accordance with GAAP and (D) nonappealable and incontestable by the Seller, the Parent, the Buyer or any of their respective Affiliates and not subject to collateral attack for any reason. (iii) For purposes of this Section 2.2, the "Final Determination Date" shall mean the earliest to occur of (A) the 31st day following the receipt by the Buyer of the Seller's Notice of Adjustment if the Buyer shall have failed to deliver the Objection Notice to the Seller within the First 30-Day Period, (B) the date on which either the Seller or the Buyer gives the other a written notice to the effect that such party has no objection to the other party's determination of the Final Net Book Value, (C) the date on which the Seller and the Buyer execute and deliver a Settlement Agreement and (D) the date as of which the Seller and the Buyer shall have received the Accountants' Determination. (c) Adjustment. (i) If the Final Net Book Value is greater than Cnd. $18,650,000 (the amount of such excess being referred to herein as the "Underpayment Amount"), then, within five Business Days following the Final Determination Date, the Purchase Price shall be increased by the amount of the Underpayment Amount and the Buyer shall pay, or cause to be paid, to the Seller the Underpayment Amount. (ii) If the Final Net Book Value is less than Cnd. $18,650,000 (the amount of such shortfall being referred to herein as the "Overpayment Amount"), then, within five Business Days following the Final Determination Date, the Purchase Price shall be decreased by the amount of the Overpayment Amount and the Seller and/or the Parent shall pay, or cause to be paid, to the Buyer the Overpayment Amount. The Seller and the Parent shall be jointly and severally liable for the obligations in this Section 2.2. 2.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated to the Purchased Assets in a statement (the "Statement of Allocation") prepared in good faith by the Buyer and approved in writing by Seller, which approval shall not be unreasonably withheld. The Buyer shall deliver the Statement of Allocation to the Seller within 90 days of the Closing Date. None of the parties shall take any action inconsistent with the Statement of Allocation prepared in accordance with this Section 2.3. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby represents and warrants to the Buyer as follows: 11 19 (a) Organization; Corporate Authority; Good Standing. The Seller is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of its incorporation and has all requisite power and authority to own, lease and operate the Purchased Assets and to carry on the Business as now being conducted, to execute and deliver this Agreement and the Related Documents to which it is or will be a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The Seller has delivered to the Buyer a copy of its articles or certificate of incorporation (the "Charter") and by-laws in effect on the Closing Date. (b) Corporate Action; No Conflict. The execution, delivery and performance by each of the Seller and the Parent of this Agreement and the Related Documents to which it is or will be a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of such Person. This Agreement has been duly and validly executed and delivered by each of the Seller and the Parent and is, and each of the Related Documents to which such Person is or will be a party, when executed and delivered in accordance with its terms, will be, the valid and binding obligation of such Person enforceable against it in accordance with the terms thereof, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws now or hereafter in effect relating to creditors' rights generally and subject to limitations on the remedy of specific performance and injunctive and other forms of equitable relief. Except as set forth on Schedule 3.1(b), neither the execution, delivery or performance by any of the Seller or the Parent of this Agreement or any Related Document to which it is or will be a party, nor the consummation by such Person of the transactions contemplated hereby or thereby, nor compliance by such Person with any provision hereof or thereof will (i) conflict with or result in a breach of any provision of the Charter or by-laws of such Person, in each case as in effect on the Closing Date, (ii) cause a default or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, lease, mortgage, indenture, license, agreement, contract or other instrument or obligation to which such Person is a party or by which it or its properties or assets may be bound or (iii) violate any law, statute, ordinance, rule, regulation, order, writ, judgment, injunction, award, decree, concession, grant, franchise, restriction or agreement (each, a "Legal Requirement") of, from or with any Governmental Authority applicable to such Person or any of its properties or assets. Except as set forth on Schedule 3.1(b), no Permit, consent or approval of or by, or any notification of or filing with, any Person is required in connection with the execution, delivery or performance by each of the Seller or the Parent of this Agreement and the Related Documents to which it is or will be a party, or the consummation of the transactions contemplated hereby or thereby, other than required filings, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), the Competition Act (Canada) and the Investment Canada Act. For the purposes of this Agreement, the term "Person" means any individual, corporation, association, partnership, joint venture, trust or other entity or organization, including a Governmental Authority, and "Governmental Authority" means any international or federal, provincial, state, local or regional (whether domestic or foreign) or other government, authority, instrumentality, department, commission, board, bureau, agency or court. (c) Financial Information. Schedule 3.1(c) contains a true and complete copy of the following: 12 20 (i) the internally-prepared unaudited balance sheet of the Business as at June 30, 1996, and the related internally-prepared unaudited statements of income and retained earnings for the fiscal period then ended relating to the Business; and (ii) the internally-prepared unaudited balance sheet (the "Interim Balance Sheet") of the Business as at May 24, 1997 (the "Interim Balance Sheet Date") and the related internally-prepared unaudited statements of income and retained earnings for the 11-month period then ended relating to the Business. The financial statements described in the foregoing clauses (i) and (ii) are collectively referred to herein as the "Financial Statements." The Financial Statements (A) were prepared in accordance with the books and records of the Business and (B) fairly present the financial position of the Business in each case at and as of the dates indicated and the results of operations and retained earnings of the Business for the periods indicated. Except as set forth on Schedule 3.1(c), the financial statements described in the foregoing clauses (i) and (ii) were prepared in accordance with GAAP consistently applied throughout the periods covered thereby (except that any unaudited financial statements may omit footnote disclosure). All allocations of corporate overhead by the Parent to the Seller in the Financial Statements were fair, proper and made in accordance with GAAP. (d) Absence of Undisclosed Liabilities. Except for liabilities incurred in the ordinary course of the Business not to exceed Cnd. $500,000 since the Interim Balance Sheet Date, there are no liabilities of any nature (matured or unmatured, fixed or contingent) affecting or relating to the Business which were not provided for or disclosed on the Interim Balance Sheet and which are required to have been provided for or disclosed thereon in accordance with GAAP, except as disclosed on Schedule 3.1(d). (e) Absence of Changes. Except as set forth on Schedule 3.1(e), since the Interim Balance Sheet Date the Business has been operated in the ordinary course and consistent with past practice, and there have not been any: (i) adverse changes in the assets (including, without limitation, levels of working capital and the components thereof), properties, liabilities, financial condition, operations, results of operations, or business of the Business (other than changes relating solely to the Excluded Assets or the Excluded Liabilities); (ii) occurrences resulting in the damage, destruction or loss (whether or not covered by insurance) affecting any tangible asset or property of the Business in excess of Cnd. $50,000 in the aggregate; (iii) obligations or liabilities (whether absolute, accrued, contingent or otherwise and whether due or to become due) created or incurred or entered into, or any transactions, contracts or commitments entered into, by the Business, other than in the ordinary course of the business of the Business and consistent with past practice (other than as related solely to the Excluded Liabilities); (iv) licenses, sales, transfers, pledges, mortgages or other hypothecations or dispositions of any tangible or intangible assets of the Business, other than in the ordinary 13 21 course of the business of the Business and consistent with past practice (other than as related solely to the Excluded Assets); (v) agreements or contracts entered into by or on behalf of the Business which require the delivery by the Seller of a performance bond; (vi) any amendments, terminations or waivers of any rights of value to the Business; (vii) increases in, or changes in the method of computing, the compensation of employees of the Seller who are employed in the Business (including, without limitation, increases pursuant to or change in method under any bonus, pension, profit sharing, deferred compensation arrangement or other plan or commitment), or increase in compensation payable to any officer, employee, consultant or agent of the Seller who are employed in the Business, or entering into of any employment contract with or making of any loan to, or engagement in any transaction with, any officer or employee of the Seller who are employed in the Business, except for increases in compensation in the ordinary course of the Business, consistent with past practices and not in excess of 10% of any such employee's overall compensation; (viii) changes in the manner in which the Business extends discounts or credits to customers or otherwise deals with customers; (ix) changes in the accounting methods or practices followed by or with respect to the Business, or any changes in depreciation or amortization policies or rates theretofore adopted; (x) forward purchase commitments in excess of normal operating inventories or at prices higher than current market prices; (xi) termination of employment of any key employee of the Seller employed in the Business, or, to the Knowledge of the Seller, any expression of intention by any key employee of the Seller employed in the Business to terminate his or her employment; (xii) cancellation or termination of any insurance policy maintained by or with respect to the Business; (xiii) any account receivable with a face amount in excess of Cnd. $100,000 having (i) become past due in excess of 90 days in its payment, (ii) had asserted against it any claim, refusal to pay or right of set-off or (iii) been placed in jeopardy; (xiv) any write-down or write-up of the value of any inventory of the Business, or any write-off of any accounts receivable or notes receivable of the Business or any portion thereof; (xv) any changes in the manner in which corporate overhead is allocated to the Business; or 14 22 (xvi) agreements or understandings, whether in writing or otherwise, for the Seller to take any of the actions specified in items (i) through (xv) above. (f) Leased Real Property. (i) Neither the Seller nor any Affiliate (including the Parent) owns any real property or interest therein that is held for use primarily in connection with the Business. (ii) (A) Each lease set forth on Schedule 3.1(f) (collectively, the "Leases") is in full force and effect and all rent and other sums and charges payable by the Seller thereunder are current, (B) no notice of default or termination under any Lease is outstanding, (C) no event or condition which, with the giving of notice or the lapse of time or both, would constitute a default or termination event or condition under any Lease exists or has occurred, and (D) no lessor under any Lease has any Encumbrance (other than Permitted Encumbrances) under any Lease or otherwise against the Purchased Assets. The Seller's leasehold estate under and the Seller's leasehold interest in each Lease is held free and clear of all Encumbrances (other than Permitted Encumbrances) and other matters adversely affecting title thereto, which is claimed by or through the Seller. The Seller has delivered to the Buyer true and complete copies of all Leases (including all amendments, waivers, modifications and supplements thereto). (iii) Except as set forth on Schedule 3.1(f), (A) all improvements on the real property leased to the Seller (the "Leased Real Property"), insofar as they relate to the Business, conform in all respects to all applicable Legal Requirements (including applicable environmental and occupational safety and health laws and regulations) and zoning and building ordinances of Governmental Authorities, and all of the Leased Real Property is zoned for the purposes for which such Leased Real Property is presently being used, (B) all improvements on the Leased Real Property, insofar as they relate to the Business, are in good condition, normal wear and tear excepted, and there does not exist any condition which interferes with the present economic value or use thereof by the Business, (C) none of the buildings and structures located on the Leased Real Property, the appurtenances thereto or the equipment therein or the operation or maintenance thereof, insofar as they relate to the Business, violates any restrictive covenant or encroaches on any property owned by others or any servitude easement, right of way or other encumbrance or restriction affecting such Leased Real Property, nor does any building or structure of any third party encroach upon the Leased Real Property or any servitude easement or right of way benefitting the Leased Real Property, and (D) no condemnation proceeding is pending or, to the Knowledge of the Seller, threatened, which would preclude or impair the use by the Business of any Leased Real Property for the uses for which it is intended. (g) Title to Assets, Properties, Interests in Properties and Rights and Related Matters. The Seller has good, valid and marketable title to all of the Purchased Assets, free and clear of all Encumbrances, other than Permitted Encumbrances. Except as disclosed on Schedule 3.1(g), no Affiliate of the Seller or the Parent owns any assets, properties, interests in properties or rights, of any kind or description, used in the Business, other than the Excluded Assets. There does not exist any condition which interferes with the use of any tangible personal property 15 23 included in the Purchased Assets. The Purchased Assets are in good operating condition, normal wear and tear excepted. The Purchased Assets include all assets and properties (real, personal and mixed, tangible and intangible), interests in properties and rights necessary to permit the Buyer to carry on the Business as presently conducted by the Seller. The Seller has the complete and unrestricted power and the unqualified right to sell, transfer, convey and assign the Purchased Assets owned by it. (h) Intellectual Property Rights. (i) Schedule 3.1(h)(i)(a) attached hereto, sets forth a list of all extant patents, rademarks, service marks, and registrations thereof, trade names and copyrights, applications and registrations for the foregoing owned by the Seller and licenses of Intellectual Property granted to the Seller that are used or held for use in the Business; and invention disclosures of the employees on Schedule 3.1(h)(ii), which invention disclosures relate to the Business and for which patent applications have not been filed. As used herein, the term "Requisite Rights" means the Intellectual Property Rights of the Seller listed on Schedule 3.1(h)(i)(a). Except as set forth or disclosed in Schedule 3.1(h)(i)(b): (A) the Seller owns, and possesses all incidents of ownership of, the Requisite Rights; (B) no royalties or other fees are payable by the Seller to other persons by reason of the ownership, sale, license or use of the Requisite Rights in the Business as presently conducted; (C) no product or service manufactured, marketed or sold presently by the Business violates or infringes on any Intellectual Property Rights of any other Person; (D) there is no pending or, to the Knowledge of the Seller, threatened claim or litigation (nor, to the Knowledge of the Seller, does there exist any basis therefor) contesting the validity of or the right to bring actions for infringement (to the extent any such right presently exists with the Seller) or the right to use in the Business as presently conducted any of the Requisite Rights, nor has the Seller received any notice that any of the Requisite Rights or the operation or proposed operation of the Business conflicts or will conflict with the asserted rights of any other Person; and (E) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not breach, violate or conflict with any instrument or agreement governing any Requisite Right and will not cause the forfeiture or termination or give rise to a right of forfeiture or termination of any Requisite Right or in any way impair the right of the Buyer to use, sell, license or dispose of or bring any action for the infringement (to the extent any such right presently exists) of any Requisite Right or portion thereof. (ii) Schedule 3.1(h)(ii) sets forth a list of the employees of the Seller who have signed any agreement which provides for such employees to assign or otherwise 16 24 transfer to the Seller all of their respective right, title and interest in and to any Intellectual Property Rights relating to the Business. (iii) As used herein, the term "Intellectual Property Rights" means all intellectual property rights including, without limitation, Proprietary Technology, patents, patent applications, patent rights, trademarks, trademark registrations, trademark applications, trade names, service marks, service mark registrations, service mark applications, logos, copyrights (statutory and common law), copyright applications, copyright registrations, know-how, licenses, trade secrets, industrial designs, industrial registrations, industrial design or registration applications, proprietary processes and formulae, layouts, processes, inventions, development tools and all documentation and media constituting, describing or relating to any of the foregoing, including, without limitations, manuals, memoranda and records. As used herein, the term "Proprietary Technology" means all proprietary processes, formulae, inventions, trade secrets, know-how, development tools and other proprietary rights owned by the Seller pertaining to any product or service currently or previously manufactured, sold, distributed or marketed or proposed to be manufactured, sold, distributed or marketed (as the case may be), by the Business or used, employed or exploited in the development, manufacture, license, sale, distribution, marketing or maintenance of the business thereof, and all documentation and media constituting, describing or relating to the foregoing. (i) Environmental Matters. Except as disclosed on Schedule 3.1(i)(i), (i) the Seller has obtained all Permits which are required to conduct the Business under all Environmental Laws. The Seller is as of the Closing Date and for the past five years has been in compliance with the terms and conditions of all such Permits and with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any Environmental Law applicable to the Business or in any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder. As used herein, "Environmental Law" shall mean, without limitation, any federal, state, provincial or local statute, law, rule, regulation, ordinance, code, guideline, policy or rule of common or civil law of the United States or Canada including, without limitation, the Environmental Quality Act (Quebec), the Canadian Environmental Protection Act (Canada), the Clean Air Act (Canada), the Transportation of Dangerous Goods Act (Canada), the Hazardous Materials Information Review Act (Canada), the Act Respecting Pesticides (Quebec), the Act Respecting Ecological Reserves (Quebec), the Act Respecting Occupational Health and Safety (Quebec), the Use of Petroleum Products Act (Quebec), Regulation no. 87 (Montreal Urban Community), Regulation no. 90 (Montreal Urban Community) or of any other jurisdiction in which the Seller owns or leases any real property or conducts operations in respect of the Business, in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree of judgment relating to the environment, health, safety or Hazardous Materials. As used herein, "Hazardous Materials" shall mean all infectious, toxic or hazardous pollutants, contaminants (including contaminants as defined in the Environmental Quality Act, R.S.Q., c. Q-2 (Canada), as amended from time to time), chemicals, substances, materials or wastes of whatever kind or nature, 17 25 whether liquid, solid or gaseous, referenced, described, defined or included in any Environmental Law. Hazardous Materials include, without limitation, petroleum products, heavy metals, asbestos and PCBs. (ii) Except as disclosed on Schedule 3.1(i)(ii), no notice, notification, demand, request for information, citation, summons or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or, to the Knowledge of the Seller, threatened by any Governmental Authority with respect to any alleged failure by the Seller to comply with any Environmental Law or to have any Permit required in connection with the conduct of the Business or with respect to any generation, treatment, storage, recycling, transportation, release or disposal, or any release (including as such term is defined in 42 U.S.C. Section 9601(22)) of any Hazardous Materials. (iii) Except as disclosed on Schedule 3.1(i)(iii), in the conduct of the Business, (A) the Seller has not handled any Hazardous Material so as to require a hazardous waste management permit, and the Seller has not generated, recycled, treated, stored, disposed of or Released any Hazardous Material in violation of any Environmental Law in the conduct of the Business; (B) no PCB is or has been present, in violation of any Environmental Law, at any property occupied by the Business; (C) no asbestos is or has been present, in violation of any Environmental Law, at any property occupied by the Business; (D) there are no underground storage tanks for Hazardous Materials, active or abandoned, in violation of any Environmental Law, at any property occupied by the Business; and (E) no Hazardous Materials have been Released in excess of a "reportable quantity" established by statute, ordinance, rule, regulation or order or in a quantity or manner that would support an order from any Governmental Authority or other legal obligation under Environmental Laws requiring Buyer to perform or pay for investigation, remediation, or other relief or response to such Release. (iv) Except as disclosed on Schedule 3.1(i)(iv), the Seller has not transported or arranged for the transportation of any Hazardous Material to any location which is listed on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), listed on the Comprehensive Environmental Response Compensation and Liability and Information System ("CERCLIS") maintained by the U.S. Environmental Protection Agency ("US EPA"), or listed on any similar state list or provincial list under any Environmental Law, or which may lead to any Claim under Environmental Laws against the Seller or the Business for or with respect to clean-up costs, remedial work, damages to natural resources or personal injury claims, including, but not limited to, Claims under CERCLA. Except as disclosed on Schedule 3.1(i)(i), no oral or written notification of a Release of a Hazardous Material has been filed by or on behalf of the Seller and no property now or previously owned or leased by the Seller in the conduct of the Business is listed on the National Priorities List ("NPL") promulgated pursuant to CERCLA, on CERCLIS or on any similar state list of sites or provincial list under any Environmental Law, potentially requiring investigation or clean-up or formally proposed for listing by the US EPA or any other Governmental Authority. 18 26 (j) Contracts, Etc. Schedule 3.1(j) and, with respect to Intellectual Property Rights, Schedule 3.1(h) contains a list of all oral and written contracts, agreements and other instruments to which the Seller is a party and which relate solely or in principal part to the Business, which are outside the ordinary course of business or which are referred to in clauses (i) through (xvi) below (collectively, the "Contracts"). Except as set forth in Schedule 3.1(j), the Seller is not, with respect to the Business, a party to any of the following: (i) any distributor, dealer, sales, advertising, agency, manufacturer's representative, franchise or similar contract or any other contract requiring the payment of any commissions in excess of Cnd. $25,000 per year; (ii) any continuing contract for the future purchase of inventory, material, supplies, equipment or services or for the future sale of products or services, in each case which is not terminable within 60 days of the Closing Date without cost or other liability; (iii) any license or other agreement or arrangement providing for the payment of a royalty or licensing fee to or by the Seller; (iv) any contract with or commitment for the employment or retention of any officer, employee or consultant or any other type of contract with any officer, employee or consultant for services rendered to the Seller; (v) any profit-sharing, bonus, stock option, pension, retirement, stock purchase, disability, hospitalization, insurance or similar plan or agreement, formal or informal, providing benefits to any current or former director, officer or employee of or consultant to the Seller employed in or retained with respect to the Business; (vi) except as may relate to any Excluded Liabilities, any indenture, mortgage, promissory note, loan agreement or other agreement or commitment for the borrowing of money, for a line of credit or for any leasing transaction of a type required to be capitalized in accordance with Statement of Financial Accounting Standards No. 13 issued by the Financial Accounting Standards Board; (vii) any contract or commitment for capital expenditures involving more than Cnd. $25,000 each or Cnd. $50,000 in the aggregate; (viii) any lease, sublease or other agreement pursuant to which it is a lessee of or holds or operates any real or personal property owned by any third party; (ix) any option or other agreement to purchase or otherwise acquire or sell or otherwise dispose of any interest in real property; (x) any contract or commitment for charitable contributions; (xi) any agreement or contract with a "disqualified individual" (as defined in Section 280G(c) of the Code) which would result in a disallowance of the deduction for any "excess parachute payment" (as defined under Section 280G(b)(i) of the Code) if the Seller were subject to such provisions; 19 27 (xii) any guaranty of the obligations of third parties; (xiii) any agreement which restricts it from conducting the Business anywhere in the world; (xiv) any agreement under which it has agreed to indemnify any third party with respect to, or to share, the tax liability of any third party; (xv) any agreement or arrangement for the purchase or other acquisition of or sale or other disposition of any assets, properties or rights other than in the ordinary course of business; or (xvi) any other agreement or contract which is material to the Business, the Purchased Assets or Assumed Obligations (including, without limitation, levels of working capital and the components thereof), other than this Agreement, the Related Documents and any other agreement related to the transactions contemplated hereby and thereby. The Seller has not received notice alleging it to be in default in any respect, and the Seller has in all respects performed all the obligations required to be performed by it to date and is not in default in any respect under any Contract, and there exists no event, condition or occurrence which, with the giving of notice or lapse of time, or both, would constitute a default under any Contract. The Seller has not received from any party to any Contract notice of its intention to cancel or terminate such Contract. The Seller has furnished to the Buyer true and complete copies of all of the Contracts (including all amendments, supplements and modifications in respect thereof) or a description thereof as set forth on Schedule 3.1(j). (k) Litigation, Etc. Except as set forth on Schedule 3.1(h) or (k), there are no (i) claims (whether legal, administrative, arbitration or otherwise) pending or, to the Knowledge of the Seller, threatened affecting the Business or the Purchased Assets or Assumed Obligations, whether at law or in equity, or before or by any Governmental Authority or (ii) judgments, decrees, injunctions or orders of any Governmental Authority, or arbitrator affecting the Business or the Purchased Assets or Assumed Obligations. The Seller has delivered to the Buyer true and complete copies of all documents and correspondence relating to matters referred to in Schedule 3.1(k) which are included in the Assumed Obligations. (l) Compliance with Law; Governmental Authorizations. (i) The Seller is not in violation of any Legal Requirement applicable to the Business. (ii) (A) The Seller has all licenses, permits, orders, approvals and other authorizations of or from all Governmental Authorities which are necessary in the conduct of the Business (collectively, the "Permits"), (B) such Permits are in full force and effect, (C) no violations are currently pending with respect to any such Permit, and (D) no proceeding is pending or, to the Knowledge of the Seller, threatened to revoke or limit any such Permit. Schedule 3.1(l) contains a true and complete list of all of the Permits and the Seller has furnished to the Buyer true and complete copies thereof. 20 28 (iii) Within the past five years, neither the United States Occupational Safety and Health Administration, CSST nor any other Governmental Authority has alleged or requested a correction by the Seller in respect of the Business of any such occupational health or safety problem. (m) Warranties of Products; Products Liability; Regulatory Compliance Regarding Products. (i) The products manufactured, sold or distributed, by the Seller in connection with the Business are free from any material defects, and conform in all respects with all standards for products of such type. (ii) No Governmental Authority regulating the marketing, testing or advertising of any of the products manufactured, sold or distributed by the Business has requested that any such product be removed from the market, that substantial new product testing be undertaken as a condition to the continued manufacturing, selling or distribution of any such product or that such product be modified. (n) Inventories; Accounts and Notes Receivable. (i) Except as set forth on Schedule 3.1(n), the inventories of the Seller with respect to the Business include no items which are obsolete, of below standard quality or of a quality or quantity not usable or salable in the normal course of business of the Business, the aggregate value of which has not been written down on the books of account of the Seller to realizable market value or with respect to which adequate reserves have not been, or will not be in the Closing Balance Sheet in accordance with GAAP and Section 2.2(b), provided. (ii) Except as set forth on Schedule 3.1(n), all of the accounts receivable and notes receivable owing to the Seller as of the Closing Date constitute, and as of the Closing will constitute, valid and enforceable claims arising from bona fide transactions in the ordinary course of business, and there are no known or asserted claims, refusals to pay or other rights of set-off against any thereof. Except as set forth on Schedule 3.1(n) as of the Closing Date, there is (i) no account debtor or note debtor delinquent in its payment by more than 90 days, (ii) no account debtor or note debtor that has refused or threatened to refuse to pay its obligations for any reason, (iii) no account debtor or note debtor that is insolvent or bankrupt, (iv) no account receivable or note receivable pledged to any third party by the Seller and (v) no account or note receivable that is in jeopardy for any reason. (o) Labor Relations; Employees. Schedule 3.1(o) contains a true and complete list of the persons employed by the Seller in the Business as of the Closing Date (the "Current Employees"). Except as set forth on Schedule 3.1(o), (i)the Seller has not been notified by any Current Employee of any grievance or problem existing between the Seller and such Current Employee; (ii) the Seller is not delinquent in payments to any of the Current Employees for any wages, salaries, commissions, bonuses or other direct or indirect compensation for any services performed by them to the Closing Date or for amounts required to be reimbursed to the Current 21 29 Employees;(iii) upon termination of the employment of any of the Current Employees, neither the Seller nor the Buyer will by reason of anything done prior to the Closing, or by reason of the consummation of the transactions contemplated hereby, be liable for any excise taxes pursuant to Section 4980B of the Code or to any of the Current Employees for so-called "severance pay" or any other payments; (iv) the Seller is in compliance in all respects with all Legal Requirements respecting labor, employment and employment practices, terms and conditions of employment and wages and hours (including, without limitation, all Legal Requirements promulgated by the Equal Employment Opportunity Commission and the Department of Labor under the Occupational Safety Hazards Act and the Worker Adjustment and Retraining Notification Act); (v) there is no unfair labor practice complaint against the Seller relating to or arising out of the conduct of the Business pending or, to the Knowledge of the Seller, threatened before the National Labor Relations Board or any comparable state, provincial, local or foreign agency; (vi) there is no labor strike, dispute, slowdown or stoppage pending or, to the Knowledge of the Seller, threatened against or involving the Seller affecting the Business; (vii) no representation question exists regarding the Current Employees; (viii) no grievance and no arbitration proceeding arising out of or under collective bargaining agreements is pending in respect of the Business and no Claim therefor has been asserted; and (ix) no collective bargaining agreement or other contract with or commitment to any labor union is in effect or currently being negotiated by the Seller. The Seller has delivered to the Buyer true and complete copies of all handbooks, manuals and other policies describing the employment policies with respect to the Business. (p) Employee Plans. (i) Except as set forth on Schedule 3.1(p), the Seller has not been within the past five years a party to, sponsored or maintained any Employee Plans. As used herein, the term "Employee Plan" means any employee benefit plan (including as such term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), as well as any other plan, program or arrangement organized, maintained and/or administered pursuant to any provincial pension plan act (e.g., the Supplemental Pension Plan Act (Quebec)) involving direct or indirect compensation, under which the Seller may have any present or future obligations or liability on behalf of its employees or former employees, contractual employees or their dependents or beneficiaries, and which relates primarily to the Business. As used herein, the term "ERISA Affiliate" means any entity that is a member of a "controlled group of corporations" with or is under "common control" with the Seller as defined in Section 414(b) or (c) of the Code. (ii) Schedule 3.1(p) contains a true and complete list of all Employee Plans. (iii) No Employee Plan currently maintained by the Seller is or was within the past five years a "multiple employer plan" (including as such term is defined within the meaning of Section 413 of the Code). (iv) The Seller is not and has not been for the past five years obligated to contribute to any Employee Plan which is a "multiemployer plan" (as such term is defined within the meaning of Section 3(37) of ERISA). 22 30 (v) Neither the Seller nor any other "disqualified person" or "party in interest" (as such terms are defined in Section 4975 of the Code and Section 3(14) of ERISA, respectively) with respect to an Employee Plan has breached the fiduciary rules of ERISA (or any other statute pursuant to which the Seller maintains any other Employee Plan) or engaged in a prohibited transaction which could subject the Seller to any tax or penalty imposed under any Legal Requirement including, without limitation, Section 4975 of the Code or Section 502(i), (j) or (l) of ERISA. (vi) Each Employee Plan has been maintained and operated in accordance with its terms and is in substantial compliance with the requirements of all Legal Requirements including, without limitation, ERISA and the Code and in accordance with the provisions of any applicable collective bargaining agreement. (vii) Each Employee Plan for which the Seller has claimed a deduction under Section 404 of the Code, as if such Employee Plan were qualified under Section 401 of the Code, has received or has timely applied for a favorable determination letter from the Internal Revenue Service as to the qualification of such Employee Plan, and such favorable determination letter has not been modified, revoked or limited in any way. (viii) All contributions due and payable on or before the Closing Date in respect of the Employee Plans will be made in full and in proper form, and adequate accruals have been provided for in the financial statements for all other contributions or amounts in respect of the Employee Plans for periods ending on the Closing Date. (ix) No Employee Plan subject to, any applicable employee benefits Law including, without limitation, Part (3) of Subtitle B of Title I of ERISA or Section 412 of the Code has incurred any "accumulated funding deficiency" (as defined in Section 412(a) of the Code), whether or not waived. (x) The Seller has neither made nor agreed to make, nor is it required to make (in order to bring any of the Employee Plans into substantial compliance with any applicable employee benefits Legal Requirement including, without limitation, ERISA or the Code), any change in benefits that would increase the costs of maintaining any of the Employee Plans. (xi) As of the Closing Date, there are no actions, suits, disputes, arbitrations or claims pending (other than routine claims for benefits) or legal, administrative or other proceedings or governmental investigations pending or, to the knowledge of the Seller, threatened against any Employee Plan or against the assets of any Employee Plan. (xii) No Employee Plan subject to Title IV of ERISA (or any equivalent Canadian Legal Requirement) has been terminated within the past four years, and no proceeding has been initiated to terminate any Employee Plan. (xiii) Neither the Seller nor its ERISA Affiliates nor any member of a controlled group including the Seller or any of its ERISA Affiliates has incurred within the past five years, nor reasonably expects to incur, any termination, liability in respect of 23 31 any Employee Plan under any applicable employee benefits Legal Requirement including, without limitation, Section 4064 or 4069 of ERISA. (xiv) No "reportable event" under any applicable employee benefits Legal Requirement (within the meaning of Section 4043 of ERISA) has occurred within the past five years with respect to any Employee Plan subject to ERISA. (xv) Each Employee Plan which is a "group health plan" (as defined in any applicable employee benefits Legal Requirement including as defined in Section 5000 of the Code) has been maintained in compliance with all applicable employee benefits Legal Requirements including, without limitation, Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA and no tax payable on account of any applicable employee benefits Law including, without limitation, Section 4980B of the Code has been or is expected to be incurred by Seller with respect to an Employee Plan. (xvi) No benefit payable or which may become payable by the Seller pursuant to any Employee Plan shall constitute an "excess parachute payment" (as defined in any applicable employee benefits Legal Requirement including within the meaning of Section 280G of the Code) which is subject to the imposition of an excise tax under any applicable employee benefits Legal Requirement including, without limitation, Section 4999 of the Code or which would not be deductible by reason of Section 280G of the Code. (xvii) No Employee Plan currently maintained by the Seller provides any post-retirement health or life insurance benefits, and the Seller does not maintain any obligations to provide any post-retirement benefits in the future. (q) Tax Matters. (i) The Seller has paid (or the Parent on behalf of the Seller has paid) all Taxes required to be paid through the Closing Date and will pay all Taxes required to be paid by it, in respect of the Business, for periods ending on or prior to the Closing Date and has properly and timely filed and will, prior to the Closing, properly and timely file all returns, declarations of estimated Tax, Tax reports, information returns and statements required to be filed by it (collectively, "Returns"), in respect of the Business, prior to the Closing (other than those for which extensions shall have been granted prior to Closing) relating to any Taxes with respect to any income, properties or operations of the Seller prior to the Closing; (ii) no tax liens have been filed with respect to any of the Purchased Assets, and there are no pending tax audits of any of the Seller or the Parent relating to the Business; (iii) the Seller has withheld from each payment made to any of its present or former employees, officers and directors, and to all Persons who are non-residents of Canada for the purposes of the Income Tax Act (Canada), all amounts required by Law, and has remitted such withheld amounts within the prescribed periods to the appropriate Governmental Authority; (iv) the Seller has remitted all Canada Pension Plan and Quebec Pension Plan contributions, unemployment insurance premiums, employer health taxes and other Taxes payable by it in respect of its employees to the proper Governmental Authority within the time required by applicable Law; (v) the Seller has charged, collected and remitted on a timely basis all amounts as required by applicable Law on any sale, supply or delivery whatsoever, made by the Seller in respect to the Business including, without limitation, sales and goods and services taxes; (v) the Seller is a registrant for the purposes of the goods and 24 32 services tax provided for under the Excise Tax Act and its registration number is 140640236RT; (vi) the Seller is a registrant for the purposes of the Taxes provided for under the Quebec Sales Tax Act and its registration number is 1017799629TQ0001; (vii) The Seller has never acquired or had the use of any of the Purchased Assets from a Person (a "Related Person") with whom the Seller was not dealing at arm's length, as determined under the Income Tax Act (Canada); and the Seller is not a party to or bound by any agreement with, it is not indebted to, and no amount is owing to the Seller by any Person, not dealing at arm's length, within the meaning of the Income Tax Act (Canada), with the Seller. (r) Brokers. Except as set forth on Schedule 3.1(r), neither Seller nor any of its officers, directors, stockholders or employees has employed any investment banker, broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated hereby. (s) Distributions; Transactions with Affiliates. Except as set forth on Schedule 3.1(s), no Affiliate of the Seller has purchased, acquired or leased any property or services from (or made any payments or incurred any indebtedness with respect thereto), or sold, transferred or leased any property or services to, or entered into any management, consulting or similar agreement or tax-sharing agreement with, the Business. For purposes of this Agreement, the term "Affiliate," as to any Person, means any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such Person; provided, however, that with respect to the Parent and the Seller, the term "Affiliate" shall not be deemed to include Chase Capital Partners. (t) Principal Customers. Schedule 3.1(t) sets forth a list of each customer of the Seller to which the Seller, individually or in the aggregate, sold more than Cnd. $250,000 in goods or services in connection with the Business in its most recent fiscal year (the "Principal Customers"). Except as set forth on Schedule 3.1(t), (1) no disagreement or problem exists between the Seller and any of the Principal Customers with an amount in controversy in excess of Cnd. $250,000, (2) the business relationship between the Seller and each of the Principal Customers is good and (3) no Principal Customer has threatened to terminate its relationship and dealings with the Business, whether as a result of the transactions contemplated by this Agreement or otherwise. (u) Bank Accounts; Powers of Attorney. Schedule 3.1(u) sets forth a complete and correct list of (i) the names of each bank account in which the Seller has an account or safe deposit box used for the Business, and the names of all persons authorized to draw thereon, or have access thereto and (ii) the names of all persons, firms, associations, corporations or business organizations, holding general or special powers of attorney from the Seller in respect of the Business and a summary of the terms thereof. (v) Suppliers and Vendors. Since June 30, 1996, no material supplier or vendor of the Seller has canceled or otherwise terminated, or threatened to cancel or otherwise terminate, its relationship with the Seller or has decreased, limited or otherwise modified, or threatened to decrease, limit or otherwise modify, the services, supplies or materials it provides to the Seller. 25 33 (w) Original Purchase Agreement. The Seller or the Parent has, prior to the Closing, paid in full all Excluded Earnout Liabilities. The full amount of the liabilities or obligations of the Seller under (i) Article III of the Original Purchase Agreement (including under Sections 3.3(ii) and 3.3(vi) for the Performance Measurement Period (as such term is defined therein)) ending June 30, 1997 does not exceed Cnd. $1,250,000, and (ii)(x) Section 2.2(vi) of the Original Purchase Agreement (as it relates to clause (a) of Schedule 2.2(vi) thereunder) for the period ending on the Closing Date shall be deemed to be Excluded Obligations hereunder and (y) Section 2.2(vi) of the Original Purchase Agreement (as it relates to clause (b) of Schedule 2.2(vi) thereunder shall either have been satisfied in full on or prior to the Closing or shall be reflected as a liability on the Closing Balance Sheet in accordance with GAAP. Immediately prior to the Closing, the Seller has no obligations then owing to any Person under Sections 2.2(vi), 2.3 or 3.5 of the Original Purchase Agreement. (x) Definition of Knowledge. As used in this Agreement, the term "Knowledge" of the Seller means and includes actual knowledge of those persons listed on Schedule 3.1(y). 3.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Seller as follows: (a) Organization; Corporate Authority; Good Standing. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Buyer has all requisite power and authority to execute and deliver this Agreement and the Related Documents to which it is or will be a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. (b) Capitalization. The authorized capital of the Buyer consists of 100 Class A shares of common stock which are all issued and outstanding and owned by Advanced Accessory Systems, LLC, a Delaware limited liability company. Immediately after the Closing, all such issued and outstanding shares of common stock will be duly authorized and validly issued and outstanding. (c) Corporate Action; No Conflict. The execution, delivery and performance by the Buyer of this Agreement and the Related Documents to which the Buyer is or will be a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of the Buyer. This Agreement has been duly and validly executed and delivered by the Buyer and is, and each of the Related Documents to which the Buyer is or will be a party, when executed and delivered in accordance with its terms, will be, the valid and binding obligation of the Buyer, enforceable in accordance with the terms thereof. Neither the execution, delivery or performance by the Buyer of this Agreement or any of the Related Documents to which the Buyer is or will be a party, nor the consummation by the Buyer of the transactions contemplated hereby or thereby, nor compliance by the Buyer with any provision hereof or thereof will (i) conflict with or result in a breach of any provision of the certificate of incorporation or by-laws of the Buyer, in each case as in effect on the Closing Date, (ii) cause a default (or give rise to any right of termination, cancellation or 26 34 acceleration) under any of the terms, conditions or provisions of any note, bond, lease, mortgage, indenture, license, agreement, contract or other instrument or obligation to which the Buyer is a party or by which it or any of its properties or assets is or may be bound or (iii) violate any Legal Requirement of, from or with any Governmental Authority applicable to the Buyer or any of its properties or assets. No Permit, consent or approval of or by, or any notification of or filing with, any Person is required in connection with the execution, delivery or performance by the Buyer of this Agreement and the Related Documents to which the Buyer is or will be a party, or the consummation by the Buyer of the transactions contemplated hereby or thereby, other than required filings under the HSR Act or under Canadian Legal Requirements. (d) Brokers. Neither the Buyer nor any of its officers, managers or employees has employed any investment banker, broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated hereby. (e) No Prior Business. The Buyer was formed for the purpose of acquiring the Business and has not conducted any business in the past, except in connection with the transactions contemplated by this Agreement and related activities. (f) GST and QST. The Buyer has applied to the Quebec Ministry of Revenue for the issuance to it of GST and QST numbers and has been assured that the same will be issued to it retroactively to no later than the Closing Date. ARTICLE IV CLOSING The closing (the "Closing") for the consummation of the transactions contemplated by this Agreement shall take place at the offices of Martineau Walker simultaneously with the execution and delivery herewith on July 2, 1997 (the "Closing Date"). ARTICLE V INDEMNIFICATION 5.1 DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: (a) "Buyer Indemnification Event" means any of the following: (i) the untruthfulness, inaccuracy or breach of any representation or warranty of the Seller contained in this Agreement or any Related Document, any Schedule attached hereto or thereto or any certificate delivered by the Seller in connection herewith or therewith; (ii) the breach by the Seller of any agreement or covenant of the Seller contained in this Agreement or any Related Document; 27 35 (iii) the assertion of any Claim against or the payment of any Loss to the extent related to such Claim by any Buyer Indemnified Person that arose in connection with, or is in any way related to any Excluded Obligations; (iv) the assertion against or payment by any Buyer Indemnified Person of any Claim or Loss to the extent related to such Claim as a result of non-compliance by the Seller or the Buyer with the "bulk sales laws" of any jurisdiction which may be applicable to the transactions contemplated hereby (including, without limitation, under Article 1768 of the Civil Code of Quebec, as amended (including, without limitation, the sale of enterprise provisions thereunder)); (v) the assertion of any Claim against or payment of any Loss to the extent related to such Claim by any Buyer Indemnified Person relating in any way to Taxes of any kind whatsoever, or expenses, interest or penalties relating thereto, with respect to periods ending on or prior to the Closing Date, other than Taxes relating to the conduct of the Business after the Closing Date or as may be specified in Section 1.3(a); (vi) the assertion of any Claim against or the payment of any Loss to the extent related to such Claim by any Buyer Indemnified Person relating to or arising out of the environmental matters existing or occurring prior to the Closing Date; (vii) the assertion of any Claim against or the payment of any Loss to the extent related to such Claim by any Buyer Indemnified Person relating to or arising out of any Excluded Earnout Liabilities; and (viii) all reasonable fees, costs and expenses (including, without limitation, reasonable attorneys', accountants' and other professional fees and expenses) incurred by any Buyer Indemnified Person in connection with any action, suit, proceeding, demand, assessment or judgment arising out of any of the matters indemnified against under this Article or in connection with the enforcement by any Buyer Indemnified Person of its rights under this Article. (b) "Buyer Indemnified Persons" means and includes the Buyer and its officers, directors, employees, Affiliates, successors and assigns of all or any portion of the Business. (c) "Claim" means any claim, demand, assessment, action, suit, proceeding, investigation, cause of action, litigation, judgment, order or decree. (d) "Indemnified Persons" means the Buyer Indemnified Persons or the Seller Indemnified Persons, as the case may be. (e) "Indemnifying Person" means the Buyer, in the case of any Seller Indemnification Event, or the Seller, in the case of any Buyer Indemnification Event, as the case may be. (f) "Losses" means any and all losses, claims, shortages, damages, liabilities, obligations, expenses, assessments, tax deficiencies and Taxes, and fees, costs and expenses (including, without limitation, reasonable attorneys', accountants' and other professional fees and 28 36 expenses) sustained, suffered or incurred by any Indemnified Person in connection with any Claim incident to or otherwise arising from any matter which is the subject of indemnification under this Article or in connection with the enforcement by the Indemnified Persons or any of them of their respective rights under this Article; provided, however, that in computing the amount of any Losses for purposes of determining the liability of any Indemnifying Party under Section 5.2, the amount of any insurance proceeds actually received by the Indemnified Person, less any deductibles and any resulting premium increases, shall be deducted from such Losses. (g) "Seller Indemnification Event" means the following: (i) the untruthfulness, inaccuracy or breach of any representation or warranty of the Buyer contained in this Agreement or any Related Document, any Schedule attached hereto or thereto or any certificate delivered by the Buyer in connection herewith or therewith; (ii) the breach of any agreement or covenant of the Buyer contained in this Agreement or any Related Document; (iii) the assertion of any Claim against or payment of any Loss to the extent related to such Claim by any Seller Indemnified Person that arose in connection with or is in any way related to any Assumed Obligation; (iv) the assertion of any Claim against or payment of any Loss to the extent related to such Claim by any Seller Indemnified Person relating in any way to Taxes of any kind whatsoever, or expenses, interest or penalties relating thereto, with respect to periods after the Closing Date (other than to the extent assumed under Section 1.3(a)); (v) the assertion of any Claim against or the payment of any Loss to the extent related to such Claim by any Seller Indemnified Person relating to any legal action against such Seller Indemnified Person arising as a result of the agreements in Section 6.8 hereof; (vi) the assertion of any Claim against or the payment of any Loss to the extent directly related to such Claim by any Seller Indemnified Person relating to any legal action against such Seller Indemnified Person arising as a direct result of the grossly negligent use by the Buyer of the power of attorney in a manner in contravention of Section 1.8 hereof; (vii) the assertion of any Claim against or the payment of any Loss to the extent related to such Claim by any Seller Indemnified Person resulting from the Seller's failure to collect and remit any applicable GST and QST with respect to the transactions contemplated hereunder; and (viii) all reasonable fees, costs and expenses (including, without limitation, reasonable attorneys', accountants' and other professional fees and expenses) incurred by any Seller Indemnified Person in connection with any action, suit, proceeding, demand, assessment or judgment arising out of any of the matters indemnified against under this 29 37 Article or in connection with the enforcement by any Seller Indemnified Person of its rights under this Article. (h) "Seller Indemnified Persons" means and includes the Seller and its respective officers, directors, employees, Affiliates and successors. (i) "Taxes" means, with respect to any Person, (A) all income taxes (including any tax on or based upon net income, or gross income, or income as specially defined, or earnings, or profits, or selected items of income, earnings or profits) and all gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property or windfall profits taxes, real property taxes, alternative or add-on minimum taxes, customs duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any Governmental Authority and (B) any liability for the payment of any amount of the type described in the immediately preceding clause (A) as a result of being a "transferee" (within the meaning of Section 6901 of the Code or any other applicable law) of another Person or a member of an affiliated or combined group. Without limiting the foregoing, the term "Taxes" shall include GST and QST. The term "GST" shall mean taxes, interest, penalties and fines imposed under Part IX of the Excise Tax Act (Canada) and the regulations made thereunder as well as any Notice of Ways and Means Motion or Bill tabled in the House of Commons or any press release or publicly disseminated statement by the Minster of Finance, which sets forth a proposal to amend or a proposed amendment to the Excise Tax Act (Canada) or the regulations made thereunder which, when enacted, shall have retroactive effect to the date of its enactment and all provincial sales taxes integrated with such federal taxes, as the case may be (collectively, the "GST Legislation"). The term "QST" means taxes, interest, penalties and fines imposed under the Quebec Sales Tax Act and the regulations made thereunder including any proposed amendment to such legislation announced by way of press release from time to time by the Minister of Finance for the Province of Quebec or such other minister charged with the administration of the Quebec Sales Tax Act, which announcement confirms that such proposed amendment, when enacted, shall have retroactive effect to a date prior to the date of its enactment (collectively, the "QST Legislation"). 5.2 INDEMNIFICATION GENERALLY. (a) Buyer Indemnification. The Seller shall indemnify the Buyer Indemnified Persons for, and hold each of them harmless from and against, any and all Losses resulting from any Buyer Indemnification Event; provided, however, that the Seller shall have no obligation or liability to indemnify and hold harmless the Buyer Indemnified Persons from and against Losses resulting from a Buyer Indemnification Event described in Section 5.1(a)(i) (other than a Buyer Indemnification Event relating to a breach of the representations set forth in Sections 3.1(a), (b), (d), (n), (r) and (w)) unless and until the aggregate amount of all such Losses shall exceed Cnd. $300,000 and then only to the extent of such Losses in excess of Cnd. $300,000 and the aggregate liability of the Seller under this Section 5.2(a) for such Losses shall not exceed, when aggregated with any other payment by the Seller to the Buyer Indemnified Persons under this Agreement, Cnd. $5,000,000. Notwithstanding anything to the contrary contained herein, the foregoing limitation shall not apply to the willful breach of any representation or warranty. 30 38 (b) Seller Indemnification. The Buyer shall indemnify the Seller Indemnified Persons for, and hold each of them harmless from and against, any and all Losses resulting from any Seller Indemnification Event provided that the aggregate liability of the Buyer under this Section 5.2(b) for such Losses (except Losses resulting from the failure by the Buyer to assume, perform, pay or discharge in accordance with this Agreement, any Assumed Obligation) shall not exceed when aggregated with any other payment by the Buyer to the Seller Indemnified Persons under this Agreement Cnd. $5,000,000. 5.3 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS. The obligations and liabilities of the Indemnifying Persons with respect to Claims resulting from the assertion of liability by third parties (each, a "Third Party Claim") shall be subject to the following terms and conditions: (a) The Indemnified Persons shall give prompt written notice to the Indemnifying Persons of any Third Party Claim which might give rise to a Claim by the Indemnified Persons against the Indemnifying Persons based on the indemnity agreements contained in Section 5.2, stating the nature and basis of said Third Party Claim, and the amount thereof to the extent known. Such notice shall be accompanied by copies of all relevant documentation with respect to such Third Party Claim, including, without limitation, any summons, complaint or other pleading which may have been served or written demand, or other document or other instrument. Failure to give notice within the terms of this Section 5.3(a) shall serve to excuse the Indemnifying Person from its obligation under Section 5.2 only if and to the extent that the Indemnifying Person can establish that it was materially prejudiced or injured by the failure. (b) (Insert Title Here) (i) The Indemnifying Persons will have the right to participate in or, if the Indemnifying Persons shall acknowledge in a writing delivered to the Indemnified Persons that the Indemnifying Persons shall be obligated under the terms of their indemnity hereunder in connection with such Third Party Claim (a "Liability Letter"), then the Indemnifying Persons shall have the right to assume the defense of any Third Party Claim at their own expense and by their own counsel (satisfactory to the Indemnified Persons); provided, however, that the Indemnifying Persons shall not have the right to assume the defense of any Third Party Claim if (x) such Third Party Claim seeks an injunction, restraining order, declaratory relief or other non-monetary relief, (y) the named parties to any such action or proceeding (including any impleaded parties) include both the Indemnified Persons and the Indemnifying Persons and the former shall have been advised in writing by counsel (with a copy to the Indemnifying Persons) that there are one or more legal or equitable defenses available to them which are different from or additional to those available to Indemnifying Persons or (z) such action or proceeding involves matters beyond the scope of the indemnification obligation of the Indemnifying Persons, and in such event under subsection (y) or (z) the suit or proceeding may, at the election of the Indemnifying Person, be defended jointly as provided in (ii) below. 31 39 (ii) Notwithstanding the foregoing subsection (b)(i), if the Indemnifying Persons desire to participate in the defense of any Third Party Claim without delivering a Liability Letter to the Indemnified Persons, the Indemnifying Persons and the Indemnified Persons shall jointly assume the defense against such Third Party Claim under the following conditions: (A) a law firm will be selected by agreement between the Indemnifying Persons and the Indemnified Persons to represent the interests of both such parties in defending against the Third Party Claim; (B) if such law firm determines at any time that a conflict of interest exists between the Indemnifying Persons and the Indemnified Persons for any reason and that such law firm can not adequately represent the interests of both parties, then such law firm shall promptly notify the Indemnified Persons and the Indemnifying Persons in writing of such determination and the Indemnified Persons and Indemnifying Persons shall decide by agreement, based upon which party is more likely to be more liable for the Third Party Claim, which party the law firm will continue to represent; (C) if the party which is no longer represented by the law firm as a result of subclause (B) desires to continue to participate in the defense of the Third Party Claim, such party may do so and may retain its own counsel at its own expense; provided, however, that if such party is found to have no liability in connection with such Third Party Claim, its reasonable fees and expenses in connection with this subclause (C) shall be reimbursed by the other party. (c) (Insert Title Here) (i) If the Indemnifying Persons exercise their right to assume the defense of a Third Party Claim pursuant to subsection (b)(i) or (b)(ii) above, they shall not make any settlement of any claims without the prior written consent of the Indemnified Persons. (ii) If the Indemnifying Persons do not exercise their right to assume the defense of a Third Party Claim, the Indemnified Persons shall not make any settlement of any claims for which they may seek indemnification hereunder unless (A) they first provide written notice to the Indemnifying Persons describing the material terms of the settlement and (B) the Indemnifying Persons fail to deliver a Liability Letter within ten days of receiving such notice. 5.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS. The representations and warranties of the Seller in Section 3.1 and the representations and warranties of the Buyer contained in Section 3.2 shall survive the Closing and remain in full force and effect for a period of 24 months and thereafter shall terminate; provided, however, that (a) the representations and warranties of the Seller set forth in Section 3.1(q) shall survive the Closing and remain in full force and effect for the applicable statute of limitations, (b) the representations and warranties of the Seller set forth in Sections 3.1(a), (b), (d), (n), (r) and (w), and the representations and warranties of the Buyer set forth in Sections 3.2(a), (c) and (e) shall 32 40 survive the Closing and remain in full force and effect without time limit (without regard to any statute of limitations). Except as otherwise expressly provided in this Agreement, all agreements and covenants requiring future performance contained in this Agreement shall survive the Closing and remain in full force and effect without time limit, provided, however, that the obligation of the Buyer to indemnify the Seller Indemnified Parties under Section 5.2(b) as it relates to a Seller Indemnification Event specified in Section 5.1(g)(v) shall terminate upon the expiration of the applicable statute of limitations relating to the subject matter of such event. For convenience of reference, the date upon which any representation, warranty, agreement or covenant shall terminate, if any, shall be referred to herein as the "Survival Date". 5.5 INDEMNIFICATION EXCLUSIVE. The parties hereto acknowledge agree that, from and after the Closing, the sole and exclusive remedy with respect to any and all Claims relating to the subject matter of this Agreement and the transactions contemplated hereby (other than the Sub-Lease) shall be pursuant to Article V hereof. ARTICLE VI POST-CLOSING AGREEMENTS 6.1 ACCESS. In connection with any financial audit of the Seller or any tax audit or other governmental investigation of the Seller for any matter relating to any period prior to the Closing, the Buyer shall, upon written request, permit the Parent or the Seller and their respective representatives to have access, at reasonable times during normal business hours and in a manner which is not disruptive to the operations of the Buyer, to the work papers, books and records of the Buyer relating to the Seller and the conduct of the Business prior to the Closing which shall have been in the possession of the Buyer as of the Closing and which remain in the possession of the Buyer; provided, however, that this Section 6.1 shall not create any obligation on the part of the Buyer to retain any such work papers, books and records, so long as prior to destroying any such work papers, books, and records, the Buyer shall notify the Parent and provide the Parent an opportunity (at the Parent's sole expense) to retrieve such work papers, books and records. 6.2 BULK SALES LAWS. The Seller shall deliver to the Buyer at Closing an officer's certificate containing the aggregate indebtedness of each of the Business and the Seller, and indicating that the Purchased Assets are not subject to any security (the "Seller's Bulk Sales Statement"). 6.3 CERTAIN EMPLOYEE MATTERS. (a) On the Closing Date, the Buyer shall offer employment as of the Closing Date to the employees of the Seller who are actively employed by the Seller in the Business on the Closing Date and identified on Schedule 6.3 (any such employees who accept such offer of employment being referred to herein as the "Hired Employees"); such offer of employment to be on substantially the same terms as applicable to such employees immediately prior to the 33 41 Closing; except for Hired Employees, the Buyer shall have no liability to any employees of the Seller who, on the Closing Date, are not actively employed or are on disability, leave of absence, military service leave or lay-off (whether or not with recall rights), or whose employment has been terminated (voluntarily or involuntarily) or who have retired prior to the Closing Date. After the Closing Date, each Hired Employee shall cease to be employees of the Seller or entitled to participate in Seller's employee benefit plans, programs, policies and arrangements except to the extent required by applicable Legal Requirements. Subject to the provisions of this Section 6.3, for periods on and after the Closing Date, each Hired Employee shall be eligible to participate in employee benefit plans, programs, policies and arrangements, if any, maintained from time to time by the Buyer for the benefit of Hired Employees, as determined in the sole discretion of the Buyer so long as such Hired Employee shall satisfy the eligibility criteria thereunder. Nothing contained in this Agreement shall confer upon any Hired Employee any rights or remedies of any nature or kind whatsoever under or by reason of this Agreement, including, without limitation, any right to employment or continued employment or to any benefits that may be provided, directly or indirectly, under any employee benefit plan, policy or arrangement of the Buyer or Seller, nor shall anything contained in this Agreement constitute a limitation on or restriction against the right of the Buyer or Seller to amend, modify or terminate any such plan, policy or arrangement or the terms or conditions of employment. The Seller shall retain all liabilities and obligations arising from the termination or severance of all employees of the Business who do not become Hired Employees on the Closing Date. (b) To the extent permitted by Legal Requirement or any applicable Employee Benefit Plans the Seller shall cause all Hired Employees to be fully vested as of the Closing Date under each defined benefit pension plan, profit sharing plan, benefit restoration programs, savings plan and other employee pension benefit plan and retirement arrangements of the Seller covering such employees. To the extent applicable, Hired Employees (and their eligible dependents) shall be given credit under employee benefit plans, programs, policies and arrangements, if any, that are established or maintained by the Buyer for the benefit of Hired Employees for their service with the Seller (i) for purposes of eligibility to participate and vesting (but not benefit accrual) to the extent such service was taken into account under a corresponding Seller's plan, program, policy or arrangement and (ii) for purposes of satisfying any waiting periods, evidence of insurability requirements, or the application of any pre-existing condition limitations and shall be given credit for amounts paid under a corresponding Seller's plan, program, policy or arrangement during the same period for purposes of applying deductibles, copayments and out-of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the Buyer's plans, programs, policies or arrangements. Notwithstanding the foregoing, service and other amounts shall not be credited to Hired Employees (or their eligible dependents) to the extent the crediting of such service or other amounts would produce benefits which are substantially more favorable to Hired Employees than are provided to the current similarly situated employees of the Buyer or its affiliates who are covered by similar plans, programs, policies and arrangements. 34 42 6.4 PARENT GUARANTY. The Parent hereby irrevocably and unconditionally guarantees to Buyer the prompt and complete payment and performance when due of all obligations of the Seller under Article V of this Agreement and any Related Documents. The obligations of the Parent (i) are absolute and unconditional and shall continue in full force and effect until the payment and performance of all of the obligations of the Seller that are guaranteed hereunder, (ii) are not conditioned upon any event or contingency, or upon any attempt to enforce the Seller's performance under this Agreement or any Related Document or any other right or remedy against the Seller or to collect from the Seller through the commencement of legal proceedings or otherwise, and (iii) shall be binding upon and enforceable in full against the Parent without regard to any circumstance which might otherwise constitute a legal defense available to, or a discharge of, the Parent in respect of the obligations guaranteed hereby; provided, however, that the Parent shall be entitled to assert any rights or defenses which the Seller may have against the Buyer or its assigns and the Buyer's and its assigns' rights hereunder shall be subject thereto (excluding any defenses based upon the insolvency of the Seller). 6.5 NON-COMPETITION. For a period commencing on the Closing Date and terminating on the fourth anniversary thereof, no Restricted Party (as defined below) will, directly or indirectly, own, manage or control or have any equity interest in any sole proprietorship, partnership, corporation or business or any other Person (whether as a partner, agent, security holder, creditor, consultant or otherwise) that directly or indirectly is engaged in the business of designing, engineering, manufacturing, marketing, selling and distributing automotive roof rack systems and vehicular accessories (such as bike racks, ski racks and surfboard carriers) other than rear carriers and shuttles and related rear carrier and shuttle systems (collectively "Competitive Businesses") in the United States of America or Canada; provided, however, that nothing herein shall be deemed to prevent any Restricted Party from (i) acquiring through market purchases and owning, solely as an investment, less than two percent of the equity securities of any class of any issuer whose shares are registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and are listed or admitted for trading on any United States national securities exchange or are quoted on the National Association of Securities Dealers Automated Quotations System or on any Canadian stock exchange or any similar system of automated dissemination of quotations of securities prices in common use, so long as the Restricted Party is not a member of any "control group" (within the meaning of the rules and regulations of the United States Securities and Exchange Commission) of any such issuer and which is engaged in a Competitive Business, (ii) from owning one Competitive Business with aggregate annual revenues less than Cnd. $5,000,000, provided, however, that in the event such Competitive Business has aggregate annual revenues equal to or in excess of Cnd. $5,000,000, the Seller shall not be deemed to be in violation of this Section 6.5 until one year after the date that the financial statements of such Competitive Business shall reflect such fact, or (iii) owning an interest acquired as a creditor in bankruptcy provided that the Restricted Party makes arrangements reasonably satisfactory to the Buyer to dispose of such interest as promptly as reasonably practicable after the acquisition of such investment (and in any event within one year after the acquisition of such investment). In the event that any Restricted Party shall own, manage or control, directly or indirectly any Competitive Business, the Parent or Seller shall immediately notify Buyer in writing and, from 35 43 time to time, upon Buyer's request, deliver such financial or other information and certifications to the Buyer to enable the Buyer to monitor the Restricted Parties' compliance with this Section 6.5. The Restricted Parties agree that the covenant provided for in this Section 6.5 is reasonable and necessary in terms of time, activity and territory to protect the Buyer's interest as a buyer of the Purchased Assets and the Business. To the extent that the covenant provided for in this Section 6.5 may later be deemed by a court to be too broad to be enforced with respect to its duration or with respect to any particular activity or geographic area, the court making such determination shall have the power to reduce the duration or scope of the provision, and to add or delete specific words or phrases to or from the provision. The provision as modified shall then be enforced. As used in this Agreement, a "Restricted Party" is the Seller, the Parent and any of their Affiliates; provided, however, that the restrictions of this Section 6.5 shall not be deemed to apply to any Person (other than any controlled Affiliate of the Parent or any subsidiary) that acquires, whether by purchase, merger or otherwise, all or any portion of the assets or capital stock of the Parent or any subsidiary thereof solely to the extent that any actions that would otherwise be limited or prohibited by the provisions of this Section 6.5 are conducted by or on behalf of any Person through an entity other than the Parent or any subsidiary of the Parent. 6.6 NON-DISCLOSURE. (a) Neither the Seller, the Parent nor any of their respective controlled Affiliates (collectively, the "Covered Persons") shall disclose, divulge, furnish or make accessible to anyone (other than the Buyer or any of its Affiliates or representatives) any Confidential Information (as defined below), or in any way use any such Confidential Information in the conduct of any business. (b) Nothing in this Section 6.6 shall prohibit the disclosure by any Covered Person of any Confidential Information to (i) any federal, provincial, state or other regulatory authority having jurisdiction over such Covered Person or (ii) any other Person to which such disclosure shall, in the opinion of counsel, be legally necessary (x) to effect compliance with any law, rule, regulation or order applicable to such Covered Person, (y) in response to any subpoena or other legal process, (z) in connection with any litigation to which such Covered Person is a party; provided, however, that no disclosure shall be made until such Covered Person shall give written notice to the Buyer of the intention to disclose such Confidential Information so that the Buyer may contest the need for disclosure, and such Covered Person shall reasonably cooperate at the request of the Buyer with the Buyer in connection with any such proceeding. (c) For purposes of this Section 6.6, "Confidential Information" means any confidential information pertaining to the Purchased Assets or the Business immediately prior to the Closing, including, but not limited to, information concerning its financial condition, prospects, customers, sources of leads, methods of doing business, and the manner of design, manufacture, financing, marketing and distribution of its products; provided, however, that Confidential Information does not include information that is or becomes generally available to the public other than as a result of a disclosure in violation of this Section 6.6 by any Covered Person. 36 44 6.7 NON-SOLICITATION OF EMPLOYEES AND CUSTOMERS. For a period of four years following the Closing Date with respect to senior executives or key management and employees of the Buyer, and for a period of one year following the Closing Date with respect to the Buyers's other employees, no Restricted Party will, directly or indirectly, for itself or for any other Person, attempt to employ or enter into any contractual employment arrangement with any employee of the Buyer or any former employee of the Buyer until six months after such Person's employment with the Buyer ended. 6.8 USAGE OF TRADENAMES. The Buyer shall, for no additional consideration in excess of the Purchase Price, have the right to sell inventory of the Business existing as of the Closing under the tradenames "Bell" and "Rhode Gear" to the extent such tradenames currently appear on such inventory. The Parent shall not and shall, not permit its subsidiaries to prevent or in any way interfere with the Buyer's rights under this Section 6.8. 6.9 AGREEMENTS IN RESPECT OF INVENTORY. For a period of 90 days after the Closing Date, the Parent shall or shall cause any of its Affiliates to provide reasonable access from time to time to Buyer or its agents for the purpose of removing any portion of the Purchased Assets located at Route 136E, Rantoul, Illinois 61866. During such period, the Parent shall safekeep and store such Purchased Assets in a safe and commercially reasonable manner. 6.10 AGREEMENTS REGARDING CANADIAN TAXES. The Buyer and the Seller shall each execute and file a joint election under Section 167 of the Income Tax Act (Canada) and the corresponding provisions of any other applicable tax Law, within the prescribed time periods, in respect of the Purchased Assets. The Seller and the Buyer agree to prepare and file their respective tax returns in a manner consistent with such elections and the allocation of the Purchase Price set out in Section 2.3. ARTICLE VII MISCELLANEOUS 7.1 EXPENSES; TRANSFER TAXES, ETC. All fees, costs and expenses incurred by any party to this Agreement or any Related Document in connection with, relating to or arising out of the execution, delivery and performance of this Agreement or any Related Document and the consummation of the transactions contemplated hereby, including, without limitation, attorneys', accountants' and other professional fees and expenses, shall be borne by such party; provided, however, that up to U.S. $50,000 of the reasonable fees and expenses of the Seller shall be reimbursed by the Buyer at the Closing or promptly thereafter upon delivery of satisfactory back-up documentation. The Seller shall pay all sales, use, gains and excise taxes and all registration, or transfer taxes which 37 45 may be payable in connection with the transactions contemplated by this Agreement and the Related Documents. 7.2 ENTIRE AGREEMENT. This Agreement and the Related Documents (including the Schedules and the Exhibits attached hereto and thereto) and the other documents, instruments and certificates referred to herein and therein contain the entire agreement among the parties hereto with respect to the transactions contemplated hereby and thereby and supersede all prior agreements or understandings between the parties with respect hereto and thereto. 7.3 RELATED DOCUMENTS. As used in this Agreement, the term "Related Documents" means, collectively, the Bill of Sale and Assumption Agreement and the other Conveyance Instruments the Patent License and the Sub-Lease, dated as of the date hereof between the Seller and the Buyer. 7.4 NOTICES. All notices or other communications which are required or permitted hereunder shall be in writing and shall be deemed to have been given if (a) personally delivered or sent by telecopier, (b) sent by nationally-recognized overnight courier or (c) sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: if to the Buyer, to: Advanced Accessory Systems Canada Inc./ Les systemes d'accessoire Advanced Canada inc. c/o Advanced Accessory Systems, LLC Sterling Town Center 12900 Hall Road Suite 2000 Sterling Heights, Michigan 48313 Attention: Chief Executive Officer Telephone: (810) 997-2900 Telecopier: (810) 997-6839 with a copy to: c/o Chase Capital Partners 380 Madison Avenue 12th Floor New York, New York 10017 Attention: Donald Hofmann Telephone: (212) 622-3100 Telecopier: (212) 622-3101 38 46 with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Attention: John J. Suydam, Esq. Telephone: 212-408-2400 Telecopier: 212-408-2467; if to the Seller, to: Bell Sports Canada Inc. c/o Bell Sports Corp. 6350 San Ignacio San Jose, CA 95119 Attention: Chief Financial Officer Telephone: 408-574-3436 Telecopier: 408-574-3590 with a copy to: Sidley & Austin One First National Plaza Chicago, Illinois 60603 Attention: Larry A. Barden Telephone: 312-853-7785 Telecopier: 312-853-7036; and if to the Parent, to: Bell Sports Corp. 6350 San Ignacio San Jose, CA 95119 Attention: Chief Financial Officer Telephone: 408-574-3436 Telecopier: 408-574-3590 with a copy to Sidley & Austin at the address specified above; or to such other address as the party to whom notice is to be given may have furnished to each other party in writing in accordance herewith. Any such communication shall be deemed to have been received (i) when delivered, if personally delivered or sent by telecopier, (ii) on the Business Day after dispatch, if sent by nationally recognized, overnight courier and (iii) on the fifth Business Day following the date on which the piece of mail containing such communication is posted, if sent by mail. As used herein, the term "Business Day" means a day that is not a 39 47 Saturday, Sunday or a day on which banking institutions in New York City are not required to be open. 7.5 COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement; provided, however, that in proving this Agreement, it shall not be necessary to produce or account for more than one counterpart hereof. 7.6 GOVERNING LAW; CONSENT TO JURISDICTION. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS (EXCEPT FOR THOSE PRINCIPLES SET FORTH IN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). (B) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY RELATED DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE SELLER, PARENT OR BUYER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY FINAL AND NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE PARTIES FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH PARTY, TO THE EXTENT PERMITTED BY LAW, HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS. 40 48 7.7 BENEFITS OF AGREEMENT; ASSIGNMENT. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Anything contained herein to the contrary notwithstanding, this Agreement shall not be assignable by any party hereto without the written consent of the other parties hereto; provided, however, that (a) the Buyer may, without the consent of any other party, transfer or assign, in whole or from time to time in part, to one or more of its Affiliates, any of its rights in, to and under this Agreement, including, without limitation, the right to purchase all or any part of the Purchased Assets, (b) the Buyer may, without the consent of any other party, assign its rights to indemnification hereunder to or for the benefit of any Person, (c) the Seller may, without the consent of any other party, assign its rights to indemnification hereunder to or for the benefit of any Affiliate and (d) the Buyer may, without the consent of any other party, assign any or all of its rights and interests hereunder to any lenders providing financing for the transactions contemplated hereby. 7.8 CONSTRUCTION. The provisions of this Agreement shall be construed according to their fair meaning and neither for nor against any party hereto irrespective of which party caused such provisions to be drafted. Each of the parties acknowledges that it has been represented by an attorney in connection with the preparation and execution of this Agreement. 7.9 PRONOUNS. As used herein, all pronouns shall include the masculine, feminine, neuter, singular and plural thereof whenever the context and facts require such construction. 7.10 DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provisions of this Agreement. 7.11 SEVERABILITY. It is the desire and intent of the parties that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any provision of this Agreement shall be adjudicated to be invalid, illegal or unenforceable in any respect in any jurisdiction, such provision shall be automatically deemed amended, but only to the extent necessary to render such provision valid, legal and enforceable in such jurisdiction, such amendment to apply only with respect to the operation of such provision in such jurisdiction, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 7.12 DISCLAIMER OF WARRANTIES. The Seller makes no representations or warranties with respect to any projections, forecasts or forward-looking information provided to the Buyer. There is no assurance that any 41 49 such projected or forecasted results will be achieved. EXCEPT AS TO THOSE MATTERS EXPRESSLY COVERED BY THE REPRESENTATIONS AND WARRANTIES IN THIS AGREEMENT AND THE RELATED DOCUMENTS, THE SELLER IS SELLING THE PURCHASED ASSETS (AND THE BUSINESS) ON AN "AS IS, WHERE IS" BASIS AND DISCLAIMS ALL OTHER WARRANTIES AND REPRESENTATIONS WHETHER EXPRESS OR IMPLIED. THE SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE AND NO IMPLIED WARRANTIES WHATSOEVER. 7.13 AMENDMENT. This Agreement may not be amended except by an instrument in writing signed by the Buyer, the Seller and the Parent. 7.14 NO THIRD PARTY BENEFICIARIES. Nothing in the Agreement shall confer any rights upon any Person other than the parties hereto and their respective heirs, successors and permitted assigns. IN WITNESS WHEREOF, each of the parties hereto has caused this Asset Purchase Agreement to be executed on its behalf as of the day and year first above written. BELL SPORTS CANADA INC. By:___________________________ Name: Title: BELL SPORTS CORP. By:___________________________ Name: Title: ADVANCED ACCESSORY SYSTEMS CANADA INC./LES SYSTEMES D'ACCESSOIRE ADVANCED CANADA INC. By:___________________________ Name: Title: 42 EX-10.4 11 EX-10.4 1 EXHIBIT 10.4 Memorandum of Agreement made and entered into on the 24th day of July, 1997, AMONG: ROBERT BOULARD (hereinafter referred to as "Boulard") PARTY OF THE FIRST PART, - and - ALAN HAMER (hereinafter referred to as Hamer") PARTY OF THE SECOND PART, (Boulard and Hamer, being hereinafter referred to collectively as the "Vendors") - and - ADVANCED ACCESSORY SYSTEMS CANADA INC. / LES SYSTEMS D'ACCESSOURY ADVANCED DU CANADA INC. (hereinafter referred to as the "Purchaser") PARTY OF THE THIRD PART. WHEREAS the Vendors have agreed to sell and the Purchaser has agreed to purchase all the Vendors' issued and outstanding shares in the capital stock of the Corporation. NOW, THEREFORE, THIS AGREEMENT WITNESSETH AS FOLLOWS: SECTION 1 - DEFINED TERMS 1.1 Where used herein the following terms have the following meanings respectively: 1.1.1 "Agreement" means this memorandum of agreement; 1.1.2 "Banking Day" means any day, Monday through Friday, inclusively, when Canadian chartered banks are open for business in the City of Toronto, Province of Ontario; 2 2 1.1.3 "Benefit Plans" means all pension, retirement, profit sharing, bonus, savings, compensation, incentive, severance, stock option, stock purchase, stock appreciation, group insurance, medical, hospitalization, disability, death and other similar plans, programs, arrangements or practices covering any or all of the past or present employees, shareholders, directors or officers of the Corporation; and "Benefit Plan" means any one of them; 1.1.4 "Best Efforts" means the taking by a party of all such actions as would be prudent in accordance with reasonable commercial practices as applied to the particular matter in question; 1.1.5 "Closing" means the completion of the transaction contemplated herein on the Closing Date, at the offices of Pinckard, Wyjad, 39 Dominion Street, Bracebridge, Ontario P1L 1T6, or such other place as the parties may agree upon; 1.1.6 "Closing Date" means July 9, 1997, or such other Banking Day as the parties may agree upon; 1.1.7 "1997 Financial Statements" means the financial statements of the Corporation for the period ended January 31, 1997, consisting of the unaudited balance sheet of the Corporation as at January 31, 1997, and the unaudited statements of earnings, retained earnings and changes in financial position for the period ending March January 31, 1997, and annexed hereto as Schedule 1.1.7; 1.1.8 "Constating Documents" means the constating documents of the Corporation annexed hereto as Schedule 1.1.8; 1.1.9 "Contracts" means the agreements, obligations and undertakings listed on Schedule 1.1.9 annexed hereto; 1.1.10 "Corporation" means Nomadic Sport Inc.; 1.1.11 "Environment" means surface waters, groundwater, drinking water supply, land surface, subsurface strata, air, both inside and outside of buildings and structures, and plant and animal life; 1.1.12 "Boulard Employment Agreement" means the employment agreement to be entered into between Boulard and Advanced Accessory Systems, LLC on the Closing Date annexed hereto as Schedule 1.1.12; 1.1.13 "Boulard Purchase Price" means One Hundred and Ninety Thousand, Six Hundred and Twenty Five ($190,625.00) Dollars; 3 3 1.1.14 "Boulard Shares" means One Thousand, One Hundred and Twenty Five (1,125) Common shares in the capital of the Corporation; 1.1.15 "Governmental Authority" means any government or political subdivision thereof, whether federal, state, provincial, county, local, municipal or regional or any other governmental authority, any agency or instrumentality of any such government, political subdivision or other governmental authority, any court, arbitral tribunal or arbitrator, and any non-governmental regulating body, to the extent that the rules, regulations or orders of such body have the force of law; 1.1.16 "Hazardous Substance" means any toxic waste, pollutant, contaminant, hazardous substance, hazardous material, toxic substance, hazardous waste, special waste, industrial substance or waste, petroleum or petroleum-derived substance or waste, or any constituent of any of same as such terms are regulated under or defined by any Environmental Law; 1.1.17 "Indemnified Party" has the meaning ascribed thereto in subsection 7.6 hereof; 1.1.18 "Indemnifying Party" has the meaning ascribed thereto in subsection 7.6 hereof; 1.1.19 "Hamer Purchase Price" means One Hundred and Nine Thousand, Three Hundred and Seventy Five ($109,375.00) Dollars; 1.1.20 "Hamer Shares" means Eight Hundred and Seventy Five (875) Common shares in the capital of the Corporation; 1.1.21 "Losses" has the meaning ascribed thereto in subsection 7.1 hereof; 1.1.22 "Non-Competition and Confidentiality Agreement" means the agreement to be entered into between the Corporation, Boulard, Hamer, Janet Boulard and the Purchaser on the Closing Date and annexed hereto as Schedule 1.1.22; 1.1.23 "Permits" means all permits, licenses, consents, certificates, authorizations and approvals required pursuant to applicable Environmental Laws; 1.1.24 "Purchase Price" means Three Hundred Thousand ($300,000.00) Dollars; 1.1.25 "Purchased Shares" means, collectively, the Boulard Shares, and the Hamer Shares; 4 4 1.1.26 "Real Property" means the real property, together with all buildings, structures, fixtures and improvements thereon owned by the Corporation and described in Schedule 1.1.26; 1.1.27 "Real Property Mortgage" means the mortgages affecting the Real Property and annexed hereto as Schedule 1.1.27; 1.1.28 "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the Environment; 1.1.29 "Tax Claim" means any claim based upon, arising out of or otherwise in respect of any inaccuracy in or any breach of any representation or warranty of the Vendors contained in paragraphs 4.3.17 and 4.3.26 hereof; 1.1.30 "Taxes" (or "Tax" where the context requires) means all taxes, whether federal, provincial, local, municipal or otherwise (including, without limitation, income, profit, corporation, business, excise, sales, goods and services, value-added, franchise, withholding, capital, transfer, stamp, unemployment compensation, payroll, property and duties), whether or not measured in whole or in part by net income, and including interest and penalties with respect thereto; 1.1.31 "Third Party Claim" has the meaning ascribed thereto in subsection 7.8 hereof; 1.1.32 "Title Defect(s)" means any mortgage, deed of trust, lien, pledge, security interest, hypothec, charge (including any local improvement charge), right of first refusal, easement, servitude, restrictive covenant, encroachment or other survey or title defect, encumbrance or other restriction or limitation whatsoever, other than (i) any unperfected security interest for a purchase money obligation under the Personal Property Security Act (Ontario) incurred by the Corporation in the ordinary and usual conduct and course of its business; (ii) any registered restriction or covenant which runs with the Leased Real Property and/or the Real Property provided same is complied with and does not restrict in any material adverse respect the current use of the Leased Real Property and/or the Real Property by the Corporation; (iii) unregistered liens for taxes, assessments and governmental charges or levies not yet due; (iv) undetermined or inchoate privileges, liens or charges of mechanics, labourers or workmen, builders and contractors, suppliers of materials or others incidental to construction of improvements on the Leased Real Property and/or the Real Property incidental to maintenance or operation of the same and arising by operation of law, provided that claims for them have not yet been registered or filed pursuant to law and provided they relate to obligations not due and delinquent; (v) statutory privileges, liens and charges which relate to obligations incurred with respect to hydro-electric and other 5 5 utility services and which are not overdue; (vi) servitudes, easements, rights-of-way and other similar rights in the nature of a servitude or easement which do not prevent or materially adversely affect the current use of the Leased Real Property and/or Real Property; (vii) zoning by-laws and ordinances and municipal by-laws and regulations and land use restrictions which do not materially, adversely affect the current use of the Leased Real Property and/or the Real Property; (viii) any reservations and exceptions expressed in the original grant from the Crown; (ix) title defects or irregularities which are of a minor nature and which, in the aggregate, do not materially, adversely affect the current use or value of the Leased Real Property and/or the Real Property; (x) any registered municipal or similar agreements and registered agreements with publicly regulated utilities provided the same have been complied with to date; (xi) any leases, the benefit of which form part of the property of the Corporation; and (xii) any encumbrance which the Purchaser has expressly agreed to assume or accept pursuant to the terms of this Agreement; 1.1.33 "To the best of their knowledge" means a statement of the declarants' knowledge of the facts or circumstances to which such qualification relates, after reasonable inquiry and investigation into issues brought to their attention or with respect to which they have knowledge. SECTION 2 - SCHEDULES 2.1 The following are the Schedules annexed hereto and deemed to be a part hereof: Schedule 1.1.7 - 1997 Financial Statements Schedule 1.1.8 - Constating Documents Schedule 1.1.9 - List of Contracts Schedule 1.1.12 - Boulard Employment Agreement Schedule 1.1.22 - Non-Competition and Confidentiality Agreement Schedule 1.1.26 - Real Property Schedule 1.1.27 - Real Property Mortgage Schedule 4.3.3 - Authorized Capital of the Corporation Schedule 4.3.5 - Powers of Attorney Schedule 4.3.9 - List and Condition and of Assets Schedule 4.3.11 - Intellectual Property Schedule 4.3.12 - Aged Listing of Accounts Receivable and Accounts Payable Schedule 4.3.16 - Litigation Schedule 4.3.18.1 - Labour Relations Issues Schedule 4.3.19 - Benefit Plans Schedule 4.3.20 - Insurance 6 6 Schedule 4.3.21 - List of Employees Schedule 4.3.22.1 - Suppliers and Customers Schedule 4.3.24 - Related Transactions Schedule 9.1.1 - Vendors' Solicitors' Opinion Schedule 9.1.3 - Releases of Officers and Directors SECTION 3 - PURCHASE AND SALE 3.1 Subject to subsection 9.2, on the Closing Date the Purchaser shall purchase the Boulard Shares and the Hamer Shares from Boulard and Hamer, respectively, and pay for same as follows and the Vendors, jointly and severally, agree as follows: 3.1.1 Boulard shall sell to the Purchaser, and the Purchaser shall purchase from Boulard, the Boulard Shares in consideration of the payment of the sum of One Hundred and Ninety Thousand, Six Hundred and Twenty Five ($190,625.00) Dollars (the "Boulard Purchase Price"), payable on closing: 3.1.2 Hamer shall sell to the Purchaser, and the Purchaser shall purchase from Hamer, the Hamer Shares in consideration of the payment of the sum of One Hundred and Nine Thousand, Three Hundred and Seventy Five ($109,375.00) Dollars (the "Hamer Purchase Price"), payable on closing: SECTION 4 - REPRESENTATIONS AND WARRANTIES OF THE VENDORS 4.1 Boulard hereby represents and warrants to the Purchaser that the following representations and warranties are true and correct and acknowledges that the Purchaser is relying upon such representations and warranties in connection with the transaction contemplated hereby and that the Purchaser would not have entered into this Agreement without the same: 4.1.1 OWNERSHIP OF BOULARD SHARES Boulard is, on the date hereof, the legal and beneficial owner of One Thousand, One Hundred and Twenty Five (1,125) Common shares in the capital stock of the Corporation, and these are the only shares which he owns legally and beneficially in the Corporation, with good and marketable title, free and clear of any mortgage, lien, encumbrance, security interest, restriction or claim of any kind whatsoever. On Closing, Boulard will deliver to the Purchaser good and marketable title to the Boulard Shares free and clear of any mortgage, lien, encumbrance, security interest, restriction or claim of any kind whatsoever. The share certificates representing the Boulard Shares are true, genuine and subsisting, and nothing affects the validity of same; 7 7 4.1.2 OPTIONS TO ACQUIRE BOULARD SHARES There are no outstanding options or other rights or agreements to purchase any of the Boulard Shares, and Boulard has not agreed to sell any of the Boulard Shares; 4.1.3 SHAREHOLDERS AGREEMENT None of the Boulard Shares is subject to any shareholders agreement, voting trust, escrow agreement or other agreement or restriction. Without limiting the generality of the foregoing, there is no restriction or limitation on the power of Boulard to vote any of the Boulard Shares. Boulard does not have and does not know of any other shareholder of the Corporation who has any interest, directly or indirectly, in any corporation, partnership, business trust, association, syndicate, joint venture or other business entity or organization of any kind whatsoever in competition or engaged in a similar business to that of the Corporation. Boulard has no material direct or indirect interest or ownership, or profit participation, in any outside business with which the Corporation has had significant transactions, or with which Boulard has had significant transactions, or which are competitors of the Corporation, and, to the best of the information and belief of Boulard, no other officer, director, or employee of the Corporation, has any such material direct or indirect, interest or ownership, or profit participation, in any outside businesses which have had significant transactions with the Corporation or which are its competitors; 4.1.4 LITIGATION There are no claims, actions, suits, arbitrations, investigations or other proceedings pending or threatened which affect any of the Boulard Shares; 4.1.5 AUTHORITY TO ENTER INTO AGREEMENT Boulard has the legal capacity and authority to enter into this Agreement and consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the performance of the transaction contemplated hereby will not, with or without the giving of notice and/or the passage of time, or both, (i) violate any provision of law applicable to Boulard, or require any consent or approval of, or any filing with or notice to, any third party, governmental or otherwise, (ii) result in the loss of any right under or conflict with or result in a default of any provision or termination of or accelerate the date of performance of any obligation under any agreement, obligation or undertaking which affects the Boulard Shares. This Agreement constitutes a valid and binding obligation of Boulard enforceable against him in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws relating to or affecting the enforcement of creditors' rights generally, and principles of equity; 8 8 4.1.6 RESIDENCE Boulard is not a "non-resident" for purposes of the Income Tax Act (Canada); 4.2 Hamer hereby represents and warrants to the Purchaser that the following representations and warranties are true and correct and acknowledges that the Purchaser is relying upon such representations and warranties in connection with the transactions contemplated hereby and that the Purchaser would not have entered into this Agreement without the same; 4.2.1 OWNERSHIP OF HAMER SHARES Hamer is, on the date hereof, the legal and beneficial owner of Eight Hundred and Seventy Five (875) Common shares in the capital stock of the Corporation and these are the only shares which he owns legally or beneficially in the Corporation with good and marketable title, free and clear of any mortgage, lien, encumbrance, security interest, restriction or claim of any kind whatsoever. On Closing, Hamer will deliver to the Purchaser good and marketable title to the Hamer Shares, free and clear of any mortgage, lien, encumbrance, security interest, restriction or claim of any kind whatsoever. The share certificate representing the Hamer Shares is true, genuine and subsisting, and nothing affects the validity of same; 4.2.2 OPTIONS TO ACQUIRE HAMER SHARES There are no outstanding options or other rights or agreements to purchase any of the Hamer Shares, and Hamer has not agreed to sell any of the Hamer Shares; 4.2.3 SHAREHOLDERS AGREEMENT None of the Hamer Shares is subject to any shareholders agreement, voting trust, escrow agreement or other agreement or restriction. Without limiting the generality of the foregoing, there is no restriction or limitation on the power of Hamer to vote any of the Hamer Shares. Hamer does not have and does not know of any other shareholder of the Corporation who has any interest, directly or indirectly, in any corporation, partnership, business trust, association, syndicate, joint venture or other business entity or organization of any kind whatsoever in competition or engaged in a similar business to that of the Corporation. Hamer has no material direct or indirect interest or ownership, or profit participation, in any outside business with which the Corporation has had significant transactions, or with which Hamer has had significant transactions, or which are competitors of the Corporation, and, to the best of the information and belief of Hamer, no other officer, director, or employee of the Corporation, has any such material direct or indirect, interest or ownership, or profit participation, in any outside businesses which have had significant transactions with the Corporation or which are its competitors; 9 9 4.2.4 LITIGATION There are no claims, actions, suits, arbitrations, investigations or other proceedings pending or threatened which affect any of the Hamer Shares; 4.2.5 AUTHORITY TO ENTER INTO AGREEMENT Hamer has the legal capacity and authority to enter into this Agreement and consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the performance of the transactions contemplated hereby will not, with or without the giving of notice and/or the passage of time, or both, (i) violate any provision of law applicable to Hamer or require any consent or approval of, or any filing with or notice to, any third party, governmental or otherwise or (ii) result in the loss of any right under or conflict with or result in a default of any provision or termination of or accelerate the date of performance of any obligation under any agreement, obligation or undertaking which affects the Hamer Shares. This Agreement constitutes a valid and binding obligation of Hamer enforceable against him in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws relating to or affecting the enforcement of creditors' rights generally, and principles of equity; and 4.2.6 RESIDENCE Hamer is not a "non-resident" for purposes of the Income Tax Act (Canada). 4.3 The Vendors, jointly and severally, hereby represent and warrant to the Purchaser that the following representations and warranties are true and correct and acknowledge that the Purchaser is relying upon such representations and warranties in connection with the transactions contemplated hereby and that the Purchaser would not have entered into this Agreement without the same: 4.3.1 CONSTATING DOCUMENTS The Corporation is a corporation duly organized, existing, subsisting under the laws of the Province of Ontario, has full corporate power to carry on its business as now conducted, and does not now carry on business in any jurisdiction other than Ontario, and does not own any assets in any jurisdiction other than Ontario, which would require qualification in another jurisdiction. Schedule 1.1.8 annexed hereto contains a true and complete copy of the constating documents of the Corporation, which have not been amended other than as reflected in said Schedule, and there is no application pending for the amendment of any of the same. The minute books and corporate records of the Corporation contain true and complete records of all the by-laws of the Corporation and all meetings and consents in lieu of meetings of the board of directors of the Corporation and their shareholders, and accurately and completely reflect all matters referred to in such minutes 10 10 and consents. The share certificate book and the register of shareholders, directors and transfers of shares of the Corporation are complete and accurate. There is no claim, liability or obligation of the Corporation approved at any meeting of the shareholders or directors of the Corporation which is not set out or contained in the corporate records or minute book of the Corporation; 4.3.2 OPTIONS There are no outstanding subscriptions, calls, options, warrants or other agreements or rights to purchase or subscribe for any shares of the capital stock of the Corporation or to convert any obligation into shares of the capital stock of the Corporation and the Corporation has not agreed to issue or sell any shares of its capital stock or any securities of any kind; 4.3.3 CAPITAL STOCK Schedule 4.3.3 annexed hereto sets forth the authorized capital of the Corporation, and all of the shareholders of issued shares in the capital stock of the Corporation. All of the Purchased Shares are validly issued, fully paid and non-assessable; 4.3.4 SUBSIDIARIES The Corporation does not have any subsidiary or own any equity or other interest in any corporation, partnership, joint venture or other entity. 4.3.5 POWERS OF ATTORNEY Schedule 4.3.5 annexed hereto sets forth a true and complete list of (i) the name of each person with whom the Corporation maintains an account or safety deposit box and the names of all persons authorized to draw thereon or having access thereto and (ii) the name of each person holding a general or special power of attorney from the Corporation, and a true and complete copy thereof; 4.3.6 FINANCIAL STATEMENTS AND CLOSING FINANCIAL STATEMENTS The 1997 Financial Statements have been prepared from the books and records of the Corporation in accordance with Canadian generally accepted accounting principles applied on a consistent basis throughout the period indicated and have been prepared upon a basis consistent with that of preceding years and present fairly, accurately and completely the financial position and results of operation of the Corporation as at the year ending January 31, 1997, including, without limitation, accruals or provisions for warranty claims, bonuses, vacation pay and Taxes within the bounds of reasonable materiality. Except to the extent reflected or reserved against in the 1997 Financial Statements, the Corporation has no liabilities or obligations of any nature whatsoever, whether accrued, absolute, contingent 11 11 or otherwise, other than those incurred by the Corporation in the ordinary course of business since January 31, 1997. 4.3.7 SUBSEQUENT ACTIVITIES Without limiting the generality of paragraph 4.3.6 hereof, since January 31, 1997, there has not occurred any material adverse change in the condition, financial or otherwise, of the Corporation other than changes occurring in the ordinary course of business which changes, individually or in the aggregate, have not materially adversely affected the Corporation's business, financial condition or results of operations. Without limiting the generality of the foregoing, since January 31, 1997, the Corporation has not, directly or indirectly: 4.3.7.1 declared or paid any dividend on its capital stock or redeemed, purchased or otherwise acquired any shares of its capital stock, or otherwise reduced its paid up capital or altered its capital stock, 4.3.7.2 incurred any material obligation or liability or entered into any agreement, obligation, undertaking or transaction outside the ordinary and usual conduct and course of its business, 4.3.7.3 except for the payment of bonuses to employees with respect to the year ended January 31, 1997, which bonuses are reflected in the 1997 Financial Statements, increased the salary, benefits, bonuses or other compensation of its officers, directors or employees or amended its existing group insurance or bonus plans or adopted any new Benefit Plan, 4.3.7.4 sold, leased, mortgaged, pledged or otherwise encumbered or disposed of any of its material assets, rights or properties, except in the ordinary and usual conduct and course of its business, 4.3.7.5 purchased or leased any additional material assets, rights or properties, except for purchases of inventory and supplies in the ordinary and usual conduct and course of its business, 4.3.7.6 made any purchase commitment in excess of Five Thousand ($5,000.00) Dollars or made any changes in its selling, pricing, advertising or personnel practices, 4.3.7.7 cancelled or released any material debts or material claims of customers, 12 12 4.3.7.8 made any material change in its accounting principles, policies or practices as heretofore applied including, without limitation, the basis upon which its assets and liabilities are recorded on its books, its earnings are ascertained or the methods or rates of depreciation or amortization employed, 4.3.7.9 violated any material provision of any agreement, obligation or undertaking to which it is a party or by which it or any of its material assets, rights or properties may be bound, or 4.3.7.10 agreed to do any of the things described in paragraphs 4.3.7.1 through 4.3.7.9 hereof, inclusive; 4.3.7.11 received any material items of income which are unusual or non-recurring; 4.3.7.12 materially changed the manner in which the business and affairs of the Corporation are being conducted as at the date hereof. 4.3.7.13 since the preparation of the 1997 Financial Statements, the Corporation has been subject to an audit of its Scientific Research and Experimental Claims for the years 1989 to 1996. Although a Notice of Assessment has not been issued, Revenue Canada has indicated that such Notice will have the following effect on shareholders deficit, income tax losses and undepreciated capital cost
As reported As revised Shareholders Deficit 75,073 56,346 Non Capital Loss carry-forward 284,220 42,909 Undepreciated capital cost 228,226 550,699 Investment tax credits 47,849 39,071
4.3.8 TITLE TO ASSETS The Corporation is the legal and beneficial owner of, has good and marketable title to and possesses all its material properties, rights and assets free and clear of any Title Defect; 4.3.8.1 TITLE TO REAL PROPERTY The Corporation is the legal and beneficial owner of the Real Property, has good and marketable title to the Real Property, and it possesses the Real Property free of any Title Defect and free of any mortgages, liens or encumbrances, except the Real Property Mortgage, subject to usual qualifications on title. 13 13 4.3.9 LIST AND CONDITION OF ASSETS Schedule 4.3.9 annexed hereto sets forth a true and complete list of all the major fixed assets owned or used by the Corporation having a value in excess of Five Thousand ($5,000.00) Dollars, all of which are located at the Real Property. To the best of Boulard's knowledge all of the material assets and properties of the Corporation (i) are operating as required for the normal and ordinary conduct of the Corporation's business and have been serviced and maintained in the manner of a prudent owner and (ii) are adequate and sufficient for the continuing conduct of the business of the Corporation as now conducted, subject to normal wear and tear. There are no outstanding work orders relating to any of the assets, rights or properties of the Corporation which were received from or required by any Governmental Authority; 4.3.10 REAL PROPERTY 4.3.10.1 The Corporation leases no real property. The Real Property is the only Real Property, which the Corporation owns, uses or occupies. 4.3.10.2 except as set forth in Schedule 1.1.11 annexed hereto, the Corporation has not entered into any sublease, license or other agreement granting to any person any right to the possession, use, occupancy or enjoyment of the Real Property or any portion thereof, 4.3.10.3 all water, gas, electrical, steam, compressed air, telecommunication, sanitary and storm sewage lines and systems and other similar systems serving the Real Property are operating as required for the normal and ordinary conduct of the Corporation's business and have been serviced and maintained in the manner of a prudent owner. The continued existence, use, occupancy and operation of each such line and system is not dependent on the granting of any special permit, exception, approval or variance, and 4.3.10.4 the Corporation has received all certificates of occupancy, permits, licenses, approvals and authorizations of all governmental authorities having jurisdiction over the Real Property, required to have been issued to the Corporation to enable the Real Property to be lawfully occupied and used by the Corporation for all of the purposes for which they are currently occupied and used, and each of the certificates, permits, licenses, approvals and authorizations have been lawfully issued and is in full force and effect and no action by the Corporation or the Purchaser is required in order that such certificates, permits, licenses, approvals and authorizations will remain valid following the completion of the transactions contemplated hereby, except such renewals as are required by applicable law; 14 14 4.3.10.5 the Corporation does not own or hold, and is not obligated under or party to, any option, right of first refusal or other contractual right to purchase, use, lease, occupy, acquire, sell or dispose of the Real Property or any portion thereof or interest therein; 4.3.10.6 there are no pending or, to the best of their knowledge, threatened expropriation proceedings affecting the Real Property or any part thereof or any sale or other disposition of the Real Property or any part thereof in lieu of expropriation. 4.3.11 INTELLECTUAL PROPERTY Schedule 4.3.11 annexed hereto is a true and complete list and copy of all Intellectual Property used by the Corporation in the conduct of its business, as currently conducted, none of which has been opposed or held unenforceable and each of which is in full force and effect. To the best of their knowledge, the Corporation is the absolute owner and has the sole and exclusive right to use the said Intellectual Property without making any payment to others or granting rights to others in exchange. To the best of their knowledge, there is no infringement by others of any of the said Intellectual Property. To the best of their knowledge, the operations of the Corporation do not infringe in any respect upon the Intellectual Property of any other person or entity and, without limiting the generality of paragraph 4.3.16 hereof, no other person or entity has claimed or threatened to claim the right to use any Intellectual Property set forth in Schedule 4.3.11 annexed hereto or to deny the right of the Corporation to use same. No license or sub-license has been granted by the Corporation with respect to any Intellectual Property. The completion of the transactions contemplated hereby will not limit the ownership of or the use by the Corporation of any of the Intellectual Property. To the best of their knowledge, no third party has any interest in any of the Intellectual Property. The Corporation has not conducted business under any name other than its corporate name; 4.3.12 ACCOUNTS RECEIVABLE AND PAYABLE Schedule 4.3.12 annexed hereto sets forth a true and complete (i) aged accounts receivable listing of the Corporation as of June 30, 1997, and (ii) 15 15 aged accounts payable listing of the Corporation as of June 30, 1997. The accounts receivable of the Corporation reflected on the 1997 Financial Statements and those created after January 31, 1997, are genuine and bona fide receivables which arose in the ordinary course of business; 4.3.13 CONTRACTS The Vendors have delivered to the Purchaser a true and complete copy of each of the material written Contracts. The Corporation has no material verbal contracts. The Contracts represent all material agreements, obligations and undertakings to which the Corporation is a party or by which the Corporation or its assets may be bound. The Corporation is not in material violation of or in material default with respect to and no event has occurred which, with lapse of time or action by a third party, or both, would result in violation of or a material default with respect to any of the Contracts. Each of the Contracts is in full force and effect and is valid, binding and enforceable in accordance with its terms and, to the best of their knowledge, all parties to the Contracts (other than the Corporation) are in compliance with their material obligations thereunder. The Corporation has complied with and satisfied (and will have complied with and satisfied in calendar year 1994) all requirements relating to minimum purchase order and sales levels in the Contracts. The Corporation does not have any executory or open contracts with any customers. The aggregate outstanding purchase orders or purchase commitments do not exceed Twenty-Five Thousand ($25,000.00) Dollars; 4.3.14 QUALIFICATIONS The Corporation has not been required to suspend operations of its business or been liable for a fine or penalty as a result of the operation of its business. The Corporation has all licenses, permits, certificates and authorizations necessary for the conduct of its business as presently conducted and such licenses, permits, certificates and authorizations are validly issued, in full force and effect and the Corporation is in compliance therewith, and none of them will be affected by the transactions contemplated hereby; 4.3.15 COMPLIANCE WITH LAWS The Corporation has to date received no notice from any source that it is in material violation of any law, by-law, ordinance or regulation of any Governmental Authority applicable to the Corporation or to which the Corporation is subject; 4.3.16 LITIGATION Schedule 4.3.16 annexed hereto contains true and complete details of all claims, actions, suits, investigations, arbitrations and other proceedings pending or, to the best of their knowledge, threatened against the 16 16 Corporation, including any opinions given to or discussions with any person or other entity which may lead to litigation in the future. The claims, actions, suits, investigations, arbitrations and other proceedings listed on Schedule 4.3.16 annexed hereto will not, individually or in the aggregate, have a material adverse effect on the business, financial condition or results of operations of the Corporation. There are no product liability claims to which the Corporation is or has been subject. There is no order, decree, decision, ruling or judgment of any kind in existence enjoining or restraining the Corporation in any manner, or requiring the Corporation to take any action of any kind; 4.3.17 TAX MATTERS 4.3.17.1 The Corporation (a) has paid all Taxes required to be paid by it through the date hereof or such Taxes have been recorded as a liability on the 1997 Financial Statements and (b) has duly and punctually filed all returns, reports and other forms related to Taxes required to be filed through the date hereof, each of which is true and complete in all respects, 4.3.17.2 The liability of the Corporation for Taxes as of the date of the 1997 Financial Statements do not and will not, in either case, exceed the amount reserved for Taxes thereon and, other than in the ordinary course of business, such liability for Taxes will not increase from the date of the 1997 Financial Statements through the Closing Date, 4.3.17.3 No penalties or other charges are or will become due with respect to the late filing of any Tax return of the Corporation required to be filed on or before the Closing Date, 4.3.17.4 The Corporation has withheld from each payment made to each of its past and present shareholders, agents, employees, officers and directors all deductions required to be made therefrom and has paid same to the proper tax or other authorities, 4.3.17.5 There has not been any Tax audit of any Tax return of the Corporation in the past ten (10) years, 4.3.17.6 Each Tax return heretofore filed by the Corporation, correctly and accurately reflects the amount of liability for Taxes thereunder and makes all disclosures required thereon and, without limiting the generality of paragraph 4.3.15 hereof, otherwise complies with applicable provisions of law, 4.3.17.7 No extension of time is in force with respect to any date on which any Tax return was or is to be filed, and no waiver or agreement is in force for the extension of time for the assessment or payment of any Tax, and 17 17 4.3.17.8 The Corporation is registered under the Excise Tax Act (Canada) and the Retail Sales Tax Act (Ontario); 4.3.18 LABOUR RELATIONS AND RELATIONS WITH EMPLOYEES 4.3.18.1 Without limiting the generality of paragraph 4.3.15 hereof, and to the best of Boulard's knowledge and belief the Corporation is in compliance with all laws and regulations respecting employment and employment practices, terms and conditions of employment, wages and hours of work, other than that set out on Schedule 4.3.18.1 annexed hereto, 4.3.18.2 There is no collective agreement or labour contract to which the Corporation is a party, 4.3.18.3 To the best of Boulard's knowledge and belief there are no labour disruptions pending or, to the best of their knowledge, threatened against the Corporation and the Corporation is not involved in any controversy with any of its employees except in the ordinary and usual conduct and course of its business, 4.3.18.4 There are no written employment agreements entered into by the Corporation. Without limiting the generality of paragraph 4.3.12 hereof, there is no agreement providing for a specified notice of termination or fixed term of employment. There is no director, officer or employee of the Corporation who, provided his or her common law rights are fulfilled, cannot be dismissed upon such notice as is required by the Employment Standards Act of Ontario, and 4.3.18.5 To the best of their knowledge, there has never been and there is not presently pending or existing any strike, slowdown, picketing, work stoppage, labour arbitration or proceeding in respect of the grievance of any employee or other labour dispute against or affecting the Corporation, or threatened against the Corporation. To the best of their knowledge, no application for the certification of a collective bargaining unit has been instituted or is pending or threatened. To the best of their knowledge, no fact, condition or circumstance exists which could provide the basis for any work stoppage or other labour dispute. 4.3.19 BENEFIT PLANS 4.3.19.1 Schedule 4.3.19 annexed hereto contains a list of all the Benefit Plans to which the Corporation is a party. The Vendors have delivered to the Purchaser a true and complete copy of all the said Benefit Plans. Without 18 18 limiting the generality of paragraph 4.3.15 hereof, all Benefit Plans are duly registered where required by law (including registration with the relevant tax authorities where such registration is required to qualify for tax exemption or other beneficial tax status) and are in good standing under all applicable laws, 4.3.19.2 There are no material outstanding defaults or violations by the Corporation of any obligation required to be performed by it in connection with any Benefit Plans. Without limiting the generality of the foregoing, there are no actions, suits, claims, trials, demands, investigations, arbitrations or other proceedings pending or, to the best of our knowledge, threatened with respect to any of the Benefit Plans (other than routine claims for benefits) against the Corporation, 4.3.19.3 Without limiting the generality of paragraph 4.3.14, all Benefit Plans which are funded plans are funded in accordance with their rules and all relevant laws and are fully funded on both a going-concern and a termination basis. Without limiting the generality of paragraph 4.3.14, all required employer contributions, premium payments and source-deducted employee contributions under the Benefit Plans have been made and remitted to the funding agents including, without limitation, all current service costs and special payments, 4.3.19.4 The Vendors have delivered to the Purchaser true and complete copies of all documents embodying, related to or summarizing the Benefit Plans, 4.3.19.5 No step has been taken to terminate any Benefit Plan and no liability has been incurred by the Corporation in connection with any Benefit Plan that has not been satisfied in full. There exists no agreement, decree or other binding provision which prohibits the termination of any Benefit Plan, and 4.3.19.6 No promises or commitments have been made by the Corporation to amend any Benefit Plan or to provide increased benefits thereunder; 4.3.20 INSURANCE Schedule 4.3.20 annexed hereto contains a list of each insurance policy currently maintained by the Corporation. The Vendors have delivered to the Purchaser a true and complete copy of each of the said insurance policies. All such policies are in full force and effect and to the best of Boulard's knowledge and belief are not void or voidable and nothing has been done or omitted to be done by the Corporation that would make any such policy void or voidable. The Corporation has not failed to give any notice or present any 19 19 claim under any insurance policy when due or in a timely fashion. No claim presented by the Corporation has been or continues to be disputed or is under negotiation, nor does any amount recoverable from any insurer in respect of any such claim remain unpaid; 4.3.21 EMPLOYEES Schedule 4.3.21 annexed hereto contains a true and complete a list of the employees of the Corporation detailing dates of hire, total remuneration including total salary and bonuses paid and position held. Each of the employees listed on Schedule 4.3.21 annexed hereto received compensation from the Corporation solely in consideration of services performed on their behalf. The salaries and bonuses of all officers and employees of the Corporation were paid entirely by the Corporation; 4.3.22 SUPPLIERS AND CUSTOMERS 4.3.22.1 Schedule 4.3.22.1 annexed hereto contains a true and complete list of (i) the Corporation's five (5) largest suppliers detailing amounts purchased during the 1996 calendar year and the 1997 year to date from the Corporation's five (5) largest suppliers, and (ii) the Corporation's customers, and amounts of sales during the 1996 calendar year and the 1997 year to date in connection with the Corporation's Ten (10) largest customers by volume; and written details of all material customer complaints and warranty claims for each of the last three (3) fiscal periods of the Corporation which have not been resolved. The Corporation has not granted or consented to any mortgage, lien, pledge, security interest, charge or encumbrance in favour of any of its suppliers; 4.3.22.2 Since March 31, 1994, no supplier or customer of the Corporation has cancelled or otherwise terminated or, to the best of their knowledge, threatened to cancel or otherwise terminate its relationship with the Corporation other than as set out on Schedule 4.3.22.2 annexed hereto. To the best of their knowledge, there is no condition which adversely affects the supply of materials required to conduct the business of the Corporation. There is no reason to believe that the transactions contemplated by this Agreement will materially adversely affect the Corporation's relationship with any supplier or customer. The Vendors have no notice that any customers intend to cease dealing with the Corporation. 4.3.23 INVENTORY The inventory of the Corporation (including that reflected on the balance sheets forming part of the Financial Statements and the Closing Financial Statements) has been reflected in accordance with Canadian generally accepted accounting principles, consistently applied. Without limiting the generality of the foregoing, such inventory does not and will not include any 20 20 obsolete, defective or excess items which have not been valued in accordance with Canadian generally accepted accounting principles, consistently applied; 4.3.24 RELATED TRANSACTIONS The Corporation does not have any indebtedness to any of its shareholders, directors, officers or employees, past or present, or any person not dealing at arms-length with any of such persons, except for current unpaid salaries and bonuses; and no shareholder, director, officer or employee, past or present, of the Corporation or any person not dealing at arms-length with any of such persons has any indebtedness to the Corporation, other than as set out on Schedule 4.3.24 annexed hereto; 4.3.25 NO BROKER The Corporation has not employed, nor is the Corporation subject to any claim of any broker, finder, consultant or other intermediary in connection with the transactions contemplated by this Agreement; 4.3.26 PAID-UP CAPITAL There is no tax liability of the Corporation under parts IV, VII or VIII of the Income Tax Act (Canada). No property has been acquired by the Corporation pursuant to subsection 85(1) of the Income Tax Act (Canada). The paid up capital (as such expression is used in the Income Tax Act (Canada)) of the Shares of the Corporation's capital stock is identical to their stated capital under applicable corporate legislation; 4.3.27 NO GUARANTEES Without limiting the generality of paragraph 4.3.13 hereof, the Corporation is not a party to nor bound by any comfort letter, understanding or agreement of guarantee, indemnification, assumption or endorsement or any like commitment with respect to the liabilities or obligations of any third party, whether accrued, absolute, contingent or otherwise; 4.3.28 PRODUCT LIABILITY AND WARRANTIES To the best of their knowledge, but without limiting the generality of paragraph 4.3.14 hereof, the Corporation has marketed its products and services in accordance with all applicable truth-in-labelling, health and safety, truth-in-advertising, anti-fraud and other such laws which are applicable to the marketing of the Corporation's products and services. Subject to any warranty required by law (including, without limitation, pursuant to the Sale of Goods Act of Ontario), the Corporation has not issued any warranty to, nor had any other understanding or made any other agreement with, any customer relating to warranties, including warranties, understandings or agreements relating to the quality or condition of any products or services sold by the Corporation. 21 21 4.3.29 GRANTS AND SUBSIDIES Without limiting the generality of paragraphs 4.1.5 and 4.2.5 hereof, neither the execution and delivery of this Agreement nor the completion of the transactions contemplated hereby will result in any obligation or liability of the Corporation or the Purchaser to repay, in whole or in part, any grant, subsidy, loan or other benefit which has been paid to or for the benefit of the Corporation, nor will the Corporation suffer any reduction in the amount of, loss of right to or any adverse change in the terms and conditions of any grant, subsidy, loan or other benefit paid to or for the benefit of the Corporation or which are or may become payable to the Corporation after the date hereof; 4.3.30 ENVIRONMENTAL CLAIMS To the best of their knowledge, there has been no material Release by the Corporation (or, to the best of their knowledge, any predecessor in interest of the Corporation or any prior owner, lessee or occupant of the Leased Real Property or the Real Property) of Hazardous Substances in, under or on the Leased Real Property or the Real Property and the Leased Real Property and the Real Property are free of any material contamination by the Corporation (or, to the best of their knowledge, any predecessor in interest of the Corporation or any prior owner, lessee or occupant of the Leased Real Property and the Real Property) of the Environment by Hazardous Substances therein or thereon, 4.3.31 ACCURACY OF INFORMATION 4.3.31.1 The Vendors have made or caused to be made reasonable inquiry with respect to each covenant, agreement, obligation, representation and warranty contained in this Agreement, and any certificates or other documents referred to herein or furnished to the Purchaser pursuant hereto, and to the best of Boulard's knowledge and belief, none of the aforesaid covenants, agreements, obligations, representations, warranties, certificates or documents contains any untrue statement of a material fact or omits to state a material fact necessary to make such representation, warranty, certificate or other document not misleading, and 4.3.31.2 To the best of their knowledge, there is no fact, condition or circumstance which (i) materially adversely or in the future may (so far as the Vendors can now reasonably foresee) materially adversely affect the business, operations, properties, prospects, or condition of the Corporation or the ability of the Vendors to perform this Agreement or (ii) relates to the business of the Corporation and might reasonably be expected to deter a person carrying on a like business from consummating the transactions hereby contemplated. 22 22 SECTION 5 - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 5.1 The Purchaser hereby represents and warrants to the Vendors that the following representations and warranties are true and correct and acknowledges that the Vendors are relying upon such representations and warranties in connection with the transactions contemplated hereby and that the Vendors would not have entered into this Agreement without the same: 5.1.1 CORPORATE ORGANIZATION, QUALIFICATIONS, ETC. The Purchaser is duly incorporated and organized and is a validly existing corporation and is current with respect to filings required under the laws of its jurisdiction of incorporation; the Purchaser has all the requisite power and authority to own, lease and operate its properties and carry on its business as presently conducted; 5.1.2 AUTHORITY TO ENTER INTO AGREEMENT The Purchaser has the necessary corporate power and authority to enter into this Agreement and consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Purchaser and the performance by the Purchaser of the transactions contemplated hereby will not, with or without the giving of notice and/or the passage of time, or both, (i) violate any provision of law applicable to the Purchaser or, require any consent or approval of, or any filing with or notice to, any third party, governmental or otherwise, (ii) conflict with or result in a default of any provision or termination of or accelerate the date for performance of any obligation under any agreement to which the Purchaser is a party or by which it may be bound (iii) result in the creation of any Title Defect upon any of its property or assets or (iv) conflict with or result in a default of any provision or termination of any of its constating documents or by-laws. All necessary corporate action has been taken by the Purchaser in order to authorize the execution and delivery by the Purchaser of this Agreement and the consummation by the Purchaser of the transactions contemplated hereby. This Agreement constitutes a valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws relating to or affecting the enforcement of creditors' rights generally, and principles of equity; SECTION 6 - SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS 6.1 The representations and warranties set forth herein and in any document, certificate or other instrument expressly required to be delivered by or on behalf of any party pursuant hereto and the covenants and agreements of the parties set forth herein shall survive 23 23 the Closing Date, notwithstanding any investigation concluded by any of the parties hereto, until one year from the Closing Date, other than (i) the representations and warranties relating to any Tax Claim as set out in paragraphs 4.3.17 or 4.3.26 hereof, which shall survive the Closing Date until the later of (a) the date upon which the liability to which any such Tax Claim may relate is barred by all applicable statutes of limitation (after taking into account any extensions, provided same have not been requested by either the Purchaser or the Corporation) or (b) the date upon which any claim for refund or credit related to such Tax Claim is barred by all applicable statutes of limitations and (ii) the representations and warranties contained in subsections 4.1.1, 4.1.2, 4.1.3, 4.1.4, 4.1.5 and 4.1.6 hereof and in paragraphs 4.2 and 5.1 hereof, each of which shall survive the Closing Date for a period of three (3) years from the Closing Date. SECTION 7 - INDEMNIFICATION 7.1 The Vendors shall indemnify and save harmless the Purchaser from and against any claims, demands, actions, causes of actions, judgments, damages, losses (which shall include any diminution in value), liabilities, costs or expenses (including, without limitation, interest, penalties and reasonable attorneys' and experts' fees and disbursements) any claims, demands, actions, causes of actions, judgments, damages, losses (which shall include any diminution in value), liabilities, costs or expenses (including, without limitation, interest, penalties and reasonable attorneys' and experts' fees and disbursements) shall be collectively referred to as the "Losses") which may be made against the Purchaser or the Corporation or which any of them may suffer or incur as a result of, arising out of or relating to: 7.1.1 any violation, contravention or breach of any covenant, agreement or obligation of the Vendors under or pursuant to this Agreement; 7.1.2 any incorrectness in, or breach of, any representation or warranty made by the Vendors in this Agreement or in any certificate or other document delivered or given pursuant to this Agreement (other than in connection with subsections 4.1 or 4.2 hereof); 7.2 Boulard shall indemnify and save harmless the Purchaser from and against any Losses which may be made against the Purchaser or the Corporation or which any of them may suffer or incur as a result of, arising out of or relating to any incorrectness in, or breach of, any representation or warranty made by Boulard in subsection 4.1 hereof or in any certificate or other document delivered or given by Boulard pursuant hereto in connection with subsection 4.1 hereof. 7.3 Hamer shall indemnify and save harmless the Purchaser from and against any Losses which may be made against the Purchaser or the Corporation or which any of them may suffer or incur as a result of, arising out of or relating to any incorrectness in, or breach 24 24 of, any representation or warranty made by Hamer in subsection 4.2 hereof or in any certificate or other document delivered or given by Hamer pursuant hereto in connection with subsection 4.2 hereof. 7.4 The Purchaser shall indemnify and save harmless the Vendors from and against any Losses which may be made against the Vendors or which the Vendors may suffer or incur as a result of, arising out of or relating to: 7.4.1 any violation, contravention or breach of any covenant, agreement or obligation of the Purchaser under or pursuant to this Agreement; 7.4.2 any incorrectness in, or breach of, any representation or warranty made by the Purchaser in this Agreement or in any certificate or other document delivered or given pursuant to this Agreement; and 7.4.3 any action, suit, claim, trial, demand, investigation, arbitration or other proceeding by any person containing allegations which, if true, would constitute an event described in subsection 7.4.1 or 7.4.2 hereof. 7.5 The party or parties providing indemnification hereunder (the "Indemnifying Party") shall jointly and severally in the case of paragraph 7.1 and severally only, in the case of paragraphs 7.2 and 7.3, reimburse, on demand, to the party or parties being indemnified hereunder (the "Indemnified Party") the amount of any Losses suffered or incurred by the Indemnified Party, as of the date that the Indemnified Party incurs any such Losses, together with interest thereon from the aforesaid date until payment in full at the rate per annum equal to the rate announced by the Toronto-Dominion Bank in Toronto from time to time as its reference rate for determining the rate of interest charged to its most credit-worthy customers for commercial loans in Canadian currency, plus two percent (2%). 7.6 Promptly upon obtaining knowledge thereof, the Indemnified Party shall notify the Indemnifying Party of any cause which the Indemnified Party has determined has given or could give rise to indemnification under this Section 7. In circumstances where the Indemnifying Party is notified of such cause but not promptly, the Indemnifying Party shall not be relieved from any duty to indemnify and hold harmless which otherwise might exist with respect to such cause unless (and only to that extent) the omission to notify promptly materially prejudices the ability of the Indemnifying Party to exercise its right to defend provided in this Section 7. 7.7 If any legal proceeding shall be instituted or any claim or demand shall be asserted by a third party against the Indemnified Party (each a "Third Party Claim"), in respect of a matter for which the Indemnifying party has agreed in this section 7 to indemnify the Indemnified party, then the Indemnifying Party shall have the right, after receipt of the 25 25 Indemnified Party's notice under subsection 7.6 hereof and upon giving written notice to the Indemnified Party within ten (10) Banking Days of such receipt, to defend the Third Party Claim at its own cost and expense with counsel of its own selection, provided that: 7.7.1 the Indemnified Party shall at all times have the right to fully participate in the defense at its own expense; 7.7.2 the Third Party Claim seeks only monetary damages and does not seek any injunctive or other relief against the Indemnified Party; 7.7.3 the Indemnifying Party unconditionally acknowledges in writing its obligation to indemnify and hold the Indemnified Party harmless with respect to the Third Party Claim; 7.7.4 legal counsel chosen by the Indemnifying Party is satisfactory to the Indemnified Party, acting reasonably. 7.8 The Indemnifying Party shall not be permitted to compromise and settle or to cause a compromise and settlement of any Third Party Claim, without the prior written consent of the Indemnified Party, unless: 7.8.1 the terms of the compromise and settlement require only the payment of money and do not require the Indemnified Party or the Corporation to admit any wrongdoing or take or refrain from taking any action; 7.8.2 the Indemnified Party receives, as part of the compromise and settlement, a legally binding and enforceable unconditional satisfaction or release, which is in form and substance satisfactory to the Indemnified Party, acting reasonably. 7.9 If the Indemnifying Party fails: 7.9.1 within fifteen (15) Banking Days from receipt of the notice of a Third Party Claim to give notice of its intention to defend the Third Party Claim in accordance with subsection 7.6 hereof, or 7.9.2 to comply at any time with any of paragraphs 7.7.1 through 7.7.4 (inclusive) hereof, then the Indemnifying Party shall be deemed to have waived its right to defend the Third Party Claim and the Indemnified Party shall have the right (but not the obligation) to undertake or to cause the Corporation to undertake the defense of the Third Party Claim and compromise and settle the Third Party Claim on behalf, for the account and at the risk and expense of the Indemnifying Party. 26 26 7.10 The obligations of indemnification set out in subsections 7.1, 7.2, 7.3 and 7.4 hereof shall survive the Closing as to time, in accordance with the limitations regarding survival of representations and warranties set forth in Section 6. 7.11 The rights, recourses and remedies provided to an Indemnified Party under this Section 7 are cumulative with any other right such Indemnified Party may have or may hereafter acquire under any applicable law or in equity, any provision of this Agreement or otherwise, and any right, recourse or remedy of such Indemnified Party may be asserted completely against the Indemnifying Party, without regard to the rights, recourses or remedies the Indemnified Party may have against any third party. 7.12 The Vendors, jointly and severally, and the Purchaser agree to provide each other with such assistance as may reasonably be requested in connection with Tax matters relating to any taxable period, including but not limited to, providing information with respect to the preparation of any Tax return, any audit or other examination by any taxing authority, or any judicial or administrative proceeding relating to liability for Taxes, or any Tax Claim. The Purchaser will cause the Corporation to retain all books and records that relate to any Tax return, audit or examination, proceedings, or determination of the Corporation for a period of not less than five (5) years following the filing date of such Tax return. SECTION 8 - INTERIM PERIOD 8.1 The Vendors, jointly and severally, covenant that during the Interim Period, they shall: 8.1.1 cause the Corporation to (a) timely pay all Taxes required to be paid by it after the date hereof and on or before the Closing Date; and (b) duly and punctually prepare and file, in a manner consistent with the prior years and applicable laws and regulations, all returns for Taxes required to be filed after the date hereof and on or before the Closing Date; 8.1.2 promptly notify the Purchaser, in writing, of the existence of any fact, event, condition or occurrence, which comes to their attention, which may alter the accuracy or truth of any representation or warranty on their part contained herein, or result in such representation or warranty being incorrect; 8.1.3 cause the Corporation to carry on business in the ordinary course, and use its best efforts to preserve its business organization and goodwill, maintain its relationships with suppliers, customers and others having business relations with it and retain in its employ all of its employees; 8.1.4 use their Best Efforts to satisfy or cause to be satisfied all of the conditions precedent set forth in subsection 9.2 hereof; 27 27 8.1.5 cause to be afforded to the Purchaser, and its representatives, at reasonable times and on reasonable notice, complete access to the Real Property, as well as to the assets, rights, properties, books, files and records of, and all other documents and data relating to, the Corporation (including the right to make copies and extracts thereof) and all officers and employees of the Corporation shall cooperate with such individuals; 8.1.6 ensure that the Corporation does not make or promise any change in the compensation, rate of compensation, commissions or bonuses payable by it, pay any bonus, profit-sharing or other extraordinary compensation of any kind or adopt or enter into any additional Benefit Plan. 8.1.7 not to enter into discussions or negotiations with any third party relating to the sale of any of the Purchased Shares, or the issuance of any shares in the capital stock of the Corporation; and ensure that the Corporation does not enter into any discussions or negotiations with any third party relating to the merger, sale or other disposition of any of the assets of the Corporation, except for sales of inventory in the ordinary and usual conduct and course of its business. 8.2 The Purchaser covenants that during the Interim Period it shall: 8.2.1 promptly notify the Vendors, in writing, of the existence of any fact, event, condition or occurrence, which comes to its attention, which may alter the accuracy or truth of any representation or warranty on its part contained herein, or result in such representation or warranty being incorrect; and 8.2.2 use its Best Efforts to satisfy or cause to be satisfied all of the conditions precedent set forth in subsection 9.5 hereof. SECTION 9 - CLOSING AND CLOSING CONDITIONS 9.1 On the Closing Date, the Vendors, jointly and severally, undertake to: 9.1.1 cause to be delivered to the Purchaser the opinion of the Vendors' solicitors, dated the Closing Date, in the form annexed hereto as Schedule 9.1.1; 9.1.2 cause all requisite corporate action of the Corporation to be taken to approve the transfer of the Purchased Shares pursuant hereto; 9.1.3 deliver to the Purchaser the written resignations of such members of the board of directors and officers of the Corporation as are designated by the Purchaser, and cause each of such directors and officers to execute and deliver to the Purchaser releases in the form annexed hereto as Schedule 9.1.3; 28 28 9.1.4 deliver to the Purchaser share certificates representing the Purchased Shares, in each case duly endorsed in blank for transfer; 9.1.5 cause Boulard to execute and deliver the Boulard Employment Agreement to Advanced Accessory Systems, LLC. 9.1.6 cause Boulard, Janet Boulard and Hamer to execute and deliver the Non- Competition and Confidentiality Agreement to the Purchaser; 9.1.7 deliver to the Purchaser (i) the minute books, registers of transfer, registers of shareholders, registers of directors, share certificate books and the corporate seal of the Corporation, and (ii) by leaving same at the Corporation's head office location the ledgers, account books, financial records, permits and licenses, policies of insurance, contracts, agreements, indentures, instruments, commitments, Tax returns, evidence or indications of ownership of the Corporation in and to their assets, rights and properties and all other documents, certificates and records of the Corporation, all of which shall be true and complete. 9.1.8 cause Boulard to pay the sum of Sixteen Thousand ($16,000.00) Dollars (Cdn) plus the relevant G.S.T. and P.S.T. to the Corporation for a transfer of ownership to Boulard of the Nissan vehicle owned by the Corporation and used by Boulard. 9.2 The obligation of the Purchaser to proceed with the Closing is subject to each of the conditions hereinbelow set forth, all of which are agreed to be material and are inserted for the exclusive benefit of the Purchaser, and may be waived in whole or part by the Purchaser, provided that any waiver, to be effective, must be in writing: 9.2.1 the representations and warranties of Boulard contained in subsection 4.1 hereof shall be true and correct as if made at and as of the Closing Date; the representations and warranties of Hamer contained in subsection 4.2 hereof shall be true and correct as if made at and as of the Closing Date; all other representations and warranties of the Vendors contained herein, which are not expressly limited or qualified as to materiality, shall be true and correct in all material respects as if made at and as of the Closing Date; all other representations and warranties of the Vendors contained herein, which are expressly limited or qualified as to materiality, shall be true and correct as if made at and as of the Closing Date; the Vendors shall have complied with all the covenants and agreements contained herein and satisfied all the conditions set forth in this subsection 9.2 as of the Closing Date; Boulard shall have delivered to the Purchaser a certificate in his personal capacity, dated as of the Closing Date, certifying that the representations and warranties contained in subsection 4.1 hereof are true and correct as of the Closing Date; Hamer shall 29 29 have delivered to the Purchaser a certificate in his personal capacity, dated as of the Closing Date, certifying that the representation and warranties contained in subsection 4.2 hereof are true and correct as of the Closing Date, and the Vendors shall have delivered to the Purchaser a certificate, dated as of the Closing Date, certifying that the representations and warranties of the Vendors to the Purchaser contained in this Agreement (other than in subsections 4.1 and 4.2 hereof): (i) which are not expressly limited or qualified as to materiality are true and correct in all material respects as of the Closing Date (ii) which are expressly limited or qualified as to materiality are true and correct as of the Closing Date, and confirming that the Vendors have complied with all their covenants and agreements contained herein and satisfied all the conditions in this subsection 9.2 as of the Closing Date; 9.2.2 The Corporation shall not have suffered any material adverse change in its business, financial condition, results of operations or prospects since the date hereof, and there will not have been any occurrence or circumstance which might reasonably be expected to result in a change thereto, and there shall be no material adverse difference in the financial position of the Corporation as compared with the financial position of the Corporation set out in the 1997 Financial Statements; 9.2.3 all actions, proceedings, instruments and documents required to complete the transactions contemplated herein or instrumental thereto, and all other legal matters relating to the matters contemplated herein, shall have been approved as to form, substance and legality by counsel for the Purchaser, acting reasonably; 9.2.4 that no suit, action or other proceeding of material consequence shall be pending, or threatened, before a court or Governmental Agency seeking to restrain or to obtain damages or other relief in connection with this Agreement, or the consummation of the transaction contemplated hereby; 9.2.5 the Purchaser and its accountants shall undertake such examination of the books of account and financial statements of the Corporation (and in particular, but without restricting the generality of that statement, financial representations of the Vendors herein) as the Purchaser views requisite, and the Purchaser shall, in its sole discretion, be satisfied with the accountants' report, provided that the Purchaser and its accountant's due diligence shall be completed within thirty (30) days of the date of the execution of this Agreement by all of the parties to the Agreement. In the event that the Purchaser or its accountants identifies any discrepancy in the representations and warranties of the Vendors, that is material in nature, the period of due diligence will be extended by up to five (5) days. If a resolution of any material discrepancy in the representations and warranties of the Vendors is not achieved within the further five (5) day period and the discrepancy results in the breach of a 30 30 material representation or warranty herein, the Agreement will be deemed to be terminated in accordance with Section 9.3 and the parties shall no longer be obligated to each other, except for the joint and several obligations of the Vendors to pay the Purchaser's reasonable legal and accounting fees and expenses and the Purchaser shall have no further recourse against the Vendors in respect thereof. If the Purchaser has not notified the Vendors in writing prior to the end of such fifteen (15) day period (or twenty (20) day period in the event it has been extended) that this condition has not been fulfilled, this condition shall be deemed to be fulfilled. 9.3 In the event that any of the conditions precedent to the obligations of the Purchaser set forth in subsection 9.2 hereof shall not have been fulfilled and/or performed on or prior to the Closing Date, otherwise than as a result of the Purchaser's acts or omissions, the Purchaser may, at its option, either (i) terminate this Agreement by written notice to the Vendors at any time prior to the Closing without further formality or (ii) proceed with the Closing, in either case without prejudice to the Purchaser's rights, recourses and remedies. 9.4 At Closing, the Purchaser undertakes to: 9.4.1 cause all requisite corporate action of the Purchaser to be taken to approve the transactions contemplated herein; 9.4.2 pay the Purchase Price; 9.4.3 to loan Three Hundred and Fifty Two Thousand Three Hundred and Forty Eight ($352,348.00) Dollars (Cdn) to the Corporation to be used by the Corporation to pay out shareholders loans in the amount of Two Hundred and Forty One Thousand Three Hundred and Forty Eight ($241,348.00) Dollars and to allow the Corporation to redeem all of the outstanding Preference shares for One Hundred and Eleven Thousand ($111,000.00) Dollars; 9.4.4 To loan to the Corporation a sum sufficient to pay out as of closing the Corporation's outstanding third party debts as listed below, to a maximum of $547,652.00, in order to secure release of all of the personal guarantees of the shareholders of the Corporation.
THIRD PARTY CREDITOR OUTSTANDING AS OF JUNE 30/97 Ontario Development Corporation - Loan 1 (July 4) $201,214.90 Ontario Development Corporation - Loan 2 (July 4) 78,025.32 Business Development Bank of Canada (Mortgage) 140,800.00 Toronto Dominion Bank (line of credit) 62,500.00 Jutland Tool and Die 15,699.70 AT & T Capital Lease 3,913.06 Nissan Canada 16,923.01 Teleteck 1,091.78 ----------- TOTAL: $520,167.77
31 31 9.5 The Vendors' obligation to proceed with the Closing is subject to the conditions hereinbelow set forth, all of which are agreed to be material and are inserted for the Vendors' exclusive benefit, and may be waived in whole or part by the Vendors, provided that any waiver, to be effective, must be in writing: 9.5.1 the representations and warranties of the Purchaser contained herein shall be true and correct in all material respects as if made at and as of the Closing Date and the Purchaser shall have complied with all the covenants and agreements contained herein and satisfied all the conditions in this subsection 9.5 as of the Closing Date; the Purchaser shall have delivered to the Vendors a certificate, dated as of the Closing Date, certifying that the representations and warranties of the Purchaser to the Vendors contained in this Agreement are true and correct in all material respects as of the Closing Date, and confirming that the Purchaser has complied with all its covenants and agreements contained herein and satisfied all the conditions in this subsection 9.5 as of the Closing Date; and 9.5.2 all material actions, proceedings, instruments and documents required to complete the transactions contemplated herein or instrumental thereto, and all other legal matters relating to the matters contemplated herein, shall have been approved as to form, substance and legality by counsel for the Vendors, acting reasonably. 9.6 In the event that any of the conditions precedent to the Vendors' obligations set forth in subsection 9.5 hereof shall not have been fulfilled and/or performed on or prior to the Closing Date, otherwise than as a result of the acts or omissions of any of the Vendors, the Vendors may, at their option, either (i) terminate this Agreement by written notice to the Purchaser at any time prior to the Closing without further formality or (ii) proceed with the Closing, in either case without prejudice to the Vendors' rights, recourses or remedies. SECTION 10 - NOTICES 10.1 Any notice, demand or other communication required or permitted to be given hereunder shall be given in writing and sent by prepaid registered mail, return receipt requested, by telecopier or delivered by hand, at the following addresses: If to Boulard: Hamer Bay Road Hamer Bay, Ontario P0C 1H0 If to Hamer: Hamer Bay Road Hamer Bay, Ontario P0C 1H0 32 32 In each case with a copy to: Pinckard, Wyjad Associates 39 Dominion Street, Box 77 Bracebridge, Ontario P1L 1R6 Att: Daniel J. Wyjad, M Sc., L.L.B. If to the Purchaser: Advanced Accessory Systems Canada Inc. / Les Systems D'Accessoury Advanced Du Canada Inc. Sterling Town Centre 12900 Hall Road, Suite 200 Sterling Heights, Michigan U.S.A. 48313 Att: Terence C. Seikel, V.P. Finance and Administration Fax: (810) 997 6839 With a copy to: Wilson, Walker, Hochberg, Slopen 300 - 443 Ouellette Avenue Windsor, Ontario N9A 6R4 (519) 977-1555 Att: Stephen M. Cheifetz Fax: (519) 977-1566 or to such other address as any of the parties may have previously indicated in writing in accordance with the terms hereof. Any such notice, demand or communication shall be deemed to have been received on the first Banking Day following actual receipt. SECTION 11 - CONCLUDING PROVISIONS 11.1 No public statement regarding the transactions contemplated herein shall be made without the prior written consent of the parties hereto. 11.2 This Agreement shall be governed by and construed and enforced in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. Any and all disputes, claims or controversies between the parties hereto, whether arising during the term of this Agreement or at any time thereafter, which touches upon the validity, negotiation, breach, existence, construction, meaning, performance or effect of this Agreement or the rights and liabilities of the parties hereto or any matter arising out of or connected with this Agreement shall be referred to and finally settled by binding arbitration pursuant to the Arbitrations Act (Ontario) and as provided in this subsection 11.2 and the decision of the arbitrator shall be final and binding as among the parties hereto. There will be one arbitrator chosen by and acceptable to the parties hereto. The place of arbitration shall be in Toronto, Ontario, Canada. The governing law shall be the substantive law of the Province of Ontario and the laws of Canada applicable therein. 33 33 11.3 No party hereto may assign or transfer any of its rights or obligations hereunder without the express written consent of the other parties hereto, except that any party shall be entitled to assign or transfer its rights and/or obligations hereunder to: (i) any subsidiary or affiliated company thereof, (ii) any or all of its lenders, as general and continuing collateral security for the performance of its obligations to such lenders. Subject to the foregoing, this Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors, heirs, administrators, executors and legal representatives. 11.4 The parties agree to perform such acts and execute and deliver such agreements and instruments as may be necessary or desirable from time to time in order to give full effect to the provisions hereof including, without limitation, the timely furnishing of all information. 11.5 The provisions contained herein and in any document, certificate or other instrument required to be delivered by or on behalf of a party hereto constitute the entire understanding among the parties in connection with the matters contemplated herein. All previous communications between the parties, whether written or verbal, relating to the subject matter hereof, are superseded and replaced hereby. No modification of the terms hereof shall be binding upon a party hereto unless made in writing and signed by such party. 11.6 The terms "hereof", "herein", "hereunder" and other words of similar import mean and refer to this Agreement as a whole and not a particular section, subsection or paragraph, unless expressly so stated. Any reference herein to any gender shall include all genders. 11.7 Time shall be of the essence hereof. 11.8 All references to dollar amounts herein mean Canadian dollars unless otherwise indicated. 11.9 Each of the parties hereto shall be responsible and pay for all costs, expenses and fees incurred by them in connection with the transactions contemplated hereby. 34 34 11.10 This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and together shall constitute one and the same document. IN WITNESS WHEREOF THE PARTIES HAVE SIGNED ON THE DATE AND AT THE PLACE FIRST HEREINABOVE MENTIONED. /s/ Robert Boulard ----------------------------------------------- ROBERT BOULARD /s/ Alan Hamer ----------------------------------------------- ALAN HAMER ADVANCED ACCESSORY SYSTEMS CANADA INC. / LES SYSTEMES D'ACCESSOIRE ADVANCED CANADA INC. Per: /s/ Terence Seikel -------------------------------------------- (Authorized Signing Officer) EX-10.5 12 EX-10.5 1 EXHIBIT 10.5 ASSET PURCHASE AGREEMENT This Agreement is entered into as of the 5th day of August, 1997, by and between VALLEY INDUSTRIES, LLC, a Delaware limited liability company (the "Buyer"), AAS HOLDINGS, LLC, a Delaware limited liability company (the "Parent", and together with Buyer, the "Buyer Companies"), VALLEY INDUSTRIES, INC., a Delaware corporation (the "Company"), FISHER FAMILY HOLDINGS LIMITED PARTNERSHIP, a Nevada limited partnership ("FHLP", and together with the Company, individually, a "Seller" and, jointly, the "Sellers"), FISHER FAMILY HOLDINGS, INC., a Nevada corporation ("FFHI"), FISHER PARENT HOLDINGS, INC., a Nevada corporation ("FPHI"), FISHER PARENT HOLDINGS LIMITED PARTNERSHIP, a Nevada limited partnership ("Parent LP"), ROBERT L. FISHER ("Fisher"), ROGER T. MORGAN ("Morgan", and together with FFHI, FPHI, Parent LP and Fisher, individually, an "Equityholder" and, collectively, the "Equityholders"). The Buyer Companies, Sellers and Equityholders are sometimes referred to herein individually as a "Party" and, collectively, as the "Parties." The Sellers and Equityholders are sometimes referred to herein, jointly, severally and collectively, as the "Selling Group Members." RECITALS A. The Company is engaged in the business (the "Company Business") of designing, engineering, manufacturing, marketing, selling and distributing towing products, including trailer hitches, trailer balls, ball mounts, couplers, tow bars and brush guards. As of the Closing (as defined below), substantially all of the assets, rights and properties used in the conduct of the Company Business (as further defined hereinbelow, the "Valley Assets") are owned by the Sellers. B. The Equityholders collectively own directly or indirectly all of the capital stock, partnership interests and other equity interests in the Sellers. C. Pursuant to the terms and conditions herein set forth, the Buyer will purchase and acquire all of the right, title and interest of the Sellers in and to all of the Valley Assets and Third Party Property from the Sellers and the Sellers will sell, transfer, assign and convey all of their respective right, title and interest in and to Valley Assets and Third Party Property to the Buyer. Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. 1. DEFINITIONS. As used in this Agreement, the following terms shall have the meaning ascribed to them in this Section 1: 2 "Action" means any action, suit, arbitration, inquiry, proceeding, hearing or investigation by or before any court, arbitration tribunal or panel or any Governmental Authority. "Adjustment Date" has the meaning defined in Section 3(c)(iv) below. "Adjustment Notice" has the meaning set forth in Section 3(c)(i) below. "Affiliate" means, as to any Person, any other Person (i) which directly or indirectly controls, is controlled by, or is under common control with such Person, (ii) which beneficially owns or holds 5% or more of any class of voting interests or other equity interests of such Person or (iii) 5% or more of any class of voting interests or other equity interests of which is beneficially owned or held, directly or indirectly, by such Person. As used herein, the term "control" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Affiliate Debt" means the indebtedness of the Sellers described on EXHIBIT A-1 attached hereto and any other indebtedness of either Seller to any Equityholder or any Affiliate of either Seller or any Equityholder otherwise unpaid on the Closing Date. "Affiliated Group" means any affiliated group within the meaning of Code Section 1504(a). "Allocable Portion" means, with respect to the share of any Selling Group Member in a particular amount, (i) in the case of Morgan, a percentage amount equal to ten percent (10%) and (ii) in the case of each of the other Selling Group Members, jointly, severally and collectively, a percentage amount equal to ninety percent (90%). "Applicable Laws" means, as to the Person to which reference is made, all laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of all Governmental Authorities applicable to such Person, its assets or properties or its operations. "Arbitrator" means the accounting firm of Deloitte & Touche LLP or, subject to the mutual agreement of the Buyer and the Valley Equityholder Representative, such other firm of certified public accountants as may be so mutually agreed. "Assumed Contracts" means each of the Contracts, other than any Excluded Contracts. "Assumed Funded Debt" means the portion of the Funded Debt, to the extent outstanding as of the Closing Date, identified on EXHIBIT A-2 attached hereto. "Assumption Documents" means each of the instruments and other documents which are executed by the Buyer and delivered to the Sellers to further evidence the Buyer's assumption of the obligations of the Sellers to pay and discharge the Valley Liabilities and -2- 3 otherwise assume all of the liabilities and obligations of the Sellers' under the terms of the Assumed Contracts. "Auburn Hills Lease" means that certain Lease between the Company and Herman Kaplan and Shirley Kaplan dated October 1, 1996, relating to the real property and improvements located at 1972 Brown Road in Auburn Hills, Michigan, as amended, modified or supplemented. "Base Equity Value" means an amount equal to $23,645,000. "Blanket Purchase Orders" mean such purchase orders for products of the Company as have been submitted to the Company by customers such as Chrysler Corporation, Ford Motor Company and General Motors Corporation and which cover all or a portion of such customer's annual requirements for a particular product. "Business Day" means a day other than a Saturday, Sunday, holiday or other day on which commercial banks in the locale of any Party are authorized by law to be closed. "Buyer" has the meaning set forth in the preface above. "Buyer Auditors" means Price Waterhouse L.L.P. or such other firm of independent certified public accountants as may be designated by the Buyer. "Buyer Companies" has the meaning set forth in the preface above. "Charter Documents" mean the respective certificates of incorporation, bylaws, partnership agreements and other agreements, instruments or documents (i) pursuant to which the Selling Group Members have, as applicable, been formed, incorporated or organized or (ii) which otherwise govern or restrict the respective rights, powers and authority of the Selling Group Members. "Claims Period" has the meaning set forth in 7(a) below. "Closing" has the meaning set forth in Section 3(e) below. "Closing Asset Value" means the Net Book Value of the Valley Assets determined as of the Closing Date on the basis of the Closing Balance Sheet, provided, that, notwithstanding anything to the contrary herein, in determining the Closing Asset Value (a) no value shall be recognized for or in respect of (i) the deferred loss on the sale/leaseback relating to the Dequindre Road real property and improvements, (ii) prepaid travel expenses, (iii) unamortized tooling or (iv) nonreimbursable tooling and (b) the lost contract reserve shall be fixed at the amount of $128,000. "Closing Balance Sheet" has the meaning set forth in Section 3(c)(i) below. -3- 4 "Closing Date" has the meaning set forth in Section 3(e) below. "Closing Equity Value" means an amount equal to the difference between the Closing Asset Value and Closing Liability Value, provided, however, that no effect shall be given to any increase in property, plant or equipment as a result of an "involuntary conversion" as defined in GAAP. "Closing Liability Value" means the Net Book Value of the Valley Liabilities determined as of the Closing Date on the basis of the Closing Balance Sheet. "Code" means the Internal Revenue Code of 1986, as amended. "Company" has the meaning set forth in the preface above. "Company Business" has the meaning set forth in Recital A above. "Confidential Information" means any confidential information pertaining to the Company and Company Business as of the date hereof, including, but not limited to, information concerning its financial condition, prospects, customers, sources of leads, methods of doing business, and the manner of design, manufacture, financing, marketing and distribution of its products, provided, however, that Confidential Information does not include information that is or becomes generally available to the public other than as a result of a disclosure in violation of Section 8(d) by any Covered Person. "Contract" means each contract, agreement or arrangement, whether written or oral, to which the Company is a party, or by which the Company or any of its assets is bound. "Conveyance Documents" means each of the instruments and other documents which are executed by either of the Sellers and delivered to the Buyer to further evidence the sale, transfer, assignment or other conveyance of the rights, title and interests of the Sellers in and to the Valley Assets and Third Party Property by the Sellers to Buyer. "Covered Persons" has the meaning set forth in Section 8(d) below. "Customer Tooling" means the tooling identified on EXHIBIT B attached hereto. "Dequindre Road Lease" means that certain Lease Agreement between the Company and Valley Realty dated January 21, 1997, relating to the real property and improvements located at 32451 and 32501 Dequindre Road in Madison Heights, Michigan, as amended, modified or supplemented. "Disputed Matter(s)" has the meaning set forth in Section 3(c)(iii) below. -4- 5 "Documents" mean this Agreement, the Parent Subscription Documents, the Reorganization Documents, the Employment Agreement, the Conveyance Documents and the Assumption Documents, in each instance, each as amended, modified or supplemented from time to time. "Employee Benefit Plan" means any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan, or (d) Employee Welfare Benefit Plan. "Employee Pension Benefit Plan" has the meaning set forth in ERISA Section 3(2). "Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section 3(1). "Employment Agreement" means an Employment Agreement, dated as of the Closing Date between the Buyer and Morgan, in form satisfactory to Morgan. "Environmental Claim" means any notice or claim, written or oral, by any Person or any governmental authority alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries or penalties) arising out of, based on or resulting from now or at any time in the past on property currently or formerly owned or operated by the Company (a) the presence, or release into the environment, of any Material of Environmental Concern at any location, whether or not owned or leased by the Company presently or at any time in the past or (b) any violation, or alleged violation, of any Environmental Law. "Environmental Laws" means all federal, state, local and foreign laws and regulations relating to pollution or protection of the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or the protection of human health from environmental hazards, including, without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of Materials of Environmental Concern, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern. "Equityholder" and "Equityholders" have the meaning set forth in the preface above. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Excluded Assets" means the Excluded Contracts and such other assets, rights and properties identified on EXHIBIT C attached hereto. -5- 6 "Excluded Contracts" means the Excluded Debt Documents and each of the other Contracts identified on EXHIBIT D attached hereto. "Excluded Debt Closing Payments" has the meaning set forth in Section 3(b)(ii). "Excluded Debt Documents" means each of the Contracts which evidence any Excluded Obligations or any security therefor or other agreements incidental thereto. "Excluded Funded Debt" means the Funded Debt to the extent not Assumed Fund Debt. "Excluded Obligations" means, collectively, the Excluded Funded Debt, Affiliate Debt and such other liabilities, indebtedness and obligations of the Company identified on EXHIBIT E attached hereto. "Excluded Representations and Warranties" means those representations and warranties of the Parties set forth in subsections (a), (b), (c), (d), (e), (f), (g), and, as to matter of title, (h) of Section 4 hereof and subsections (a), (b), (c), (d) and (f) of Section 5 hereof. "Facility Leases" means the Auburn Hills Lease, the Dequindre Road Lease and the Turner Road Lease. "FFHI", "FHLP" and "FPHI" have the meaning set forth in the preface above. "Financial Statements" has the meaning set forth in Section 4(i) below. "Fisher" has the meaning set forth in the preface above. "FHLP/Valley Assets" means that portion of the Valley Assets consisting of (a) accounts and notes receivable, (b) inventory, and (c) prepaid items. "Funded Debt" means, without duplication, the aggregate amount (including the current portions thereof) outstanding as of the Closing Date of all (a) indebtedness of the Sellers for money borrowed from others and purchase money indebtedness (other than accounts payable or trade letters of credit issued in the ordinary course and outstanding as of the Closing Date); (b) indebtedness of the type described in clause (a) in respect of which a Seller has provided a Guaranty to any other Person, (c) indebtedness of the type described in clause (a) above secured by any Lien upon property owned by a Seller, even though each Seller has not in any manner become liable for the payment of such indebtedness; and (d) interest expense accrued but unpaid, and all prepayment premiums. on or relating to any of such indebtedness. "GAAP" means United States generally accepted accounting principles as in effect from time to time, applied on a basis consistent with such principles and methodologies as employed by the Company in the preparation of the Financial Statements, so long as such -6- 7 principles and methodologies do not conflict with such United States generally accepted accounting principles. "Governmental Authority" means any foreign, federal, state or local government or political subdivision, or any department or agency thereof. "Guaranty" means, with respect to the Person to which reference is made, any agreement, contingent or otherwise, excluding endorsements of checks, instruments or other items of payment in the ordinary course for deposit or collection, to guarantee or in effect guarantee or assure the payment of, or performance with respect to, any indebtedness, liability or other obligation of any other Person (a "primary obligor"), including, without limitation, any agreement made with a creditor of such primary obligor, primarily for the purpose of enabling such primary obligor to make payment of the indebtedness or to assure the owners or holders of the indebtedness against loss, (a) to supply funds to, or in any other manner invest in, such primary obligor or (b) to purchase indebtedness, or Co-purchase and pay for property if not delivered, or pay for services if not performed. "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Income Tax" means any federal, state, local, or foreign income tax, including any interest, penalty, or addition thereto, whether disputed or not, including any tax on or based upon net income, gross income, or income as specially defined, or earnings, profits, or selected items of income, earnings or profits, including all taxes payable in respect of the Michigan Single Business Tax and California Corporate Income Tax. "Income Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Income Taxes, including any schedule or attachment thereto. "Indemnifiable Loss" means, with respect to any claim for indemnification made by a Party entitled to indemnification pursuant to this Agreement, any and all losses, liabilities, claims (including assertion of claims), damages, obligations, payments, costs and expenses incurred by such Party (including attorney's fees and expenses) with respect to such claim, including, without limitation, the costs and expenses of any and all Actions, demands, assessments, judgments, settlements and compromises relating thereto. "Indemnified Party" has the meaning set forth in Section 7(e) below. "Indemnifying Party" has the meaning set forth in Section 7(e) below. "Indemnity Claim Notice" has the meaning set forth in Section 7(e) below. -7- 8 "Interim Balance Sheet" means the unaudited balance sheet of the Company as of March 31, 1997. "Interim Financial Statements" means the Interim Balance Sheet and the related unaudited statement of income and changes in stockholders' equity and cash flow for the three month period ending as of March 31, 1997. "Knowledge" or "known" means actual knowledge of the matter to which reference is made. "Leased Property" means the property leased by the Company under the Real Property Leases and each of the other leases identified on EXHIBIT F attached hereto. "Licensed Property" means the property or technology which is licensed to the Company as identified on EXHIBIT G attached hereto. "Lien" means any security interest mortgage, pledge, lien, encumbrance or other charge upon any property, including the leasehold interest of the lessor under any capital lease. "Lodi Environmental Liabilities" means Indemnifiable Losses any of the Buyer Indemnified Persons shall incur as a direct result of any breach or inaccuracy in the representations and warranties of the Sellers under Section 4(n) hereof to the extent relating to the Lodi Facility. "Lodi Facility" means the real property described on EXHIBIT H attached hereto, and all buildings, improvements, fixtures and fittings thereon and all easements, rights-of-way and other appurtenants thereto (such as appurtenant rights in and to public streets). "Material Adverse Change" and "Material Adverse Effect" mean, as related to the circumstances, events or conditions to which reference is made, any such circumstances, events or conditions which (a) has any material adverse effect upon the validity or enforceability of any of the Documents, (b) impairs, in any material respect, any of the rights of the Buyer or Parent under any of the Documents or (c) is material and adverse to the business, properties, assets, financial condition or results of operations, of the Company Business, taken as a whole. "Material Agreements" means, (a) the Real Property Leases, (b) each other Material Lease and (c) other than the Excluded Contracts, each other Contract of the following nature: (i) letters of credit, pledges, bonds or similar arrangements running to the account of or for the benefit of the Company, excluding, however, trade letters of credit and bonds issued for the benefit or account of the Company in the ordinary course of business and, which do not evidence obligations in excess of $25,000, determined as of the Closing Date; -8- 9 (ii) Contracts relating to the purchase, maintenance or acquisition, or sale or furnishing of materials, supplies, merchandise, machinery, equipment, parts or any other property or services, excluding, however, any such Contract made in the Ordinary Course of Business and which is expected to be fully performed within 30 days of the Closing Date or which involves revenues or expenditures of less than $50,000); (iii) any collective bargaining agreement; (iv) Contracts obligating the Company to refrain from competing with any business, or to conduct any business with only certain parties, or which otherwise restrains or prevents the Company from carrying on any lawful business or which restricts the right of the Company to use or disclose any information in its possession, excluding, however, such nondisclosure arrangements incidental to the Company's supply of product to customers pursuant to such customer's designs or specifications; (v) employment, compensation, severance or consulting Contracts, not otherwise terminable by the Company, without penalty, on no more than 30 days advance written notice, involving, in any instance, an annual expenditure, by the Company, including any such amounts as would be payable upon termination of such Contract (computed as if so terminated effective as of the Closing Date), of in excess of $25,000 (excluding however any such arrangements provided for under the written employment policies of the Company generally applicable to all employees of the Company); (vi) any Contract with any Equityholder, or any Affiliate of any Equityholder, excluding, however, any such Contract which has been terminated, without further liability to the Company, effective as of the Closing Date; (vii) any Contract, not otherwise cancelable by the Company without material penalty or loss, for capital expenditures or the acquisition or construction of fixed assets for or in respect of any real property involving payments in excess of $100,000 per year; (viii) any Contract granting any Person a Lien on any of the assets of the Company, in whole or in part, other than a Permitted Lien or, in the case of any real property, any Permitted Real Estate Restriction; (ix) any Contract, not otherwise cancellable without liability on 30 days notice, by which (A) the Company retains any manufacturer's representatives, broker, sales agent or other distributor or (B) the Company is appointed or authorized as a sales agent, distributor or representative of any other Person; -9- 10 (x) any Contract under which the Company has granted or received a license or sublicense or under which the Company is obligated to pay, or has the right to receive. a royalty, license fee or similar payment of in excess of $25,000 per annum; (xi) any Contract for the Company's participation in any joint venture or partnership; (xii) any Contract for (A) the storage, transportation, treatment and disposal of any materials subject to regulation under any Environmental Laws, or (B) for storage, transportation or similar services with carriers or warehousemen, excluding, however, any such Contract entered into in the ordinary course and involving annual expenditures not exceeding $25,000; (xiii) other than as related to the insurance policies described on SCHEDULE 4(U) hereto, any Employee Benefit Plan or any Contract otherwise a Material Agreement or excluded by reason of the foregoing provisions of this definition, any Contract which is otherwise material to the assets, business, operations or financial condition of the Company and (A) is not otherwise described in a Schedule, or (B) involves the payment of more than $50,000 by the Company or (C) is not cancellable by the Company on 30 days notice without liability. "Material Leases" means (a) the Facility Leases and Real Property Leases and (b) each other lease or sublease of real property, or a lease, sublease or other title retention agreement or conditional sales agreement relating to any machinery, equipment, vehicle or other tangible personal property, which, individually, involves annual payments in excess of $25,000. "Material Real Property" means the Lodi Facility and the real property leased by the Company under the Facility Leases and Real Property Leases. "Materials of Environmental Concern" means chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products in each case with respect to which liability or standards of conduct are imposed pursuant to any Environmental Laws. "Members Agreement" means the Second Amended and Restated Members' Agreement among the Parent, Fisher, Morgan and the other members of the Parent, dated as of the Closing Date. "Morgan" has the meaning set forth in the preface above. -10- 11 "Morgan Note" means that certain Promissory Note dated January 1, 1995, executed by Roger T. Morgan in favor of the Company, in the original principal amount of $291,500.00. "Most Recent Year-End" means December 31, 1996. "Most Recent Year-End Balance Sheet" means the balance sheet of the Company as of the Most Recent Year-End included in the Most Recent Year-End Financial Statements. "Most Recent Year-End Financial Statements" means the Financial Statements of the Company for, and as of, the fiscal year ending as of the Most Recent Year-End. "Net Book Value" means the net book value of the Valley Assets or the Valley Liabilities, as the case may be, as determined in accordance with GAAP. "Notice of Dispute" has the meaning set forth in Section 3(c)(iii) below. "Operating Agreement" means the Second Amended and Restated Operating Agreement of the Parent, dated as of the Closing Date. "Ordinary Course of Business" or "ordinary course of business" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). "Other Taxes" means Taxes, other than Income Taxes. "Parent" has the meaning set forth in the preface above. "Parent LP" has the meaning set forth in the preface above. "Parent LP/Valley Assets" means that portion of the Valley Assets consisting of the Company's machinery, equipment, tooling, jigs, dies and other tangible personal property, other than inventory. "Parent Subscription Documents" means the Subscription Agreements, the Operating Agreement, the Members Agreements and each of the other agreements, instruments or documents executed by, or delivered to, Fisher and Morgan in connection with their subscription for Units of the Parent. "Party" or "Parties" has the meaning set forth in the preface above. "PBGC" means the Pension Benefit Guaranty Corporation. -11- 12 "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or any Governmental Authority. "Permits" means, with respect to the Person to which reference is made, all governmental permits, licenses and authorizations necessary for the conduct of such Person's business as presently conducted. "Permitted Liens" means (a) Liens securing taxes, assessments or other governmental charges or levies, or the claims or demands of materialmen, mechanics, contractors, carriers, warehousemen, landlords and other similarly situated Persons, incurred in the ordinary course of business and which are not yet due and payable, or which are being contested in good faith through appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, and (b) Liens incurred or deposits made in the ordinary course of business, and provided that no amounts secured thereby are overdue or delinquent, (i) in connection with worker's compensation, unemployment insurance, social security and other like laws or (ii) to secure performance of letters of credit, bids, tenders, sales contracts, leases, statutory obligations, surety, appeal and performance bonds incurred in the ordinary course of business and (c) such other Liens, if any, described on EXHIBIT I attached hereto. "Permitted Real Estate Restrictions" means (a) reservations, exceptions, rights of way, encroachments, easements, covenants, conditions, restrictions, and other similar title exceptions or encumbrances affecting real property, provided that the same do not materially detract from the value of said real properties or materially interfere with their use in the ordinary conduct of business and (b) such other exceptions to title, if any, as are described in EXHIBIT J attached hereto. "Purchase Price" has the meaning set forth in Section 3(b) below. "Real Property Leases" mean the Facility Leases and each other lease of real property to which the Company is a party, other than any leases or storage agreements for warehouse space used to store inventory, entered into in the Ordinary Course of Business, and which are terminable by the Company, without penalty, on the delivery of written notice of not more than sixty (60) days. "Reorganization" means the transactions consummated pursuant to the Reorganization Documents and as further described in Section 2 below. "Reorganization Documents" mean each of those agreements, instruments and other documents to which any of the Selling Group Members are a party relating to the reorganization of Fisher's ownership of the Company and the transfer of Valley Assets ultimately to FHLP immediately prior to Closing. -12- 13 "Reportable Event" has the meaning set forth in ERISA Section 4043. "Response Period" has the meaning set forth in Section 7(e) below. "Review Period" means the thirty (30) day period following the Buyer's receipt of the Adjustment Notice. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. "Seller" and "Sellers" have the meaning set forth in the preface above. "Selling Group Members" has the meaning set forth in the preface above. "Subscription Agreements" means those certain Subscription Agreements dated as of the Closing Date between the Parent and Fisher and the Parent and Morgan, respectively, relating to the purchase by Fisher and Morgan of certain Class A Units of the Parent. "Tax" or "Taxes" means, with respect to any Person, all Income Taxes and all gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment or windfall profits taxes, alternative or add-in minimum taxes, customs duties or other taxes of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority on such Person. "Threatened Claims" means those matters described on EXHIBIT K attached hereto. "Third Party Claim" has the meaning set forth in Section 7(f) below. "Third Party Property" means, collectively, Leased Property, Licensed Property and Customer Tooling. "Transactions" means, collectively, the transactions contemplated to be effected under the terms of the Documents. "Turner Road Lease" means that certain Lease dated April 23, 1996 between Stanley Herstein, as Lessor, and the Company, as Lessee, for Unit C at 104 East Turner Road in Lodi, California, as supplemented by that certain Agreement to Lease Additional Space dated March 12, 1997 between such parties relating to the lease of Unit B at 104 East Turner Road in Lodi, California and that certain Lease Extension dated June 20, 1997 between such parties extending the term of the lease as related to Unit C. "Valley Assets" means, to the extent not otherwise an Excluded Asset, all of the Sellers' right, title and interest to and under all assets, properties, interests in properties and rights of the Sellers of every kind, nature and description, whether real, personal or mixed, -13- 14 moveable or immoveable, tangible or intangible, wherever located as the same shall exist immediately prior to Closing including the following: (a) the Lodi Facility; (b) all of the assets, properties and rights of the Sellers in and to all of each Seller's (i) accounts and notes receivable and, regardless of the nature, other amounts which may be owing to either such Seller, (ii) inventories of raw materials and supplies, manufactured and purchased parts, goods in process and finished goods, (iii) machinery, equipment, furniture, automobiles, trucks, tractors, trailers, tools, jigs, dies and other tangible personal property, (iv) in respect of Third Party Property, including all leasehold interests under all Leases (including the Material Leases and any other lease of real or personal property), (v) intellectual property, goodwill associated therewith, licenses and sublicenses granted and obtained with respect thereto, and rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the laws of all jurisdictions, (vi) rights under, and interests in, any Contracts or other arrangements relating to, or arising out of the conduct of, its business, including all Assumed Contracts, (vii) claims, deposits, prepayments, refunds, causes of action, chooses in action, rights of recovery, rights of set off, and rights of recoupment (exclusive of any such item relating to the payment of Income Taxes in respect of periods prior to the Closing Date), (viii) franchises, approvals, Permits, licenses, orders, registrations, certificates, variances, and similar rights obtained from governments and governmental agencies, (ix) books, records, ledgers, files, documents, correspondence, lists, plats, architectural plans, drawings, and specifications, creative materials, advertising and promotional materials, studies, reports, and other printed or written materials, and (x) rights in and with respect to the assets associated with its Employee Benefit Plans; and (c) all other assets, properties, rights, interests and other items existing as of the Closing Date to the extent categorized as "assets" (including "other assets") on the balance sheet of either Seller included in the Financial Statements, including all unamortized expenses, prepaid expenses or items, deposits and the like. The term "Valley Assets" shall not include the Excluded Assets. "Valley Auditors" means Ernst & Young LLP. "Valley Closing Bonuses" means bonus payments to be made by the Company on the Closing Date as set forth on EXHIBIT L attached hereto. "Valley Liabilities" means each of the following: -14- 15 (a) all liabilities and obligations of the Company, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and whether due or to become due, including, without limitation, all such liabilities and obligations for, under, in respect of or arising out of (i) accounts payable and other liabilities and expenses incurred in the Ordinary Course of Business on or before the Closing Date, (ii) unpaid Taxes, other than Income Taxes, with respect to periods prior to the Closing Date, (iii) any agreements, contracts, leases, licenses, and other arrangements to which the Company is or was a party, including, without limitation, each of the Assumed Contracts, (iv) goods manufactured or sold prior to Closing, including all warranty and product liability claims relating thereto, (v) the Assumed Funded Debt, and (vi) all other liabilities and obligations of the Company arising out of the conduct of its business prior to the Closing Date or any of the facts, events, circumstances or conditions set forth in any of the Schedules hereto; (b) all liabilities and obligations of FHLP for or in respect of any of the liabilities or obligations described in clause (a) above; and (c) all other liabilities and obligations of the Company categorized as "liabilities" on the balance sheets of the Company included in the Financial Statements. The term "Valley Liabilities" shall not include the Excluded Obligations. "Valley Equityholder Representative" means Robert L. Fisher or such successor representative as may be designated in writing by Fisher. "Valley/FHLP Partnership Interest" has the meaning set forth in Section 2(a) below. "Valley/Parent LP Partnership Interest" has the meaning set forth in Section 2(a) below. "Valley Realty" means Valley Industries Realty, L.P., a Delaware limited partnership. -15- 16 2. REORGANIZATION. Prior to the consummation of the transactions contemplated hereby, (i) the Company has transferred all of its right, title and interest in and to the Parent LP/Valley Assets to Parent LP in return for a limited partnership interest in Parent LP (the "Valley/Parent LP Partnership Interest"), (ii) Parent LP has, in turn, transferred all of its right, title and interest in the Valley Assets to FHLP in consideration of the issuance of a preferred limited partnership interest in FHLP to Parent LP and (iii) the Company has otherwise transferred all of its right, title and interest in and to FHLP/Valley Assets directly to FHLP in consideration of the issuance to the Company of a common limited partnership interest in FHLP (the "Valley/FHLP Partnership Interest"). 3. BASIC TRANSACTION. (a) Purchase and Sale of Valley Assets/Assumption of Valley Liabilities. On and subject to the terms and conditions of this Agreement, and for the consideration specified below in this Section 3: (i) The Buyer agrees to purchase and acquire from the Sellers, and each of the Sellers agrees to sell, transfer, assign, convey, and deliver to the Buyer, all of the Valley Assets, including all such rights, title and interests of each Seller with respect to any Third Party Property free and clear of all Liens other than Permitted Liens and with respect to the Lodi Facility free and clear of all Liens other than Permitted Real Estate Restrictions. (ii) The Buyer agrees to assume, pay and discharge, as and when due, all of the Valley Liabilities. (iii) Simultaneously with the execution herewith, the Sellers are executing and delivering (or causing to be executed and delivered) to the Buyer, the Conveyance Documents necessary to sell, transfer, convey and assign to the Buyer, in accordance with the terms hereof, the Valley Assets, free and clear of all Liens (other than Permitted Liens). Simultaneously with the execution herewith, the Sellers shall relinquish to the Buyer possession and operating control of the Valley Assets and shall take all other steps that may be required or desirable to pass title to the Valley Assets to the Buyer. (iv) The Sellers shall promptly pay or deliver to the Buyer any amounts or items which may be received by the Sellers after the Closing which constitute Valley Assets and shall cause all customer orders and purchase orders placed with Affiliates of the Sellers and relating to the products or services of the Company Business to be assigned at the Closing to the Buyer. Each of the Selling Group Members shall, at any time and from time to time after the Closing, upon the reasonable request of the Buyer, and at Buyer's sole cost and expense, do, -16- 17 execute, acknowledge, deliver and file, or cause to be done, executed, acknowledged, delivered and filed, all such further acts, transfers, conveyances, assignments or assurances as may reasonably be required for better selling, transferring, conveying, assigning and assuring to the Buyer, or for aiding and assisting in the collection of or reducing to possession by the Buyer, any of the Valley Assets. (v) Anything contained in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement or attempted agreement to transfer, sublease or assign any contract, license, real or personal property lease, sales order, purchase order or other agreement, or any claim or right with respect to any benefit arising thereunder or resulting therefrom, or any Permit, if an attempted transfer, sublease or assignment thereof, without the required consent of any other party thereto, would constitute a breach thereof or in any respect affect the rights of the Buyer or the Sellers thereunder. The Sellers shall use their commercially reasonable efforts to obtain the consent of any such third party to any of the foregoing to the transfer or assignment thereof to the Buyer in all cases in which such consent is required for such transfer or assignment. If such consent is not obtained, the Sellers, at Buyer's sole cost and expense, shall make any arrangements necessary or desirable to provide for the Buyer the benefits thereunder, including, without limitation, enforcement by the Sellers for the benefit of the Buyer of any and all rights of the Sellers thereunder against the other parties thereto. (vi) The Sellers hereby constitute and appoint the Buyer and its successors and assigns the true and lawful attorney of the Sellers with full power of substitution, in the name of the Buyer, or the name of the Sellers on behalf of and for the benefit of the Buyer, to collect all accounts and notes receivable and other items being sold, transferred, conveyed and assigned to the Buyer hereunder to endorse, without recourse, checks, notes and other instruments constituting the Valley Assets in the name of the Sellers, to institute and prosecute all proceedings which the Buyer may deem proper in order to collect, assert or enforce any claim, right or title of any kind in or to the Valley Assets, to defend and compromise any and all actions, suits or proceedings in respect of any of the Valley Assets or the Company Business and to all such acts and things in relation thereto as the Buyer may deem advisable. The foregoing powers are coupled with an interest and shall be irrevocable by the Sellers, directly or indirectly, whether by the dissolution of the Sellers or in any manner or for any reason. (b) The Purchase Price (i) Purchase Price. The aggregate purchase price (the "Purchase Price") to be paid by the Buyer to the Sellers for the Valley Assets, and the covenants set forth in Section Sections 8(c) and 8(e) hereof, shall be an amount equal to: -17- 18 (A) $___________ (the "Closing Payment Amount"); and (B) less, the amount, if any, by which the Closing Equity Value is less than the Base Equity Value, or plus, the amount, if any, by which the Closing Equity Value exceeds the Base Equity Value. The Purchase Price, as increased to reflect the Closing Liability Value, shall be subject to allocation among the Valley Assets by the Buyer in accordance with the allocation principles attached as EXHIBIT M hereto, provided, that, the allocation so made by the Buyer shall be subject to the Sellers' consent, which will not be unreasonably withheld. The Parties agree to use such allocation for all purposes and to assist each other as reasonably requested in the preparation of IRS Form 8594. (ii) Payment of Closing Payment Amount. The Closing Payment Amount shall be paid, on the Closing Date, to or for the account of the Sellers as follows: (A) such amounts as may be required to discharge any Liens (not otherwise a Permitted Lien) securing any Excluded Funded Debt (the "Excluded Debt Closing Payments") shall be paid and delivered by Buyer, out of and as a credit against the Closing Payment Amount, directly to the holders of such Excluded Funded Debt; and (B) the balance of the Closing Payment Amount (i.e. after credit for Excluded Debt Closing Payments) shall be paid by wire transfer of immediately available funds to such account(s) as the Sellers may direct. The amount of the Excluded Debt Closing Payments shall be determined on the basis of the payoff letters from the holders of such Excluded Funded Debt required to be so paid as delivered to Buyer under the provisions of Section 3(f)(i)(G) below. (iii) Payment of Adjustments. Following the finalization of the Closing Balance Sheet in accordance with the provisions of Section 3(c) below, the Buyer and Sellers shall, within five (5) Business Days following the Adjustment Date, make such final payments in respect of the Purchase Price as follows: (A) If the Closing Equity Value is greater than the Base Equity Value (the amount of such excess being referred to herein as the "Underpayment Amount"), the Buyer shall pay the Underpayment Amount to the Sellers; or (B) If the Closing Equity Value is less than the Base Equity Value (the amount of such shortfall being referred to herein as the "Overpayment Amount"), the Sellers shall pay the Overpayment Amount to the Buyer. -18- 19 (iv) Reliance. The Buyer shall be entitled to rely on the such written disbursement instructions or payment directions as may be executed by each of the Sellers in making any payment required to be made to the Sellers under this Agreement. (c) Closing Balance Sheet. (i) Preparation of Closing Balance Sheet. Promptly following the Closing, the Company's internal accounting staff shall prepare a balance sheet of the Company as of Closing Date (the "Closing Balance Sheet") which, for purposes of this Agreement, shall reflect the Net Book Value of FHLP's interest in the Valley Assets as if such interest were wholly-owned by the Company. The Valley Auditors shall, at the expense of the Sellers, review the Closing Balance Sheet as so prepared and issue their report thereon as provided below. For such purposes, the Buyer shall provide the Valley Auditors with such access to, and copies of, such financial information and reports concerning the Valley Assets and Valley Liabilities as the Valley Auditors deem necessary or appropriate so as to enable them to so review the Closing Balance Sheet. The Closing Balance Sheet shall be prepared in accordance with GAAP and reviewed subject to standards otherwise consistent with the "review" provisions of Statement No. 1, entitled "Compilation and Review of Financial Statements" (December 1978) of the Accounting and Review Services Committee of the American Institute of Certified Public Accountants. For purposes of the foregoing, the Closing Balance Sheet shall specifically identify any Excluded Obligations otherwise discharged on the Closing Date. The Valley Auditors shall provide the Parties with the Closing Balance Sheet, together with its report thereon to the effect that there are no material modifications that should be made to the Closing Balance Sheet in order for them to be in conformity with GAAP, as soon as practicable but in any event not later than 45 days after the Closing Date. In addition to such report, the Valley Auditors shall, at the time of delivery of the report on the Closing Balance Sheet, also provide the Buyer and Sellers with a separate schedule setting forth the calculation of the Closing Equity Value. The Closing Equity Value shall be calculated in accordance with the agreed-upon procedures set forth on EXHIBIT N attached hereto, which the Parties agree shall be followed in making such calculation. Upon calculation of the Closing Equity Value, the Sellers shall promptly deliver a written notice to Buyer setting forth, as applicable, the calculation of the Underpayment Amount or Overpayment Amount, if any (the "Adjustment Notice"). (ii) Review by Buyer's Auditors. In rendering the foregoing review and report, the Valley Auditors shall consult with the Buyer Auditors, and permit the -19- 20 Buyer Auditors and Buyer at the earliest practicable date to review the report of the Valley Auditors, including all work papers, schedules and calculations related thereto, whether prior to or after the issuance thereof. The Buyer Auditors shall commence its review of said work papers, schedules and calculations as soon as practicable after the Valley Auditors have completed the field work phase of its review. Final review of the Closing Balance Sheet as prepared by the Valley Auditors, and the related determination of the Closing Equity Value, shall be completed by the Buyer and Buyer Auditors within the Review Period. (iii) Dispute Resolution. To the extent the Buyer (or the Buyer Auditors) dispute the Closing Balance Sheet, or the amount of the Closing Equity Value, such dispute (a "Disputed Matter(s)") shall be resolved in the following manner: (A) Buyer shall notify the Valley Equityholder Representative in writing of such Disputed Matter(s), describing such Disputed Matter(s) in reasonable detail, prior to the expiration of the Review Period (such notice being referred to as a "Notice of Dispute"). In the absence of the timely delivery of a Notice of Dispute to the Valley Equityholder Representative, the Closing Balance Sheet, and Closing Equity Value, as determined by the Valley Auditors shall be final and binding upon the Parties; (B) during the 30 day period following the date of receipt of a Notice of Dispute, the Valley Equityholder Representative and Buyer shall attempt, in good faith, to resolve the Disputed Matter(s) and to determine the appropriateness of the Closing Balance Sheet or the Closing Equity Value; and (C) if at the end of the 30 day period specified in subsection (c)(iii)(B) above, the Valley Equityholder Representative and Buyer shall have failed to reach a written agreement with respect to the Disputed Matter(s), such matter(s) shall be referred for final binding resolution to the Arbitrator, which shall act as an arbitrator and shall issue its report as to the Closing Balance Sheet and Closing Equity Value within sixty (60) days after such dispute is referred to the Arbitrator. The Arbitrator shall issue such report using the methodologies specified in this Agreement. Each of the parties hereto shall bear all costs and expenses incurred by it in connection with such arbitration, except that the fees and expenses of the Arbitrator hereunder shall be borne equally by the Selling Group Members on the one hand (in accordance with their Allocable Portion) and Buyer on the other hand. This provision for arbitration shall be specifically enforceable by the parties and the decision of the Arbitrator in accordance with the provisions hereof shall be final, binding, not subject to collateral attack and there shall be no right of appeal therefrom. -20- 21 (iv) Adjustment Date. The "Adjustment Date", as such term is used herein, shall be the later of the last day of the Review Period, or, assuming a Notice of Dispute is delivered by the Buyer to the Valley Equityholder Representative, the date upon which the Disputed Matter(s), if any, are finally resolved pursuant to the foregoing procedures of this Section 3(c). (d) Allocation to Non-Compete and Non-Solicitation Covenants. $100,000 of the Purchase Price shall be allocated to, and deemed consideration for the covenants set forth in Section Section 8(c) and 8(e) below. (e) The Closing. The closing ("Closing") of the transactions contemplated hereby shall, unless a later date is otherwise mutually agreed upon in writing by the Buyer and Valley Equityholder Representative, take place on the date hereof. The date of the Closing is herein referred to as the "Closing Date." (f) Actions Taken at Closing. At the Closing and subject to the terms and conditions herein contained: (i) unless otherwise waived by the Buyer, the Sellers shall deliver to Buyer the following: (A) such bills of sale, deeds, assignments, releases and other instruments, documents and certificates (including Conveyance Documents), duly executed by the Sellers or, as applicable, the holders of any Liens, as may, in the opinion of the Buyer, be required to effectively vest in Buyer all of the right, title and interest of the Sellers in and to the Valley Assets, free and clear of all Liens of any nature, other than Permitted Liens; (B) such opinion(s) of counsel from counsel to the Selling Group Members, addressed to the Buyer and dated as of the Closing Date, in form and substance satisfactory to the Buyer; (C) copies of the Charter Documents of each Selling Group Member other than Fisher and Morgan, accompanied by a certificate of the Secretary of such Selling Group Member (or the General Partner thereof); (D) good standing certificates for the Company from the States of Delaware, Michigan and California and from each of the other Selling Group Members (other than Morgan and Fisher) from the respective jurisdiction of such organization; (E) to the extent that the rights of the Company under, or in respect of, any Assumed Contract or Permit would be subject to termination or -21- 22 revocation by reason of the sale and transfer of the Valley Assets to the Buyer unless the consent of another Person is first obtained, and such termination or revocation would result in a Material Adverse Effect, such consent(s) with respect thereto as Buyer may reasonably require; (F) such estoppel letters, subordination, non-disturbance and attornment agreements and landlord waiver agreements, in such form as Buyer may reasonably require, executed by the owners and/or mortgagees of the real property leased to the Company under the Facility Leases. (G) customary forms of pay-off letters from all holders of Excluded Funded Debt secured by any Lien, together with, in recordable form where appropriate, such lien releases, termination statements, trademark and patent assignments and other documents reasonably requested by the Buyer in order to evidence the release and/or termination of any Liens securing the repayment of any such Excluded Funded Debt, it being agreed by the Buyer that all such instruments effecting the release of Liens may be delivered under reasonable conditions of escrow requiring the payment of the related Excluded Funded Debt as a condition of delivery to the Buyer; and (H) a certificate, executed by the Selling Group Members, to the effect that: (1) the representations and warranties made by such Selling Group Members under the Documents do not contain any untrue statement of a material fact and, when taken together, do not omit to state any material fact necessary to make such representations and warranties, in light of the circumstances under which they are made, not materially misleading; (2) the Selling Group Members holders have performed and complied with all of their respective covenants under the Documents in all material respects through the Closing Date; and (3) no injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the Transactions; and (I) MESC Form 1027, executed by the Company. (ii) Unless otherwise agreed by the Valley Equityholder Representative, Buyer shall deliver to the Sellers the following: -22- 23 (A) the Closing Payment Amount in accordance with Section 3(b)(ii) hereof; and (B) an opinion of counsel from counsel to Buyer addressed to the Sellers, dated as of the Closing Date, and in form and substance satisfactory to the Sellers; (C) an instrument of assumption evidencing Buyer's assumption of the Valley Liabilities in form reasonably acceptable to the Sellers, together with such additional forms of assignment and assumption with respect to such of the Assumed Contracts as the Sellers may reasonably require. (D) a certificate, executed by the Buyer Companies, to the effect that: (1) the representations and warranties made by the Buyer Companies under the Documents do not contain any untrue statement of a material fact and, when taken together, do not omit to state any material fact necessary to make such representations and warranties, in light of the circumstances under which they are made, not materially misleading; (2) the Buyer Companies have performed and complied with all of their respective covenants under the Documents in all material respects through the Closing Date; and (3) no injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the Transactions. (iii) Unless otherwise agreed by Morgan, the Buyer shall otherwise deliver the Employment Agreement, duly executed by Buyer, to Morgan and Morgan shall execute and deliver to the Buyer, a copy of such Employment Agreement. (iv) Sellers shall cause, or have caused, Medikmark, Inc. and Automed, Inc. to repay all amounts owed to the Company as reimbursement for claims paid by the Company to, or for the account of, employees and beneficiaries of Medikmark, Inc. and Automed, Inc. under the Company's health plan. 4. REPRESENTATIONS AND WARRANTIES OF SELLERS. Each of the Sellers hereby jointly and severally represent and warrant to the Buyer that: (a) Organizational Matters. Each Selling Group Member (other than Morgan and Fisher) is a corporation or limited partnership duly organized, validly existing, and in good -23- 24 standing under the laws of the state of its incorporation, formation or organization. Each Selling Group Member has all requisite power and authority to own, lease and operate its assets and properties and to conduct its business as it has been and is now conducted. The Charter Documents of each Selling Group Member delivered under Section 3(f)(i)(C) above are correct complete and in full force and effect on the date hereof. Each Selling Group Member is qualified to do business and in good standing as a foreign Person in each jurisdiction where the conduct of its business or the ownership of its assets requires it to be so qualified. Except to the extent otherwise disclosed herein, and except as may relate to Fisher or Morgan, none of the Selling Group Members has any subsidiary corporations, nor does any such Selling Group Member own any interest, directly or indirectly, in any other business, enterprise, firm or corporation. (b) FHLP Interests. After giving effect to the Reorganization and the Closing of the transactions contemplated by this Agreement, none of the Selling Group Members has any interest in any of the Valley Assets. Prior to the Closing, FHLP, FFHI, FPHI and Parent LP did not engage in any transactions or conduct any business whatsoever except in connection with the consummation of the Reorganization. On and as of the Closing Date, the Reorganization has been fully consummated in accordance with its terms. None of the Selling Group Members (other than the Company) has any employees. The entirety of the Company Business is operated by the Company. (c) Authorization of Transactions. Each of the Selling Group Members has full power and authority to execute and deliver each of the Documents to which it is a party and to perform his or its obligations under all such Documents. Each of the Documents constitutes the valid and legally binding obligation of each of the Selling Group Members a party thereto, enforceable in accordance with its terms and conditions. Except as set forth on SCHEDULE 4(C) hereto, no filing with, and no Permit, authorization, consent or approval of, any Person is necessary to be made or obtained by any of the Selling Group Members for the consummation of the Transactions which has not otherwise been so made or obtained. The execution, delivery and performance by each of the Selling Group Members of this Agreement and each other Document to which he or it is or will be a party, and the consummation of the Transactions, have been duly and validly authorized by all necessary action on the part of each such Party. (d) Litigation. There are no Actions pending or, to the knowledge of any of the Sellers, threatened against or involving any Selling Group Member, or any of his or its assets or properties, that question the validity of any of the Documents or seeks to prohibit, enjoin or otherwise challenge the consummation of the Transactions. There are no outstanding orders, judgments, injunctions, stipulations, awards or decrees of any Governmental Authority against any Selling Group Member, or any of his or its assets or properties, which prohibit or enjoin the consummation of the Transactions. (e) Noncontravention. Except as set forth on SCHEDULE 4(E) hereto, neither the execution and the delivery of the Documents by any Selling Group Member, nor the -24- 25 performance by any such Selling Group Member of his or its obligations thereunder, will (i) violate any law, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Authority or court to which any such Selling Group Member is subject or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any Contract, Permit or other arrangement to which any such Selling Group Member is a party or by which he or it is bound or to which any of his or its assets is subject. (f) Consents and Authorizations. Except as set forth in SCHEDULE 4(F) attached hereto, none of the Selling Group Members need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate any of the Transactions. (g) Brokers' Fees. The Selling Group Members will be and remain solely and fully liable for, and will pay and discharge, all fees or commissions which are payable with respect to the transactions contemplated by this Agreement to any broker, finder, or agent who was engaged by any of the Selling Group Members with respect to the sale of the Company Business. (h) Title to Valley Assets. The Valley Assets, together with the Third Party Property, constitute all of the assets, properties and rights used in carrying on the Company Business as conducted by the Company prior to the Closing, and the Sellers have good, valid title to, or a valid leasehold interest in, or right to use, all of such assets, properties and rights. The interest of Sellers in and to the Valley Assets, and the interests of the Sellers under the Assumed Contracts, will be transferred to the Buyer on the Closing Date free of all Liens, other than any such Liens as may be created by Buyer at Closing, Permitted Liens and, in the case of any real property, any Permitted Real Estate Restrictions. Other than as related to the Third Party Property otherwise identified herein, there are no assets, properties or rights which are used in the operation of the Company Business which are owned by any Person other than the Sellers which are of any material value or which are otherwise material to the operations of the Company Business. The Sellers enjoy peaceful and undisturbed possession of all Leased Property. (i) Financial Statements. Attached hereto as EXHIBIT O are (i) the audited balance sheets and statements of income, changes in stockholders' equity, and cash flow as of and for the fiscal years ended December 31, 1996, December 31, 1995, December 31, 1994 for the Company and (ii) the Interim Financial Statements (collectively the "Financial Statements"). The Financial Statements (including the notes thereto) have been prepared in accordance with the books and records of the Company and, in accordance with GAAP applied on a consistent basis throughout the periods covered thereby and fairly present the financial condition of the Company as of such dates and the results of operations of the Company for such periods subject, in the case of the Interim Financial Statements, to normal year end audit adjustments, none of which are material. -25- 26 (j) Events Subsequent to Most Recent Year-End. Since the Most Recent Year-End, and except as otherwise disclosed on, or reflected in, the Interim Financial Statements or SCHEDULE 4(J) hereto, (i) no event, condition or circumstance has occurred which has resulted, or is reasonably expected to result, in any Material Adverse Change, (ii) the Company has been operated in the Ordinary Course of Business and (iii) the Company has not suffered any damage, destruction or casualty loss to any of its assets (whether or not covered by insurance) having a replacement cost or fair market value in excess of $50,000. (k) Liabilities. Except as disclosed on SCHEDULE 4(K) hereto or otherwise disclosed or reflected on the Most Recent Year-End Balance Sheet and the Interim Balance Sheet, and/or the notes thereto, neither of the Sellers have any liabilities (matured or unmatured, fixed or contingent) except (i) liabilities incurred by the Company in the Ordinary Course of Business since the Most Recent Year-End, (ii) liabilities of the Company disclosed on any Schedule hereto, (iii) liabilities of the Company arising (A) under any Contracts or (B) in respect of warranty or product liability claims in amounts consistent with historical claims experience, (iv) obligations of the Company for borrowed money or under any guarantees of obligations of third parties not required by GAAP to be reflected, reserved against or disclosed on the Most Recent Year-End Balance Sheet or the Interim Balance Sheet which, individually or in the aggregate, could not reasonably be expected by the Sellers to have a Material Adverse Effect and (v) other liabilities of the Company which, individually or in the aggregate, could not reasonably be expected by the Sellers to have a Material Adverse Effect. (l) Legal Compliance. Except as otherwise disclosed on SCHEDULE 4(L)(I) hereto, the Sellers are in compliance with all Applicable Laws. Except as otherwise disclosed on SCHEDULE 4(S) hereto in connection with any threatened or pending Action, none of the Selling Group Members have received any written notice of any alleged claim or threatened claim, violation of or liability under any such Applicable Law which has not heretofore been cured or for which there is no remaining liability not otherwise reflected, or reserved for, in the Interim Balance Sheet. SCHEDULE 4(L)(II) hereto sets forth a list of all Permits held by the Company. Except as set forth on SCHEDULE 4(L)(II), the Company is the holder of all Permits and is in compliance with all of the Permits and all such Permits are valid, binding, and in full force and effect and no loss or termination of any such Permit is pending, threatened or reasonably foreseeable (other than expiration upon the end of the term thereof). (m) Tax Matters. Except as set forth on SCHEDULE 4(M)(I) hereto, or in respect of which any resulting liability has been properly accrued in accordance with GAAP (i) the Sellers have filed, or caused to be filed in compliance with Applicable Laws, all returns, declarations of estimated tax, tax reports, information returns and statements required to be filed by each such Seller prior to the Closing Date relating to any Taxes due from the either Seller with respect to any income, assets or operations of the Sellers prior to the Closing Date (collectively, the "Returns"), (ii) as of the time of filing, the Returns were -26- 27 true and correct in all respects, (iii) the Sellers have paid all Taxes shown to be due on such Returns, (iv) the Sellers have not waived any statute of limitations affecting any Tax liability or agreed to any extension of time during which a Tax assessment or deficiency assessment may be made, (v) there are no pending Tax audits of any Returns of either of the Sellers and neither Seller has received written notice of any unresolved questions or claims concerning its Tax liability, and (vi) neither of the Sellers have consented to have the provisions of Section 341(f)(2) of the Code applied to it. Neither of the Sellers have, during the five-year period ending on the Closing Date, been a personal holding company within the meaning of Section 541 of the Code. Except as set forth on SCHEDULE 4(M)(II) hereto, each of the Sellers have complied in all respects with all Applicable Laws relating to the payment and withholding of Taxes and have withheld all amounts required to be withheld from the wages or salaries of employees in accordance with Applicable Laws. Neither of the Sellers is, or has been, a party to any Tax sharing agreement. Neither of the Sellers has any obligation, including in connection with this Agreement and the other Documents, to make any payments that will be non-deductible under Section 280G of the Code (or any corresponding provision of any applicable state, local or foreign law relating to Income Taxes). Since December 31, 1986, neither of the Sellers has filed or been included in any combined or consolidated Return with any other Person or been a member of an Affiliated Group within the meaning of Section 1504 of the Code. (n) Environmental Matters. Except as set forth on SCHEDULE 4(N) hereto: (i) the Company is in compliance with all Environmental Laws and, other than as to matters heretofore corrected or resolved, the Company has not received any communication from a Governmental Authority that alleges that the Company is not in such compliance; (ii) there is no Environmental Claim currently pending or, to the knowledge of any of the Selling Group Members, threatened against (A) the Company, (B) any Person whose liability for such Environmental Claim the Company has retained or assumed either contractually or by operation of law or (C) against any real or personal property or operations which the Company currently or formerly owns/owned, leases/leased or operates/operated; (iii) the Company has not disposed of or released any substance, arranged for the disposal of any substance, knowingly exposed any employee or other individual to any substance or condition, or owned or operated its businesses or any property or facility nor at any time in the past which could reasonably be expected to give rise to any liability or corrective or remedial obligation of the Company under any Environmental Laws; -27- 28 (iv) no real property currently or formerly owned or operated by the Company is currently listed on the National Priorities List or the Comprehensive Environmental Response, Compensation and Liability Information System, both promulgated under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), or on any comparable state list, nor does the Company have any knowledge of any facts that could, if known to any Governmental Authority, give rise to a potential claim under any Environmental Law, and the Company has not received any written notice of potential liability from any Person under or relating to CERCLA or any comparable state or local Environmental Law; (v) the Company has not disposed or arranged for the disposal of any waste at any off-site location which is listed on the National Priorities List or on any comparable state list, nor has the Company received any written notice from any Person with respect to any such off-site location, of potential or actual liability or a written request for information from any Person under or relating to CERCLA or any comparable state or local law; and (vi) to the knowledge of Sellers, no underground storage tanks ("USTs"), asbestos containing materials ("ACMs"), polychlorinated biphenyls ("PCBs"), above ground storage tanks ("ASTs") or other storage containers are located on, under, in, or otherwise connected to any property or facility currently or formerly owned or operated by the Company. (o) Real Property. (i) The Lodi Facility constitutes the only real property that the Company owns. As related to the Lodi Facility: (A) the Company has good and marketable fee simple title to the same, free and clear of any Lien or other easement, covenant, or other restriction, except for Permitted Liens and Permitted Real Estate Restrictions; (B) there are no leases, subleases, licenses or other agreements granting to any party or parties the right of use or occupancy of any portion of the Lodi Facility; and (C) there are no outstanding options or rights of first refusal to purchase the Lodi Facility, or any portion thereof or interest therein. (ii) SCHEDULE 4(O)(II) hereto lists all Real Property Leases, other than the Facility Leases. The Sellers have delivered to the Buyer correct and complete copies of each of the Real Property Leases. Neither Seller subleases any real -28- 29 property. Each Real Property Lease is legal, valid, binding, enforceable, and in full force and effect. (iii) With respect to the Material Real Property, no portion thereof is subject to any pending condemnation proceeding or proceeding by any public or quasi-public authority and there is no threatened condemnation or proceeding with respect thereto. (iv) All plant structures and equipment of the Sellers are in good operating condition and repair, subject to normal wear and tear and the provision of usual and customary maintenance and repair performed in the ordinary course with respect to similar properties of like age and construction. (v) Other than as related to customary service agreements, and such agreements as the Company has otherwise entered into in connection with certain construction-in-progress at the Company's facility located at 32501 Dequindre Road, neither of the Sellers has entered into any Contract, arrangement, license, concession or easement, either recorded or unrecorded, written or oral, affecting any of the Material Real Property, or any portion thereof or the use thereof. (vi) With respect to the Material Real Property, there are no (i) pending improvement Liens to be made by any Governmental Authority; (ii) violations of zoning ordinances, building codes or related regulations; or (iii) pending Actions to which either of the Sellers is a named party or in respect of which it has otherwise received notice, including any pending condemnation proceedings. (vii) All improvements made by the Company on the Material Real Property were permitted and conforming structures under applicable zoning and building laws and ordinances in effect when the improvements were constructed and the present uses thereof are permitted and conforming uses under applicable zoning and building laws and ordinances. (p) Intellectual Property. SCHEDULE 4(P)(I) hereto sets forth an accurate and complete list of all patents, pending patent applications, trademarks, servicemarks, pending trademark or servicemark applications and trade names licensed to, applied for or registered in the name of, either of the Sellers, and all copyright registrations or pending applications for registrations of the Sellers, including the nature (e.g., patent, trademark, etc.) of the intellectual property, the application or registration number, the jurisdiction and the record owner (the "Listed Intellectual Property"). Except as set forth on SCHEDULE 4(P)(II), with respect to the Listed Intellectual Property, no registration relating thereto (if any) has lapsed, expired or been abandoned or canceled or is the subject of cancellation proceedings. Except as set forth on SCHEDULE 4(P)(III), the Sellers own or possess adequate and enforceable licenses to use all Listed Intellectual Property and any other intellectual property rights (including, without limitation, drawings, trade secrets, -29- 30 know-how and confidential information) currently used by the Sellers, or necessary to permit the Sellers to conduct the Company Business as now conducted (the Listed Intellectual Property and the other intellectual property rights hereinafter collectively called the "Intellectual Property"). SCHEDULE 4(P)(IV) sets forth all licenses to which either of the Sellers are a party relating to the Intellectual Property (the "Intellectual Property Licenses"). Except as set forth on SCHEDULE 4(P)(V), the operations of the Company Business as currently conducted do not infringe upon the proprietary rights of others, nor have any of the Selling Group Members received any notice or claim from any third party of any such infringement. The Company is not aware of any infringement by any third party on, or any competing claim of right to use or own any of the Intellectual Property. No Contract between the Company and any other Person exists and no Liens, other than Permitted Liens, exist which in either case would impede or prevent the continued use by the Company of the entire right, title and interest of the Company in and to any of the Intellectual Property. (q) Contracts. SCHEDULE 4(Q) hereto sets forth an accurate and complete list of each Material Agreement. All of the Material Agreements are enforceable in all respects by the Company in accordance with their terms except to the extent that such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally and the Company is not in breach or default under (and no event has occurred which with notice or the passage of time or both would constitute a breach or default under) any Material Agreement. To the knowledge of the Company, no other party to a Material Agreement is in beach or default thereunder. (r) Powers of Attorney. SCHEDULE 4(R) hereto sets forth outstanding powers of attorney executed on behalf of either of the Sellers. (s) Litigation. SCHEDULE 4(S) hereto sets forth each instance in which either of the Sellers (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge, (ii) is a party to any Action or (iii) has, to the knowledge of any of the Selling Group Members, been threatened with any claim or litigation which has not otherwise been finally resolved,. (t) Employee Benefits. (i) The Company is not a party to, or bound by, any collective bargaining agreement covering its employees. The Company is in compliance with all Applicable Laws respecting employment and employment practices, terms and conditions of employment and wages and hours. There is no labor strike, dispute, slowdown, stoppage or organizational effort pending or threatened against or involving the Company (other than individual grievances that arise in the ordinary course). -30- 31 (ii) Except as set forth on SCHEDULE 4(T)(II) hereto, the Company (A) does not maintain any Employee Benefit Plan, (B) does not presently contribute to any Employee Benefit Plan maintained by any other Person and (C) is not liable for any payments pursuant to any Employee Benefit Plan maintained by the Company or any other Person. Each Employee Benefit Plan has been maintained in all respects in accordance with its terms and, where applicable, in compliance with ERISA, the Code and all other Applicable Laws. The Company has not maintained or contributed to any Employee Benefit Plan which is an "employee defined pension benefit plan" as such term is defined in Section 3(35) of ERISA or a "multi-employer plan" as such term is defined in Section 3(37) of ERISA. (iii) With respect to each such Employee Benefit Plan governed by ERISA, the Company previously has furnished to Buyer a true and correct copy of, where applicable, (A) the most recent annual report (Form 5500) filed with the Internal Revenue Service (the "IRS"), (B) the plan document, (C) each trust agreement and group annuity contract, if any, relating to such ERISA Plan, (D) the most recent summary plan description and (E) the most recent determination letter issued by the IRS. (iv) Except as set forth in SCHEDULE 4(T)(IV) hereto, with respect to each such Employee Benefit Plan, there are no funded benefit obligations for which contributions have not been made or properly accrued. (v) No such Employee Benefit Plan has incurred any "accumulated funding deficiency" (as defined in Section 412 of the Code), whether or not waived. (vi) Except as set forth in SCHEDULE 4(T)(VI) hereto, each of such Employee Benefit Plans which is intended to be a qualified plan within the meaning of Section 40l(a) of the Code has been determined by the IRS to be so qualified and nothing has occurred to cause the loss of such qualified status. (vii) Except as set forth in SCHEDULE 4(T)(VII) hereto, no such Employee Benefit Plan provides health, medical or life insurance benefits with respect to any current or former employees of the Company beyond their retirement or other termination of service other than (A) coverage mandated by applicable law, or (B) benefits the full cost of which are borne by the current or former employee (or his or her beneficiary). (viii) With respect to all of its past and present employees, the Company has complied with the notice and continuation requirements of Part 6 of Subtitle B of Title I of ERISA and of Section 4980B of the Code. -31- 32 (ix) All contributions (including all employer contributions and employee salary reduction contributions, if any) which are due have been paid to each such ERISA Plan which is an "Employee Pension Benefit Plan", (as defined in ERISA). (x) Each such Employee Benefit Plan which is intended to meet the requirements of Section 125 of the Code meets such requirements and each program of benefits for which employee contributions are provided pursuant to elections under any such Employee Benefit Plan meets the requirements of the Code applicable thereto. (xi) No "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to any such ERISA Plan which is an Employee Pension Benefit Plan (as defined in ERISA), or its related trust, which could subject the Company, or any officer, director or employee of the Company, to any Tax or penalty imposed under Section 4975 of the Code or liability under Section 406 of ERISA. (xii) There are no actions, suits, proceedings, hearings or investigations with respect to the administration or the investment of assets of any such Employee Benefit Plan (other than routine claims for benefits) and none of the Selling Group Members have received any written notice threatening any such action, suit, proceeding, hearing or investigation. (xiii) All reporting and disclosure obligations imposed under ERISA and the Code have been satisfied with respect to each Employee Benefit Plan. (u) Insurance. SCHEDULE 4(U) hereto contains an accurate and complete list and a brief description of all insurance policies currently in effect which are presently owned or held by either of the Sellers, insuring the products, properties, assets, business and operations of the Company and its potential liabilities to third parties, and all general liability policies maintained by either of the Sellers. As of the Closing Date, all premiums due have been paid and no notice of cancellation or termination or intent to cancel has been received by either of the Sellers with respect to any such policy. To the knowledge of the Sellers, the Company is not in default under any such insurance policies, nor do such Sellers have any reason to believe the Company is in violation of any of the conditions necessary for the maintenance of continued coverage under such policies. (v) Bank Accounts. SCHEDULE 4(V) hereto contains a correct and complete list of the name of each bank or other financial institution which the Company has an account or safe deposit box, and the names of all Persons authorized to draw thereon or to have access thereto. (w) Product Liability. Except as set forth on SCHEDULE 4(W) hereto and except for routine warranty claims for the return of defective or non-conforming merchandise, there -32- 33 exist no claims made and not otherwise covered by insurance, but subject otherwise to currently applicable deductibles threatened claims against the Company for injury to persons or property suffered by any Person as a result of the sale of any product by the Company, including, but not limited to, claims alleging defective or unsafe nature of the products of the Company. (x) HSR. The Selling Group Members have received notice of the early termination of the waiting required under the provisions the Hart-Scott-Rodino Act. (y) Inventories; Accounts and Notes Receivable. (i) Except as set forth on SCHEDULE 4(Y)(I) hereto, the inventories of the Sellers include no items which are obsolete, of below standard quality or of a quality or quantity not usable or salable in the normal course of business, the aggregate value of which has not been written down on the books of account of the Sellers to realizable market value or with respect to which adequate reserves have not been provided. (ii) All of the accounts receivable and notes receivable owing to the Sellers as of the Closing Date constitute and as of the Closing will constitute valid and enforceable claims arising from bona fide transactions in the Ordinary Course of Business. SCHEDULE 4(Y)(II) hereto sets forth all known or asserted claims, refusals to pay or other rights of set-off against the accounts receivable and notes receivable owing to the Sellers as of the Closing Date which are in excess of $_________________________. (z) Customers. SCHEDULE 4(Z)(I) sets forth a list of each customer of the Company to which the Company, individually or in the aggregate, sold more than $750,000.00 in goods or service in its most recent fiscal year (the "Principal Customers"). Except as set forth on SCHEDULE 4(Z)(I), the relationships of the Company with its customers are good commercial relationships, and the Company does not know of any plan or intention of any customer and has not received any written threat or notice from any customer to terminate, cancel or modify its relationship with the Company. (aa) Suppliers and Vendors. Since March 31, 1997, no material supplier or vendor of the Company has canceled or otherwise terminated, or threatened to cancel or otherwise terminate, its relationship with the Company or has decreased, limited or otherwise modified, or threatened to decrease, limit or otherwise modify, the services, supplies or materials it provides to the Company. (bb) Certain Business Relationships with Valley. Except as set forth on SCHEDULE 4(BB) hereto, and except for normal advances to employees consistent with past practices, payment of compensation to employees consistent with past practices, and participation in Employee Benefit Plans by employees, neither of the Sellers has purchased, acquired or -33- 34 leased any property or services from, or sold, transferred or leased any property or services to, or loaned or advanced any money to, or borrowed any money from, or entered into or been subject to any management, consulting or similar agreement with, any Affiliate of such Person or any officer, director, manager or partner of the Company or their respective Affiliates (including, the Selling Group Members). (cc) Reimbursement of Advances. All amounts owed to the Company as reimbursements for claims paid by the Company to, or for the account of, employees and beneficiaries of Medikmark, Inc. and Automed, Inc. under the Company's health plan have been fully reimbursed to Valley. (dd) Trust Representation. No more than $____________________ of the Closing Payment Amount shall be distributed by the Selling Group Members to the Trust established under that certain Trust Agreement dated August __, 1997 between Charles J. O'Toole and Citicorp Trust South Dakota, as Trustees, and Fisher, as Settlor. 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Selling Group Members that: (a) Organization of Buyer Companies. The Buyer is a limited liability company duly formed, validly existing, and in good standing under the laws of the State of Delaware. Parent is a limited liability company, duly formed, validly existing, and in good standing under the laws of the State of Delaware. (b) Authorization of Transactions. Each of the Buyer Companies has full power and authority to execute and deliver this Agreement and each of the other Documents to which it is a party, and to perform its obligations under the Documents to which it is a party. Each of the Documents constitutes the valid and legally binding obligation of each of the Buyer Companies a party thereto, enforceable in accordance with its terms and conditions. Except as set forth on SCHEDULE 5(B) hereto, no filing with, and no permit, authorization, consent or approval of, any Person is necessary to be obtained by the either of the Buyer Companies for the consummation by the Buyer Companies of the Transactions. The execution, delivery and performance by each of the Buyer Companies of this Agreement and each other Document to which such Party is or will be a party, and the consummation of the Transactions, have been duly and validly authorized by all necessary action on the part of such Party. (c) Noncontravention. Neither the execution and the delivery of the Documents by either of the Buyer Companies, nor the performance by such Party of its obligations thereunder, will (i) violate any law, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which either such Party is subject or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to -34- 35 accelerate, terminate, modify, or cancel, or require any notice under any other agreement, contract, instrument, or other arrangement which, if terminated or otherwise violated, would as to the Parent and its subsidiaries, taken as a whole, have a Material Adverse Effect. (d) Consents and Authorizations. Except as required under the provisions of the Hart-Scott-Rodino Act, neither of the Buyer Companies, nor any member of the Parent needs to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency or other Person in order for the Parties to consummate the Transactions, which authorization, consent, or approval has not otherwise been so obtained. (e) Litigation. There are no Actions pending or, to the knowledge of either of the Buyer Companies, threatened against or involving such Party, any of its assets or properties, or otherwise that question the validity of the Documents or seek to prohibit, enjoin or otherwise challenge the consummation of the Transactions. There are no outstanding orders, judgments, injunctions, stipulations, awards or decrees of any Governmental Authority against either of the Buyer Companies or any of its assets or properties which prohibit or enjoin the consummation of the Transactions. (f) Brokers' Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which any of the Seller Group Members could become liable or obligated. 6. EMPLOYEE MATTERS. (a) Employment. On the Closing Date, Buyer will offer employment to all employees (whether working or on a leave of absence) of the Company Business, effective as of the Closing Date and at rates of compensation at least equal to the rates of compensation applicable to such employees as of the Closing Date. (b) Employee Benefit Obligations. Buyer acknowledges that, except as set forth in SCHEDULE 6(B) hereto, the Valley Liabilities shall include all employee benefit-related obligations or liabilities of the Sellers existing at the Closing Date with respect to the current and former employees of the Company Business under the provisions of each Employee Benefit Plan or other employee benefit plan, fund, program or arrangement sponsored or maintained by Sellers as of the Closing Date, including, without limitation, all liabilities and obligations of the Sellers in respect of vacation pay, sick pay, severance pay, insurance and payroll taxes and all accrued contributions, if any, required under the terms of any Employee Benefit Plans, or salary reduction amounts and matching contributions with respect thereto through the Closing Date. Nothing contained in this Agreement shall obligate the Buyer to continue or maintain any Employee Benefit Plan or paid time off policy adopted or sponsored by the Company prior to the Closing Date, or to continue to provide the same level of benefits -35- 36 under any Employee Benefit Plan or paid time off policy adopted or sponsored by the Company prior to the Closing. (c) Medikmark/Automed Coverage. Effective as of the Closing Date, the Sellers shall cause Medikmark, Inc. ("Medikmark") and Automed, Inc. ("Automed") to have established their own separate 401(k) plan and employee health and medical plan coverage and all coverage of employees of Medikmark and Automed under the Employee Benefit Plan shall thereupon terminate; provided, however, the Buyer shall administer all claims incurred prior to the Closing Date under, and subject to, the terms of the Company's self-insured health plan, and Sellers shall immediately reimburse all payments made by the Buyer with respect to such claims. (d) Severance Liabilities. Buyer will be responsible for, and will indemnify Sellers against, any and all liabilities for severance pay, including liability under the Worker Adjustment and Retraining Notification Act or any similar state law relating to or arising out of the layoff or termination of employment of any employees of the Company Business after the Closing Date. (e) No Third-Party Rights. Nothing contained in this Agreement shall confer upon any employee any rights or remedies of any nature or kind whatsoever under or by reason of this Agreement, including, without limitation, any right to employment or continued employment or to any benefits that may be provided, directly or indirectly, under any employee benefit plan, policy or arrangement of the Buyer or Sellers, nor shall anything contained in this Agreement constitute a limitation on or restriction against the right of the Buyer or Sellers to amend, modify or terminate any such plan, policy or arrangement or the terms or conditions of employment. 7. REMEDIES FOR BREACHES OF THIS AGREEMENT AND THE OTHER DOCUMENTS. (a) Survival of Representations and Warranties/Claims Period. The representations and warranties of the Parties contained in the Documents, shall survive the Closing and continue in full force and effect for a period (the "Claims Period") determined as follows: (i) the representations and warranties of the Sellers set forth in Section 4(a), (b), (c), (d), (e), (f), (g) and, as to matters of title, (h), and the representations and warranties of the Buyer in Section 5(a), (b), (c), (d) and (f), shall continue in full force and effect indefinitely, (ii) the representations and warranties of the Seller in Section 4(n) shall continue in full force and effect for a period of 3 years after Closing and (iii) all other representations and warranties of the Parties shall continue in full force and effect for a period of 18 months after the Closing. (b) Indemnification Provisions for Benefit of the Buyer. Each of the Selling Group Members shall indemnify the Buyer and its officers, directors, stockholders, partners, trustees, beneficiaries, employees, agents, Affiliates, successors and assigns (collectively, the "Buyer Indemnified Persons") from and against such Selling Group Member's Allocable Portion of any Indemnifiable Losses such Buyer Indemnified Persons shall incur as a result of (i) any breach or inaccuracy in any representation or warranty made by any -36- 37 of the Selling Group Members under the Documents, (ii) except as set forth in clause (D) below, any breach by any of the Selling Group Members of any of the Selling Group Members' covenant or other agreement of any of the Selling Group Members as provided for in the Documents, (iii) all costs and penalties incurred by any of the Buyer Indemnified Persons, including legal fees, if any, as a result of the alleged failure of the Company to file Annual Reports with respect to the Company's 125 Plan, (iv) any claims asserted in respect of the Threatened Claims or (v) the assertion against any of the Buyer Indemnified Persons of any Excluded Obligation, provided, that: (A) such claim for indemnification must be asserted by Buyer Indemnified Persons within the related Claims Period (if any), pursuant to a written claim for indemnification delivered to the Valley Equityholder Representative by written notice in the manner provided herein, provided, however, that after the assertion of any such claim hereunder on or prior to the expiration of the Claims Period (if any), the Buyer Indemnified Persons shall be fully entitled to the benefits of this Section 7 (and the other indemnification provisions in this Agreement) notwithstanding the fact that such claim shall not be finally resolved on or prior to the expiration of the Claims Period (if any); (B) except for any Lodi Environmental Liabilities or Indemnifiable Losses caused by the breach of an Excluded Representation or Warranty, the Selling Group Members shall not have any obligation to indemnify the Buyer Indemnified Persons from and against any Indemnifiable Losses arising out of any Threatened Claims or caused by the breach of any representation or warranty contained in Section 4 of this Agreement until the Buyer Indemnified Persons have incurred such Indemnifiable Losses which, in the aggregate, exceed a $750,000 aggregate deductible, it being acknowledged and agreed that the Selling Group Members will only be obligated to indemnify the Buyer Indemnified Persons from and against such further Indemnifiable Losses in excess of such $750,000 deductible amount; (C) except for Indemnifiable Losses caused by the breach of an Excluded Representation or Warranty, the Selling Group Members shall not have any obligation to indemnify the Buyer Indemnified Persons from and against any Indemnifiable Losses caused by the breach of any representation or warranty contained in Section 4 of this Agreement, any Lodi Environmental Liabilities or any Threatened Claims to the extent the indemnification claims which the Selling Group Members have, in the aggregate, paid, discharged or otherwise satisfied, exceed an aggregate ceiling of $6,000,000, it being acknowledged and agreed that the maximum liability of the Selling Group Members to the Buyer Indemnified Persons in respect of such Indemnifiable Losses shall be the aggregate amount of $6,000,000; and (D) with regard to any breach of any of the covenants set forth in subsections (c), (d) or (e) of Section 8 hereof, (1) Morgan shall be solely liable to the -37- 38 Buyer Indemnified Persons for any breach of any such covenant(s) by Morgan, and neither Fisher, nor any other Selling Group Member, shall have any liability to the Buyer Indemnified Persons for such breach and (2) Fisher and each of the other Selling Group Members (other than Morgan) shall be solely liable to the Buyer Indemnified Persons for any breach of any covenant(s) by Fisher or such other Selling Group Member (other than Morgan), and Morgan shall have no liability to the Buyer Indemnified persons for such breach. Notwithstanding anything to the contrary contained herein, the limitations set forth in the foregoing provisions of clauses (B) and (C) above shall not apply to the willful breach of any representation or warranty. (c) Indemnification Provisions for Benefit of Selling Group Members. The Buyer Companies shall jointly and severally indemnify the Selling Group Members and each of the officers, directors, stockholders, partners, trustees, beneficiaries, employees, agents, Affiliates, successors and assigns of each of the Selling Group Members (collectively, the "Seller Indemnified Persons") from and against all Indemnifiable Losses any of the Seller Indemnified Persons shall incur as a direct result of (i) any breach or inaccuracy in any representation or warranty made by the Buyer Companies under the Documents, and (ii) any breach by the Buyer Companies of any of the covenants or other agreements of the Buyer Companies as provided for in the Documents or (iii) the assertion against any of the Seller Indemnified Persons of any liability for any of the Valley Liabilities, provided, that: (A) such claim for indemnification must be asserted by a Stockholder within the related Claims Period, pursuant to a written claim for indemnification delivered to the Buyer by written notice as herein provided, however, that after the assertion of any such claim hereunder on or prior to the expiration of the Claims Period (if any), the Seller Indemnified Persons shall be fully entitled to the benefits of this Section 7 (and the other indemnification provisions in this Agreement) notwithstanding the fact that such claim shall not be finally resolved on or prior to the expiration of the Claims Period (if any).; (B) the Buyer Companies shall not have any obligation to indemnify the Seller Indemnified Persons from and against any Indemnifiable Losses caused by the breach of any representation or warranty (other than an Excluded Representation or Warranty) contained in Section 5 of this Agreement, or any representation or warranty made to Fisher or Morgan under the Parent Subscription Documents, until the Seller Indemnified Persons have incurred such Indemnifiable Losses which, in the aggregate, exceed a $60,000.00 aggregate deductible, it being acknowledged and agreed that the Buyer Companies will only be obligated to indemnify the Seller Indemnified Persons from and against such further Indemnifiable Losses in excess of such $60,000.00 deductible amount; and -38- 39 (C) the Buyer Companies shall not have any obligation to indemnify the Seller Indemnified Persons from and against any Indemnifiable Losses caused by the breach of any representation or warranty (other than an Excluded Representation or Warranty) contained in Section 5 of this Agreement, or any representation or warranty made to Fisher or Morgan under the Parent Subscription Documents, to the extent the indemnification claims which the Buyer Companies have, in the aggregate, paid, discharged or otherwise satisfied, exceed an aggregate ceiling of $480,000.00, it being acknowledged and agreed that the maximum liability of the Selling Group Members to the Buyer Indemnified Persons in respect of such Indemnifiable Losses shall be the aggregate amount of $480,000.00. Notwithstanding anything to the contrary contained herein, the limitations set forth in the foregoing provisions of clauses (B) and (C) above shall not apply to the willful breach of any representation or warranty. (d) Closing Equity Value. Notwithstanding anything to the contrary set forth in this Section 7, the Selling Group Members have no liability to the Buyer Indemnified Persons for any claims arising out of the breach of any representation or warranty set forth in Section 4 hereof to the extent the liability or loss claimed to have been incurred by the Buyer Indemnified Person(s) has otherwise been reflected or reserved for in the determination of the Closing Equity Value, as finally determined and adjustment to the Purchase Price shall have been made in accordance with this Agreement. (e) Notice of Claim. In the event a Party, or Parties, desire(s) to make a claim for indemnification under the provisions of this Agreement, including any claim for indemnification in respect of a Third Party Claim under subsection (f) below, against any other Party(ies), the Party(ies) seeking indemnification (the "Indemnified Party") shall, within the Claims Period, promptly notify the other Party(ies) (the "Indemnifying Party"), in writing (an "Indemnity Claim Notice"), of such claim or demand, specifying in reasonable detail the nature of such claim or demand and the amount or estimated amount thereof to the extent then feasible. The Indemnifying Party shall have fifteen (15) days after receipt of the Indemnity Claim Notice (the "Response Period") within which to notify the Indemnified Party (i) whether or not such Indemnifying Party disputes liability to the Indemnified Party hereunder with respect to such claim or demand and (ii) in the case of a claim for indemnity involving a Third Party Claim, and notwithstanding whether the Indemnifying Party disputes his or its liability to the Indemnified Party, whether or not the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim. If the Indemnifying Party disputes his or its liability with respect to such claim or demand for indemnification, or the amount thereof (and whether or not, in the case of any Third Party Claim, such Indemnifying Party otherwise desires to defend the Indemnified Party against such claim as otherwise provided in subsection (e) below), the dispute as to the liability of the Indemnifying Party with respect to such claim or demand for indemnification, or the amount thereof, shall, unless otherwise agreed by the Indemnified Party and Indemnifying Party, be resolved in accordance with the -39- 40 provisions of subsection (g) below. If the Indemnifying Party fails to notify the Indemnified Party within the Response Period that it disputes the claim or demand for indemnification made by the Indemnified Party, or the amount thereof, or otherwise admits such liability in such notification, the amount of such claim shall be conclusively deemed a liability of the Indemnifying Party hereunder. (f) Third Party Claims. (i) In the event that any claim or demand made by an Indemnified Party for indemnification in an Indemnity Claim Notice arises out of the assertion of any claim or demand against the Indemnified Party by any third party (a "Third Party Claim"), then the defense of such Third Party Claim shall be handled in accordance with the provisions of this subsection (f). (ii) In the event the Indemnifying Party notifies the Indemnified Party within the Response Period that they desire to defend against the Third party Claim, then the Indemnifying Party will have the right thereafter to assume and thereafter conduct the defense of the Third Party Claim with counsel of his or its choice reasonably satisfactory to the Indemnified Party; provided, however, that: (A) in the event the Indemnifying Party has otherwise disputed his or its liability with respect to such claim or demand for indemnification made by the Indemnified Party, or the amount thereof, the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party; (B) in the event the Indemnifying Party has otherwise admitted or accepted his or its liability with respect to such claim or demand for indemnification made by the Indemnified Party, and the amount thereof, the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party. (iii) In the event the Indemnifying Party does not elect to assume the defense of a Third Party Claim within the Response Period, such Indemnifying Party may, at any time thereafter, and provided such Indemnifying Party agrees to assume liability for such Third Party Claim and the underlying indemnity claim made by the Indemnified Party, elect to assume such defense, provided, that, the assumption of such defense at such time would not otherwise unduly prejudice the rights or interests of the Indemnified Party. (iv) Unless and until an Indemnifying Party assumes the defense of a Third Party Claim as provided in Section 7(f)(ii) or (iii) above, the Indemnified Party may -40- 41 defend against such Third Party Claim in any manner he or it reasonably may deem appropriate. (iv) In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party in the event the Indemnifying Party has otherwise elected to assume and conduct the defense of such Third Party Claim or otherwise prior to the expiration of the Response Period. (g) Arbitration. The parties shall attempt in good faith to resolve all disputes with respect to any claims for indemnification under this Agreement by arbitration in Detroit, Michigan, before a single arbitrator pursuant to the rules of the American Arbitration Association. Arbitration may be commenced at any time by any Party hereto by giving written notice to each other Party to such dispute that such dispute has been referred to arbitration under the provisions of this subsection (g). The arbitrator shall be selected by the joint agreement of the Indemnified Party and Indemnifying Party, but if they do not so jointly agree within twenty (20) days after the date of the notice referred to above, the selection shall be made pursuant to the rules from the panels of arbitrators maintained by such Association. Any award rendered by the arbitrator shall be appealable by any Party in accordance with Section 9(i). The Selling Group Members on the one hand and the Buyer Companies on the other hand shall each bear their own expenses of arbitration, provided, that, the expenses of the arbitrator shall be equally shared by the Selling Group Members and the Buyer Companies. (h) Determination of Indemnifiable Loss. In the determination of Indemnifiable Losses for purposes of this Agreement, appropriate adjustments for tax benefits resulting in actual reduced tax payments in the fiscal year in which the Indemnified Loss was paid shall be made. All indemnification payments under this Agreement shall be deemed adjustments to the Purchase Price. (i) Exclusive Remedy. The indemnification provisions of this Agreement are intended to be the exclusive remedy of the Parties for any breach of the representations, warranties or covenants set forth in this Agreement, provided, however, that, in such instances where injunctive or other equitable relief is otherwise appropriate, nothing herein shall be deemed to preclude a Party from commencing an action in a court specified in Section 9(i) for the purpose of obtaining any such injunctive or other equitable relief otherwise deemed necessary or appropriate by such Party. 8. POST-CLOSING COVENANTS. The Parties agree as follows with respect to the period following the Closing: -41- 42 (a) General. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under Section 7 above). (b) Litigation Support. In the event and for so long as any Party is actively contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or the other Documents or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Company, each of the other Parties will cooperate with the contesting or defending Party and his or its counsel in the contest or defense, make available his or its personnel, and provide such testimony and access to his or its books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under Section 7 above). (c) Non-Competition. For a period commencing on the Closing Date and terminating on the fifth anniversary thereof, no Restricted Party (as defined below) will, directly or indirectly, engage in or have any interest in any sole proprietorship, partnership, corporation or business or any other Person (whether as an employee, officer, director, partner, agent, security holder, creditor, consultant or otherwise) that directly or indirectly is engaged in the Company Business (collectively "Competitive Businesses'') in the United States of America or Canada; provided, however, that nothing herein shall be deemed to prevent any Restricted Party from acquiring through market purchases and owning, solely as an investment, less than two percent of the equity securities of any class of any issuer whose shares are registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and are listed or admitted for trading on any national securities exchange or are quoted on the National Association of Securities Dealers Automated Quotations System or any similar system of automated dissemination of quotations of securities prices in common use, so long as the Restricted Party is not a member of any ''control group" (within the meaning of the rules and regulations of the United States Securities and Exchange Commission) of any such issuer and which is engaged in a Competitive Business. The Restricted Parties agree that the covenant provided for in this Section 8(c) is reasonable and necessary in terms of time, activity and territory to protect the Buyer's interest as a buyer of the Purchased Shares. To the extent that the covenant provided for in this Section 8(c) may later be deemed by a court to be too broad to be enforced with respect to its duration or with respect to any particular activity or geographic area, the court making such determination shall have the power to reduce the duration or scope of the provision, and to add or delete specific words or phrases to or from the provision. The provision as modified shall then be enforced. As used in this Agreement, a "Restricted Party" shall mean the Selling Group Members and their respective Affiliates. -42- 43 (d) Non-Disclosure. (A) Neither the Selling Group Members nor any of their respective Affiliates (collectively, the "Covered Persons") shall disclose. divulge, furnish or make accessible to anyone (other than the Buyer or any of its Affiliates or representatives) any Restricted Confidential Information (as defined below), or in any way use any such Restricted Confidential Information in the conduct of any business. (B) Nothing in this Section 8(d) shall prohibit the disclosure by any Covered Person of any Restricted Confidential Information to (i) any federal, state or other regulatory authority having jurisdiction over such Covered Person or (ii) any other Person to which such disclosure shall, in the opinion of counsel, be legally necessary (x) to effect compliance with any law, rule, regulation or order applicable to such Covered Person, (y) in response to any subpoena or other legal process, (z) in connection with any litigation to which such Covered Person is a party; provided, however, that no disclosure shall be made until such Covered Person shall give written notice to the Buyer of the intention to disclose such Restricted Confidential Information so that the Buyer may contest the need for disclosure, and such Covered Person shall reasonably cooperate at the request of the Buyer with the Buyer in connection with any such proceeding. (C) For purposes of this Section 8(d), "Restricted Confidential Information" means any Confidential Information pertaining to the Company immediately prior to the Closing, including, but not limited to, information concerning its financial condition, prospects, customers, sources of leads, methods of doing business,. and the manner of design, manufacture, financing, marketing and distribution of its products; provided, however, that Restricted Confidential Information does not include information that is or becomes generally available to the public other than as a result of a disclosure in violation of this Section 8(d) by any Covered Person. (e) Non-Solicitation of Employees and Customers. For a period of five years following the Closing Date, no Restricted Party will, directly or indirectly, for itself or for any other Person, (a) attempt to employ or enter into any contractual employment arrangement with any employee of the Buyer or any former employee of the Buyer until nine months after such Person's employment with the Buyer ended, or (b) call on or solicit any of the customers or clients of the Buyer for the purpose of competing with the Borrower. 9. MISCELLANEOUS. -43- 44 (a) Survival of Representations and Warranties. All of the representations and warranties of the Parties contained in this Agreement shall survive the Closing hereunder as and to the extent provided in Section 7 above. (b) Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the other Party; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will advise the other Party prior to making the disclosure and allow the other Party to comment upon the disclosure). (c) No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (d) Entire Agreement. This Agreement (including the documents listed as Exhibits and Schedules and attached hereto) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they related in any way to the subject matter hereof. (e) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party, provided, however, that the Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates and to any financing institutions providing financing for the transactions contemplated hereunder and (ii) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). (f) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (g) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (h) Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by -44- 45 registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to the Selling Group Members or Valley Equityholders Representative: Robert L. Fisher Ocean Reef Club 18 W. Snapper Point Drive Key Largo, FL 33037 Telephone: (305) 367-2454 Facsimile: (305) 367-2964 with a copies to: Roger T. Morgan c/o Valley Industries, Inc. 32501 Dequindre Road Madison Hts., MI 48071 Telephone: (810) 588-6900 Facsimile: (810) 588-0027 and Arter & Hadden 925 Euclid Avenue, Suite 1100 Cleveland, Ohio 44115 Attention: Charles J. O'Toole, Esq. Telephone: (216) 696-1100 Facsimile: (216) 696-2645 If to the Buyer: Valley Industries, LLC c/o Advanced Accessory Systems, LLC Sterling Town Center 12900 Hall Road Suite 2000 Sterling Heights, Michigan 48313 Attention: Chief Executive Officer Telephone: (810) 997-2900 Telecopier: (810) 997-6839 -45- 46 with a copies to: c/o Chase Capital Partners 380 Madison Avenue 12th Floor New York, New York 10017 Attention: Donald Hofmann Telephone: (212) 622-3100 Telecopier: (212) 622-3101 and O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Attention: John J. Suydam, Esq. Telephone: 212-408-2400 Telecopier: 212-408-2467; Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, 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 intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. (i) Governing Law. (i) This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Michigan. (ii) Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, trial by jury in any suit, action or proceeding arising hereunder. (iii) The parties to this Agreement agree that any and all actions arising under or in respect of this Agreement (including, without limitation, the resolution of any dispute under Section 7(g)) shall be litigated exclusively in any federal or state court of competent jurisdiction located in the State of Michigan. By execution and delivery -46- 47 of this Agreement, each party to this Agreement irrevocably submits to the personal and. exclusive jurisdiction of such courts for itself or himself and in respect of its or his property with respect to such action. Each party to this Agreement agrees that venue would be proper in any of such courts, and hereby waives any objection that any such court is an improper or inconvenient forum for the resolution of any such action. The parties further agree that the mailing by certified or registered mail, return receipt requested, to he addresses specified for notice in this Agreement, of any processor summons required by any such court shall constitute valid and lawful service of process against them, without the necessity for service by any other means provided by statute or rule of court. (j) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and each of the Stockholders. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to be a continuous waiver or 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 such occurrence. (k) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (l) Expenses. Each of the Buyer and the Stockholders will bear its own costs and expenses (including investment banking and legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. (m) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. (n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. (o) Maintenance of Books and Records. Until the third anniversary of the Closing Date, the Buyer shall preserve all of the records relating to any of the assets, liabilities or business of the Company prior to the Closing Date. After the Closing Date, where there is a legitimate purpose, the Selling Group members, and their respective representatives, -47- 48 shall be provided with access, upon prior reasonable written request specifying the need therefor, during regular business hours, to (i) the former officers and employees of the Company and (ii) the books of account and records of the Company, but, in each case, only to the extent relating to the assets, liabilities or business of the Company prior to the Closing Date, and the Selling Group Members, and their respective representatives, shall have the right to make copies of such books and records; provided, however, that the foregoing right of access shall not be exercisable in such a manner as to interfere unreasonably with the normal operations and business of such party. Such records may nevertheless be destroyed by the Buyer if the Buyer sends written notice of its intent to destroy records to the Valley Equityholder Representative, specifying with particularity the contents of the records to be destroyed. Such records may then be destroyed after the 30th day after such notice is given unless the Valley Equityholder Representative objects to the destruction in which case the Buyer shall deliver such records to the objecting party. (p) Transfer Taxes. Buyer acknowledges that in addition to the Buyer's liability to assume the Valley Liabilities, Buyer shall be, subject to receipt from Sellers of relevant sales and resales certificates which are required by the relevant state tax authorities in connection with the transfers contemplated by the Reorganization and evidence of payment, responsible to reimburse to Sellers all sums paid to any state or local taxing authority by the Sellers or any of the other Selling Group Members as sales or use taxes, or any transfer or conveyance fees or taxes, which may be payable by reason of the transfer of any of the Valley Assets to the Buyer and the consummation otherwise of the Transactions. (q) Release of Assets. Each Selling Group Member agrees that after giving effect to the Closing of the transactions contemplated by this Agreement, the Buyer shall be the owner of the Valley Assets, free and clear of all Liens, other than Permitted Liens and Liens granted by Buyer. To the extent that any Selling Group Member is deemed to have any interest in any Valley Asset, whether by operation of law, contract or otherwise, such Party hereby releases irrevocably, such interest and agrees, at the request of the Buyer to execute such further documents or instruments to further evidence of such release. ***** IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on [as of] the date first above written. VALLEY INDUSTRIES, LLC AAS HOLDINGS, LLC By: By: -------------------------------- --------------------------------- Title: Title: ----------------------------- ------------------------------ VALLEY INDUSTRIES, INC. FISHER PARENT HOLDINGS, INC. By: By: -------------------------------- --------------------------------- Title: Title: ----------------------------- ------------------------------ 49 FISHER FAMILY HOLDINGS, INC. FISHER PARENT HOLDINGS LIMITED PARTNERSHIP By: -------------------------------- Title: By: Fisher Parent Holdings, Inc. ----------------------------- General Partner By: --------------------------------- Title: ------------------------------ FISHER FAMILY HOLDINGS LIMITED PARTNERSHIP By: Fisher Family Holdings, Inc. ------------------------------------- General Partner Robert L. Fisher By: -------------------------------- Title: ----------------------------- ------------------------------------- Roger T. Morgan 50 INDEX TO SCHEDULES Schedule 4(c) Third-Party Approvals to be Obtained by the Selling Group Members Schedule 4(e) Noncontravention Schedule 4(f) Governmental Consents to Transactions Schedule 4(j) Interim Events Schedule 4(k) Liabilities Schedule 4(l)(i) Non-Compliance with Applicable Laws Schedule 4(l)(ii) Permits Schedule 4(m)(i) Pending Tax Audits of the Company Schedule 4(m)(ii) Non-Compliance with Applicable Laws Regarding Withholding of Taxes Schedule 4(n) Environmental Claims and Non-Compliance Schedule 4(o)(ii) Real Property Leases Schedule 4(p)(i) Listed Intellectual Property Schedule 4(p)(ii) Lapsed Listed Intellectual Property Schedule 4(p)(iii) Exceptions to License Rights Schedule 4(p)(iv) Intellectual Property Licenses Schedule 4(p)(v) Notice of Third-Party Claims for Infringement of Proprietary Rights of Others Schedule 4(q) Material Agreements Schedule 4(r) Powers of Attorney on Behalf of Valley Schedule 4(s) Litigation for Valley Schedule 4(t)(ii) Employee Benefit Plans Schedule 4(t)(iv) Funded Benefit Obligations Under Employee Benefit Plans Schedule 4(t)(vi) Non-Qualified Employee Benefit Plans 51 Schedule 4(t)(vii) Employee Benefit Plans Providing Health, Medical or Life Insurance Benefits Schedule 4(u) Schedule of Insurance Schedule 4(v) Bank Accounts of the Company Schedule 4(w) Warranty Claims of the Company Schedule 4(y)(i) Obsolete Inventory Schedule 4(y)(ii) Accounts Receivable and Notes Receivable Disputes Schedule 4(z)(i) Principal Customers Schedule 4(z)(ii) Notices from Principal Customers to Terminate, Cancel or Modify a Relationship Schedule 4(bb) Stockholder or Affiliate Agreements with the Company EX-10.6 13 EX-10.6 1 EXHIBIT 10.6 PRELIMINARY AGREEMENT FOR THE TRANSFER OF A BUSINESS THIS AGREEMENT entered into on between ELLEBI S.P.A., an Italian corporation with paid-in capital of Lit. 9.250.000.000 and registered office at Gualtieri (Reggio Emilia) Frazione Santa Vittoria, Strada Statale 63 n. 189, Taxpayer No. 00356930354, (hereinafter referred to as "Seller"), represented by the Chairman of the Board of Directors Mr. Vittorio Benaglia; on the one part AND BRINK ITALIA S.R.L., an Italian corporation with paid-in capital of 20,000,000 and registered office at Milano, Piazza Meda n. 5, Taxpayer No. 12212400159 (hereinafter referred to as "Buyer" and which changed its corporate name into "Ellebi Srl" and its corporate address to Gualtieri (Reggio Emilia), Frazione Santa Vittoria, Strada Statale 63, n. 189, by means of a quotaholders resolution of Dec. 9, 1997, subject to Court approval ), represented by Mr. Jan Willem Rengelink, in his capacity as Managing Director; BRINK INTERNATIONAL B.V., a Dutch corporation with registered office at Industrieweg, 5, 7951 CX Staphorst, The Netherlands, Italian fiscal code No. 97203440157, represented by Mr. Jan Willem Rengelink, in his capacity as Managing Director; on the other part 2 WITNESSETH: WHEREAS Seller, among other activities, is engaged in the manufacturing, marketing and selling of towbars for passengers cars and vans, trailers, accessories and parts thereof, and WHEREAS Seller desires to sell to Buyer the business referred to above, and WHEREAS Buyer desires to buy such business at the Closing (as such term is defined in Article 1.0 hereinbelow) and, to this end, prior to the date of this Agreement, has conducted, directly and through auditors and advisors of its choice, a due diligence investigation of such business; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE 1.0 - DEFINITIONS In this Agreement the following terms shall have the following meaning unless otherwise specified: (a) "Accounting Principles" shall mean the accounting principles of the "Commissione per la statuizione dei principi contabili dei Commercialisti e dei Ragionieri" as integrated (or, as the case may be, superseded) by the special accounting principles agreed upon between the parties, which are set forth in Exhibit "E" hereto. (b) "Assumed Liabilities" shall have the meaning set forth in point (c) of paragraph 2.1 hereof. (c) "Business" shall have the meaning set forth in paragraph 2.1 hereof. 2 3 (d) "Buyer" shall mean Brink Italia S.r.l. (e) "Closing" shall have the meaning set forth in Article 7 hereof. (f) "Effective Date" shall mean the hours 00.01 of January 1, 1998, or such different date that the parties hereto may agree, and will be the date of the actual transfer from Seller to Buyer of the Business, as hereinafter specified. (g) "Effective Date Financial Statement" shall have the meaning set forth in paragraph 6.3 hereof. (h) "Financial Statement" shall mean a financial statement of the Business as of 31 December 1996, which indicates the book value at the same date of the assets and liabilities comprised in the Business and which is attached under Exhibit "A" hereto. (i) "Guarantor" shall mean Brink International B.V. (j) "Seller" shall mean Ellebi SpA. (k) "Transferred Assets" shall have the meaning set forth in point (A) of paragraph 2.1 hereof. ARTICLE 2.0 - PURPOSE 2.1 Subject to the terms and conditions of this Agreement. Seller shall sell to Buyer, and Buyer shall purchase from Seller, the Business, as hereinafter defined, effective as of the Effective Date. For the purposes of this Agreement Business shall mean the going concern (azienda)of the Seller 3 4 comprising the assets and properties, the contracts and rights and the liabilities and obligations set forth hereafter relating to the production, sale and distribution of the products described in the first recital hereof, provided that such going concern shall not include any assets or properties, contracts or rights, liabilities or obligations that are not specifically and expressly listed or referred to in this paragraph 2.1, even if they relate to or are connected with the Business: (A) Assets and Properties (a) All machinery vehicles, equipment, fixtures, furniture, tools, spare parts, maintenance equipment and supplies and other items of personal property (other than inventory, which is separately dealt with in paragraph (b) below), the book value of which is indicated in the Financial Statement and such other items of machinery, vehicles, equipment, furniture, tools, spare parts, maintenance equipment and supplies and other items of personal property as are owned or otherwise held by the Seller on the date of this Agreement or which will be acquired by same on or prior to the Effective Date and used in connection with or for the purpose of the conduct and operation of the Business, but excluding any such items disposed of by the Seller in the ordinary course of business between the reference date of the Financial Statement and the Effective Date. (b) All raw materials, work-in-process, finished products, packaging, advertising and other materials owned or otherwise held by the Seller as at the Effective Date and used in connection with or for the purpose of the conduct and operation of the Business. 4 5 (c) The accounts and notes receivable relating to or arising in connection with the conduct and operation of the Business up to the Effective Date (excluded), excluding tax refunds and any other receivable relating to taxes. (d) The intellectual property rights referred to in paragraph 3.3 hereof. (e) Deposits, pre-paid expenses or premiums and other items of similar nature as existing as of the Effective Date. (f) All goodwill and goodwill related items concerning the Business (customer lists, market information, marketing and sales plans, etc.). (B) Contracts and Rights (a) All employment relationships entered into with the persons employed by the Seller in the conduct and operation of the Business as of the date hereof, listed on Schedule 5 attached to Exhibit "F", plus any other employees hired by the Seller in the ordinary course of the Business and upon written approval of Buyer between the date hereof and the Effective Date, but excluding any employees the employment of which was terminated (for any cause) effective on or prior to the Effective Date. (b) All other contracts, agreements, commitments or other binding arrangements, whether oral or written, including purchase orders, existing as of the date of this Agreement entered into by the Seller in connection with or for the purpose of the conduct and operation of the Business and referred to in paragraph 3.7. 5 6 (c) All contracts, agreements, commitments or other binding arrangements whether oral or written, including purchase orders, entered into by the Seller in the ordinary course of business between the date hereof and the Effective Date, consistently with the provisions of Article 5. (C) Liabilities and Obligations (a) All liabilities and obligations relating to the employees of the Seller, including (without limitation) any accrued liabilities for severance indemnity (trattamento difine rapporto) 13th and 14th month salary and unused vacation and for any social security charges accrued prior to the Effective Date the payment of which has not yet fallen due. (b) The total amount which Seller would be required to pay to any of its agents up to the Effective Date to cover any kind of termination entitlements upon cessation of the relevant agency relationship (i.e. "indennita di clientela" and "F.I.R.R." if not accrued with ENASARCO) as provided for by the applicable provisions of law. (c) All obligations to be performed or accruing under the contracts referred to under paragraph (b) preceding. (d) The trading accounts and notes payable relating to or arising in connection with the conduct and operation to the Business up to the Effective Date (excluded). 2.2 In consideration for the sale, Buyer shall pay to Seller the difference between the value of 6 7 the Transferred Assets, including goodwill, and the value of the Assumed Liabilities as of the Effective Date, to be determined in accordance with the criteria and adjustments hereinafter set forth. ARTICLE 3.0 - REPRESENTATIONS, WARRANTIES AND GUARANTEES OF THE SELLER Seller represents, warrants and guarantees to Buyer that each of the representations and warranties contained in this Agreement is true as of the date of execution of this Agreement and will be true as of the Effective Date. 3.1 Seller's Rights (a) Seller is a corporation duly organized, validly existing and in good standing under the laws of Italy. It has full right and authority to own, operate and lease its property and to carry on its business substantially as it is being conducted on the date hereof, and to pursue the purposes indicated in its by laws, and has obtained all necessary governmental licences, permits and authorizations to carry on its business. (b) The execution of this Agreement by the proper representative of Seller has been duly authorized by its Administrative Body and no other authorizations and approvals are required by Seller. 3.2 Title to property 7 8 Seller has good and marketable title to all the properties and assets presently used in the operations of the Business (excepting only those properties and assets which are leased) which are listed in Exhibit "B(i)" hereto. Except as set forth in Exhibit "B(i)" hereto, such properties and assets are free from liens, mortgages, pledges, encumbrances or charges of any kind or nature whatsoever and, except as set forth in Exhibit "C" hereto, are not held or used by Seller as a lessee or as a conditional vendee. Attached hereto as Exhibit "C" is a true and complete list, with a detailed description thereof, of all properties, leased or subleased or to be leased or subleased by Seller in connection with the activity of the Business and transferred under this Agreement, together with the terms, rental and other material provisions of each lease. All properties currently owned, used or leased by Seller in connection with the activity of the Business conform to all applicable laws, statutes, ordinances and regulations relating to such properties, including, by way of example, zoning and environmental laws and regulations, and no notice of violation relating to same has been received by Seller. 3.3. Know-How and Industrial Property (a) Exhibit "B"(ii) is a list of all intellectual or industrial property belonging to the Seller and related to the Business including, without limitation, trademarks, patent and design granted or applied for or de facto used in the Business. (b) Tradenames, trademarks and patents listed in Exhibit "B"( ii) are valid and enforceable in the countries where they have been registered. 8 9 (c) Except as disclosed in Exhibit "B"(ii) Seller is in a position to operate the Business without requiring any know-how, trademark and/or patent licenses from third parties. (d) Except for the trademarks whose use have been granted by the Seller to the South African company Towlink Ltd., Seller has not licensed any know-how, trademark or patent owned by Seller to any third parties. (e) All application and renewal fees, costs and charges for patents and trademarks of Seller have been paid on time. (f) Seller owns or has adequate licenses or other rights to use all patents, inventions, trademarks, trade names and copyrights, with all relating applications, presently used, related to, or necessary for the conduct of the Business. Seller owns or has adequate licenses or other rights relating to the use of technical data and know-how used in its products and operations, including the right to utilize the manufacturing processes presently employed. No claim for infringement of any such patents, inventions, trademarks, trade names or copyrights, with all relating applications, or relating to use of technical data or know-how, is pending or known to be threatened against Seller nor has any such claim been filed or lodged against Seller in the five years preceding the Effective Date. To the best of Seller's knowledge and belief, none of the Seller's products violates any industrial property rights of any third party. 9 10 3.4 Financial (a) The Financial Statement attached under "A" hereto includes all assets and liabilities comprised in the Business as of 31 December 1996 on the basis of the net value thereof resulting from Seller's mandatory accounting books as of 31 December 1996, except the total value of the goodwill which has been agreed upon between the parties hereto. (b) The book value of the inventory indicated in the Financial Statement has been calculated applying the Accounting Principles and shall be adjusted following the procedure under paragraph 6.3(ii) below. 3.5 Indemnities and Social Security (a) The amount shown on the Financial Statement as "accrued seniority indemnity" is equal to the total amount which the Seller would be required to pay to the identified employees through 31 December 1996 to cover employees' entitlements upon cessation of the employment relationships as of that date, including, by way of example, seniority indemnity, holiday indemnity if applicable, thirteenth and fourteenth months pay, prorated to the extent necessary. Such amount shall be adjusted accordingly through the Effective Date. (b) The amount shown on the Financial Statement as "termination entitlements due to Agents", is equal to the total amount which the Seller would be required to pay to all its agents through 31 December 1996 to cover any 10 11 kind of termination entitlements upon cessation of the agency relationships as of that date (including "i.e. "indenita di clientela" and F.I.R.R. if not accrued with ENASARCO). Such amount to be adjusted accordingly through the Effective Date. (c) Except as set forth on Schedule 5 attached to Exhibit "F", neither of employees or agents of the Business has been granted any special termination pay, pension or beneficial plan in excess of what is required by the law and by the applicable National Collective Agreements. (d) Seller has timely filed and will timely file all declarations, returns and reports required to be filed with respect to social security and welfare laws and regulations. All social and welfare charges of Seller through the Effective Date have been or will be timely paid in ful1. 3.6 Taxes All declarations, returns and reports to be filed by Seller with respect to all municipal, provincial, regional and national direct and indirect taxes, duties, imposts and governmental levies (hereinafter collectively referred to as "Taxes") have been or shall be timely filed. All Taxes concerning the Business for which Seller is or may be liable through the Effective Date have been or shall be timely paid in full by Seller. 3.7 Contracts and Commitments The transfer of the Business includes (i) those contracts or commitments with any third party listed in Exhibit "F", together with its attached schedules, (ii) the contracts for the supply of 11 12 water, energy, telephone and other services (collectively referred to as "utenze"); and (iii) all other oral and written contracts inherent to the Business, but not listed in Exhibit "F", Schedule 1, provided that they do not exceed, in the case of any one agreement, an obligation or benefit of Lire 10,000,000 (ten millions) and, in the case of all agreements, an aggregate obligation of Lire 50,000,000 (fifty millions) [all of them referred to hereinafter as "Contracts"]. The Seller is not in default or alleged to be in default under any Contract nor is Seller aware of any default by any other party to any Contract, and there exists no event, condition or occurrence which, after notice or lapse of time, or both, would constitute a default under any Contract. All of the Contracts are in full force and effect and constitute legal, valid and binding obligations of the parties thereto in accordance with their terms, and will remain in full force and effect after the Closing without any notice to or consent by any other party, subject to the provisions of Section 2558, second paragraph, of the Italian Civil Code. Copies of all agreements, contracts and documents delivered and to be delivered hereunder by Seller are and will be true and complete copies of such agreements, contracts and documents. All written summaries of oral agreements will be true and complete. Seller hereby represents that each of the following schedules of Exhibit "F" is complete and the information contained therein is correct in all material respect as of the date of execution of this Agreement and will be correct in all material respect as of the Effective Date: Schedule 1: This Schedule lists the following agreements, whether oral or written to which Seller is a party as of the date of this Agreement, and which relate to the activity of the Business to the extent such agreements are not set forth in other Exhibits or Schedules: 12 13 (i) Each contract, agreement, or arrangements made in the course of ordinary business by Seller for the purchase of any services, materials, or equipment. (ii) Each contract, agreement, or commitment by Seller for delivery of its products or services. (iii) Each consultancy agreement between Seller and third party who is not an employee of Seller. (iv) Each sales agency or distributorship agreements providing for the services of an independent contractor to which Seller is a party or by which it is bound. Scheudle 2: This Schedule lists each policy of product liability covering only the assets relating to the Business and not listed in Schedule 1. Schedule 3: This Schedule lists the homologations obtained for the products of the Business; Seller guarantees that it has obtained all permits, licences and other approvals and authorizations which are necessary to conduct the activity of the Business. Schedule 4: This Schedule lists all tangible personal property owned by any third parties (whether a customer, supplier or other person) for which Seller is responsible, and which relate to the activity of the Business. Schedule 5: This Schedule is a list of all current employees of the Seller hereinafter referred to also as ("Transferred Employees"), a designation of such employees' full or part time status, the compensation payable to each such employee, all fringe benefits which Seller currently makes available to such employees, and the accrued vacation pay owing by Seller to 13 14 each of its employee. It is hereby agreed that absent different agreement between the parties, only the employees of the Seller listed in Schedule 5 shall be transferred from Seller to Buyer. Seller does hereby undertake to hold Buyer harmless from whatsoever liability it might incur for Seller's inability to comply with its undertaking. Seller guarantees (i) that all employees listed in Schedule 5 are employed in the correct level and category, as provided for by the applicable Italian laws and Collective Agreements, and (ii) that it will hold Buyer harmless from whatsoever liability it might incur for claims filed by the employees relating to their employment with Seller and matured before the Effective Date. 3.8 Legal proceedings. (a) Exhibit "G" lists any legal action, suit, arbitration, governmental investigation or other legal or administrative proceeding and any order, decree or judgement against or relating to Seller, its officers, directors or employees, its properties, assets or business or the transaction contemplated by this Agreement, with exclusion of credit collection cases. (b) Any liability (or gain) arising out of the proceedings listed under Exhibit "G" shall be borne (or accrued) to Seller. 3.9 Liabilities related to products There are no liabilities, accrued or unaccrued, of the Seller, including products liability, arising from the sale of the products manufactured and/or sold by Seller, which products were and will be manufactured and/or sold in compliance with all the applicable laws and regulations. 3.10 Accounts Receivable 14 15 All accounts receivable which will be reflected in the Effective Date Financial Statement shall be actually due to Seller and shall be collected within 270 days of Closing. None of such accounts receivable is or will be subject to any claim, dispute or set off arising from any circumstances up to the Effective Date. Upon expiration of the term of 270 days of Closing, within the following 30 days, Buyer shall be entitled to require the Seller to repurchase all or part of the accounts which remain uncollected for a price equal to the aggregate face value thereof less the entire amount of the provision for bad and doubtful debts which shall be reflected in the Effective Date Financial Statement. 3.11 Compliance with laws and environmental liabilities (a) For the purposes of this Agreement: (i) "the Environmental Legislation" means any law and any other statute or subordinate legislation relating to pollution of the environment in force in Italy as at the date hereof. (ii) "Hazardous Items" means any controlled waste (as defined in the Environmental Legislation) of any kind noise, vibration, smell, fumes, smoke, soot, ash, dust, grit, chemical, petroleum products, noxious, radioactive, inflammable, explosive, dangerous or offensive gases or materials and any other substances of whatever nature which may cause harm to the health of living organisms or the environment and which are regulated under the Environmental Legislation. 15 16 (iii) "Pollution of the environment" means the pollution of all or any of the air, water and land due to the release into such from any process or substances which are capable of causing harm to man or any other living organism. (iv) "Properties" shall mean any real estate owned, leased or occupied at the date hereof by the Seller for the operation of the Business. (v) "Consents" shall mean all necessary licenses, consents, authorizations, and registrations required under the Environmental Legislation to operate the Business. (b) The Consents as hereinabove defined (or true and complete evidential copies of the same) are in the possession or under the control of the Seller and the Business and there are no outstanding applications or appeals in relation to the same. (c) Seller guarantees that there is anything in, on, over or under the Properties the presence existence or condition of which constitutes a breach of the Environmental Legislation nor is any manufacturing, storage, generation, servicing treatment, disposal or other process carried on at the Properties in such a way as to amount to a breach of the same. (d) The Consents with regard to the Properties and/or any activities processes and substances from time to time on the Properties have been obtained and made in the name of the Seller and the Business. 16 17 (e) All statements made and all information supplied by or on behalf of Seller and the Business in support of applications made for the Consents were and remain true and accurate in all respects. (f) All conditions attached to the Consents have in all respects been complied with and no claims or proceedings have been made or issued or are contemplated or threatened alleging a breach of such conditions. (g) No writ, summons, orders, enforcement notice, prohibition notice or other notice has been received by the Seller and the Business and so far as the Seller is aware, no direction of any public, local or other statutory authority has been made with regard to the Properties and/or any activities, processes or substances in, on, over or under the Properties pursuant to the Environmental Legislation and no prosecutions have been instituted with respect thereto. (h) Seller and the Business guarantees that any offense pursuant to the Environmental Legislation has been committed during Seller and the Business, occupation of the Properties or before in connection with the Properties or any activities, processes or substances in, or over or under the Properties. (i) No complaints have been received by Seller or the Business from any governmental body or agency or any other competent authority or any third party (including any employee) with regard to the Properties and/or any activities, processes or substances in, or over or under the properties as the 17 18 result of any actual or alleged breach of the Environmental Legislation or the presence of any Hazardous Items and Seller is not aware of any facts which may lead to any such complaint. (j) No works have been carried out on the Properties by any public, local or other statutory authority under the Environmental Legislation in respect of which such authority is entitled to recover costs nor have Seller or the Business received any notice or have any information indicating that it is or may be responsible for all or some portion of the costs of investigating, treating, containing, removing from any place or otherwise addressing any Hazardous Items. (k) There are not in use or stored on the Properties: (i) Any radioactive material or radioactive apparatus. (ii) Any hazardous substance as defined in the Environmental legislation. (iii) Any processes or substances prescribed by regulations under the Environmental Legislation for which an authorization is required. (iv) Any underground storage tanks (UST), pipes or landfills. (l) The Properties have not been affected by any landfill gas nor has there been deposited on or in the Properties any Hazardous Items. 18 19 (m) Seller guarantees that no Hazardous Items have been spilled, released, discharged or disposed of and no contamination of any kind has ever occurred in the soil or water in, under or upon the Properties. 3.12 Governmental Authorities. Seller is not required to submit any notice, report or other filing with, and no consent, approval or authorization is required, by any governmental or regulatory authority in connection with their execution, delivery, consummation or performance of this Agreement or the transactions contemplated hereby, except for any approval or authorization which may be required for the transfer to Purchaser of any of the permits, licences and authorizations referred to in point (b) of paragraph 3.11 preceding. 3.13 No Undisclosed Liabilities, Claims, etc. Except for (a) liabilities fully reflected or reserved against in the Financial Statement; and (b) regular and usual liabilities and obligations incurred in the ordinary course of business consistent with past practices after the date of the Financial Statement and which will be reflected in the Effective Date Financial Statement, the Seller has no liabilities, obligations or claims (absolute, accrued, fixed or contingent, matured or unmatured, or otherwise), including liabilities, obligations or claims which may become known or which arise only after the Effective Date and which result from actions, omissions or occurrences of the Seller prior to the Closing, to the extent that any such liability, obligation or claim may be enforced against the Purchaser. 3.14 Absence of Certain Business Practices 19 20 Neither Seller, or any person or entity related to or affiliated with the Seller, any officer, employee or agent of the Seller, any other person or entity acting on behalf of or associated with the Seller, nor any other entity directly or indirectly owned or controlled by the Seller, acting alone or together, has (a) received, directly or indirectly, any rebates, payments, commissions, promotional allowances or any other economic benefit, regardless of its nature or type, from any customer, supplier, trading company, shipping company, governmental employee or other entity or individual with whom the Seller has done business directly or indirectly; or (b) directly or indirectly, given or agreed to give any gift or similar benefit to any customer, supplier, trading company, shipping company, governmental employee or other person or entity who is or may be in a position to help or hinder the business of the Seller (or assist the Seller in connection with any actual or proposed transaction) which (i) might subject the Seller to any damage or penalty in any civil, criminal or governmental litigation or proceeding; (ii) if not given in the past, might have had an adverse effect on the assets, business or operations of the Seller as reflected in the Financial Statements; or, (iii) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Seller or which might subject the 20 21 Seller to suit or penalty in any private or governmental litigation or proceeding. 3.15 Disclosure The representations, warranties and guarantees made by Seller herein and the statements, documents and certificates furnished or to be furnished by or on behalf of Seller to Buyer, in connection with the transaction contemplated herein, do not and will not contain any untrue statement of a material fact, do not and will not omit to state a material fact necessary to make any of said representations, warranties, guarantees, statements, documents and certificates not misleading. Seller shall give Buyer prompt written notice of any change in any of the information contained in the representations and warranties made in Article 3 or elsewhere in this Agreement or in the Exhibits or Schedules referred to herein which occurs prior to the Effective Date. Seller shall consult with and follow the recommendations of Buyer respect to (i) the cancellation of contracts, agreements, commitments or other understandings or arrangements to which Seller is a party, including, without limitation, commitments for improvements (ii) the commencement in one or more of Seller's locations of the orderly and gradual discontinuance of particular items or operation, and (iii) purchasing, pricing or selling policy (including, without limitation, selling merchandise at discounts); provided, however, that nothing contained in this subsection shall require Seller to take or fail to take any action that, in Seller's reasonable judgement, is likely to give rise to a substantial penalty or a claim for damages by any third party against Seller, or is likely to result in losses to Seller, or is otherwise likely to prejudice in any material respect or unduly interfere with the conduct of Seller's business and operations in the ordinary course 21 22 consistent with prior practice, or is likely to result in a breach by Seller or any of its representations, warranties or covenants contained in this Agreement (unless any such breach is first waived in writing by Buyer). The representations and warranties of the Seller contained in this Agreement are in lieu of all other representations and warranties however provided under applicable law and constitute all of the representations and warranties made by the Seller in connection with the purchase and sale of the Business and the other transactions contemplated under this Agreement. ARTICLE 4.0 - REPRESENTATIONS AND WARRANTIES OF BUYER AND GUARANTOR Buyer and Guarantor hereby make to Seller the following representations and warranties as of the date of this Agreement and as of the Effective Date: (a) The Buyer and the Guarantor are corporations duly organized, validly existing and in good standing under the laws of Italy and respectively, The Netherlands. (b) The execution of this Agreement by the proper representative of the Buyer and the Guarantor has been duly authorized by the relevant Board of Directors and no other authorizations or approvals are required. (c) The execution of this Agreement by Buyer and Guarantor and its performance hereunder will not contravene any contract to which either the Buyer or the Guarantor are parties, or any applicable law or regulations. 22 23 ARTICLE 5.0 - CONDUCT OF BUSINESS AND ACTIONS BY SELLER 5.1 Absence of Certain Changes. Except as set forth in Exhibit "O", since the date of the Financial Statement, Seller has conducted its business only in the ordinary course and has not: (i) incurred any obligation or liability, absolute, accrued, contingent or otherwise, whether due or to become due, except current liabilities for trade or business obligations incurred in the ordinary course of business and consistent with its prior practice, none of which liabilities, in any case or in the aggregate, materially and adversely affects the business, liabilities or financial condition of Seller; (ii) mortgaged, pledged or subjected to lien, charge, security interest or any other encumbrance or restriction any of its property, business or assets, tangible or intangible, other than in the ordinary course of business; (iii) received any notice of termination of any contract, lease or other agreement or suffered any damage, destruction or loss (whether or not covered by insurance) which, in any case or in the aggregate, has had a materially adverse effect on the assets, operations or prospects of Seller; (iv) encountered any labour union organizing activity, had any actual or threatened employee strikes, work stoppages, slow-downs or lock-outs which have had a materially adverse effect on its operations, or had any material change in its relations with its employees, agents, customers or suppliers; 23 24 (iv) made any material change in the rate of compensation, commission, bonus or other direct or indirect remuneration payable, or paid or agreed or orally promised to pay, conditionally or otherwise, any bonus, extra compensation, pension or severance or vacation pay, to any Shareholder, director, officer, employee, salesman, distributor or agent of Seller; (v) suffered any change, event or condition which, in any case or in the aggregate, has had or may have a materially adverse effect on Seller's condition (financial or otherwise), properties, assets, liabilities, operations or prospects, including, without limitation, any change in Seller's revenues, costs, backlog or relations with its employees, agents, customers or suppliers; (vi) entered into any transaction, contract or commitment other than in the ordinary course of business or paid or agreed to pay any legal, accounting, brokerage, finder's fee, taxes or other expenses in connection with, or incurred any severance pay obligations by reason of, this Agreement or the transactions contemplated hereby; (vii) made any change to its accounting methods, practices or principles; (viii) adopted or amended any collective bargaining, bonus, profit sharing, compensation, stock option, pension, retirement, deferred compensation, or other plan, agreement, trust, fund or arrangement for the benefit of employees, exception made for the coming into force of the National Metal Workers Collective Agreement in 1997. 24 25 (ix) entered into any other transaction or event other than in the ordinary course of the Business. 5.2 Between the date hereof and the Effective Date, Seller: (a) Will not negotiate, enter into, renew or terminate any shop-level collective labour agreement without prior written consent of Buyer. (b) Will cooperate with Buyer, if so requested by it, for the purposes of obtaining from the appropriate authorities the transfer of all licenses, franchises, permits, and authorizations necessary to run the activity of the Business in the name of Buyer. (c) Will conduct its business and affairs in the ordinary course and consistent with its prior practice and shall maintain, keep and preserve its assets and properties in good condition and repair and maintain insurance thereon in accordance with present practices. 5.3 Without limiting the generality of the foregoing, prior to the Effective Date, Seller will not without Buyer's prior written approval: (i) increase the salaries or other fringe benefits made available to its employees of more than lira 75,000,000 (seventy-five millions), other than in the ordinary course of business (i.e. due to mandatory laws or collective agreements) and excluding the increases of salary to Messrs. Guidetti, Poti, Pavesi and Ragni referred to under 8.0 below; 25 26 (ii) enter into any contract or commitment with respect to the operation of the Business extending beyond the Effective Date, other than sales or purchases made in the ordinary course of business; (iii) enter into any capital expenses higher than lira 15,000,000 (fifteen millions) without written consent of Buyer. ARTICLE 6.0 - PURCHASE AND SALE OF THE BUSINESS - CONSIDERATION 6.1 Purchase and Sale The purchase and sale of the Business will occur on the basis of the Transferred Assets and the Assumed Liabilities, as resulting from the Effective Date Financial Statement. 6.2 Transfer of assets and liabilities As of the Closing Seller shall transfer to Buyer, at latter's expenses, the Business, including: (i) the Transferred Assets and the Assumed Liabilities as of the Effective Date; (ii) all customer lists, and (iii) the contracts and commitments pertinent to the Business listed in Exhibit "F" hereto. Buyer shall not assume nor be liable for any liabilities, obligations or undertakings of Seller of any nature whatsoever, whether fixed or contingent and whether known or unknown, other than the Assumed Liabilities and liabilities and obligations deriving from the Contracts which will be transferred to the Buyer as contemplated in this Agreement. 26 27 6.3 Consideration In consideration for the transfer, Buyer shall pay to Seller a purchase price equal to the difference between the Transferred Assets and the Assumed Liabilities as of the Effective Date plus Lire 17,734,764,795 (seventeen billion seven hundred thirty-four millions seven hundred sixty-four thousand seven hundred ninety-five) for goodwill: (i) as of January 2, 1998, Buyer (i) shall pay to Seller in cash, to the bank account which shall be communicated by the Seller the amount of lire 33,500,000,000 (thirty-three billion five hundred millions): (ii) shall put in escrow with the notary public Pasquale Lebano of Milan the amount of lira 1,500,000,000 (one billion five hundred millions), to secure payment of the adjustment of the Purchase Price (if any). The parties undertake to instruct the notary to release the amount only upon joint request of duly authorized representatives of the Seller and of the Buyer or upon request of one of the parties supported by the award of the arbitration panel referred to under article 11.10 hereinbelow, as per the draft instructions attached hereto under Exhibit "P"; and (iii) within forty-five days from the Effective Date the parties shall jointly prepare a financial statement of the Business as of the Effective Date (the "Effective Date Financial Statement") on the basis of the Accounting Principles, with the purpose to adjourn the Financial Statement to the situation of the Business as of the Effective Date. The difference between (i) the net value of the Business (excluding goodwill) as resulting 27 28 from the Effective Date Financial Statement and the net value of the Business (excluding goodwill) as resulting from the Financial Statement shall be paid by the Buyer to the Seller or reimbursed by Seller to the Buyer within the following 30 days, increased by an interest of 5% p.a. starting from the Effective Date. Should the parties fail to reach an agreement on the Effective Date Financial Statement, each of them may promote an audit to be carried out by Arthur Andersen of Milan (or, should the latter refuse, by an auditing company appointed by the Chairman of the Milan Chamber of Commerce), whose report shall be released to the parties within 45 days from the mandate and shall be binding upon the parties. The cost of the audit shall be borne equally by the parties and the aforesaid difference shall be paid (or reimbursed) within 30 days from the delivery of the audit report, increased by an interest of 5% p.a. starting from the Effective Date. ARTICLE 7.0 - CLOSING As of the Effective Date, (i) a Deed of Sale shall be executed before the public notary Pasquale Lebano in Milano, according to the Draft attached hereto under Exhibit "H", it being understood that all obligations of Seller and Buyer set forth by this agreement shall survive and shall prevail over the Deed of Sale; (ii) a lease agreement for the plants and buildings hosting the Business shall be entered into between Seller and Buyer according to the draft attached under Exhibit "L" hereto; (iii) Buyer and Seller shall enter into a pre-emption agreement substantially in the terms of Exhibit "Q" hereto; (iv) Seller shall deliver the original bank guarantee referred to under 28 29 article 9.3, as per the draft attached under "N"; (v) the parties shall give the notary the letter of instructions as per the draft attached under Exhibit "P"; (vi) each party shall deliver such documents, instructions and materials as may be reasonably required in order to effectuate the intent and provisions of this Agreement, and all such documents, instruments and materials shall be satisfactory in form and in substance to counsel for the other party. The closing shall take place in the offices of Baker & McKenzie at Milano, Piazza Meda, 3, or at such other time and place as shall be mutually acceptable to the parties. ARTICLE 8.0 - CONDITIONS PRECEDENT TO THE CLOSING The obligations of Buyer and Seller hereunder to complete the purchase of the Business on the Effective Date are subject to the conditions precedent (i) that a revision of the employment agreement with Messrs. Guidetti, Poti, Pavesi and Ragni entered into according to Exhibit "I" hereto, (ii) that current shareholders of Seller and their relatives resign as employees effective as of March 31, 1998 without any cost for the Business, save for ordinary termination entitlements due under Italian labour laws, and (iii) that the procedure contemplated in paragraph 11.8 has been duly completed in accordance with the applicable provisions of law. ARTICLE 9.0 - ENFORCEMENT PROVISIONS 9.1 Indemnities 9.1.1 Seller shall defend at its expenses, and hold Buyer harmless against any liability, damage or loss in any way relating to the Business which are the consequence of circumstances, obligations and omissions before the Effective Date, including, without limitation, (i) any and all liabilities relating to the Business arising from operations or transactions occurring before the Effective Date, and (ii) any 29 30 and all liability concerning employees and agents accrued before the Effective Date and any charge and liability vis-a-vis employees, agents and social security agencies, to the extent (but only to the extent) that any such liabilities are not reflected or reserved for in the Effective Date Financial Statement or do not arise from the contracts and commitments transferred to Buyer pursuant to this Agreement. Anything in any applicable law to the contrary notwithstanding, no breach or inaccuracy of any representation or warranty contained herein shall give rise to any right on the part of the Buyer to rescind or terminate this Agreement after completion of the Closing, unless the default is "serious" according to article 1455 of the Italian Civil Code. The parties hereto agree that a default shall be considered "serious" if it implies the impossibility to carry out the Business or involves a liability for the Seller or the Buyer exceeding 4 billion lira. The non defaulting party shall give the other party 30 days to cure the default, warning it that the failure to cure it shall entitle the other party to terminate the agreement. 9.2 Survival of Representations - Limitation of liability. (a) All representations, warranties, guarantees and undertakings set forth in this Agreement and the obligations and rights arising therefrom shall survive the Effective Date and shall continue in full force for a period of 2 years following the Effective Date. With respect to Taxes, claims from employees, social security contributions and environmental matters, all obligations and undertakings shall survive 30 31 for 6 years or until final settlement thereof, or until expiration of the statute of limitations relating to thereto, whichever is later. (b) Buyer and Seller (and their respective tax, accounting and legal service providers) shall provide each other with such assistance as may reasonably be requested by any of them in connection with the preparation of any return or report of Taxes, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes. Buyer and Seller (and their respective tax, accounting and legal service providers) will retain for the full period of any statute of limitations and provide the others with any records or information that may be relevant to such preparation, audit, examination, proceeding or determination. (c) Buyer and Seller hereby agree that in the event a claim with respect to Taxes is made pursuant to this Agreement, each party shall furnish or cause to be furnished to any of them all books, records, tax returns and other information reasonably requested by such other party that relate to such claims, and each party agrees to file on behalf of the other party any returns, forms or other statements that relate to such claims. (d) If in connection with any examination, investigation, audit or other proceeding of any Tax return for a taxable period ending prior to the Effective Date, any governmental body or authority issues to Buyer, a written notice of deficiency, a proposed adjustment, an assertion of claim or demand concerning the tax period covered by such return, Buyer shall 31 32 notify Seller of its receipt of such communication from the governmental body or authority. Seller shall, at its expense, have the sole and exclusive right, power and authority to contest any such assessment, proposal, claim, demand or other proceeding and to represent and act for and on behalf of Seller in connection with any notice, proposal, investigation, assessment, audit, examination or any other proceedings of any kind whatsoever in connection with any Tax return for a taxable period of Seller ending on or prior to the Effective Date. Seller agrees to keep Buyer informed of the progress of any such proceeding and to consult with Buyer in good faith in connection therewith. Seller further agrees that they will not settle or resolve any issue related to Taxes which, is so settled or resolved, would have an effect on Seller or Buyer for periods ending after the Effective Date, without having consulted with Buyer. If any examination, investigation, audit or other proceeding relates to a Tax return for a period that ends after the Effective Date, Buyer shall control and resolve such examination, investigation, audit or other proceeding, without prejudice to Seller's liability under article 3.6 hereof. 9.3 Bank Guarantee The performance by Seller of all the obligations arising as of this agreement, including, without limitation, the obligation to indemnify Buyer in case of breach of the representations and warranties given by Seller, shall be guaranteed by a Bank guarantee, released at Seller's cost by a primary Italian Bank according to the draft attached under Exhibit "N". 32 33 The Bank guarantee shall amount to 2 (two) billion lira and shall have a duration of 6 years from the Effective Date for the indemnification obligations arising as of the breach of guarantees referred to under articles 3.6, 3.5 and 3.7 (Exhibit F.5) and 3.11 hereof and of 2 years for all other obligations. The Bank shall pay to Buyer, without delay, (I) the amounts indicated in a written request bearing the joint signature of the Seller and of the Buyer, or (II) the amounts indicated in a written request of the Buyer, provided that it is supported by the award of the arbitration panel referred to in article 11.10 hereinbelow. The duration of the guarantee shall be suspended from the date of the filing of the arbitration claim to the date of delivery of the arbitration award. 9.4 Covenants of Buyer Buyer shall indemnify and hold Seller harmless in respect of any claim or demand of third parties however relating to liabilities comprised in the Business pursuant to this Agreement, to the extent that such liabilities are reflected in the Effective Date Financial Statement. ARTICLE 10.0 - EXCLUSIONS AND LIMITATIONS - REFUND 10.1 Exclusions and Limitations Anything herein or in any applicable law to the contrary notwithstanding: (a) The Seller shall not be liable to the Buyer under Article 9 or otherwise: (i) if the sum due in connection with any single occurrence giving rise to liability pursuant thereto does not exceed Lire 20 (twenty) million; and 33 34 (ii) until the aggregate of all amounts that would otherwise be due pursuant to such Article 9 or otherwise, exceeds Lire 300 (three hundred) million, provided that, if such limit is exceeded, the Seller's liability shall be limited to the excess. (b) The Seller's maximum aggregate liability under Article 9 or otherwise shall be limited to Lire 8.5 (eightpointfive) billion. (c) The amount of all indemnities payable by the Seller to the Buyer pursuant to Article 9 or otherwise shall be further reduced by: (i) any reserve amount recorded on the Effective Date Financial Statement relating to the event giving rise to indemnification; (ii) the amount of any insurance or similar payment that Buyer has received or is entitled to receive in connection with the event giving rise to indemnification; (iii) the amount of any indemnification that Buyer has received or is entitled to receive from any third party; (iv) the amount by which any liabilities or provisions shown on the Effective Date Financial Statement subsequently proves to have been overstated or unnecessary. (d) The Seller will not be required to indemnify the Buyer under Article 9 or otherwise in respect of any contingent or potential liability, unless and until 34 35 such liability has become actual and has been paid for by the Buyer or has become the subject matter of a final and uncontestable obligation to pay the Buyer. (e) In no event will the Seller be responsible to the Buyer under Article 9 or otherwise in respect of: (i) any actual or alleged inaccuracy or breach of the representations and warranties (other than representations and warranties referred to at point (ii) below) which is notified to the Seller later than two (2) years following the Effective Date; or (ii) any actual or alleged inaccuracy or breach of the representations and warranties with respect to Taxes, claims from employees, social security contributions and environmental matters that is notified to the Seller later than 30 (thirty) days after the elapse of 6 years or final settlement thereof or expiration of the statute of limitations relating thereto, whichever is later. 10.2 Refund Buyer shall refund to Seller any portion of the provision which will be reflected in the Effective Date Financial Statement to cover any termination entitlements (including "indennita di clientela" and F.I.R.R., if not accrued with ENASARCO) accrued in favour of the agents of the Seller as of the Effective Date, if and to the extent that any portion of such provision will become unnecessary or excessive under the applicable provisions of law after the Effective Date, 35 36 including the fact that the relevant agents or any of them have terminated the respective agency relationship with Buyer thus becoming no longer entitled to the payment by Buyer of the respective termination entitlements (including "indennita di clientela" and F.I.R.R., if not accrued with ENASARCO). ARTICLE 11.0 - MISCELLANEOUS 11.1 Finder's Fees Expenses (a) Buyer agrees to indemnify and hold harmless Seller against any claim asserted against Seller for brokerage or finder's fees in respect to the transactions contemplated herein by any person purporting to act on behalf of Buyer and its representatives. Seller agrees to indemnify and hold harmless Buyer for brokerage or finder's fees in respect of the transactions contemplated herein by any person purporting to act on behalf of Seller. (b) Each of the parties hereto shall pay the expenses incident to its preparation, signature and performance under this Agreement whether or not the transactions contemplated herein are consummated. The Seller shall bear the income tax incident to this transaction, whereas the registration tax of the Deed of Sale and the notary fees shall be borne by Buyer. 11.2 Covenant not to Compete Seller and its shareholders represent, warrant and agree that for the maximum duration of 5 (five) years from the Effective Date, they shall not, either jointly or separately, directly or indirectly, 36 37 engage in any business in competition with the Business in Italy, and in the territory in which, at the Effective Date, shall be marketed the products manufactured by the Business. Each of the Seller and its shareholders shall be severally (and not jointly with the others) liable towards Buyer for any breach of the aforesaid covenant. The shareholders of the Seller execute this agreement for acceptance of the above mentioned non compete obligation and of any other provision set forth in this agreement whose accomplishment will require their actions and or intervention. 11.3 Notices Unless otherwise provided herein, any notices under this Agreement or in connection therewith shall be sent by registered airmail, or telegraph, cable or telex to the addresses indicated in the preamble hereof. Such notice or communication shall be deemed to have been given as of the date of receipt. Either party may change its address for receipt of notices and copies by notice duly given to the other party. 11.4 Assignment Neither party may assign this Agreement unless such assignment is authorized in writing by the other party except that Buyer without consent of Seller may assign this Agreement to any company belonging to the Brink Group, it being however understood that in such event the Guarantor shall be jointly liable towards the Seller for the due performance of the obligations of the aforesaid assignee arising out of this Agreement. 11.5 Headings 37 38 The descriptive words or phrases at the head of the various Articles hereof are inserted only as a convenience and for reference and in no way are or are intended to be a part of this Agreement, or in any way define, limit or describe the scope or intent of the particular Article to which they refer. 11.6 Waivers No party hereto shall have been deemed to have waived any right arising out of this Agreement or out of any default or breach hereunder, unless such waiver is evidenced by a written instrument by such party. No waiver of any default or breach hereunder shall be construed to constitute a waiver of any other default or breach hereunder whether similar or not. l1.7 Complete agreement This Agreement including the Exhibits hereto constitute the entire agreement between the parties relating to the subject matter hereof, and there are no prior representations, warranties, or agreements relating thereto. No change in, addition to, or waiver of the terms and conditions hereof shall be binding on any party unless approved by it in writing. 11.8 Announcements - Notice to the Unions This Agreement and the transaction contemplated hereby shall be maintained as confidential. No public announcements or publicity shall be made by Seller and Buyer without the prior written consent of the other party. Seller and Buyer, as soon as practicable after the execution of this agreement, shall send a joint communication to the Unions and to the Shop Representatives of the Unions (R.S.A.) under section 47 of the Law no. 428 according to the draft attached hereto under Exhibit "M", and shall thereafter take any actions required pursuant to the aforesaid law. 38 39 11.9 Obligations of the Guarantor The Guarantor hereby jointly and severally guarantees to the Seller-the obligations of the Buyers (i) to complete the purchase of the Business at closing, and (ii) to pay the Purchase Price, including its adjustments. 11.10 Post-closing obligation As soon as possible after Closing, Seller shall transfer to Buyer, free of charge, all the 250 shares equity it currently owns in Towlink Ltd., a company with registered office at 19 Ficus, Heldervue 7130, Cape Town, South Africa, representing 25% of the corporate capital of Towlink Ltd., (the "South African Shares"). Buyer recognizes that the other shareholder of Towlink Ltd, the company Aucrite Close Corporation may exercise a pre-emptive right on the transfer of the South African Shares and Seller shall endeavor to obtain its consent to the sale of the South African Shares to the Buyer. The parties hereto agree that should Seller not obtain within 60 days from the date of closing the consent of Aucrite Close Corporation to the transfer of the Shares from Seller to Buyer, Seller shall repossess tile financial rights related to Towlink (Lire 71.219.429) free of charge and, if so requested by Buyer, shall terminate the distribution agreement on July 8, 1998. 11.11 Governing law and jurisdiction This agreement is subject to the Italian law and all the controversies arising therefrom shall be settled by formal arbitration to be conducted and governed under the rules of the Camera Arbitrale of the Chamber of Commerce of Milan. 39 40 For the purpose of the arbitration proceedings, Buyer and Guarantor shall be deemed to constitute a single party. IN WITNESS WHEREOF, the parties hereto have signed and delivered this Agreement. - ------------------------ ------------------------ ------------------------ (Buyer) (Seller) (Guarantor) - --------------------- Shareholders of Ellebi ( ) Vittorio Benaglia ------------------------ Gianfranco Landini ------------------------ Paolo Landini ------------------------ Renato Bianchi ------------------------
40 41 LIST OF EXHIBITS A - Financial Statement 1. B(i) - List of properties and assets presently used in the operations of the Business 3.2 B(ii) - List of the industrial property and know how 3.3 C - List of all properties leased or subleased or to be leased or subleased by Seller 3.2 D - Annulled E - Accounting principles 3.3(c) F - Contracts and commitments 3.6 Schedule 1. Agreements Schedule 2. Product liability policies Schedule 3. Permits and licenses Schedule 4. Personal property owned by third parties Schedule 5. List of employees G - Legal proceedings 3.8(a) H - Draft Deed of Sale 7.0 I - Draft Employment Agreement 8.0(i) L - Draft Lease Agreement 8.0(ii) M - Notice under section 47 of Law no. 428 11.8 N - Draft Bank Guarantee 9.3 O - "Changes" since the date of Financial Statement 5.0 P - Instructions to notary (draft) 6.3(i) Q - Draft pre-emption agreement 7.0
41 EX-10.7 14 EX-10.7 1 EXHIBIT 10.7 EXECUTION COPY SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of August 5, 1997 among AAS HOLDINGS, LLC ADVANCED ACCESSORY SYSTEMS, LLC VALLEY INDUSTRIES, LLC BRINK INTERNATIONAL BV BRINK BV THE INSTITUTIONS FROM TIME TO TIME PARTY HERETO AS LENDERS and NBD BANK, as Administrative Agent and Documentation and Collateral Agent and THE CHASE MANHATTAN BANK, as Co-Administrative Agent and Syndication Agent 2 TABLE OF CONTENTS
PAGE ARTICLE I: DEFINITIONS...................................................................................1 1.1 Certain Defined Terms.......................................................................1 1.2 Supplemental Disclosure....................................................................41 ARTICLE II: THE CREDITS.................................................................................42 2.1. Term Loans.................................................................................42 2.2 Revolving Loans............................................................................46 2.3 Swing Line Loans...........................................................................46 2.4 Rate Options for all Advances..............................................................48 2.5 Optional Payments; Mandatory Prepayments...................................................48 (A) Optional Payments.................................................................48 (B) Mandatory Prepayments.............................................................48 2.6 Reduction of Commitments...................................................................52 2.7 Method of Borrowing........................................................................52 2.8 Method of Selecting Types and Interest Periods for Advances; Determination of Applicable Margins.....................................................................52 (a) Method of Selecting Types and Interest Periods for Advances.......................52 (b) Determination of Applicable Margins, Applicable Letter of Credit Fee and Applicable Commitment Fee.....................................................53 2.9 Minimum Amount of Each Advance.............................................................55 2.10 Method of Selecting Types and Interest Periods for Conversion and Continuation of Advances............................................................................55 (A) Right to Convert..................................................................55 (B) Automatic Conversion and Continuation.............................................56 (C) No Conversion Post-Default or Post-Unmatured Default..............................56 (D) Conversion/Continuation Notice....................................................56 2.11 Default Rate..............................................................................56 2.12 Collections Account Arrangements..........................................................56 2.13 Method of Payment.........................................................................57 2.14 Notes, Telephonic Notices.................................................................58 2.15 Promise to Pay; Interest and Fees; Interest Payment Dates; Interest and Fee Basis; Taxes; Loan and Control Accounts.......................................................58 (A) Promise to Pay....................................................................58 (B) Interest Payment Dates............................................................59 (C) Fees..............................................................................59 (D) Interest and Fee Basis............................................................59 (E) Taxes.............................................................................60
- i - 3
(F) Loan Account......................................................................63 (G) Control Account...................................................................63 (H) Entries Binding...................................................................63 2.16 Notification of Advances, Interest Rates, Prepayments and Aggregate Revolving Loan Commitment Reductions.............................................................64 2.17 Lending Installations.....................................................................64 2.18 Non-Receipt of Funds by the Administrative Agent..........................................64 2.19 Termination Date..........................................................................64 2.20 Replacement of Certain Lenders............................................................65 2.21 Letter of Credit Facility.................................................................66 2.22 Letter of Credit Participation............................................................66 2.23 Reimbursement Obligation..................................................................67 2.24 Cash Collateral...........................................................................67 2.25 Letter of Credit Fees.....................................................................68 2.26 Indemnification; Exoneration..............................................................68 2.27 Judgment Currency.........................................................................70 2.28 Market Disruption.........................................................................70 2.29 Borrowing Subsidiaries....................................................................70 ARTICLE III: CHANGE IN CIRCUMSTANCES....................................................................71 3.1 Yield Protection...........................................................................71 3.2 Changes in Capital Adequacy Regulations....................................................72 3.3 Availability of Types of Advances..........................................................73 3.4 Funding Indemnification....................................................................73 3.5 Lender Statements; Survival of Indemnity...................................................73 ARTICLE IV: CONDITIONS PRECEDENT........................................................................74 4.1 Initial Advances and Letters of Credit.....................................................74 4.2 Each Advance and Letter of Credit..........................................................74 ARTICLE V: REPRESENTATIONS AND WARRANTIES...............................................................74 5.1 Organization; Powers.......................................................................75 5.2 Authority..................................................................................75 5.3 No Conflict; Governmental Consents.........................................................76 5.4 Financial Statements.......................................................................76 5.5 No Material Adverse Change.................................................................77 5.6 Taxes......................................................................................77 (A) Tax Examinations..................................................................77 (B) Payment of Taxes..................................................................77 5.7 Litigation; Loss Contingencies and Violations..............................................77 5.8 Subsidiaries...............................................................................78 5.9 ERISA......................................................................................78 5.10 Accuracy of Information...................................................................79
-ii- 4
5.11 Securities Activities.....................................................................79 5.12 Material Agreements.......................................................................79 5.13 Compliance with Laws......................................................................79 5.14 Assets and Properties.....................................................................80 5.15 Statutory Indebtedness Restrictions.......................................................80 5.16 Post-Retirement Benefits..................................................................80 5.17 Insurance.................................................................................80 5.18 Contingent Obligations....................................................................80 5.19 Restricted Junior Payments................................................................80 5.20 Labor Matters.............................................................................81 5.21 The Valley Acquisition....................................................................81 5.22 Environmental Matters.....................................................................81 5.23 Capitalization............................................................................82 5.24 Solvency..................................................................................82 5.25 Foreign Employee Benefit Matters..........................................................83 5.26 Dutch Withholding.........................................................................83 ARTICLE VI: COVENANTS...................................................................................83 6.1 Reporting..................................................................................83 (A) Financial Reporting...............................................................83 (B) Notice of Default.................................................................85 (C) Lawsuits..........................................................................85 (D) Insurance.........................................................................86 (E) ERISA Notices.....................................................................86 (F) Labor Matters.....................................................................88 (G) Other Indebtedness................................................................88 (H) Other Reports.....................................................................88 (I) Environmental Notices.............................................................88 (J) Borrowing Base Certificate........................................................88 (K) Other Information.................................................................89 6.2 Affirmative Covenants......................................................................89 (A) Existence, Etc....................................................................89 (B) Powers............................................................................89 (C) Compliance with Laws, Etc.........................................................89 (D) Payment of Taxes and Claims; Tax Consolidation....................................90 (E) Insurance.........................................................................90 (F) Inspection of Property; Books and Records; Discussions............................90 (G) Insurance and Condemnation Proceeds...............................................91 (H) ERISA Compliance..................................................................92 (I) Maintenance of Property...........................................................92 (J) Environmental Compliance..........................................................92 (K) Use of Proceeds...................................................................92 (L) Interest Rate Agreements..........................................................92
- iii - 5
(M) High Yield Offering...............................................................93 (N) Foreign Employee Benefit Compliance...............................................93 6.3 Negative Covenants.........................................................................93 (A) Indebtedness......................................................................93 (B) Sales of Assets...................................................................95 (C) Liens.............................................................................95 (D) Investments.......................................................................96 (E) Contingent Obligations............................................................97 (F) Restricted Junior Payments........................................................98 (G) Conduct of Business; Subsidiaries; Acquisitions...................................99 (H) Transactions with Shareholders and Affiliates....................................100 (I) Restriction on Fundamental Changes...............................................100 (J) Sales and Leasebacks.............................................................101 (K) Margin Regulations...............................................................101 (L) ERISA............................................................................101 (M) Issuance of Equity Interests.....................................................102 (N) Organizational Documents.........................................................102 (O) Other Indebtedness...............................................................102 (P) Fiscal Year......................................................................102 (Q) Change of Deposit Accounts.......................................................102 (R) Rate Hedging Obligations.........................................................103 (S) Subordinated Indebtedness........................................................103 6.4 Financial Covenants.......................................................................103 (A) Defined Terms for Financial Covenants............................................103 (B) Rentals..........................................................................105 (C) Fixed Charge Coverage Ratio......................................................105 (D) Minimum Consolidated Net Worth...................................................106 (E) Maximum Leverage Ratio...........................................................106 (F) Capital Expenditures.............................................................107 ARTICLE VII: DEFAULTS..................................................................................107 7.1 Defaults..................................................................................107 ARTICLE VIII: ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS AND REMEDIES........................................................................110 8.1 Remedies..................................................................................110 (a) Termination of Commitments; Acceleration.........................................110 (b) Rescission.......................................................................111 (c) Enforcement.......................................................................111 8.2 Defaulting Lender.........................................................................111 8.3 Amendments................................................................................113 8.4 Preservation of Rights....................................................................114
- iv - 6
ARTICLE IX: GENERAL PROVISIONS.........................................................................114 9.1 Survival of Representations...............................................................114 9.2 Governmental Regulation...................................................................115 9.3 Performance of Obligations................................................................115 9.4 Headings..................................................................................115 9.5 Entire Agreement..........................................................................116 9.6 Several Obligations; Benefits of this Agreement...........................................116 9.7 Expenses; Indemnification.................................................................116 (A) Expenses.........................................................................116 (B) Indemnity........................................................................117 (C) Waiver of Certain Claims; Settlement of Claims...................................118 (D) Survival of Agreements...........................................................118 9.8 Numbers of Documents......................................................................118 9.9 Accounting................................................................................118 9.10 Severability of Provisions...............................................................118 9.11 Nonliability of Lenders..................................................................118 9.12 GOVERNING LAW............................................................................118 9.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL..................................119 (A) EXCLUSIVE JURISDICTION...........................................................119 (B) OTHER JURISDICTIONS..............................................................119 (C) VENUE............................................................................120 (D) WAIVER OF JURY TRIAL.............................................................120 (E) WAIVER OF BOND...................................................................120 (F) ADVICE OF COUNSEL................................................................120 9.14 No Strict Construction...................................................................120 ARTICLE X: THE ADMINISTRATIVE AGENT....................................................................121 10.1 Appointment; Nature of Relationship......................................................121 10.2 Powers...................................................................................122 10.3 General Immunity.........................................................................122 10.4 No Responsibility for Loans, Creditworthiness, Collateral, Recitals, Etc.................122 10.5 Action on Instructions of Lenders........................................................123 10.6 Employment of Administrative Agents and Counsel..........................................123 10.7 Reliance on Documents; Counsel...........................................................123 10.8 The Agents' Reimbursement and Indemnification............................................123 10.9 Rights as a Lender.......................................................................124 10.10 Lender Credit Decision..................................................................124 10.11 Successor Administrative Agent; Successor Documentation and Collateral Agent............124 10.12 Collateral Documents....................................................................125 ARTICLE XI: SETOFF; RATABLE PAYMENTS...................................................................126 11.1 Setoff...................................................................................126 11.2 Ratable Payments.........................................................................126
- v - 7
PAGE 11.3 Application of Payments..................................................................126 11.4 Relations Among Lenders..................................................................127 ARTICLE XII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.........................................127 12.1 Successors and Assigns...................................................................127 12.2 Participations...........................................................................128 (A) Permitted Participants; Effect...................................................128 (B) Voting Rights....................................................................128 (C) Benefit of Setoff................................................................129 12.3 Assignments..............................................................................129 (A) Permitted Assignments............................................................129 (B) Effect; Effective Date...........................................................129 (C) The Register.....................................................................130 12.4 Confidentiality..........................................................................130 12.5 Dissemination of Information.............................................................130 ARTICLE XIII: NOTICES..................................................................................131 13.1 Giving Notice............................................................................131 13.2 Change of Address........................................................................131 ARTICLE XIV: COUNTERPARTS..............................................................................131
- vi - 8 EXHIBITS AND SCHEDULES EXHIBITS
EXHIBIT A -- Borrowing Base Certificate (Definitions) EXHIBIT B -- Commitments (Definitions) EXHIBIT C -- Form of Revolving Note (Definitions) EXHIBIT D-1 -- Form of Tranche A Term Note (Definitions) EXHIBIT D-2 -- Form of Tranche B Term Note (Definitions) EXHIBIT E -- Form of Swing Line Loan Note (Definitions) EXHIBIT F -- Form of Assignment Agreement (Sections 2.19, 12.3) EXHIBIT G -- List of Closing Documents (Section 4.1) EXHIBIT H -- Form of Officer's Certificate (Sections 4.2, 6.1(A)(iv)) EXHIBIT I -- Form of Compliance Certificate (Sections 4.2, 6.1(A)(iv)) EXHIBIT J -- Pro Forma Financial Statements (Section 5.4(A)) EXHIBIT K -- Form of Assumption Letter (Definitions) EXHIBIT J -- Acquisition Agreement (Definitions)
- vii - 9 SCHEDULES
Schedule 1.1.1 -- Permitted Existing Contingent Obligations (Definitions) Schedule 1.1.2 -- Permitted Existing Indebtedness (Definitions) Schedule 1.1.3 -- Permitted Existing Investments (Definitions) Schedule 1.1.4 -- Permitted Existing Liens (Definitions) Schedule 5.3 -- Conflicts; Governmental Consents (Section 5.3) Schedule 5.7 -- Litigation; Loss Contingencies (Section 5.7) Schedule 5.8 -- Subsidiaries (Section 5.8) Schedule 5.17 -- Insurance (Sections 5.17, 6.2(E)) Schedule 5.18 -- Contingent Obligations (Sections 5.7, 5.18) Schedule 5.20 -- Labor Matters; Compensation Agreements (Section 5.20) Schedule 5.22 -- Environmental Matters (Section 5.22)
- viii - 10 SECOND AMENDED AND RESTATED CREDIT AGREEMENT This Second Amended and Restated Credit Agreement dated as of August 5, 1997 is entered into among AAS Holdings, LLC, a Delaware limited liability company, Advanced Accessory Systems, LLC, a Delaware limited liability company, Valley Industries, LLC, a Delaware limited liability company, Brink International BV, a private company with limited liability incorporated under the laws of The Netherlands, Brink BV, a private company with limited liability incorporated under the laws of The Netherlands, and any Borrowing Subsidiaries which are now or may hereafter become a party hereto from time to time, the institutions from time to time a party hereto as Lenders, whether by execution of this Agreement or an assignment and acceptance pursuant to Section 12.3, NBD Bank, in its capacity as Administrative Agent for itself and the other Lenders and as Documentation and Collateral Agent, The Chase Manhattan Bank, in its capacity as Co-Administrative Agent and Syndication Agent and Chase Manhattan Bank Delaware, a Delaware banking corporation, as an Issuing Lender (as defined in Section 2.21) to amend and restate the Amended and Restated Credit Agreement entered into on or about December 26, 1996 among certain of the parties hereto (the "Existing Credit Agreement" which was an amendment to and restatement of the Credit Agreement dated as of October 30, 1996 among certain of the parties hereto) which is hereby amended and restated in its entirety. The parties hereto agree as follows: ARTICLE I: DEFINITIONS 1.1 Certain Defined Terms. In addition to the terms defined in other sections of this Agreement, the following terms used in this Agreement shall have the following meanings, applicable both to the singular and the plural forms of the terms defined: As used in this Agreement: "AAS" means Advanced Accessory Systems, LLC, a Delaware limited liability company, and its successors and assigns, including a debtor-in-possession on behalf of AAS. "AAS CANADA" means Advanced Accessory Systems Canada Inc./Les Systemes d'Accessoire Advanced Canada inc., and its successors and assigns. "ACCOUNT DEBTOR" means the account debtor or obligor with respect to any of the Receivables and/or the prospective purchaser with respect to any contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with a Borrower. "ACQUISITION" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which a Borrower or any Subsidiary of a Borrower 11 (i) acquires any going business or all or substantially all of the assets of any firm, corporation or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of vote) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage of voting power), of the membership, ownership or other equity interests in a limited liability company or of the outstanding partnership interests of a partnership. "ACQUISITION AGREEMENT" has the meaning given that term in the definition of Valley Acquisition below. "ACQUISITION DOCUMENTS" means the Acquisition Agreement and all other documents, instruments and agreements entered into by Valley in connection with the Valley Acquisition. "ADMINISTRATIVE AGENT" means NBD in its capacity as contractual representative for itself and the Lenders pursuant to Article X hereof and any successor Administrative Agent appointed pursuant to Article X hereof. "ADVANCE" means a borrowing hereunder consisting of the aggregate amount of the several Loans (other than Swing Line Loans) made by the Lenders to any Borrower of the same Type and, in the case of Eurocurrency Rate Advances, denominated in the same currency and for the same Interest Period. "AFFECTED LENDER" is defined in Section 2.20 hereof. "AFFILIATE" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person is the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act) of greater than ten percent (10%) or more of any class of voting securities (or other voting interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, membership, ownership or other equity interests, by contract or otherwise. In addition, each director of a Borrower or any Subsidiary of a Borrower shall be deemed to be an Affiliate of each Borrower. Notwithstanding the foregoing, none of Chase, any Subsidiary or Affiliate (including Chase Capital Partners) of, or any Person which directly or indirectly controls, is under common control with or is controlled by Chase Capital Partners shall be deemed to be an Affiliate of any Borrower solely as a result of such Person's affiliation with Chase Capital Partners. "AGENTS" means the Administrative Agent, the Documentation and Collateral Agent, the Co-Administrative Agent and the Syndication Agent. -2- 12 "AGREED CURRENCIES" means Dollars, Dutch Guilders, and any other currency which is freely available and convertible into Dollars in which deposits are customarily offered to banks in the London interbank market, which the applicable Borrower requests the Administrative Agent to include as an Agreed Currency hereunder and which is acceptable to each Lender; provided that the Administrative Agent shall promptly notify each Lender of each such request and each Lender shall be deemed not to have agreed to each such request unless its consent thereto has been received by the Administrative Agent within four Business Days from the date of such notification by the Administrative Agent to such Lender. "AGGREGATE REVOLVING LOAN COMMITMENT" means the aggregate of the Revolving Loan Commitments of all the Lenders, as reduced from time to time pursuant to the terms hereof. The initial Aggregate Revolving Loan Commitment is Twenty-Five Million and 00/100 Dollars ($25,000,000.00). "AGGREGATE TERM LOAN COMMITMENT" means the aggregate of the Tranche A Term Loan Commitments and the Tranche B Term Loan Commitments. The Aggregate Term Loan Commitment is One Hundred Fifteen Million Nine Hundred Eighty Two Thousand and 00/100 Dollars ($115,982,000.00). "AGREEMENT" means this Credit Agreement, as it may be amended, restated or otherwise modified and in effect from time to time. "AGREEMENT ACCOUNTING PRINCIPLES" means generally accepted accounting principles as in effect as of the date of this Agreement in the United States, applied in a manner consistent with that used by Holdings and AAS in their preparation of their audited financial statements for the year ended December 31, 1996. "ALTERNATE BASE RATE" means, for any day, a fluctuating interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) as shall be in effect from time to time, which rate per annum shall at all times be equal to the greatest of (a) the Prime Rate in effect on such day; and (b) the sum of one-half of one percent (0.50%) and the Federal Funds Effective Rate in effect on such day. For purposes hereof, "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by NBD as its prime rate (it being acknowledged that such announced rate may not necessarily be the lowest rate charged by the Administrative Agent to any of its customers) in effect at its principal office in Detroit, Michigan; each change in the Prime Rate shall be effective on the date such change is publicly announced as being effective. "Federal Funds Effective Rate" shall mean, for any day, a fluctuating interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published 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 such day on such transactions -3- 13 received by NBD from three Federal funds brokers of recognized standing selected by the Administrative Agent. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to clause (b) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change. "APPLICABLE BASE RATE MARGINS" as at any date of determination, shall be the rate per annum then applicable to Base Rate Loans which are Revolving Loans, Tranche A Term Loans or Tranche B Term Loans, as applicable, determined in accordance with the provisions of Section 2.8(b). "APPLICABLE COMMITMENT FEE" as at any date of determination, shall be the rate per annum then applicable in the determination of the amount payable under Section 2.15(C) with respect to the unused Aggregate Revolving Loan Commitment, determined in accordance with the provisions of Section 2.8(b). "APPLICABLE EUROCURRENCY MARGINS" as at any date of determination, shall be the rate per annum then applicable to Eurocurrency Rate Loans which are Revolving Loans, Tranche A Term Loans or Tranche B Term Loans, as applicable, determined in accordance with the provisions of Section 2.8(b). "APPLICABLE LETTER OF CREDIT FEE" as at any date of determination, shall be the rate per annum then applicable in the determination of the amount payable under Section 2.25 with respect to Letters of Credit, determined in accordance with the provisions of Section 2.8(b). "APPLICABLE MARGIN(S)" shall have the meaning ascribed to that term in Section 2.8(b). "APPROXIMATE EQUIVALENT AMOUNT" of any currency with respect to any amount of Dollars shall mean the Equivalent Amount of such currency with respect to such amount of Dollars at such date (i) if such currency is Dutch Guilders, rounded up to the nearest 100,000 of such currency and (ii) if such currency is any other Agreed Currency, rounded up to the nearest amount of such currency as determined by the Administrative Agent from time to time. "ARRANGERS" means Chase Securities Inc. and First Chicago Capital Markets, Inc. "ASSET SALE" means, with respect to any Person, (i) the sale, lease, conveyance, disposition or other transfer by such Person of any of its assets (including by way of a sale-leaseback transaction and including the sale or other transfer of any of the capital stock or ownership, -4- 14 membership or other equity interest of any Subsidiary of such Person) or (ii) the issuance, sale, conveyance, disposition or other transfer by such Person of any Capital Stock of or ownership, membership or other equity interests in such Person; provided, however, that notwithstanding the foregoing, the term "Asset Sale" shall not include the sale, lease, conveyance, disposition or other transfer of inventory in the ordinary course of business. "ASSUMPTION LETTER" means a letter of a Subsidiary of Holdings addressed to the Lenders substantially in the form of Exhibit K hereto pursuant to which such Subsidiary agrees to become a "Borrowing Subsidiary" and agrees to be bound by the terms hereof. "AUTHORIZED OFFICER" means any of the chief executive officer, chief financial officer, controller and treasurer of a Borrower, acting singly. "BASE RATE" means, for any day for any Loan, a rate per annum equal to (i) the Alternate Base Rate for such day plus (ii) the Applicable Base Rate Margin applicable to such Loan, changing when and as the Alternate Base Rate changes. "BASE RATE ADVANCE" means an Advance which bears interest at the Base Rate. "BASE RATE LOAN" means a Loan, or portion thereof, which bears interest at the Base Rate. "BELL PURCHASE AGREEMENT" means that certain Asset Purchase Agreement among Bell Sports Corp., Bell Sports Canada Inc. and AAS Canada dated as of July 2, 1997. "BENEFIT PLAN" means a defined benefit plan as defined in Section 3(35) of ERISA (other than a Multiemployer Plan) in respect of which the Borrower or any other member of the Controlled Group is, or within the immediately preceding six (6) years was, an "employer" as defined in Section 3(5) of ERISA. "BORROWER" means, as applicable, Holdings, AAS, Brink International, Brink, Valley and their respective successors and assigns and any Borrowing Subsidiary. "BORROWING BASE" means, as of any date of calculation, an amount, as set forth on the most current Borrowing Base Certificate delivered to the Administrative Agent, equal to the sum of: (i) eighty-five percent (85%) of the Gross Amount of Eligible U.S. Receivables; plus (ii) eighty percent (80%) of the Gross Amount of Eligible Dutch Receivables; plus (iii) eighty percent (80%) of the Gross Amount of Eligible Canadian Receivables; plus (iv) the lesser of (A) $10,000,000 and (B) the sum of fifty percent (50%) of the Gross Amount of Eligible U.S. Inventory plus forty percent (40%) of the Gross Amount of Eligible Dutch Inventory; plus fifty percent (50%) of the Gross Amount of Eligible Canadian Inventory. -5- 15 "BORROWING BASE CERTIFICATE" means a certificate, in substantially the form of Exhibit A attached hereto and made a part hereof, setting forth the Borrowing Base and the component calculations thereof. "BORROWING DATE" means a date on which an Advance or a Swing Line Loan is made hereunder. "BORROWING NOTICE" is defined in Section 2.8 hereof. "BORROWING SUBSIDIARY" means any Borrowing Subsidiary duly designated by Holdings pursuant to Section 2.29 hereof to request Advances hereunder, provided 95% of the Capital Stock of such Subsidiary is owned directly or indirectly by Holdings and such Subsidiary shall have delivered to the Administrative Agent an Assumption Letter in accordance with Section 2.29 and such other documents, instruments and agreements as may be required pursuant to the terms of this Agreement. "BRINK ACQUISITION" means AAS Holdings, Inc., a Delaware corporation. "BRINK" means Brink BV, a private company with limited liability incorporated under the laws of The Netherlands and a wholly-owned Subsidiary of Holdings. "BRINK INTERNATIONAL" means Brink International BV, a private company with limited liability incorporated under the laws of The Netherlands and a wholly-owned Subsidiary of Holdings. "BUSINESS ACTIVITY REPORT" means (A) a Notice of Business Activities Report from the State of Minnesota, Department of Revenue or (B) any similar report required by any other State relating to the ability of the Borrower or its Subsidiaries to enforce their accounts receivable claims against account debtors located in any such state. "BUSINESS DAY" means (i) with respect to any borrowing, payment or rate selection of Loans bearing interest at the Eurocurrency Rate, a day (other than a Saturday or Sunday) on which banks are open for business in Detroit, Michigan and New York, New York and on which dealings in United States Dollars and the other Agreed Currencies are carried on in the London interbank market and (ii) for all other purposes a day (other than a Saturday or Sunday) on which banks are open for business in Detroit, Michigan and New York, New York. "CANADIAN LENDERS" means First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of Nova Scotia in their capacity as lenders to AAS Canada and any successors or assigns of either. "CAPITAL EXPENDITURES" is defined in Section 6.4(A) hereof. -6- 16 "CAPITALIZED LEASE" of a Person means any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "CAPITAL STOCK", with respect to any Person, means any capital stock of such Person, regardless of class or designation, and all warrants, options, purchase rights, conversion or exchange rights, voting rights, calls or claims of any character with respect thereto. "CASH EQUIVALENTS" means (i) marketable direct obligations issued or unconditionally guaranteed by the government of the United States, the government of Canada or the government of any member of the European Union; (ii) domestic and Eurocurrency certificates of deposit and time deposits, bankers' acceptances and base rate certificates of deposit issued by any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, or its branches or agencies or under the laws of Canada or the laws of any member of the European Union and having capital and surplus in an aggregate amount not less than $500,000,000 (fully protected against currency fluctuations for any such deposits with a term of more than ten (10) days); (iii) shares of money market, mutual or similar funds having net assets in excess of $500,000,000 maturing or being due or payable in full not more than one hundred eighty (180) days any Borrower's acquisition thereof and the investments of which are limited to investment grade securities (i.e., securities rated at least Baa by Moody's Investors Service, Inc. or at least BBB by Standard & Poor's Ratings Group) or shares of similar funds of similar credit quality in Europe approved for such purposes by the Administrative Agent in its sole discretion and (iv) commercial paper of United States and foreign banks and bank holding companies and their subsidiaries and United States and foreign finance, commercial, industrial or utility companies which, at the time of acquisition, are rated A-1 (or better) by Standard & Poor's Ratings Group or P-1 (or better) by Moody's Investors Services, Inc. or commercial paper of Dutch, Canadian, British or French banks of similar credit quality approved for such purposes by the Administrative Agent in its sole discretion; provided that the maturities of such Cash Equivalents shall not exceed 365 days. "CASH FLOW PERIOD" means each 12-month period ending on December 31 of each calendar year commencing with the 12-month period ending December 31, 1997. "CB CAPITAL" means CB Capital Investors, Inc., a Delaware corporation and a wholly-owned Subsidiary of Chase. "CHANGE" is defined in Section 3.2 hereof. - 7 - 17 "CHANGE OF CONTROL" means an event or series of events by which (a) prior to any initial public offering of equity interests in Holdings: (i) CB Capital or an entity controlled by Chase Capital Partners or CB Capital ceases to be the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of at least forty percent (40%) (or thirty-three percent (33%) if the reduction below forty percent (40%) is attributable solely to dilution as a result of an acquisition or acquisitions permitted by this Agreement or consented to by the Required Lenders) of the ownership, membership or other equity interests of Holdings ordinarily having the right to vote at an election of managers; (ii) Holdings ceases to be the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of at least ninety-nine percent (99%) of the combined voting power of the ownership, membership or other equity interests of both AAS and Brink ordinarily having the right to vote at an election of managers; (iii) CB Capital or an entity controlled by Chase Capital Partners or CB Capital, together with members of management of Holdings and its Subsidiaries, members of the Brink family and related Affiliates, F. Alan Smith and Barry R. Banducci, cease to be the "beneficial owner"(as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of at least fifty-one percent (51%) on a fully diluted basis of the ownership, membership or other equity interests of both AAS and Brink ordinarily having the right to vote at an election of managers; or (iv) any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of an equal or greater percentage of the total economic interests in equity of Holdings than that percentage beneficially owned by CB Capital or an entity controlled by Chase Capital Partners or CB Capital; and (b) after any initial public offering of equity interests in Holdings: (i) CB Capital or an entity controlled by Chase Capital Partners or CB Capital ceases to be the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of at least twenty-eight percent (28%) (or twenty-two percent (22%) if the reduction below twenty-eight percent (28%) is attributable solely to dilution as a result of an acquisition or acquisitions permitted by this Agreement or consented to by the Required Lenders) of the -8- 18 ownership, membership or other equity interests of Holdings ordinarily having the right to vote at an election of managers; (ii) Holdings ceases to be the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of at least ninety-nine percent (99%) of the combined voting power of the ownership, membership or other equity interests of both AAS and Brink ordinarily having the right to vote at an election of managers; (iii) CB Capital or an entity controlled by Chase Capital Partners or CB Capital, together with members of management of Holdings and its Subsidiaries, members of the Brink family and related Affiliates, F. Alan Smith and Barry R. Banducci, cease to be the "beneficial owner"(as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of at least thirty-four percent (34%) on a fully diluted basis of the ownership, membership or other equity interests of both AAS and Brink ordinarily having the right to vote at an election of managers; or (iv) any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of an equal or greater percentage of the total economic interests in equity of Holdings than that percentage beneficially owned by CB Capital or an entity controlled by Chase Capital Partners or CB Capital. "CHASE" means The Chase Manhattan Bank, in its individual capacity. "CLOSING DATE" means the date on which a portion of the Term Loans and the initial Revolving Loans were advanced under the Credit Agreement dated as of October 30, 1996. "CO-ADMINISTRATIVE AGENT" means Chase in its capacity as Co-Administrative Agent with respect to this Agreement. "CODE" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "COLLATERAL" means all property and interests in property now owned or hereafter acquired by a Borrower or any of its Subsidiaries in or upon which a security interest, lien or mortgage is granted to the Administrative Agent or the Documentation and Collateral Agent, for the benefit of the Lenders, to secure all of the Secured Obligations or, in the case of property now owned or hereafter acquired by non-U.S. Borrowers, that portion of the Secured Obligations arising from -9- 19 Advances made to non-U.S. Borrowers, whether under the Security Agreement, under any of the other Collateral Documents or under any of the other Loan Documents. "COLLATERAL DOCUMENTS" means all agreements, instruments and documents executed in connection with this Agreement, including, without limitation the Security Agreements, the Collection Account Agreements, the Pledge Agreements, the Mortgages, the Intellectual Property Security Agreements and all other security agreements, loan agreements, notes, guarantees, mortgages, subordination agreements, pledges, powers of attorney, consents, assignments, contracts, fee letters, notices, leases, financing statements and all other written matter whether heretofore, now, or hereafter executed by or on behalf of a Borrower or any Subsidiary of a Borrower and delivered to the Administrative Agent or any of the Lenders, together with all agreements and documents referred to therein or contemplated thereby. "COLLECTION ACCOUNT" means each lock-box and blocked depository account maintained by AAS or Valley, subject to a Collection Account Agreement, for the collection of Receivables and other proceeds of Collateral. "COLLECTION ACCOUNT AGREEMENTS" means the written agreements among AAS or Valley, the Documentation and Collateral Agent, and, as applicable, each of the banks at which AAS maintains a Collection Account. "COLLECTION ACCOUNT BLOCKAGE DATE" means the date, following the occurrence of a Default on which the Documentation and Collateral Agent or the Required Lenders, in the Documentation and Collateral Agent's or the Required Lenders' sole discretion, instruct(s) any financial institution party to a Collection Account Agreement as described in the applicable Collection Account Agreement to remit, during the continuance of such Default, all amounts deposited in the Collection Account to the Documentation and Collateral Agent or as the Documentation and Collateral Agent shall direct. "COMMISSION" means the Securities and Exchange Commission and any Person succeeding to the functions thereof. "COMMITMENT" means, for each Lender, collectively, such Lender's Revolving Loan Commitment, Tranche A Term Loan Commitment and Tranche B Term Loan Commitment and for the Swing Line Lender, its Swing Line Loan Commitment. "COMPLIANCE CERTIFICATE" means a certificate substantially in the form of Exhibit I delivered to the Administrative Agent and each Lender by Holdings pursuant to the provisions of this Agreement and covering, among other things, its calculation of the Applicable Margins, Commitment Fee, Applicable Letter of Credit Fee, its compliance with the financial covenants contained in Section 6.4 and certain other provisions of this Agreement. -10- 20 "CONSOLIDATED NET WORTH" is defined in Section 6.4(A) hereof. "CONTAMINANT" means any waste, pollutant, hazardous substance, toxic substance, hazardous waste, special waste, petroleum or petroleum-derived substance or waste, asbestos, polychlorinated biphenyls ("PCBS"), or any constituent of any such substance or waste, and includes but is not limited to these terms as defined in Environmental, Health or Safety Requirements of Law. "CONTINGENT OBLIGATION", as applied to any Person, means any Contractual Obligation, contingent or otherwise, of that Person with respect to any Indebtedness of another or other obligation or liability of another, including, without limitation, any such Indebtedness, obligation or liability of another directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable, including Contractual Obligations (contingent or otherwise) arising through any agreement to purchase, repurchase, or otherwise acquire such Indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, or other financial condition, or to make payment other than for value received. "CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of any equity or debt securities issued by that Person or any indenture, mortgage, deed of trust, security agreement, pledge agreement, guaranty, contract, undertaking, agreement or instrument, in any case in writing, to which that Person is a party or by which it or any of its properties is bound, or to which it or any of its properties is subject. "CONTROLLED GROUP" means the group consisting of (i) any corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as Holdings; (ii) a partnership or other trade or business (whether or not incorporated) which is under common control (within the meaning of Section 414(c) of the Code) with Holdings; and (iii) a member of the same affiliated service group (within the meaning of Section 414(m) of the Code) as Holdings, any corporation described in clause (i) above or any partnership or trade or business described in clause (ii) above. "CONVERSION/CONTINUATION NOTICE" is defined in Section 2.10(D) hereof. "CURE LOAN" is defined in Section 8.2 hereof. "CUSTOMARY PERMITTED LIENS" means: (i) Liens (other than Environmental Liens and Liens in favor of the IRS or the PBGC) with respect to the payment of taxes, assessments or governmental charges in all -11- 21 cases which are not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with Agreement Accounting Principles; (ii) statutory Liens of landlords and Liens of suppliers, mechanics, carriers, materialmen, warehousemen or workmen and other similar Liens imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with Agreement Accounting Principles; (iii) Liens (other than Environmental Liens and Liens in favor of the IRS or the PBGC) incurred or deposits made in the ordinary course of business in connection with worker's compensation, unemployment insurance or other types of social security benefits or to secure the performance of bids, tenders, sales, contracts (other than for the repayment of borrowed money), surety, appeal and performance bonds; provided that (A) all such Liens do not in the aggregate materially detract from the value of assets or property of any Borrower taken as a whole or materially impair the use thereof in the operation of the businesses taken as a whole, and (B) all Liens securing bonds to stay judgments or in connection with appeals that do not secure at any time an aggregate amount exceeding $500,000; (iv) Liens arising with respect to zoning restrictions, easements, licenses, reservations, covenants, rights-of-way, utility easements, building restrictions and other similar charges or encumbrances on the use of real property which do not interfere with the ordinary conduct of the business of any Borrower or any Subsidiary of any Borrower; (v) Liens of attachment or judgment with respect to judgments, writs or warrants of attachment, or similar process against any Borrower or any Subsidiary of any Borrower which do not constitute a Default under Section 7.1(h); (vi) Liens arising from leases, subleases or licenses granted to others which do not interfere in any material respect with the business of any Borrower or any Subsidiary of any Borrower; and (vii) any interest or title of the lessor in the property subject to any operating lease entered into by any Borrower or any Subsidiary of any Borrower in the ordinary course of business. "DECISION PERIOD" is defined in Section 6.2(G) hereof. -12- 22 "DECISION RESERVE"at any time shall be the sum of (a) the Reinvestment Reserve and (b) the Insurance Reserve. "DEFAULT" means an event described in Article VII hereof. "DOCUMENTATION AND COLLATERAL AGENT" means NBD in its capacity as contractual representative for itself and the Lenders pursuant to Article X hereof and any successor Documentation and Collateral Agent appointed pursuant to Article X hereof. "DOL" means the United States Department of Labor and any Person succeeding to the functions thereof. "DOLLAR" and "$" means dollars in the lawful currency of the United States of America. "DOLLAR AMOUNT" of any currency at any date shall mean (i) the amount of such currency if such currency is Dollars or (ii) the Equivalent Amount of Dollars if such currency is any currency other than Dollars, calculated on the basis of the arithmetical mean of the buy and sell spot rates of exchange of the Administrative Agent for such currency on the London market at 11:00 a.m., London time, two Business Days prior to the date on which such amount is to be determined. "EBITDA" is defined in Section 6.4(A) hereof. "EFFECTIVE DATE" means August 5, 1997. "ELIGIBLE CANADIAN INVENTORY" means Inventory of AAS Canada which is held for sale or lease or furnished under any contract of service by AAS Canada which is not rendered ineligible by the provisions set forth herein. Holdings understands and agrees that the standards of ineligibility may be revised from time to time by the Documentation and Collateral Agent in its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial ineligibility standards were determined). The following Inventory is ineligible and shall not be included in Eligible Canadian Inventory: (i) (to the extent not provided for by reserves described in the definition of the Gross Amount of Eligible Canadian Inventory) Inventory which is obsolete, not in good condition, not either currently usable or currently saleable in the ordinary course of AAS Canada's business or does not meet all material standards imposed by any Governmental Authority having regulatory authority over such item of Inventory, its use or its sale; (ii) Inventory which the Documentation and Collateral Agent determines, in the exercise of its reasonable discretion (which discretion shall not be exercised in a manner that is arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial ineligibility standards were determined), to be unacceptable due to age, type, category and/or quantity; (iii) Inventory consisting of packaging material and supplies; (iv) Inventory which (a) is consigned to a third party for sale or (b) is on consignment from a third -13- 23 party to AAS Canada for sale; (v) Inventory which consists of goods in transit; (vi) Inventory which is subject to a Lien in favor of any Person other than the Documentation and Collateral Agent; (vii) Inventory with respect to which the Documentation and Collateral Agent does not have a first and valid fully-perfected security interest; (viii) Inventory which is not located on premises owned by AAS Canada in Canada unless AAS Canada has entered into arrangements satisfactory to the Documentation and Collateral Agent; (ix) Inventory which is evidenced by a Receivable; and (x) Inventory which is not in full conformity with the representations and warranties made by AAS Canada to the Documentation and Collateral Agent with respect thereto whether contained in this Agreement or any other agreement. "ELIGIBLE DUTCH INVENTORY" means Inventory of Brink BV which is held for sale or lease or furnished under any contract of service by Brink BV which is not rendered ineligible by the provisions set forth herein. Holdings understands and agrees that the standards of ineligibility may be revised from time to time by the Documentation and Collateral Agent in its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial ineligibility standards were determined). The following Inventory is ineligible and shall not be included in Eligible Dutch Inventory: (i) (to the extent not provided for by reserves described in the definition of the Gross Amount of Eligible Dutch Inventory) Inventory which is obsolete, not in good condition, not either currently usable or currently saleable in the ordinary course of Brink BV's business or does not meet all material standards imposed by any Governmental Authority having regulatory authority over such item of Inventory, its use or its sale; (ii) Inventory which the Documentation and Collateral Agent determines, in the exercise of its reasonable discretion (which discretion shall not be exercised in a manner that is arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial ineligibility standards were determined), to be unacceptable due to age, type, category and/or quantity; (iii) Inventory consisting of packaging material and supplies; (iv) Inventory which (a) is consigned to a third party for sale or (b) is on consignment from a third party to Brink BV for sale; (v) Inventory which consists of goods in transit; (vi) Inventory which is subject to a Lien in favor of any Person other than the Documentation and Collateral Agent; (vii) Inventory with respect to which the Documentation and Collateral Agent does not have a first and valid fully-perfected security interest; (viii) Inventory which is not located on premises owned by Brink BV in The Netherlands unless Brink BV has entered into arrangements satisfactory to the Documentation and Collateral Agent; (ix) Inventory which is evidenced by a Receivable; and (x) Inventory which is not in full conformity with the representations and warranties made by Brink BV to the Documentation and Collateral Agent with respect thereto whether contained in this Agreement or any other agreement. -14- 24 "ELIGIBLE U.S. INVENTORY" means Inventory of AAS or Valley which is held for sale or lease or furnished under any contract of service by AAS or Valley which is not rendered ineligible by the provisions set forth herein. AAS and Valley understand and agree that the standards of ineligibility may be revised from time to time by the Documentation and Collateral Agent in its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial ineligibility standards were determined). The following Inventory is ineligible and shall not be included in Eligible U.S. Inventory: (i) (to the extent not provided for by reserves described in the definition of the Gross Amount of Eligible Inventory) Inventory which is obsolete, not in good condition, not either currently usable or currently saleable in the ordinary course of AAS's or Valley's business or does not meet all material standards imposed by any Governmental Authority having regulatory authority over such item of Inventory, its use or its sale; (ii) Inventory which the Documentation and Collateral Agent determines, in the exercise of its reasonable discretion (which discretion shall not be exercised in a manner that is arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial ineligibility standards were determined), to be unacceptable due to age, type, category and/or quantity; (iii) Inventory consisting of packaging material and supplies; (iv) Inventory which (a) is consigned to a third party for sale or (b) is on consignment from a third party to AAS or Valley for sale; (v) Inventory which has been held by AAS or Valley for more than ninety (90) days (to the extent not provided for by reserves described in the definition of the Gross Amount of Eligible Inventory) to the extent that the value of such Inventory (valued as provided in this Agreement) exceeds $500,000; (vi) Inventory which consists of goods in transit; (vii) Inventory which is subject to a Lien in favor of any Person other than the Documentation and Collateral Agent; (viii) Inventory with respect to which the Documentation and Collateral Agent does not have a first and valid fully-perfected security interest; (ix) Inventory which is not located either (a) on premises owned by AAS or Valley in the United States listed on Schedule 2 to the applicable Security Agreement or (b) in other owned or leased premises, warehouses or with bailees in the United States not listed on Schedule 2 to the Security Agreement permitted to be established under the applicable Security Agreement or established in connection with a Permitted Acquisition, in each case in connection with which the Documentation and Collateral Agent shall have received landlord, mortgagee, bailee and/or warehousemen's access and lien waiver agreements, as applicable, in each case, if requested by the Administrative Agent, in form and substance reasonably acceptable to the Documentation and Collateral Agent (except with respect to Inventory located in a warehouse in Auburn Hills, Michigan which, so long as Valley remains current with respect to rent payments, will be treated as Eligible U.S. Inventory subject to a reserve equal in amount to three months rent); (x) Inventory which is evidenced by a Receivable; and (xi) Inventory which is not in full conformity with the representations and warranties made by AAS or Valley to the Documentation and Collateral Agent with respect thereto whether contained in this Agreement or the applicable Security Agreement. Without limiting the foregoing, (i) Inventory of AAS or Valley which is acquired pursuant to a Permitted Acquisition shall be treated as Eligible Inventory only if the Documentation and -15- 25 Collateral Agent and the Required Lenders, after concluding any due diligence they reasonably deem necessary, shall be satisfied as to the condition thereof and that such Inventory would not otherwise be ineligible under the ineligibility standards set forth herein (including, without limitation, each of perfection and priority of the Documentation and Collateral Agent's security interests in such Inventory) and (ii) Inventory acquired pursuant to such Permitted Acquisition may be deemed Eligible Inventory from and after such Permitted Acquisition if the foregoing determinations have been made to the Documentation and Collateral Agent's and the Required Lenders' satisfaction. "ELIGIBLE CANADIAN RECEIVABLES" means Receivables created by AAS Canada in the ordinary course of its business arising out of the sale of goods or rendition of services by AAS Canada, which Receivables are not rendered ineligible by the provisions set forth herein. Holdings understands and agrees that the standards of ineligibility may be revised from time to time by the Documentation and Collateral Agent in its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial ineligibility standards were determined). The following Receivables are ineligible and shall not be included in Eligible Canadian Receivables: (i) Receivables which remain unpaid ninety (90) days after the date payment is due in accordance with the original applicable invoice; (ii) all Receivables owing by a single Account Debtor (including a Receivable which remains unpaid fewer than ninety (90) days after the date of the original applicable invoice) if twenty-five percent (25%) of the balance owing by such Account Debtor, calculated without taking into account any credit balances of such Account Debtor, remains unpaid one hundred and twenty (120) days after the date of the original applicable invoice; (iii) Receivables with respect to which the Account Debtor is a director, officer, employee, Subsidiary or Affiliate (with the percentage test for Affiliate set forth in the definition of Affiliate being 15% for purposes of this clause (iii)) of any of the Borrowers; (iv) Receivables with respect to which the Account Debtor is (a) any Governmental Authority, or any department, agency or instrumentality thereof; (v) Receivables consisting of tooling and non-production related Receivables and Receivables consisting of cancellation fees unless such Receivables are evidenced by purchase orders or the Documentation and Collateral Agent in its discretion elects to treat such Receivables as eligible in which case such Receivables shall thereafter be treated as eligible; -16- 26 (vi) Receivables with respect to which the Account Debtor has (a) asserted a counterclaim, (b) a right of setoff or (c) a receivable owing from AAS Canada but only to the extent of such counterclaim, setoff or receivable; (vii) Receivables for which the prospect of payment or performance by the Account Debtor is or will be impaired as determined by the Documentation and Collateral Agent in the exercise of its reasonable credit judgment (which credit judgment shall not be exercised in a manner that is arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial ineligibility standards were determined); (viii) Receivables with respect to which the Documentation and Collateral Agent does not have a first and valid fully perfected and enforceable security interest; (ix) Receivables with respect to which the Account Debtor is the subject of bankruptcy or a similar insolvency proceeding or has made an assignment for the benefit of creditors or whose assets have been conveyed to a receiver, trustee or assignee for the benefit of creditors; (x) Receivables with respect to which the Account Debtor's obligation to pay the Receivable is conditional upon the Account Debtor's approval or is otherwise subject to any repurchase obligation or return right, as with sales made on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval (except with respect to Receivables in connection with which Account Debtors are entitled to return Inventory on the basis of the quality of such Inventory) or consignment basis; (xi) Receivables with respect to which the Account Debtor's obligation does not constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms; (xii) Receivables with respect to which AAS Canada has not yet shipped the applicable goods, performed the applicable service or issued the applicable invoice; (xiii) Receivables with respect to which AAS Canada requires cash on delivery; (xiv) any Receivable which is not in conformity with the representations and warranties made by AAS Canada to the Documentation and Collateral Agent with respect thereto whether contained in this Agreement or the applicable Security Agreement; and (xv) Receivables in connection with which AAS Canada or any other party to such Receivable, is in default in the performance or observance of any of the terms thereof in any material respect. -17- 27 "ELIGIBLE DUTCH RECEIVABLES" means Receivables created by Brink in the ordinary course of its business arising out of the sale of goods or rendition of services by Brink, which Receivables are not rendered ineligible by the provisions set forth herein. Holdings understands and agrees that the standards of ineligibility may be revised from time to time by the Documentation and Collateral Agent in its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial ineligibility standards were determined). The following Receivables are ineligible and shall not be included in Eligible Dutch Receivables: (i) Receivables which remain unpaid ninety (90) days after the date of the original applicable invoice; (ii) all Receivables owing by a single Account Debtor (including a Receivable which remains unpaid fewer than ninety (90) days after the date of the original applicable invoice) if twenty-five percent (25%) of the balance owing by such Account Debtor, calculated without taking into account any credit balances of such Account Debtor, remains unpaid one hundred and twenty (120) days after the date of the original applicable invoice; (iii) Receivables with respect to which the Account Debtor is a director, officer, employee, Subsidiary or Affiliate (with the percentage test for Affiliate set forth in the definition of Affiliate being 15% for purposes of this clause (iii)) of any of the Borrowers; (iv) Receivables with respect to which the Account Debtor is (a) any Governmental Authority, or any department, agency or instrumentality thereof; (v) Receivables consisting of tooling and non-production related Receivables and Receivables consisting of cancellation fees unless such Receivables are evidenced by purchase orders or the Documentation and Collateral Agent in its discretion elects to treat such Receivables as eligible in which case such Receivables shall thereafter be treated as eligible; (vi) Receivables with respect to which the Account Debtor has (a) asserted a counterclaim, (b) a right of setoff or (c) a receivable owing from Brink but only to the extent of such counterclaim, setoff or receivable; (vii) Receivables for which the prospect of payment or performance by the Account Debtor is or will be impaired as determined by the Documentation and Collateral Agent in the exercise of its reasonable credit judgment (which credit judgment shall not be exercised in a manner that is arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial ineligibility standards were determined); -18- 28 (viii) Receivables with respect to which the Documentation and Collateral Agent does not have a first and valid fully perfected and enforceable security interest; (ix) Receivables with respect to which the Account Debtor is the subject of bankruptcy or a similar insolvency proceeding or has made an assignment for the benefit of creditors or whose assets have been conveyed to a receiver, trustee or assignee for the benefit of creditors; (x) Receivables with respect to which the Account Debtor's obligation to pay the Receivable is conditional upon the Account Debtor's approval or is otherwise subject to any repurchase obligation or return right, as with sales made on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval (except with respect to Receivables in connection with which Account Debtors are entitled to return Inventory on the basis of the quality of such Inventory) or consignment basis; (xi) Receivables with respect to which the Account Debtor's obligation does not constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms; (xii) Receivables with respect to which Brink has not yet shipped the applicable goods, performed the applicable service or issued the applicable invoice; (xiii) Receivables with respect to which Brink requires cash on delivery; (xiv) any Receivable which is not in conformity with the representations and warranties made by Brink to the Documentation and Collateral Agent with respect thereto whether contained in this Agreement or the applicable Security Agreement; and (xv) Receivables in connection with which Brink or any other party to such Receivable, is in default in the performance or observance of any of the terms thereof in any material respect. "ELIGIBLE U.S. RECEIVABLES" means Receivables created by AAS or Valley in the ordinary course of its business arising out of the sale of goods or rendition of services by AAS or Valley, which Receivables are not rendered ineligible by the provisions set forth herein. AAS and Valley understand and agree that the standards of ineligibility may be revised from time to time by the Documentation and Collateral Agent in its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial ineligibility standards were determined). The following Receivables are ineligible and shall not be included in Eligible U.S. Receivables: - 19 - 29 (i) Receivables which remain unpaid ninety (90) days after the date of the original applicable invoice; (ii) all Receivables owing by a single Account Debtor (including a Receivable which remains unpaid fewer than ninety (90) days after the date of the original applicable invoice) if twenty-five percent (25%) of the balance owing by such Account Debtor, calculated without taking into account any credit balances of such Account Debtor, remains unpaid one hundred and twenty (120) days after the date of the original applicable invoice; (iii) Receivables with respect to which the Account Debtor is a director, officer, employee, Subsidiary or Affiliate (with the percentage test for Affiliate set forth in the definition of Affiliate being 15% for purposes of this clause (iii)) of AAS or Valley or any of the other Borrowers; (iv) Receivables with respect to which the Account Debtor is (a) any federal Governmental Authority, the United States of America, or, in each case, any department, agency or instrumentality thereof, unless with respect to any such Account, AAS or Valley has complied to the Documentation and Collateral Agent's satisfaction with the provisions of the Federal Assignment of Claims Act or other applicable statutes, including, without limitation, executing and delivering to Documentation and Collateral Agent all statements of assignment and/or notification which are in form and substance acceptable to Documentation and Collateral Agent and which are deemed necessary by Documentation and Collateral Agent to effectuate the assignment to the Documentation and Collateral Agent of such Accounts on behalf of the Lenders or (b) any state or municipal Governmental Authority or any agency or instrumentality thereof; (v) Receivables consisting of tooling and non-production related Receivables and Receivables consisting of cancellation fees unless such Receivables are evidenced by purchase orders or the Documentation and Collateral Agent in its discretion elects to treat such Receivables as eligible in which case such Receivables shall thereafter be treated as eligible; (vi) Receivables not denominated in U.S. Dollars or Canadian Dollars or with respect to which the Account Debtor is not a resident of the United States or Quebec or one of the provinces of Canada which has adopted the Personal Property Security Act unless the Account Debtor has supplied AAS or Valley, as applicable, with an irrevocable letter of credit, issued by a financial institution satisfactory to the Documentation and Collateral Agent, sufficient to cover such Receivable in form and substance satisfactory to the Documentation and Collateral Agent; -20- 30 (vii) Receivables with respect to which the Account Debtor has (a) asserted a counterclaim, (b) a right of setoff or (c) a receivable owing from AAS or Valley, as applicable, but only to the extent of such counterclaim, setoff or receivable; (viii) Receivables for which the prospect of payment or performance by the Account Debtor is or will be impaired as determined by the Documentation and Collateral Agent in the exercise of its reasonable credit judgment (which credit judgment shall not be exercised in a manner that is arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial ineligibility standards were determined); (ix) Receivables with respect to which the Documentation and Collateral Agent does not have a first and valid fully perfected and enforceable security interest; (x) Receivables with respect to which the Account Debtor is the subject of bankruptcy or a similar insolvency proceeding or has made an assignment for the benefit of creditors or whose assets have been conveyed to a receiver, trustee or assignee for the benefit of creditors; (xi) Receivables with respect to which the Account Debtor's obligation to pay the Receivable is conditional upon the Account Debtor's approval or is otherwise subject to any repurchase obligation or return right, as with sales made on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval (except with respect to Receivables in connection with which Account Debtors are entitled to return Inventory on the basis of the quality of such Inventory) or consignment basis; (xii) Receivables with respect to which the Account Debtor is located in Minnesota (or any other jurisdiction which adopts a statute or other requirement with respect to which any Person that obtains business from within such jurisdiction or is otherwise subject to such jurisdiction's tax law requiring such Person to file a Business Activity Report or make any other required filings in a timely manner in order to enforce its claims in such jurisdiction's courts or arising under such jurisdiction's laws); provided, however, such Receivables shall nonetheless be eligible if AAS or Valley, as applicable, has filed a Business Activity Report (or other applicable report) with the applicable state office or is qualified to do business in such jurisdiction and, at the time the Receivable was created, was qualified to do business in such jurisdiction or had on file with the applicable state office a current Business Activity Report (or other applicable report); (xiii) Receivables with respect to which the Account Debtor's obligation does not constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms; -21- 31 (xiv) Receivables with respect to which AAS or Valley, as applicable, has not yet shipped the applicable goods, performed the applicable service or issued the applicable invoice; (xv) Receivables with respect to which AAS or Valley, as applicable, requires cash on delivery; (xvi) any Receivable which is not in conformity with the representations and warranties made by AAS or Valley, as applicable, to the Documentation and Collateral Agent with respect thereto whether contained in this Agreement or the Security Agreement; (xvii) Receivables in connection with which AAS or Valley, as applicable, has not complied with all material requirements contained in the charter and by-laws or other organizational or governing documents of AAS or Valley, as applicable, and any law, rule or regulation, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon AAS or Valley, as applicable, or any of its property or to which AAS or Valley, as applicable, or any of its property is subject, including, without limitation, all laws, rules, regulations and orders of any Governmental Authority or judicial authority relating to truth in lending, billing practices, fair credit reporting, equal credit opportunity, debt collection practices and consumer debtor protection, applicable to such Receivable (or any related contracts) or affecting the collectibility of such Receivables; and (xviii) Receivables in connection with which AAS or Valley, as applicable, or any other party to such Receivable, is in default in the performance or observance of any of the terms thereof in any material respect. Without limiting the foregoing, (i) Receivables of AAS or Valley, as applicable, which are acquired pursuant to a Permitted Acquisition shall be treated as Eligible Receivables only if the Documentation and Collateral Agent and the Required Lenders, after concluding any due diligence they reasonably deem necessary, shall be satisfied as to the quality and creditworthiness thereof and that such Receivables would not otherwise be ineligible under the ineligibility standards set forth herein (including, without limitation, lack of perfection and priority of the Documentation and Collateral Agent's security interests in such Receivables) but for the fact that they were acquired by AAS or Valley, as applicable, outside of the ordinary course of business and (ii) Receivables acquired pursuant to such Permitted Acquisition may be deemed Eligible Receivables from and after such Permitted Acquisition if the foregoing determinations have been made to the Documentation and Collateral Agent's and the Required Lenders' satisfaction. "ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all Requirements of Law derived from or relating to federal, state and local laws or regulations relating to or -22- 32 addressing pollution or protection of the environment, or protection of worker health or safety, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 et seq., and the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq., in each case including any amendments thereto, any successor statutes, and any regulations or guidance promulgated thereunder, and any state or local equivalent thereof. "ENVIRONMENTAL LIEN" means a lien in favor of any Governmental Authority for (a) any liability under Environmental, Health or Safety Requirements of Law, or (b) damages arising from, or costs incurred by such Governmental Authority in response to, a Release or threatened Release of a Contaminant into the environment. "ENVIRONMENTAL PROPERTY TRANSFER ACT" means any applicable requirement of law that conditions, restricts, prohibits or requires any notification or disclosure triggered by the closure of any property or the transfer, sale or lease of any property or deed or title for any property for environmental reasons, including, but not limited to, any so-called "Industrial Site Recovery Act" or "Responsible Property Transfer Act." "EQUIVALENT AMOUNT" of any currency with respect to any amount of Dollars at any date shall mean the equivalent in such currency of such amount of Dollars, calculated on the basis of the arithmetical mean of the buy and sell spot rates of exchange of the Administrative Agent for such other currency at 11:00 a.m., London time, two Business Days prior to the date on which such amount is to be determined. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time including (unless the context otherwise requires) any rules or regulations promulgated thereunder. "EUROCURRENCY BASE RATE" means, with respect to any Eurocurrency Rate Advance for any specified Interest Period, either (i) the rate of interest per annum equal to the rate for deposits in the applicable Agreed Currency in the approximate amount of the pro rata share of the Administrative Agent of such Eurocurrency Advance with a maturity approximately equal to such Interest Period which appears on Telerate Page 3740 or Telerate Page 3750, as applicable, or, if there is more than one such rate, the average of such rates rounded to the nearest 1/100 of 1%, as of 11 a.m. (London time) two Business Days prior to the first day of such Interest Period or (ii) if no such rate of interest appears on Telerate Page 3740 or Telerate Page 3750, as applicable, for any specified Interest Period, the rate at which deposits in the applicable Agreed Currency are offered by the Administrative Agent to first-class banks in the London interbank market at approximately 11 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of the pro rata share of the Administrative Agent of such Eurocurrency Advance and having a maturity approximately equal to such Interest Period. The terms "Telerate Page 3740" and "Telerate Page 3750" mean the display designated as "Page -23- 33 3740" and "Page 3750", as applicable, on the Associated Press-Dow Jones Telerate Service (or such other page as may replace Page 3740 or Page 3750, as applicable, on the Associated Press- Dow Jones Telerate Service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association interest rate settlement rates for the relevant Agreed Currency). Any Eurocurrency Base Rate determined on the basis of the rate displayed on Telerate Page 3740 or Telerate Page 3750 in accordance with the foregoing provisions of this subparagraph shall be subject to corrections, if any, made in such rate and displayed by the Associated Press-Dow Jones Telerate Service within one hour of the time when such rate is first displayed by such service. "EUROCURRENCY PAYMENT OFFICE" of the Administrative Agent shall mean, for each of the Agreed Currencies, the office, branch or affiliate of the Administrative Agent, specified as the "EUROCURRENCY PAYMENT OFFICE" for such currency in Schedule I hereto or such other office, branch, affiliate or correspondent bank of the Administrative Agent, as it may from time to time specify to the Borrowers and each Lender as its Eurocurrency Payment Office. "EUROCURRENCY RATE" means, with respect to a Eurocurrency Rate Advance for the relevant Interest Period, the sum of (a) the Eurocurrency Base Rate and (b) the percentage determined in accordance with Section 2.8(b) to be the Applicable Margin in connection with Eurocurrency Loans. "EUROCURRENCY RATE ADVANCE" means an Advance which bears interest at the Eurocurrency Rate. "EUROCURRENCY RATE LOAN" means a Loan, or portion thereof, which bears interest at the Eurocurrency Rate. "EXCESS CASH FLOW" means, for any Cash Flow Period, an amount equal to Holdings' and its Subsidiaries' consolidated (i) EBITDA for such period plus or minus (ii) the net reduction or increase, respectively, if any, in Working Capital during such period, minus (iii) Tax Distributions for such period, minus (iv) Capital Expenditures, whether paid in cash or accrued during such period, minus (v) Interest Expense for such period, minus (vi) scheduled amortization of the principal portion of the Term Loans and scheduled amortization of the principal portion of all other Indebtedness of Holdings and its Subsidiaries during such period, plus (vii) the amount of any extraordinary gain realized in such period in connection with an Asset Sale to the extent deducted in calculating EBITDA for such period and to the extent applied in such period as a mandatory prepayment pursuant to Section 2.5(B)(i)(a). "EXCLUDED EQUITY SALES" means the private placement and sale of equity interests by Holdings, AAS or any Subsidiary: (i) the Net Cash Proceeds of which are used to consummate a Permitted Acquisition or (ii) the aggregate Net Cash Proceeds of which do not exceed $5,000,000 -24- 34 (excluding amounts used as described in clause (i) above) since the Closing Date or (iii) in a transaction which is an Excluded Transfer. "EXCLUDED TRANSFER" means any transfer of the Capital Stock of a Subsidiary of Holdings to Holdings or another Subsidiary of Holdings or any issuance of the Capital Stock of any Subsidiary of Holdings that is a Borrower or a Guarantor or a Subsidiary the Capital Stock of which is pledged pursuant to one of the Pledge Agreements. "FEDERAL FUNDS EFFECTIVE RATE" shall have the meaning assigned to that term in the definition of Alternate Base Rate above. "FEES" is defined in Section 6.4(A) hereof. "FIXED CHARGE COVERAGE RATIO" is defined in Section 6.4(C) hereof. "FOREIGN EMPLOYEE BENEFIT PLAN" means any employee benefit plan as defined in Section 3(3) of ERISA which is maintained or contributed to for the benefit of the employees of Holdings, any of its Subsidiaries or any members of its Controlled Group and is not covered by ERISA pursuant to ERISA Section 4(b)(4). "FOREIGN PENSION PLAN" means any employee benefit plan as described in Section 3(3) of ERISA which (i) is maintained or contributed to for the benefit of employees of Holdings, any of its Subsidiaries or any of its ERISA Affiliates, (ii) is not covered by ERISA pursuant to Section 4(b)(4) of ERISA, and (iii) under applicable local law, is required to be funded through a trust or other funding vehicle. "GOVERNMENTAL ACTS" is defined in Section 2.26(a) hereof. "GOVERNMENTAL AUTHORITY" means any nation or government, any federal, state, local or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GROSS AMOUNT OF ELIGIBLE CANADIAN INVENTORY" means the Dollar Amount of the Canadian Dollar value of Eligible Canadian Inventory valued at the lower of cost determined on a first-in-first-out basis (determined in accordance with Agreement Accounting Principles, consistently applied) or market value less (i) the value of reserves which have been recorded by AAS Canada with respect to obsolete, slow-moving or excess Inventory and (ii) such other reserves as the Documentation and Collateral Agent elects to establish in accordance with its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial reserves were determined). -25- 35 "GROSS AMOUNT OF ELIGIBLE DUTCH INVENTORY" means the Dollar Amount of the Dutch Guilder value of Eligible Dutch Inventory valued at the lower of cost determined on a first-in- first-out basis (determined in accordance with Agreement Accounting Principles, consistently applied) or market value less (i) the value of reserves which have been recorded by Brink with respect to obsolete, slow-moving or excess Inventory and (ii) such other reserves as the Documentation and Collateral Agent elects to establish in accordance with its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial reserves were determined). "GROSS AMOUNT OF ELIGIBLE U.S. INVENTORY" means Eligible U.S. Inventory valued at the lower of cost determined on a first-in-first-out basis (determined in accordance with Agreement Accounting Principles, consistently applied) or market value less (i) the value of reserves which have been recorded by AAS with respect to obsolete, slow-moving or excess Inventory and (ii) such other reserves as the Documentation and Collateral Agent elects to establish in accordance with its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial reserves were determined). "GROSS AMOUNT OF ELIGIBLE CANADIAN RECEIVABLES" means the Dollar Amount of the outstanding face amount in Canadian Dollars of Eligible Canadian Receivables, determined in accordance with Agreement Accounting Principles, consistently applied, less (i) all finance charges, late fees and other fees that are unearned, (ii) the value of any accrual which has been recorded by AAS Canada with respect to downward price adjustments, (iii) a warranty reserve in an amount reasonably sufficient for purposes of meeting AAS Canada's warranty obligations or warranty sharing obligations; and (iv) such other reserves as the Documentation and Collateral Agent elects to establish in accordance with its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial reserves were determined). "GROSS AMOUNT OF ELIGIBLE DUTCH RECEIVABLES" means the Dollar Amount of the outstanding face amount in Dutch Guilders of Eligible Dutch Receivables, determined in accordance with Agreement Accounting Principles, consistently applied, less (i) all finance charges, late fees and other fees that are unearned, (ii) the value of any accrual which has been recorded by Brink with respect to downward price adjustments, (iii) a warranty reserve in an amount reasonably sufficient for purposes of meeting Brink's warranty obligations or warranty sharing obligations; and (iv) such other reserves as the Documentation and Collateral Agent elects to establish in accordance with its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial reserves were determined). -26- 36 "GROSS AMOUNT OF ELIGIBLE U.S. RECEIVABLES" means the outstanding face amount of Eligible U.S. Receivables, determined in accordance with Agreement Accounting Principles, consistently applied, less (i) all finance charges, late fees and other fees that are unearned, (ii) the value of any accrual which has been recorded by AAS or Valley, as applicable, with respect to downward price adjustments, (iii) a warranty reserve in an amount reasonably sufficient for purposes of meeting the warranty obligations or warranty sharing obligations of AAS or Valley, as applicable; and (iv) such other reserves as the Documentation and Collateral Agent elects to establish in accordance with its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious and shall be exercised in a manner not inconsistent with the manner in which the initial reserves were determined). "GROSS NEGLIGENCE" means recklessness, the absence of the slightest care or the complete disregard of consequences. Gross Negligence does not mean the absence of ordinary care or diligence, or an inadvertent act or inadvertent failure to act. If the term "gross negligence" is used with respect to the Administrative Agent, the Documentation and Collateral Agent, any Arranger or any Lender or any Indemnitee in any of the other Loan Documents, it shall have the meaning set forth herein. "GUARANTIES" means those certain Guaranties executed by Holdings, AAS, Valley and Brink Acquisition with respect to all of the Secured Obligations and Brink International with respect to that portion of the Secured Obligations arising out of Advances made to Subsidiaries of Brink International. "HIGH YIELD NOTE AGREEMENT" means the Indenture to be dated a date occurring between July 31, 1997 and December 31, 1997 among Holdings and a trustee acting on behalf of the note purchasers pursuant to which Holdings plans to issue notes in the original principal amount of US$100,000,000. "HOLDERS OF SECURED OBLIGATIONS" shall mean the holders of the Secured Obligations from time to time and shall include their respective successors, transferees and assigns. "HOLDINGS" means AAS Holdings, LLC, a Delaware limited liability company, and its successors and assigns, including a debtor-in-possession on behalf of Holdings. "INCOME TAX LIABILITIES" means with respect to any member or, in the event such member is a flow-through entity, such direct or indirect owner or owners of such member as is or are subject to income taxes on income of AAS, Valley or Holdings for any calendar year, an amount determined as follows: (i) with respect to any Tax Distribution to be made at a time when no Default or Unmatured Default has occurred and is continuing, determined by multiplying (a) such Person's allocable share of all taxable income and gains of AAS, Valley or Holdings (as -27- 37 determined under Section 7 of each of the Operating Agreements of AAS, Valley and Holdings) by (b) forty-four percent (44%); and (ii) with respect to any Tax Distribution to be made after the occurrence and during the continuance of a Default or Unmatured Default, an amount equal to such Person's actual liabilities for U.S. federal income taxes and for all relevant state and local income taxes for jurisdictions located in the U.S. (taking into account the deductibility of state and local taxes for federal income tax purposes and determined based on the highest marginal income tax rates applicable to any such member without taking into account such member's actual taxable income or losses from other sources), however denominated (together with any interest, penalties, additions to tax, or additional amounts with respect thereto), imposed under applicable tax law (i.e., reflecting all items and the amounts thereof in the period properly applicable thereto for tax accounting purposes) resulting to such member based upon its allocable share (as determined under Section 7 of each of the Operating Agreements of AAS, Valley and Holdings) of all taxable income and gains of AAS, Valley or Holdings for such calendar year. "INDEBTEDNESS" of any Person means (i) any indebtedness of such Person, contingent or otherwise, (a) in respect of borrowed money including all principal, interest, fees and expenses with respect thereto (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), or (b) evidenced by bonds, notes, acceptances, debentures or other instruments or letters of credit (or reimbursement obligations with respect thereto, including, in the case of the Borrowers, Reimbursement Obligations under the Letters of Credit) or representing the balance deferred and unpaid of the purchase price of any property (including pursuant to Capitalized Leases) or services, if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet of such Person prepared in accordance with Agreement Accounting Principles (except that any such balance that constitutes a trade payable and/or an accrued liability arising in the ordinary course of business shall not be considered Indebtedness); (ii) to the extent not otherwise included, (a) interest accruing after the commencement of any bankruptcy, insolvency, receivership or similar proceedings and other interest that would have accrued but for the commencement of such proceedings, (b) any Capitalized Lease Obligations, (c) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person, and (d) Contingent Obligations (exclusive of whether such items would appear upon such balance sheet). The amount of Indebtedness of any Person at any date shall be without duplication (i) the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any such Contingent Obligations at such date and (ii) in the case of Indebtedness of others secured by a Lien to which the property or assets owned or held by such Person is subject, the lesser of the fair market value at such date of any asset subject to a Lien securing the Indebtedness of others and the amount of the Indebtedness secured. "INDEMNIFIED MATTERS" is defined in Section 9.7(B) hereof. -28- 38 "INDEMNITEES" is defined in Section 9.7(B) hereof. "INSURANCE RESERVE" is defined in Section 6.2(G) hereof. "INTELLECTUAL PROPERTY SECURITY AGREEMENTS" means (a) those certain Patent Security Agreements, and (b) those certain Trademark Security Agreements executed by AAS and Valley, respectively, in favor of the Documentation and Collateral Agent for the benefit of the holders of Secured Obligations as amended, restated or otherwise modified from time to time. "INTEREST EXPENSE" is defined in Section 6.4(A) hereof. "INTEREST EXPENSE COVERAGE RATIO" is defined in Section 6.4(B) hereof. "INTEREST PERIOD" means, with respect to a Eurocurrency Rate Loan, a period of one (1), two (2), three (3) or six (6) months commencing on a Business Day selected by the applicable Borrower pursuant to this Agreement. Such Interest Period shall end on (but exclude) the day which corresponds numerically to such date one, two, three or six months thereafter; provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day. "INTEREST RATE AGREEMENTS" is defined in Section 6.3(R) hereof. "INVENTORY" shall mean any and all goods, including, without limitation, goods in transit, wheresoever located, whether now owned or hereafter acquired by AAS, Valley, AAS Canada or Brink which are held for sale or lease, furnished under any contract of service or held as raw materials, work in process or supplies, and all materials used or consumed in the business of AAS, Valley, AAS Canada or Brink, and shall include such property the sale or other disposition of which has given rise to Receivables and which has been returned to or repossessed or stopped in transit by AAS, Valley, AAS Canada or Brink. "INVESTMENT" means, with respect to any Person, (i) any purchase or other acquisition by that Person of stock, partnership interest, ownership or membership interest, notes, debentures or other securities, or of a beneficial interest in stock, partnership interest, ownership or membership interest, notes, debentures or other securities, issued by any other Person, (ii) any purchase by that Person of all or substantially all of the assets of a business conducted by another Person, and (iii) any loan, advance (other than deposits with financial institutions available for withdrawal on demand, prepaid expenses, accounts receivable, advances to employees and similar items made or incurred in the ordinary course of business) or capital contribution by that Person to any other -29- 39 Person, including all Indebtedness to such Person arising from a sale of property by such Person other than in the ordinary course of its business. "IRS" means the Internal Revenue Service and any Person succeeding to the functions thereof. "ISSUING LENDER" means, as the context may require, (i) The Chase Manhattan Bank, with respect to Letters of Credit issued by it pursuant to this Agreement, (ii) NBD Bank, with respect to Letters of Credit issued by it pursuant to this Agreement, (iii) Chase Manhattan Bank Delaware, with respect to Letters of Credit issued by it pursuant to this Agreement, (iv) any other Lender that becomes an Issuing Lender, pursuant to Section 2.21, with respect to Letters of Credit issued by such Lender or (v) collectively, all the foregoing. "L/C DRAFT" means a draft drawn on an Issuing Lender pursuant to a Letter of Credit. "L/C INTEREST" shall have the meaning ascribed to such term in Section 2.22. "L/C OBLIGATIONS" means, without duplication, an amount equal to the sum of (i) the aggregate of the amount then available for drawing under each of the Letters of Credit, (ii) the face amount of all outstanding L/C Drafts corresponding to the Letters of Credit, which L/C Drafts have been accepted by the Issuing Lender, (iii) the aggregate outstanding amount of all Reimbursement Obligations at such time and (iv) the aggregate face amount of all Letters of Credit requested by any Borrower but not yet issued (unless the request for an unissued Letter of Credit has been denied). "LENDERS" means the lending institutions listed on the signature pages of this Agreement, including the Issuing Lenders and the Swing Line Lenders and their respective successors and assigns. "LENDING INSTALLATION" means, with respect to a Lender or the Administrative Agent, any office, branch, subsidiary or affiliate of such Lender or the Administrative Agent. "LETTER(S) OF CREDIT" means the letters of credit to be issued by one of the Issuing Lenders pursuant to Section 2.21 hereof. "LIEN" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "LOAN(S)" means, (i) with respect to a Lender, such Lender's portion of any Advance made pursuant to Section 2.1 or Section 2.2, as applicable, (ii) with respect to the Swing Line -30- 40 Lender, its Swing Line Loans and (iii) collectively all Term Loans and Revolving Loans, whether made or continued as or converted to Base Rate Loans or Eurocurrency Rate Loans and all Swing Line Loans. "LOAN ACCOUNT" is defined in Section 2.15(F) hereof. "LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranties, the Collateral Documents and all other documents, instruments and agreements executed in connection therewith or contemplated thereby, including the letter agreements regarding fees among the Administrative Agent, AAS and Holdings and among Chase, NBD, the Arrangers, Holdings and AAS, in each case as the same may be amended, restated or otherwise modified and in effect from time to time. "MANAGEMENT" means those Persons listed on Schedule 1.1.5 under such heading. "MARGIN STOCK" shall have the meaning ascribed to such term in Regulation U. "MATERIAL ADVERSE EFFECT" means a material adverse effect upon (a) the business, condition (financial or otherwise), operations, performance, properties or prospects of Holdings and its Subsidiaries taken as a whole, (b) the ability of the Borrowers to perform their respective obligations under the Loan Documents in any material respect, or (c) the ability of the Lenders, the Administrative Agent or the Documentation and Collateral Agent to enforce in any material respect the Obligations or their rights with respect to the Collateral. "MAXIMUM REVOLVING CREDIT AMOUNT" means, at any particular time: (i) the lesser of (A) the Aggregate Revolving Loan Commitment at such time minus the Dollar Amount of the outstanding principal balance of the Indebtedness of AAS Canada to the Canadian Lenders with respect to the Four Million Canadian Dollar (C$4,000,000.00) revolving credit facility provided by the Canadian Lenders to AAS Canada and (B) the Borrowing Base at such time minus (ii) the amount of any Decision Reserve in effect at such time. "MORTGAGES" shall mean mortgages, deeds of trust, collateral assignments of beneficial interest, leasehold mortgages and/or leasehold deeds of trust of even date herewith executed by any U.S. Borrower in favor of the Documentation and Collateral Agent for the benefit of the Holders of Secured Obligations as amended, restated or otherwise modified from time to time and any other mortgage executed by any Subsidiary of Brink International securing Advances made to Brink International or Subsidiaries of Brink International. "MULTIEMPLOYER PLAN" means a "Multiemployer Plan" as defined in Section 4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years was, contributed to by either Holdings, AAS, Valley or any member of the Controlled Group. -31- 41 "NBD" means NBD Bank, in its individual capacity. "NET CASH PROCEEDS" means, with respect to any Asset Sale of any Person, (a) cash (freely convertible into U.S. Dollars) received by such Person or any Subsidiary of such Person from such Asset Sale (including cash received as consideration for the assumption or incurrence of liabilities incurred in connection with or in anticipation of such Asset Sale), after (i) provision for all income or other taxes measured by or resulting from such Asset Sale, (ii) payment of all brokerage commissions and other fees and expenses related to such Asset Sale, (iii) all amounts used to repay Indebtedness secured by a Lien on any asset disposed of in such Asset Sale or which is or may be required (by the express terms of the instrument governing such Indebtedness) to be repaid in connection with such Asset Sale (including payments made to obtain or avoid the need for the consent of any holder of such Indebtedness), and (iv) deduction of appropriate amounts to be provided by such Person or a Subsidiary of such Person as a reserve, in accordance with Agreement Accounting Principles, against any liabilities associated with the assets sold or disposed of in such Asset Sale and retained by such Person or a Subsidiary of such Person after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with the assets sold or disposed of in such Asset Sale; and (b) cash payments in respect of any Indebtedness, Capital Stock, ownership or membership interest or other consideration received by such Person or any Subsidiary of such Person from such Asset Sale upon receipt of such cash payments by such Person or such Subsidiary. "NET INCOME" is defined in Section 6.4(A) hereof. "NON PRO RATA LOAN" is defined in Section 8.2 hereof. "NOMADIC SPORTS PURCHASE" means the purchase by AAS Canada of certain assets and stock for a purchase price not to exceed in the aggregate C$2,000,000. "NOTES" means the Revolving Notes, the Term Notes and the Swing Line Loan Note. "NOTICE OF ASSIGNMENT" is defined in Section 12.3(B) hereof. "OBLIGATIONS" means all Loans, advances, debts, liabilities, obligations, covenants and duties owing by any of the Borrowers to the Administrative Agent, the Documentation and Collateral Agent, either of the Arrangers, any Lenders, the Issuing Lenders, the Swing Line Lender, any Affiliate of any of the foregoing or any Indemnitee, of any kind or nature, present or future, arising under this Agreement, the Notes, the Collateral Documents, any other Loan Document, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, guaranty, indemnification, or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term includes, without limitation, all interest, charges, expenses, fees, -32- 42 attorneys' fees and disbursements, paralegals' fees (in each case whether or not allowed), and any other sum chargeable to any of the Borrowers under this Agreement or any other Loan Document. "OTHER TAXES" is defined in Section 2.15(E)(ii) hereof. "PARTICIPANTS" is defined in Section 12.2(A) hereof. "PAYMENT DATE" means the last Business Day of each March, June, September and December. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "PERMITTED ACQUISITION" is defined in Section 6.3(G) hereof. "PERMITTED EXISTING CONTINGENT OBLIGATIONS" means the Contingent Obligations of the Borrowers and all other Subsidiaries of Holdings identified as such on Schedule 1.1.1 to this Agreement. "PERMITTED EXISTING INDEBTEDNESS" means the Indebtedness of the Borrowers and all other Subsidiaries of Holdings identified as such on Schedule 1.1.2 to this Agreement. "PERMITTED EXISTING INVESTMENTS" means the Investments of the Borrowers and all other Subsidiaries of Holdings identified as such on Schedule 1.1.3 to this Agreement. "PERMITTED EXISTING LIENS" means the Liens on assets of the Borrowers or all other Subsidiaries of Holdings identified as such on Schedule 1.1.4 to this Agreement. "PERMITTED PURCHASE MONEY INDEBTEDNESS" is defined in Section 6.3(A)(ii) hereof. "PERMITTED SUBORDINATED INDEBTEDNESS" means (a) Indebtedness evidenced by the Subordinated Notes in an outstanding principal amount not at any time exceeding $20,000,000, plus interest, fees and expenses and any other amounts other than principal provided for under the Subordinated Note Agreement in connection therewith, together with interest thereon; (b) Indebtedness evidenced by substitute subordinated notes delivered upon the registration of the transfer or exchange for or in lieu of such Subordinated Notes as provided in the Subordinated Note Agreement; (c) Indebtedness evidenced by the Seller Note; (d) Indebtedness evidenced by the Subordinated Notes in an outstanding principal amount not at any time exceeding $100,000,000 issued pursuant to the High Yield Note Agreement; (e) Indebtedness evidenced by the Subordinated Notes in an outstanding principal amount not exceeding $20,000,000 issued pursuant to the Supplemental Subordinated Note Agreement; and (e) other Subordinated Indebtedness permitted pursuant to Section 6.3(A)(d) -33- 43 "PERSON" means any natural person, corporation, firm, company, joint venture, partnership, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "PLAN" means an employee benefit plan defined in Section 3(3) of ERISA in respect of which the Borrower or any member of the Controlled Group is, or within the immediately preceding six (6) years was, an "employer" as defined in Section 3(5) of ERISA. "PLEDGE AGREEMENTS" means (i) that certain Pledge Agreement executed by Holdings in favor of the Documentation and Collateral Agent for the benefit of the Holders of Secured Obligations to secure payment of the Secured Obligations, as amended, restated or otherwise modified from time to time; (ii) that certain Pledge Agreement executed by CB Capital in favor of the Documentation and Collateral Agent for the benefit of the Holders of Secured Obligations to secure payment of the Secured Obligations, as amended, restated or otherwise modified from time to time; (iii) that certain Pledge Agreement executed by Brink International in favor of the Documentation and Collateral Agent for the benefit of the Holders of Secured Obligations pledging 65% of the Capital Stock of Brink to secure payment of the Secured Obligations and (iv) any other pledge agreements executed by Brink Acquisition and non-U.S. Subsidiaries of Holdings in favor of the Documentation and Collateral Agent for the benefit of the Holders of Secured Obligations pledging the Capital Stock of certain non-U.S. Subsidiaries of Holdings to secure payment of Advances made to non-U.S. Subsidiaries of Holdings. "PRO RATA SHARE" means, with respect to any Lender, (i) at any time prior to the Effective Date, the percentage obtained by dividing (A) such Lender's Commitments at such time (in each case, as adjusted from time to time in accordance with the provisions of this Agreement) by (B) the sum of the Aggregate Term Loan Commitments and the Aggregate Revolving Loan Commitments at such time and (ii) at any time after the Effective Date, the percentage obtained by dividing (A) the sum of such Lender's Term Loans and Revolving Loan Commitment at such time (in each case, as adjusted from time to time in accordance with the provisions of this Agreement) by (B) the sum of the aggregate amount of all of the Term Loans and the Aggregate Revolving Loan Commitment at such time; provided, however, if all of the Commitments are terminated pursuant to the terms of this Agreement, then "Pro Rata Share" means the percentage obtained by dividing (x) the sum of such Lender's Term Loans and Revolving Loans by (y) the aggregate amount of all Term Loans and Revolving Loans. "PURCHASERS" is defined in Section 12.3(A) hereof. "RATE HEDGING OBLIGATIONS" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the -34- 44 parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts and warrants, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any of the foregoing. "RATE OPTION" means the Eurocurrency Rate or the Base Rate. "RECEIVABLE(S)" means and includes all of AAS's, Valley's, AAS Canada's or Brink's presently existing and hereafter arising or acquired accounts, accounts receivable, and all present and future rights of AAS, Valley, AAS Canada or Brink to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether or not they have been earned by performance, and all rights in any merchandise or goods which any of the same may represent, and all rights, title, security and guaranties with respect to each of the foregoing, including, without limitation, any right of stoppage in transit. "REGISTER" is defined in Section 12.3(C) hereof. "REGULATION G" means Regulation G of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by nonbank, nonbroker lenders for the purpose of purchasing or carrying margin stock (as defined therein). "REGULATION T" means Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by and to brokers and dealers of securities for the purpose of purchasing or carrying margin stock (as defined therein). "REGULATION U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying Margin Stock applicable to member banks of the Federal Reserve System. "REGULATION X" means Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by foreign lenders for the purpose of purchasing or carrying margin stock (as defined therein). "REIMBURSEMENT OBLIGATION" is defined in Section 2.23 hereof. -35- 45 "REINVESTMENT PERIOD" is defined in Section 2.5(B)(i)(f) hereof. "REINVESTMENT RESERVE" is defined in Section 2.5(B)(i)(f) hereof. "RELEASE" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including the movement of Contaminants through or in the air, soil, surface water or groundwater. "RENTALS" is defined in Section 6.4(A) hereof. "REPLACEMENT LENDER" is defined in Section 2.20 hereof. "REPORTABLE EVENT" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days after such event occurs, provided, however, that a failure to meet the minimum funding standards of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "REQUIRED LENDERS" means Lenders whose Pro Rata Shares, in the aggregate, are greater than fifty percent (50%); provided, however, that, if any of the Lenders shall have failed to fund its Pro Rata Share of any Revolving Loan requested by the Borrower which such Lenders are obligated to fund under the terms of this Agreement and any such failure has not been cured, then for so long as such failure continues, "REQUIRED LENDERS" means Lenders (excluding all Lenders whose failure to fund their respective Pro Rata Shares of such Revolving Loans have not been so cured) whose Pro Rata Shares represent greater than fifty percent (50%) of the aggregate Pro Rata Shares of such Lenders; provided, further, however, that, if the Commitments have been terminated pursuant to the terms of this Agreement, "REQUIRED LENDERS" means Lenders (without regard to such Lenders' performance of their respective obligations hereunder) whose aggregate ratable shares (stated as a percentage) of the aggregate outstanding principal balance of all Loans and L/C Obligations are greater than fifty percent (50%). "REQUIREMENTS OF LAW" means, as to any Person, the charter and by-laws or other organizational or governing documents of such Person, and any law, 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 including, without limitation, the Securities Act, the Securities Exchange Act, Regulations G, T, U and X, ERISA, the Fair Labor Standards Act, the Worker Adjustment and Retraining Notification Act, Americans with Disabilities Act of 1990, and any certificate of occupancy, zoning ordinance, building, environmental or land use requirement or Permit or -36- 46 environmental, labor, employment, occupational safety or health law, rule or regulation, including Environmental, Health or Safety Requirements of Law. "RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other distribution, direct or indirect, on account of any ownership, membership or other equity interest in Holdings now or hereafter outstanding, except a dividend payable solely in additional interests of the same type, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any ownership, membership or other equity interest in Holdings or any such interests or shares of any class of Capital Stock of Holdings now or hereafter outstanding, (iii) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to any Permitted Subordinated Indebtedness, (iv) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding options or other rights to acquire any ownership, membership or other equity interests in Holdings, (v) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of any Permitted Subordinated Indebtedness or any ownership, membership or other equity interests in Holdings or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission and (vi) any payment of management fees (or other fees of a similar nature) by Holdings to CB Capital, any holder of ownership, membership or other equity interests in Holdings or any member of management of Holdings or their Affiliates. "REVOLVING CREDIT AVAILABILITY" means, at any particular time, the amount by which the Maximum Revolving Credit Amount at such time exceeds the Revolving Credit Obligations at such time. "REVOLVING CREDIT OBLIGATIONS" means, at any particular time, the sum of (i) the outstanding principal amount of the Revolving Loans at such time, plus (ii) the L/C Obligations at such time plus (iii) the outstanding principal amount of the Swing Line Loans at such time. "REVOLVING LOAN" is defined in Section 2.2. "REVOLVING LOAN COMMITMENT" means, for each Lender, the obligation of such Lender to make Revolving Loans and to purchase participations in Letters of Credit not exceeding the amount set forth on Exhibit B to this Agreement opposite its name thereon under the heading "Revolving Loan Commitment" or the signature page of the Assignment and Acceptance by which it became a Lender, as such amount may be modified from time to time pursuant to the terms of this Agreement or to give effect to any applicable Assignment and Acceptance. "REVOLVING NOTE" means a promissory note, in substantially the form of Exhibit C hereto, duly executed by a Borrower and payable to the order of a Lender in the amount of its Revolving -37- 47 Loan Commitment, including any amendment, restatement modification, renewal or replacement of such Revolving Note. "RISK-BASED CAPITAL GUIDELINES" is defined in Section 3.2 hereof. "SECURED OBLIGATIONS" means, collectively, (i) the Obligations, (ii) all Rate Hedging Obligations owing to one or more of the Lenders and (iii) the obligations of Holdings and AAS under guaranties of the Indebtedness of AAS Canada owed to the Canadian Lenders. "SECURITY AGREEMENTS" means those certain Security Agreements executed by AAS, Holdings, Valley and Brink Acquisition, respectively, in favor of the Documentation and Collateral Agent for the benefit of the Holders of Secured Obligations as amended, restated or otherwise modified from time to time. "SELLER" means Valley Industries, Inc. "SELLER NOTE" means that certain Amended and Restated Note issued by Holdings to the Seller in the principal amount of Twelve Million Five Hundred Thousand Dutch Guilders (NLG 12,500,000). "SINGLE EMPLOYER PLAN" means a Plan maintained by AAS or any member of the Controlled Group for employees of AAS, Valley or any member of the Controlled Group. "SOLVENT" shall mean, when used with respect to any Person, that at the time of determination: (i) the fair value of its assets (both at fair valuation and at present fair saleable value) is equal to or in excess of the total amount of its liabilities, including, without limitation, contingent liabilities; and (ii) it is then able and expects to be able to pay its debts as they mature; and (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. With respect to contingent liabilities (such as litigation, guarantees and pension plan liabilities), such liabilities shall be computed at the amount which, in light of all the facts and circumstances existing at the time, represent the amount which can be reasonably be expected to become an actual or matured liability. "SUBORDINATED INDEBTEDNESS" means the Indebtedness evidenced by the Subordinated Notes and the Seller Note and other Permitted Subordinated Indebtedness. -38- 48 "SUBORDINATED NOTE AGREEMENT" means the Senior Subordinated Note Purchase Agreement dated as of October 30, 1996 among Holdings, and CB Capital and International Mezzanine Capital BV, as amended by Amendment No. 1 dated July 2, 1997 and Amendment No. 2 dated as of August 5, 1997. "SUBORDINATED NOTES" means (i) the Senior Subordinated Promissory Notes issued by Holdings pursuant to the Subordinated Note Agreement, (ii) any notes issued by Holdings pursuant to the High Yield Note Agreement and (iii) any notes issued by Holdings pursuant to the Supplemental Subordinated Note Agreement. "SUBSIDIARY" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any company, partnership, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a direct or indirect Subsidiary of Holdings. "SUPPLEMENTAL SUBORDINATED NOTE AGREEMENT" means the Senior Subordinated Note Purchase Agreement to be dated a date occurring between July 31, 1997 and December 31, 1997 among Holdings and one or more note purchasers or a trustee acting on their behalf pursuant to which Holdings plans to issue subordinated notes in an original principal amount sufficient to generate proceeds available to prepay the Loans of not less than US$20,000,000. "SWING LINE COMMITMENT" means the obligation of the Swing Line Lenders to make Swing Line Loans up to a maximum principal amount of $2,000,000 in the aggregate at any one time outstanding. "SWING LINE LENDER" means Chase, NBD and any other Lender that elects to be a Swing Line Lender. "SWING LINE LOAN" means a loan made available to any of the Borrowers by the Swing Line Lender pursuant to Section 2.3. "SWING LINE LOAN NOTE" means a Note in substantially the form of Exhibit E hereto duly executed by the applicable Borrower and payable to the order of each Swing Line Lender in the amount of its Swing Line Commitment. "SYNDICATION AGENT" means Chase in its capacity as Syndication Agent with respect to this Agreement. -39- 49 "TAX DISTRIBUTION" means, as of the time of determination thereof, any distribution by AAS, Valley or Holdings to members of AAS, Valley or Holdings (or in each case, if such member is a flow-through entity, such direct or indirect owner or owners of such member as is or are subject to income taxes on income of AAS, Valley or Holdings) pursuant to the provisions of Section 6.3(F)(i), which (i) with respect to quarterly estimated tax payments due in each calendar year shall be equal to twenty-five percent (25%) of the relevant member's Income Tax Liabilities for such calendar year as estimated in writing by the chief financial officer of Holdings and (ii) with respect to tax payments to be made with income tax returns filed for a full calendar year or with respect to adjustments to such returns imposed by the IRS or other taxing authority, shall be equal to the Income Tax Liabilities of such member for such calendar year minus the aggregate amount distributed to such member for such calendar year as provided in clause (i) above. In the event the amount determined under clause (ii) is a negative amount, the amount of any distributions to the relevant member in the succeeding calendar year (or, if necessary, any subsequent calendar years) shall be reduced by such negative amount. "TAXES" is defined in Section 2.15(E)(i) hereof. "TERMINATION DATE" means the earlier of (a) October 30, 2003, (b) the date of termination of the Commitments pursuant to Section 2.6 or Section 8.1 and (c) the date of the payment in full of the Tranche A Term Loans. "TERMINATION EVENT" means (i) a Reportable Event with respect to any Benefit Plan; (ii) the withdrawal of AAS, Valley or any member of the Controlled Group from a Benefit Plan during a plan year in which AAS, Valley or such Controlled Group member was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or the cessation of operations which results in the termination of employment of twenty percent (20%) of Benefit Plan participants who are employees of AAS, Valley or any member of the Controlled Group; (iii) the imposition of an obligation on AAS, Valley or any member of the Controlled Group under Section 4041 of ERISA to provide affected parties written notice of intent to terminate a Benefit Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Benefit Plan; (v) any event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Benefit Plan; or (vi) the partial or complete withdrawal of AAS, Valley or any member of the Controlled Group from a Multiemployer Plan. "TERM LOANS" means, collectively, the Tranche A Term Loans and the Tranche B Term Loans. "TRANCHE A PRO RATA SHARE" shall mean, at any particular time and with respect to any Lender, a fraction (expressed as a percentage), the numerator of which shall be the then aggregate amount of such Lender's Revolving Credit Commitment plus the outstanding principal balance of such Lender's Tranche A Term Loans and the denominator of which shall be the then aggregate -40- 50 amount of all Revolving Credit Commitments and the outstanding principal balance of the Tranche A Term Loans. "TRANCHE A TERM LOAN" is defined in Section 2.1(a) hereof. "TRANCHE A TERM LOAN COMMITMENT" means, for each Lender, the obligation of such Lender to make its Tranche A Term Loan pursuant to the terms and conditions of this Agreement, and which shall not exceed the principal amount set forth on Exhibit B to this Agreement opposite its name thereon under the heading "Tranche A Term Loan Commitment", as such amount may be modified from time to time pursuant to the terms hereof. "TRANCHE A TERM LOAN LENDER" means any Lender with a Tranche A Term Loan Commitment. "TRANCHE A TERM LOAN TERMINATION DATE" means the earlier of (a) October 30, 2003 and (b) the date of termination of the Revolving Loan Commitments pursuant to Section 2.6 or Section 8.1. "TRANCHE A TERM NOTE" means a promissory note, in substantially the form of Exhibit D- 1 hereto, duly executed by the applicable Borrower and payable to the order of a Lender in the amount of its Tranche A Term Loan Commitment, including any amendment, restatement, modification, renewal or replacement of such Tranche A Term Note. "TRANCHE B PRO RATA SHARE" shall mean, at any particular time and with respect to any Lender, a fraction (expressed as a percentage), the numerator of which shall be the then outstanding principal balance of such Lender's Tranche B Term Loans and the denominator of which shall be the then outstanding principal balance of all Tranche B Term Loans. "TRANCHE B TERM LOAN" is defined in Section 2.1(b) hereof. "TRANCHE B TERM LOAN COMMITMENT" means, for each Lender, the obligation of such Lender to make its Tranche B Term Loan pursuant to the terms and conditions of this Agreement, and which shall not exceed the principal amount set forth on Exhibit B to this Agreement opposite its name thereon under the heading "Tranche B Term Loan Commitment", as such amount may be modified from time to time pursuant to the terms hereof. "TRANCHE B TERM LOAN LENDER" means any Lender with a Tranche B Term Loan Commitment. "TRANCHE B TERM LOAN TERMINATION DATE" means October 30, 2004. -41- 51 "TRANCHE B TERM NOTE" means a promissory note, in substantially the form of Exhibit D- 2 hereto, duly executed by the applicable Borrower and payable to the order of a Lender in the amount of its Tranche B Term Loan Commitment, including any amendment, restatement, modification, renewal or replacement of such Tranche B Term Note. "TRANSACTION COSTS" means the fees, costs and expenses payable by the Borrowers in connection with the execution, delivery and performance of the Transaction Documents and the consummation of the Valley Acquisition. "TRANSACTION DOCUMENTS" means the Loan Documents, the Subordinated Note Agreement and the Acquisition Documents. "TRANSFEREE" is defined in Section 12.5 hereof. "TYPE" means, with respect to any Loan, its nature as a Base Rate Loan or a Eurocurrency Rate Loan. "UNMATURED DEFAULT" means an event which, but for the lapse of time or the giving of notice, or both, would constitute a Default. "U.S. BORROWING BASE" means, as of any date of calculation, an amount, as set forth on the most current Borrowing Base Certificate delivered to the Administrative Agent, equal to the sum of (i) eighty-five percent (85%) of the Gross Amount of Eligible U.S. Receivables plus (ii) the lesser of (A) $10,000,000 and (B) fifty percent (50%) of the Gross Amount of Eligible U.S. Inventory. "VALLEY" means Valley Industries, LLC, a Delaware limited liability company, and its successors and assigns, including a debtor-in-possession on behalf of Valley. "VALLEY ACQUISITION" means the acquisition of substantially all of the assets of Valley Industries, Inc. by Valley on the terms and conditions set forth in that certain Asset Purchase Agreement ("ACQUISITION AGREEMENT") dated as of August 5, 1997 by and among Valley, Seller and certain other parties substantially in the form attached as Exhibit J hereto. "WORKING CAPITAL" means, as at any date of determination, the excess, if any, of (i) Holding's consolidated current assets, except cash and Cash Equivalents, over (ii) Holdings' consolidated current liabilities, except current maturities of long-term debt and Revolving Credit Obligations as of such date and all accrued interest as of such date. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. Any accounting terms used in this Agreement which are not specifically -42- 52 defined herein shall have the meanings customarily given them in accordance with generally accepted accounting principles in existence as of the date hereof. 1.2 Supplemental Disclosure. At any time at the request of the Administrative Agent and at such additional times as Holdings determines, Holdings shall supplement each schedule or representation herein or in the other Loan Documents with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such schedule or as an exception to such representation or which is necessary to correct any information in such schedule or representation which has been rendered inaccurate thereby. If any such supplement to such schedule or representation discloses the existence or occurrence of events, facts or circumstances which are restricted or prohibited by the terms of this Agreement or any other Loan Documents, such supplement to such schedule or representation shall not be deemed an amendment thereof unless expressly consented to in writing by Administrative Agent and the Required Lenders, and no such amendments, except as the same may be consented to in a writing which expressly includes a waiver, shall be or be deemed a waiver by the Administrative Agent or any Lender of any Default disclosed therein. ARTICLE II: THE CREDITS 2.1. Term Loans. (a) Amount of Tranche A Term Loans. Subject to the terms and conditions set forth in this Agreement, each Tranche A Term Loan Lender on the Effective Date severally and not jointly agrees to make (or, to the extent previously made, re-evidence) a term loan or loans, in one or more Agreed Currencies, to one or more of the Borrowers in an aggregate Dollar Amount at any time outstanding not to exceed such Lender's Tranche A Term Loan Commitment (each individually, a "TRANCHE A TERM LOAN" and, collectively, the "TRANCHE A TERM LOANS"). All Tranche A Term Loans shall be made or re-evidenced by the Lenders on or after the Effective Date simultaneously and proportionately to their respective Tranche A Pro Rata Shares, it being understood that no Tranche A Term Loan Lender shall be responsible for any failure by any other Tranche A Term Loan Lender to perform its obligation to make or re- evidence any Tranche A Term Loan hereunder nor shall the Tranche A Term Loan Commitment of any Lender be increased or decreased as a result of any such failure. (b) Amount of Tranche B Term Loans. Subject to the terms and conditions set forth in this Agreement, each Tranche B Term Loan Lender on the Effective Date severally and not jointly agrees to make a term loan or loans, in Dollars, to one or more of the Borrowers in an aggregate amount at any time outstanding not to exceed such Lender's Tranche B Term Loan Commitment (each individually, a "TRANCHE B TERM LOAN" and, collectively, the "TRANCHE B TERM LOANS"). All Tranche B Term Loans shall be made by the Lenders on or after the Effective Date simultaneously and proportionately to their respective Tranche B Pro Rata Shares, it being understood that no Tranche B Term Loan Lender shall be responsible for any failure by any other Tranche B Term Loan Lender to perform its obligation to make any Tranche B Term Loan -43- 53 hereunder nor shall the Tranche B Term Loan Commitment of any Lender be increased or decreased as a result of any such failure. (c) Borrowing Notice. The applicable Borrower shall deliver to the Administrative Agent a Borrowing Notice, signed by an Authorized Officer, on or after the Effective Date. Such Borrowing Notice shall specify (i) the aggregate amount of the Tranche A Term Loans and Tranche B Term Loans requested which shall be $60,982,000 and $55,000,000, respectively, on the Effective Date and (ii) instructions for the disbursement of the proceeds of such Term Loans. The Term Loans shall initially be Base Rate Loans and thereafter may be continued as Base Rate Loans or converted into Eurocurrency Rate Loans in the manner provided in Section 2.10 and subject to the other conditions and limitations therein set forth and set forth in this Article II. Any Borrowing Notice given pursuant to this Section 2.1(b) shall be irrevocable. (d) Making of Term Loans. Promptly after receipt of the Borrowing Notice under Section 2.1(c) in respect of any Term Loans, the Administrative Agent shall notify each Lender by telex or telecopy, or other similar form of transmission, of the proposed Advance. Each Lender shall deposit an amount equal to its Tranche A Pro Rata Share of such Tranche A Term Loans and its Tranche B Pro Rata Share of such Tranche B Term Loans with the Administrative Agent at its office (i) in Detroit, Michigan in immediately available funds with respect to any Advance denominated in Dollars and (ii) in the Administrative Agent's Eurocurrency Payment Office in immediately available funds with respect to any Advance denominated in an Agreed Currency other than Dollars, in each case, on the Effective Date or, if thereafter, on the date specified in the Borrowing Notice. Subject to the fulfillment of the conditions precedent set forth in Sections 4.1 and 4.2, the Administrative Agent shall make the proceeds of such amounts received by it available to the applicable Borrower at the Administrative Agent's office in Detroit, Michigan on the date specified and shall disburse such proceeds in accordance with the disbursement instructions set forth in such Borrowing Notice. The failure of any Lender to deposit the amount described above with the Administrative Agent on or after the Closing Date shall not relieve any other Lender of its obligations hereunder to make such Term Loan. (e) Repayment of the Tranche A Term Loans. (i) The Tranche A Term Loans shall be repaid by the Borrowers (it being understood that each non-U.S. Borrower shall be liable only to repay Loans made to such Borrower and certain other non-U.S. Borrowers) in twenty-five (25) consecutive quarterly installments payable on the last day of each calendar quarter commencing September 30, 1997 and continuing thereafter until the Tranche A Term Loan Termination Date, and the Tranche A Term Loans shall be permanently reduced by the amount of each installment on the date payment thereof is required to be made hereunder. The principal amount of the installments may be paid by any or all of the Borrowers at their discretion provided that each of the quarterly installments shall be in the aggregate amounts set forth below: -44- 54
INSTALLMENT DATE INSTALLMENT AMOUNT ---------------- ------------------ September 30, 1997 $1,500,000 December 31, 1997 $1,500,000 March 31, 1998 $1,500,000 June 30, 1998 $1,500,000 September 30, 1998 $1,500,000 December 31, 1998 $1,875,000 March 31, 1999 $1,875,000 June 30, 1999 $1,875,000 September 30, 1999 $1,875,000 December 31, 1999 $2,500,000 March 31, 2000 $2,500,000 June 30, 2000 $2,500,000 September 30, 2000 $2,500,000 December 31, 2000 $3,000,000 March 31, 2001 $3,000,000 June 30, 2001 $3,000,000 September 30, 2001 $3,000,000 December 31, 2001 $3,000,000 March 31, 2002 $3,000,000 June 30, 2002 $3,000,000 September 30, 2002 $3,000,000 December 31, 2002 $3,000,000 March 31, 2003 $3,000,000 June 30, 2003 $3,000,000 October 30, 2003 $2,982,000
Notwithstanding the foregoing, the final installment shall be in the amount of the then outstanding principal balance of the Tranche A Term Loans. In addition, the then outstanding principal balance of the Tranche A Term Loans, if any, shall be due and payable on the Tranche A Term Loan Termination Date. No installment of any Tranche A Term Loan shall be reborrowed once repaid, except that the initial Tranche A Term Loans extended or re-evidenced on the Effective Date may, to the extent they have not been repaid, be refinanced with Tranche A Term Loans made subsequently to Brink International or one of the other Borrowers. (ii) In addition to the scheduled payments on the Tranche A Term Loans, the (a) Borrowers may make the voluntary prepayments described in Section 2.5(A) for credit against the scheduled payments on the Tranche A Term Loans pursuant to Section 2.5(A) and (b) Holdings -45- 55 shall make or cause to be made the mandatory prepayments prescribed in Section 2.5(B), for credit against such scheduled payments on the Tranche A Term Loans pursuant to Section 2.5(B). (f) Repayment of the Tranche B Term Loans. (i) The Tranche B Term Loans shall be repaid by the Borrowers (it being understood that each non-U.S. Borrower shall be liable only to repay Loans made to such Borrower and certain other non-U.S. Borrowers) in twenty-nine (29) consecutive quarterly installments payable on the last day of each calendar quarter commencing September 30, 1997 and continuing thereafter until the Tranche B Term Loan Termination Date, and the Tranche B Term Loans shall be permanently reduced by the amount of each installment on the date payment thereof is required to be made hereunder. The principal amount of the installments may be paid by any or all of the Borrowers at their discretion provided that each of the quarterly installments shall be in the aggregate amounts set forth below:
INSTALLMENT DATE INSTALLMENT AMOUNT ---------------- ------------------ September 30, 1997 $250,000 December 31, 1997 $250,000 March 31, 1998 $250,000 June 30, 1998 $250,000 September 30, 1998 $250,000 December 31, 1998 $250,000 March 31, 1999 $250,000 June 30, 1999 $250,000 September 30, 1999 $250,000 December 31, 1999 $250,000 March 31, 2000 $250,000 June 30, 2000 $250,000 September 30, 2000 $250,000 December 31, 2000 $250,000 March 31, 2001 $250,000 June 30, 2001 $250,000 September 30, 2001 $250,000 December 31, 2001 $250,000 March 31, 2002 $250,000 June 30, 2002 $250,000 September 30, 2002 $250,000 December 31, 2002 $250,000 March 31, 2003 $250,000 June 30, 2003 $250,000
-46- 56 September 30, 2003 $ 250,000 December 31, 2003 $10,000,000 March 31, 2004 $12,916,666 June 30, 2004 $12,916,667 October 30, 2004 $12,916,667
Notwithstanding the foregoing, the final installment shall be in the amount of the then outstanding principal balance of the Tranche B Term Loans. In addition, the then outstanding principal balance of the Tranche B Term Loans, if any, shall be due and payable on the Tranche B Term Loan Termination Date. No installment of any Tranche B Term Loan shall be reborrowed once repaid, except that the initial Tranche B Term Loans extended or re-evidenced on the Effective Date may, to the extent they have not been repaid, be refinanced with Tranche B Term Loans made subsequently to Brink International or one of the other Borrowers. (ii) In addition to the scheduled payments on the Tranche B Term Loans, the (a) Borrowers may make the voluntary prepayments described in Section 2.5(A) for credit against the scheduled payments on the Tranche B Term Loans pursuant to Section 2.5(A) and (b) Holdings shall make or cause to be made the mandatory prepayments prescribed in Section 2.5(B), for credit against such scheduled payments on the Tranche B Term Loans pursuant to Section 2.5(B). 2.2 Revolving Loans. Upon the satisfaction of the conditions precedent set forth in Sections 4.1 and 4.2 hereof, from and including the date of this Agreement and prior to the Termination Date, each Lender severally and not jointly agrees, on the terms and conditions set forth in this Agreement, to make revolving loans to the applicable Borrower from time to time, in an Agreed Currency, in a Dollar Amount not to exceed such Lender's Tranche A Pro Rata Share of the Dollar Amount of the Revolving Credit Availability at such time (each individually, a "REVOLVING LOAN" and, collectively, the "REVOLVING LOANS"); provided, however, at no time shall the Dollar Amount of the Revolving Credit Obligations exceed the Dollar Amount of the Maximum Revolving Credit Amount except to the extent permitted in Section 2.5(B)(ii); provided further that at no time shall the Dollar Amount of the Revolving Credit Obligations owed by Holdings, AAS and Valley exceed the U.S. Borrowing Base. Each Advance under Section 2.2 shall consist of Revolving Loans made by each Lender ratably in proportion to such Lender's respective Tranche A Pro Rata Share. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow at any time prior to the Termination Date. The Revolving Loans made on the Closing Date shall initially be Base Rate Loans and thereafter may be continued as Base Rate Loans or converted into Eurocurrency Rate Loans in the manner provided in Section 2.10 and subject to the other conditions and limitations therein set forth and set forth in this Article II. On the Termination Date, the outstanding principal balance of the Revolving Loans shall be paid in full by the applicable Borrower. -47- 57 2.3 Swing Line Loans. (a) Amount of Swing Line Loans. Upon the satisfaction of the conditions precedent set forth in Sections 4.1 and 4.2, from and including the date of this Agreement and prior to the Termination Date, each Swing Line Lender agrees, on the terms and conditions set forth in this Agreement, to make Swing Line Loans in Dollars to AAS or Valley from time to time in an amount not to exceed the lesser of (i) $2,000,000 (minus the outstanding principal balance of all Swing Line Loans then outstanding)or (ii) the Revolving Credit Availability at such time. Each Swing Line Loan shall be in a minimum amount of not less than $50,000 (or such lesser amount as may be agreed to by any Swing Line Lender) or an integral multiple of $50,000 ( or such lesser amount as may be agreed to by any Swing Line Lender) in excess thereof, and all interest payable on the Swing Line Loans shall be payable to the Swing Line Lender for the account of such Swing Line Lender. (b) Borrowing Notice. The applicable Borrower shall deliver to the Administrative Agent and the applicable Swing Line Lender a Borrowing Notice signed by it not later than 11:00 a.m. (Detroit time) on the Borrowing Date of each Swing Line Loan specifying (i) the applicable Borrowing Date (which shall be a Business Day) and (ii) the aggregate amount of the requested Swing Line Loan. The Swing Line Loans shall at all times be Base Rate Loans. (c) Making of Swing Line Loans. Promptly after receipt of the Borrowing Notice under Section 2.3(b), the Administrative Agent shall notify each Lender of the requested Swing Line Loan. Not later than 2:00 p.m. (Detroit time) on the applicable Borrowing Date, the applicable Swing Line Lender shall make available its Swing Line Loan in funds immediately available in Detroit to the Administrative Agent at the address specified by the Administrative Agent or directly to the applicable Borrower. If such funds are made available to the Administrative Agent, the Administrative Agent will promptly make such funds available to the applicable Borrower. (d) Repayment of Swing Line Loans. The Swing Line Loans shall be evidenced by the Swing Line Loan Notes and each Swing Line Loan shall be paid in full by the applicable Borrower on or before the fifth Business Day after the Borrowing Date for such Swing Line Loan. Outstanding Swing Line Loans may be repaid from the proceeds of Revolving Loans or Swing Line Loans. Any repayment of a Swing Line Loan shall be accompanied by accrued interest thereon and shall be in the minimum amount of $50,000 (or such lesser amount as may be agreed to by the applicable Swing Line Lender) and in increments of $50,000 (or such lesser amount as may be agreed to by the applicable Swing Line Lender) in excess thereof or the full amount of such Swing Line Loan. If the applicable Borrower at any time fails to repay a Swing Line Loan on the applicable date when due, the applicable Borrower shall be deemed to have elected to borrow a Revolving Loan which shall be a Base Rate Loan under Section 2.2 as of such date equal in amount to the unpaid amount of such Swing Line Loan (notwithstanding the minimum amount of Base Rate Advances as provided in Section 2.9). The proceeds of any such Advance shall be used to repay such Swing Line Loan. Unless the Administrative Agent upon the request of or with the consent of the Required Lenders shall have notified the applicable Swing -48- 58 Line Lender prior to such Swing Line Lender making any Swing Line Loan, that the applicable conditions precedent set forth in Article IV have not then been satisfied, each Lender's obligation to make Loans pursuant to Section 2.2 and this Section 2.3(d) to repay such Swing Line Loan shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including the occurrence or continuance of a Default. In the event that any Lender fails to make payment to the Administrative Agent of any amount due under this Section 2.3(d), the Administrative Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Administrative Agent receives such payment from such Lender or such obligation is otherwise fully satisfied. In addition to the foregoing, if for any reason any Lender fails to make payment to the Administrative Agent of any amount due under this Section 2.3(d), such Lender shall be deemed, at the option of the Administrative Agent, to have unconditionally and irrevocably purchased from the applicable Swing Line Lender, without recourse or warranty, an undivided interest in and participation in the applicable Swing Line Loan in the amount of the Loan such Lender was required to make pursuant to this Section 2.3(d) and such interest and participation may be recovered from such Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of demand by the Administrative Agent and ending on the date such obligation is fully satisfied. 2.4 Rate Options for all Advances. The Advances may be Base Rate Advances or Eurocurrency Rate Advances, or a combination thereof, selected by the applicable Borrower in accordance with Section 2.10. The applicable Borrower may select, in accordance with Section 2.10, Rate Options and Interest Periods applicable to portions of the Revolving Loans and the Term Loans. 2.5 Optional Payments; Mandatory Prepayments. (A) Optional Payments. The Borrowers may from time to time repay or prepay, without penalty or premium all or any part of outstanding Base Rate Advances. A Eurocurrency Rate Advance may not be voluntarily repaid or prepaid prior to the last day of the applicable Interest Period. Unless the aggregate outstanding principal balance of the Term Loans is to be prepaid in full, voluntary prepayments of the Term Loans shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in excess of that amount. Each voluntary prepayment shall be applied pro rata between the Tranche A Term Loans and the Tranche B Term Loans and, in each case, applied to the unpaid installments of such Term Loans pro rata over the remaining unpaid installments. (B) Mandatory Prepayments. (i) Mandatory Prepayments of Term Loans. -49- 59 (a) Upon the consummation of any Asset Sale by Holdings, any other Borrower or any Subsidiary of any Borrower (other than Excluded Equity Sales, Excluded Transfers and other than as set forth in Section 6.2(G) with respect to insurance and condemnation proceeds and other than other Asset Sales which generate Net Cash Proceeds of less than $250,000 in any one fiscal year) or, except as otherwise expressly provided in Section 2.5(B)(i)(d)(II), the issuance of any Indebtedness for borrowed money of Holdings or any other Borrower (other than Indebtedness permitted pursuant to Section 6.3(A)(f) and (i)), within three (3) Business Days after the applicable Borrower's or Subsidiary's (i) receipt of any Net Cash Proceeds from any such Asset Sale or issuance of Indebtedness for borrowed money, or (ii) conversion to cash or Cash Equivalents of non-cash proceeds (whether principal or interest and including securities, release of escrow arrangements or lease payments) received from any Asset Sale, Holdings shall make or cause to be made a mandatory prepayment of the Obligations in an amount equal to one hundred percent (100%) of such Net Cash Proceeds (or in the case of the issuance of Subordinated Notes pursuant to the Supplemental Subordinated Note Agreement, not less than $20,000,000) or such proceeds converted from non-cash to cash or Cash Equivalents in the case of Asset Sales, including, without limitation, Asset Sales consisting of the issuance of Capital Stock or ownership, membership or other equity interests. (b) Simultaneously with the delivery of the annual audited financial statements required to be delivered pursuant to Section 6.1(A)(iii) for each Cash Flow Period, Holdings shall calculate Excess Cash Flow for such Cash Flow Period and shall make a mandatory prepayment, payable no later than ten (10) days after such calculation is made and financial statements are delivered in an amount equal to the difference between (1) seventy-five percent (75%), or, with respect to each Cash Flow Period beginning with the Cash Flow Period ending December 31, 1999 or, if Holdings effects an offering of Subordinated Notes in an aggregate principal amount of not less than $100,000,000 in accordance with Section 6.2(M), with respect to each Cash Flow Period beginning with the Cash Flow Period ending December 31, 1997, fifty percent (50%) of such Excess Cash Flow and (2) all prepayments of Term Loans made during such period (other than repayments of Term Loans to the extent financed with new Term Loans) and the aggregate amount of all permanent reductions in the Aggregate Revolving Loan Commitment made during such period. (c) Nothing in this Section 2.5(B)(i) shall be construed to constitute the Lenders' consent to any transaction referred to in Section 2.5(B)(i)(a) above which is not expressly permitted by the terms of this Agreement. (d) Each mandatory prepayment required by clauses (a) and (b) of this Section 2.5(B) shall be referred to herein as a "DESIGNATED PREPAYMENT". Except as set forth in clause (f) below and in Section 6.2(G) with respect proceeds of insurance and -50- 60 condemnation, Designated Prepayments shall be allocated and applied to the Obligations as follows: (I) the amount of each Designated Prepayment (other than a Designated Prepayment attributable to the issuance of Subordinated Notes pursuant to either the High Yield Note Agreement or the Supplemental Subordinated Note Agreement) shall be applied pro rata between the Tranche A Term Loans and the Tranche B Term Loans and, in each case, applied to the unpaid installments of such Term Loans in the inverse order of their maturity; (II) the amount of each Designated Prepayment attributable to the issuance of Subordinated Notes pursuant to the High Yield Note Agreement shall be applied as follows: first, to repay in full the Subordinated Notes issued pursuant to the Subordinated Note Agreement and, at Holdings' option, the Seller Note; second, at Holdings' option, up to $7,500,000 may be applied to reduce the outstanding balance of the Revolving Credit Obligations (without reducing the Revolving Loan Commitment); and, third, pro rata between the Tranche A Term Loans and the Tranche B Term Loans and, in each case, applied to the unpaid installments of such Term Loans on a pro rata basis; (III) the amount of each Designated Prepayment attributable to the issuance of Subordinated Notes pursuant to the Supplemental Subordinated Note Agreement shall be applied pro rata between the Tranche A Term Loans and the Tranche B Term Loans and, in each case, applied to the unpaid installments of such Term Loans on a pro rata basis; and (IV) following the payment in full of the Term Loans, the amount of each Designated Prepayment shall be applied to repay Revolving Loans (but shall reduce Revolving Loan Commitments only at the option of the Required Lenders) and following the payment in full of the Revolving Loans, the amount of each Designated Prepayment shall be applied first to interest on the Reimbursement Obligations, then to principal on the Reimbursement Obligations, then to fees on account of Letters of Credit and then, to the extent any L/C Obligations are contingent, deposited with the Administrative Agent as cash collateral in respect of such L/C Obligations. (e) Any Tranche B Term Loan Lender may decline any Designated Prepayment attributable to an Asset Sale or to Excess Cash Flow (but not Designated Prepayments attributable to the issuance of Subordinated Notes pursuant to the High Yield Note Agreement or the Supplemental Subordinated Note Agreement), in which case the amount -51- 61 declined will be applied pro rata to each of the then remaining installments of the Tranche A Term Loans in the inverse order of maturity. (f) Unless Holdings directs otherwise and agrees to pay any resulting breakage costs as required by Section 3.4, on the date any Designated Prepayment is received by the Administrative Agent, such prepayment shall be applied first to Base Rate Loans and to any Eurocurrency Rate Loans maturing on such date. The Administrative Agent shall hold the remaining portion of such Designated Prepayment as cash collateral in an interest bearing deposit account and shall apply funds from such account to subsequently maturing Eurocurrency Rate Loans in order of maturity unless the applicable Borrower directs the Administrative Agent to prepay specific Eurocurrency Rate Loans and agrees to make the payments required pursuant to Section 3.4 in connection therewith. (g) Notwithstanding anything herein to the contrary, if, in connection with the making of the mandatory prepayment under clause (a) in connection with any Asset Sale (other than from the issuance, sale, conveyance or disposition of Capital Stock or ownership, membership or other equity interests), the Borrowers notify the Administrative Agent of their intention to use the proceeds (1) for replacement assets purchased not longer than thirty (30) days prior to the consummation of such sale, which assets at or prior to the time of such purchase were identified to the Administrative Agent as assets being purchased in anticipation of a reinvestment sale under this provision ("SCHEDULED ASSETS") or (2) to replace the assets sold with operating assets to be used in one or more lines of business in which the Borrowers were engaged at the time of such Asset Sale, then, provided and to the extent that such proceeds do not exceed $7,500,000, the Administrative Agent shall, upon receipt of such proceeds and at the Borrowers' direction, (y) return the same to the applicable Borrower for application to the cost of the purchase of Scheduled Assets or (z) apply the same to the principal amount of the Revolving Loans outstanding at the time of such receipt and create a corresponding reserve against Revolving Credit Availability in an amount equal to such application (the "REINVESTMENT RESERVE") or, if the outstanding balance of the Revolving Loan is zero, hold such proceeds in an interest bearing account as cash collateral for the Loans. To the extent that such proceeds exceed $7,500,000, they shall be applied as a mandatory prepayment of the Term Loans pursuant to Section 2.5(B). For up to 120 days from the date of any Asset Sale not in connection with Scheduled Assets (the "REINVESTMENT PERIOD"), the Borrowers may notify the Administrative Agent that they seek the use of such funds to replace the property subject to any such Asset Sale with operating assets to be used in one or more lines of business in which the Borrowers were engaged at the time of such Asset Sale. Should a Default occur at any time during the Reinvestment Period, should the Borrowers notify the Administrative Agent that they have decided not to replace such property during the Reinvestment Period, or should the Borrowers fail to consummate such repurchase during the Reinvestment Period, then the amounts held as the -52- 62 Reinvestment Reserve shall, unless otherwise agreed by the Required Lenders, be applied as a mandatory prepayment pursuant to Section 2.5(B) and allocated in accordance with clause (d) above. Amounts constituting the Reinvestment Reserve shall be disbursed as payments for replacement of such property; provided, however, should a Default occur after the Borrowers have notified the Administrative Agent that they intend to replace the property, the Reinvestment Reserve shall, unless otherwise agreed by the Required Lenders, be applied as a mandatory prepayment pursuant to Section 2.5(B) and allocated in accordance with clause (d) above. In the event the Reinvestment Reserve is to be applied as a mandatory prepayment to the Term Loans, the Borrowers shall be deemed to have requested Revolving Loans in an amount equal to the Reinvestment Reserve, and such Loans shall be made regardless of any failure of the Borrowers to meet the conditions precedent set forth in Article IV. Upon completion of the replacement of such property, the unused proceeds shall constitute Net Cash Proceeds of an Asset Sale and shall be allocated in accordance with clause (d) above. (ii) Mandatory Prepayments of Revolving Loans. In addition to repayments under Section 2.5(B)(i)(d)(II), if at any time and for any reason the Dollar Amount of the Revolving Credit Obligations is greater than the Dollar Amount of the Maximum Revolving Credit Amount or the Dollar Amount of the Revolving Credit Obligations owed by Holdings, AAS and Valley exceeds the U.S. Borrowing Base, the Borrowers shall immediately make a mandatory prepayment of the Obligations in an amount equal to such excess, provided, however, that to the extent that such excess is attributable to changes in currency exchanges rates, any such mandatory prepayment to eliminate such excess will be required only at the end of the Interest Period next ended, or to the extent necessary to avoid the incurrence of breakage costs under Section 3.4 the Interest Period or Periods next ended thereafter. In addition, if the Revolving Credit Availability is at any time less than the amount of contingent L/C Obligations outstanding at any time, the Borrowers shall deposit cash collateral with the Administrative Agent in an amount equal to the amount by which such L/C Obligations exceed such Maximum Revolving Credit Amount. (iii) Subject to the preceding provisions of this Section 2.5(B), all of the mandatory prepayments made under this Section 2.5(B) shall be applied first to Base Rate Loans and to any Eurocurrency Rate Loans maturing on such date. The Administrative Agent shall hold the remaining portion of such mandatory prepayment as cash collateral in an interest bearing deposit account and shall apply funds from such account to subsequently maturing Eurocurrency Rate Loans in order of maturity. 2.6 Reduction of Commitments. The Borrowers may permanently reduce the Aggregate Revolving Loan Commitment in whole, or in part ratably among the Lenders, in an aggregate minimum amount of $500,000 and integral multiples of $250,000 in excess of that amount, upon at least one Business Day's prior written notice to the Administrative Agent, which notice shall specify the amount of any such reduction; provided, however, that the amount of the Aggregate Revolving Loan Commitment may not be reduced below the aggregate principal amount of the -53- 63 outstanding Revolving Credit Obligations. All accrued commitment fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder. 2.7 Method of Borrowing. The Administrative Agent shall notify each Lender by 11:30 a.m. (Detroit time) of each Advance on the Borrowing Date of each Base Rate Advance, three Business Days before the Borrowing Date of each Eurocurrency Rate Advance in Dollars and four Business Days before the Borrowing Date for each Eurocurrency Rate Advance in an Agreed Currency other than Dollars and, not later than 1:00 p.m. (Detroit time) on each Borrowing Date, each Lender shall make available its Revolving Loan or Loans, in funds immediately available in Detroit to the Administrative Agent at its address specified pursuant to Article XIII hereof unless the Administrative Agent has notified the Lenders that such Loan is to be made available to the applicable Borrower at the Administrative Agent's Eurocurrency Payment Office in which case each Lender shall make available its Revolving Loan or Loans, in funds immediately available to the Administrative Agent at its Eurocurrency Payment Office not later than 1:00 p.m. (local time in the city of the Administrative Agent's Eurocurrency Payment Office) in the Agreed Currency designated by the Administrative Agent. The Administrative Agent will promptly make the funds so received from the Lenders available to the applicable Borrower. 2.8 Method of Selecting Types and Interest Periods for Advances; Determination of Applicable Margins. (a) Method of Selecting Types and Interest Periods for Advances. The applicable Borrower shall select the Type of Advance and, in the case of each Eurocurrency Rate Advance, the Interest Period and Agreed Currency applicable to each Advance from time to time. The applicable Borrower shall give the Administrative Agent irrevocable notice (a "BORROWING NOTICE") not later than 11:00 a.m. (Detroit time) on the Borrowing Date of each Base Rate Advance, three Business Days before the Borrowing Date for each Eurocurrency Rate Advance in Dollars and four Business Days before the Borrowing Date for each Eurocurrency Rate Advance in an Agreed Currency other than Dollars, specifying: (i) the Borrowing Date (which shall be a Business Day) of such Advance; (ii) the aggregate amount of such Advance; (iii) the Type of Advance selected; and (iv) in the case of each Eurocurrency Rate Advance, the Interest Period and Agreed Currency applicable thereto. Each Advance in an Agreed Currency other than Dollars must be a Eurocurrency Rate Advance. There shall be no more than eight Interest Periods in effect with respect to all of the Loans at any time. The Borrowers shall select Interest Periods so that, to the best of the Borrowers' knowledge, it will not be necessary to prepay all or any portion of any Eurocurrency Rate Advance prior to the last day of the applicable Interest Period in order to make mandatory prepayments as required pursuant to the terms hereof. Each Base Rate Advance shall bear interest from and including the date of the making of such Advance to (but not including) the date of repayment thereof at the Base Rate, changing when and as such Base Rate changes. All Obligations (other than Advances) shall bear interest from and including the date such amount is payable under the -54- 64 terms of this Agreement or the other Loan Documents to (but not including) the date of repayment thereof at the Base Rate, changing when and as such Base Rate changes. Changes in the rate of interest on that portion of any Advance maintained as a Base Rate Loan or such other Obligations will take effect simultaneously with each change in the Alternate Base Rate. Each Eurocurrency Rate Advance shall bear interest from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Eurocurrency Rate Advance. (b) Determination of Applicable Margins, Applicable Letter of Credit Fee and Applicable Commitment Fee. (i) Definitions. As used in this Section 2.8(b) and in this Agreement, the following terms shall have the following meanings: "Applicable Margins", "Applicable Commitment Fee" and "Applicable Letter of Credit Fee" shall mean the Applicable Base Rate Margin and/or Applicable Eurocurrency Margin, with respect to Loans and the Applicable Commitment Fee and/or Applicable Letter of Credit Fee, with respect to fees payable as the case may be. The Applicable Margins shall be determined, in accordance with the provisions of this Section 2.8(b), by reference to the following: -55- 65
APPLICABLE BASE APPLICABLE BASE APPLICABLE EUROCURRENCY APPLICABLE APPLICABLE SENIOR DEBT RATIO RATE MARGIN FOR RATE MARGIN FOR MARGIN FOR TRANCHE A TERM EUROCURRENCY COMMITMENT TRANCHE A TERM TRANCHE B TERM LOANS AND REVOLVING LOANS MARGIN FOR FEE LOANS AND LOANS AND APPLICABLE LETTER OF TRANCHE B REVOLVING LOANS CREDIT FEE TERM LOANS GREATER THAN OR EQUAL TO 4.0 TO 1.75% 2.25% 2.75% 3.25% 0.50% 1.0 LESS THAN 4.0 TO 1.0 AND GREATER THAN OR EQUAL TO 1.50% 2.00% 2.50% 3.00% 0.50% 3.5 TO 1.0 LESS THAN 3.5 TO 1.0 AND GREATER THAN OR EQUAL TO 1.25% 1.75% 2.25% 2.75% 0.50% 3.0 TO 1.0 LESS THAN 3.0 TO 1.0 AND GREATER THAN OR EQUAL TO 1.00% 1.50% 2.00% 2.50% 0.50% 2.5 TO 1.0 LESS THAN 2.5 TO 1.0 AND GREATER THAN OR EQUAL TO 0.75% 1.25% 1.75% 2.25% 0.375% 2.0 TO 1.0 LESS THAN 2.0 TO 1.0 0.50% 1.00% 1.50% 2.00% 0.375%
"Senior Debt Ratio" shall have the meaning ascribed to that term in Section 6.4(A). (ii) Determination of Applicable Margins, Applicable Letter of Credit Fee and Applicable Commitment Fee. (A) Subject to the provisions of clause (C) below, the Applicable Margin in respect of any Loan, the Applicable Letter of Credit Fee payable under Section 2.25 and the Applicable Commitment Fee payable under Section 2.15(c) shall be determined by reference to the tables set forth in clause (i) above, as applicable, on the basis of the Senior -56- 66 Debt Ratio (calculated as provided in Section 6.4(A)) determined by reference to the most recent financial statements delivered pursuant to Section 6.1(A)(ii) or 6.1(A)(iii). (B) Upon receipt of the financial statements delivered pursuant to Section 6.1(A)(ii) or Section 6.1(A)(iii), as applicable, the Applicable Margins for all outstanding Loans, the Applicable Letter of Credit Fee and Applicable Commitment Fee shall be adjusted, such adjustment being effective on the first (1st) Business Day after receipt of such financial statements and the Compliance Certificate to be delivered in connection therewith; provided, however, if the Borrowers shall not have timely delivered such financial statements in accordance with Section 6.1(A)(ii) or Section 6.1(A)(iii), as applicable, beginning with the date upon which such financial statements should have been delivered and continuing until such financial statements are delivered, it shall be assumed for purposes of determining the Applicable Margins, the Applicable Commitment Fee and the Applicable Letter of Credit Fee that the Senior Debt Ratio was greater than or equal to 4.0 to 1.0. (C) Notwithstanding anything herein to the contrary, from the Effective Date to but not including the first Business Day following receipt of the Borrowers' quarterly financial statements delivered pursuant to Section 6.1(A)(ii) for the quarter ended June 30, 1997, the Applicable Margins, Applicable Letter of Credit Fee and Applicable Commitment Fee shall be determined based upon an assumption that the Senior Debt Ratio is greater than 4.0 to 1.0. In addition, notwithstanding anything herein to the contrary, from the Effective Date to but not including the first Business Day following receipt of the Borrowers' quarterly financial statements delivered pursuant to Section 6.1(A)(ii) for the quarter ending September 30, 1998, the Borrowers shall not be entitled to a reduction in the Applicable Margins, Applicable Letter of Credit Fee or Applicable Commitment Fee to the lowest Applicable Margins, Applicable Letter of Credit Fee and Applicable Commitment Fee (based upon a Senior Debt Ratio of less than 2.0 to 1.0). 2.9 Minimum Amount of Each Advance. Each Eurocurrency Rate Advance shall be in the minimum amount of $1,000,000 or the Approximate Equivalent Amount of any Agreed Currency other than Dollars (and in multiples of $500,000 or the Approximate Equivalent Amount of any Agreed Currency other than Dollars if in excess thereof), and each Base Rate Advance shall be in the minimum amount of $500,000 (and in multiples of $100,000 if in excess thereof), provided, however, that any Base Rate Advance may be in the amount of the unused Aggregate Revolving Loan Commitment. 2.10 Method of Selecting Types and Interest Periods for Conversion and Continuation of Advances. (A) Right to Convert. The Borrowers may elect from time to time, subject to the provisions of Section 2.4, Section 2.8 and this Section 2.10, to convert all or any part of a Loan -57- 67 (other than a Swing Line Loan) of any Type into any other Type or Types of Loans; provided that any conversion of any Eurocurrency Rate Advance shall be made on, and only on, the last day of the Interest Period applicable thereto. (B) Automatic Conversion and Continuation. Base Rate Loans shall continue as Base Rate Loans unless and until such Base Rate Loans are converted into Eurocurrency Rate Loans. Eurocurrency Rate Loans shall continue as Eurocurrency Rate Loans until the end of the then applicable Interest Period therefor, at which time such Eurocurrency Rate Loans (other than Eurocurrency Rate Loans in an Agreed Currency other than Dollars) shall be automatically converted into Base Rate Loans unless the Borrower shall have given the Administrative Agent notice in accordance with Section 2.10(D) requesting that, at the end of such Interest Period, such Eurocurrency Rate Loans continue as a Eurocurrency Rate Loan. Eurocurrency Rate Loans in an Agreed Currency other than Dollars shall automatically continue as Eurocurrency Rate Loans unless the applicable Borrower notifies the Administrative Agent otherwise as provided herein. (C) No Conversion Post-Default or Post-Unmatured Default. Notwithstanding anything to the contrary contained in Section 2.10(A) or Section 2.10(B), no Loan may be converted into or continued as a Eurocurrency Rate Loan (other than a Eurocurrency Rate Loan in an Agreed Currency other than Dollars) except with the consent of the Required Lenders when any Default or Unmatured Default has occurred and is continuing. (D) Conversion/Continuation Notice. The Borrower shall give the Administrative Agent irrevocable notice (a "CONVERSION/CONTINUATION NOTICE") of each conversion of a Base Rate Loan into a Eurocurrency Rate Loan or continuation of a Eurocurrency Rate Loan (other than a Eurocurrency Rate Loan in an Agreed Currency other than Dollars) not later than 11:00 a.m. (Detroit time) three Business Days or with respect to the continuation of a Eurocurrency Rate Loan in an Agreed Currency other than Dollars, four Business Days prior to the date of the requested conversion or continuation, specifying: (1) the requested date (which shall be a Business Day) of such conversion or continuation; (2) the amount and Type of the Loan to be converted or continued; and (3) the amounts of Eurocurrency Rate Loan(s) into which such Loan is to be converted or continued and the duration of the Interest Periods applicable thereto. If no such notice is given with respect to a Eurocurrency Rate Loan in an Agreed Currency other than Dollars, the Interest Period applicable to the automatic continuation of such Loan shall be one month. 2.11 Default Rate. After the occurrence and during the continuance of a Default, at the option of the Administrative Agent or at the direction of the Required Lenders, the interest rate(s) applicable to the Obligations and the letter of credit fee payable under Section 2.25 with respect to Letters of Credit shall be increased by two percent (2.0%) per annum above the Base Rate, Eurocurrency Rate or Applicable Letter of Credit Fee, as applicable. -58- 68 2.12 Collections Account Arrangements. (a) All collections of Receivables owed to AAS or Valley included in the Collateral and other proceeds of Collateral shall be deposited in a Collection Account which is subject to a Collection Account Agreement or pursuant to another similar arrangement for the collection of such amounts established by AAS or Valley, as applicable, and the Documentation and Collateral Agent and shall be transferred in accordance with the provisions of the respective Collection Account Agreements. On or prior to the Effective Date, AAS and Valley shall each have entered into and shall thereafter maintain lock-box services agreements with banks which are parties to Collection Account Agreements and to which lock-boxes Account Debtors shall directly remit all payments on Receivables. Any of the foregoing collections received by AAS or Valley and not so deposited, shall be deemed to have been received by AAS or Valley, as applicable, as the Documentation and Collateral Agent's trustee and, upon receipt thereof by AAS or Valley, as applicable, AAS or Valley shall immediately transfer all such amounts into the applicable Collection Account in their original form. Such deposits shall be remitted to the Documentation and Collateral Agent, or as the Documentation and Collateral Agent may direct, all in accordance with the provisions of the Collection Account Agreements. (b) Following the Collection Account Blockage Date and during the continuance of a Default giving rise thereto, (i) all payments received by the Documentation and Collateral Agent, all collections of Receivables owed to AAS or Valley included in the Collateral received by the Documentation and Collateral Agent, and all proceeds of other Collateral received by the Documentation and Collateral Agent, whether through payment or otherwise, will be the sole property of the Documentation and Collateral Agent for the benefit of the Holders of Secured Obligations and will be deemed received by the Documentation and Collateral Agent for application to the Obligations pursuant to the terms of this Agreement. 2.13 Method of Payment. All payments of principal, interest, and fees hereunder shall be made, without setoff, deduction or counterclaim, to the Administrative Agent (i) at the Administrative Agent's office in Detroit, Michigan in immediately available funds with respect to Advances denominated in Dollars and (ii) in the Administrative Agent's Eurocurrency Payment Office in immediately available funds with respect to any Advance denominated in an Agreed Currency other than Dollars, in each case, or at any other Lending Installation of the Administrative Agent specified in writing (by 9:00 a.m. (Detroit time) on the day before the date when due) by the Administrative Agent to the Borrower, by 2:00 p.m. local time in Detroit with respect to Advances denominated in Dollars and 2:00 p.m. local time in the Administrative Agent's Eurocurrency Payment Office with respect to Advances denominated in an Agreed Currency other than Dollars on the date when due and shall be made ratably among the Lenders (unless such amount is not to be shared ratably in accordance with the terms hereof). Each Advance shall be repaid or prepaid in the currency in which it was made in the amount borrowed and interest payable thereon shall be paid in such currency. Each payment delivered to the Administrative Agent for the account of any Lender shall be delivered promptly by the Administrative Agent to such Lender in the same type of funds which the Administrative Agent -59- 69 received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Administrative Agent from such Lender. The Borrowers authorize the Administrative Agent or the Documentation and Collateral Agent to charge any account of any Borrower maintained with Chase or NBD, as applicable, for each payment of principal, interest and fees as it becomes due hereunder. Notwithstanding the foregoing provisions of this Section, if, after the making of any Advance in any currency other than Dollars, currency control or exchange regulations are imposed in the country which issues such currency with the result that different types of such currency (the "New Currency") are introduced and the type of currency in which the Advance was made (the "Original Currency") no longer exists or the applicable Borrower is not able to make payment to the Administrative Agent for the account of the Lenders in such Original Currency, then all payments to be made by the applicable Borrower hereunder or under the Notes in such currency shall be made in such amount and such type of the New Currency or Dollars as shall be equivalent to the amount of such payment otherwise due hereunder or under the Notes in the Original Currency, it being the intention of the parties hereto that the Borrowers take all risks of the imposition of any such currency control or exchange regulations. In addition, notwithstanding the foregoing provisions of this Section, if, after the making of any Advance in any currency other than Dollars, the applicable Borrower is not able to make payment to the Administrative Agent for the account of the Lenders in the type of currency in which such Advance was made because of the imposition of any such currency control or exchange regulation, then such Advance shall instead be repaid when due in Dollars in a principal amount equal to the Dollar Amount (as of the date of repayment) of such Advance. 2.14 Notes, Telephonic Notices. Each Lender is authorized to record the principal amount of each of its Loans and each repayment with respect to its Loans on the schedule attached to its respective Notes; provided, however, that the failure to so record shall not affect the applicable Borrower's obligations under any such Note. The Borrowers authorize the Lenders and the Administrative Agent to extend Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Administrative Agent or any Lender in good faith believes to be acting on behalf of one or more of the Borrowers. The Borrowers agree to deliver promptly to the Administrative Agent a written confirmation, signed by an Authorized Officer, if such confirmation is requested by the Administrative Agent or any Lender, of each telephonic notice. If the written confirmation differs in any material respect from the action taken by the Administrative Agent and the Lenders, (i) the telephonic notice shall govern absent manifest error and (ii) the Administrative Agent or the Lender, as applicable, shall promptly notify the Authorizing Officer who provided such confirmation of such difference. 2.15 Promise to Pay; Interest and Fees; Interest Payment Dates; Interest and Fee Basis; Taxes; Loan and Control Accounts. (A) Promise to Pay. Each of the Borrowers unconditionally promises to pay when due the principal amount of each Loan made to it and all other Obligations incurred by it, and to pay -60- 70 all unpaid interest accrued thereon, in accordance with the terms of this Agreement and the Notes, it being understood and agreed that each non-U.S. Borrower shall be obligated to repay only the Loans made to it and pay the other Obligations incurred by it and certain other Loans made and Obligations incurred by other non-U.S. Borrowers. (B) Interest Payment Dates. Interest accrued on each Base Rate Loan shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof, on any date on which the Base Rate Loan is prepaid, whether due to acceleration or otherwise, and at maturity (whether by acceleration or otherwise). Interest accrued on each Eurocurrency Rate Loan shall be payable on the last day of its applicable Interest Period, on any date on which the Eurocurrency Rate Loan is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Eurocurrency Rate Loan having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest accrued on the principal balance of all other Obligations shall be payable in arrears (i) upon repayment thereof in full or in part, (ii) if not theretofore paid in full, at the time such other Obligation becomes due and payable (whether by acceleration or otherwise) and (iii) if not theretofore paid in full, on demand, commencing on the first such day following the date such Obligation became payable pursuant to the terms of this Agreement or the other Loan Documents. (C) Fees. (i) Holdings shall pay or cause the appropriate Subsidiary to pay to the Administrative Agent, for the account of the Lenders in accordance with their Tranche A Pro Rata Shares, a commitment fee accruing at the rate of the Applicable Commitment Fee per annum from and after the Effective Date until the Termination Date on the amount by which (A) the Aggregate Revolving Loan Commitment in effect from time to time exceeds (B) the Revolving Credit Obligations (excluding the outstanding balance of any Swing Line Loans) in effect from time to time. All such commitment fees payable under this clause (C) shall be payable quarterly in arrears on the last calendar day of each quarter occurring after the Effective Date and, in addition, on the Termination Date. For purposes of calculating the Applicable Commitment Fee hereunder, the principal amount of each Advance made in a currency other than Dollars shall be the Dollar Amount of such Advance as determined under clause (ii) of the definition of "Dollar Amount". (ii) Holdings agrees to pay or cause the appropriate Subsidiary to pay to the Administrative Agent and the Documentation and Collateral Agent, respectively, the fees set forth in the letter agreements (A) among the Administrative Agent, AAS and Holdings dated July 10, 1997 and (B) among Holdings, AAS, the Agents and the Arrangers dated July 10, 1997. (D) Interest and Fee Basis. Interest and fees shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Obligation is incurred but not for the day of any payment on the amount paid if payment is received prior to 12:00 noon local time in Detroit with respect to Advances denominated in Dollars and 12:00 noon local time in the Administrative Agent's Eurocurrency Payment Office with respect to Advances denominated in an -61- 71 Agreed Currency other than Dollars at the place of payment. If any payment of principal of or interest on a Loan or any payment of any other Obligations shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. (E) Taxes. (i) Any and all payments by any of the Borrowers hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings or any liabilities with respect thereto including those arising after the date hereof as a result of the adoption of or any change in any law, treaty, rule, regulation, guideline or determination of a Governmental Authority or any change in the interpretation or application thereof by a Governmental Authority but excluding, in the case of each Lender and the Administrative Agent, such taxes (including income taxes, franchise taxes and branch profit taxes) as are imposed on or measured by such Lender's or Administrative Agent's, as the case may be, income by the United States of America or any Governmental Authority of the jurisdiction under the laws of which such Lender or Administrative Agent, as the case may be, is organized (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings, and liabilities which the Administrative Agent or a Lender determines to be applicable to this Agreement, the other Loan Documents, the Revolving Loan Commitments, the Loans or the Letters of Credit being hereinafter referred to as "TAXES"). If any of the Borrowers shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the other Loan Documents to any Lender or the Administrative Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.15(E)) such Lender or Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, and (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. If a withholding tax of the United States of America or any other Governmental Authority shall be or become applicable (y) after the date of this Agreement, to such payments by any of the Borrowers made to the Lending Installation or any other office that a Lender may claim as its Lending Installation, or (z) after such Lender's selection and designation of any other Lending Installation, to such payments made to such other Lending Installation, such Lender shall use reasonable efforts to make, fund and maintain its Loans through another Lending Installation of such Lender in another jurisdiction so as to reduce the Borrowers' liability hereunder, if the making, funding or maintenance of such Loans through such other Lending Installation of such Lender does not, in the good faith judgment of such Lender, otherwise adversely affect such Loans, or obligations under the Revolving Loan Commitments or such Lender. -62- 72 (ii) In addition, Holdings agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, or similar levies that arise from any payment made hereunder, from the issuance of Letters of Credit hereunder, or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the other Loan Documents, the Revolving Loan Commitments, the Loans or the Letters of Credit (hereinafter referred to as "OTHER TAXES"). (iii) Subject to Section 2.15(E)(vii), Holdings indemnifies each Lender and the Administrative Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any Governmental Authority on amounts payable under this Section 2.15(E)) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within thirty (30) days after the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor. A certificate as to any additional amount payable to any Lender or the Administrative Agent under this Section 2.15(E) submitted to Holdings and the Administrative Agent (if a Lender is so submitting) by such Lender or the Administrative Agent shall show in reasonable detail the amount payable and the calculations used to determine such amount and shall, absent manifest error, be final, conclusive and binding upon all parties hereto. With respect to such deduction or withholding for or on account of any Taxes and to confirm that all such Taxes have been paid to the appropriate Governmental Authorities, Holdings shall promptly (and in any event not later than thirty (30) days after receipt) furnish to each Lender and the Administrative Agent such certificates, receipts and other documents as may be required (in the judgment of such Lender or the Administrative Agent) to establish any tax credit to which such Lender or the Administrative Agent may be entitled. A payment may be made by Holdings or by the Subsidiary that is the Borrower with respect to the Loan that gives rise to such payment. (iv) Within thirty (30) days after the date of any payment of Taxes or Other Taxes by any Borrower, such Borrower shall furnish to the Administrative Agent the original or a certified copy of a receipt evidencing payment thereof. (v) Without prejudice to the survival of any other agreement of Holdings hereunder, the agreements and obligations of Holdings contained in this Section 2.15(E) shall survive the payment in full of principal and interest hereunder, the termination of the Letters of Credit and the termination of this Agreement. (vi) Without limiting the obligations of the Borrowers under this Section 2.15(E), each Lender that is not created or organized under the laws of the United States of America or a political subdivision thereof shall deliver to Holdings and the Administrative -63- 73 Agent on or before the Closing Date, or, if later, the date on which such Lender becomes a Lender pursuant to Section 12.3 hereof, a true and accurate certificate executed in duplicate by a duly authorized officer of such Lender, in a form satisfactory to Holdings and the Administrative Agent, to the effect that such Lender is capable under the provisions of an applicable tax treaty concluded by the United States of America (in which case the certificate shall be accompanied by two executed copies of Form 1001 of the IRS) or under Section 1442 of the Code (in which case the certificate shall be accompanied by two copies of Form 4224 of the IRS) or, if such Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, two completed and signed copies of IRS Form W-8 or W-9 or successor applicable form, of receiving payments of interest and fees hereunder without deduction or withholding of United States federal income tax. Each such Lender further agrees to deliver to Holdings and the Administrative Agent from time to time a true and accurate certificate executed in duplicate by a duly authorized officer of such Lender substantially in a form satisfactory to Holdings and the Administrative Agent, before or promptly upon the occurrence of any event requiring a change in the most recent certificate previously delivered by it to Holdings and the Administrative Agent pursuant to this Section 2.15(E)(vi). Further, each Lender which delivers a certificate accompanied by Form 1001 of the IRS covenants and agrees to deliver to Holdings and the Administrative Agent within fifteen (15) days prior to January 1, 1999, and every third (3rd) anniversary of such date thereafter, on which this Agreement is still in effect, another such certificate and two accurate and complete original signed copies of Form 1001 (or any successor form or forms required under the Code or the applicable regulations promulgated thereunder), and each Lender that delivers a Form W-8 or W-9 as prescribed above or a certificate accompanied by Form 4224 of the IRS covenants and agrees to deliver to Holdings and the Administrative Agent within fifteen (15) days prior to the beginning of each subsequent taxable year of such Lender during which this Agreement is still in effect, another such Form W-8 or W-9 or another such certificate and two accurate and complete original signed copies of IRS Form 4224 (or any successor form or forms required under the Code or the applicable regulations promulgated thereunder). Each such certificate shall certify as to one of the following: (a) that such Lender is capable of receiving payments of interest hereunder without deduction or withholding of United States of America federal income tax; (b) that such Lender is not capable of receiving payments of interest hereunder without deduction or withholding of United States of America federal income tax as specified therein but is capable of recovering the full amount of any such deduction or withholding from a source other than the Borrowers and will not seek any such recovery from the Borrowers; or -64- 74 (c) that, as a result of the adoption of or any change in any law, treaty, rule, regulation, guideline or determination of a Governmental Authority or any change in the interpretation or application thereof by a Governmental Authority after the date such Lender became a party hereto, such Lender is not capable of receiving payments of interest hereunder without deduction or withholding of United States of America federal income tax as specified therein and that it is not capable of recovering the full amount of the same from a source other than the Borrowers. Each Lender shall promptly furnish to Holdings and the Administrative Agent such additional documents as may be reasonably required by Holdings or the Administrative Agent to establish any exemption from or reduction of any Taxes or Other Taxes required to be deducted or withheld and which may be obtained without undue expense to such Lender. (vii) None of the Borrowers shall be required to pay any additional amounts under subsection (i) above or indemnification under subsection (iii) above to the extent that the obligation to pay such additional amounts or indemnification would not have arisen but for: (a) a failure by the Lender or Administrative Agent to comply with the provisions of subsection (vi) above; or (b) the certifications referred to in subsection (vi) above not being true. (viii) Each Lender and the Administrative Agent agree that if it shall become aware that it is entitled to receive a refund in respect of Taxes or Other Taxes as to which it has been indemnified by Holdings or any other Borrower pursuant to this Section 2.15(E), it shall promptly notify Holdings of the availability of such refund and at the request of Holdings will apply for such refund; provided, however the failure to provide such notice shall not relieve Holdings or any other Borrower of any of their Obligations hereunder. Upon receipt of such refund, the Lender or Administrative Agent agrees to pay such refund to the applicable Borrower along with any interest actually received from the taxing authority, net of all out-of-pocket expenses of such Lender or Administrative Agent incurred with respect to such refund. (F) Loan Account. Each Lender shall maintain in accordance with its usual practice an account or accounts (a "LOAN ACCOUNT") evidencing the Obligations of each of the Borrowers to such Lender owing to such Lender from time to time, including the amount of principal and interest payable and paid to such Lender from time to time hereunder and under the Notes. (G) Control Account. The Register maintained by the Administrative Agent pursuant to Section 12.3(C) shall include a control account, and a subsidiary account for each Lender and each Borrower, in which accounts (taken together) shall be recorded (i) the date and amount of each Advance made hereunder, the type and currency of each Loan comprising such Advance, the -65- 75 Borrower of such Advance, and any Interest Period applicable thereto, (ii) the effective date and amount of each assignment and acceptance delivered to and accepted by it and the parties thereto pursuant to Section 12.3, (iii) the amount of any principal or interest due and payable or to become due and payable from any Borrower to each Lender hereunder or under its Notes, (iv) the amount of any sum received by the Administrative Agent from each of the Borrowers hereunder and each Lender's share thereof, and (v) all other appropriate debits and credits as provided in this Agreement, including, without limitation, all fees, charges, expenses and interest. (H) Entries Binding. The entries made in the Register and each Loan Account shall be conclusive and binding for all purposes, absent manifest error, unless the Borrowers object to information contained in the Register and each Loan Account within thirty (30) days of the Borrowers' receipt of such information. 2.16 Notification of Advances, Interest Rates, Prepayments and Aggregate Revolving Loan Commitment Reductions. Promptly after receipt thereof, the Administrative Agent will notify each Lender of the contents of each Aggregate Revolving Loan Commitment reduction notice, Borrowing Notice, Continuation/Conversion Notice, and repayment notice received by it hereunder. The Administrative Agent will notify each Lender of the interest rate applicable to each Eurocurrency Rate Loan promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate. 2.17 Lending Installations. Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Notes shall be deemed held by each Lender for the benefit of such Lending Installation. Each Lender may, by written or facsimile notice to the Administrative Agent and the Borrowers, designate a Lending Installation through which Loans will be made by it and for whose account Loan payments are to be made. 2.18 Non-Receipt of Funds by the Administrative Agent. Unless the applicable Borrower or a Lender, as the case may be, notifies the Administrative Agent prior to the date on which it is scheduled to make payment to the Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of a Borrower, a payment of principal, interest or fees to the Administrative Agent for the account of the Lenders, that it does not intend to make such payment, the Administrative Agent may assume that such payment has been made. The Administrative Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or Borrower, as the case may be, has not in fact made such payment to the Administrative Agent, the recipient of such payment shall, on demand by the Administrative Agent, repay to the Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to (i) in the case of payment by a Lender, the Federal Funds Effective Rate for such day or (ii) in the case of payment by a Borrower, the interest rate applicable to the relevant Loan. -66- 76 2.19 Termination Date. This Agreement shall be effective until the Tranche B Term Loan Termination Date. Notwithstanding the termination of this Agreement on the Tranche B Term Loan Termination Date, until all of the Obligations (other than contingent indemnity and reimbursement obligations) shall have been fully and indefeasibly paid and satisfied, all financing arrangements among the Borrowers and the Lenders shall have been terminated (other than under Interest Rate Agreements or other agreements with respect to Rate Hedging Obligations) and all of the Letters of Credit shall have expired, been canceled or terminated, all of the rights and remedies under this Agreement and the other Loan Documents shall survive and the Administrative Agent shall be entitled to retain its security interest in and to all existing and future Collateral for the benefit of itself and the Holders of Secured Obligations. 2.20 Replacement of Certain Lenders. In the event a Lender ("AFFECTED LENDER") shall have: (i) failed to fund its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, of any Advance requested by any Borrower which such Lender is obligated to fund under the terms of this Agreement and which failure has not been cured, (ii) requested compensation from the Borrower under Sections 2.15(E), 3.1 or 3.2 to recover Taxes, Other Taxes or other additional costs incurred by such Lender which are not being incurred generally by the other Lenders, (iii) delivered a notice pursuant to Section 3.3 claiming that such Lender is unable to extend Eurocurrency Rate Loans to any Borrower for reasons not generally applicable to the other Lenders or (iv) has invoked Section 9.2, then, in any such case, any Borrower or the Administrative Agent may make written demand on such Affected Lender (with a copy to the Administrative Agent in the case of a demand by any Borrower and a copy to the Borrowers in the case of a demand by the Administrative Agent) for the Affected Lender to assign, and such Affected Lender shall use its best efforts to assign pursuant to one or more duly executed assignment and acceptance agreements in substantially the form of Exhibit F five (5) Business Days after the date of such demand, to one or more financial institutions that comply with the provisions of Section 12.3(A) (and, if selected by the Borrowers is reasonably acceptable to the Administrative Agent) which any Borrower or the Administrative Agent, as the case may be, shall have engaged for such purpose ("REPLACEMENT LENDER"), all of such Affected Lender's rights and obligations under this Agreement and the other Loan Documents (including, without limitation, its Revolving Loan Commitment, all Loans owing to it, all of its participation interests in existing Letters of Credit, and its obligation to participate in Letters of Credit hereunder) in accordance with Section 12.3. The Administrative Agent agrees, upon the occurrence of such events with respect to an Affected Lender and upon the written request of any Borrower, to use its reasonable efforts to obtain the commitments from one or more financial institutions to act as a Replacement Lender. Further, with respect to such assignment the Affected Lender shall have concurrently received, in cash, all amounts due and owing to the Affected Lender hereunder or under any other Loan Document, including, without limitation, the aggregate outstanding principal amount of the Loans owed to such Lender, together with accrued interest thereon through the date of such assignment, amounts payable under Sections 2.15(E), 3.1, and 3.2 with respect to such Affected Lender and compensation payable under Section 2.15(C) in the event of any replacement of any -67- 77 Affected Lender under clause (ii) or clause (iii) of this Section 2.20; provided that upon such Affected Lender's replacement, such Affected Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15(E), 3.1, 3.2, 3.4, and 9.7, as well as to any fees accrued for its account hereunder and not yet paid, and shall continue to be obligated under Section 10.8. Upon the replacement of any Affected Lender pursuant to this Section 2.20, the provisions of Section 8.2 shall continue to apply with respect to Advances which are then outstanding with respect to which the Affected Lender failed to fund its obligations hereunder and which failure has not been cured. 2.21 Letter of Credit Facility. Upon receipt of duly executed applications therefor, and such other documents, instructions and agreements as such Issuing Lender may reasonably require, and subject to the provisions of Article IV, the Administrative Agent shall, or any other Lender in its sole discretion may, issue letters of credit denominated in dollars for the account of the applicable Borrower, on terms as are satisfactory to the Issuing Lender; provided, however, that no Letter of Credit will be issued for the account of any Borrower by an Issuing Lender if on the date of issuance, before or after taking such Letter of Credit into account, (i) the Revolving Credit Obligations at such time would exceed the Maximum Revolving Credit Amount at such time or (ii) the aggregate outstanding amount of the L/C Obligations exceeds $10,000,000; and provided, further, that no Letter of Credit shall be issued which has an expiration date more than one year after the date of issuance of such Letter of Credit or an expiration date later than the date which is five (5) Business Days immediately preceding the Termination Date. Each Issuing Lender that is not the Administrative Agent will notify the Administrative Agent of any request for issuance of a Letter of Credit prior to the issuance of such Letter of Credit. Each Letter of Credit may, upon the request of the applicable Borrower, include a provision whereby such Letter of Credit shall be renewed automatically for additional consecutive periods of 12 months or less (but not beyond the date that is five Business Days prior to the Termination Date) unless the Issuing Lender notifies the beneficiary thereof at least 30 days prior to the then-applicable expiry date that such Letter of Credit will not be renewed. That certain letter of credit No. 536224 issued by Comerica Bank for the account of Valley Industries, Inc. shall be treated as a Letter of Credit issued hereunder for all purposes from and after the Effective Date, including, without limitation, Section 2.25; Valley hereby assumes the reimbursement obligation with respect to such letter of credit. 2.22 Letter of Credit Participation. Immediately upon the issuance of each Letter of Credit by any Issuing Lender hereunder, each Lender with a Tranche A Pro Rata Share shall be deemed to have automatically, irrevocably and unconditionally purchased and received from the applicable Issuing Lender an undivided interest and participation in and to such Letter of Credit, the obligations of the applicable Borrower in respect thereof, and the liability of the applicable Issuing Lender thereunder (collectively, an "L/C INTEREST") in an amount equal to the amount available for drawing under such Letter of Credit multiplied by such Lender's Tranche A Pro Rata Share. -68- 78 The applicable Issuing Lender will notify the Administrative Agent promptly upon presentation to it of an L/C Draft or upon any other draw under a Letter of Credit and the Administrative Agent will promptly notify each Lender. On or before the Business Day on which the applicable Issuing Lender makes payment of each such L/C Draft or any other draw on a Letter of Credit, on demand of the Issuing Lender received by each Lender not later than 1:00 p.m. (Detroit time) on such Business Day, each Lender shall make payment on such Business Day to the Administrative Agent for the account of the applicable Issuing Lender, in immediately available funds in an amount equal to such Lender's Tranche A Pro Rata Share of the amount of such payment or draw. Upon the Administrative Agent's receipt of funds as a result of an Issuing Lender's payment on an L/C Draft or any other draw on a Letter of Credit issued by an Issuing Lender, the Administrative Agent shall promptly pay such funds to the Issuing Lender. The obligation of each Lender to pay the Administrative Agent for the account of the applicable Issuing Lender under this Section 2.22 shall be unconditional, continuing, irrevocable and absolute. In the event that any Lender fails to make payment to the Administrative Agent of any amount due under this Section 2.22, the Administrative Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Administrative Agent on behalf of the applicable Issuing Lender receives such payment from such Lender or such obligation is otherwise fully satisfied; provided, however, that nothing contained in this sentence shall relieve such Lender of its obligation to reimburse the Administrative Agent for such amount in accordance with this Section 2.22. 2.23 Reimbursement Obligation. Each of the Borrowers agrees unconditionally, irrevocably and absolutely upon receipt of notice from the Administrative Agent or the applicable Issuing Lender to pay immediately to the Administrative Agent, for the account of the applicable Issuing Lender or the account of the Lenders, as the case may be, the amount of each advance which may be drawn under or pursuant to a Letter of Credit issued for its account or an L/C Draft related thereto (such obligation of each of the Borrowers to reimburse the Issuing Lender or the Administrative Agent for an advance made under a Letter of Credit or L/C Draft being hereinafter referred to as a "REIMBURSEMENT OBLIGATION" with respect to such Letter of Credit or L/C Draft), each such payment to be made by the applicable Borrower to the Administrative Agent no later than 2:00 p.m. (Detroit time) on the Business Day on which the applicable Issuing Lender makes payment of each such L/C Draft or, in the case of any other draw on a Letter of Credit, 2:00 p.m. (Detroit time) on the date specified in a demand by the Administrative Agent. Any Issuing Lender may direct the Administrative Agent to make such demand with respect to Letters of Credit issued by such Issuing Lender. If any Borrower at any time fails to repay a Reimbursement Obligation pursuant to this Section 2.23, such Borrower shall be deemed to have elected to borrow a Revolving Loan from the Lenders, as of the date of the Advance giving rise to the Reimbursement Obligation equal in amount to the amount of the unpaid Reimbursement Obligation. Such Revolving Loan shall be made as of the date of the payment giving rise to such Reimbursement Obligation, automatically, without notice and without any requirement to satisfy -69- 79 the conditions precedent otherwise applicable to an Advance of Revolving Loans if such Borrower shall have failed to make such payment to the Administrative Agent for the account of the applicable Issuing Lender prior to such time. Such Revolving Loans shall constitute a Base Rate Advance, the proceeds of which Advance shall be used to repay such Reimbursement Obligation. If, for any reason, such Borrower fails to repay a Reimbursement Obligation on the day such Reimbursement Obligation arises and, for any reason, the Lenders are unable to make or have no obligation to make a Revolving Loan, then such Reimbursement Obligation shall bear interest from and after such day, until paid in full, at the interest rate applicable to a Base Rate Advance. 2.24 Cash Collateral. Notwithstanding anything to the contrary herein or in any application for a Letter of Credit, after the occurrence and during the continuance of Default, each Borrower shall, upon the Administrative Agent's demand, deliver to the Administrative Agent for the benefit of the Lenders, cash, or other collateral of a type satisfactory to the Required Lenders, having a value, as determined by such Lenders, equal to the aggregate outstanding L/C Obligations or such Borrower. In addition, if the amount of L/C Obligations outstanding at any time exceeds the Maximum Revolving Credit Amount minus the outstanding principal balance of the Revolving Loans, Holdings shall deposit cash collateral with the Administrative Agent in an amount equal to the amount by which such L/C Obligations exceeds the Maximum Revolving Credit Amount minus the outstanding principal balance of the Revolving Loans. Any such collateral shall be held by the Administrative Agent in a separate account appropriately designated as a cash collateral account in relation to this Agreement and the Letters of Credit and retained by the Administrative Agent for the benefit of the Lenders as collateral security for the Borrowers' obligations in respect of this Agreement and each of the Letters of Credit and L/C Drafts. Such amounts shall be applied to reimburse the Administrative Agent or each Issuing Lender, as applicable, for drawings or payments under or pursuant to Letters of Credit or L/C Drafts, or if no such reimbursement is required, to payment of such of the other Obligations as the Administrative Agent shall determine. If no Default shall be continuing, amounts remaining in any cash collateral account established pursuant to this Section 2.24 which are not to be applied to reimburse the Administrative Agent for amounts actually paid or to be paid by the Administrative Agent in respect of a Letter of Credit or L/C Draft, shall be returned to the applicable Borrower (after deduction of the Administrative Agent's expenses incurred in connection with such cash collateral account). 2.25 Letter of Credit Fees. Each of the Borrowers agrees to pay (i) quarterly, in arrears, on each Payment Date to the Administrative Agent for the ratable benefit of the Lenders, except as set forth in Section 8.2, a letter of credit fee ("LETTER OF CREDIT FEE")in the amount of the Applicable Letter of Credit Fee Rate per annum on the aggregate average daily outstanding amount available for drawing under all of the Letters of Credit issued for its account, and (ii) to the Administrative Agent for the benefit of the Issuing Lenders, a fronting fee of one-eighth of one percent (0.125%) per annum on the aggregate average daily outstanding amount available for drawing under all of the Letters of Credit issued for its account payable monthly in arrears plus all -70- 80 customary fees and other issuance, amendment, document examination, negotiation and presentment expenses and related charges in connection with the issuance, amendment, presentation of L/C Drafts, and the like customarily charged by the Issuing Lender with respect to standby and commercial Letters of Credit, including, without limitation, standard commissions with respect to commercial Letters of Credit, payable at the time of invoice of such amounts. 2.26 Indemnification; Exoneration. (a) In addition to amounts payable as elsewhere provided in this Agreement, each Borrower with respect to Letters of Credit issued for its account agrees to protect, indemnify, pay and save harmless the Administrative Agent, each Issuing Lender and each Lender from and against any and all liabilities and costs which the Administrative Agent, any Issuing Lender or any Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit other than, in the case of the Issuing Lender, as a result of its Gross Negligence or willful misconduct, as determined by the final judgment of a court of competent jurisdiction, or (ii) the failure of the Issuing Lender of a Letter of Credit to honor a drawing under such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Authority (all such acts or omissions herein called "GOVERNMENTAL ACTS"). (b) As among the Borrowers, the Lenders, the Issuing Lenders and the Administrative Agent, the Borrowers assume all risks of the acts and omissions of, or misuse of such Letter of Credit by, the beneficiary of any Letter of Credit. In furtherance and not in limitation of the foregoing, subject to the provisions of the Letter of Credit applications and Letter of Credit reimbursement agreements executed by the applicable Borrower at the time of request for any Letter of Credit, the Issuing Lender of a Letter of Credit, the Administrative Agent and the Lenders shall not be responsible (in the absence of Gross Negligence or willful misconduct in connection therewith, as determined by the final judgment of a court of competent jurisdiction): (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of the Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of a Letter of Credit to comply duly with conditions required in order to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, or other similar form of teletransmission or otherwise; (v) for errors in interpretation of technical trade terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (vii) for the misapplication by the beneficiary of a Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of the Administrative Agent, the Issuing Lender and the Lenders including, without limitation, any Governmental Acts. None -71- 81 of the above shall affect, impair, or prevent the vesting of any of the Issuing Lender's rights or powers under this Section 2.26. (c) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by an Issuing Lender under or in connection with Letters of Credit issued on behalf of any Borrower or any related certificates shall not, in the absence of Gross Negligence or willful misconduct, as determined by the final judgment of a court of competent jurisdiction, put the Issuing Lender, the Administrative Agent or any Lender under any resulting liability to any Borrower or relieve any Borrower of any of its obligations hereunder to any such Person. (d) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 2.26 shall survive the payment in full of principal and interest hereunder, the termination of the Letters of Credit and the termination of this Agreement. 2.27 Judgment Currency. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due from a Borrower hereunder or under any of the Notes in the currency expressed to be payable herein or under the Notes (the "specified currency") into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the specified currency with such other currency at the Administrative Agent's main office in Detroit, Michigan on the Business Day preceding that on which the final, non-appealable judgment is given. The obligations of the applicable Borrower in respect of any sum due to any Lender or the Administrative Agent hereunder or under any Note shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency such Lender or the Administrative Agent (as the case may be) may in accordance with normal, reasonable banking procedures purchase the specified currency with such other currency. If the amount of the specified currency so purchased is less than the sum originally due to such Lender or the Administrative Agent, as the case may be, in the specified currency, the applicable Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds (a) the sum originally due to any Lender or the Administrative Agent, as the case may be, in the specified currency and (b) any amounts shared with other Lenders as a result of allocations of such excess as a disproportionate payment to such Lender under Section 11.2, such Lender or the Agent, as the case may be, agrees to remit such excess to the applicable Borrower. 2.28 Market Disruption. Notwithstanding the satisfaction of all conditions referred to in Article II with respect to any Advance in any currency other than Dollars, if there shall occur on -72- 82 or prior to the date of such Advance any change in national or international financial, political or economic conditions or currency exchange rates or exchange controls which would in the reasonable opinion of the Administrative Agent or the Required Lenders make it impracticable for the Eurocurrency Rate Loans comprising such Advance to be denominated in the currency specified by the applicable Borrower, then the Administrative Agent shall forthwith give notice thereof to Holdings and the Lenders, and such Loans shall not be denominated in such currency but shall be made on such Borrowing Date in Dollars, in an aggregate principal amount equal to the Dollar Amount of the aggregate principal amount specified in the related Borrowing Notice, as Base Rate Loans, unless the applicable Borrower notifies the Agent at least one Business Day before such date that (i) it elects not to borrow on such date or (ii) it elects to borrow on such date in a different Agreed Currency, as the case may be, in which the denomination of such Loans would in the opinion of the Administrative Agent and the Required Lenders be practicable and in an aggregate principal amount equal to the Dollar Amount of the aggregate principal amount specified in the related Borrowing Notice. 2.29 Borrowing Subsidiaries. Holdings may at any time or from time to time, with the consent of the Administrative Agent, which consent shall not be unreasonably withheld, add as a party to this Agreement any Subsidiary to be a "Borrowing Subsidiary" hereunder by (a) the execution and delivery to the Administrative Agent of a duly completed Assumption Letter by such Subsidiary, with the written consent of Holdings at the foot thereof and (b) the execution and delivery to the Administrative Agent of such guaranty and security documents as may be reasonably required by the Administrative Agent. Upon such execution, delivery and consent, such Subsidiary shall for all purposes be a party hereto as a Borrowing Subsidiary as fully as if it had executed and delivered this Agreement. So long as the principal of and interest on any Advances made to any Borrowing Subsidiary under this Agreement shall have been repaid or paid in full, all Letters of Credit issued for the account of such Borrowing Subsidiary have expired or been returned and terminated and all other obligations of such Borrowing Subsidiary under this Agreement shall have been fully performed, Holdings may, by not less than five Business Days' prior notice to the Administrative Agent (which shall promptly notify the Lenders thereof), terminate such Borrowing Subsidiary's status as a "Borrowing Subsidiary". ARTICLE III: CHANGE IN CIRCUMSTANCES 3.1 Yield Protection. If any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) adopted after the date of this Agreement and having general applicability to all banks within the jurisdiction in which such Lender operates (excluding, for the avoidance of doubt, the effect of and phasing in of capital requirements or other regulations or guidelines passed prior to the date of this Agreement), or any interpretation or application thereof by any Governmental Authority charged with the interpretation or application thereof, or the compliance of any Lender therewith, -73- 83 (i) subjects any Lender (each reference in this Section 3.1 to a Lender being in its capacity as a Lender or an Issuing Lender, or both) or any applicable Lending Installation to any tax, duty, charge or withholding on or from payments due from any of the Borrowers (excluding taxation imposed by the United States of America or any Governmental Authority of the jurisdiction under the laws of which such Lender is organized, on the overall net income of any Lender or applicable Lending Installation), or changes the basis of taxation of payments to any Lender in respect of its Loans, its L/C Interests, the Letters of Credit or other amounts due it hereunder, provided however that this clause (i) shall not apply with respect to any Taxes to which Section 2.15(E) applies, or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation with respect to its Eurocurrency Rate Loans, L/C Interests or the Letters of Credit, or (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining the Eurocurrency Rate Loans, the L/C Interests or the Letters of Credit or reduces any amount received by any Lender or any applicable Lending Installation in connection with Eurocurrency Rate Loans or Letters of Credit, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of Loans or L/C Interests held or interest received by it or by reference to the Letters of Credit, by an amount deemed material by such Lender; and the result of any of the foregoing is to increase the cost to that Lender of making, renewing or maintaining its Loans, L/C Interests or Letters of Credit or to reduce any amount received under this Agreement, then, within 15 days after receipt by Holdings of written demand by such Lender pursuant to Section 3.5, Holdings shall pay or cause the appropriate Subsidiary to pay such Lender that portion of such increased expense incurred or reduction in an amount received which such Lender determines is attributable to making, funding and maintaining its Loans, L/C Interests, Letters of Credit and its Revolving Loan Commitment. 3.2 Changes in Capital Adequacy Regulations. If a Lender (each reference in this Section 3.2 to a Lender being in its capacity as a Lender or an Issuing Lender, or both) determines (i) the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a "Change" (as defined below), and (ii) such increase in capital will result in an increase in the cost to such Lender of maintaining its Loans, L/C Interests, the Letters of Credit or its obligation to make Loans hereunder, then, within 15 days after receipt by Holdings of written demand by such Lender pursuant to Section 3.5, Holdings shall pay or cause the appropriate Subsidiary to pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the -74- 84 portion of such increased capital which such Lender determines is attributable to this Agreement, its Loans, its L/C Interests, the Letters of Credit or its obligation to make Loans hereunder (after taking into account such Lender's policies as to capital adequacy). "CHANGE" means (i) any change after the date of this Agreement in the "Risk-Based Capital Guidelines" (as defined below) excluding, for the avoidance of doubt, the effect of any phasing in of such Risk-Based Capital Guidelines or any other capital requirements passed prior to the date hereof, or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement and having general applicability to all banks and financial institutions within the jurisdiction in which such Lender operates which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. "RISK-BASED CAPITAL GUIDELINES" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. 3.3 Availability of Types of Advances. If (i) any Lender determines that maintenance of its Eurocurrency Rate Loans at a suitable Lending Installation would violate any applicable law, rule, regulation or directive, whether or not having the force of law, or (ii) the Required Lenders determine that (x) deposits of a type, currency and maturity appropriate to match fund Eurocurrency Rate Advances are not available or (y) the interest rate applicable to a Eurocurrency Rate Advance does not accurately reflect the cost of making or maintaining such a Eurocurrency Rate Advance, then the Administrative Agent shall suspend the availability of Eurocurrency Rate Advances and, in the case of any occurrence set forth in clause (i), require any Eurocurrency Rate Advances to be repaid or, at the option of Holdings, converted to Base Rate Advances. 3.4 Funding Indemnification. If any payment of a Eurocurrency Rate Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment, or otherwise, or a Eurocurrency Rate Advance is not made or continued on the date specified by the applicable Borrower for any reason other than default by the Lenders, the applicable Borrower agrees to indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain the Eurocurrency Rate Advance. In connection with any assignment by Chase or NBD of any portion of the Loans made pursuant to Section 12.3 and made on or prior to September 8, 1997, and if any of the Borrowers has requested the use of the Eurocurrency Rate, such Borrower shall be deemed to have repaid all outstanding Eurocurrency Rate Advances as of such date and reborrowed such amount as a Base Rate Advance and/or -75- 85 Eurocurrency Rate Advance (chosen in accordance with the provisions of Section 2.4) and the indemnification provisions under this Section 3.4 shall apply. 3.5 Lender Statements; Survival of Indemnity. If reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurocurrency Rate Loans to reduce any liability of Holdings to such Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of Advance under Section 3.3, so long as such designation is not disadvantageous to such Lender. Each Lender requiring compensation pursuant to Section 2.15(E) or to this Article III shall use its best efforts to notify Holdings and the Administrative Agent in writing of any Change, law, policy, rule, guideline or directive giving rise to such demand for compensation not later than ninety (90) days following the date upon which the responsible account officer of such Lender knows or should have known of such Change, law, policy, rule, guideline or directive. Any demand for compensation pursuant to this Article III shall be in writing and shall state the amount due, if any, under Section 3.1, 3.2 or 3.4 and shall set forth in reasonable detail the calculations upon which such Lender determined such amount. Such written demand shall be rebuttably presumed correct for all purposes. Notwithstanding anything in this Agreement to the contrary, neither Holdings nor any of the other Borrowers shall be obligated to pay any amount or amounts under Section 2.15(E) or this Article III to the extent such amount or amounts result from a Change, law, policy, rule, guideline or directive which took effect more than 120 days prior to the date of delivery of the notice described above. Determination of amounts payable under such Sections in connection with a Eurocurrency Rate Loan shall be calculated as though each Lender funded its Eurocurrency Rate Loan through the purchase of a deposit of the type, currency and maturity corresponding to the deposit used as a reference in determining the Eurocurrency Rate applicable to such Loan, whether in fact that is the case or not. The obligations of the Borrowers under Sections 3.1, 3.2 and 3.4 shall survive payment of the Obligations and termination of this Agreement. ARTICLE IV: CONDITIONS PRECEDENT 4.1 Initial Advances and Letters of Credit. The Lenders shall not be required to make the initial Loans or issue any Letters of Credit unless the Borrowers have furnished to the Administrative Agent, with sufficient copies for the Lenders, such documents as the Administrative Agent or any Lender or its counsel may have reasonably requested, including, without limitation, all of the documents reflected on the List of Closing Documents attached as Exhibit G to this Agreement (other than those designated to be delivered post-closing). 4.2 Each Advance and Letter of Credit. Except as expressly provided in Sections 2.5(B)(i)(f) and 2.23, the Lenders shall not be required to make any Advance and the Issuing Lender shall not be required to issue any Letter of Credit, unless on the applicable Borrowing Date, or in the case of a Letter of Credit, the date on which the Letter of Credit is to be issued: -76- 86 (i) There exists no Default or Unmatured Default; and (ii) The representations and warranties contained in Article V are true and correct in all material respects as of such Borrowing Date, except for representations and warranties made with reference to a specific date which representations and warranties shall be true and correct in all material respects as of such date, and except for amendments to the Schedules made pursuant to the provisions of Section 1.3. Each Borrowing Notice with respect to each such Advance and the letter of credit application with respect to a Letter of Credit shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(i) and (ii) will have been satisfied as of the date of such Advance or the issuance of such Letter of Credit. Any Lender may require a duly completed officer's certificate in substantially the form of Exhibit H hereto and/or a duly completed compliance certificate in substantially the form of Exhibit I hereto as a condition to making an Advance. ARTICLE V: REPRESENTATIONS AND WARRANTIES In order to induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and the other financial accommodations to the Borrowers and in order to induce the Issuing Lender to issue the Letters of Credit described herein, each of the Borrowers represents and warrants as follows to each Lender and the Administrative Agent as of the Effective Date and thereafter on each date as required by Section 4.2: 5.1 Organization; Powers. Each of the Borrowers and each of their respective Subsidiaries (i) is a duly organized limited liability company or corporation, as applicable, validly existing and, with respect to U.S. Borrowers, in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified to do business as a foreign company or corporation and is in good standing under the laws of each jurisdiction in which failure to be so qualified and in good standing could have a Material Adverse Effect, (iii) has timely filed and maintained effective (unless exempt from the requirements for filing) a current Business Activity Report with the appropriate Governmental Authority in the States in which it is required to do so, and (iv) has all requisite power and authority to own, operate and encumber its property and to conduct its business as presently conducted giving effect to the Valley Acquisition and as proposed to be conducted in connection with and following the consummation of the transactions contemplated by this Agreement. 5.2 Authority. (A) Each of the Borrowers and each of their respective Subsidiaries has the requisite power and authority (i) to execute, deliver and perform each of the Transaction Documents which -77- 87 are to be executed by it in connection with the Valley Acquisition or which have been executed by it as required by this Agreement on or prior to the Effective Date and (ii) to file the Transaction Documents which must be filed by it in connection with the Valley Acquisition or which have been filed by it as required by this Agreement on or prior to the Effective Date with any Governmental Authority. (B) The execution, delivery, performance and filing, as the case may be, of each of the Transaction Documents which must be executed or filed by any of the Borrowers or any other Subsidiary of Holdings in connection with the Valley Acquisition or which have been executed or filed as required by this Agreement on or prior to the Effective Date and to which any of the Borrowers or any other Subsidiary of Holdings is party, and the consummation of the transactions contemplated thereby, have been duly approved, to the extent required, by the respective boards of managers or directors, as applicable, and, if necessary, the members or shareholders or workers' councils of the applicable Borrower or Subsidiary, as applicable, and such approvals have not been rescinded. No other action or proceedings on the part of any Borrower or any other Person are necessary to consummate such transactions. (C) Each of the Transaction Documents to which any of the Borrowers or any other Subsidiary of Holdings is a party has been duly executed, delivered or filed, as the case may be, by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (except as enforceability may be limited by bankruptcy, insolvency, or similar laws affecting the enforcement of creditor's rights generally), is in full force and effect and no material term or condition thereof has been amended, modified or waived from the terms and conditions contained in the Transaction Documents delivered to the Administrative Agent pursuant to Section 4.1 without the prior written consent of the Required Lenders, and each of the Borrowers or each other Subsidiary of Holdings have, and, to the best of such Borrower's or Subsidiary's knowledge, all other parties thereto have performed and complied with all the terms, provisions, agreements and conditions set forth therein and required to be performed or complied with by such parties on or before the Effective Date, and no unmatured default, default or breach of any covenant by any such party exists thereunder. 5.3 No Conflict; Governmental Consents. The execution, delivery and performance of each of the Loan Documents and other Transaction Documents to which any of the Borrowers or any other Subsidiary of Holdings is a party do not and will not (i) conflict with the documents of organization or governance of such Borrower or Subsidiary (ii) constitute tortious interference with any Contractual Obligation of any Person or conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under any Requirement of Law (including, without limitation, any Environmental Property Transfer Act) or Contractual Obligation of any Borrower or any such Subsidiary, or require termination of any Contractual Obligation, except such interference, breach, default or termination which individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect or to subject the Administrative Agent, any of the Lenders or the Issuing Lender to any liability, (iii) with respect -78- 88 to the Loan Documents and, to the best of each Borrower's and each Subsidiary's knowledge with respect to the other Transaction Documents, result in or require the creation or imposition of any Lien whatsoever upon any of the property or assets of any Borrower or any such Subsidiary, other than Liens permitted by the Loan Documents, or (iv) require any approval of the Borrower's or any such Subsidiary's members or shareholders except such as have been obtained. Except as set forth on Schedule 5.3 to this Agreement, the execution, delivery and performance of each of the Transaction Documents to which any Borrower or any other Subsidiary is a party do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by any Governmental Authority, including under any Environmental Property Transfer Act, except (i) filings, consents or notices which have been or, in the case of any of the foregoing, not required prior to the Effective Date, will be made, obtained or given, or which, if not made, obtained or given, individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect, and (ii) filings necessary to create or perfect security interests in the Collateral. 5.4 Financial Statements. The pro forma financial statements of Holdings and its Subsidiaries, copies of which are attached hereto as Exhibit J, present on an estimated pro forma basis the financial condition of Holdings and such Subsidiaries as of June 30, 1997, as if the Valley Acquisition and the other transactions contemplated hereby had been consummated as of such date, and reflect on a pro forma basis those liabilities reflected in the notes thereto and resulting from consummation of the Valley Acquisition and the transactions contemplated by this Agreement, and the payment or accrual of all Transaction Costs payable on the Effective Date with respect to any of the foregoing. The projections and assumptions expressed in the pro forma financials referenced in this Section 5.4 were prepared in good faith and represent management's opinion based on the information available to Holdings at the time so furnished. 5.5 No Material Adverse Change. (a) Since December 31, 1996 up to the Effective Date, there has occurred no change in the business, properties, condition (financial or otherwise) or results of operations of (i) Holdings and its Subsidiaries taken as a whole or (ii) Valley Industries, Inc. or any other event which has had or is reasonably likely to have a Material Adverse Effect. (b) Since the Effective Date, there has occurred no change in the business, properties, condition (financial or otherwise) or results of operations of Holdings and its Subsidiaries taken as a whole or any other event which has had or is reasonably likely to have a Material Adverse Effect. 5.6 Taxes. (A) Tax Examinations. All deficiencies which have been asserted against Holdings or any of Holdings' Subsidiaries as a result of any federal, state, local or foreign tax examination for each taxable year in respect of which an examination has been conducted have been fully paid or finally settled or are being contested in good faith, and as of the Effective Date no issue has been raised -79- 89 by any taxing authority in any such examination which, by application of similar principles, reasonably can be expected to result in assertion by such taxing authority of a material deficiency for any other year not so examined which has not been reserved for in Holdings' consolidated financial statements to the extent, if any, required by Agreement Accounting Principles. Except as permitted pursuant to Section 6.2(D), neither Holdings nor any of Holdings' Subsidiaries anticipates any material tax liability with respect to the years which have not been closed pursuant to applicable law. (B) Payment of Taxes. All tax returns and reports of each of Holdings, AAS, Brink and Holdings' other Subsidiaries required to be filed have been timely filed, and all taxes, assessments, fees and other governmental charges thereupon and upon their respective property, assets, income and franchises which are shown in such returns or reports to be due and payable have been paid except those items which are being contested in good faith and have been reserved for in accordance with Agreement Accounting Principles. Holdings has no knowledge of any proposed tax assessment against Holdings, AAS, Brink or any of Holdings' other Subsidiaries that will have or is reasonably likely to have a Material Adverse Effect. 5.7 Litigation; Loss Contingencies and Violations. Except as set forth in Schedules 5.7 and 5.18 to this Agreement, there is no action, suit, proceeding, investigation of which Holdings has knowledge or arbitration before or by any Governmental Authority or private arbitrator pending or, to the knowledge of Holdings or any of its Subsidiaries, threatened against Holdings or any of its Subsidiaries or any property of any of them (i) challenging the validity or the enforceability of any material provision of the Transaction Documents or (ii) which will have or is reasonably likely to have a Material Adverse Effect. There is no material loss contingency within the meaning of Agreement Accounting Principles which has not been reflected in the consolidated financial statements of Holdings prepared and delivered pursuant to Section 6.1(A) for the fiscal period during which such material loss contingency was incurred. Neither Holdings nor any of its Subsidiaries is (A) in violation of any applicable Requirements of Law which violation will have or is reasonably likely to have a Material Adverse Effect, or (B) subject to or in default with respect to any final judgment, writ, injunction, restraining order or order of any nature, decree, rule or regulation of any court or Governmental Authority which will have or is reasonably likely to have a Material Adverse Effect. 5.8 Subsidiaries. Schedule 5.8 to this Agreement (i) contains a description (both narratively and in flow chart form) of the corporate structure of Holdings, Holding's Subsidiaries and any other Person in which Holdings or any of its Subsidiaries holds an equity interest; and (ii) accurately sets forth (A) the correct legal name, the jurisdiction of organization or incorporation and the jurisdictions in which each Borrower and the direct and indirect Subsidiaries of Holdings is qualified to transact business as a foreign company or corporation, (B) the authorized, issued and outstanding shares of each class of Capital Stock of each entity referred to above that is a corporation and the owners of such shares (both as of the Closing Date and on a -80- 90 fully-diluted basis), and (C) a summary of the direct and indirect ownership, membership, partnership, joint venture, or other equity interests, if any, of Holdings and each Subsidiary of Holdings in any Person that is not a corporation. 5.9 ERISA. No Benefit Plan has incurred any accumulated funding deficiency (as defined in Sections 302(a)(2) of ERISA and 412(a) of the Code) whether or not waived. Neither Holdings nor any member of the Controlled Group has incurred any liability to the PBGC which remains outstanding other than the payment of premiums, and there are no premium payments which have become due which are unpaid. Schedule B to the most recent annual report filed with the IRS with respect to each Benefit Plan and furnished to the lenders is complete and accurate. Since the date of each such Schedule B, there has been no material adverse change in the funding status or financial condition of the Benefit Plan relating to such Schedule B. Neither Holdings nor any member of the Controlled Group has (i) failed to make a required contribution or payment to a Multiemployer Plan or (ii) made a complete or partial withdrawal under Sections 4203 or 4205 of ERISA from a Multiemployer Plan. Neither Holdings nor any member of the Controlled Group has failed to make a required installment or any other required payment under Section 412 of the Code on or before the due date for such installment or other payment. Neither Holdings nor any member of the Controlled Group is required to provide security to a Benefit Plan under Section 401(a)(29) of the Code due to a Plan amendment that results in an increase in current liability for the plan year. Neither Holdings nor any of its Subsidiaries maintains or contributes to any employee welfare benefit plan within the meaning of Section 3(1) of ERISA which provides benefits to employees after termination of employment other than as required by Section 601 of ERISA. Each Plan which is intended to be qualified under Section 401(a) of the Code as currently in effect is so qualified, and each trust related to any such Plan is exempt from federal income tax under Section 501(a) of the Code as currently in effect. Holdings and all Subsidiaries are in compliance in all material respects with the responsibilities, obligations and duties imposed on them by ERISA and the Code with respect to all Plans. Neither Holdings nor any of its Subsidiaries nor any fiduciary of any Plan has engaged in a nonexempt prohibited transaction described in Sections 406 of ERISA or 4975 of the Code which could reasonably be expected to subject Holdings to liability in excess of $500,000. Neither Holdings nor any member of the Controlled Group has taken or failed to take any action which would constitute or result in a Termination Event, which action or inaction could reasonably be expected to subject Holdings to liability in excess of $500,000. Neither Holdings nor any Subsidiary is subject to any liability under Sections 4063, 4064, 4069, 4204 or 4212(c) of ERISA and no other member of the Controlled Group is subject to any liability under Sections 4063, 4064, 4069, 4204 or 4212(c) of ERISA which could reasonably be expected to subject Holdings to liability in excess of $500,000. Neither Holdings nor any of its Subsidiaries has, by reason of the transactions contemplated hereby, any obligation to make any payment to any employee pursuant to any Plan or existing contract or arrangement. 5.10 Accuracy of Information. The information, exhibits and reports furnished by or on behalf of Holdings and any of its Subsidiaries to the Administrative Agent or to any Lender in -81- 91 connection with the negotiation of, or compliance with, the Loan Documents, including, without limitation, the Confidential Information Memorandum dated July, 1997 prepared by Holdings, the representations and warranties of Holdings and its Subsidiaries contained in the Loan Documents, and all certificates and documents delivered to the Administrative Agent and the Lenders pursuant to the terms thereof do not contain as of the date furnished any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. 5.11 Securities Activities. Neither Holdings nor any of its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock. 5.12 Material Agreements. Neither Holdings nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other contractual or corporate restriction which will have or is reasonably likely to have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries has received notice or has knowledge that (i) it is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation applicable to it, or (ii) any condition exists which, with the giving of notice or the lapse of time or both, would constitute a default with respect to any such Contractual Obligation, in each case, except where such default or defaults, if any, will not have or are not reasonably likely to have a Material Adverse Effect. 5.13 Compliance with Laws. Holdings and its Subsidiaries are in compliance with all Requirements of Law applicable to them and their respective businesses, in each case where the failure to so comply individually or in the aggregate will have or is reasonably likely to have a Material Adverse Effect. 5.14 Assets and Properties. Holdings and each of its Subsidiaries has good and marketable title to all of its assets and properties (tangible and intangible, real or personal) owned by it or a valid leasehold interest in all of its leased assets (except insofar as marketability may be limited by any laws or regulations of any Governmental Authority affecting such assets), and all such assets and property are free and clear of all Liens, except Liens securing the Obligations and Liens permitted under Section 6.3(C). Substantially all of the assets and properties owned by, leased to or used by Holdings and/or each such Subsidiary of Holdings are in adequate operating condition and repair, ordinary wear and tear excepted. Except for Liens granted to the Administrative Agent for the benefit of the Administrative Agent and the Holders of Secured Obligations, neither this Agreement nor any other Transaction Document, nor any transaction contemplated under any such agreement, will affect any right, title or interest of Holdings or such Subsidiary in and to any of such assets in a manner that will have or is reasonably likely to have a Material Adverse Effect. 5.15 Statutory Indebtedness Restrictions. Neither Holdings, nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or the Investment Company Act of 1940, or any other federal -82- 92 or state statute or regulation which limits its ability to incur indebtedness or its ability to consummate the transactions contemplated hereby or in connection with the Valley Acquisition. 5.16 Post-Retirement Benefits. As of the Effective Date, Holdings and its Subsidiaries have no expected cost of post-retirement medical and insurance benefits payable by Holdings or its Subsidiaries to its employees and former employees, as estimated by the Borrower in accordance with Financial Accounting Standards Board Statement No. 106. 5.17 Insurance. Schedule 5.17 to this Agreement accurately sets forth as of the Effective Date all insurance policies and programs currently in effect with respect to the respective properties and assets and business of Holdings and its Subsidiaries, specifying for each such policy and program, (i) the amount thereof, (ii) the risks insured against thereby, (iii) the name of the insurer and each insured party thereunder, (iv) the policy or other identification number thereof, (v) the expiration date thereof, (vi) the annual premium with respect thereto and (vii) describes any reserves, relating to any self-insurance program that is in effect. Such insurance policies and programs reflect coverage that is reasonably consistent with prudent industry practice. 5.18 Contingent Obligations. Except as set forth on Schedule 5.18 to this Agreement, neither Holdings nor any of its Subsidiaries has any Contingent Obligation, contingent liability, long-term lease, synthetic lease or commitment, not reflected in the pro forma financial statements attached hereto as Exhibit J or otherwise disclosed to the Administrative Agent and the Lenders in the other Schedules to this Agreement, which could reasonably be expected to subject Holdings to liability in excess of $1,000,000. 5.19 Restricted Junior Payments. Neither Holdings nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made or set apart any sum or properties for any Restricted Junior Payment or agreed to do so, except to the extent not prohibited pursuant to Section 6.3(F) of this Agreement. 5.20 Labor Matters. (A) Except as listed on Schedule 5.20 to this Agreement, there are on the Effective Date no collective bargaining agreements, other labor agreements or Multiemployer Plans covering any of the employees of Holdings or any of its Subsidiaries. As of the Effective Date, no labor disputes, strikes or walkouts affecting the operations of Holdings or any of its Subsidiaries, is pending, or, to Holdings' knowledge, threatened, planned or contemplated. (B) Set forth in Schedule 5.20 to this Agreement is a list, as of the Effective Date, of all material consulting agreements, executive compensation plans, deferred compensation agreements, employee pension plans or retirement plans, employee profit sharing plans, employee stock purchase and stock option plans, severance plans, group life insurance, hospitalization -83- 93 insurance or other plans or arrangements of Holdings, AAS and Valley providing for benefits for employees of Holdings, AAS and Valley. 5.21 The Valley Acquisition. As of the Effective Date and immediately prior to the making of the Loans hereunder to be made on the Effective Date: (i) the Acquisition Documents are in full force and effect, no material breach, default or waiver of any term or provision of any of the Acquisition Documents by Holdings or any of its Subsidiaries or, to the best of Holdings' knowledge, the other parties thereto has occurred (except for such breaches, defaults and waivers, if any, consented to in writing by the Administrative Agent) and no action has been taken by any competent authority which restrains, prevents or imposes any material adverse condition upon, or seeks to restrain, prevent or impose any material adverse condition upon, the Valley Acquisition; (ii) the representations and warranties of each of Holdings and its Subsidiaries contained in the Acquisition Documents, if any, are true and correct in all material respects; (iii) the Valley Acquisition was consummated in accordance with the Acquisition Documents. 5.22 Environmental Matters. (a) Except as disclosed on Schedule 5.22 to this Agreement (i) the operations of Holdings and its Subsidiaries comply in all material respects with Environmental, Health or Safety Requirements of Law; (ii) Holdings and its Subsidiaries have all material permits, licenses or other authorizations required under Environmental, Health or Safety Requirements of Law and are in material compliance with such permits; (iii) neither Holdings, any of its Subsidiaries nor any of their respective present property or operations, or, to the best of, Holdings' or any of its Subsidiaries' knowledge, any of their respective past property or operations, are subject to or the subject of, any investigation known to Holdings or any of its Subsidiaries, any judicial or administrative proceeding, order, judgment, decree, settlement or other agreement respecting: (A) any material violation of Environmental, Health or Safety Requirements of Law; (B) any material remedial action; or (C) any material claims or liabilities arising from the Release or threatened Release of a Contaminant into the environment; -84- 94 (iv) there is not now, nor to the best of Holdings' or any of its Subsidiaries' knowledge has there ever been on or in the property of Holdings or any of its Subsidiaries any material landfill, waste pile, underground storage tanks, aboveground storage tanks, surface impoundment or hazardous waste storage facility of any kind, polychlorinated biphenyls (PCBs) used in hydraulic oils, electric transformers or other equipment, or asbestos-containing material; and (v) neither Holdings nor any of its Subsidiaries has any material Contingent Obligation or material contingent liability in connection with any Release or threatened Release of a Contaminant into the environment. (b) For purposes of this Section 5.22 "material" means any noncompliance or basis for liability which could reasonably be likely to subject Holdings to liability in excess of $1,000,000. 5.23 Capitalization. As of the Effective Date and immediately prior to and following the funding of the Loans to be funded on the Effective Date, the subordination provisions of the Subordinated Note Agreement are enforceable against the holders of the Subordinated Notes, the subordination provisions of the Seller Note are enforceable against the holder of the Seller Note, and the Secured Obligations are within the definition of "Senior Debt" as defined in the Subordination Agreement and the Seller Note. 5.24 Solvency. After giving effect to the (i) Loans to be made on the Effective Date or such other date as Loans requested hereunder are made, (ii) the disbursement of the proceeds of such Loans pursuant to Holdings' instructions, and (iii) the transactions contemplated by the Acquisition Agreement and (iv) the payment and accrual of all Transaction Costs with respect to the foregoing, Holdings and its Subsidiaries taken as a whole is Solvent. 5.25 Foreign Employee Benefit Matters. Each Foreign Employee Benefit Plan is in compliance in all respects with all laws, regulations and rules applicable thereto and the respective requirements of the governing documents for such Plan, except for any non-compliance the consequences of which, in the aggregate, would not result in a material obligation to pay money. The aggregate of the accumulated benefit obligations under all Foreign Pension Plans does not exceed the current fair market value of the assets held in the trusts or similar funding vehicles for such Plans or reasonable reserves have been established in accordance with prudent business practices or as required by Agreement Accounting Principles with respect to any shortfall. With respect to any Foreign Employee Benefit Plan maintained or contributed to by Holdings or any Subsidiary or any member of its Controlled Group (other than a Foreign Pension Plan), reasonable reserves have been established in accordance with prudent business practice or where required by ordinary accounting practices in the jurisdiction in which such Plan is maintained. There are no actions, suits or claims (other than routine claims for benefits) pending or, to the knowledge of -85- 95 the Borrowers, threatened against Holdings or any Subsidiary or any ERISA Affiliate with respect to any Foreign Employee Benefit Plan. 5.26 Dutch Withholding. As of the Effective Date, with respect to any portion of the Loans, the interest referred to in Article II is not subject to withholding tax in The Netherlands. If any interest referred to in Article II due to a Dutch Bank or to the Dutch branch of a non-Dutch Bank are paid to the Administrative Agent in accordance with the provisions of Article XI, then, as at the Effective Date, such interest or commitment and utilization commission is not subject to any withholding in The Netherlands. For the purposes of this Section, a "Dutch Bank" shall mean a bank organized under the laws of The Netherlands and a "non-Dutch Bank" shall mean a bank organized under the laws of a country other than The Netherlands. ARTICLE VI: COVENANTS Each of the Borrowers covenants and agrees that so long as any Commitments are outstanding and thereafter until payment in full of all of the Obligations (other than contingent indemnity and reimbursement obligations), unless the Required Lenders shall otherwise give prior written consent: 6.1 Reporting. The Borrowers shall: (A) Financial Reporting. Furnish to the Administrative Agent (which will furnish copies of the following to the Lenders): (i) Monthly Reports. As soon as practicable, and in any event within forty-five (45) days after the end of each calendar month, the consolidated and consolidating balance sheet of Holdings and its Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income and of cash flow of Holdings and its Subsidiaries for such calendar month, certified by the chief financial officer of Holdings on behalf of Holdings as fairly presenting in all material respects the consolidated and consolidating financial position of Holdings and its Subsidiaries as at the dates indicated and the results of operations and cash flow for the calendar months indicated in accordance with Agreement Accounting Principles, subject to normal year end adjustments. (ii) Quarterly Reports. As soon as practicable, and in any event within forty-five (45) days after the end of each fiscal quarter in each fiscal year, the consolidated and consolidating balance sheet of Holdings and its Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income and cash flow of Holdings and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter and a comparison of the -86- 96 statement of earnings and cash flow to the budget, certified by the chief financial officer of Holdings on behalf of Holdings as fairly presenting in all material respects the consolidated and consolidating financial position of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in accordance with Agreement Accounting Principles, subject to normal year end adjustments. (iii) Annual Reports. As soon as practicable, and in any event within one hundred twenty (120) days after the end of each fiscal year, (a) the consolidated and consolidating balance sheet of Holdings and its Subsidiaries as at the end of such fiscal year and the related consolidated and consolidating statements of income, members' equity and cash flow of Holdings and its Subsidiaries for such fiscal year, and, in comparative form the corresponding figures for the previous fiscal year, (b) a schedule from Holdings setting forth for each item in clause (a) hereof, the corresponding figures from the consolidated financial budget for the current fiscal year delivered pursuant to Section 6.1(A)(v), and (c) an audit report on the items (other than the consolidating financial statements) listed in clause (a) hereof of independent certified public accountants of recognized national standing, which audit report shall be unqualified and shall state that such financial statements fairly present in all material respects the consolidated financial position of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with Agreement Accounting Principles and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards. The deliveries made pursuant to this clause (iii) shall be accompanied by (y) any management letter prepared by the above-referenced accountants and (z) a certificate of such accountants that, in the course of their examination necessary for their certification of the foregoing, (i) they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof and (ii) if a Tax Distribution has been made after the occurrence and during the continuance of any Default or Unmatured Default, they have reviewed the calculations of Income Tax Liabilities for such period and have determined that the amount of the Tax Distributions for such year does not exceed the amount permitted under Section 6.3(F). (iv) Officer's Certificate. Together with each delivery of any financial statement (a) pursuant to clauses (i), (ii) and (iii) of this Section 6.1(A), an Officer's Certificate of Holdings, substantially in the form of Exhibit H attached hereto and made a part hereof, stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof and (b) pursuant to clauses (ii) and (iii) of this Section 6.1(A), a Compliance Certificate, substantially in the form of Exhibit I attached hereto and made a part hereof, signed by Holdings' chief financial officer or treasurer, setting forth calculations for the period then ended for Section 2.5(B), if -87- 97 applicable, for Income Tax Liabilities for such period, and which demonstrate compliance, when applicable, with the provisions of Section 6.4. (v) Budgets; Business Plans; Financial Projections. As soon as practicable and in any event not later than the beginning of each fiscal year beginning with the fiscal year beginning January 1, 1998, a copy of the plan and forecast (including a projected balance sheet, income statement and funds flow statement) of Holdings for the upcoming fiscal year prepared in such detail as shall be reasonably satisfactory to the Administrative Agent. (B) Notice of Default. Promptly upon any of the chief executive officer, chief operating officer, chief financial officer, treasurer or controller of Holdings obtaining knowledge (i) of any condition or event which constitutes a Default or Unmatured Default, or becoming aware that any Lender or Administrative Agent has given any written notice with respect to a claimed Default or Unmatured Default under this Agreement, or (ii) that any Person has given any written notice to Holdings or any Subsidiary of Holdings or taken any other action with respect to a claimed default or event or condition of the type referred to in Section 7.1(e), deliver to the Administrative Agent and the Lenders an Officer's Certificate specifying (a) the nature and period of existence of any such claimed default, Default, Unmatured Default, condition or event, (b) the notice given or action taken by such Person in connection therewith, and (c) what action Holdings has taken, is taking and proposes to take with respect thereto. (C) Lawsuits. (i) Promptly upon Holdings obtaining knowledge of the institution of, or written threat of, any action, suit, proceeding, governmental investigation or arbitration against or affecting Holdings or any of its Subsidiaries or any property of Holdings or any of its Subsidiaries not previously disclosed pursuant to Section 5.7, which action, suit, proceeding, governmental investigation or arbitration exposes, or in the case of multiple actions, suits, proceedings, governmental investigations or arbitrations arising out of the same general allegations or circumstances which expose, in Holdings' reasonable judgment, Holdings or any of its Subsidiaries to liability in an amount aggregating $1,000,000 or more (exclusive of claims covered by insurance policies of Holdings or any of its Subsidiaries unless the insurers of such claims have disclaimed coverage or reserved the right to disclaim coverage on such claims and exclusive of claims covered by the indemnity of a financially responsible indemnitor in favor of Holdings or any of its Subsidiaries (unless the indemnitor has disclaimed or reserved the right to disclaim coverage thereof)), give written notice thereof to the Administrative Agent on behalf of the Lenders and provide such other information as may be reasonably available to enable each Lender and the Administrative Agent and its counsel to evaluate such matters; and (ii) in addition to the requirements set forth in clause (i) of this Section 6.1(C), upon request of the Administrative Agent or the Required Lenders, promptly give written notice of the status of any action, suit, proceeding, governmental investigation or arbitration covered by a report delivered pursuant to clause (i) above and provide such other information as may be reasonably available to it that would not result in loss of any attorney-client privilege by disclosure to the Lenders to enable each Lender and the Administrative Agent and its counsel to evaluate such matters. -88- 98 (D) Insurance. As soon as practicable and in any event within one hundred twenty (120) days of the end of each fiscal year, deliver to the Administrative Agent and the Lenders (i) a report in form and substance reasonably satisfactory to the Administrative Agent and the Lenders outlining all material insurance coverage maintained as of the date of such report by Holdings and its Subsidiaries and the duration of such coverage and (ii) an insurance broker's statement that all premiums with respect to such coverage have been paid when due. (E) ERISA Notices. Deliver or cause to be delivered to the Administrative Agent and the Lenders, at Holdings' expense, the following information and notices as soon as reasonably possible, and in any event: (i) (a) within ten (10) Business Days after any Borrower obtains knowledge that a Termination Event has occurred, a written statement of the chief financial officer of Holdings describing such Termination Event and the action, if any, which Holdings has taken, is taking or proposes to take with respect thereto, and when known, any action taken or threatened by the IRS, DOL or PBGC with respect thereto and (b) within ten (10) Business Days after any member of the Controlled Group obtains knowledge that a Termination Event has occurred which could reasonably be expected to subject Holdings to liability in excess of $250,000, a written statement of the chief financial officer of Holdings describing such Termination Event and the action, if any, which the member of the Controlled Group has taken, is taking or proposes to take with respect thereto, and when known, any action taken or threatened by the IRS, DOL or PBGC with respect thereto; (ii) within ten (10) Business Days after Holdings or any of its Subsidiaries obtains knowledge that a prohibited transaction (defined in Sections 406 of ERISA and Section 4975 of the Code) has occurred, a statement of the chief financial officer of Holdings describing such transaction and the action which Holdings or such Subsidiary has taken, is taking or proposes to take with respect thereto; (iii) within ten (10) Business Days after any material increase in the benefits of any existing Plan or the establishment of any new Benefit Plan or the commencement of, or obligation to commence, contributions to any Benefit Plan or Multiemployer Plan to which Holdings or any member of the Controlled Group was not previously contributing, notification of such increase, establishment, commencement or obligation to commence and the amount of such contributions; (iv) within ten (10) Business Days after Holdings or any of its Subsidiaries receives notice of any unfavorable determination letter from the IRS regarding the qualification of a Plan under Section 401(a) of the Code, copies of each such letter; -89- 99 (v) within thirty (30) Business Days after the establishment of any Foreign Employee Benefit Plan or the commencement of, or obligation to commence, contributions to any Foreign Employee Benefit Plan to which Holdings or any Subsidiary was not previously contributing, notification of such establishment, commencement or obligation to commence and the amount of such contributions; (vi) within ten (10) Business Days after the filing thereof with the IRS, a copy of each funding waiver request filed with respect to any Benefit Plan and all communications received by Holdings or a member of the Controlled Group with respect to such request; (vii) within ten (10) Business Days after receipt by Holdings or any member of the Controlled Group of the PBGC's intention to terminate a Benefit Plan or to have a trustee appointed to administer a Benefit Plan, copies of each such notice; (viii) within ten (10) Business Days after receipt by Holdings or any member of the Controlled Group of a notice from a Multiemployer Plan regarding the imposition of withdrawal liability, copies of each such notice; (ix) within ten (10) Business Days after Holdings or any member of the Controlled Group fails to make a required installment or any other required payment under Section 412 of the Internal Revenue Code on or before the due date for such installment or payment, a notification of such failure; and (x) within ten (10) Business Days after Holdings or any member of the Controlled Group knows or has reason to know that (a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan. For purposes of this Section 6.1(E), Holdings, any of its Subsidiaries and any member of the Controlled Group shall be deemed to know all facts known by the Administrator of any Plan of which the Borrower or any member of the Controlled Group or such Subsidiary is the plan sponsor. (F) Labor Matters. Notify the Administrative Agent and the Lenders in writing, promptly upon Holdings' or any of its Subsidiaries' learning thereof, of (i) any labor dispute to which Holdings or any of its Subsidiaries may become a party, including, without limitation, any strikes, lockouts or other disputes relating to such Persons' plants and other facilities and (ii) any Worker Adjustment and Retraining Notification Act liability incurred with respect to the closing of any plant or other facility of Holdings or any of its Subsidiaries where, in the case of (i) or (ii), such is reasonably likely to have a Material Adverse Effect. -90- 100 (G) Other Indebtedness. Deliver to the Administrative Agent (i) a copy of each regular report, notice or communication regarding potential or actual defaults (including any accompanying officers' certificate) delivered by or on behalf of Holdings to the holders of Indebtedness for money borrowed pursuant to the terms of the agreements governing such Indebtedness, such delivery to be made at the same time and by the same means as such notice or other communication is delivered to such holders, and (ii) a copy of each notice or other communication received by Holdings from the holders of Indebtedness for money borrowed pursuant to the terms of such Indebtedness, such delivery to be made promptly after such notice or other communication is received by Holdings. (H) Other Reports. Deliver or cause to be delivered to the Administrative Agent and the Lenders copies of all financial statements, reports and notices, if any, sent or made available generally by Holdings to owners of ownership, membership or other equity interests in Holdings or filed with the Commission by Holdings, all press releases made available generally by Holdings or any of Holdings' Subsidiaries to the public concerning material developments in the business of Holdings or any such Subsidiary and all notifications received from the Commission by Holdings or its Subsidiaries pursuant to the Securities Exchange Act and the rules promulgated thereunder. (I) Environmental Notices. As soon as possible and in any event within ten (10) days after receipt by Holdings or any of its Subsidiaries, a copy of (i) any notice or claim to the effect that Holdings or any of its Subsidiaries is or may be liable to any Person as a result of the Release by Holdings, any of its Subsidiaries, or any other Person of any Contaminant into the environment, and (ii) any notice alleging any violation of any Environmental, Health or Safety Requirements of Law by Holdings or any of its Subsidiaries if, in either case, such notice or claim relates to an event which could reasonably be expected to subject Holdings or any of its Subsidiaries to liability in excess of $500,000. (J) Borrowing Base Certificate. As soon as practicable, and in any event within thirty (30) days after the close of each calendar month (and more often if requested by the Administrative Agent, the Documentation and Collateral Agent or the Required Lenders but no more often than once weekly for so long as no Default has occurred and is continuing), Holdings shall provide the Administrative Agent, the Documentation and Collateral Agent and the Lenders with a Borrowing Base Certificate, together with such supporting documents as the Administrative Agent or the Documentation and Collateral Agent deems desirable, all certified as being true and correct by the chief financial officer or treasurer of Holdings. Holdings may update the Borrowing Base Certificate and supporting documents more frequently than monthly and the most recently delivered Borrowing Base Certificate shall be the applicable Borrowing Base Certificate for purposes of determining the Borrowing Base at any time. (K) Other Information. Promptly upon receiving a request therefor from the Administrative Agent, prepare and deliver to the Administrative Agent and the Lenders such other information with respect to Holdings, any of its Subsidiaries, or the Collateral, including, without -91- 101 limitation, schedules identifying and describing the Collateral and any dispositions thereof or any Asset Sale (and the use of the Net Cash Proceeds thereof), as from time to time may be reasonably requested by the Administrative Agent or the Documentation and Collateral Agent. 6.2 Affirmative Covenants. (A) Existence, Etc. Holdings shall, and shall cause each of its Subsidiaries to, at all times maintain its existence and preserve and keep, or cause to be preserved and kept, in full force and effect its rights and franchises material to its businesses except that any Subsidiary of Holdings may merge with or liquidate into Holdings or any other Subsidiary of Holdings, provided that the surviving entity expressly assumes any liabilities, if any, of either of such Subsidiaries with respect to the Obligations pursuant to an assumption agreement reasonably satisfactory to the Administrative Agent and provided further that the consolidated net worth of the surviving corporation is not less than the consolidated net worth of the Subsidiary with any liability with respect to the Obligations immediately prior to such merger and any limited liability company other than Holdings can elect to terminate its existence and Holdings can merge or liquidate into a corporation that expressly assumes Holdings' liabilities with respect to the Obligations pursuant to an assumption agreement reasonably satisfactory to the Administrative Agent provided the consolidated net worth of such corporation following such merger is not less than the consolidated net worth of Holdings immediately prior to such merger. (B) Powers. Holdings shall, and shall cause each of its Subsidiaries to qualify and remain qualified to do business in each jurisdiction in which the nature of its business requires it to be so qualified and where the failure to be so qualified will have or is reasonably likely to have a Material Adverse Effect. (C) Compliance with Laws, Etc. Holdings shall, and shall cause its Subsidiaries to, (a) comply with all Requirements of Law and all restrictive covenants affecting such Person or the business, properties, assets or operations of such Person, and (b) obtain as needed all Permits necessary for its operations and maintain such Permits in good standing unless failure to comply or obtain could not reasonably be anticipated to have a Material Adverse Effect. (D) Payment of Taxes and Claims; Tax Consolidation. Holdings shall pay, and cause each of its Subsidiaries to pay, (i) all taxes, assessments and other governmental charges imposed upon it or on any of its properties or assets or in respect of any of its franchises, business, income or property before any penalty or interest accrues thereon, and (ii) all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien (other than a Lien permitted by Section 6.3(C)) upon any of Holdings' or such Subsidiary's property or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided, however, that no such taxes, assessments and governmental charges referred to in clause (i) above or claims referred to in clause (ii) above (and interest, penalties or fines relating thereto) need be paid if being contested in good faith by appropriate proceedings diligently instituted and conducted and if such reserve or -92- 102 other appropriate provision, if any, as shall be required in conformity with Agreement Accounting Principles shall have been made therefor. Holdings will not permit any of its Subsidiaries to file or consent to the filing of any consolidated income tax return with any Person other than Holdings or any of its Subsidiaries. (E) Insurance. Holdings shall maintain for itself and its Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force and effect the insurance policies and programs listed on Schedule 5.17 to this Agreement or substantially similar policies and programs or other policies and programs as reflect coverage that is reasonably consistent with prudent industry practice. Holdings shall deliver to the Administrative Agent endorsements (y) to all "All Risk" physical damage insurance policies on all of the Borrowers' tangible real and personal property and assets and business interruption insurance policies naming the Documentation and Collateral Agent loss payee, and (z) to all general liability and other liability policies naming the Administrative Agent an additional insured. In the event Holdings, at any time or times hereafter shall fail to obtain or maintain any of the policies or insurance required herein or to pay any premium in whole or in part relating thereto, then the Administrative Agent, without waiving or releasing any obligations or resulting Default hereunder, may at any time or times thereafter (but shall be under no obligation to do so) obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which the Administrative Agent deems advisable. All sums so disbursed by the Administrative Agent shall constitute part of the Obligations, payable as provided in this Agreement. (F) Inspection of Property; Books and Records; Discussions. Holdings shall permit, and cause each of Holdings' Subsidiaries to permit, any authorized representative(s) designated by either the Administrative Agent or any Lender to visit and inspect any of the properties of Holdings or any of its Subsidiaries, to examine, audit, check and make copies of their respective financial and accounting records, books, journals, orders, receipts and any correspondence and other data relating to their respective businesses or the transactions contemplated hereby and by the Valley Acquisition (including, without limitation, in connection with environmental compliance, hazard or liability), and to discuss their affairs, finances and accounts with their officers and independent certified public accountants, all upon reasonable notice and at such reasonable times during normal business hours, as often as may be reasonably requested; provided, the Administrative Agent and the Lenders shall not retain independent accountants to conduct an accounting audit pursuant to the provisions of this Section unless a Default or Unmatured Default shall have occurred and be continuing. Holdings shall keep and maintain, and cause each of Holdings' Subsidiaries to keep and maintain, in all material respects, proper books of record and account in which entries in conformity with Agreement Accounting Principles shall be made of all dealings and transactions in relation to their respective businesses and activities, including, without limitation, transactions and other dealings with respect to the Collateral. If a Default has occurred and is continuing, Holdings, upon the Administrative Agent's request, shall turn over any such records to the Administrative Agent or its representatives. -93- 103 (G) Insurance and Condemnation Proceeds. Holdings directs (and, if applicable, shall cause its Subsidiaries to direct) all insurers under policies of property damage, boiler and machinery and business interruption insurance and payors of any condemnation claim or award relating to the property to pay all proceeds payable under such policies or with respect to such claim or award for any loss with respect to the Collateral directly to the Documentation and Collateral Agent, for the benefit of the Documentation and Collateral Agent and the Holders of the Secured Obligations; provided, however, in the event that such proceeds or award are less than $100,000 ("EXCLUDED PROCEEDS"), unless a Default shall have occurred and be continuing, the Documentation and Collateral Agent shall remit such Excluded Proceeds to Holdings. Each such policy shall contain a long-form loss-payable endorsement naming the Documentation and Collateral Agent as loss payee, which endorsement shall be in form and substance acceptable to the Documentation and Collateral Agent. The Documentation and Collateral Agent shall, upon receipt of such proceeds (other than Excluded Proceeds) and at Holdings' direction, either remit such proceeds to the Administrative Agent which will apply the same to the principal amount of the Revolving Loans outstanding at the time of such receipt and create a corresponding reserve against Revolving Credit Availability in an amount equal to such application (the "INSURANCE RESERVE") or hold them as cash collateral for the Obligations. For up to 180 days from the date of any loss (the "DECISION PERIOD"), Holdings may notify the Documentation and Collateral Agent that it intends to restore, rebuild or replace the property subject to any insurance payment or condemnation award and shall, as soon as practicable thereafter, provide the Documentation and Collateral Agent detailed information, including a construction schedule and cost estimates. Should a Default occur at any time during the Decision Period, should Holdings notify the Documentation and Collateral Agent that it has decided not to rebuild or replace such property during the Decision Period, or should Holdings fail to notify the Documentation and Collateral Agent of Holdings' decision during the Decision Period, then the amounts held as cash collateral pursuant to this Section 6.2(G) or as the Insurance Reserve shall, at the option of the Required Lenders, be applied as a mandatory prepayment of the Term Loans pursuant to Section 2.5(B). Proceeds held as cash collateral pursuant to this Section 6.2(G) or constituting the Insurance Reserve shall be disbursed as payments for restoration, rebuilding or replacement of such property as such amounts become due; provided, however, should a Default occur after Holdings has notified the Documentation and Collateral Agent that it intends to rebuild or replace the property, the Insurance Reserve or amounts held as cash collateral may, or shall, upon the Required Lenders' direction, be applied as a mandatory prepayment of the Term Loans pursuant to Section 2.5(B). In the event the Insurance Reserve is to be applied as a mandatory prepayment to the Term Loans, Holdings shall be deemed to have requested Revolving Loans in an amount equal to the Insurance Reserve, and such Loans shall be made regardless of any failure of Holdings to meet the conditions precedent set forth in Article IV. Upon completion of the restoration, rebuilding or replacement of such property, the unused proceeds shall constitute Net Cash Proceeds of an Asset Sale and shall be applied as a mandatory prepayment of the Term Loans pursuant to Section 2.5(B). Proceeds of insurance with respect to non-U.S. assets will be applied only to Loans made to a non-U.S. Borrower. -94- 104 (H) ERISA Compliance. Holdings shall, and shall cause each of Holdings' U.S. Subsidiaries to, establish, maintain and operate all Plans to comply in all material respects with the provisions of ERISA, the Code, all other applicable laws, and the regulations and interpretations thereunder and the respective requirements of the governing documents for such Plans. (I) Maintenance of Property. Holdings shall cause all property used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in adequate condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of Holdings may be necessary so that the business carried on in connection therewith may be properly conducted at all times; provided, however, that nothing in this Section 6.2(I) shall prevent Holdings from discontinuing the operation or maintenance of any of such property if such discontinuance is, in the judgment of Holdings, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Administrative Agent or the Lenders. (J) Environmental Compliance. Holdings and its Subsidiaries shall comply with all Environmental, Health or Safety Requirements of Law, except where noncompliance will not have or is not reasonably likely to subject Holdings and its Subsidiaries to liability, individually or in the aggregate, in excess of $500,000 (excluding amounts covered by indemnity claims that are not in dispute). (K) Use of Proceeds. Holdings shall use the proceeds of the Loans to effect the Valley Acquisition, to pay Transaction Costs, and to provide funds for the working capital needs and other general corporate purposes of the Borrowers and to repay outstanding Indebtedness. Holdings will not, nor will it permit any Subsidiary to, use any of the proceeds of the Loans to purchase or carry any "Margin Stock" or to make any Acquisition, other than the Valley Acquisition and any Permitted Acquisition pursuant to Section 6.3(G). (L) Interest Rate Agreements. Within one hundred eighty (180) days after the Effective Date, Holdings shall enter or AAS or Valley shall have entered into, and shall thereafter maintain, Interest Rate Agreements on terms and with counterparties determined by Holdings and reasonably acceptable to the Administrative Agent. In the event a Lender elects to enter into any Interest Rate Agreement with Holdings, the obligations of Holdings with respect to such Interest Rate Agreement shall be Secured Obligations secured by the Collateral. (M) High Yield Offering. On or before December 31, 1997, Holdings either (i) will effect an offering of Subordinated Notes in an aggregate principal amount of not less than $100,000,000 pursuant to the High Yield Note Agreement which shall contain terms, including, without limitation, terms with respect to amount, maturity, amortization, interest rate, premiums, fees, redemption, covenants, subordination terms, events of default and remedies satisfactory to the Lenders or (ii) will have raised an additional $20,000,000 in net proceeds through the issuance of additional Subordinated Notes pursuant to the Supplemental Subordinated Note Agreement -95- 105 which shall contain terms, including, without limitation, terms with respect to amount, maturity, amortization, interest rate, premiums, fees, redemption, covenants, subordination terms, events of default and remedies substantially identical to those in the Subordinated Note Agreement or otherwise satisfactory to the Required Lenders. (N) Foreign Employee Benefit Compliance. Holdings shall, and shall cause each of its Subsidiaries and ERISA Affiliates to, establish, maintain and operate all Foreign Employee Benefit Plans to comply in all material respects with all laws, regulations and rules applicable thereto and the respective requirements of the governing documents for such Plans, except for failures to comply which, in the aggregate, would not result in a material obligation to pay money. 6.3 Negative Covenants. (A) Indebtedness. Neither Holdings nor any of its Subsidiaries shall directly or indirectly create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except: (a) the Obligations; (b) the Transaction Costs; (c) Permitted Existing Indebtedness, and any extension, renewal, refunding or refinancing thereof, provided that any such extension, renewal, refunding or refinancing is in an aggregate principal amount not greater than the principal amount of and interest, fees and expenses accrued on, such Permitted Existing Indebtedness outstanding at the time thereof and is on terms (including, without limitation, maturity, amortization, interest rate, premiums, fees, covenants, events of default, and remedies) not materially less favorable to the obligor or materially adverse to the Lenders than the terms of such Permitted Existing Indebtedness; (d) Indebtedness evidenced by the Subordinated Notes, but not any increase in the principal amount thereof or interest rate or fees applicable thereto and not any refinancing or refunding thereof, in whole or in part, unless (i) any such refinancing is in an aggregate principal amount not greater than the principal amount of and interest, fees and expenses accrued on, such Subordinated Notes outstanding at the time thereof; (ii) the terms of such refinancing or refunding, including, without limitation, with respect to amount, maturity, amortization, interest rate, premiums, fees, covenants, subordination terms, events of default and remedies have been disclosed in writing to the Administrative Agent and the Lenders not later than fifteen (15) Business Days prior to the date of the proposed refinancing and (iii) neither the Administrative Agent nor the Required Lenders shall have informed Holdings within ten (10) Business Days of the receipt of the written terms of such proposed refinancing, that, in their reasonable judgment, such refinancing or refunding is materially less favorable to Holdings or adverse to the interests of the -96- 106 Lenders, including, without limitation, with respect to amount, maturity, amortization, interest rate, premiums, fees, covenants, subordination terms, events of default and remedies; (e) Indebtedness evidenced by the Seller Note but not any increase in the principal amount thereof or interest rate or fees applicable thereto and not any refinancing or refunding thereof, in whole or in part; (f) Indebtedness arising from intercompany loans from (1) Holdings or any Subsidiary of Holdings to any Borrower, or (2) any Subsidiary that is not a Borrower to any other Subsidiary or (3) Brink or Brink International to any Subsidiary of Brink or Brink International provided the aggregate amount of all Indebtedness of such Subsidiaries of Brink or Brink International to Brink or Brink International does not exceed in the aggregate the sum of $12,000,000 or the Equivalent Amount thereof, and provided further that all such Indebtedness is evidenced by notes (or other evidence of indebtedness acceptable to the Documentation and Collateral Agent) which are pledged to the Documentation and Collateral Agent, (it being understood that notes and debt obligations pledged by non-U.S. Subsidiaries will secure payment only of Advances made to non-U.S. Subsidiaries); (g) Indebtedness in respect of Interest Rate Agreements permitted under Section 6.3(R); (h) Indebtedness with respect to warranties and indemnities made under any agreements for Asset Sales permitted under Section 6.3(B); (i) secured or unsecured purchase money Indebtedness (including Capitalized Leases) incurred by Holdings or any of its Subsidiaries after the Closing Date to finance the acquisition of fixed assets, if (1) at the time of such incurrence, no Default or Unmatured Default has occurred and is continuing or would result from such incurrence, (2) such Indebtedness has a scheduled maturity and is not due on demand, (3) such Indebtedness does not exceed in the aggregate outstanding at any time $4,000,000, and (4) any Lien securing such Indebtedness is permitted under Section 6.3(C) (such Indebtedness being referred to herein as "PERMITTED PURCHASE MONEY INDEBTEDNESS"); (j) Indebtedness with respect to surety, appeal and performance bonds obtained by Holdings or any of its Subsidiaries in the ordinary course of business; (k) Indebtedness constituting Contingent Obligations permitted by Section 6.3(E); -97- 107 (l) unsecured Indebtedness and other liabilities incurred in the ordinary course of business and consistent with past practice, but not incurred through the borrowing of money or the obtaining of credit (other than customary trade terms); and (m) Indebtedness incurred by AAS Canada on or after July 2, 1997 in an amount not to exceed Twenty Four Million Canadian Dollars (C$24,000,000.00) to purchase certain assets pursuant to the Bell Purchase Agreement, to effect the Nomadic Sports Purchase and to provide for the working capital needs of AAS Canada. (B) Sales of Assets. Neither Holdings nor any of its Subsidiaries shall sell, assign, transfer, lease, convey or otherwise dispose of any property, whether now owned or hereafter acquired, or any income or profits therefrom, or enter into any agreement to do so, except: (i) sales of Inventory in the ordinary course of business; (ii) the disposition of obsolete equipment in the ordinary course of business; (iii) subject to compliance in connection therewith with the terms of Section 2.5(B), sales, assignments, transfers, leases, conveyances or other dispositions of other assets if such transaction (a) is for all cash consideration with respect to any Collateral which is sold, (b) is for not less than fair market value, and (c) when combined with all such other sales, assignments, transfers, conveyances or other dispositions in the immediately preceding twelve-month period represents the disposition of not greater than ten percent (10.0%) of Holdings' consolidated (y) tangible assets or (z) revenues; (iv) subject to compliance in connection therewith with the terms of Section 2.5(B) and Section 6.2(G), non-consensual dispositions of property resulting from casualty damage (provided the loss is covered by insurance in accordance with the provisions of Section 6.2(E)) or condemnation; and (v) Excluded Transfers. (C) Liens. Neither Holdings nor any of its Subsidiaries shall directly or indirectly create, incur, assume or permit to exist any Lien on or with respect to any of their respective property or assets except: (i) Liens created by the Loan Documents; (ii) Permitted Existing Liens; (iii) Customary Permitted Liens; -98- 108 (iv) Liens to secure Indebtedness permitted pursuant to Section 6.3(A)(f); (v) purchase money Liens (including the interest of a lessor under a Capitalized Lease and Liens to which any property is subject at the time of the acquisition thereof by Holdings or one of its Subsidiaries) securing Permitted Purchase Money Indebtedness; provided that such Liens shall not apply to any property of Holdings or its Subsidiaries other than that purchased or subject to such Capitalized Lease; and (vi) Liens to secure Indebtedness permitted pursuant to Section 6.3(A)(m). In addition, neither Holdings nor any or its Subsidiaries (other than AAS Canada) shall become a party to any agreement, note, indenture or other instrument, or take any other action, which would prohibit the creation of a Lien on any of its properties or other assets in favor of the Administrative Agent for the benefit of itself and the Holders of Secured Obligations, as additional collateral for the Obligations; provided that any agreement, note, indenture or other instrument in connection with Permitted Purchase Money Indebtedness (including Leases) may prohibit the creation of a Lien in favor of the Administrative Agent for the benefit of itself and the Holders of the Secured Obligations on the items of property obtained with the proceeds of such Permitted Purchase Money Indebtedness. (D) Investments. Except to the extent permitted pursuant to paragraph (G) below, neither Holdings nor any of its Subsidiaries shall directly or indirectly make or own any Investment except: (i) Investments in Cash Equivalents; (ii) Permitted Existing Investments in an amount not greater than the amount thereof on the Effective Date; (iii) Investments received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (iv) Investments consisting of deposit accounts maintained by AAS or Valley in connection with their cash management systems provided funds deposited in such deposit accounts are regularly transferred to concentration accounts maintained, as of the date of this Agreement with the Documentation and Collateral Agent, or such other concentration account as is established with the consent of the Administrative Agent; (v) Investments consisting of deposit accounts maintained by AAS Canada, or Brink International or Brink or any other Subsidiaries of Brink International; -99- 109 (vi) Investments made prior to the occurrence of a Default or Unmatured Default in third parties or joint ventures consisting of manufacturing operations in a related line of business to that of AAS and which can provide manufacturing support to AAS ("DESIGNATED INVESTMENTS"), provided the aggregate amount of Designated Investments after the date hereof do not exceed $5,000,000 and treating such Designated Investment as capital expenditures, after making such Investments, AAS is in full compliance with the Terms of Section 6.4; (vii) Investments made by Holdings in Brink Acquisition prior to January 31, 1997 and in Brink International, by Brink Acquisition in Brink and its Subsidiaries and in Brink International and Investments made prior to January 31, 1997 by Brink International in Brink and its Subsidiaries; (viii) Investments with respect to Indebtedness permitted pursuant to Section 6.3(A)(f); (ix) Investments with any other Persons which do not exceed $50,000 in the aggregate at any time; (x) Investments by AAS Canada effected pursuant to the Bell Purchase Agreement; and (xi) Investments in AAS Canada in an aggregate amount not to exceed C$2,500,000. (E) Contingent Obligations. Neither Holdings nor any of its Subsidiaries shall directly or indirectly create or become or be liable with respect to any Contingent Obligation, except: (i) recourse obligations resulting from endorsement of negotiable instruments for collection in the ordinary course of business; (ii) Permitted Existing Contingent Obligations and any extensions, renewals or replacements thereof, provided that any such extension, renewal or replacement is not greater than the Indebtedness under, and shall be on terms no less favorable to Holdings or such Subsidiary than the terms of, the Permitted Existing Contingent Obligation being extended, renewed or replaced; (iii) obligations, warranties, and indemnities, not relating to Indebtedness of any Person, which have been or are undertaken or made in the ordinary course of business and not for the benefit of or in favor of an Affiliate of Holdings or such Subsidiary; (iv) Contingent Obligations arising under the Transaction Documents; (v) Contingent Obligations of Holdings or any of its Subsidiaries with respect to any Indebtedness permitted by this Agreement, (vi) additional Contingent Obligations which do not exceed $500,000 in the aggregate at any time; (vii) Contingent Obligations with respect to surety, appeal and performance bonds obtained by borrower or any subsidiary in the ordinary course of business; (viii) guaranties by Holdings and AAS of Indebtedness incurred by AAS Canada to the Canadian Lenders to finance the purchase pursuant to the Bell Purchase Agreement and any earnout or contingent purchase price payments -100- 110 assumed pursuant to the Bell Purchase Agreement, to finance the Nomadic Sports Purchase and to provide for the working capital needs of AAS Canada; and (ix) earnout or contingent purchase price obligations assumed by AAS Canada pursuant to the Bell Purchase Agreement in an aggregate amount not to exceed C$2,500,000. (F) Restricted Junior Payments. Neither Holdings nor any of its Subsidiaries shall declare or make any Restricted Junior Payment, except: (i) Tax Distributions made sufficiently in advance to permit the members of AAS, Valley or Holdings to pay (or if a flow-through entity, to permit the party liable with respect thereto to pay) their respective Income Tax Liabilities at the time they are obligated to make such payments in respect thereof to the relevant Governmental Authorities; (ii) scheduled payments of interest, fees or expenses, if any, due on the Subordinated Indebtedness permitted under Section 6.3(A)(d) and Section 6.3(A)(e) unless such payments are prohibited by the terms of such Indebtedness; (iii) payments of Permitted Subordinated Indebtedness from the proceeds of Indebtedness incurred pursuant to Section 6.3(A)(d) to refinance such Permitted Subordinated Indebtedness; (iv) payments made in connection with the repurchase of membership, ownership or other equity interests in Holdings or any of its Subsidiaries from any Person in connection with the termination (voluntarily or involuntarily) of such Person's employment with Holdings or any of its Subsidiaries which, in the aggregate, exceed the aggregate amount received by Holdings or any of its Subsidiaries from the resale or reissuance of such interests by not more than $300,000; (v) payments of customary and reasonable fees and expense reimbursements to members of the board of managers or directors of Holdings and any Borrower in an aggregate amount not to exceed $100,000 in any 12-month period; (vi) management, consulting, advisory or other similar fees to F. Alan Smith and/or Barry Banducci in the amounts required to be paid pursuant to the Consulting Agreements dated as of the Closing Date between AAS and F. Alan Smith and Barry R. Banducci, respectively, in an aggregate amount not to exceed $290,000 in any 12-month period; and (vii) Restricted Junior Payments made by any Subsidiary of Holdings to Holdings or any other Subsidiary of Holdings except that no Subsidiary that is a Borrower or an -101- 111 obligor on a Guaranty shall make any Restricted Junior Payment to a Subsidiary of Holdings that is not a Borrower or an obligor on a Guaranty. provided, however, that the Restricted Junior Payments described in clause (iv) above shall not be permitted if either a Default or an Unmatured Default shall have occurred and be continuing at the date of declaration or payment thereof or would result therefrom and further provided that the Restricted Junior Payments described in clause (vi) above shall not be permitted if either a Default or an Unmatured Default under Section 7.1(a) or an "Event of Default" (as defined in the Subordinated Note Agreement) under Section 9.01(a) of the Subordinated Note Agreement shall have occurred and be continuing at the date of declaration or payment thereof, provided that after any such default is cured or waived in writing and all amounts then due or owing to the Lenders and/or the holder of the Subordinated Indebtedness have been paid in full, AAS, Valley or Holdings may make the payments which, but for such default, AAS, Valley or Holdings would have been permitted to make. (G) Conduct of Business; Subsidiaries; Acquisitions. Neither Holdings nor any of its Subsidiaries shall engage in any business other than the businesses engaged in by them on the date hereof and any business or activities which are substantially similar, related or incidental thereto. Holdings shall not engage, either directly or indirectly (except through its Subsidiaries) in any operating business enterprise but shall solely own ownership, membership or other equity interests in its Subsidiaries. Holdings shall not and shall not permit any of its Subsidiaries to create, capitalize or acquire any Subsidiary after the date hereof except (i) Excluded Transfers, (ii) the reorganization of certain French Subsidiaries and (iii) AAS Canada. Neither Holdings nor any of its Subsidiaries shall enter into any transaction or series of transactions (other than Excluded Transfers) in which it acquires all or any significant portion of the assets of another Person unless such purchase meets the following requirements (each such purchase constituting a "PERMITTED ACQUISITION") except for AAS Canada: (1) no Default or Unmatured Default shall have occurred and be continuing or would result from such transaction or transactions or the incurrence of any Indebtedness in connection therewith; (2) prior to each such purchase, Holdings shall deliver to the Administrative Agent and the Lenders a certificate from one of Holdings' Authorized Officers demonstrating to the satisfaction of the Administrative Agent and the Required Lenders that after giving effect to such transaction or transactions and the incurrence of any Indebtedness permitted by Section 6.3(A) in connection therewith on a pro forma basis as if such acquisition and such incurrence of Indebtedness had occurred on the first day of the twelve-month period ending on the last day of Holdings' most recently completed fiscal quarter, Holdings would have been in compliance with all provisions of Section 6.4 at all times during such twelve-month period; and -102- 112 (3) effective as of the date of each such purchase (taking into account the effect of such purchase and any indebtedness incurred in connection therewith), Holdings shall deliver to the Administrative Agent a Borrowing Base Certificate, which Borrowing Base Certificate shall demonstrate that Revolving Credit Availability shall not be less than $5,000,000; and (4) the purchase is consummated pursuant to a negotiated acquisition agreement on a non-hostile basis and involves the purchase of a business line similar, related or incidental to that of the Borrowers' as of the Effective Date; and (5) the aggregate purchase price (including assumed liabilities) in connection with all such transactions from and after the Effective Date shall not exceed: (A) $10,000,000 provided the sources for such purchases are from Net Cash Proceeds resulting from the issuance, sale, conveyance, disposition or other transfer by Holdings or one of the other Borrowers of any Capital Stock of or ownership, membership or other equity interests in such Person; and (B) $2,000,000 if the sources for such purchases are other than as set forth in clause (A) above. The acquisitions pursuant to the Bell Purchase Agreement and the Nomadic Sports Purchase shall each be deemed to be Permitted Acquisitions. (H) Transactions with Shareholders and Affiliates. Neither Holdings nor any of its Subsidiaries shall directly or indirectly (i) except as permitted in Section 6.3(F), pay any management fees or other similar fees or compensation to Chase Capital Partners, Management or any other holder or holders of ownership, membership or other equity interests in any of the Borrowers, other than wages, salaries and bonuses of employees who are also holders of ownership, membership or other equity interests in any of the Borrowers or Holdings in the ordinary course and consistent with past practices or (ii) enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder or holders of any ownership, membership or other equity interests in Holdings, or with any Affiliate of Holdings which is not its Subsidiary, on terms that are less favorable to Holdings or its Subsidiaries, as applicable, than those that might be obtained in an arm's length transaction at the time from Persons who are not such a holder or Affiliate. (I) Restriction on Fundamental Changes. Neither Holdings nor any of its Subsidiaries shall enter into any merger or consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), or convey, lease, sell, transfer or otherwise dispose of, in one transaction or series of transactions, all or substantially all of Holdings' or any such Subsidiary's -103- 113 business or property, whether now or hereafter acquired, except transactions permitted under Sections 6.3(B) or 6.3(G) and except that any Subsidiary of Holdings may merge with or liquidate into Holdings or any other Subsidiary of Holdings, provided that the surviving entity expressly assumes any liabilities, if any, of either of such Subsidiaries with respect to the Obligations pursuant to an assumption agreement reasonably satisfactory to the Administrative Agent and provided further that the consolidated net worth of the surviving corporation is not less than the consolidated net worth of the Subsidiary with any liability with respect to the Obligations immediately prior to such merger and any limited liability company other than Holdings may terminate its existence and Holdings may merge or liquidate into a corporation provided such corporation expressly assumes the liabilities of Holdings with respect to the Obligations pursuant to an assumption agreement reasonably satisfactory to the Administrative Agent and the consolidated net worth of such corporation following such merger is not less than the consolidated net worth of Holdings immediately prior thereto. (J) Sales and Leasebacks. Neither Holdings nor any of its Subsidiaries shall become liable, directly, by assumption or by Contingent Obligation, with respect to any lease, whether an Operating Lease or a Capitalized Lease, of any property (whether real or personal or mixed) (i) which it or one of its Subsidiaries sold or transferred or is to sell or transfer to any other Person, or (ii) which it or one of its Subsidiaries intends to use for substantially the same purposes as any other property which has been or is to be sold or transferred by it or one of its Subsidiaries to any other Person in connection with such lease, unless in either case the sale involved is not prohibited under Section 6.3(B) and the lease involved is not prohibited under Section 6.3(A). (K) Margin Regulations. Neither the Borrower nor any of its Subsidiaries, shall use all or any portion of the proceeds of any credit extended under this Agreement to purchase or carry Margin Stock. (L) ERISA. Holdings shall not (i) engage, or permit any of its Subsidiaries to engage, in any prohibited transaction described in Sections 406 of ERISA or 4975 of the Code for which a statutory or class exemption is not available or a private exemption has not been previously obtained from the DOL; (ii) permit to exist any accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of the Internal Revenue Code), with respect to any Benefit Plan, whether or not waived; (iii) fail, or permit any Controlled Group member to fail, to pay timely required contributions or annual installments due with respect to any waived funding deficiency to any Benefit Plan; (iv) terminate, or permit any Controlled Group member to terminate, any Benefit Plan which would result in any liability of Holdings or any Controlled Group member under Title IV of ERISA; -104- 114 (v) fail to make any contribution or payment to any Multiemployer Plan which Holdings or any Controlled Group member may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto; (vi) fail, or permit any Controlled Group member to fail, to pay any required installment or any other payment required under Section 412 of the Internal Revenue Code on or before the due date for such installment or other payment; or (vii) amend, or permit any Controlled Group member to amend, a Plan resulting in an increase in current liability for the plan year such that Holdings or any Controlled group member is required to provide security to such Plan under Section 401(a)(29) of the Code. (M) Issuance of Equity Interests. Neither Holdings nor any of its Subsidiaries shall issue any ownership, membership or other equity interests after the date of this Agreement other than issuance of equity interests by Subsidiaries of Holdings to Holdings or to a wholly-owned Subsidiary of Holdings; provided in each such case all mandatory prepayments required under Section 2.5(B) are made and provided further that all such equity interests shall have been pledged to the Documentation and Collateral Agent for the benefit of itself and the Holders of Secured Obligations pursuant to pledge documentation in form and substance acceptable to the Documentation and Collateral Agent (unless such a pledge would have adverse tax consequences for Holdings). (N) Organizational Documents. Neither Holdings nor any of its Subsidiaries shall amend, modify or otherwise change any of the terms or provisions in any of their respective organizational documents as in effect on the date hereof in any manner adverse to the interests of the Lenders without the prior written consent of the Required Lenders. (O) Other Indebtedness. Neither Holdings nor any of its Subsidiaries shall amend, supplement or otherwise modify the terms of any Indebtedness (other than the Obligations) permitted under Section 6.3(A) except Indebtedness owed by a Borrower or Guarantor to a Borrower or Guarantor in any way that would be materially less advantageous to Holdings or such Subsidiary or materially adverse to the Lenders, including, without limitation, with respect to amount, maturity, amortization, interest rate, premiums, fees, covenants, events of default and remedies. (P) Fiscal Year. Neither Holdings nor any of its consolidated Subsidiaries shall change its fiscal year for accounting or tax purposes from a period consisting of the 12-month period ending on December 31 of each calendar year. (Q) Change of Deposit Accounts. Holdings shall not, and shall not permit any Subsidiary to, establish or maintain any deposit account with any bank or other financial institution other than -105- 115 (i) those which have entered into a Collection Account Agreement in form and substance acceptable to the Documentation and Collateral Agent, (ii) in the case of AAS Canada, Brink International or Brink or other Subsidiaries of Brink International, those which have entered into arrangements acceptable to the Documentation and Collateral Agent and (iii) others where the aggregate balance does not exceed $500,000 in the aggregate. (R) Rate Hedging Obligations. Holdings shall not and shall not permit any of its Subsidiaries to enter into any interest rate, commodity or foreign currency exchange, swap, collar, cap or similar agreements other than interest rate, foreign currency or commodity exchange, swap, collar, cap, leveraged derivative or similar agreements entered into pursuant to Section 6.2(L) hereof or pursuant to which Holdings or any of its Subsidiaries have hedged its or their actual interest rate, foreign currency or commodity exposure (such hedging agreements are sometimes referred to herein as "INTEREST RATE AGREEMENTS"). (S) Subordinated Indebtedness. Holdings shall not amend, supplement or modify the terms of any Permitted Subordinated Indebtedness, or make any payment required as a result of an amendment or change thereto. Except as permitted in Section 6.3(F)(ii) or as required by Section 2.5(B)(ii)(d)(II), neither Holdings nor any of its Subsidiaries shall purchase, redeem, prepay (by set-off or otherwise), defease or repay any principal of, premium, if any, or other amount (other than interest) payable in respect of any Permitted Subordinated Indebtedness nor shall any of them prepay (by set-off or otherwise) any interest payable in respect of any Permitted Subordinated Indebtedness. 6.4 Financial Covenants. Holdings shall comply with the following: (A) Defined Terms for Financial Covenants. The following terms used in this Agreement shall have the following meanings (such meanings to be applicable, except to the extent otherwise indicated in a definition of a particular term, both to the singular and the plural forms of the terms defined): "CAPITAL EXPENDITURES" means, for any period, the aggregate of (i) all expenditures (whether paid in cash or accrued as liabilities and including Capitalized Leases and Permitted Purchase Money Indebtedness) by Holdings and its Subsidiaries during that period that, in conformity with Agreement Accounting Principles, are required to be included in or reflected by the property, plant, equipment or similar fixed asset accounts reflected in the consolidated balance sheet of Holdings and its Subsidiaries other than with respect to the acquisition of inventory in the ordinary course of business and (ii) all Designated Investments during that period under Section 6.3(D)(v). No portion of the purchase of assets by AAS Canada pursuant to the Bell Purchase Agreement or the Nomadic Sports Purchase shall be deemed to be a Capital Expenditure. "CONSOLIDATED NET WORTH" shall mean, at a particular date, all amounts which would be included under owners' or members' equity for Holdings and its consolidated Subsidiaries -106- 116 determined in accordance with Agreement Accounting Principles, provided, however, (i) if Holdings issues Subordinated Notes pursuant to the High Yield Note Agreement, the effect of payments made to repurchase, redeem or cancel the warrants issued to the Holders of the Subordinated Notes issued pursuant to the Subordinated Note Agreement shall be excluded in calculating Holdings' Consolidated Net Worth and (ii) the effect of any adjustments in the cumulative foreign currency translation account of Holdings and its consolidated Subsidiaries shall be excluded in calculating Holdings' Consolidated Net Worth. "EBITDA" means, for any period, on a consolidated basis for Holdings and its consolidated Subsidiaries, the sum of the amounts for such period, without duplication, of (i) Net Income, plus (ii) Tax Distributions, plus (iii) charges against income for foreign income taxes or U.S. income taxes, plus (iv) Interest Expense, plus (v) depreciation expense, plus (vi) amortization expense, including, without limitation, amortization of goodwill and other intangible assets, plus (vii) other non-cash charges (including, without duplication, any effect of any write-up in the value of Inventory attributable to purchase accounting) in accordance with Agreement Accounting Principles, minus (viii) interest income, minus (ix) extraordinary gains (and any nonrecurring unusual gains arising in or outside of the ordinary course of business not included in extraordinary gains determined in accordance with Agreement Accounting Principles which have been included in the determination of Net Income). "INTEREST EXPENSE" means, for any period, the total interest expense of Holdings and its consolidated Subsidiaries, whether paid or accrued, but without duplication (including the interest component of Capitalized Leases), but excluding interest expense not payable in cash (including amortization of discount), all as determined in conformity with Agreement Accounting Principles. "NET INCOME" means, for any period, the net earnings (or loss) after taxes of Holdings and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with Agreement Accounting Principles minus an amount equal to Tax Distributions made for such period. "RENTALS" of a Person means the aggregate fixed amounts payable by such Person under any lease of real or personal property but does not include any amounts payable under Capitalized Leases of such Person. "SENIOR DEBT RATIO" shall mean the ratio of (i) the Indebtedness of Holdings and its consolidated Subsidiaries with respect to the Secured Obligations (other than Rate Hedging Obligations) to (ii) EBITDA. In each case, the Senior Debt Ratio shall be determined as of the last day of each fiscal quarter based upon, for Indebtedness, the outstanding principal balance of the Obligations of the Borrowers as of the last day of each such fiscal quarter and, for EBITDA, the actual amount of EBITDA of Holdings and its consolidated Subsidiaries for the four (4) fiscal quarter period ending on such day (provided, however, that (a) for the fiscal quarter ending September 30, 1997, the Senior Debt Ratio shall be calculated using EBITDA for Holdings and -107- 117 its consolidated Subsidiaries for such fiscal quarter multiplied by four (4), (b) for the fiscal quarter period ending December 31, 1997, the Senior Debt Ratio shall be calculated using EBITDA for Holdings and its consolidated Subsidiaries for the two (2) fiscal quarters ending December 31, 1997 multiplied by two (2), and (c) for the fiscal quarter ending March 31, 1998, the Senior Debt Ratio shall be calculated using EBITDA for Holdings and its consolidated Subsidiaries for the three (3) fiscal quarters ending March 31, 1998 multiplied by four-thirds (4/3)). (B) Rentals. Holdings will not, nor will it permit any Subsidiary to, create, incur or suffer to exist obligations for Rentals in excess of $4,000,000 in any fiscal year of Holdings on a non-cumulative basis in the aggregate for Holdings and its Subsidiaries. (C) Fixed Charge Coverage Ratio. Holdings shall maintain a ratio ("FIXED CHARGE COVERAGE RATIO") of: (i) the sum of the amounts of (a) EBITDA, minus (b) Capital Expenditures (excluding Capital Expenditures to the extent (x) they are financed by third parties, (y) they are paid for with proceeds from Asset Sales or (z) they are paid for with insurance or condemnation proceeds) to (ii) the sum of the amounts of (a) Interest Expense, plus (b) scheduled amortization of the principal portion of the Term Loans and scheduled amortization of the principal portion of all other Indebtedness of Holdings and its Subsidiaries during such period of at least: (1) 1.25 to 1.00 for the fiscal quarter ending December 31, 1997; (2) 1.30 to 1.00 for the fiscal quarter ending March 31, 1998; (3) 1.35 to 1.00 for the fiscal quarter ending June 30, 1998; (4) 1.40 to 1.00 for the fiscal quarter ending September 30, 1998; and (5) 1.50 to 1.00 for each fiscal quarter thereafter until the Tranche B Term Loan Termination Date. In each case the Fixed Charge Coverage Ratio shall be determined as of the last day of each fiscal quarter for the four-quarter period ending on such day (provided, however, that (a) for the fiscal quarter ending December 31, 1997, the Fixed Charge Coverage Ratio shall be calculated using (i) EBITDA, Capital Expenditures, Interest Expense and the scheduled principal amortization of Indebtedness of Holdings and its consolidated Subsidiaries for the fiscal quarter ended December 31, 1997, (b) for the fiscal quarter ending March 31, 1998, the Fixed Charge Coverage Ratio shall be calculated using (i) EBITDA, Capital Expenditures, Interest Expense and the scheduled principal amortization of Indebtedness of Holdings and its consolidated Subsidiaries for the two fiscal quarters ending March 31, 1998 and (c) for the fiscal quarter ending June 30, 1998, the Fixed Charge Coverage Ratio shall be calculated using (i) EBITDA, Capital Expenditures, Interest Expense and the scheduled principal amortization of Indebtedness of Holdings and its consolidated Subsidiaries for the three fiscal quarters ending June 30, 1998). -108- 118 (D) Minimum Consolidated Net Worth. Holdings shall not permit its Consolidated Net Worth at any time to be less than $14,000,000 plus seventy-five percent (75%) of Net Income from October 1, 1997 to the date of such calculation. At the time the purchase accounting adjustments for the Valley Acquisition are finalized, the financial covenants in Section 6.4(D) will be amended in a credit neutral manner to reflect any difference between the actual purchase accounting adjustments and the purchase accounting adjustments projected as of the Effective Date. (E) Maximum Leverage Ratio. Holdings shall not permit the ratio ("LEVERAGE RATIO") of (i) the sum of (a) Indebtedness of Holdings and its consolidated Subsidiaries for borrowed money, including, without limitation, Indebtedness evidenced by the Subordinated Notes and Indebtedness evidenced by the Seller Note and (b) Capitalized Lease Obligations to (ii) EBITDA to be greater than the ratio set forth below at the end of the fiscal quarter ending on the corresponding date set forth below: PERIOD ENDING MAXIMUM LEVERAGE RATIO ------------- ---------------------- December 31, 1997 5.50 to 1.00 March 31, 1998 5.25 to 1.00 June 30, 1998 5.00 to 1.00 September 30, 1998 4.75 to 1.00 December 31, 1998 4.50 to 1.00 March 31, 1999 4.50 to 1.00 June 30, 1999 4.25 to 1.00 September 30, 1999 4.25 to 1.00 December 31, 1999 4.00 to 1.00 March 31, 2000 4.00 to 1.00 June 30, 2000 3.75 to 1.00 September 30, 2000 3.75 to 1.00 December 31, 2000 3.50 to 1.00 and each quarter thereafter The Leverage Ratio shall be calculated, in each case, determined as of the last day of each fiscal quarter based upon (A) for Indebtedness, Indebtedness as of the last day of each such fiscal quarter; and (B) for EBITDA, the actual amount for the four-quarter period ending on such day (provided, however, that (a) for the fiscal quarter ending December 31, 1997, the Leverage Ratio -109- 119 shall be calculated using EBITDA for Holdings and its consolidated Subsidiaries for the fiscal quarter ending on such date multiplied by four (4), (b) for the fiscal quarter ending March 31, 1998, the Leverage Ratio shall be calculated using EBITDA for Holdings and its consolidated Subsidiaries for the two fiscal quarter period ending March 31, 1998 multiplied by two (2), and (c) for the fiscal quarter ending June 30, 1998, the Leverage Ratio shall be calculated using EBITDA for Holdings and its consolidated Subsidiaries for the three fiscal quarter period ending June 30, 1998 multiplied by four-thirds (4/3). (F) Capital Expenditures. Holdings will not, nor will it permit any Subsidiary to, expend, or be committed to expend, for Capital Expenditures (excluding Capital Expenditures to the extent (x) they are financed by third parties, (y) they are paid for with proceeds from Asset Sales or (z) they are paid for with insurance or condemnation proceeds) during any one fiscal year in the aggregate for Holdings and its Subsidiaries in excess of $10,000,000 plus the difference, if positive, between the maximum aggregate amount of Capital Expenditures permitted to be expended in the immediately preceding fiscal year and the amount of Capital Expenditures actually expended in the immediately preceding fiscal year but only to the extent that such difference does not exceed $5,000,000. ARTICLE VII: DEFAULTS 7.1 Defaults. Each of the following occurrences shall constitute a Default under this Agreement: (a) Failure to Make Payments When Due. Any Borrower shall (i) fail to pay when due any of the Obligations consisting of principal with respect to the Loans or (ii) shall fail to pay within three (3) Business Days of the date when due any of the other Obligations under this Agreement or the other Loan Documents. (b) Breach of Certain Covenants. Any Borrower shall fail duly and punctually to perform or observe any agreement, covenant or obligation binding on such Borrower under: (i) Sections 6.1(C), 6.1(D), 6.1(E), 6.1(F), 6.1(G), 6.1(H), 6.1(I), 6.1(K), 6.2(B), 6.2(C) or 6.2(F) and such failure shall continue unremedied for fifteen (15) days; (ii) Section 6.1(A), 6.1(B) or 6.1(J) and such failure shall continue unremedied for five (5) Business Days; or (iii) Section 6.3 or 6.4(B), 6.4(C), 6.4(D), 6.4(E) or 6.4(F). (c) Breach of Representation or Warranty. Any representation or warranty made or deemed made by any Borrower to the Administrative Agent or any Lender herein or by Holdings or any of its Subsidiaries in any of the other Loan Documents or in any statement or certificate at -110- 120 any time given by any such Person pursuant to any of the Loan Documents shall be false or misleading in any material respect on the date as of which made (or deemed made). (d) Other Defaults. Any Borrower shall default in the performance of or compliance with any term contained in this Agreement (other than as covered by paragraphs (a), (b) or (c) of this Section 7.1), or Holdings or any of its Subsidiaries shall default in the performance of or compliance with any term contained in any of the other Loan Documents, and such default shall continue for thirty (30) days after Holdings or any of its Subsidiaries knew of such default or should have known of such default exercising reasonable diligence, or Holdings or any of its Subsidiaries shall default on the performance of or compliance with any term contained in the Subordinated Note Agreement, the High Yield Note Agreement or the Supplemental Subordinated Note Agreement and such default shall continue for the applicable period of grace set forth therein. (e) Default as to Other Indebtedness. Any of Holdings or any of its Subsidiaries shall fail to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) with respect to any Indebtedness (other than the Obligations) the outstanding principal amount of which Indebtedness is in excess of $500,000; or any breach, default or event of default shall occur, or any other condition shall exist under any instrument, agreement or indenture pertaining to any such Indebtedness, if the effect thereof is to cause an acceleration, mandatory redemption, a requirement that Holdings or any such Subsidiary offer to purchase such Indebtedness or other required repurchase of such Indebtedness, or permit the holder(s) of such Indebtedness to accelerate the maturity of any such Indebtedness or require a redemption or other repurchase of such Indebtedness; or any such Indebtedness shall be otherwise declared to be due and payable (by acceleration or otherwise) or required to be prepaid, redeemed or otherwise repurchased by Holdings or any of its Subsidiaries (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof. (f) Involuntary Bankruptcy; Appointment of Receiver, Etc. (i) An involuntary case shall be commenced against Holdings or any of its Subsidiaries and the petition shall not be dismissed, stayed, bonded or discharged within sixty (60) days after commencement of the case; or a court having jurisdiction in the premises shall enter a decree or order for relief in respect of Holdings or any of its Subsidiaries in an involuntary case, under any applicable bankruptcy, insolvency or other similar law now or hereinafter in effect; or any other similar relief shall be granted under any applicable federal, state, local or foreign law. (ii) A decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Holdings or any of its Subsidiaries or over all or a substantial part of the property of Holdings or any of its Subsidiaries shall be entered; or an interim receiver, trustee or other custodian of Holdings or any of its Subsidiaries or of all or a -111- 121 substantial part of the property of Holdings or any of its Subsidiaries shall be appointed or a warrant of attachment, execution or similar process against any substantial part of the property of Holdings or any of its Subsidiaries shall be issued and any such event shall not be stayed, dismissed, bonded or discharged within sixty (60) days after entry, appointment or issuance. (g) Voluntary Bankruptcy; Appointment of Receiver, Etc. Holdings or any of its Subsidiaries shall (i) commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, (iii) consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property, (iv) make any assignment for the benefit of creditors or (v) take any corporate, partnership or comparable action to authorize any of the foregoing. (h) Judgments and Attachments. Any money judgment(s) (other than a money judgment covered by insurance as to which the insurance company has not disclaimed or reserved the right to disclaim coverage), writ or warrant of attachment, or similar process against any of Holdings or any of its Subsidiaries or any of their respective assets involving in any single case or in the aggregate an amount in excess of $500,000 is (are) entered and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days or in any event later than fifteen (15) days prior to the date of any proposed sale thereunder. (i) Dissolution. Any order, judgment or decree shall be entered against Holdings or any of its Subsidiaries decreeing its involuntary dissolution or split up and such order shall remain undischarged and unstayed for a period in excess of sixty (60) days; or Holdings or any of its Subsidiaries shall otherwise dissolve or cease to exist except as specifically permitted by this Agreement unless the dissolving entity is a limited liability company which elects to continue its existence. (j) Loan Documents; Failure of Security. At any time, for any reason, (i) any Loan Document as a whole that materially affects the ability of the Administrative Agent, Documentation and Collateral Agent, or any of the Lenders to enforce the Obligations or enforce their rights against the Collateral ceases to be in full force and effect or any of Holdings or any of its Subsidiaries party thereto seeks to repudiate its obligations thereunder and the Liens intended to be created thereby are, or any of Holdings or any such Subsidiary seeks to render such Liens, invalid and unperfected, or (ii) Liens on Collateral with a fair market value in excess of $500,000 in favor of the Administrative Agent contemplated by the Loan Documents shall, at any time, for any reason, be invalidated or otherwise cease to be in full force and effect, or such Liens shall not have the priority contemplated by this Agreement or the Loan Documents. -112- 122 (k) Termination Event. Any Termination Event occurs which the Required Lenders believe is reasonably likely to subject Holdings, Valley or AAS to liability in excess of $250,000. (l) Waiver of Minimum Funding Standard. If the plan administrator of any Plan applies under Section 412(d) of the Code for a waiver of the minimum funding standards of Section 412(a) of the Code and any Lender believes the substantial business hardship upon which the application for the waiver is based could reasonably be expected to subject either Holdings or any Controlled Group member to liability in excess of $250,000. (m) Change of Control. A Change of Control shall occur. (n) Interest Rate Agreements. Nonpayment by Holdings or any of its Subsidiaries of any obligation under the any Interest Rate Agreements entered into with any Lender on the date such payment is due or the breach by Holdings or any of its Subsidiaries of any other term, provision or condition contained in any such Interest Rate Agreements which breach remains unremedied for thirty (30) days. (o) Environmental Matters. Holdings or any of its Subsidiaries shall be the subject of any proceeding or investigation pertaining to (i) the Release by Holdings or any of its Subsidiaries of any Contaminant into the environment, (ii) the liability of any of Holdings or any of its Subsidiaries arising from the Release by any other Person of any Contaminant into the environment, or (iii) any violation of any Environmental, Health or Safety Requirements of Law by Holdings or any of its Subsidiaries, which, in any case, has or is reasonably likely to subject Holdings or any of its Subsidiaries to liability individually or in the aggregate in excess of $500,000. (p) Guarantor Revocation. Any guarantor of the Obligations shall terminate or revoke or refuse to perform any of its payment obligations under the applicable guarantee agreement or breach any of the other terms of such guarantee agreement which breach remains unremedied for thirty (30) days. (q) Failure of Subordination. The subordination provisions of the documents and instruments evidencing any Permitted Subordinated Indebtedness, at any time, be invalidated or otherwise cease to be in full force and effect. A Default shall be deemed "continuing" until cured or until waived in writing in accordance with Section 8.3. ARTICLE VIII: ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS AND REMEDIES -113- 123 8.1 Remedies (a) Termination of Commitments; Acceleration. If any Default described in Section 7.1(f) or 7.1(g) occurs with respect to any of the Borrowers, the obligations of the Lenders to make Loans hereunder and the obligation of the Administrative Agent or any Issuing Lender to issue Letters of Credit hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Administrative Agent, any Lender or any Issuing Lender. If any other Default occurs, the Required Lenders may (i) terminate or suspend the obligations of the Lenders to make Loans hereunder and the obligation of the Issuing Lenders to issue Letters of Credit hereunder, or (ii) declare the Obligations to be due and payable, or both, and upon any declaration under clause (ii), the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrowers expressly waive. (b) Rescission. If at any time after termination of the Lenders' obligations to make Revolving Loans or acceleration of the maturity of the Loans, Borrowers shall pay all arrears of interest and all payments on account of principal of the Loans and Reimbursement Obligations which shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Defaults and Unmatured Defaults (other than nonpayment of principal of and accrued interest on the Loans due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 8.3, then upon the written consent of the Required Lenders and written notice to Borrowers, the termination of Lenders' respective obligations to make Revolving Loans and the respective Lenders' and the Issuing Lenders' obligations to participate in or issue Letters of Credit or the aforesaid acceleration and its consequences may be rescinded and annulled; but such action shall not affect any subsequent Default or Unmatured Default or impair any right or remedy consequent thereon. The provisions of the preceding sentence are intended merely to bind the Lenders and the Issuing Lenders to a decision which may be made at the election of the Required Lenders; they are not intended to benefit Borrowers and do not give Borrowers the right to require the Lenders to rescind or annul any termination of the aforesaid obligations of the Lenders or Issuing Lenders or any acceleration hereunder, even if the conditions set forth herein are met. (c) Enforcement. The Borrowers acknowledge that in the event the Borrowers fail to perform, observe or discharge any of their respective obligations or liabilities under this Agreement or any other Loan Document, any remedy of law may prove to be inadequate relief to the Administrative Agent, the Issuing Lenders and the Lenders; therefore, Borrowers agree that the Administrative Agent, the Issuing Lenders and the Lenders shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. 8.2 Defaulting Lender. In the event that any Lender fails to fund its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, of any Advance requested or deemed requested by any Borrower which such Lender is obligated to fund under the terms of this -114- 124 Agreement (the funded portion of such Advance being hereinafter referred to as a "NON PRO RATA LOAN"), until the earlier of such Lender's cure of such failure and the termination of the Revolving Loan Commitments, the proceeds of all amounts thereafter repaid to the Administrative Agent by the Borrowers and otherwise required to be applied to such Lender's share of all other Obligations pursuant to the terms of this Agreement shall be advanced to the Borrowers by the Administrative Agent ("CURE LOANS") on behalf of such Lender to cure, in full or in part, such failure by such Lender, but shall nevertheless be deemed to have been paid to such Lender in satisfaction of such other Obligations. Notwithstanding anything in this Agreement to the contrary: (i) the foregoing provisions of this Section 8.2 shall apply only with respect to the proceeds of payments of Obligations and shall not affect the conversion or continuation of Loans pursuant to Section 2.10; (ii) any such Lender shall be deemed to have cured its failure to fund its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable of any Advance at such time as an amount equal to such Lender's original Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, of the requested principal portion of such Advance is fully funded to the applicable Borrower, whether made by such Lender itself or by operation of the terms of this Section 8.2, and whether or not the Non Pro Rata Loan with respect thereto has been repaid, converted or continued; (iii) amounts advanced to any Borrower to cure, in full or in part, any such Lender's failure to fund its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, of any Advance shall bear interest at the rate applicable to Tranche A Term Loans or Tranche B Term Loans, as applicable, which are Base Rate Loans, in effect from time to time, and for all other purposes of this Agreement shall be treated as if they were Base Rate Loans; (iv) regardless of whether or not a Default has occurred or is continuing, and notwithstanding the instructions of the applicable Borrower as to its desired application, all repayments of principal which, in accordance with the other terms of this Agreement, would be applied to the outstanding Base Rate Loans shall be applied first, ratably to all Base Rate Loans constituting Non Pro Rata Loans, second, ratably to Base Rate Loans other than those constituting Non Pro Rata Loans or Cure Loans and, third, ratably to Base Rate Loans constituting Cure Loans; (v) for so long as and until the earlier of any such Lender's cure of the failure to fund its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, of any Advance and the termination of the Revolving Loan Commitments, the term "Required Lenders" for purposes of this Agreement shall -115- 125 mean Lenders (excluding all Lenders whose failure to fund their respective Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, of such Advance have not been so cured) whose Pro Rata Shares represent greater than fifty percent (50%) of the aggregate Pro Rata Shares of such Lenders; and (vi) for so long as and until any such Lender's failure to fund its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, of any Advance is cured in accordance with Section 8.2(ii), (A) such Lender shall not be entitled to any commitment fees with respect to its Revolving Loan Commitment and (B) such Lender shall not be entitled to any letter of credit fees, which commitment fees and letter of credit fees shall accrue in favor of the Lenders which have funded their respective Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, of such requested Advance, shall be allocated among such performing Lenders ratably based upon their relative Revolving Loan Commitments, and shall be calculated based upon the average amount by which the aggregate Revolving Loan Commitments of such performing Lenders exceeds the sum of (I) the outstanding principal amount of the Loans owing to such performing Lenders, plus (II) the outstanding Reimbursement Obligations owing to such performing Lenders, plus (III) the aggregate participation interests of such performing Lenders arising pursuant to Section 2.21 with respect to undrawn and outstanding Letters of Credit. 8.3 Amendments. Subject to the provisions of this Article VIII, the Required Lenders (or the Administrative Agent with the consent in writing of the Required Lenders) and the Borrowers may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrowers hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of each Lender affected thereby: (i) Postpone or extend the Termination Date, the Tranche A Term Loan Termination Date, the Tranche B Term Loan Termination Date or any other date fixed for any payment of principal of, or interest on, the Loans, the Reimbursement Obligations or any fees or other amounts payable to such Lender (except with respect to (a) any modifications of the provisions relating to prepayments of Loans and other Obligations (other than the provisions relating to prepayments of the Tranche B Term Loans which can be modified only with the approval of Lenders with Tranche B Pro Rata Shares greater than fifty percent (50%)) and (b) a waiver of the application of the default rate of interest pursuant to Section 2.11 hereof). (ii) Reduce the principal amount of any Loans or L/C Obligations, or reduce the rate or extend the time of payment of interest or fees thereon or other amounts payable hereunder. -116- 126 (iii) Reduce the percentage specified in the definition of Required Lenders or any other percentage of Lenders specified to be the applicable percentage in this Agreement to act on specified matters or amend the definitions of "Requisite Lenders", "Tranche A Pro Rata Share", "Tranche B Pro Rata Share" or "Pro Rata Share". (iv) Increase the amount of the Revolving Loan Commitment of any Lender hereunder (except with respect to an increase in the amount, or other modification to the terms or components, of the Borrowing Base) or increase any Lender's Tranche A Pro Rata Share, Tranche B Pro Rata Share or Pro Rata Share. (v) Amend the provisions of Section 2.5 to the extent they prescribe pro rata application between Tranche A Term Loans and Tranche B Term Loans of all prepayments governed by Section 2.5. (vi) Permit any Borrower to assign its rights under this Agreement. (vii) Amend this Section 8.3. (viii) Release any guarantor of the Obligations or all or substantially all of the Collateral. (ix) Amend, modify or waive the provisions of Section 6.2(M). (x) Amend, modify or waive the provisions of Section 11.3. No amendment of any provision of this Agreement relating to the Administrative Agent shall be effective without the written consent of the Administrative Agent. No amendment of any provision of this Agreement relating to any Issuing Lender shall be effective without the written consent of the Administrative Agent and each of the Issuing Lenders. No amendment of any provision of this Agreement relative to any Swing Line Lender shall be effective without the written consent of each of the Swing Line Lenders. The Administrative Agent may waive payment of the fee required under Section 12.3(B) without obtaining the consent of any of the Lenders. 8.4 Preservation of Rights. No delay or omission of the Lenders, the Issuing Lenders, the Documentation and Collateral Agent or the Administrative Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Loan or the issuance of a Letter of Credit notwithstanding the existence of a Default or the inability of the Borrowers to satisfy the conditions precedent to such Loan or issuance of such Letter of Credit shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other -117- 127 or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.3, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Administrative Agent, the Issuing Lenders, the Documentation and Collateral Agent and the Lenders until the Obligations have been paid in full. ARTICLE IX: GENERAL PROVISIONS 9.1 Survival of Representations. All representations and warranties of the Borrowers contained in this Agreement shall survive delivery of the Notes and the making of the Loans herein contemplated. 9.2 Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrowers and neither the Administrative Agent nor any Issuing Lender shall be obligated to issue any Letter of Credit for the account of any Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 9.3 Performance of Obligations. Each of the Borrowers agrees that the Administrative Agent may, but shall have no obligation to (i) at any time, pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against any Collateral and (ii) after the occurrence and during the continuance of a Default make any other payment or perform any act required of any Borrower under any Loan Document or take any other action which the Administrative Agent in its discretion deems necessary or desirable to protect or preserve the Collateral, including, without limitation, any action to (y) effect any repairs or obtain any insurance called for by the terms of any of the Loan Documents and to pay all or any part of the premiums therefor and the costs thereof and (z) pay any rents payable by any Borrower which are more than 30 days past due, or as to which the landlord has given notice of termination, under any lease. The Administrative Agent shall use its best efforts to give the applicable Borrower notice of any action taken under this Section 9.3 prior to the taking of such action or promptly thereafter provided the failure to give such notice shall not affect the applicable Borrower's obligations in respect thereof. Each of the Borrowers agrees to pay the Administrative Agent, upon demand, the principal amount of all funds advanced by the Administrative Agent under this Section 9.3, together with interest thereon at the rate from time to time applicable to Base Rate Loans from the date of such advance until the outstanding principal balance thereof is paid in full. If any Borrower fails to make payment in respect of any such advance under this Section 9.3 within one (1) Business Day after the date such Borrower receives written demand therefor from the Administrative Agent, the Administrative Agent shall promptly notify each Lender and each Lender agrees that it shall thereupon make available to the Administrative Agent, in Dollars in -118- 128 immediately available funds, the amount equal to such Lender's Pro Rata Share of such advance. If such funds are not made available to the Administrative Agent by such Lender within one (1) Business Day after the Administrative Agent's demand therefor, the Administrative Agent will be entitled to recover any such amount from such Lender together with interest thereon at the Effective Federal Funds Rate for each day during the period commencing on the date of such demand and ending on the date such amount is received. The failure of any Lender to make available to the Administrative Agent its Pro Rata Share of any such unreimbursed advance under this Section 9.3 shall neither relieve any other Lender of its obligation hereunder to make available to the Administrative Agent such other Lender's Pro Rata Share of such advance on the date such payment is to be made nor increase the obligation of any other Lender to make such payment to the Administrative Agent. All outstanding principal of, and interest on, advances made under this Section 9.3 shall constitute Obligations secured by the Collateral until paid in full by the Borrower. 9.4 Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 9.5 Entire Agreement. The Loan Documents embody the entire agreement and understanding among the Borrowers, the Administrative Agent, the Documentation and Collateral Agent and the Lenders and supersede all prior agreements and understandings among the Borrowers, the Administrative Agent and the Lenders relating to the subject matter thereof. 9.6 Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other. The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns. 9.7 Expenses; Indemnification. (A) Expenses. The Borrowers shall reimburse the Agents and the Arrangers for any reasonable costs, internal charges and out-of-pocket expenses (including attorneys' and paralegals' fees and time charges of attorneys and paralegals for either Agent or Arranger, which attorneys and paralegals may be employees of either Agent or Arranger) paid or incurred by either Agent or Arranger in connection with the preparation, negotiation, execution, delivery, syndication, review, amendment, modification, and administration of the Loan Documents other than costs and charges incurred prior to a Default customarily viewed as the overhead expenses of either Agent of customary administration of the Loan Documents, the Collateral and the Loans. Each of the Borrowers also agrees to reimburse the Agents, the Lenders and the Issuing Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys' and paralegals' fees and time charges of attorneys and paralegals for the Agents, the Lenders and the Issuing Lenders, -119- 129 which attorneys and paralegals may be employees of either Agent, the Lenders or the Issuing Lenders) paid or incurred by either Agent, any Lender or any Issuing Lender in connection with the collection of the Obligations and enforcement of the Loan Documents. In addition to expenses set forth above, each of the Borrowers agrees to reimburse the Documentation and Collateral Agent, promptly after the request therefor, for each audit, collateral analysis or other business analysis performed by or for the benefit of the Lenders in connection with this Agreement or the other Loan Documents in an amount equal to the Documentation and Collateral Agent's then customary charges for each person employed to perform such audit or analysis, plus all costs and expenses (including without limitation, travel expenses) incurred by the Documentation and Collateral Agent in the performance of such audit or analysis; provided, however the Borrowers shall be obligated to reimburse the or Documentation and Collateral Agent for not more than two (2) such audits in any twelve-month period with respect to Brink and its Subsidiaries and (1) such audit in any twelve-month period with respect to each of AAS, Valley and AAS Canada and in an aggregate amount not to exceed $100,000 if such audits were conducted other than in connection with a proposed Acquisition and at a time when no Default has occurred and is continuing; provided, further, it is expressly understood that the Borrowers shall reimburse the Administrative Agent or Documentation and Collateral Agent for all such audits (1) conducted in connection with a proposed Valley Acquisition and related matters or (2) conducted at a time when a Default has occurred and is continuing. The Administrative Agent or Documentation and Collateral Agent, as applicable, shall provide the Borrowers with a detailed statement of all reimbursements requested under this Section 9.7(A). (B) Indemnity. Each of the Borrowers further agrees to defend, protect, indemnify, and hold harmless the Agents, the Arrangers, each and all of the Lenders, each and all of the Issuing Lenders, the Swing Loan Lender and each of their respective Affiliates, and each of such Agent's, Arrangers', Lender's, Issuing Lender's or Affiliate's respective officers, directors, employees, attorneys and agents (including, without limitation, those retained in connection with the satisfaction or attempted satisfaction of any of the conditions set forth in Article IV) (collectively, the "INDEMNITEES") from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses of any kind or nature whatsoever (including, without limitation, the fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitees shall be designated a party thereto), imposed on, incurred by, or asserted against such Indemnitees in any manner relating to or arising out of: (i) this Agreement, the other Loan Documents or any of the Transaction Documents, or any act, event or transaction related or attendant thereto or to the Valley Acquisition, the making of the Loans, and the issuance of and participation in Letters of Credit hereunder, the management of such Loans or Letters of Credit, the use or intended use of the proceeds of the Loans or Letters of Credit hereunder, or any of the other transactions contemplated by the Transaction Documents; or -120- 130 (ii) any liabilities, obligations, responsibilities, losses, damages, personal injury, death, punitive damages, economic damages, consequential damages, treble damages, intentional, willful or wanton injury, damage or threat to the environment, natural resources or public health or welfare, costs and expenses (including, without limitation, attorney, expert and consulting fees and costs of investigation, feasibility or remedial action studies), fines, penalties and monetary sanctions, interest, direct or indirect, known or unknown, absolute or contingent, past, present or future relating to violation of any Environmental, Health or Safety Requirements of Law arising from or in connection with the past, present or future operations of Holdings, its Subsidiaries or any of their respective predecessors in interest, or, the past, present or future environmental, health or safety condition of any respective property of Holdings or its Subsidiaries, the presence of asbestos-containing materials at any respective property of Holdings or its Subsidiaries or the Release or threatened Release of any Contaminant into the environment (collectively, the "INDEMNIFIED MATTERS"); provided, however, the Borrowers shall have no obligation to an Indemnitee hereunder with respect to Indemnified Matters caused solely by or resulting solely from the willful misconduct or Gross Negligence of such Indemnitee or breach of contract by such Indemnitee with respect to the Loan Documents, in each case, as determined by the final non-appealable judgment of a court of competent jurisdiction. If the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrowers shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees. (C) Waiver of Certain Claims; Settlement of Claims. Each of the Borrowers further agrees to assert no claim against any of the Indemnitees on any theory of liability for consequential, special, indirect, exemplary or punitive damages. No settlement shall be entered into by Holdings or any if its Subsidiaries with respect to any claim, litigation, arbitration or other proceeding relating to or arising out of the transaction evidenced by this Agreement, the other Loan Documents or in connection with the Valley Acquisition (whether or not the Administrative Agent, any Lender, any Issuing Lender or any Indemnitee is a party thereto) unless such settlement releases all Indemnitees from any and all liability with respect thereto. (D) Survival of Agreements. The obligations and agreements of the Borrowers under this Section 9.7 shall survive the termination of this Agreement. 9.8 Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Administrative Agent with sufficient counterparts so that the Administrative Agent may furnish one to each of the Lenders. -121- 131 9.9 Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles. 9.10 Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 9.11 Nonliability of Lenders. The relationship among the Borrowers and the Lenders, Issuing Lenders, the Swing Line Lender, the Administrative Agent and the Documentation and Collateral Agent shall be solely that of borrower and lender. Neither the Administrative Agent nor the Documentation and Collateral Agent nor any Lender nor any Issuing Lender shall have any fiduciary responsibilities to the Borrowers. Neither the Administrative Agent, nor the Documentation and Collateral Agent, nor any Lender, nor any Issuing Lender undertakes any responsibility to the Borrowers to review or inform the Borrowers of any matter in connection with any phase of the Borrowers' business or operations. 9.12 GOVERNING LAW. THE ADMINISTRATIVE AGENT ACCEPTS THIS AGREEMENT, ON BEHALF OF ITSELF, THE LENDERS AND THE ISSUING LENDERS, AT NEW YORK, NEW YORK BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE BETWEEN THE BORROWERS AND THE ADMINISTRATIVE AGENT, ANY LENDER, ANY ISSUING LENDER OR ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF NEW YORK. 9.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL. (A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS -122- 132 MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE. (B) OTHER JURISDICTIONS. EACH OF THE BORROWERS AGREES THAT THE ADMINISTRATIVE AGENT, THE DOCUMENTATION AND COLLATERAL AGENT, ANY LENDER, ANY ISSUING LENDER OR ANY HOLDER OF SECURED OBLIGATIONS SHALL HAVE THE RIGHT TO PROCEED AGAINST ANY BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION OVER SUCH BORROWER OR (2) REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. EACH OF THE BORROWERS AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT UNDER THIS CLAUSE (B) BY SUCH PERSON TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON ALL OF WHICH PERMISSIVE COUNTERCLAIMS MAY BE BROUGHT ONLY IN THE JURISDICTION SET FORTH IN CLAUSE (A) ABOVE. EACH OF THE BORROWERS WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION (B). (C) VENUE. EACH OF THE BORROWERS IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE. (D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT -123- 133 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. (E) WAIVER OF BOND. EACH OF THE BORROWERS WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO REALIZE ON THE COLLATERAL (INCLUDING, WITHOUT LIMITATION, THE REAL PROPERTY COLLATERAL) OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. (F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE PROVISIONS OF THIS SECTION 9.13, WITH ITS COUNSEL. 9.14 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. ARTICLE X: THE ADMINISTRATIVE AGENT AND THE DOCUMENTATION AND COLLATERAL AGENT 10.1 Appointment; Nature of Relationship. NBD Bank is appointed by the Lenders (each reference in this Article X to a Lender being in its capacity either as a Lender or an Issuing Lender or a Swing Line Lender, or any or all of the foregoing) and the Canadian Lenders as the Administrative Agent hereunder and under each other Loan Document, and each of the Lenders and the Canadian Lenders irrevocably authorizes the Administrative Agent to act as the contractual representative of such Lender or Canadian Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Administrative Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term "Administrative Agent," it is expressly understood and agreed that the Administrative Agent shall not have any fiduciary responsibilities to any Lender or Canadian Lenders by reason of this Agreement and that the Administrative Agent is merely acting as the representative of the Lenders and Canadian Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders' and Canadian Lenders' contractual representative, the Administrative Agent (i) does not assume any fiduciary duties to any of the Lenders or Canadian Lenders, (ii) is a "representative" -124- 134 of the Lenders and Canadian Lenders within the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders and Canadian Lenders agrees to assert no claim against the Administrative Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender waives. NBD Bank is appointed by the Lenders (each reference in this Article X to a Lender being in its capacity either as a Lender or an Issuing Lender or a Swing Line Lender or any or all of the foregoing) and the Canadian Lenders as the Documentation and Collateral Agent hereunder and under each other Loan Document, and each of the Lenders and Canadian Lenders irrevocably authorizes the Documentation and Collateral Agent to act as the contractual representative of such Lender or Canadian Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Documentation and Collateral Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term "Documentation and Collateral Agent," it is expressly understood and agreed that the Documentation and Collateral Agent shall not have any fiduciary responsibilities to any Lender or Canadian Lender by reason of this Agreement and that the Documentation and Collateral Agent is merely acting as the representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders' and Canadian Lenders' contractual representative, the Documentation and Collateral Agent (i) does not assume any fiduciary duties to any of the Lenders or Canadian Lenders, (ii) is a "representative" of the Lenders and Canadian Lenders within the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders and Canadian Lenders agrees to assert no claim against the Documentation and Collateral Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender waives. 10.2 Powers. The Administrative Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Administrative Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Administrative Agent shall have no implied duties or fiduciary duties to the Lenders or Canadian Lenders, or any obligation to the Lenders or Canadian Lenders to take any action hereunder or under any of the other Loan Documents except any action specifically provided by the Loan Documents required to be taken by the Administrative Agent. The Documentation and Collateral Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Documentation and Collateral Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Documentation and Collateral Agent shall have no implied duties or fiduciary duties to the Lenders or Canadian Lenders, or any obligation to the Lenders or Canadian Lenders to take any action hereunder or under any of the other Loan Documents except any action specifically provided by the Loan Documents required to be taken by the Documentation and Collateral Agent. -125- 135 10.3 General Immunity. Neither the Administrative Agent, nor the Documentation and Collateral Agent, nor the Co-Administrative Agent, nor the Syndication Agent, nor any of their respective directors, officers, agents or employees shall be liable to any of the Borrowers, the Lenders or any Lender or either Canadian Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is found in a final non-appealable judgment by a court of competent jurisdiction to have arisen solely from (i) the Gross Negligence or willful misconduct of such Person or (ii) breach of contract by such Person with respect to the Loan Documents. 10.4 No Responsibility for Loans, Creditworthiness, Collateral, Recitals, Etc. Neither the Administrative Agent nor the Documentation and Collateral Agent, nor the Co-Administrative Agent, nor the Syndication Agent, nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (i) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document; (iii) the satisfaction of any condition specified in Article IV; (iv) the existence or possible existence of any Default or (v) the validity, effectiveness or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith. Neither the Administrative Agent nor the Documentation and Collateral Agent shall be responsible to any Lender or either Canadian Lender for any recitals, statements, representations or warranties herein or in any of the other Loan Documents, for the perfection or priority of any of the Liens on any of the Collateral, or for the execution, effectiveness, genuineness, validity, legality, enforceability, collectibility, or sufficiency of this Agreement or any of the other Loan Documents or the transactions contemplated thereby, or for the financial condition of any guarantor of any or all of the Obligations, Holdings or any of its Subsidiaries. 10.5 Action on Instructions of Lenders. The Administrative Agent, the Documentation and Collateral Agent, the Co-Administrative Agent and the Syndication Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders (except with respect to actions that require the consent of all of the Lenders as provided in Section 8.3), and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders and on all holders of Notes. The Administrative Agent, the Documentation and Collateral Agent, the Co-Administrative Agent and the Syndication Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 10.6 Employment of Administrative Agents and Counsel. The Administrative Agent and the Documentation and Collateral Agent may execute any of their respective duties hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact, and shall not be answerable to the Lenders or the Canadian Lenders, except as to money or securities -126- 136 received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Administrative Agent, the Documentation and Collateral Agent, the Co-Administrative Agent and the Syndication Agent shall be entitled to advice of counsel concerning the contractual arrangement among the Administrative Agent, the Documentation and Collateral Agent and the Lenders or the Co- Administrative Agent and the Syndication Agent and the Lenders, as the case may be, and all matters pertaining to such Agent's duties hereunder and under any other Loan Document. 10.7 Reliance on Documents; Counsel. The Administrative Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Administrative Agent, which counsel may be employees of the Administrative Agent. 10.8 The Agents' Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Administrative Agent, the Documentation and Collateral Agent, the Co- Administrative Agent and the Syndication Agent ratably in proportion to their respective Pro Rata Shares (i) for any amounts not reimbursed by the Borrowers for which the Administrative Agent or the Co-Administrative Agent is entitled to reimbursement or indemnification by the Borrowers under the Loan Documents, (ii) for any other expenses incurred by the Administrative Agent or the Documentation and Collateral Agent or the Co-Administrative Agent or the Syndication Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents including as a result of a dispute among the Lenders or between any Lender and the Administrative Agent or the Documentation and Collateral Agent, and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent or the Documentation and Collateral Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby, or the enforcement of any of the terms thereof or of any such other documents, including as a result of a dispute among the Lenders or between any Lender and the Administrative Agent or the Documentation and Collateral Agent, provided that no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have arisen solely from the Gross Negligence or willful misconduct of the Administrative Agent or the Documentation and Collateral Agent, as applicable. 10.9 Rights as a Lender. With respect to its Revolving Loan Commitment, its Tranche A Term Loan Commitment, its Tranche B Term Loan Commitment, Loans made by it and the Notes issued to it and Letters of Credit issued by it as an Issuing Lender, the Administrative Agent and the Co-Administrative Agent each shall have the same rights and powers hereunder and under any other Loan Document as any Lender and may exercise the same as through it were not the Administrative Agent or the Co-Administrative Agent, as applicable, and the term "Lender" or -127- 137 "Lenders" or "Issuing Lender" or "Issuing Lenders", as applicable, shall, unless the context otherwise indicates, include the Administrative Agent and the Co-Administrative Agent, each in its individual capacity. The Administrative Agent and the Co-Administrative Agent may each accept deposits from, lend money to, enter into Interest Rate Agreements and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with Holdings or any of its Subsidiaries in which such Person is not prohibited hereby from engaging with any other Person. 10.10 Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or the Co-Administrative Agent or any other Lender and based on the financial statements prepared by Holdings and the Borrowers and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or the Co-Administrative 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 decisions in taking or not taking action under this Agreement and the other Loan Documents. 10.11 Successor Administrative Agent; Successor Documentation and Collateral Agent. (A) The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right to appoint, on behalf of the Borrowers and the Lenders, a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may appoint, on behalf of the Borrowers and the Lenders, a successor Administrative Agent. Notwithstanding anything herein to the contrary, so long as no Default has occurred and is continuing, each such successor Administrative Agent shall be subject to approval by the Borrowers, which approval shall not be unreasonably withheld. Such successor Administrative Agent shall be a commercial bank having capital and retained earnings of at least $500,000,000. Upon the acceptance of any appointment as the Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article X shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder and under the other Loan Documents. (B) The Documentation and Collateral Agent may resign at any time by giving written notice thereof to the Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right to appoint, on behalf of the Borrowers and the Lenders, a successor Documentation and Collateral -128- 138 Agent. If no successor Documentation and Collateral Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty days after the retiring Documentation and Collateral Agent's giving notice of resignation, then the retiring Documentation and Collateral Agent may appoint, on behalf of the Borrowers and the Lenders, a successor Documentation and Collateral Agent. Notwithstanding anything herein to the contrary, so long as no Default has occurred and is continuing, each such successor Documentation and Collateral Agent shall be subject to approval by the Borrowers, which approval shall not be unreasonably withheld. Such successor Documentation and Collateral Agent shall be a commercial bank having capital and retained earnings of at least $500,000,000. Upon the acceptance of any appointment as the Documentation and Collateral Agent hereunder by a successor Documentation and Collateral Agent, such successor Documentation and Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Documentation and Collateral Agent, and the retiring Documentation and Collateral Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents. After any retiring Documentation and Collateral Agent's resignation hereunder as Documentation and Collateral Agent, the provisions of this Article X shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Documentation and Collateral Agent hereunder and under the other Loan Documents. 10.12 Collateral Documents. Each Lender authorizes the Documentation and Collateral Agent to enter into each of the Collateral Documents to which it is a party and to take all action contemplated by such documents. Each Lender agrees that no Lender shall have the right individually to seek to realize upon the security granted by any Collateral Document, it being understood and agreed that such rights and remedies may be exercised solely by the Documentation and Collateral Agent for the benefit of the Holders of Secured Obligations upon the terms of the Collateral Documents. ARTICLE XI: SETOFF; RATABLE PAYMENTS 11.1 Setoff. In addition to, and without limitation of, any rights of the Lenders or Issuing Lenders under applicable law, if any Default occurs and is continuing, any indebtedness from any Lender or Issuing Lender to any of the Borrowers (including all account balances, whether provisional or final and whether or not collected or available) may be offset and applied toward the payment of the Obligations owing to such Lender, such Issuing Lender and the other Obligations, whether or not the Obligations, or any part hereof, shall then be due. 11.2 Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Loans (other than payments received pursuant to Sections 3.1, 3.2 or 3.4) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Loans held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligation or such amounts which may be subject to setoff, such Lender agrees, -129- 139 promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to the obligations owing to them. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. 11.3 Application of Payments. Subject to the provisions of Section 8.2, the Administrative Agent shall apply all payments in respect of any Obligations and all proceeds of Collateral in the following order: (A) first, to pay interest on and then principal of any portion of the Loans which the Administrative Agent may have advanced on behalf of any Lender for which the Administrative Agent has not then been reimbursed by such Lender or the Borrower; (B) second, to pay interest on and then principal of any advance made under Section 9.3 for which the Administrative Agent has not then been paid by the Borrowers or reimbursed by the Lenders; (C) third, to pay Obligations in respect of any fees, expense reimbursements or indemnities then due to the Administrative Agent; (D) fourth, to pay Obligations in respect of any fees, expenses, reimbursements or indemnities then due to the Lenders and Issuing Lender; (E) fifth, to pay interest due in respect of the Secured Obligations (other than Rate Hedging Obligations); (F) sixth, to the ratable payment or prepayment of principal outstanding on the Secured Obligations (other than Rate Hedging Obligations); (G) seventh, to the payment of the Rate Hedging Obligations in such order as the Administration Agent may determine in its sole discretion; (H) eighth, to provide required cash collateral if any pursuant to Section 2.24; and (I) ninth, to the ratable payment of all other Obligations. Unless otherwise designated (which designation shall only be applicable prior to the occurrence of a Default) by the Borrowers, all principal payments in respect of Loans shall be applied first, to repay outstanding Base Rate Loans, and then to repay outstanding Eurocurrency Rate Loans with those Eurocurrency Rate Loans which have earlier expiring Interest Periods being repaid prior to those which have later expiring Interest Periods. The order of priority set forth in this Section 11.3 and the related provisions of this Agreement are set forth solely to determine the rights and -130- 140 priorities of the Administrative Agent, the Lenders, the Issuing Lender and other Holders of Secured Obligations as among themselves. 11.4 Relations Among Lenders. (a) Except with respect to the exercise of set-off rights of any Lender in accordance with Section 11.1, the proceeds of which are applied in accordance with this Agreement, and each Lender agrees that it will not take any action, nor institute any actions or proceedings, against any Borrower or any other obligor hereunder or with respect to any Collateral or Loan Document, without the prior written consent of the Required Lenders or, as may be provided in this Agreement or the other Loan Documents, at the direction of the Administrative Agent. (b) The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Administrative Agent) authorized to act for, any other Lender. ARTICLE XII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 12.1 Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrowers and the Lenders and their respective successors and assigns, except that (i) the Borrowers shall not have the right to assign their rights or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in compliance with Section 12.3 hereof. Notwithstanding clause (ii) of this Section 12.1, any Lender may at any time, without the consent of any Borrower or the Administrative Agent, assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank; provided, however, that no such assignment shall release the transferor Lender from its obligations hereunder. The Administrative Agent may treat the payee of any Note as the owner thereof for all purposes hereof unless and until such payee complies with Section 12.3 hereof in the case of an assignment thereof or, in the case of any other transfer, a written notice of the transfer is filed with the Administrative Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the holder of any Note, shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange therefor. 12.2 Participations. (A) Permitted Participants; Effect. Subject to the terms set forth in this Section 12.2, any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("PARTICIPANTS") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Revolving Loan Commitment of such Lender, any L/C Interest of such Lender or any other interest of such Lender under the Loan -131- 141 Documents on a pro rata basis; provided that the amount of such participation shall not be for less than $5,000,000. Notice of such participation to Holdings and the Administrative Agent shall be required prior to any participation becoming effective with respect to a Participant which is not a Lender or an Affiliate thereof. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the holder of any such Note for all purposes under the Loan Documents, all amounts payable by the Borrowers under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrowers and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents except that, for purposes of Article III hereof, the Participants shall be entitled to the same rights as if they were Lenders provided however that no Participant shall be entitled to receive any greater payment under such Article III than the Lender would have been entitled to receive with respect to the rights participated. (B) Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan or Revolving Loan Commitment in which such Participant has an interest which forgives principal, interest or fees or reduces the interest rate or fees payable pursuant to the terms of this Agreement with respect to any such Loan or Revolving Loan Commitment, postpones any date fixed for any regularly-scheduled payment of principal of, or interest or fees on, any such Loan or Revolving Loan Commitment, or releases all or substantially all of the Collateral, if any, securing any such Loan. (C) Benefit of Setoff. The Borrowers agree that each Participant shall be deemed to have the right of setoff provided in Section 11.1 hereof in respect to its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 hereof with respect to the amount of participating interests sold to each Participant except to the extent such Participant exercises its right of set off. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1 hereof, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. 12.3 Assignments. (A) Permitted Assignments. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities ("PURCHASERS") all or a portion of its rights and obligations under this Agreement (including, without limitation, its Revolving Loan Commitment, all Loans owing to it, all of its interests as -132- 142 Issuing Lender with respect to Letters of Credit, all of its participation interests in existing Letters of Credit and Swing Line Loans, and its obligation to participate in additional Letters of Credit and Swing Line Loans hereunder) in accordance with the provisions of this Section 12.3. Each assignment shall be of a constant, and not a varying, ratable percentage of all of the rights and obligations of any assigning Lender under this Agreement. Such assignment shall be substantially in the form of Exhibit F hereto and shall not be permitted hereunder unless such assignment is either for all of such Lender's rights and obligations under the Loan Documents or involves loans and commitments in an aggregate amount of at least $5,000,000. Notice to the Administrative Agent and consent of the Administrative Agent (which consent will not be unreasonably withheld) shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof. Each Lender with a Revolving Loan Commitment shall at all times have a Tranche A Pro Rata Share of the Tranche A Term Loans equal to its pro rata share of the aggregate Revolving Loan Commitments. (B) Effect; Effective Date. Upon (i) delivery to the Administrative Agent of a notice of assignment, substantially in the form attached as Appendix I to Exhibit F hereto (a "NOTICE OF ASSIGNMENT"), together with any consent required by Section 12.3(A) hereof, and (ii) except in the case of an assignment from a Lender to an Affiliate thereof or to a fund managed by the same investment manager, payment of a $3,500 fee to the Administrative Agent for processing such assignment, such assignment shall become effective on the effective date specified in such Notice of Assignment. The Notice of Assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment, Loans and L/C Obligations under the applicable assignment agreement are "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser, if not already a Lender, shall for all purposes be a Lender party to this Agreement and any other Loan Documents executed by the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no consent or action by any of the Borrowers or the Lenders and no further consent or action by the Administrative Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Revolving Loan Commitment, Loans and Letter of Credit participations assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3(B), the transferor Lender, the Administrative Agent and the Borrowers shall make appropriate arrangements so that replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their Revolving Loan Commitment and their Term Loans, as adjusted pursuant to such assignment. (C) The Register. The Administrative Agent shall maintain at its address referred to in Section 13.1 a copy of each assignment delivered to and accepted by it pursuant to this Section 12.3 and a register (the "REGISTER") for the recordation of the names and addresses of the Lenders and the Revolving Loan Commitment of and principal amount of the Loans owing to, each -133- 143 Lender from time to time and whether such Lender is an original Lender or the assignee of another Lender pursuant to an assignment under this Section 12.3. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Holdings and each of its Subsidiaries, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. 12.4 Confidentiality. Subject to Section 12.5, the Administrative Agent and the Lenders shall hold all nonpublic information obtained pursuant to the requirements of this Agreement and identified as such by Holdings in accordance with such Person's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure reasonably required by a prospective Transferee in connection with the contemplated participation or assignment or as required or requested by any Governmental Authority or representative thereof or pursuant to legal process and shall require any such Transferee or prospective Transferee to agree (and require any of its Transferees to agree) to comply with this Section 12.4. In no event shall the Administrative Agent or any Lender be obligated or required to return any materials furnished by the Borrowers; provided, however, each prospective Transferee shall be required to agree that if it does not become a participant or assignee it shall return all materials furnished to it by or on behalf of the Borrowers in connection with this Agreement. 12.5 Dissemination of Information. Each of the Borrowers authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "TRANSFEREE") and any prospective Transferee any and all information in such Lender's possession concerning the Holdings and its Subsidiaries and the Collateral; provided that prior to any such disclosure, such prospective Transferee shall agree to preserve in accordance with Section 12.4 the confidentiality of any confidential information described therein. ARTICLE XIII: NOTICES 13.1 Giving Notice. Except as otherwise permitted by Section 2.14 with respect to borrowing notices, all notices and other communications provided to any party hereto under this Agreement or any other Loan Documents shall be in writing or by telex or by facsimile and addressed or delivered to such party at its address set forth below its signature hereto or at such other address as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid, shall be deemed given when received; any notice, if transmitted by telex or facsimile, shall be deemed given when transmitted (answerback confirmed in the case of telexes); or, if by courier, one (1) Business Day after deposit with a reputable overnight carrier service; with all charges paid. -134- 144 13.2 Change of Address. Any of the Borrowers, the Administrative Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. ARTICLE XIV: COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Borrowers, the Administrative Agent and the Lenders and each party as notified the Administrative Agent by telex or telephone, that it has taken such action. [Remainder of This Page Intentionally Blank] -135- 145 IN WITNESS WHEREOF, the Borrowers, the Lenders, the Administrative Agent and the Documentation and Collateral Agent, the Co-Administrative Agent and the Syndication Agent have executed this Agreement as of the date first above written. AAS HOLDINGS, LLC as a Borrower By:___________________________ Name: Title: Address: Sterling Town Center 12900 Hall Road Suite 2000 Sterling Heights, Michigan 48313 Attention: Chief Executive Officer Telephone No.: 810-997-2900 Facsimile No.: 810-997-6868 ADVANCED ACCESSORY SYSTEMS, LLC as a Borrower By: AAS HOLDINGS, LLC Its Manager By:___________________________ Name: Title: Address: Sterling Town Center 12900 Hall Road Suite 2000 Sterling Heights, Michigan 48313 Attention: Chief Executive Officer Telephone No.: 810-997-2900 Facsimile No.: 810-997-6868 S-1 146 VALLEY INDUSTRIES, LLC as a Borrower By: AAS HOLDINGS, LLC Its Manager By:___________________________ Name: Title: Address: Sterling Town Center 12900 Hall Road Suite 2000 Sterling Heights, Michigan 48313 Attention: Chief Executive Officer Telephone No.: 810-997-2900 Facsimile No.: 810-997-6868 BRINK INTERNATIONAL as a Borrower By:___________________________ Name: Title: Address: ___________________ ___________________ ___________________ ___________________ Attention: _________________ Telephone No.: _________________ Facsimile No.: _________________ S-2 147 BRINK BV as a Borrower By:___________________________ Name: Title: Address: ________________________ ________________________ ________________________ ________________________ Attention: _________________ Telephone No.: _________________ Facsimile No.: _________________ NBD BANK as the Administrative Agent, the Documentation and Collateral Agent, an Issuing Lender, a Swing Line Lender and as a Lender By:___________________________ Name: Title: Address: 611 Woodward Avenue Detroit, MI 48226 _______________________________ Attention: William H. Canney Telephone No.: (313) 225-3489 Facsimile No.: (313) 225-2290 S-3 148 THE CHASE MANHATTAN BANK as the Co-Administrative Agent, the Syndication Agent, an Issuing Lender, a Swing Line Lender and as a Lender By:___________________________ Name: Thomas H. Kozlark Title: Vice President Address: 270 Park Avenue, 10th Floor New York, New York 10017-2070 ______________________________ Attention: George C. Hansen Telephone No.: 212-270-5723 Facsimile No.: 212-270-1340 CHASE MANHATTAN BANK DELAWARE as an Issuing Lender By:___________________________ Name: Title: Address: 1201 North Market Street, 9th Floor Wilmington, Delaware 19801 _______________________________ Attention: Michael P. Handago Telephone No.: (302) 428-3311 Facsimile No.: (302)428-3390 S-4 149 FIRST UNION NATIONAL BANK as a Lender By:____________________________ Name: Title: Address: 301 South College Street Charlotte, NC 28288-0745 _______________________________ Attention: John S. Cannon Telephone No.: (704) 383-4747 Facsimile No.: (704) 374-2802 THE BANK OF NOVA SCOTIA as a Lender By:____________________________ Name: Title: Address: Suite 2700 600 Peachtree St. N.E. Atlanta, Georgia 30308 _______________________________ Attention: Sharon Law Telephone No.: (404) 887-1500 Facsimile No.: (404) 888-8998 S-5 150 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By:____________________________ Title: By:____________________________ Title: Address: 245 Park Avenue New York, New York 10167 Attention: Corporate Services Department Telephone No.: (212) 916-7800 Facsimile No.: (212) 818-0233 With a copy to: Rabobank Nederland 300 South Wacker Drive Suite 3500 Chicago, Illinois 60606 Attn: David Thompson Wire Transfer Instructions: Bank of New York ABA No. 021000018 A/C Rabobank New York A/C/ No. 802 6002533 Re: AAS Holdings S-6 151 LASALLE NATIONAL BANK as a Lender By:____________________________ Name: Title: Address: 125 Ottawa Avenue, Suite 370 NW Grand Rapids, MI 48503 ________________________________ Attention: __________________ Telephone No.: (616) 776-____ Facsimile No.: (616) 776-7770 MICHIGAN NATIONAL BANK as a Lender By:____________________________ Name: Title: Address: 27777 Inkster Road Farmington Hills, MI 48334-9066 _______________________________ Attention: __________________ Telephone No.: (810) 473-____ Facsimile No.: (810) 473-3577 S-7 152 NATIONAL CITY BANK (CLEVELAND) as a Lender By:____________________________ Name: Title: Address: 979 Westwood Birmingham, MI 48009 ________________________________ Attention: __________________ Telephone No.: (810) 664-____ Facsimile No.: (810) 664-0432 S-8 153 FIRST CHICAGO NBD BANK, CANADA as a Holder of Secured Obligations By:____________________________ Name: Title: Address: ________________________ ________________________ _________________________________ Attention: __________________ Telephone No.: (___) ___-____ Facsimile No.: (___) ___-____ THE CHASE MANHATTAN BANK OF CANADA as a Holder of Secured Obligations By:____________________________ Name: Title: Address: ___________________ ___________________ ___________________________ Attention: __________________ Telephone No.: (___) ___-____ Facsimile No.: (___) ___-____ S-9 154 COMERICA BANK, as Lender By:____________________________ Name: Title: Address: _________________________ _________________________ _______________________________ Attention: __________________ Telephone No.: (___) ___-____ Facsimile No.: (___) ___-____ S-10 155 VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, as a Lender By:____________________________ Name: Title: Address: One Parkview Plaza Oakbrook Terrace, IL Attention: __________________ Telephone No.: (___) ___-____ Facsimile No.: (___) ___-____ S-11 156 DEBT STRATEGIES FUND, INC. as a Lender By:____________________________ Name: Title: Address: 800 Scudders Mill Road, Area 2C Plainsboro, NJ 08536 Attention: __________________ Telephone No.: (___) ___-____ Facsimile No.: (___) ___-____ S-12 157 SENIOR HIGH INCOME PORTFOLIO, INC. as a Lender By:____________________________ Name: Title: Address: ______________________ ______________________ ______________________________ Attention: __________________ Telephone No.: (___) ___-____ Facsimile No.: (___) ___-____ S-13 158 DEEPROCK & COMPANY as a Lender By:____________________________ Name: Title: Address: 24 Federal Street, 6th Floor Boston, MA 02110 Attention: __________________ Telephone No.: (___) ___-____ Facsimile No.: (___) ___-____ S-14 159 AMENDMENT NO. 1 Dated as of September 5, 1997 to SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of August 5, 1997 and SECURITY AGREEMENTS Dated as of October 5, 1996 THIS AMENDMENT NO. 1 ("Amendment") is made as of September 5, 1997 by and among AAS Holdings, LLC, Advanced Accessory Systems, LLC, Valley Industries, LLC, Brink International BV and Brink BV (the "Borrowers"), the financial institutions listed on the signature pages hereof (the "Lenders") and NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent (the "Agents"), under that certain Second Amended and Restated Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the Lenders and the Agents (the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrowers, the Lenders and the Agents have agreed to amend the Credit Agreement and certain of the Security Agreements on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Agents have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement and Security Agreements. Effective as of the Effective Date (as defined below) and subject to the satisfaction of the condition precedent set forth in Section 3 below: 1.1 Schedule 5.8 to the Credit Agreement is amended by deleting the existing Schedule 5.8 in its entirety and substituting therefor Amended Schedule 5.8 attached hereto. 1.2 Section 5(a) of the Security Agreement executed by Holdings in favor of the Documentation and Collateral Agent is amended by deleting the first sentence thereof in its entirety and substituting therefor the following: The correct name of Grantor is "Advanced Accessory Systems, LLC". 1.3 Section 5(a) of the Security Agreement executed by AAS in favor of the Documentation and Collateral Agent is amended by deleting the first sentence thereof in its entirety and substituting therefor the following: The correct name of Grantor is "SportRack, LLC". 2. Consent. The Lenders hereby consent to the amendment by Holdings and AAS of their respective organizational documents to effect changes in their names to "Advanced Accessory Systems, LLC" and "SportRack, LLC", respectively. 160 3. Condition of Effectiveness. The effectiveness of this Amendment is subject to the condition precedent that the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers, the Required Lenders and the Agents. Upon the satisfaction of the foregoing condition precedent, this Amendment shall become effective (i) with respect to the consent set forth in Section 2 above, as of the date hereof, and (ii) with respect to the amendments set forth in Section 1 above, as of the date on which appropriate amendments effecting the name changes are filed with the Secretary of State of Delaware and copies thereof are delivered to the Administrative Agent (the "Effective Date"). 4. Representations and Warranties of the Borrowers. Each Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of the Borrowers and are enforceable against the Borrowers in accordance with their terms. (b) As of the Effective Date, (i) there exists no Default or Unmatured Default and (ii) the representations and warranties contained in Article V of the Credit Agreement, as amended hereby, are true and correct in all material respects, except for representations and warranties made with reference to a specific date which representations and warranties are true and correct in all material respects as of such date. 5. Reference to and Effect on the Credit Agreement and Security Agreements. (a) Upon the effectiveness of Section 1 hereof, each reference in any Loan Document to such Loan Document or any other Loan Document shall mean and be a reference to the applicable Loan Document as amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agents or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 6. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. 7. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 8. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. -2- 161 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. AAS HOLDINGS, LLC as a Borrower By:____________________________ Name: Title: ADVANCED ACCESSORY SYSTEMS, LLC as a Borrower By: AAS HOLDINGS, LLC Its Manager By:____________________________ Name: Title: VALLEY INDUSTRIES, LLC as a Borrower By: AAS HOLDINGS, INC. Its Manager By:____________________________ Name: Title: BRINK INTERNATIONAL BV as a Borrower By:____________________________ Name: Title: BRINK BV as a Borrower By:____________________________ Name: Title: -3- 162 NBD BANK as the Administrative Agent and the Documentation and Collateral Agent, and as a Lender By:____________________________ Name: Title: THE CHASE MANHATTAN BANK as the Co-Administrative Agent and the Syndication Agent, and as a Lender By:____________________________ Name: Title: FIRST UNION NATIONAL BANK as a Lender By:____________________________ Name: Title:_________________________ THE BANK OF NOVA SCOTIA as a Lender By:____________________________ Name: Title: COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH as a Lender By:____________________________ Name: Title: By:____________________________ Name: Title: -4- 163 LASALLE NATIONAL BANK as a Lender By:____________________________ Name: Title: MICHIGAN NATIONAL BANK as a Lender By:____________________________ Name: Title: NATIONAL CITY BANK (CLEVELAND) as a Lender By:____________________________ Name: Title: COMERICA BANK as a Lender By:____________________________ Name: Title: VAN KAMPEN AMERICA CAPITAL PRIME RATE INCOME TRUST as a Lender By:____________________________ Name: Title: DEBT STRATEGIES FUND, INC. as a Lender By:____________________________ Name: Title: -5- 164 SENIOR HIGH INCOME PORTFOLIO, INC. as a Lender By:____________________________ Name: Title: DEEPROCK & CO. By: Eaton Vance Management as Investment Advisor By:____________________________ Name: Title: SENIOR DEBT PORTFOLIO By: Boston Management and Research as Investment Advisor By:____________________________ Name: Title: -6- 165 EXECUTION COPY AMENDMENT NO. 2 Dated as of September 24, 1997 to SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of August 5, 1997 THIS AMENDMENT NO. 2 ("Amendment") is made as of September 24, 1997 by and among Advanced Accessory Systems, LLC (formerly known as AAS Holdings, LLC), Sportrack, LLC (formerly known as Advanced Accessory Systems, LLC), Valley Industries, LLC, Brink International BV and Brink BV (the "Borrowers"), the financial institutions listed on the signature pages hereof (the "Lenders") and NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent (the "Agents"), under that certain Second Amended and Restated Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the Lenders and the Agents (as amended, the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrowers, the Lenders and the Agents have agreed to amend the Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Agents have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement. Effective as of September 24, 1997 and subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows: 1.1 Article I of the Credit Agreement is hereby amended to add alphabetically the following defined terms: "ACQUISITION FACILITY COMMITMENT" means, for each Lender, the obligation of such Lender to make Acquisition Facility Loans not exceeding the amount set forth on Exhibit B to this Agreement opposite its name thereon under the heading "Acquisition Facility Commitment" or in the Assignment Agreement by which it became a Lender, as such amount may be modified from time to time pursuant to the terms of this Agreement or to give effect to any applicable assignment and acceptance. "ACQUISITION FACILITY LOAN" is defined in Section 2.2A hereof. "ACQUISITION FACILITY NOTE" means a note in substantially the form of Exhibit C-1 hereto duly executed by the applicable Borrower and payable to the order of a Lender in the amount of its Acquisition Facility Commitment, including any amendment, restatement, modification, renewal or replacement of such Acquisition Facility Note. 166 "AGGREGATE ACQUISITION FACILITY COMMITMENT" means the aggregate of the Acquisition Facility Commitments of all the Lenders, as reduced from time to time pursuant to the terms hereof. The initial Aggregate Acquisition Facility Commitment is Twenty Two Million Dollars ($22,000,000). 1.2 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Tranche B Term Loans" in the definition of "Applicable Base Rate Margin": "or Acquisition Facility Loans". 1.3 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Tranche B Term Loans" in the definition of "Applicable Eurocurrency Margins": "or Acquisition Facility Loans". 1.4 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Tranche A Term Loan Commitment" in the definition of "Commitment": ", Acquisition Facility Commitment,". 1.4(A) Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "principal amount of" in the definition of "High Yield Note Agreement": "not less than". 1.5 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Term Loans" in the definition of "Loans": ", Acquisition Facility Loans" and to add the following immediately after the reference to "Section 2.2" in such definition" "or Section 2.2A". 1.6 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Revolving Loan Commitment" in (ii)(A) of the definition of "Pro Rata Share": "and Acquisition Facility Commitment (or, after December 31, 1999, the outstanding principal balance of such Lender's Acquisition Facility Loans)" and to add the following immediately after the phrase "Aggregate Revolving Loan Commitment" in (ii)(B) of such definition: "and the Aggregate Acquisition Facility Commitment (or after December 31, 1999, the outstanding principal balance of such Lender's Acquisition Facility Loans)" "and to add the following immediately after the phrase "such Lender's Term Loans" in (x) of such definition: Acquisition Facility Loans" -2- 167 and to add the following immediately after the phrase "all Term Loans" in (y) of such definition: ", Acquisition Facility Loans". 1.7 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Pro Rata Share of any Revolving Loan" in the definition of "Required Lenders": "or Acquisition Facility Loan" and to add the following phrase immediately after the phrase "Pro Rata Shares of such Revolving Loans" in such definition: "or Acquisition Facility Loans". 1.8 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Tranche B Term Loans" in the definition of "Term Loans": "and, after December 31, 1999, the Acquisition Facility Loans". 1.9 Article I of the Credit Agreement is hereby amended to add the following definition of "Term Notes": "Term Notes means, collectively, the Tranche A Term Notes, the Tranche B Term Notes, and, after December 31, 1999, the Acquisition Facility Notes". 1.10 Article I of the Credit Agreement is hereby amended to delete the definition of "Tranche A Pro Rata Share" now contained therein and to substitute the following therefor: "'TRANCHE A PRO RATA SHARE' shall mean, at any particular time and with respect to any Lender, a fraction (expressed as a percentage), the numerator of which shall be the then aggregate amount of such Lender's Revolving Credit Commitment (or, if such Commitment has been terminated, the outstanding principal balance of such Lender's Revolving Loans) and Acquisition Facility Commitment (or, after December 31, 1999 or if such Commitment has been terminated, the outstanding principal balance of such Lender's Acquisition Facility Loans) plus the outstanding principal balance of such Lender's Tranche A Term Loans and the denominator of which shall be the then aggregate amount of all Revolving Credit Commitments (or, if such Commitments have been terminated, the outstanding principal balance of all Revolving Loans), Acquisition Facility Commitments (or, after December 31, 1999 or if such Commitments have been terminated, the outstanding principal balance of all Acquisition Facility Loans) and the outstanding principal balance of the Tranche A Term Loans." -3- 168 1.11 Article II of the Credit Agreement is hereby amended by adding the following new Section 2.2A immediately after Section 2.2 and before Section 2.3: "2.2A Acquisition Facility. Upon the satisfaction of the conditions precedent set forth in Sections 4.1 and 4.2, from and including the date of this Agreement and prior to December 31, 1999, each Lender severally and not jointly agrees, on the terms and conditions set forth in this Agreement, to make revolving loans, in Dollars only, to the applicable Borrower from time to time in an amount not to exceed such Lender's Acquisition Facility Commitment (each individually, an "'ACQUISITION FACILITY LOAN" and collectively, the "ACQUISITION FACILITY LOANS"). Each Advance under this Section 2.2A shall consist of Acquisition Facility Loans made by each Lender ratably in proportion to such Lender's respective Tranche A Pro Rata Share. Subject to the terms of this Agreement, the Borrowers may borrow, repay and reborrow Acquisition Facility Loans at any time prior to December 31, 1999. On December 31, 1999, the Borrower's option to borrow and reborrow Acquisition Facility Loans shall terminate, the Aggregate Acquisition Facility Commitment shall be reduced to zero and the outstanding principal balance of the Acquisition Facility Loans shall be repaid in sixteen (16) equal consecutive quarterly installments of principal, payable on the last Business Day of each fiscal quarter of the Borrower, commencing on December 31, 1999 and continuing thereafter until the Tranche A Term Loan Termination Date, and the Acquisition Facility Loans shall be permanently reduced by the amount of each installment on the date payment thereof is made hereunder. Notwithstanding the foregoing, the final installment shall be in the amount of the then outstanding principal balance of the Acquisition Facility Loans. In addition, the then outstanding principal balance of all Acquisition Facility Loans, if any, shall be due and payable on the Tranche A Term Loan Termination Date." 1.12 Section 2.5(B)(i)(d)(I) of the Credit Agreement is hereby amended to insert the following phrase immediately after the phrase "Tranche B Term Loans": "and, after December 31, 1999, the Acquisition Facility Loans". 1.13 Section 2.5(B)(i)(e) of the Credit Agreement is hereby amended to insert the following phrase immediately after the reference to "Tranche A Term Loans": "and, after December 31, 1999, the Acquisition Facility Loans". 1.14 Section 2.6 of the Credit Agreement is hereby amended to insert the following phrase after the first reference to "Aggregate Revolving Loan Commitment": "or the Aggregate Acquisition Facility Commitment", and to insert at the end of the first sentence the following: "and the amount of the Aggregate Acquisition Facility Commitment may not be reduced below the aggregate principal amount of the outstanding Acquisition Facility Loans". -4- 169 1.15 Section 2.7 of the Credit Agreement is hereby amended to insert the following phrase immediately after the phrase "Revolving Loan or Loans": "or Acquisition Facility Loan or Loans". 1.16 Section 2.8(b)(i) of the Credit Agreement shall be amended to insert immediately after the reference to "Tranche A Term Loans and Revolving Loans" in the pricing grid a reference to the following: "and Acquisition Facility Loans". 1.17 Section 2.9 of the Credit Agreement is hereby amended to insert the following phrase immediately after the phrase "Aggregate Revolving Loan Commitment": "or the unused Aggregate Acquisition Facility Commitment". 1.18 Section 2.15(C) of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Aggregate Revolving Loan Commitment" in (i)(A): "plus the Aggregate Acquisition Facility Commitment (prior to December 31, 1999)" and to insert immediately after the phrase "Revolving Credit Obligations" in (i) (B) the following: "plus, prior to December 31, 1999, the outstanding principal balance of the Acquisition Facility Loans". 1.19 Section 2.22 of the Credit Agreement is hereby amended to add the following immediately after the end thereof: "Notwithstanding the foregoing, Comerica Bank may issue commercial Letters of Credit up to an aggregate amount at any one time outstanding of $75,000 for its own account with respect to which the participation provisions of this Section 2.22 shall not apply." 1.20 Section 2.25 of the Credit Agreement is hereby amended to add the following immediately after the end thereof: -5- 170 "Notwithstanding the foregoing, the Letter of Credit Fee prescribed in this Section 2.25 shall not apply to the commercial letters of credit issued by Comerica Bank for its own account as described in Section 2.22 and Comerica Bank and the Borrowers shall negotiate separate fee arrangements with respect to such letters of credit and such fees shall be for the account of Comerica Bank." 1.21 Section 6.3(D) of the Credit Agreement is hereby amended to add the following new subsection (xii) ad the end thereof: "(xii) Investments made in Permitted Acquisitions". 1.22 Section 6.3(G) of the Credit Agreement is here by amended to delete Section 6.3(G)(2) now contained therein and to substitute the following therefor: "prior to each such acquisition, Holdings shall deliver to the Administrative Agent a certificate from one of Holdings' Authorized Officers demonstrating to the satisfaction of the Administrative Agent that after giving effect to the transaction or transactions on a pro forma basis using pro forma historical audited and reviewed unaudited financial statements (or other financial statements reasonably acceptable to the Administrative Agent) obtained from the seller on an unadjusted basis (other than one-time adjustments agreed to by the Administrative Agent, such agreement not to be unreasonable withheld) as if the acquisition had occurred in the first day of the twelve-month period ending on the last day of Holdings' most recently completed fiscal quarter, Holdings and its Subsidiaries (a) would have been in compliance with all provisions of Section 6.4 at all times during such twelve-month period and would have maintained a Leverage Ratio at all times prior to January 1, 1998 of less than 5.50 to 1.0; and (b) will be in compliance, based on projections deemed reasonable by the Administrative Agent, with all provisions of Section 6.4 through the first anniversary of such acquisition;" and is further amended to delete the language now contained in Section 6.3(G)(5)(B) and substitute the following therefor: "with respect to acquisitions other than the acquisition of Ellebi, S.A., $5,000,000 if the sources for such purchases are other than as set forth in clause (A) above, unless such acquisition is approved by the Required Lenders" and is further amended to add a new subsection (6) immediately following subsection (5): "(6) if the acquisition is a stock acquisition, the acquisition shall result in a transfer of 100% of the common stock of the company being acquired". 1.23 Section 8.2(vi) of the Credit Agreement is hereby amended to insert immediately after each reference to "Revolving Loan Commitment" the following: "or its Acquisition Facility Commitment". 1.24 Section 8.3(iv) of the Credit Agreement is hereby amended to insert immediately after the phrase "Revolving Loan Commitment" the following: -6- 171 "or Acquisition Facility Commitment". 1.25 Section 10.9 of the Credit Agreement is hereby amended to insert immediately after the phrase "Revolving Loan Commitment" the following: "its Acquisition Facility Commitment". 1.26 Section 12.2 of the Credit Agreement is hereby amended to insert immediately after each reference to the phrase "Revolving Loan Commitment" the following: "or any Acquisition Facility Commitment". 1.27 Section 12.3 of the Credit Agreement is hereby amended to insert immediately after each reference to the phrase "Revolving Loan Commitment" the following: "or Acquisition Facility Commitment", and to insert immediately after the phrase "Aggregate Revolving Loan Commitment" the following: ", the Aggregate Acquisition Facility Commitment". 2. Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that (a) the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers, the Required Lenders and the Agents, (b) the Borrowers shall have raised $100,000,000 through an offering of subordinated notes containing terms substantially identical to those set forth in the Preliminary Offering Memorandum dated September 8, 1997, and (c) the Borrowers shall have paid any fees due and payable pursuant to any applicable fee letter. Upon the satisfaction of the foregoing conditions precedent, this Amendment shall become effective with respect to the amendments set forth in Section 1 above. 3. Representations and Warranties of the Borrowers. Each Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of the Borrowers and are enforceable against the Borrowers in accordance with their terms. (b) As of September 24, 1997, (i) there exists no Default or Unmatured Default and (ii) the representations and warranties contained in Article V of the Credit Agreement, as amended hereby, are true and correct in all material respects, except for representations and warranties made with reference to a specific date which representations and warranties are true and correct in all material respects as of such date. 4. Reference to and Effect on the Credit Agreement and Security Agreements. (a) Upon the effectiveness of Section 1 hereof, each reference in any Loan Document to such Loan Document or any other Loan Document shall mean and be a reference to the applicable Loan Document as amended hereby. -7- 172 (b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agents or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. 6. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 7. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. -8- 173 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. ADVANCED ACCESSORY SYSTEMS, LLC as a Borrower By:____________________________ Name: Title: SPORTRACK, LLC as a Borrower By: ADVANCED ACCESSORY SYSTEMS, LLC Its Manager By:____________________________ Name: Title: VALLEY INDUSTRIES, LLC as a Borrower By: ADVANCED ACCESSORY SYSTEMS, LLC Its Manager By:____________________________ Name: Title: BRINK INTERNATIONAL BV as a Borrower By:____________________________ Name: Title: BRINK BV as a Borrower By:____________________________ Name: Title: -9- 174 NBD BANK as the Administrative Agent and the Documentation and Collateral Agent, and as a Lender By:____________________________ Name: Title: THE CHASE MANHATTAN BANK as the Co-Administrative Agent and the Syndication Agent, and as a Lender By:____________________________ Name: Title: FIRST UNION NATIONAL BANK as a Lender By:____________________________ Name: Title:_________________________ THE BANK OF NOVA SCOTIA as a Lender By:____________________________ Name: Title: COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH as a Lender By:____________________________ Name: Title: By:____________________________ Name: Title: -10- 175 LASALLE NATIONAL BANK as a Lender By:____________________________ Name: Title: MICHIGAN NATIONAL BANK as a Lender By:____________________________ Name: Title: NATIONAL CITY BANK (CLEVELAND) as a Lender By:____________________________ Name: Title: COMERICA BANK as a Lender By:____________________________ Name: Title: VAN KAMPEN AMERICA CAPITAL PRIME RATE INCOME TRUST as a Lender By:____________________________ Name: Title: DEBT STRATEGIES FUND, INC. as a Lender By:____________________________ Name: Title: -11- 176 SENIOR HIGH INCOME PORTFOLIO, INC. as a Lender By:____________________________ Name: Title: DEEPROCK & CO. By: Eaton Vance Management as Investment Advisor By:____________________________ Name: Title: SENIOR DEBT PORTFOLIO By: Boston Management and Research as Investment Advisor By:____________________________ Name: Title: MERRILL LYNCH DEBT STRATEGIES PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By:____________________________ Name: Title: MERRILL LYNCH PRIME RATE PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By:____________________________ Name: Title: -12- 177 EXECUTION COPY AMENDMENT NO. 3 Dated as of December 29, 1997 to SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of August 5, 1997 THIS AMENDMENT NO. 3 ("Amendment") is made as of December 29, 1997 by and among Advanced Accessory Systems, LLC (formerly known as AAS Holdings, LLC), SportRack, LLC (formerly known as Advanced Accessory Systems, LLC), Valley Industries, LLC, Brink International BV and Brink BV (the "Borrowers"), the financial institutions listed on the signature pages hereof (the "Lenders") and NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent (the "Agents"), under that certain Second Amended and Restated Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the Lenders and the Agents (as amended, the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrowers, the Lenders and the Agents have agreed to amend the Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Agents have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement. Effective as of December 29, 1997 and subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows: 1.1 Article I of the Credit Agreement is hereby amended to delete the definition of "AAS" now contained therein and to substitute therefor the following definition: "'AAS' means SportRack, LLC, a Delaware limited liability company (formerly known as Advanced Accessory Systems, LLC), and its successors and assigns, including a debtor-in-possession on behalf of AAS." 1.2 Article I of the Credit Agreement is hereby amended to delete the definition of "Holdings" now contained therein and to substitute therefor the following: "'HOLDINGS' means Advanced Accessory Systems, LLC, a Delaware limited liability company (formerly known as AAS Holdings, LLC), and its successors and assigns, including a debtor-in-possession on behalf of Holdings." 1.3 Section 6.3(A)(f) of the Credit Agreement is hereby amended to add a new subsection (5) at the end thereof: "and (5) Brink BV or Brink International to Brink Italia S.r.l. in an amount not to exceed $22,000,000 or the Equivalent Amount thereof, provided that if such 178 Indebtedness is evidenced by a note, such note is pledged to the Documentation and Collateral Agent to secure payment of Advances made to non-U.S. Subsidiaries." 1.4 Section 6.3(D) of the Credit Agreement is hereby amended to add a new subsection (xiii) at the end thereof: (xiii) Investments made through a purchase of equity or as a contribution to capital by Brink BV or Brink International in Brink Italia S.r.l. provided that any such Investment shall not exceed $10,000,000 or the Equivalent Amount thereof." 1.5 Section 6.4(A) of the Credit Agreement is hereby amended to add the following as a new last sentence at the end of the definition of "Capital Expenditures": "No portion of the purchase of assets by Brink Italia S.r.l. from Ellebi S.p.A. shall be deemed to be a Capital Expenditure." 1.6 Schedule 5.8 of the Credit Agreement is hereby amended to add immediately at the end thereof the following: "Brink Italia S.r.l., an Italian corporation." 2. Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers, the Required Lenders and the Agents. Upon the satisfaction of the foregoing conditions precedent, this Amendment shall become effective with respect to the amendments set forth in Section 1 above. 3. Representations and Warranties of the Borrowers. Each Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of the Borrowers and are enforceable against the Borrowers in accordance with their terms. (b) As of December 29, 1997, (i) there exists no Default or Unmatured Default and (ii) the representations and warranties contained in Article V of the Credit Agreement, as amended hereby, are true and correct in all material respects, except for representations and warranties made with reference to a specific date which representations and warranties are true and correct in all material respects as of such date. 4. Reference to and Effect on the Credit Agreement and Security Agreements. (a) Upon the effectiveness of Section 1 hereof, each reference in any Loan Document to such Loan Document or any other Loan Document shall mean and be a reference to the applicable Loan Document as amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. -2- 179 (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agents or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. 6. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 7. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. -3- 180 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. ADVANCED ACCESSORY SYSTEMS, LLC as a Borrower By:____________________________ Name: Title: SPORTRACK, LLC as a Borrower By: ADVANCED ACCESSORY SYSTEMS, LLC Its Manager By:____________________________ Name: Title: VALLEY INDUSTRIES, LLC as a Borrower By: ADVANCED ACCESSORY SYSTEMS, LLC Its Manager By:____________________________ Name: Title: BRINK INTERNATIONAL BV as a Borrower By:____________________________ Name: Title: BRINK BV as a Borrower By:____________________________ Name: Title: -4- 181 NBD BANK as the Administrative Agent and the Documentation and Collateral Agent, and as a Lender By:____________________________ Name: Title: THE CHASE MANHATTAN BANK as the Co-Administrative Agent and the Syndication Agent, and as a Lender By:____________________________ Name: Title: FIRST UNION NATIONAL BANK as a Lender By:____________________________ Name: Title:_________________________ THE BANK OF NOVA SCOTIA as a Lender By:____________________________ Name: Title: COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH as a Lender By:____________________________ Name: Title: By:____________________________ Name: Title: -5- 182 LASALLE NATIONAL BANK as a Lender By:____________________________ Name: Title: MICHIGAN NATIONAL BANK as a Lender By:____________________________ Name: Title: NATIONAL CITY BANK (CLEVELAND) as a Lender By:____________________________ Name: Title: COMERICA BANK as a Lender By:____________________________ Name: Title: VAN KAMPEN AMERICA CAPITAL PRIME RATE INCOME TRUST as a Lender By:____________________________ Name: Title: DEBT STRATEGIES FUND, INC. as a Lender By:____________________________ Name: Title: -6- 183 SENIOR HIGH INCOME PORTFOLIO, INC. as a Lender By:____________________________ Name: Title: DEEPROCK & CO. By: Eaton Vance Management as Investment Advisor By:____________________________ Name: Title: SENIOR DEBT PORTFOLIO By: Boston Management and Research as Investment Advisor By:____________________________ Name: Title: MERRILL LYNCH DEBT STRATEGIES PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By:____________________________ Name: Title: MERRILL LYNCH PRIME RATE PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By:____________________________ Name: Title: -7- EX-10.8 15 EX-10.8 1 EXHIBIT 10.8 ================================================================================ FIRST AMENDED AND RESTATED CREDIT AGREEMENT AMONG SPORTRACK INTERNATIONAL INC. (AS "BORROWER") - AND - FIRST CHICAGO NBD BANK, CANADA (AS "AGENT") - AND - FIRST CHICAGO NBD BANK, CANADA, THE CHASE MANHATTAN BANK OF CANADA AND THE BANK OF NOVA SCOTIA (AS "LENDERS") DATED AS OF THE 19TH DAY OF MARCH, 1998 ================================================================================ 2 TABLE OF CONTENTS
PAGE ARTICLE 1 INTERPRETATION.................................................................... 2 1.1 Defined Terms............................................................. 2 1.2 Interpretation............................................................ 15 1.3 Ancillary Agreements...................................................... 16 1.4 Severability.............................................................. 16 1.5 Entire Agreement.......................................................... 16 1.6 Waiver.................................................................... 16 1.7 Governing Law............................................................. 17 1.8 Incorporation of Schedules and Exhibits................................... 17 1.9 Conflicts................................................................. 17 1.10 Language.................................................................. 17 ARTICLE 2 CREDIT FACILITIES................................................................. 18 2.1 Revolving Facility and Term Facility...................................... 18 2.2 Commitments and Facility Limits........................................... 18 2.3 Available Accommodations.................................................. 19 2.4 Use of Proceeds........................................................... 19 2.5 Mandatory Repayments...................................................... 19 2.6 Mandatory Prepayments and Payments........................................ 20 2.7 Additional Prepayments and Reductions..................................... 21 2.8 Evidence of Indebtedness.................................................. 21 2.9 Facility Ratios........................................................... 21 2.10 Allocation of Fees and Expenses........................................... 22 ARTICLE 3 LOAN ADVANCES..................................................................... 22 3.1 The Advances.............................................................. 22 3.2 Procedure for Borrowing................................................... 25 3.3 Interest on Advances...................................................... 25 3.4 Conversions and Elections Regarding Types of Advances and Interest Rates............................................................ 26 3.5 Conversions of Floating Rate Advances to Bankers' Acceptances or BA Equivalent Notes.................................................... 27 3.6 Circumstances Requiring US Base Rate or Floating Rate Pricing............. 27 ARTICLE 4 BANKERS' ACCEPTANCES.............................................................. 30 4.1 Acceptances and BA Equivalent Notes....................................... 30 4.2 Procedure for Drawing..................................................... 30 4.3 Amount and Term........................................................... 30
3 - 2 - 4.4 Completion of Drafts...................................................... 31 4.5 Making of Accommodations.................................................. 31 4.6 Reimbursement at Contract Maturity Date................................... 31 4.7 Renewal or Conversion of Bankers' Acceptances............................. 32 4.8 Waiver.................................................................... 32 4.9 Obligations Absolute...................................................... 32 4.10 Prepayments............................................................... 33 4.11 Circumstances Making Bankers' Acceptances Unavailable..................... 33 4.12 Presigned Draft Forms..................................................... 33 4.13 Schedule 2 Reference Lenders.............................................. 33 ARTICLE 5 CONDITIONS OF LENDING............................................................. 34 5.1 Conditions Precedent to Further Accommodations Under Revolving Facility and Term Facility ....................................... 34 5.2 Conditions of all Accommodations........................................... 37 5.3 Condition Precedent to Initial Accommodation under the Revolving Facility......................................................... 37 ARTICLE 6 REPRESENTATIONS AND WARRANTIES.................................................... 37 6.1 Representations and Warranties............................................. 37 6.2 Survival of Representations and Warranties................................. 41 6.3 No Representations by Lenders.............................................. 41 ARTICLE 7 COVENANTS OF THE BORROWER......................................................... 41 7.1 Affirmative Covenants...................................................... 41 ARTICLE 8 SECURITY.......................................................................... 44 8.1 Guarantees................................................................. 44 8.2 Security................................................................... 44 8.3 Registrations.............................................................. 44 ARTICLE 9 EVENTS OF DEFAULT................................................................. 45 9.1 Events of Default.......................................................... 45 9.2 Expense of Agent........................................................... 47 9.3 Right to Confirm and Set-off............................................... 47 9.4 Remedies Cumulative........................................................ 47
4 - 3 - ARTICLE 10 PAYMENTS, COMPUTATIONS AND INDEMNITIES........................................... 47 10.1 Timing of Payments under this Agreement, etc............................... 47 10.2 Payments on Non-Business Days.............................................. 48 10.3 Overdue Amounts............................................................ 48 10.4 Application of Proceeds.................................................... 48 10.5 Computations of Interest and Fees.......................................... 49 10.6 Judgment Currency.......................................................... 50 10.7 Costs and Expenses......................................................... 50 10.8 Indemnity for Change in Circumstances...................................... 51 10.9 Indemnity Relating to Accommodations....................................... 52 10.10 Indemnity for Transactional and Environmental Liability.................... 53 10.11 Survival of Indemnities: Contribution...................................... 54 ARTICLE 11 GENERAL PROVISIONS............................................................... 54 11.1 Notices.................................................................... 54 11.2 Time of the Essence........................................................ 55 11.3 Third Party Beneficiaries.................................................. 55 11.4 Enurement.................................................................. 55 11.5 Counterparts............................................................... 55 11.6 Knowledge.................................................................. 55 11.7 Assignment................................................................. 56 11.8 Non-Merger................................................................. 56 11.9 Certificates and Opinions.................................................. 56 11.10 Amendment.................................................................. 56 11.11 Agent's and Lenders' Confidentiality Obligations........................... 56 ARTICLE 12 THE AGENT........................................................................ 57 12.1 Appointment and Authorization of Agent..................................... 57 12.2 Interest Holders........................................................... 57 12.3 Consultation with Counsel.................................................. 57 12.4 Documents.................................................................. 57 12.5 Agent as Lender............................................................ 57 12.6 Responsibility of Agent.................................................... 58 12.7 Action by Agent............................................................ 58 12.8 Notice of Events of Default................................................ 58 12.9 Benefit of Article 12...................................................... 58 12.10 Responsibility Disclaimed.................................................. 59 12.11 Indemnification............................................................ 59 12.12 Credit Decision............................................................ 59 12.13 Successor Agent............................................................ 59 12.14 Delegation by Agent........................................................ 60 12.15 Waivers and Amendments..................................................... 60 12.16 Determination by Agent Conclusive and Binding.............................. 61 12.17 Remittance of Payments..................................................... 61 12.18 Redistribution of Set-Off Payment.......................................... 61
5 - 4 - 12.19 Redistribution of Payment Under Security................................... 62 12.20 Distribution of Notices.................................................... 63 12.21 Dealings Between Borrower and Agent........................................ 63 12.22 Appointment of NBD Bank.................................................... 63
6 FIRST AMENDED AND RESTATED CREDIT AGREEMENT DATED as of the 19th day of March, 1998 A M O N G: SPORTRACK INTERNATIONAL INC. (as "BORROWER") - and - FIRST CHICAGO NBD BANK, CANADA (as "AGENT") - and - FIRST CHICAGO NBD BANK, CANADA, THE CHASE MANHATTAN BANK OF CANADA AND THE BANK OF NOVA SCOTIA (as "LENDERS") WHEREAS the Borrower, the Agent and certain of the Lenders have entered into and executed a Credit Agreement, dated as of July 2, 1997, as amended by that certain First Amending Agreement thereto, dated as of September 24, 1997 (collectively, the "EXISTING CREDIT AGREEMENT"); AND WHEREAS the Borrower has requested that the Agent and the Lenders amend the Existing Credit Agreement in accordance with the terms hereof. NOW, THEREFORE, THE BORROWER, THE AGENT AND THE LENDERS AGREE THAT THE EXISTING CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY AS SET FORTH HEREIN, WITHOUT NOVATION. 7 - 2 - ARTICLE 1 INTERPRETATION 1.1 DEFINED TERMS. In this Agreement, the following terms shall have the following meanings: "ACCOMMODATION" means (i) an Advance made by the Lenders, or any one or more of them, on the occasion of any Borrowing and (ii) a Bankers' Acceptance created or a BA Equivalent Note purchased by a Lender on the occasion of any Drawing. "ACCOMMODATION NOTICE" means a Borrowing Notice or a Drawing Notice. "ACCOUNTS" means, with respect to any Person, all accounts receivable, Claims (including Claims relating to insurance policies and Refundable Taxes), monies and book debts, on account or in respect of any Disposition of any Inventory, at any time due, owed or owing to such Person (including by any Affiliate of such Person), and all Liens, instruments, chattel paper, securities, bills, notes and other documents in respect of any such accounts receivable, Claims, monies or book debts. "ACQUISITION" means the purchase by the Borrower of certain assets from Bell Sports Canada Inc. pursuant to that certain asset purchase agreement, dated as of July 2, 1997, between the Borrower and Bell Sports Canada Inc. "ADVANCES" means advances made by the Lenders, or any one or more of them, under this Agreement and "ADVANCE" means any one of such Advances. A Canadian Dollar Advance may be designated a "FLOATING RATE ADVANCE" and a US Dollar Advance may be designated a "LIBOR ADVANCE" or a "US BASE RATE ADVANCE". "AFFECTED LENDER" has the meaning specified in SECTION 10.8(2). "AFFILIATE" shall have the meaning ascribed thereto in the Amended and Restated Credit Agreement. "AGENT" means First Chicago NBD Bank, Canada, in its capacity as administrative agent for the Lenders, its successors and permitted assigns. "AGREEMENT" means this first amended and restated credit agreement and all schedules and exhibits hereto, as the same may be amended, supplemented or restated from time to time. "AGREEING LENDER" has the meaning specified in SECTION 3.6(2). "AMENDED AND RESTATED CREDIT AGREEMENT" means that certain second amended and restated credit agreement, dated as of August 5, 1997, among Holdings, SportRack, Valley Industries, LLC, Brink International BV, Brink BV, the other Borrowing Subsidiaries (as defined therein), the financial institutions from time to time party thereto, as lenders, as well as NBD Bank and The Chase Manhattan Bank, as amended by (i) that certain amendment No. 1 thereto, dated as of September 5, 1997, by (ii) that certain amendment No. 2 thereto, dated as of September 24, 1997 and by (iii) that certain amendment No. 3 thereto, dated as of 8 - 3 - December 29, 1997 and as such agreement may be further amended, modified or otherwise supplemented form time to time. "ANCILLARY AGREEMENTS" means all Drafts, Bankers' Acceptances, BA Equivalent Notes, Guarantees, Security Documents, Fee Agreements and other agreements, certificates and instruments delivered or given pursuant to or in connection with this Agreement, in each case as the same may be amended, supplemented or restated from time to time; and "ANCILLARY AGREEMENT" means any one of such Drafts, Bankers' Acceptances, BA Equivalent Notes, Guarantees, Security Documents, Fee Agreements and other agreements, certificates or instruments. "ASSENTING LENDER" has the meaning specified in SECTION 10.8(2). "ASSUMPTION AGREEMENT" means an agreement substantially in the form attached as SCHEDULE 8. "AUTHORIZATION" means, with respect to any Person, any authorization, order, permit, approval, grant, license, written consent, right, franchise, privilege, certificate, judgment, writ, injunction, award, determination, direction, decree, by-law, rule or regulation of any Governmental Entity having jurisdiction over such Person. "BA DISCOUNT PROCEEDS" means, in respect of any Bankers' Acceptance or BA Equivalent Note, an amount calculated on the applicable Drawing Date which is the result (rounded to the nearest full cent, with one-half of one cent being rounded up) obtained by dividing the Face Amount of such Bankers' Acceptance or BA Equivalent Note by the sum of one plus the product of (i) the BA Discount Rate applicable thereto expressed as a decimal fraction and (ii) a decimal fraction, the numerator of which is the number of days to elapse from and including the Drawing Date of such Bankers' Acceptance or BA Equivalent Note up to but excluding the maturity date thereof and the denominator of which is 365, which product will be rounded to the nearest multiple of 0.0001. "BA DISCOUNT RATE" means either (i) with respect to any Bankers' Acceptance accepted by a Schedule 1 BA Lender, the rate determined by the Agent as being the arithmetic average (rounded up to the nearest 0.01%) of the discount rates, calculated on the basis of a year of 365 days and determined in accordance with normal market practice at or about 10:00 a.m. (Montreal time) on the applicable Drawing Date, for bankers' acceptances of the Schedule 1 Reference Lenders having a comparable face amount and identical maturity date to the Face Amount and maturity date of such Bankers' Acceptance accepted by a Schedule 1 BA Lender, (ii) with respect to any Bankers' Acceptance accepted by a Schedule 2 BA Lender, the rate determined by the Agent as being the arithmetic average (rounded up to the nearest 0.01%) of the discount rates, calculated on the basis of a year of 365 days and determined in accordance with normal market practice at or about 10:00 a.m. (Montreal time) on the applicable Drawing Date, for bankers' acceptances of the Schedule 2 Reference Lenders having a comparable face amount and identical maturity date to the Face Amount and maturity date of such Bankers' Acceptance accepted by a Schedule 2 BA Lender, or (iii) with respect to any BA Equivalent Note, the rate determined in (i). 9 - 4 - "BA EQUIVALENT NOTE" means, on any date, a notional bankers' acceptance issued by the Borrower in favour of any Non-BA Lender evidenced by the account records maintained by the Agent. "BA LENDER" means each Lender which is not a Non-BA Lender. "BANKERS' ACCEPTANCE" has the meaning specified in SECTION 4.1. "BORROWER" means SportRack International Inc. (formerly known as Advanced Accessory Systems Canada Inc./Les Systemes d'Accessoire Advanced Canada Inc.), its successors and permitted assigns. "BORROWER'S CANADIAN DOLLAR ACCOUNT" means the Canadian Dollar account maintained by the Borrower at the Canadian Account Branch, the particulars of which shall have been notified by the Borrower to the Agent. "BORROWER'S US DOLLAR ACCOUNT" means the US Dollar account maintained by the Borrower at the Canadian Account Branch, the particulars of which shall have been notified by the Borrower to the Agent. "BORROWING" means a borrowing consisting of one or more Advances. "BORROWING NOTICE" has the meaning specified in SECTION 3.2. "BUSINESS" means the business acquired from Bell Sports Canada Inc. and from Nomadic Sports Inc. and henceforth carried on by the Borrower and its Subsidiaries in respect of the designing, engineering, manufacturing, marketing, selling and distributing of automotive roof rack systems and vehicular accessories (such as bike racks, ski racks and surfboard carriers) and rear carriers and shuttles and related rear carriers and shuttle systems as well as all ancillary or related activities and businesses of the Borrower and its Subsidiaries. "BUSINESS DAY" means any day of the year on which banks are open for business in Montreal, Quebec, Toronto, Ontario and New York City, New York and, where used in the context of a LIBOR Advance, such day is also a day on which dealings are carried on in the London interbank market. "CANADIAN ACCOUNT BRANCH" means the branch bank of the Agent in Toronto, Ontario at which the Borrower maintains the Borrower's Canadian Dollar Account and the Borrower's US Dollar Account from time to time. "CANADIAN DOLLARS", "CDN. $" AND "$" each mean lawful money of Canada. "CAPITAL STOCK" means, with respect to any Person, any and all shares, interests, participations or other equivalents of or interests in (however designated) the equity interest (including common shares, preferred shares and partnership interests) of such Person and any rights (other than debt securities convertible into an equity interest), warrants or options to subscribe for or acquire an equity interest in such Person. 10 - 5 - "CHANGE OF CONTROL" means, with respect to the Borrower, the purchase or acquisition, by any Person (other than Holdings or any of its Subsidiaries), or any other Person acting jointly or in concert with such Person directly or indirectly, legally or beneficially, of shares in the capital stock of the Borrower, having ordinary voting power to elect a majority of the board of directors of the Borrower, or persons performing similar functions. "CLAIM" means any claim of any nature whatsoever, including any demand, dispute, liability, obligation, debt, action, cause of action, suit, proceeding, litigation, arbitration, judgment, order, award, assessment and reassessment, and any formal inquiry reasonably likely in the opinion of the Borrower to result in any of the foregoing. "CLOSING" means the date on which the initial Accommodation was made under the Term Facility pursuant to the terms and conditions of the Existing Credit Agreement. "COLLATERAL" means (i) all Accounts and Inventory; (ii) all Property (including all books, records, lists, correspondence, papers, data, choses in action, warehouse receipts, bills of lading, licenses, permits, franchises, leases, goodwill, instruments, chattel paper, documents of title, intangibles, contracts, purchase orders and proceeds) relating to any Accounts or Inventory; (iii) all bank or other deposit accounts; (iv) all certificates of deposit and other deposit instruments purchased with the proceeds of Dispositions of Accounts, Inventory or such certificates of deposit or other deposit instruments, (v) all Intellectual Property relating to Inventory; (vi) all insurance policies in respect of the loss or destruction of Inventory; and (vii) all increases, additions and accessions to and all substitutions, replacements and proceeds of any of the foregoing; in each case, present and future, of the Borrower. "COMMITMENTS" means the Revolving Facility Aggregate Commitment and the Term Facility Aggregate Commitment; and "Commitment" means any one of such Commitments. "CONSOLIDATED SUBSIDIARY" means, at any time, in respect of any Person, any other Person the accounts of which are or should, in accordance with GAAP, be consolidated with those of such first-mentioned Person in its consolidated financial statements at such time. "CONTRIBUTING LENDER" has the meaning specified in SECTION 3.1(2)(A). "CREDIT DOCUMENTS" means this Agreement and the Ancillary Agreements; and "CREDIT DOCUMENT" means any one of such Credit Documents. "CREDIT FACILITIES" means, collectively, the Revolving Facility and the Term Facility; and "CREDIT FACILITY" means either one of the Credit Facilities. "DEFAULT" means an event, condition or circumstance which, with the giving of notice or passage of time, or both, would constitute an Event of Default. "DEFAULTING LENDER" has the meaning specified in SECTION 3.1(2)(A). "DEPOSITARY" means any depositary, bailee or warehouseperson of any of the Collateral. 11 - 6 - "DEPOSITARY'S LETTER" means a letter substantially in the form attached as SCHEDULE 10. "DETERMINING LENDER" has the meaning specified in SECTION 3.6(1). "DISPOSITION" means, with respect to any Property of any Person, any direct or indirect sale, lease (where such Person is the lessor of such Property), transfer (including any transfer of title or possession), exchange, conveyance, release, abandonment expropriation, requisition of title, seizure, condemnation, forfeiture, actual or constructive, total loss or agreed or compromised loss or other disposition, including by means of a reorganization, consolidation, amalgamation or merger ; and "DISPOSE" and "DISPOSED" have meanings correlative thereto. "DRAFT" means, at any time, a blank bill of exchange within the meaning of the Bills of Exchange Act (Canada) drawn by the Borrower on a BA Lender in the form supplied by such BA Lender and bearing such distinguishing letters and numbers as such BA Lender may determine, but which at such time, except as otherwise provided herein, has not been completed or accepted by such BA Lender. "DRAWING" means the creation of Bankers' Acceptances or purchase of BA Equivalent Notes by the Lenders. "DRAWING DATE" means any Business Day fixed pursuant to SECTION 4.2 for a Drawing. "DRAWING FEE" means, with respect to each Draft or BA Equivalent Note drawn by the Borrower hereunder and accepted (or, in the case of a BA Equivalent Note, purchased) by a Lender on any Drawing Date, an amount equal to the Variable Percentage applicable to Bankers' Acceptances or BA Equivalent Notes, as the case may be, on such date, multiplied by the Face Amount of such Draft or BA Equivalent Note, calculated daily on the basis of the term to maturity of such Draft or BA Equivalent Note and a year of 365 days. "DRAWING FEE ADJUSTMENT" shall mean, with respect to any Bankers' Acceptance accepted or BA Equivalent Note purchased hereunder, a positive or negative amount equal to (i) the Drawing Fee paid by the Borrower with respect to such Bankers' Acceptance or BA Equivalent Note, minus (ii) the sum of the amounts, each of which is an amount equal to the Variable Percentage applicable to such Bankers' Acceptance or BA Equivalent Note on each day during the term thereof multiplied by the Face Amount thereof, and divided by 365 days. If the aforesaid calculation results in a negative amount such negative amount shall be deemed to be an additional Drawing Fee payable hereunder by the Borrower on account of the Drawing of such Bankers' Acceptance or BA Equivalent Note. "DRAWING NOTICE" has the meaning specified in SECTION 4.2. "ELECTION NOTICE" has the meaning specified in SECTION 3.4(2). "ELIGIBLE ASSIGNEE" means (i) a commercial bank organized under the laws of Canada, and having total assets in excess of $1,000,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development ("OECD"), or a political subdivision of any such country , and having total assets in excess of $3,000,000,000, provided that such bank is acting through a branch or 12 - 7 - agency located in the country in which it is organized or another country which is a member of the OECD; (iii) the central bank of any country which is a member of the OECD; and (iv) any other financial institution approved in writing by the Borrower and the Agent as an Eligible Assignee for the purposes of this Agreement; provided that the Borrower's approval shall not be unreasonably withheld. Without limitation to the foregoing, the Borrower may withhold its consent of any such other financial institution if the proposed assignment of any portion of any Lender's rights and obligations under this Agreement to such other financial institution would materially increase the amount of Taxes required to be deducted by the Borrower from or in respect of any sum payable under the Credit Documents or would materially increase the cost to the Borrower of obtaining Accommodations (determined as of the date on which such other financial institution is proposed to become a Lender hereunder). "ENVIRONMENT" means all components of the earth, including, without limitation, air (and all layers of the atmosphere), land (and all surface and subsurface soil, underground spaces and cavities and all land submerged under water) and water (and all surface and underground water), organic and inorganic matter and living organisms, and the interacting natural systems that include components referred to above in this definition of "ENVIRONMENT". "ENVIRONMENTAL LAWS" means all applicable Laws relating to the Environment, Hazardous Substances, pollution or protection of the Environment, including Laws relating to: (i) on site or off-site contamination; (ii) chemical substances or products; (iii) Releases of pollutants, contaminants, chemicals or other industrial, toxic or radioactive substances or Hazardous Substances into the Environment; and (iv) the manufacture, processing, distribution, use, treatment, storage, transport, packaging, labeling, sale, recycling, disposal, destruction, incineration, burial or handling of Hazardous Substances. "ENVIRONMENTAL LIABILITIES AND COSTS" means all Losses and Claims, whether known or unknown, present or future, imposed by, under or pursuant to any Environmental Laws applicable to the Borrower or any of its Subsidiaries or resulting from any Environmental Order and all reasonable fees, disbursements and expenses of counsel and experts, including Losses and Claims based on or arising out of: (i) the ownership or operation of the Business or any Real Estate or Leasehold Real Estate either related to the Business or owned, leased or operated by the Borrower or any of its Subsidiaries; (ii) the conditions on, under or above any Real Estate or Leasehold Real Estate, currently or previously owned, leased or operated by the Borrower or any of its Subsidiaries; (iii) expenditures necessary to cause the operations of the Business, Real Estate or Leasehold Real Estate either related to the Business or owned, leased or operated by the Borrower or any of its Subsidiaries to comply with any and all requirements pursuant to any applicable Environmental Laws or Environmental Orders; (iv) the use, generation, manufacture, refining, treatment, transportation, storage, handling, recycling, disposal, depositing, transferring, producing or processing of Hazardous Substances; and (v) liability for personal injury or property damage, including damages assessed for the maintenance of a public or private nuisance. "ENVIRONMENTAL NOTICE" means any written Claim, citation, directive, statement of claim, notice of investigation, notice of default, letter or other written communication from any Person given in connection with any actual or alleged violation of any applicable Environmental Law or Environmental Order. 13 - 8 - "ENVIRONMENTAL ORDER" means any final and binding (or, if not final and binding, any executory (notwithstanding the institution of an appeal or the filing of an application for review)) order, citation, summons, suit, action or judgment issued or given by any competent court or any Governmental Entity pursuant to any violation of Environmental Laws, caused by the activities, acts or omissions of the Borrower or any of its Subsidiaries. "ENVIRONMENTAL PERMITS" means all permits, certificates, approvals, registrations and licenses issued by any Governmental Entity to the Borrower, its Subsidiaries or to the Business pursuant to Environmental Laws and relating to or required for the operation of the Business or the use or ownership of the Real Estate, Leasehold Real Estate or other Property of the Borrower or its Subsidiaries. "EQUIVALENT CDN. $ AMOUNT" means, on any day with respect to any amount in any currency other than Canadian Dollars, the equivalent amount of Canadian Dollars determined by using the quoted spot rate at which the Agent at its head or principal office in Toronto offers to provide Canadian Dollars in exchange for such other currency, at 12:00 noon (Montreal time) on such day. "EQUIVALENT US $ AMOUNT" means, on any day with respect to any amount of Canadian Dollars, the equivalent amount of US Dollars determined by using the quoted spot rate at which the Agent at its head or principal office in Toronto offers to provide US Dollars in exchange for Canadian Dollars at 12:00 noon (Montreal time) on such day. "EVENT OF DEFAULT" has the meaning specified in SECTION 9.1. "FACE AMOUNT" means, in respect of a Bankers' Acceptance or BA Equivalent Note, the amount payable to the holder thereof at its maturity. "FEE AGREEMENTS" means (i) the provisions of this Agreement relating to Fees; and (ii) all agreements entered into after the date of this Agreement between the Agent and the Borrower relating to Fees. "FEES" means any and all fees payable by the Borrower in connection with the Credit Facilities. "FINANCIAL QUARTER" means, in relation to the Borrower and its Consolidated Subsidiaries, each successive period of three consecutive months, the first such period beginning on the first day of the first month of the Borrower's Financial Year. "FINANCIAL YEAR" means, in relation to the Borrower and its Consolidated Subsidiaries, the Borrower's financial year commencing on January of each calendar year and ending on December 31 of such calendar year. "FLOATING RATE" means, for any particular day, the rate of interest per annum equal to the greater of: (i) the Prime Rate plus the Variable Percentage applicable to Floating Rate Advances on such day; and (ii) the sum of (A) the rate per annum for Canadian Dollar bankers' acceptances accepted by First Chicago NBD Bank, Canada having a term of one month that appears on the Reuters Screen CDOR Page as of 10:00 a.m. (Montreal time) for such day 14 - 9 - plus one percent, and (B) the Variable Percentage applicable to Bankers' Acceptances on such day. "FLOATING RATE ADVANCE" means an Advance denominated in Canadian Dollars which bears interest based on the Floating Rate. "GAAP" has the meaning ascribed to the expression "Agreement Accounting Principles" contained in the Amended and Restated Credit Agreement. "GOVERNMENTAL ENTITY" means any: (i) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, commission, board, bureau or agency, domestic or foreign; (ii) any subdivision, agent, commission, board, or authority of any of the foregoing; or (iii) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing. "GUARANTEE" means an unconditional, irrevocable, continuing joint and several guarantee, acceptable to the Agent, acting reasonably, of the payment and performance of all the obligations of the Borrower under, in connection with or relating to the Credit Facilities. "GUARANTOR" means each of Holdings and SportRack individually or collectively, as the case may be, and their respective successors and permitted assigns. "HAZARDOUS SUBSTANCE" means any Substance which is or is deemed to be, alone or in any combination, hazardous, hazardous waste, toxic, a pollutant, a contaminant or a source of pollution or contamination under any applicable Environmental Laws. "HOLDINGS" means Advanced Accessory Systems, LLC, formerly known as AAS Holdings, LLC. "INDEMNIFIED LIABILITIES" has the meaning specified in SECTION 10.10. "INDEMNIFIED PARTIES" has the meaning specified in SECTION 10.10. "INDIVIDUAL COMMITMENT" means, at any time with respect to a Lender, when used with reference to a particular Credit Facility only, the amount set forth in SCHEDULE 1 as the individual commitment of such Lender under such Credit Facility, and otherwise, the aggregate of the amounts set forth in SCHEDULE 1 as the individual commitments of such Lender under both of the Credit Facilities, in each case as such amount may be reduced from time to time pursuant to this Agreement. "INSOLVENCY LAW" means any Law relating to bankruptcy, insolvency, reorganization, arrangement, adjustment, liquidation, winding-up, relief, protection or composition of debts or debtors, or relating to creditors' rights, or those provisions of any other Law (whether or not similar to the foregoing Laws) affecting or relating to solvency or liquidity of any Person. "INTELLECTUAL PROPERTY" means any and all patents and patent applications and registrations, industrial designs and industrial design applications and registrations, trademarks and trademark applications and registrations, trade names and styles, logos, copyrights and 15 - 10 - copyright applications and registrations, all of the foregoing owned by or licensed to the Debtor and used in or necessary to the operation of the Debtor's business. "INTEREST PERIOD" means, for each LIBOR Advance, a period which commences: (i) in the case of the initial Interest Period, on the date such Advance is made or converted from another Type of Advance or Accommodation; and (ii) in the case of any subsequent Interest Period, on the last day of the immediately preceding Interest Period, and which ends, in either case, on (but does not include) the day selected by the Borrower in the applicable Borrowing Notice or Election Notice in accordance with this Agreement. "INVENTORY" means, with respect to any Person, all inventory now owned or hereafter acquired or reacquired by such Person, whether or not conditionally or unconditionally sold to such Person, including: (i) merchandise, finished goods, work in progress, raw materials, new and unused production, packing and shipping supplies; (ii) all automotive roof rack systems and vehicular accessories (such as bike racks, ski racks and surfboard carriers) and rear carriers and shuttles and related rear carriers and shuttle systems manufactured, produced, assembled, processed or purchased for sale, lease or resale by such Person, or procured for such manufacture, production, assembly, processing or sale, lease or resale; (iii) all new and unused maintenance items and replacement parts; and (iv) all other materials and supplies on hand to be used or consumed or which might be used or consumed in connection with the manufacture, production, assembly, processing, packing, shipping, advertising, selling, or furnishing of goods. "LANDLORD" means an owner, landlord or lessor of Leasehold Real Estate. "LANDLORD'S LETTER" means a letter substantially in the form attached as SCHEDULE 9. "LAWS" means all statutes, codes, ordinances, decrees, rules, regulations, municipal by-laws, judicial or arbitral or administrative or ministerial or departmental or regulatory judgments, orders, decisions, rulings or awards, policies and guidelines which are binding or any provisions of the foregoing, binding on the Person referred to in the context in which such word is used; and "LAW" means any one of such Laws. "LEASEHOLD REAL ESTATE" means the real estate of the Borrower and its Subsidiaries held under a lease, agreement to lease or other right of occupation. "LENDERS" means the lenders named in SCHEDULE 1 and any one or more Eligible Assignee and their respective successors and permitted assigns. "LIBOR" means, for each Interest Period for each LIBOR Advance, the variable rate of interest per annum which appears on the Reuters Screen LIBO page at approximately 11:00 a.m. (London time) on the second Business Day before the first day of such Interest Period for, if there is no such rate at such time, the London inter-bank offered rate quoted by First Chicago NBD Bank, Canada at its head or principal office in Toronto at such time), for a period comparable to such Interest Period and in an amount approximately equal to the amount of such LIBOR Advance to be outstanding during such Interest Period. "LIBOR ADVANCE" means an Advance denominated in US Dollars which bears interest based on the LIBOR Rate. 16 - 11 - "LIBOR RATE" means, for any particular day of an Interest Period, the rate of interest per annum equal to (i) LIBOR for such Interest Period, plus (ii) the Variable Percentage applicable to LIBOR Advances on such day. "LIEN" means, with respect to any Property of any Person, any charge, mortgage, prior claim (within the meaning of the Civil Code of Quebec), pledge, hypothecation, security interest, security under the Bank Act (Canada), lien, conditional sale (or other title retention agreement or lease in the nature thereof), lease (where such Person is the lessee of such Property), servitude, assignment, adverse claim, defect of title, restriction, trust, right of setoff or other encumbrance of any kind in respect of such Property, whether or not filed, recorded or otherwise perfected under applicable Law. "LOSS" means any loss whatsoever, whether direct or indirect, including expenses, costs, damages, judgments, penalties, fines, charges, claims, demands, liabilities, loss of profits, debts, interest and any and all reasonable legal fees and disbursements. "MAJORITY LENDERS" means, at any particular time but subject to SECTION 12.15(B), in the case of any request, consent, approval, instruction or other action required or permitted to be made, given or taken at such time by the Majority Lenders, such group of Lenders whose Individual Commitments aggregate more than 50% of the aggregate of the Individual Commitments of all of the Lenders under the Credit Facilities collectively at such time. "MATERIAL ADVERSE EFFECT" means a material adverse effect upon: (i) the business, condition (financial or otherwise), operations, performance, Property or prospects of the Holdings and its Subsidiaries, taken as a whole; or (ii) the ability of the Borrower to perform any of its obligations under any of the Credit Documents to which the Borrower is a party in any material respect; or (iii) the ability of any Guarantor to perform any of its obligations under any Ancillary Agreement to which such Guarantor is a party in any material respect; or (iv) the ability of the Agent and the Lenders to enforce in any material respect any of the obligations of the Borrower under this Agreement, any of the obligations of the Borrower or any of the Guarantors under any of the Ancillary Agreements or any of their rights with respect to the Collateral or the shares in the share capital of the Borrower which are pledged in favour of the Agent, in each case in accordance with applicable Laws. "NOMADIC ACQUISITION" means the purchase, as of July 24, 1997, by the Borrower of either (i) substantially all of the assets of Nomadic Sports Inc. or (ii) all of the issued and outstanding shares in the share capital thereof. "NON-BA LENDER" means a Lender which is not permitted by applicable Law or by customary market practices to stamp, for purposes of subsequent sale, or accept, a Bankers' Acceptance. "NOTICE" means any written notice, citation, directive, request for information, writ, summons, statement of claim, or other written communication from any Person. "ORIGINAL CURRENCY" has the meaning specified in SECTION 10.6. "OTHER CURRENCY" has the meaning specified in SECTION 10.6. 17 - 12 - "OUTSTANDINGS" means, at any time, when used with reference to the Revolving Facility, an amount, calculated by reference to the Equivalent Cdn. $ Amount in the case of amounts denominated in US Dollars, equal to the sum of: (i) the aggregate principal amount at such time of all outstanding Advances under the Revolving Facility; and (ii) the aggregate Face Amount at such time of all outstanding Bankers' Acceptances or BA Equivalent Notes under the Revolving Facility; and when used with reference to the Term Facility, an amount, calculated by reference to the Equivalent Cdn. $ Amount in the case of amounts denominated in US Dollars, equal to the sum of: (a) the aggregate principal amount at such time of all outstanding Advances under the Term Facility; and (b) the aggregate Face Amount at such time of all outstanding Bankers' Acceptances or BA Equivalent Notes under the Term Facility. "PERSON" means an individual, partnership, corporation, limited liability company, trust, unincorporated association, syndicate, joint venture or other entity or Governmental Entity, and pronouns have a similarly extended meaning. "PRIME RATE" means, for any particular day, the variable rate of interest per annum, calculated on the basis of a year of 365 days (or 366 days), established by First Chicago NBD Bank, Canada at its head or principal office in Toronto for such day as the reference rate of interest per annum for the determination of interest rates that First Chicago NBD Bank, Canada charges to its customers of varying degrees of creditworthiness for Canadian Dollar loans made by it in Canada and which it refers to as its "prime rate". "PROPERTY" means, with respect to any Person, any interest of such Person in any kind of property or asset, wherever situate, whether real or immovable, personal, moveable or mixed, tangible or corporeal, intangible or incorporeal, including Capital Stock in any other Person. "PRO RATA SHARE" means, at any time with respect to a Lender, when used with respect to a particular Credit Facility, the ratio of the Individual Commitment of such Lender at such time under such Credit Facility to the aggregate of the Individual Commitments of all of the Lenders at such time under such Credit Facility, and otherwise, the ratio of the aggregate amount of the Individual Commitments of such Lender at such time under both Credit Facilities to the aggregate of the Individual Commitments of all of the Lenders at such time under both Credit Facilities. "REAL ESTATE" means an interest as absolute owner as it relates to immovable property of the Borrower and its Subsidiaries situate in the Province of Quebec and the real estate of the Borrower and its Subsidiaries held in fee simple. "REFUNDABLE TAXES" means Taxes paid by the Borrower or any Guarantor to the Government of Canada or any province thereof or of the United States of America or any state thereof, which Taxes are required by Law to be refunded by such Governmental Entity to the Borrower or any Guarantor. "RELEASE" when used as a verb includes release, spill, leak, emit, deposit, discharge, leach, migrate, dump, issue, empty, place, seep, exhaust, abandon, bury, incinerate or dispose into the Environment and "RELEASE" when used as a noun has a correlative meaning. 18 - 13 - "RELEVANT MATURITY DATE" means: (i) in the case of the Revolving Facility, the Revolving Facility Maturity Date; and (ii) in the case of the Term Facility, the Term Facility Maturity Date. "REMEDIAL ACTION" means any action taken by the Borrower or any of its Subsidiaries, that is reasonably necessary to comply with any applicable Environmental Laws or Environmental Order to: (i) clean up, remove, treat or in any other way deal with Hazardous Substances in the Environment as required by any applicable Environmental Laws or Environmental Order; (ii) prevent any Release of Hazardous Substances where such Release would violate any Environmental Laws or Environmental Order; or (iii) perform remedial studies, investigations, restoration and post-remedial studies, investigations and monitoring as required by any applicable Environmental Laws or Environmental Order on, about or in connection with the Business or any of the Real Estate, Leasehold Real Estate or other Property. "REPLACEMENT LENDER" has the meaning specified in SECTION 3.1(2)(B). "REVOLVING FACILITY" means the revolving liquidity facility to be made available to the Borrower hereunder. "REVOLVING FACILITY AGGREGATE COMMITMENT" means $4,000,000, as such amount may be reduced from time to time in accordance with this Agreement. "REVOLVING FACILITY MATURITY DATE" means the earlier of (i) October 30, 2003 and (ii) the date of termination of the Amended and Restated Credit Agreement, whether at maturity, pursuant to acceleration or otherwise, or if such date is not a Business Day, then the next succeeding Business Day. "REVOLVING FACILITY RATIO" has the meaning specified in SECTION 2.9. "SCHEDULE 1 BA LENDER" means any BA Lender which is a bank referred to in Schedule I of the Bank Act (Canada). "SCHEDULE 2 BA LENDER" means any BA Lender which is a bank referred to in Schedule II of the Bank Act (Canada). "SCHEDULE 1 REFERENCE LENDERS" means The Bank of Nova Scotia and, if there is more than one Schedule 1 BA Lender at any time hereafter other than The Bank of Nova Scotia, one of such other Schedule 1 BA Lenders designated by the Borrower (provided that if the Borrower does not so designate, The Bank of Nova Scotia shall be the sole Schedule 1 Reference Lender), the initial Schedule 1 Reference Lenders being The Bank of Nova Scotia. "SCHEDULE 2 REFERENCE LENDERS" means the Schedule 2 BA Lenders which have been designated as such or deemed to be Schedule 2 Reference Lenders in accordance with SECTION 4.13, the initial Schedule 2 Reference Lenders designated in accordance with SECTION 4.13 being First Chicago NBD Bank, Canada and The Chase Manhattan Bank of Canada. 19 - 14 - "SECURITY DOCUMENTS" means those agreements and other documents in favour of the Agent and/or the Lenders described in SCHEDULE 4, as such documents may be amended, supplemented or replaced from time to time, and any other agreement or instrument which the Agent may reasonably from time to time deem necessary for the purpose of obtaining, creating, perfecting, preserving or protecting any of the Liens in favour of the Agent and/or the Lenders in any of the Collateral, in the shares of the capital stock of the Borrower or in the respective personal property of SportRack and Holdings. "SENIOR DEBT RATIO" has the meaning ascribed thereto in the Amended and Restated Credit Agreement. "SPORTRACK" means SportRack, LLC, formerly known as Advanced Accessory Systems, LLC. "SUBSIDIARY" means, at any time, as to any Person, any corporation or other Person, if at such time the first-mentioned Person owns, directly or indirectly, securities or other ownership interests in such corporation or other Person, having ordinary voting power to elect a majority of the board of directors or persons performing similar functions for such corporation or other Person. For greater certainty, the term "SUBSIDIARY" shall refer to a direct or indirect Subsidiary. "SUBSTANCE" means any substance, waste, liquid, gaseous or solid matter, fuel, micro-organism, sound, vibration, ray, heat, odour, radiation, energy vector, plasma, and organic or inorganic matter. "TAXES" means all taxes imposed by any Governmental Entity, including income, profits, real property, personal property, goods and services, sales, transfer, purchase, stumpage, registration, capital, excise, import duties, payroll, unemployment, disability, employee's income withholding, social security or withholding. "TERM FACILITY" means the term acquisition facility to be made available to the Borrower hereunder. "TERM FACILITY AGGREGATE COMMITMENT" means $20,000,000, as such amount may be reduced from time to time in accordance with this Agreement. "TERM FACILITY MATURITY DATE" means the earlier of (i) October 30, 2003 and (ii) the date of termination of the Amended and Restated Credit Agreement, whether at maturity, pursuant to acceleration or otherwise, or if such date is not a Business Day, then the next succeeding Business Day. "TERM FACILITY RATIO" has the meaning specified in SECTION 2.9. "TOTAL OUTSTANDINGS" means, at any time, the aggregate amount in Canadian Dollars of all Outstandings under both the Credit Facilities at such time, calculated by reference to the Equivalent Cdn. $ Amount in the case of Outstandings in US Dollars. "TYPE OF ACCOMMODATION" means, with respect to any Accommodation, an Advance or a Bankers' Acceptance or BA Equivalent Note (as the case may be). 20 - 15 - "TYPE OF ADVANCE" means, with respect to any Advance, a Floating Rate Advance, a LIBOR Advance or a US Base Rate Advance. "US BASE" means, for any particular day, the variable rate of interest per annum, calculated on the basis of a year of 365 days (or 366 days), established by First Chicago NBD Bank, Canada at its head or principal office in Toronto for such day as the reference rate of interest per annum for the determination of interest rates that First Chicago NBD Bank, Canada charges to its customers of varying degrees of creditworthiness for US Dollar loans made by it in Canada and which it refers to as its "US base rate". "US BASE RATE" means, for any particular day, the rate of interest per annum equal to (i) the US Base on such day; plus (ii) the Variable Percentage applicable to US Base Rate Advances on such day. "US BASE RATE ADVANCE" means an Advance denominated in US Dollars bearing interest based on the US Base Rate. "US DOLLARS" AND "US $" means lawful money of the United States of America. "VARIABLE PERCENTAGE" means, with respect to any Type of Accommodation under either Credit Facility for any particular day, the percentage per annum set out in SCHEDULE 3, which is applicable to such Type of Accommodation under such Credit Facility based on the highest level on the grid set forth in SCHEDULE 3 under the heading "Senior Debt Ratio" in respect of which the Senior Debt Ratio was met for the fiscal quarter immediately preceding the fiscal quarter during which such day occurs. 1.2 INTERPRETATION. This Agreement shall be interpreted in accordance with the following: (a) words denoting the singular include the plural and vice versa and words denoting any gender include all genders; (b) headings shall not affect the interpretation of this Agreement; (c) "HEREOF", "HERETO" and "HEREUNDER" and similar expressions refer to this Agreement and not to any particular Article, Section or other subdivision, and "Article", "Section" or other subdivision of this Agreement followed by a number refers to the specified Article, Section or other subdivision of this Agreement; (d) references to dollars, unless otherwise specifically indicated, shall be references to Canadian Dollars; (e) the word "including" shall mean "including without limitation" and "includes" shall mean "includes without limitation"; (f) the expressions "THE AGGREGATE", "THE TOTAL", "THE SUM" and expressions of similar meaning shall mean "the aggregate (or total or sum) without DUPLICATION"; 21 - 16 - (g) in the computation of periods of time, unless otherwise expressly provided, the word ,"FROM" means "FROM AND INCLUDING" and the words "TO" and "UNTIL" mean "TO BUT EXCLUDING"; (h) accounting terms not specifically defined shall be construed in accordance with GAAP; and (i) the references in this Agreement to terms defined in the Amended and Restated Credit Agreement are made in respect of such terms as they are defined on the date hereof under such Amended and Restated Credit Agreement, unless any relevant amendment thereto is approved by the Majority Lenders, in which case, such amendment will apply for the purposes hereof. Furthermore, such references shall not in any way be affected by the fact that the Amended and Restated Credit Agreement is terminated or is no longer in force at any time prior to the Relevant Maturity Date. 1.3 ANCILLARY AGREEMENTS. The provisions of SECTION 1.2 (other than SECTION 1.2(C)) shall apply to the interpretation of Ancillary Agreements unless specifically otherwise indicated. 1.4 SEVERABILITY. If any provision of this Agreement or any Ancillary Agreement is, or becomes, illegal, invalid or unenforceable in any jurisdiction, such provision shall be severed, for the purposes of such jurisdiction, from this Agreement or such Ancillary Agreement and, for the purposes of such jurisdiction, be ineffective in such jurisdiction to the extent of such illegality, invalidity or unenforceability. The remaining provisions hereof or thereof and such provision for the purposes of any other jurisdiction shall be unaffected and shall continue to be valid and enforceable. 1.5 ENTIRE AGREEMENT. Other than any Fee Agreements, this Agreement supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties relating to the subject matter hereof and entered into prior to the date of this Agreement. The Fee Agreements entered into on or prior to the date of this Agreement shall remain in full force and effect. The Borrower, the Agent and the Lenders hereby agree that the entering into and execution of this Agreement does not constitute novation, including, without limitation, in respect of the Existing Credit Agreement and the indebtedness and obligations of the Borrower evidenced thereunder or in connection therewith, and that all of the security created under the Security Documents shall continue to apply in relation to all of the Outstandings under the Credit Facilities in all respects and for all purposes. 1.6 WAIVER. No failure on the part of the Borrower, the Agent or any of the Lenders to exercise, and no delay in exercising, any right under this Agreement or any Ancillary Agreement shall operate as a waiver of such right; nor shall any single or partial exercise of any right under this Agreement or any Ancillary Agreement preclude any other or further exercise thereof or the exercise of any other right; nor shall any waiver of one provision be deemed to constitute a waiver of any other provision (whether or not similar). No waiver of any of the provisions of this Agreement or any Ancillary Agreement shall be effective unless it is in writing duly executed by the waiving party. 22 - 17 - 1.7 GOVERNING LAW. (1) This Agreement and, unless otherwise provided therein, each Ancillary Agreement, shall be governed by, and interpreted in accordance with, the Laws of the Province of Quebec and the Laws of Canada applicable therein, without giving effect to any conflicts of law rules thereof. (2) The parties hereby irrevocably attorn and submit to the non-exclusive jurisdiction of the courts of the Province of Quebec with respect to any matter arising under or related to the Agreement or any Ancillary Agreement. 1.8 INCORPORATION OF SCHEDULES AND EXHIBITS. The following schedules and exhibits attached hereto shall, for all purposes hereof, be incorporated in and form an integral part of this Agreement: SCHEDULE 1 Individual Commitments SCHEDULE 2 Addresses for Notices SCHEDULE 2.5 Term Loan Repayment Schedule SCHEDULE 3 Variable Percentages SCHEDULE 4 Security Documents SCHEDULE 5 Form of Borrowing Notice SCHEDULE 6 Form of Election Notice SCHEDULE 7 Form of Drawing Notice SCHEDULE 8 Assumption Agreement SCHEDULE 9 Landlord's Letter SCHEDULE 10 Depositary's Letter EXHIBIT 6.1(4)(A) Locations which are not Real Estate of the Borrower EXHIBIT 6.1(4)(B) Locations which are Real Estate of the Borrower EXHIBIT 6.1(7) List of Bank Accounts
1.9 CONFLICTS. If a conflict or inconsistency exists between a provision of this Agreement and a provision of any of the other Credit Documents or any part thereof, then the provisions of this Agreement shall prevail. Notwithstanding the foregoing, if there is any right or remedy of the Borrower, the Agent or any of the Lenders set out in any of the other Credit Documents or any part thereof which is not set out or provided for in this Agreement, such additional right or remedy shall not constitute a conflict or inconsistency. 1.10 LANGUAGE. The parties hereto agree that this Agreement and all agreements and documents entered into in connection herewith or pursuant hereto shall be drawn up in English only. Les parties confirment qu'elles ont convenu que ce document ainsi que tous les autres documents ou contrats s'y rattachant soient rediges en anglais seulement. 23 - 18 - ARTICLE 2 CREDIT FACILITIES 2.1 REVOLVING FACILITY AND TERM FACILITY. Each of the Lenders severally (and not solidarily) agrees, on the terms and conditions of this Agreement, to make available to the Borrower: (a) its Pro Rata Share of the Term Facility by making such Accommodations to the Borrower as may be requested by the Borrower in accordance with this Agreement; and (b) its Pro Rata Share of the Revolving Facility by making such Accommodations as may be requested by the Borrower thereunder from time to time in accordance with this Agreement. 2.2 COMMITMENTS AND FACILITY LIMITS. (1) The Borrower shall at all times cause: (a) the Outstandings under the Term Facility to be no greater than the Term Facility Aggregate Commitment at such time; and (b) the Outstandings under the Revolving Facility to be no greater than the Revolving Facility Aggregate Commitment. (2) Any portion of the Term Facility Aggregate Commitment which is not utilized by the Borrower by March 31, 1998 shall automatically be canceled. The Term Facility shall not revolve and any amount repaid or prepaid under the Term Facility shall not be reborrowed and shall reduce the Term Facility Aggregate Commitment by the amount repaid or prepaid, with the exception however of the repayment to the Lenders who have executed and entered into the Existing Credit Agreement on the date of this Agreement of an aggregate amount equal to the Pro Rata Share of The Bank of Nova Scotia in respect of the Term Facility, which amount shall have been borrowed immediately prior to such repayment by the Borrower from The Bank of Nova Scotia (such borrowing to be subject to an irrevocable direction and instruction on the part of the Borrower to The Bank of Nova Scotia to effect the above-mentioned repayment to the Lenders having entered into and executed the Existing Credit Agreement). Upon any reduction of the Term Facility Aggregate Commitment, the Individual Commitment of each Lender under the Term Facility shall thereupon be reduced by an amount equal to such Lender's Pro Rata Share of the amount of such reduction of the Term Facility Aggregate Commitment. (3) All or any portion of the Revolving Facility Aggregate Commitment which is not utilized by the Borrower on Closing may be utilized from time to time thereafter but prior to the Revolving Facility Maturity Date on the terms and conditions of this Agreement. The Revolving Facility shall revolve and no payment under the Revolving Facility shall, of itself, reduce the Revolving Facility Aggregate Commitment. All or any portion of the Revolving Facility Aggregate Commitment may be canceled at any time by written notice from the Borrower to the Agent in accordance with SECTION 2.7(1). Upon any reduction of the Revolving Facility Aggregate Commitment, the Individual Commitment of each Lender under the Revolving 24 - 19 - Facility shall thereupon be reduced by an amount equal to such Lender's Pro Rata Share of the amount of such reduction of the Revolving Facility Aggregate Commitment. (4) Notwithstanding any other provision of the Credit Documents, the Credit Facilities shall automatically be canceled and all obligations of the Agent and the Lenders under the Credit Documents shall automatically terminate on July 15, 1997 (without affecting any obligations of the Borrower under any of the Credit Documents, including all the Borrower's obligations under SECTIONS 10.7 through 10.10, and under any Fee Agreements) if an Accommodation under the Term Facility has not been made prior to such date. 2.3 AVAILABLE ACCOMMODATIONS. (1) Each of the Lenders shall, on the terms and conditions of this Agreement, make its Pro Rata Share of the following Accommodations available under the Credit Facilities as follows: (a) Floating Rate Advances, US Base Rate Advances and LIBOR Advances on the occasion of any Borrowing; and (b) Bankers' Acceptances (or, in the case of any Non-BA Lender, BA Equivalent Notes) denominated in Canadian Dollars on the occasion of any Drawing. (2) All Advances, Bankers' Acceptances and BA Equivalent Notes requested hereunder shall be made available to the Borrower in accordance with ARTICLES 3 and 4, respectively. 2.4 USE OF PROCEEDS. (1) The Borrower shall use the proceeds of the Accommodations under the Term Facility for the sole purpose of paying (i) the purchase price payable to Bell Sports Canada Inc. for the assets being sold by it to the Borrower pursuant to the Acquisition and (ii) paying a portion or all of the purchase price payable to Nomadic Sports Inc. for the assets being sold by it to the Borrower pursuant to the Nomadic Acquisition or to each shareholder of Nomadic Sports Inc. for all of the issued and outstanding shares in the share capital thereof pursuant to the Nomadic Acquisition, as the case may be. (2) The Borrower may use the proceeds of the first Accommodation under the Revolving Facility for the purpose of (i) paying fees to the Agent and the Lenders and transaction expenses and fees in connection with the Credit Facilities and the Acquisition and (ii) paying a portion or all of the purchase price payable to Nomadic Sports Inc. for the assets being sold by it to the Borrower pursuant to the Nomadic Acquisition or to each shareholder of Nomadic Sports Inc. for all of the issued and outstanding shares in the share capital thereof pursuant to the Nomadic Acquisition, as the case may be, and the fees and expenses in relation thereto. (3) The Borrower shall use the proceeds of all Accommodations under the Revolving Facility other than as provided in SECTION 2.4(2) for general corporate purposes. 2.5 MANDATORY REPAYMENTS. (1) Unless demand is earlier made pursuant to SECTION 9.1 and without prejudice to SECTION 2.6, on the Revolving Facility Maturity Date, the Revolving Facility Aggregate 25 - 20 - Commitment shall be canceled and the Borrower shall repay, and there shall become due and payable, the Outstandings under the Revolving Facility and all accrued and unpaid interest and the Fees, costs, expenses and other amounts owing under the Credit Documents. (2) Unless demand is earlier made pursuant to SECTION 9.1 and without prejudice to SECTION 2.6, the Borrower shall repay the Term Facility in 23 consecutive quarterly installments payable on the last day of each calendar quarter commencing on March 31, 1998 (except in the case of the final installment which shall be due on the Term Facility Maturity Date) in the respective amount set out opposite each such day in SCHEDULE 2.5. Furthermore, the Borrower shall repay all Fees, costs, expenses and other amounts owing in respect of the Term Facility at the Term Facility Maturity Date on such date. (3) All optional prepayments of Outstandings under the Term Facility shall be applied to the quarterly installment amounts payable pursuant to SECTION 2.5(2) as set out in SCHEDULE 2.5 on a pro rata basis over the remaining unpaid quarterly installments mentioned above. 2.6 MANDATORY PREPAYMENTS AND PAYMENTS. (1) If, on any day, the Outstandings of the Borrower to the Lenders under the Revolving Facility exceed (except to the extent that such excess arises solely as a result of currency fluctuations) the Revolving Facility Aggregate Commitment, or under the Term Facility exceed (except to the extent that such excess arises solely as a result of currency fluctuations) the Term Facility Aggregate Commitment, the Borrower shall on that day: (i) prepay Borrowings; or (ii) make a prepayment to the Agent and irrevocably authorize and direct the Agent to apply such prepayment in reduction of the Borrower's reimbursement obligation in respect of any Drawing on the next contract maturity date; or (iii) make both a prepayment referred to in Clause (i) of this SECTION 2.6(1) and a prepayment referred to in Clause (ii) of this SECTION 2.6(1); in all cases so that the Outstandings under each Credit Facility after the prepayment referred to in Clause (i) of this SECTION 2.6(1), and less the amount of any prepayments held by the Agent pursuant to Clause (ii) of this SECTION 2.6(1), will not exceed (except to the extent that such excess arises solely as a result of currency fluctuations) the Revolving Facility Aggregate Commitment (in the case of the Revolving Facility) or the Term Facility Aggregate Commitment (in the case of the Term Facility). (2) At the end of each calendar month, the Agent shall determine, and at any other time, the Agent may (or, if requested by any Lender, shall) determine whether the Outstandings under the Revolving Facility exceed 100% of the Revolving Facility Aggregate Commitment, or under the Term Facility exceed 100% of the Term Facility Aggregate Commitment, and whether such excess arises wholly or partly as a result of currency fluctuations. If the Agent so determines, the Agent shall notify the Borrower of the amount of the excess over 100% of the Revolving Facility Aggregate Commitment or 100% of the Term Facility Aggregate Commitment, and the Borrower shall as soon as possible, but in any event within two Business Days after the giving of such notice: (i) pay Borrowings; or (ii) make a payment to the Agent and irrevocably authorize and direct the Agent to apply such payment in reduction of the Borrower's reimbursement obligation in respect of any Drawing on the next contract maturity date; or (iii) make both a payment referred to in Clause (i) of this SECTION 2.6(2) and a payment referred to in Clause (ii) of this SECTION 2.6(2); in all cases so that the Outstandings under each Credit Facility after the payment referred to in Clause (i) of this SECTION 2.6(2), and less the amount of any payments held by the Agent pursuant to Clause (ii) of this SECTION 2.6(2), 26 - 21 - will not exceed the Revolving Facility Aggregate Commitment (in the case of the Revolving Facility) or the Term Facility Aggregate Commitment (in the case of the Term Facility). 2.7 ADDITIONAL PREPAYMENTS AND REDUCTIONS. (1) The Borrower may from time to time, subject to the provisions of this Agreement, prepay the Outstandings under the Term Facility or reduce the Revolving Facility Aggregate Commitment, in each case in whole or in part, without penalty or premium but subject, where applicable, to SECTION 10.9, upon at least one Business Day's notice to the Agent, stating the proposed date of such prepayment or reduction and the aggregate principal amount of the prepayment or reduction. If such notice is given, the Borrower shall pay the Agent in accordance with such notice the amount of the prepayment of the Term Facility or the amount, if any, by which the Outstandings under the Revolving Facility exceed the proposed reduced Revolving Facility Aggregate Commitment, plus all interest on the amount of such prepayment or excess amount accrued to the date of such prepayment or reduction. Each partial prepayment or reduction shall be in a minimum aggregate principal amount of $100,000 and in an integral multiple of $ 100,000, in the case of Floating Rate Advances or other Accommodations denominated in Canadian Dollars, and in a minimum aggregate principal amount of US $100,000 and in an integral multiple of US $100,000, in the case of US Base Rate Advances or other Accommodations denominated in US Dollars except that the minimum aggregate amount shall be US $100,000 in the case of LIBOR Advances. (2) The Borrower may not pursuant to this SECTION 2.7(2) prepay the amount of any Drawing, except on the contract maturity date for the relevant Bankers' Acceptance or BA Equivalent Note. 2.8 EVIDENCE OF INDEBTEDNESS. The Indebtedness of the Borrower in respect of all Accommodations hereunder, absent manifest error, shall be conclusively evidenced by the account records maintained by the Agent. The failure of the Agent to correctly record any amount or date shall not, however, affect the obligation of the Borrower to pay amounts due hereunder to the Agent or any of the Lenders in accordance with this Agreement. 2.9 FACILITY RATIOS. Notwithstanding any other provision of any of the Credit Documents, in the event that the ratio of the Individual Commitment of a Lender under the Revolving Facility to the Revolving Facility Aggregate Commitment (the "REVOLVING FACILITY RATIO") at any time is not the same as the ratio of the Individual Commitment of such Lender under the Term Facility to the Term Facility Aggregate Commitment (the "TERM FACILITY RATIO") at such time, then: (i) any adjustment at such time to, and any acquisition of, the Individual Commitment or the Outstandings of such Lender under the Revolving Facility or the Term Facility, as the case may be, (ii) any Accommodation, payment, contribution or indemnification at such time pursuant to any of the Credit Documents to or in favour of the Agent, the Borrower or any Guarantor by such Lender under or in respect of the Revolving Facility or the Term Facility, as the case may be, and 27 - 22 - (iii) any payment, remittance or distribution at such time pursuant to any of the Credit Documents to such Lender by the Agent of any amount or Property received from the Borrower or from any Guarantor or as proceeds of any of the Collateral realized in connection with any realization or enforcement proceedings, whether on account of principal, interest, Fees or any other amounts, under or in respect of the Revolving Facility or the Term Facility, as the case may be, shall be made in the proportion of such Lender's Revolving Facility Ratio or Term Facility Ratio, as the case may be. 2.10 ALLOCATION OF FEES AND EXPENSES. Notwithstanding any other provision of any of the Credit Documents, all Fees (other than Drawing Fees), expenses, costs, charges and other amounts payable at any time by the Borrower or any Guarantor under any of the Credit Documents which do not relate exclusively to either of the Credit Facilities shall be allocated between the Revolving Facility and the Term Facility in the respective proportions which the Revolving Facility Aggregate Commitment bears to the Commitments at such time and the Term Facility Aggregate Commitment bears to the Commitments at such time. ARTICLE 3 LOAN ADVANCES 3.1 THE ADVANCES. (1) Each Lender has agreed and agrees on the terms and conditions of this Agreement to make Advances to the Borrower under the Term Facility, on the Closing and thereafter from time to time but no later than March 31, 1998, and under the Revolving Facility, on the Closing and thereafter from time to time on any Business Day prior to the Revolving Facility Maturity Date. Each Lender shall make available to the Agent its Pro Rata Share of the principal amount of each Advance in the appropriate currency, prior to 11:00 a.m. (Montreal time) on the date of the Advance. Unless the Agent has been notified by a Lender no later than 11:00 a.m. two Business Days prior to the date of the Advance that such Lender will not make available to the Agent its Pro Rata Share of such Advance, the Agent may assume that such Lender has made such portion of the Advance available to the Agent on the date of the Advance in accordance with the provisions hereof and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Agent has made such assumption, to the extent such Lender shall not have so made its Pro Rata Share of the Advance available to the Agent, such Lender agrees to pay to the Agent, forthwith on demand, such Lender's Pro Rata Share of the Advance and all costs and expenses incurred by the Agent in connection therewith (including any costs of funding or maintaining any Advance or liquidating or redeploying any funds acquired by the Agent to fund or maintain any Advance), together with interest thereon at the rate per annum determined by the Agent in accordance with its usual practice for making similar loans to financial institutions of like standing as such Lender for each day from the date such amount is made available to the Borrower until the date such amount is paid or repaid to the Agent; PROVIDED, HOWEVER, that notwithstanding such obligation, if such Lender fails so to pay, the Borrower shall repay such amount to the Agent forthwith after demand therefor by the Agent, and all costs and expenses incurred by the Agent in connection therewith (including any costs of funding or maintaining 28 - 23 - any Advance or liquidating or redeploying any funds acquired by the Agent to fund or maintain any Advance), together with interest thereon at the rate payable hereunder by the Borrower in respect of such Advance for each day from the date such amount is made available to the Borrower until the date such amount is paid or repaid to the Agent. The amount payable by each Lender to the Agent pursuant to this Section shall be set forth in a certificate delivered by the Agent to such Lender (which certificate shall contain reasonable details of how the amount payable is calculated) and shall constitute prima facie evidence of such amount payable. If such Lender makes the payment to the Agent required herein, the amount so paid shall constitute such Lender's Pro Rata Share of the Advance for purposes of this Agreement and shall entitle the Lender to all rights and remedies against the Borrower and the Guarantors in respect of such Advance. The failure of any Lender to make available to the Agent its Pro Rata Share of an Advance shall not relieve any other Lender of its obligation hereunder to make available to the Agent its Pro Rata Share of the Advance on the date thereof. (2) (a) If any Lender fails to make available to the Agent its Pro Rata Share of any Advance as required (the "DEFAULTING LENDER") and the Agent has not made the Advance to the Borrower pursuant to SECTION 3.1(1), the Agent shall forthwith give notice of such failure by the Defaulting Lender to the Borrower and the other Lenders and such notice shall state that any Lender may make available to the Agent all or any portion of the Defaulting Lender's Pro Rata Share of such Advance (but in no way shall any other Lender or the Agent be obliged to do so) in the place of the Defaulting Lender. If more than one Lender gives notice that it is prepared to make funds available in the place of a Defaulting Lender in such circumstances and the aggregate of the funds which such Lenders (each, a "CONTRIBUTING LENDER") are prepared to make available exceeds the amount of the Advance which the Defaulting Lender failed to make, then each Contributing Lender shall be deemed to have given notice that it is prepared to make available its Pro Rata Share of such Advance based on the Contributing Lenders' relative Individual Commitments in such circumstances. If any Contributing Lender makes funds available in the place of a Defaulting Lender in such circumstances, then: (i) the Defaulting Lender shall pay to any such Contributing Lender forthwith on demand, any amount advanced on its behalf, together with interest thereon at the rate payable hereunder by the Borrower in respect of such Advance for each day from the date of Advance to the date of payment, against payment by such Contributing Lender of all interest received in respect of the Advance from the Borrower; and (ii) the Borrower shall pay all amounts owing by the Borrower to the Defaulting Lender hereunder to the Agent for the Contributing Lenders until such time as the Defaulting Lender pays to the Agent for the Contributing Lenders all amounts advanced by the Contributing Lenders on behalf of the Defaulting Lender and interest thereon. The failure of any Lender to make available to the Agent its Pro Rata Share of any Advance shall not relieve any other Lender of its obligations to make available to the Agent its Pro Rata Share of any Advance. (b) If the Agent gives notice pursuant to SECTION 3.1(2)(A) of a failure by any Defaulting Lender to make available to the Agent its Pro Rata Share of any Advance, then the Borrower may notify the Agent that it desires to replace the Defaulting Lender with one or more of the other Lenders, and the Agent shall 29 - 24 - then forthwith give notice to the other Lenders that any Lender or Lenders may, in the aggregate, acquire all (but not part) of the Defaulting Lender's Individual Commitment, and all (but not part) of the rights and obligations of the Defaulting Lender under each of the other Credit Documents (but in no event shall any other Lender or the Agent be obliged to do so), provided that any discount to the price paid to such Defaulting Lender from the amounts outstanding hereunder shall first be approved by such Defaulting Lender. If one or more Lenders shall so agree in writing (each, a "REPLACEMENT LENDER") each such Lender shall give notice to the Agent that it has agreed to make such acquisition, and shall acquire its pro rata share, determined on the basis of the relative Individual Commitments of the Replacement Lenders, of such Individual Commitment and of the rights and obligations under the Credit Documents of the Defaulting Lender on a date and on other terms and conditions mutually acceptable to the Replacement Lenders and the Defaulting Lender. On the date of such acquisition, the Agent shall give notice to each of the Replacement Lenders and the Borrower setting out the amount of the Individual Commitments of each of the Replacement Lenders and the amount of the Outstandings of the Defaulting Lenders acquired by each of the Replacement Lenders and, upon the completion of such acquisition and the giving of such notice, the Defaulting Lender shall cease to be a "Lender" for purposes of this Agreement and shall no longer have any rights or obligations under the Credit Documents (other than its obligations to the Agent and to any Contributing Lender with respect to the Defaulting Lender's Pro Rata Share of any Advance not made available to the Agent prior to the acquisition of the Defaulting Lender's Individual Commitment and its rights and obligations under the Credit Documents) and the Replacement Lenders shall have acquired and assumed all of such rights and obligations. Upon the assumption of the Defaulting Lender's Individual Commitment by a Replacement Lender, SCHEDULE 1 shall be deemed to be amended to increase the Individual Commitment of such Replacement Lender by the amount of such assumption. (3) Each Borrowing shall consist of one or more Types of Advances made to the Borrower on the same day. Each Type of Advance shall be in the aggregate minimum amount and in an integral multiple of the amount set forth below: (a) a FLOATING RATE ADVANCE shall be in an aggregate amount not less than $100,000 and in an integral multiple of $100,000; (b) a US BASE RATE ADVANCE shall be in an aggregate amount not less than US $100,000 and in an integral multiple of US $100,000; and (c) a LIBOR ADVANCE shall be in an aggregate amount not less than US $500,000 and in an integral multiple of US $100,000. (4) Until repaid in full or converted in accordance with this Agreement, each Advance shall be: (i) the Type of Advance specified in the applicable Borrowing Notice or Election Notice; or (ii) if no Borrowing Notice or Election Notice is given, the Type of Advance specified in SECTIONS 3.3(1)(A) OR (B). 30 - 25 - 3.2 PROCEDURE FOR BORROWING. (1) Each Borrowing shall be made on notice (a "BORROWING NOTICE") given by the Borrower to the Agent not later than 10:00 a.m. (Montreal time) at least one Business Day for Floating Rate Advances and U.S. Base Rate Advances and three Business Days for LIBOR Advances prior to the date of the proposed Borrowing, which Borrowing Notice shall be irrevocable and binding on the Borrower. Each Borrowing Notice shall be in substantially the form of SCHEDULE 5 and shall specify: (i) the requested date of such Borrowing; (ii) the Type of Advances comprising such Borrowing; (iii) the Credit Facility under which such Borrowing is to be made; (iv) the aggregate amount of such Borrowing; and (v) in the case of a LIBOR Advance, the initial Interest Period applicable to such Advance. Upon fulfillment of the applicable conditions set forth in ARTICLE 5, the Agent will make such funds available to the Borrower in immediately available funds by crediting or causing the crediting of the Borrower's Canadian Dollar Account or the Borrower's US Dollar Account, as applicable. (2) The Borrower shall not in any Borrowing Notice select an Interest Period which ends after the Relevant Maturity Date or which conflicts with the definition of Interest Period or with the repayments or prepayments provided for in this Agreement. 3.3 INTEREST ON ADVANCES. (1) Each Advance shall bear interest at the rate applicable to such Type of Advance determined in accordance with this SECTION 3.3(1), (i) in the case of a Floating Rate Advance or US Base Rate Advance, from and including the date such Advance is made or converted from another Type of Advance or Accommodation to but excluding the date on which such Advance is repaid in full or is converted to another Type of Advance or Accommodation in accordance with this Agreement; and (ii) in the case of a LIBOR Advance, from and including the first day of the applicable Interest Period to but excluding the last day of such Interest Period. Subject to SECTIONS 3.3(2), 10.2 and 10.3, each Advance shall bear interest, and such interest shall be calculated and payable, in the following manner: (a) FLOATING RATE ADVANCES. A Floating Rate Advance shall bear interest at a rate per annum equal at all times to the Floating Rate in effect from time to time. Such interest shall be calculated (but not compounded) daily and payable for each calendar month period or part thereof, as the case may be, in arrears on the first day of the following month and on the Relevant Maturity Date. (b) US BASE RATE ADVANCES. A US Base Rate Advance shall bear interest at a rate per annum equal at all times to the US Base Rate in effect from time to time. Such interest shall be calculated (but not compounded) daily and payable for each calendar month period or part thereof, as the case may be, in arrears on the first day of the following month and on the Relevant Maturity Date. (c) LIBOR ADVANCES. A LIBOR Advance shall bear interest at a rate per annum equal, for each day during each Interest Period for such LIBOR Advance, to the LIBOR Rate for such day. Such interest shall be calculated (but not compounded) daily and paid in arrears: (i) on the last day of each three month period, if any, during each Interest Period and on the last day (if such day is not the last day of a three month period) of such Interest Period; and (ii) on the date 31 - 26 - such LIBOR Advance becomes due and payable in full. The duration of each Interest Period shall be 1, 2, 3 or 6 months unless the last day of an Interest Period would otherwise occur on a day other than a Business Day, in which case the last day of such Interest Period shall be extended to occur on the next Business Day, or if such extension would cause the last day of such Interest Period to occur in the next calendar month, the last day of such Interest Period shall occur on the preceding Business Day. (2) With each change in any of the variable rates of interest used as a component for determining the Floating Rate, the US Base Rate or the LIBOR Rate (but, for greater certainty, only the Variable Percentage applicable thereto and not LIBOR), there shall be a corresponding change in the Floating Rate, the US Base Rate or the LIBOR Rate (but, for greater certainty, only the Variable Percentage applicable thereto and not LIBOR), all without necessity of prior notice thereof to the Borrower or to any other Person. 3.4 CONVERSIONS AND ELECTIONS REGARDING TYPES OF ADVANCES AND INTEREST RATES. (1) Advances may be converted from time to time from one Type of Advance to another, at the election of the Borrower or automatically in accordance with the provisions of this SECTION 3.4(1). The Borrower may from time to time elect: (i) to convert any Advance to another Type of Advance by changing the currency of such Advance or the type of interest rate applicable thereto; or (ii) to have any LIBOR Advance continued as such Type of Advance by electing an additional Interest Period, subject in each case to the provisions of SECTIONS 3.1(3) and 3.6 and to the following provisions: (a) FLOATING RATE ADVANCES. The Borrower may elect to convert a Floating Rate Advance as of any Business Day to a LIBOR Advance or a US Base Rate Advance, in a principal amount equal to the Equivalent US $ Amount of such Floating Rate Advance determined on the date of such conversion. (b) US BASE RATE ADVANCE. The Borrower may elect to convert a US Base Rate Advance as of any Business Day to: (i) a Floating Rate Advance, in a principal amount equal to the Equivalent Cdn. $ Amount of such US Base Rate Advance determined on the date of such conversion; or (ii) a LIBOR Advance. (c) LIBOR ADVANCE. The Borrower may elect, effective on the last day of the then current Interest Period applicable thereto: (i) to convert a LIBOR Advance to (x) a Floating Rate Advance, in a principal amount equal to the Equivalent Cdn. $ Amount of such LIBOR Advance determined on the date of such conversion, or (y) a US Base Rate Advance; or (ii) to have such LIBOR Advance continued as such Type of Advance for an additional Interest Period. If the Borrower has made no such election, on the expiry of the then current Interest Period, such Advance shall be automatically converted to a US Base Rate Advance, effective on the last day of such Interest Period. (2) Each such election shall be made on notice (an "ELECTION NOTICE") given by the Borrower to the Agent not later than 11:00 a.m. (Montreal time) at least three Business Days before the effective date of such election (which period, for greater certainty, may run concurrently with the notice period provided for in SECTION 4.7(I) with respect to the conversion 32 - 27 - of a Bankers' Acceptance or BA Equivalent Note which is to be converted into the Floating Rate Advance converted hereunder). Each Election Notice shall be substantially in the form of SCHEDULE 6 and shall specify, with respect to the outstanding Advance to which such Election Notice applies: (i) if the Type of such Advance is to be converted, the new Type of Advance selected, the effective date of such conversion and, if the new Type of Advance selected is a LIBOR Advance, the duration of the initial Interest Period applicable thereto; or (ii) if such Advance is a LIBOR Advance which is to continue as such Type of Advance for an additional Interest Period in whole or in part, the amount of such Advance to be continued, the duration of the additional Interest Period and, if part of such LIBOR Advance is to continue as a LIBOR Advance, the Type of Advance into which the balance is to be converted. (3) The Borrower shall not in any Election Notice select an Interest Period which conflicts with the definition of Interest Period or with the repayments or prepayments provided for in this Agreement. (4) Any conversion of an Advance under this Section shall not constitute a repayment under SECTION 2.5 or a prepayment under SECTIONS 2.6 or 2.7. 3.5 CONVERSIONS OF FLOATING RATE ADVANCES TO BANKERS' ACCEPTANCES OR BA EQUIVALENT NOTES. (1) The Borrower may, subject to the provisions of this Agreement, convert the outstanding principal amount of a Floating Rate Advance, in whole or in part, to Bankers' Acceptances or BA Equivalent Notes, by giving a Drawing Notice in accordance with SECTION 4.2. The Borrower shall notify the Agent at the same time as the Borrower gives the Drawing Notice of the amount of any Floating Rate Advance to be converted. The Borrower may convert the Floating Rate Advance on any Business Day. If the Floating Rate Advance to be converted cannot be converted to an aggregate Face Amount of Bankers' Acceptances or BA Equivalent Notes in an amount which may be drawn as Bankers' Acceptances or BA Equivalent Notes under this Agreement, then the amount which cannot be so converted shall thereafter continue to be outstanding as a Floating Rate Advance, provided that if such amount is less than the minimum amount for Floating Rate Advances set out in SECTION 3.1(3)(A), it shall be repaid to the Agent for the Lenders. (2) Where any Floating Rate Advances are to be converted, in whole or in part, to Bankers' Acceptances or BA Equivalent Notes, the Borrower shall repay and there shall become due and payable on the Drawing Date, the principal amount of such Advances which are so converted. (3) Any conversion of an Advance under this Section shall not constitute a repayment under SECTION 2.5 or a prepayment under SECTION 2.6 or 2.7. 3.6 CIRCUMSTANCES REQUIRING US BASE RATE OR FLOATING RATE PRICING. (1) If any Lender (the "DETERMINING LENDER") determines in good faith, and the Agent notifies the Borrower that: (i) by reason of circumstances affecting financial markets inside or outside Canada, deposits of US Dollars are unavailable to the Determining Lender; (ii) adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided in the definition of LIBOR or US Base Rate, as the case may be; (iii) the making 33 - 28 - or continuation of any US Dollar Advances has been made impracticable (x) by the occurrence of a contingency (other than a mere increase in rates payable by the Determining Lender to fund the Advances) which materially adversely affects the funding of the Credit Facilities at any interest rate computed on the basis of the LIBOR or the US Base Rate, as the case may be, or (y) by reason of a change since the date of this Agreement in any applicable Law or in the interpretation or application thereof by any Governmental Entity which affects the Determining Lender or any relevant financial market, and which results in the LIBOR or the US Base Rate, as the case may be, no longer representing the effective cost to the Determining Lender of deposits in such market for a relevant Interest Period or for Advances outstanding as US Base Rate Advances; or (iv) any change since the date of this Agreement to any present Law, or any future Law, or any change since the date of this Agreement therein or in the interpretation or application thereof by any Governmental Entity, has made it unlawful for the Determining Lender to make or maintain or to give effect to its obligation in respect of US Dollar Advances as contemplated hereby, then: (a) the right of the Borrower to select any affected Type of Advance in US Dollars from the Determining Lender shall be suspended until the Determining Lender determines in good faith that the circumstances causing such suspension no longer exist and the Agent so notifies the Borrower; (b) if any affected Type of Advance in US Dollars is not yet outstanding, any applicable Borrowing Notice (i) requesting a LIBOR Advance from the Determining Lender at any time when the right of the Borrower to select LIBOR Advances from the Determining Lender is suspended shall, if the Borrower has the right to select US Base Rate Advances from the Determining Lender at such time, be deemed to be amended to request a US Base Rate Advance or, if the Borrower does not have the right to select US Base Rate Advances from the Determining Lender at such time, such Borrowing Notice shall be deemed to be amended to request a Floating Rate Advance from the Determining Lender in a principal amount equal to the Equivalent Cdn. $ Amount of the LIBOR Advance requested from the Determining Lender determined on the date on which such Advance becomes denominated in Canadian Dollars; or (ii) requesting a US Base Rate Advance from the Determining Lender at any time when the right of the Borrower to select US Base Rate Advances from the Determining Lender is suspended, shall be deemed to be amended to request a Floating Rate Advance from the Determining Lender in a principal amount equal to the Equivalent Cdn. $ Amount of the US Base Rate Advance requested from the Determining Lender determined on the date on which such Advance becomes denominated in Canadian Dollars; (c) if any LIBOR Advance from the Determining Lender is already outstanding at any time when the right of the Borrower to select LIBOR Advances or US Dollar Advances from the Determining Lender is suspended, it and all other LIBOR Advances from the Determining Lender shall, if the Borrower has the right to select US Base Rate Advances from the Determining Lender at such time, become US Base Rate Advances from the Determining Lender on the last day of the then current Interest Period applicable thereto for, without prejudice to SECTION 10.9, on such earlier date as may be required to comply with any applicable Law) or, if the Borrower does not have the right to select US Base 34 - 29 - Rate Advances from the Determining Lender at such time, such LIBOR Advances shall become a Floating Rate Advance from the Determining Lender on the last day of the then current Interest Period applicable thereto (or, without prejudice to SECTION 10.9, on such earlier date as may be required to comply with any applicable Law) in a principal amount equal to the Equivalent Cdn. $ Amount of such LIBOR Advances from the Determining Lender determined on the date on which such Advance becomes denominated in Canadian Dollars; and (d) if any relevant US Base Rate Advance from the Determining Lender is already outstanding at any time when the right of the Borrower to select US Base Rate Advances or US Dollar Advances from the Determining Lender is suspended, it and all other US Base Rate Advances from the Determining Lender in the same Borrowing shall become a Floating Rate Advance immediately, in a principal amount equal to the Equivalent Cdn. $ Amount of such US Base Rate Advances determined on the date on which such Advance becomes denominated in Canadian Dollars. (2) If any Determining Lender notifies the Borrower that the right of the Borrower to select any Type of Advance in US Dollars from the Determining Lender is suspended pursuant to SECTION 3.6(1), then the Borrower may notify the Agent that it desires to replace the Determining Lender with one or more of the other Lenders, and the Agent shall then forthwith give notice to the other Lenders that any Lender or Lenders may, in the aggregate, acquire all (but not part) of the Determining Lender's Individual Commitment and all (but not part) of the rights and obligations of the Determining Lender under each of the other Credit Documents (but in no event shall any other Lender or the Agent be obliged to do so), provided that any discount to the price paid to such Determining Lender from the amounts outstanding hereunder shall first be approved by such Determining Lender. If one or more Lenders shall so agree in writing (each, an "AGREEING LENDER") each such Lender shall give notice to the Agent that it has agreed to make such acquisition, and shall acquire its pro rata share, determined on the basis of the relative Individual Commitments of the Agreeing Lenders, of such Individual Commitment and of the rights and obligations under the Credit Documents of the Determining Lender on a date and on other terms and conditions mutually acceptable to the Agreeing Lenders and the Determining Lender. On the date of such acquisition, the Agent shall give notice to each of the Agreeing Lenders and the Borrower setting out the amount of the Individual Commitments of each of the Agreeing Lenders and the amount of the Outstandings of the Determining Lenders acquired by each of the Agreeing Lenders and, upon the completion of such acquisition and the giving of such notice, the Determining Lender shall cease to be a "Lender" for purposes of this Agreement and shall no longer have any rights or obligations under the Credit Documents and the Agreeing Lenders shall have acquired and assumed all of such rights and obligations. Upon the assumption of the Determining Lender's Individual Commitment by an Agreeing Lender, SCHEDULE 1 shall be deemed to be amended to increase the Individual Commitment of such Agreeing Lender by the amount of such assumption. 35 - 30 - ARTICLE 4 BANKERS' ACCEPTANCES 4.1 ACCEPTANCES AND BA EQUIVALENT NOTES. (1) Each of the Lenders agrees, on the terms and conditions of this Agreement and subject to the Borrower paying the applicable Drawing Fee to the Agent for the Lenders, (i) if such Lender is a BA Lender, to create acceptances ("BANKERS' ACCEPTANCES") by accepting Drafts of the Borrower, or (ii) if such Lender is a Non-BA Lender, to purchase BA Equivalent Notes of the Borrower, in each case if a Drawing is requested on the Closing and thereafter from time to time on any Business Day prior to the Relevant Maturity Date, which Drafts or BA Equivalent Notes have an aggregate Face Amount equal, subject to SECTION 4.2(2), to such Lender's Pro Rata Share of the total Accommodation being made by way of Bankers' Acceptances or BA Equivalent Notes. (2) Each Drawing shall be in an aggregate amount of not less than $500,000 and in an integral amount of $100,000. 4.2 PROCEDURE FOR DRAWING. (1) Each Drawing shall be made on notice (a "DRAWING NOTICE") given not later than 11:00 a.m. (Montreal time) at least two Business Days prior to the date of the proposed Drawing by the Borrower to the Agent. Each Drawing Notice shall be in substantially the form of SCHEDULE 7 and shall specify: (i) the requested date for such Drawing (the "DRAWING DATE"); (ii) the Credit Facility under which such Drawing is to be made; (iii) the aggregate Face Amount of Drafts to be accepted and BA Equivalent Notes to be purchased in Canadian Dollars; and (iv) the contract maturity date for such Drafts and BA Equivalent Notes. The Borrower shall not in any Drawing Notice select a contract maturity date which ends after the Relevant Maturity Date or which conflicts with the repayments or prepayments provided for in this Agreement. (2) Upon receipt of a Drawing Notice, the Agent shall advise each BA Lender of the aggregate Face Amount of the Bankers' Acceptances to be accepted by it, and advise each Non-BA Lender of the aggregate Face Amount of the BA Equivalent Note to be purchased by it. The aggregate Face Amount of the Bankers' Acceptances to be accepted by each BA Lender, and the aggregate Face Amount of the BA Equivalent Note to be purchased by each Non-BA Lender, shall be determined by the Agent by reference to the Pro Rata Shares of the Lenders, except that, if the Face Amount of a Bankers' Acceptance in the case of a BA Lender or the Face Amount of a BA Equivalent Note in the case of a Non-BA Lender would not be $100,000 or a whole multiple thereof, such Face Amount shall be increased or reduced by the Agent in its sole discretion to the nearest whole multiple of $100,000, even if, as a result of any such increase, the Total Outstandings in respect of such BA Lender or Non-BA Lender shall exceed its Individual Commitment. 4.3 AMOUNT AND TERM. Each Bankers' Acceptance or BA Equivalent Note (i) shall be in a Face Amount of not less than $500,000 and in an integral multiple of $100,000; and (ii) shall be dated the Drawing Date; and (iii) shall mature and be payable by the Borrower on a Business Day which occurs no less than one month and no more than six months after the Drawing Date. 36 - 31 - 4.4 COMPLETION OF DRAFTS. The receipt by the Agent of a Drawing Notice shall be each BA Lender's sufficient authority to complete, and each BA Lender shall, subject to the terms and conditions of this Agreement, not later than 11:00 a.m. (Montreal time) on the Drawing Date specified in such Drawing Notice, complete the pre-signed Drafts in accordance with such Drawing Notice and the advice of the Agent given pursuant to SECTION 4.2(2), and in the case of the Drafts so completed, such Drafts shall thereupon be deemed to have been presented for acceptance. 4.5 MAKING OF ACCOMMODATIONS. (1) Each Lender shall transfer to the Agent on each Drawing Date (i) if such Lender is a BA Lender, the BA Discount Proceeds of all Bankers' Acceptances accepted by it on such Drawing Date (net of the applicable Drawing Fee in respect of such Bankers' Acceptances), or (ii) if such Lender is a Non-BA Lender, the amount of the BA Discount Proceeds of the Bankers' Acceptance that it would have been required to accept if it were a BA Lender (net of the applicable Drawing Fee in respect of the BA Equivalent Note purchased by it). The Agent shall make such amounts received by it from the Lenders available to the Borrower by depositing the same for value on the applicable Drawing Date to the Borrower's Canadian Dollar Account. (2) Bankers' Acceptances accepted by a Lender hereunder may be held by it for its own account until maturity or sold by it at any time prior thereto in the relevant market therefor, in the Lender's sole discretion. 4.6 REIMBURSEMENT AT CONTRACT MATURITY DATE. (1) Subject to SECTION 4.7, the Borrower shall pay to the Agent on behalf of a Lender in same day funds, and there shall become due and payable at 11:00 a.m. (Montreal time) on the contract maturity date for each Bankers' Acceptance or BA Equivalent Note, an amount in Canadian Dollars equal to the Face Amount of such Bankers' Acceptance accepted, or BA Equivalent Note purchased, by such Lender. Any payment made by the Borrower in respect of the Term Facility pursuant to this SECTION 4.6(1) shall be treated as an optional prepayment of the Term Facility under SECTION 2.7. (2) If the Borrower fails on the contract maturity date for a Bankers' Acceptance or BA Equivalent Note to pay the Agent on behalf of any Lender pursuant to SECTION 4.6(1), or to convert or renew the Face Amount of such Bankers' Acceptance or BA Equivalent Note pursuant to SECTION 4.7, the unpaid amount due and payable to such Lender in respect of such Bankers' Acceptance or BA Equivalent Note shall automatically be converted to a Floating Rate Advance on the contract maturity date, and shall bear interest at a rate per annum equal to (i) until and including the third Business Day after such contract maturity date, 115% of the Floating Rate, and (ii) thereafter, the Floating Rate, in each case until such amount is paid in full. (3) On each contract maturity date for a Bankers' Acceptance or BA Equivalent Note accepted or purchased, respectively, by a particular Lender, if the Drawing Fee Adjustment for such Bankers' Acceptance or BA Equivalent Note is (i) a positive amount, the Agent on behalf of such Lender shall reimburse the Borrower, on such day, on account of the Drawing Fee 37 - 32 - paid by it in respect of such Bankers' Acceptance or BA Equivalent Note, an amount equal to such positive amount, or (ii) a negative amount, the Borrower shall pay to the Agent on behalf of such Lender, on such day, as an additional Drawing Fee for such Bankers' Acceptance or BA Equivalent Note, the amount equal to such negative amount. The Agent may, at its option, authorize the Borrower to deduct the amount described in Clause (i) of this SECTION 4.6(3) from the Borrower's payment obligation pursuant to SECTION 4.6(1) or SECTION 4.6(2) in respect of the relevant Bankers' Acceptance or BA Equivalent Note. If the Agent on behalf of the relevant Lender pays the amount described in Clause (i) of this SECTION 4.6(3) to the Borrower, such Lender shall reimburse the Agent for the amount so paid by it on the date notice of such payment is given by the Agent to such Lender and, if such Lender fails to reimburse such amount to the Agent it shall bear interest at the rate per annum determined by the Agent in accordance with its usual practice for making similar loans to financial institutions of like standing as such Lender until such amount is paid by such Lender in full to the Agent. 4.7 RENEWAL OR CONVERSION OF BANKERS' ACCEPTANCES. (1) For effect on the contract maturity date of a Bankers' Acceptance or BA Equivalent Note, the Borrower may elect: (i) to renew all or a portion of the Face Amount of such Bankers' Acceptance or BA Equivalent Note by giving a Drawing Notice in accordance with SECTION 4.2; or (ii) to have all or a portion of the Face Amount of such Bankers' Acceptance or BA Equivalent Note converted to a Floating Rate Advance, by giving a Borrowing Notice in accordance with SECTION 3.2. If the Bankers' Acceptance or BA Equivalent Note to be converted cannot be converted into a Floating Rate Advance in an amount which may be outstanding as a Floating Rate Advance under this Agreement, then the amount which cannot be so converted shall be repaid to the Agent on behalf of the applicable Lender on the date of such conversion in accordance with SECTION 4.6. (2) Any renewal or conversion of Bankers' Acceptances or BA Equivalent Notes under this SECTION 4.7 shall not constitute a repayment under SECTION 2.5 or a prepayment under SECTIONS 2.6 or 2.7. 4.8 WAIVER. The Borrower hereby renounces, and shall not claim, any days of grace for the payment at maturity of any Bankers' Acceptances or BA Equivalent Notes. The Borrower waives any defence to payment which might otherwise exist if for any reason a Bankers' Acceptance or BA Equivalent Note shall be held by a Lender in its own right at the maturity thereof, and the doctrine of merger shall not apply to any Bankers' Acceptance or BA Equivalent Note that is at any time held by a Lender in its own right. 4.9 OBLIGATIONS ABSOLUTE. The obligations of the Borrower with respect to Bankers' Acceptances and BA Equivalent Notes under this Agreement shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following circumstances: (i) any lack of validity or enforceability of any Draft accepted by a BA Lender as a Bankers' Acceptance or BA Equivalent Note purchased by a Non-BA Lender; or (ii) the existence of any claim, set-off, defence or other right which the Borrower may have at any time against the holder of a Bankers' Acceptance or BA 38 - 33 - Equivalent Note, a Lender or any other Person, whether in connection with this Agreement or otherwise. 4.10 PREPAYMENTS. Except as required by SECTIONS 2.5, 2.6 or 9.1, no repayment of a Bankers' Acceptance or BA Equivalent Note shall be made by the Borrower to the Agent for the Lenders prior to the contract maturity date of such Bankers' Acceptance or BA Equivalent Note. If the Borrower shall prepay any Bankers' Acceptance accepted by a Lender as required by SECTIONS 2.5, 2.6 or 9.1, then (unless such prepayment has been rescinded or otherwise is required to be returned by such Lender for any reason), as between the Borrower and such Lender, such Lender shall thereafter be solely responsible for the payment of the Face Amount of such Bankers' Acceptance to the holder thereof in accordance with the terms thereof. 4.11 CIRCUMSTANCES MAKING BANKERS' ACCEPTANCES UNAVAILABLE. If any Lender (other than a Non-BA Lender) determines in good faith, and the Agent notifies the Borrower that by reason of circumstances affecting the money market there is no market for Bankers' Acceptances, then the right of the Borrower to request a Drawing from any of the Lenders (including any Non-BA Lenders) shall be suspended until such Lender determines that the circumstances causing such suspension no longer exist and so notifies the Agent and the Agent notifies the Borrower. Any Drawing Notice which is outstanding at the time of such notice by the Agent shall be deemed to be a Borrowing Notice requesting a Floating Rate Advance in the principal amount equal to the requested Face Amount in such Drawing Notice. 4.12 PRESIGNED DRAFT FORMS. To enable the BA Lenders to create Bankers' Acceptances or complete Drafts in the manner specified in this ARTICLE 4, the Borrower shall supply the Agent with an appropriate number of Drafts in the form prescribed by each BA Lender, duly endorsed and executed in blank on behalf of the Borrower by any one or more of its officers in accordance with the Borrower's required signing authorities as evidenced by the Borrower's then current borrowing by-law and resolution, certified copies of which shall have been delivered to the Agent. Each BA Lender shall exercise such care in the custody and safekeeping of Drafts as it would exercise in the custody and safekeeping of similar property owned by it. The signatures of such officers may be mechanically reproduced in facsimile and Drafts and Bankers' Acceptances bearing such facsimile signatures shall be binding upon the Borrower as if they had been manually signed by such officers. Notwithstanding that any of the individuals whose manual or facsimile signature appears on any Draft as one of such officers may no longer hold office at the date thereof or at the date of its acceptance or purchase by a Lender hereunder or at any time thereafter, any Draft or Bankers' Acceptance so signed shall be valid and binding upon the Borrower. A Lender shall not be liable for its failure to accept a Bankers' Acceptance as required hereunder if the cause of such failure is, in whole or in part, due to the failure of the Borrower to provide Drafts, duly endorsed and executed on behalf of the Borrower, on a timely basis and the Borrower hereby agrees to indemnify and hold the Agent and each of the Lenders harmless from and against all Claims and Losses arising out of payment or negotiation of any Draft or Bankers' Acceptance which has not been duly endorsed and executed. 4.13 SCHEDULE 2 REFERENCE LENDERS. If only one Lender is a Schedule 2 BA Lender, that Schedule 2 BA Lender shall be deemed to be the Schedule 2 Reference Lenders and any applicable BA Discount Rate hereunder shall be determined on the basis of the BA Discount Rate provided by that Schedule 2 BA Lender. If more than one Lender is a Schedule 2 BA 39 - 34 - Lender, then the Borrower and the Agent shall each designate a different Schedule 2 BA Lender to be a Schedule 2 Reference Lender for the purposes of this Agreement, provided that if the Borrower does not so designate, the Agent shall designate two Schedule 2 Reference Lenders. ARTICLE 5 CONDITIONS OF LENDING 5.1 CONDITIONS PRECEDENT TO FURTHER ACCOMMODATIONS UNDER REVOLVING FACILITY AND TERM FACILITY. The obligation of each of the Lenders to make further Accommodations under the Revolving Facility after the date hereof or the obligation of The Bank of Nova Scotia to make its initial Accommodation under the Term Facility is subject to the following conditions to be fulfilled or performed at or prior to the time of making such initial Accommodation, which conditions are for the exclusive benefit of the Agent and the Lenders and may be waived in whole or in part by the Agent with the approval of each of the Lenders in their sole discretion: (1) DELIVERIES. The Agent shall have received, at or prior to the time of the making of the above-mentioned initial Accommodation under the Term Facility the following, each dated such day (or another day satisfactory to the Agent), in form, scope and substance satisfactory to the Agent and its counsel, each acting reasonably: (a) copies, certified by a senior officer of the Borrower, of: (i) the constating documents and the by-laws of each of the Borrower and the Guarantors; (ii) the resolutions of the board of directors, or any duly authorized committee thereof, of each of the Borrower and the Guarantors approving the entering into of this Agreement and each Ancillary Agreement to which the Borrower or the Guarantors are a party; and (iii) all other instruments evidencing necessary corporate action of each of the Borrower and the Guarantors and of required Authorizations, if any, with respect to such matters (which condition was met at Closing and which condition need not be met by the Guarantors only in connection with the entering into and execution of this Agreement); (b) certificates of a senior officer of each of the Borrower and the Guarantors certifying the names and true signatures of its officers authorized to sign this Agreement and the Ancillary Agreements to which the Borrower or the Guarantors are a party (which condition was met at Closing and which condition need not be met by the Guarantors only in connection with the entering into and execution of this Agreement); (c) a certificate of status, compliance, good standing or like certificate with respect to each of the Borrower and the Guarantors issued by appropriate government officials of the jurisdiction of its incorporation and, to the extent such certificates are issued, of each jurisdiction in which it carries on business (which condition was met at Closing and which condition need not be met by the Guarantors only in connection with the entering into and execution of this Agreement); 40 - 35 - (d) a sworn declaration of a senior officer of the Borrower confirming (i) that the Borrower and each of its Subsidiaries is in compliance with all Environmental Laws (including Environmental Permits) or Environmental Orders in Canada and in other applicable foreign jurisdictions with environmental jurisdiction over the Borrower or any of its Subsidiaries and (ii) that the Borrower and its Subsidiaries shall have, all Environmental Permits which were or are required, as the case may be, in order to carry on their respective businesses and operations under such Environmental Laws, except where, in the case of both (i) and (ii) above, non-compliance therewith or failure to obtain same would not have had nor does have, individually or in the aggregate, a Material Adverse Effect (which condition was met at Closing); (e) a sworn declaration of a senior officer of the Borrower confirming no violation of, and compliance with, all applicable Laws and Authorizations by the Borrower and its Subsidiaries which, if breached, would have a Material Adverse Effect (which condition was met at Closing); (f) a sworn declaration of a senior officer of the Borrower confirming no violation of, and compliance with, all agreements (except where the violation or non-compliance would not singly or in aggregate have a Material Adverse Effect) and that all applicable consents and waivers required to consummate the Acquisition and the transactions contemplated thereby have been obtained (except where the failure to obtain such consents and waivers would not singly or in aggregate have a Material Adverse Effect) (which condition was met at Closing); (g) copies, certified by a senior officer of the Borrower, of all material documentation relating to the Acquisition, and all applicable consents, waivers, agreements, instruments, certificates, legal opinions and other documents relating to the Acquisition which are requested by the Agent, acting reasonably (which condition was met at Closing); (h) any certificates of officers of the Borrower or public officials, and any consents, acknowledgments, estoppel certificates, waivers, priority agreements and intercreditor agreements which are necessary or desirable in the opinion of the Agent, acting reasonably, in relation to the Credit Facilities (including to establish or confirm the rights or priorities of the Agent or any of the Lenders under any of the Credit Documents); (i) the Guarantees duly executed by each of the Guarantors and the Security Documents duly executed by the Borrower and by each of the Guarantors pursuant to ARTICLE 8 (which condition was met at Closing) and a confirmation by each Guarantor in respect of such Guarantees; (j) confirmation from its counsel that the Liens constituted by the Security Documents have been registered, filed and recorded in all jurisdictions where such registration, filing or recording is necessary or of advantage to the creation, perfection, preservation or protection of such Liens; 41 - 36 - (k) evidence of the insurance policies required pursuant to SECTION 7.1(4) (which condition was met at Closing); (l) a legal opinion under the Laws of such jurisdictions as may be requested by the Agent or its counsel, each acting reasonably, subject to customary assumptions, qualifications, exclusions and limitations as are acceptable to the Agent and its counsel, each acting reasonably, of counsel to the Borrower and each of the Guarantors as to the due authorization, execution, delivery, legality, validity, binding nature and enforceability of this Agreement and each of the Ancillary Agreements to which the Borrower or any Guarantor is a party, the valid creation, the due perfection, protection and preservation and, in such jurisdictions where such opinions are customary, the applicable priority or ranking of the Liens constituted by the Security Documents, and such other matters as counsel to the Agent may reasonably request (which condition was met at Closing and which condition need not be met by the Guarantors only in connection with the entering into and execution of this Agreement); and (m) such other certificates and documentation as the Agent may reasonably request to give effect to this Agreement. (2) PROCEEDINGS. All proceedings to be taken in connection with the transactions contemplated by this Agreement, any Ancillary Agreement or any documentation relating to the Acquisition and to the Nomadic Acquisition shall be reasonably satisfactory in form and substance to the Agent acting reasonably, and the Agent shall have received copies of all such instruments and other evidence as it may reasonably request in order to establish the consummation of such transactions and the taking of all proceedings in connection therewith. (3) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default would occur as a consequence of the consummation of the Acquisition or to the Nomadic Acquisition and the transactions contemplated thereby. (4) NO AMENDMENTS. There shall have been no material amendment to any of the documentation relating to the Acquisition and to the Nomadic Acquisition which has not been approved by the Agent, acting reasonably. (5) ACQUISITION AND NOMADIC ACQUISITION. All conditions precedent to the consummation of the Acquisition and to the Nomadic Acquisition shall have been met and shall not have been waived. (6) OTHER CONDITIONS. The conditions set forth in SECTION 5.2 shall have been fulfilled or performed. (7) FEES. First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of Nova Scotia shall have received payment from the Borrower of all Fees payable at or prior to the date hereof in the respective amounts and at the respective rates separately agreed between the Borrower and First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of Nova Scotia. 42 - 37 - 5.2 CONDITIONS OF ALL ACCOMMODATIONS. At any time, the obligation of each of the Lenders to make an Accommodation and the right of the Borrower to deliver an Accommodation Notice shall be subject to the conditions, which conditions are for the exclusive benefit of the Agent and the Lenders and may be waived in whole or in part by the Agent with the approval of the Majority Lenders in their sole discretion, that on the date of such Accommodation, and after giving effect thereto and to the application of proceeds therefrom: (1) FACILITY LIMITS. The Outstandings under each Credit Facility shall not exceed the limits specified in SECTION 2.2. (2) TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Borrower contained in this Agreement or in any Ancillary Agreement to which it is a party or in any report or other document delivered to the Agent or any of the Lenders, and the representations and warranties of each of the Guarantors contained in any Ancillary Agreement to which it is a party or in any report or other document delivered to the Agent or any of the Lenders, shall be true and correct in all material respects as of such date with the same force and effect as if such representations and warranties had been made on and as of such date, except to the extent that any such representation or warranty related to an earlier date and except for changes therein expressly permitted or expressly contemplated by this Agreement. (3) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default has occurred and is continuing. 5.3 CONDITION PRECEDENT TO INITIAL ACCOMMODATION UNDER THE REVOLVING FACILITY. The obligation of each of the Lenders to make further Accommodations under the Revolving Facility after the date hereof is subject to the additional condition, which condition is for the exclusive benefit of the Agent and the Lenders under the Term Facility, that the initial Accommodation shall have been made by The Bank of Nova Scotia in an amount equal to the full amount of the Individual Commitment of The Bank of Nova Scotia under the Term Facility (or are being made contemporaneously with the above-mentioned further Accommodations under the Revolving Facility) to the Borrower. ARTICLE 6 REPRESENTATIONS AND WARRANTIES 6.1 REPRESENTATIONS AND WARRANTIES. To induce the Agent and each of the Lenders to make Accommodations available hereunder, the Borrower represents and warrants to the Agent and each of the Lenders each of the representations and warranties set out below. Each of the representations and warranties contained in this SECTION 6.1 shall be deemed to be made and repeated by the Borrower at the time and date of each Accommodation. (1) STATUS AND POWER. The Borrower and each of its Subsidiaries is a corporation duly incorporated and organized and validly subsisting under the Laws of its jurisdiction of incorporation, and has full corporate power and capacity to own its Property and to carry on the Business as now conducted by it and its Subsidiaries. The Borrower and each of its Subsidiaries has obtained all material Authorizations required in respect of its operations, and 43 - 38 - is not in default and has received no notice of any Claim or default, with respect to any such material Authorizations. Each of the Borrower and its Subsidiaries is duly qualified, licensed or registered to carry on business in the jurisdictions in which the nature of its Property or the business carried on by it make such qualification, licence or registration necessary except where the failure to obtain such qualification, licence or registration would not result in a Material Adverse Effect. (2) CORPORATE AUTHORIZATION. Each of the Borrower and its Subsidiaries has full corporate power and capacity and full legal right to enter into and perform its obligations under this Agreement and all other Credit Documents and all documents relating to the Acquisition and the Nomadic Acquisition to which it is or will be a party and, in the case of the Borrower, to obtain Accommodations hereunder, and each of the Borrower and its Subsidiaries has or will have by Closing taken all corporate action necessary to be taken by it to authorize such acts. (3) ENFORCEABILITY OF AGREEMENT. This Agreement and any other Credit Documents and all the documents relating to the Acquisition and to the Nomadic Acquisition to which the Borrower or any of its Subsidiaries is a party constitute legal, valid and binding obligations of each of the Borrower and its Subsidiaries enforceable against them in accordance with their respective terms, subject only to any limitation under applicable Laws relating to: (i) bankruptcy, insolvency, reorganization, moratorium or creditors' rights generally; and (ii) the discretion that a court may exercise in the granting of equitable remedies. (4) REAL ESTATE AND LEASEHOLD REAL ESTATE. EXHIBIT 6.1(4)(A) indicates as of the date of this Agreement each location thereon which is not Real Estate of the Borrower, the Landlord or the Depositary of such location and the address of such Landlord or Depositary. All leases or other agreements with the respective Landlord or Depositary relating to such locations are in good standing and the Borrower is not in default in payment of rent or in the performance of its material obligations thereunder. In addition, to the knowledge of the Borrower, the Landlords or Depositaries thereunder are not in material breach of any of their obligations thereunder. No set of facts exists which after notice or lapse of time or both or otherwise would result in a breach or default under any of the said leases or other agreements which would result in a Material Adverse Effect if such lease or other agreement were terminated by the Landlord or Depositary pursuant to such breach or default. EXHIBIT 6.1(4)(B) indicates thereon as of the date of this Agreement each location which is Real Estate of the Borrower or any of the Guarantors and identifies the owner of such Real Estate. (5) INSURANCE POLICIES. All of the Property of the Borrower and its Subsidiaries is insured against loss or damage to the extent, and in the manner, described in SECTION 7.1(4). The proceeds of such policies are payable to the Borrower or the appropriate Subsidiary and, in respect of any insured Collateral, to the Agent. (6) ENVIRONMENTAL DISCLOSURE. (a) COMPLIANCE WITH ENVIRONMENTAL LAWS. The Business has been and is being operated, and the Leasehold Real Estate and the Real Estate or any of the Property currently owned or leased by or under the charge, management or control of the Borrower or any of its Subsidiaries has been and are being owned, operated, managed and/or controlled by the Borrower and its Subsidiaries in compliance with all applicable Environmental Laws or 44 - 39 - Environmental Orders, except in each the foregoing instances for such non-compliance which could not reasonably be expected to have a Material Adverse Effect. Since June 25, 1997, none of the Borrower, any of its Subsidiaries nor any of its directors or officers has ever (i) been convicted of any offence for non-compliance with any applicable Environmental Laws or Environmental Orders, except for any such conviction which could not reasonably be expected to have a Material Adverse Effect; (ii) been fined an amount for non-compliance under any applicable Environmental Laws or Environmental Orders, except for any such fine which could not reasonably be expected to have a Material Adverse Effect; or (iii) settled any prosecution short of conviction for an amount for non-compliance under any applicable Environmental Laws or Environmental Orders, except for any such amount which could not reasonably be expected to have a Material Adverse Effect. Without limiting the generality of the foregoing: (i) ENVIRONMENTAL PERMITS. The Borrower and its Subsidiaries hold and are conducting the Business in compliance with all Environmental Permits which are required for the operation of such Business, except for such absence or non-compliance which could not reasonably be expected to have a Material Adverse Effect. All such Environmental Permits are valid and in full force and effect and, no notice of unremedied violation thereof has been formally issued by any Governmental Entity pursuant to any applicable Environmental Laws, and no material proceeding is pending or to the knowledge of the Borrower, threatened, relating to a violation of any applicable Environmental Laws or Environmental Orders, which will review, make subject to additional limitations or conditions, suspend, revoke, terminate or limit any such material Environmental Permits, except for any absence, violation, proceeding which could not reasonably be expected to have a Material Adverse Effect. (ii) DEALING WITH SUBSTANCES. None of the Borrower nor any of its Subsidiaries (A) has used or uses any of the Leasehold Real Estate or the Real Estate to generate, manufacture, refine, treat, transport, store, handle, recycle, dispose of, deposit, transfer, produce or process Hazardous Substances, except in compliance with all applicable Environmental Laws, Environmental Permits and Environmental Orders, except for such non-compliance which could not reasonably be expected to have a Material Adverse Effect; or (B) disposed or disposes of, treats, transports or stores any waste or other Substance except in compliance with all applicable Environmental Laws, Environmental Permits and Environmental Orders, except for such non-compliance which could not reasonably be expected to have a Material Adverse Effect. (iii) ENVIRONMENTAL REPORTS. Since June 25, 1997, the Borrower and its Subsidiaries have made all reports required by any applicable Environmental Laws or Environmental Orders to any appropriate Governmental Entity on the happening of all events which are required to be so reported pursuant to any applicable Environmental Laws or Environmental Orders, except for such non-compliance which could not reasonably be expected to have a Material Adverse Effect. 45 - 40 - (iv) RECORD KEEPING. Since June 25, 1997, the Borrower and its Subsidiaries have maintained all environmental and operating documents and records relating to the Leasehold Real Estate and Real Estate and the Business in the manner and for the periods required by all Environmental Laws and Environmental Permits, except for such non-compliance which could not reasonably be expected to have a Material Adverse Effect. (b) ENVIRONMENTAL LIABILITIES. Except for expenses relating to ordinary course of business, neither the Borrower nor any of its Subsidiaries has any liability caused by the activities, acts or omissions of the Borrower nor any of its Subsidiaries nor, to the knowledge of the Borrower, caused by the activities, acts or omissions of any other Person, arising under or in connection with any applicable Environmental Laws or Environmental Orders, including any Environmental Liabilities and Costs, which in each instance could, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. To the knowledge of the Borrower, there is no past fact, condition or circumstances caused by the activities, acts or omissions of the Borrower nor any of its Subsidiaries, or caused by any other Person, and relating to the Business, the Leasehold Real Estate or the Real Estate or any other Property currently or formerly owned or leased by the Borrower or any of its Subsidiaries, that could result in any liability arising under or in connection with Environmental Laws or Environmental Orders, including any Environmental Liabilities and Costs, except for expenses relating to the ordinary course of business and except where such liabilities could not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries is currently subject to an Environmental Notice concerning any liability caused by the activities, acts or omissions of the Borrower or any of its Subsidiaries in violation of any applicable Environmental Laws or Environmental Orders, nor do, to the knowledge of the Borrower, any reasonable grounds exist which would give rise to the issuance of any Environmental Notice to the Borrower or any of its Subsidiaries concerning liability due to the violation of any applicable Environmental Laws, except for such Environmental Notices which could not reasonably be expected to have a Material Adverse Effect. (c) DISCLOSURE REGARDING PROPERTIES. None of the Leasehold Real Estate or Real Estate or any other Property currently or formerly owned or leased by the Borrower or any of its Subsidiaries or under the charge, management or control of any of them has been used or is used by the Borrower or any of its Subsidiaries or any Person authorized to do so by any of the foregoing, as a landfill site, a waste disposal site, or as a location for the disposal of Hazardous Substances or waste in violation of any applicable Environmental Laws or Environmental Orders, except for such non-compliance or violation which could not reasonably be expected to have a Material Adverse Effect. (d) REMEDIAL ACTION. No Remedial Action is currently being taken by the Borrower or any of its Subsidiaries and no Environmental Notice given by any Governmental Entity has been received by the Borrower or any of its Subsidiaries nor do, to the knowledge of the Borrower, any reasonable grounds exist which would give rise to the issuance of any Environmental Notice by any 46 - 41 - Governmental Entity, that any Remedial Action, resulting from the activities, acts or omissions of the Borrower or any of its Subsidiaries, is required to be taken by such entity as a condition of continued compliance with any Environmental Permits, Environmental Laws or Environmental Orders, except for such Remedial Action which in each of the foregoing instances could not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. (e) SITE DESIGNATED FOR CLEAN-UP. To the knowledge of the Borrower, without inquiry of any Governmental Entity, none of the Leasehold Real Estate and Real Estate or Properties formerly owned or leased by or under the management or control of the Borrower or any of its Subsidiaries is identified by any Governmental Entity for investigation out of the ordinary course of business or clean-up pursuant to any Environmental Laws or Environmental Orders, which in each of the foregoing instances could reasonably be expected to result in a Material Adverse Effect. (7) BANK ACCOUNTS. The only banks, trust companies and other financial institutions (other than the Agent) in which any Collateral described in Clause (iii) of the definition thereof is held or invested as of the date of this Agreement, together with the numbers of all accounts in which such Collateral is held or invested, are set out in EXHIBIT 6.1(7). 6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All the representations and warranties of the Borrower contained in SECTION 6.1 shall survive the execution and delivery of this Agreement and shall continue in full force and effect and be deemed made on the date of each Accommodation until all Outstandings hereunder have been repaid and the Credit Facilities have been terminated notwithstanding any investigation made at any time by or on behalf of the Agent or any of the Lenders. 6.3 NO REPRESENTATIONS BY LENDERS. No representation, warranty or other statement made by the Agent or any one or more of the Lenders in respect of the Credit Facilities, the Credit Documents or any Accommodation made hereunder shall be binding on such Person unless made by it in writing as a specific amendment to this Agreement or any of the other Credit Documents, as the case may be. ARTICLE 7 COVENANTS OF THE BORROWER 7.1 AFFIRMATIVE COVENANTS. So long as there are any Outstandings hereunder or the Credit Facilities have not been terminated, and unless the Agent with the approval of the Majority Lenders shall otherwise consent, the Borrower shall: (1) REPORTING AND DELIVERIES. Cause to be delivered to the Agent the following documents, in form, scope and substance satisfactory to the Agent, acting reasonably: (a) the quarterly and annual consolidating financial statements of Holdings in the same manner and within the same time periods provided for in the Amended and Restated Credit Agreement. 47 - 42 - (b) after the occurrence of any Default which is continuing, promptly upon receipt thereof, a copy of each management letter or report submitted to the board of directors (or any committee thereof) or senior management of the Borrower or any of its Subsidiaries by the Borrower's independent auditors in connection with any annual, interim or special audit made by them of the books of the Borrower or any of its Consolidated Subsidiaries; (c) promptly (after the chief executive officer, the chief operating officer, the chief financial officer, the treasurer or the controller of the Borrower or any Subsidiary becomes aware thereof) of the occurrence of any Default or Event of Default and, upon request of the Agent from time to time during the continuance of such Event of Default, a statement of the chief financial officer or other senior officer of the Borrower setting forth the details of such Default or Event of Default and the action which the Borrower proposes to take or has taken with respect thereto; (d) promptly after receipt or the commencement thereof, notice of all Claims, pending or, to the knowledge of the Borrower, threatened in writing against (i) the Borrower or any of its Subsidiaries, which Claims could reasonably be expected to have a Material Adverse Effect or (ii) any of the Collateral in respect of an amount exceeding $250,000; and (e) such other information and reports relating to the Borrower, any of its Subsidiaries, their respective Property (including the Collateral), or the Business, as the Agent may from time to time reasonably (with respect to frequency as well as scope) request. (2) ENVIRONMENTAL REPORTING. Promptly, and in any event within five days of any senior officer of the Borrower or any other officer of the Borrower responsible for matters relating to the Environment becoming aware of its existence, notify the Agent in writing of any Environmental Notice (providing available details and further additional details if applicable, within a reasonable period of any actions taken by the Borrower in response) which could reasonably be expected to give rise to: (i) Environmental Liabilities and Costs of $250,000 or more, or (ii) any violation of Environmental Laws involving the possible imposition of a fine of $250,000 or more or where a Governmental Entity requires or notifies the Borrower or any of its Subsidiaries that it may require the shutting down of any facility forming part of the Property of the Borrower and its Subsidiaries for a period in excess of 72 hours; and promptly from time to time thereafter, notify the Agent in writing of each material change (whether or not adverse) in the status of the foregoing. (3) ENVIRONMENTAL AUDITS AND POLICY. Take, and shall cause each of its Subsidiaries, in the exercise of its reasonable business judgment, to take prompt and appropriate action to respond to any material non-compliance with Environmental Laws, Environmental Permits or Environmental Orders or to any Release or threatened Release of a Hazardous Substance which is in contravention of applicable Environmental Laws, Environmental Permits or Environmental Orders, and shall regularly report to the Agent on such response. Have, and shall cause each of its Subsidiaries to have, a comprehensive environmental management 48 - 43 - policy in place as well as ensure that all officers and employees of the Borrower and its Subsidiaries comply with such policy in all material respects in relation to the Business. (4) INSURANCE. Maintain, and cause each of its Subsidiaries to maintain, such insurance, to such extent and against such hazards and liabilities, as is customarily maintained by Persons carrying on business in the same industry and in the applicable country and in a similar location to the extent that such insurance is available at commercially reasonable rates, and furnish to the Agent in sufficient quantity for distribution to each Lender, upon written request, certificates evidencing the insurance carried by the Borrower or any Subsidiary of the Borrower. Notwithstanding the foregoing, all such insurance shall have the following characteristics: (i) insure the Inventory against loss or damage by fire and other insurable hazards for the full insurable value thereof subject to a reasonable deductible amount and name the Agent (for its own account and for the account of the Lenders) as loss payee in respect of property damage insurance covering the Inventory and as an additional named insured in respect of third party liability insurance; the whole as its interest may appear; (ii) if it is cancelled or amended for any reason whatsoever, or the same is allowed to lapse for non-payment of premium, notice of such cancellation, amendment or lapse shall not be effective as to the Agent or the Lenders for 30 days after receipt by them of notice of such cancellation, amendment or lapse from the insurers, or as otherwise agreed by the Agent; and (iii) in respect of the interest of the Agent and the Lenders in such insurance, the insurance shall not be invalidated by any action or inaction of the Agent or the Lenders and shall (other than in the case of liability insurance) insure the Agent and the Lenders regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Borrower or any of its Subsidiaries. (5) PROTECT LIENS. At all times take or cause to be taken, at the reasonable request of the Agent, all action necessary or reasonably desirable to create, maintain, register, record, file, perfect, protect and preserve the Liens provided for under the Security Documents under all applicable Laws (including the Laws of each jurisdiction in which each account debtor of each Account included in Collateral is located) and obtain and deliver to the Agent, a Landlord's Letter duly executed by each Landlord of premises that is Leasehold Real Estate at which any Collateral is located at any time and a Depositary's Letter duly executed by each Depositary of premises other than Leasehold Real Estate and Real Estate at which any Collateral is located at any time. (6) PAYMENTS. Pay all amounts of principal, interest, Fees, costs and expenses owing hereunder by the Borrower on the dates, at the times and at the places specified in this Agreement or under any other Credit Document. (7) PROCEEDS. Obtain and deliver to the Agent a subordination and postponement in favour of the Agent by each bank, trust company or other financial institution in which any Collateral described in Clause (ii) of the definition thereof is held or invested, including a waiver of all its rights of set-off and compensation in respect thereof, all in form, scope and substance 49 - 44 - satisfactory to the Agent and its counsel, each acting reasonably. Deposit and cause each of its Subsidiaries to deposit all proceeds of Dispositions of Inventory and collections of Accounts in bank accounts maintained with First Chicago NBD Bank, Canada, in the bank accounts listed in EXHIBIT 6.1(7) or in bank accounts maintained with another bank acceptable to the Agent, acting reasonably, all of which bank accounts will at all times be subject to a valid, enforceable and perfected first priority Lien in favour of the Agent for itself and the Lenders and a waiver of any right of the bank in question to exercise a right of set-off or compensation against amounts standing to the credit of the Borrower or such Subsidiary. (8) FURTHER ASSURANCES. At its cost and expense, upon request of the Agent, duly execute and deliver or cause to be duly executed and delivered to the Agent such further instruments and other documents and do and cause to be done such further acts as may be necessary or desirable in the reasonable opinion of the Agent to carry out more effectually the provisions and purposes of the Credit Documents. ARTICLE 8 SECURITY 8.1 GUARANTEES. The Borrower shall cause each of the Guarantors to execute and deliver to the Agent a Guarantee. 8.2 SECURITY. The Borrower shall execute and deliver the Security Documents in form and substance satisfactory to the Agent, acting reasonably, to the Agent and the Lenders as and when required hereunder or under the Ancillary Agreements, and shall grant exclusive first priority perfected Liens in, on or over all the Collateral in Canada and, if reasonably practicable, elsewhere, as continuing collateral security for the payment and performance by the Borrower of all of its obligations, indebtedness and liabilities, present and future, under or relating to the Credit Facilities, whether hereunder or under any of the other Credit Documents. The Borrower shall cause SportRack to execute and deliver the pledge agreement forming a part of the Security Documents in form and substance satisfactory to the Agent, acting reasonably, to the Agent and the Lenders as and when required hereunder and to grant an exclusive first priority perfected Lien in, on or over 100 Class A common shares in the capital stock of the Borrower as continuing collateral security for the payment and performance by SportRack of all of its obligations, indebtedness and liabilities, present and future, under the Guarantee to which it is a party. The Borrower shall cause each of SportRack and Holdings to execute the Security Documents to which it is a party (other than the pledge agreement mentioned in the preceding sentence) in form and substance satisfactory to the Agent, acting reasonably, and shall deliver same to the Agent and Lenders as and when required hereunder and to grant a perfected Lien in, on or over all of the personal property of each of SportRack and Holdings as continuing collateral security for the payment and performance by each of SportRack and Holdings of all of its obligations, indebtedness and liabilities, present and future, under the Guarantee to which it is a party. 8.3 REGISTRATIONS. (1) The Agent may (without any obligation to do so), at the Borrower's reasonable expense, register, file or record the Liens constituted by the Security Documents in all 50 - 45 - jurisdictions where such registration, filing or recording is necessary or of advantage to the creation, perfection, preservation or protection of such Liens. (2) The Agent may (without any obligation to do so), at the Borrower's reasonable expense, renew such registrations, filings and recordings from time to time as and when required or of advantage to keep them in full force and effect. The Borrower acknowledges that the forms of the Security Documents have been prepared based upon the Laws of the jurisdictions indicated therein as being applicable thereto in effect at the date hereof and that such Laws may change. The Borrower agrees that, following prior Notice to and consultation with the Borrower, the Agent shall have the right (without any obligation to do so) to require that the forms of the Security Documents be amended or supplemented, at the reasonable expense of the Borrower, to reflect any changes in such Laws, whether arising as a result of statutory amendments, court decisions or other similar changes, in order to confer upon the Agent and the Lenders under the Revolving Facility the Liens intended to be created thereby. ARTICLE 9 EVENTS OF DEFAULT 9.1 EVENTS OF DEFAULT. If any of the following events, conditions or circumstances (each an "EVENT OF DEFAULT") shall occur and be continuing: (a) the Borrower shall fail to pay any portion of: (i) any Outstandings due hereunder on the date when due hereunder; or (ii) any interest, Fees or other amounts due hereunder within three Business Days of notice being given by or on behalf of the Agent to the Borrower to pay any such amount; (b) any representation or warranty or certification made or deemed to be made by the Borrower or any of the Guarantors (or any director or officer thereof) pursuant to or in connection with any of the Credit Documents delivered to the Agent or any one or more of the Lenders shall prove to have been incorrect in any respect when made or deemed to be made; (c) the Borrower or any of the Guarantors shall fail to perform or observe any other term, covenant or agreement contained in any of the Credit Documents on its part to be performed or observed and such failure shall remain unremedied for 30 days after the earlier of (i) written notice thereof having been given to the Borrower by the Agent or (ii) a senior officer of the Borrower or a Guarantor having become aware thereof unless the Borrower has given written notice to the Agent of such failure within five Business Days of becoming aware thereof in which event the 30 day period shall begin to run from the date referred to in Clause (i) of this SECTION 9.1(C); (d) at any time and for any reason, (i) any Credit Document, as a whole that materially affects the ability of the Agent or of any of the Lenders to enforce the obligations and liabilities of the Borrower under this Agreement or of the Borrower and the Guarantors under any of the Ancillary Agreements or to enforce their rights against the Collateral or against the shares in the share 51 - 46 - capital of the Borrower which are pledged in favour of the Agent, ceases to be in full force and effect or any of the Borrower, any of its Subsidiaries or any of the Guarantors seeks to repudiate its obligations and liabilities thereunder and the Liens intended to be created thereby are, or any of the Borrower or any such Subsidiary or Guarantor seeks to render such Liens, invalid and unprotected, or (ii) Liens on Collateral with a fair market value in excess of $500,000 or on the shares in the share capital of the Borrower pledged in favour of the Agent and contemplated by the Security Documents shall, at any time and for any reason, be invalidated or otherwise not be in full force and effect, or such Liens shall not have the priority contemplated by this Agreement or the Credit Documents; (e) a Default (as defined in the Amended and Restated Credit Agreement) occurs under the Amended and Restated Credit Agreement; (f) the Borrower or any of its Subsidiaries shall: (i) become insolvent (as such expression is defined in or construed under any applicable Insolvency Law) or generally not pay its debts as such debts become due; (ii) admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors; (iii) file a notice of intention to file a proposal under any applicable Insolvency Law; (iv) institute or have instituted against it any proceeding seeking (x) to adjudicate it a bankrupt or insolvent, (y) any liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any applicable Insolvency Law, or (z) the entry of an order for relief or the appointment of a receiver, interim receiver, receiver and manager, assignee, liquidator, sequestrator, trustee or other similar official for it or for any substantial part of its Property; or (v) take any corporate action to authorize any of the foregoing actions; unless in the case of any proceeding instituted against the Borrower or any of its Subsidiaries, as the case may be, and referred to in (iv), (x), (y) or (z) above, such proceeding is stayed or dismissed within 60 days from the institution thereof; or (g) a Change of Control occurs; then, and in any such event, the Agent may and the Agent shall, if so instructed by the Majority Lenders at any time, by written notice to the Borrower: (i) terminate the obligation of the Lenders or any one or more of them to make further Accommodations hereunder; and/or (ii) demand repayment of all indebtedness of the Borrower to the Agent or any of the Lenders, whereupon the principal amount of all outstanding Advances and an amount equal to the Face Amount of each Bankers' Acceptance and BA Equivalent Note for which the Agent or any of the Lenders is then contingently liable and all interest and Fees accrued hereunder, and all other amounts payable under this Agreement shall become forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; and/or (iii) enforce its rights under the Guarantees and the Liens constituted by the Security Documents and any other Lien now or hereafter held by the Agent; PROVIDED, HOWEVER, that upon any Event of Default specified in SECTION 9.1(F), the obligation of the Lenders or any one or more of them to make further Accommodations hereunder shall automatically terminate and the principal amount of all outstanding Advances and an amount equal to the Face Amount of each Bankers' Acceptance and BA Equivalent 52 - 47 - Note for which the Agent or any of the Lenders is then contingently liable and all interest and Fees accrued hereunder, and all other amounts payable under this Agreement shall automatically become forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower. 9.2 EXPENSE OF AGENT. Upon the occurrence of any Default or Event of Default which has not been waived and is continuing, the Agent may take any action it considers advisable in its sole discretion, and shall take any action the Majority Lenders consider advisable in their sole discretion to remedy the effect of such Default or Event of Default. The Borrower shall pay to the Agent, upon demand, all reasonable expenses, costs and charges incurred by or on behalf of the Agent in connection with: (i) any remedial action taken pursuant to this Section; (ii) any obligation of the Borrower or any of the Guarantors to the Agent or any one or more of the Lenders hereunder or under any Ancillary Agreement; or (iii) the realization of the Collateral, including all reasonable legal fees, court costs, appraisal fees, receiver's or agent's remuneration and other expenses of taking possession of, repairing, protecting, insuring, preparing for disposition, realizing, collecting, selling, transferring, delivering or obtaining payment of the Collateral. 9.3 RIGHT TO COMBINE AND SET-OFF. Upon the occurrence and during the continuance of any Default or Event of Default, the Agent or any one or more of the Lenders is hereby authorized at any time and from time to time, to the fullest extent permitted by Law, to combine, set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent or such Lender to or for the credit or the account of the Borrower or any of the Guarantors with or against any and all of the obligations of the Borrower or any of the Guarantors now or hereafter existing under any of the Credit Documents, whether actual or contingent, matured or not, irrespective of whether or not the Agent shall have made any demand under any of the Credit Documents and although such obligations may be unmatured. The Agent or such Lender agrees promptly to notify the Borrower after any such combination or set-off and application made by the Agent or such Lender provided that the failure to give such notice shall not affect the validity of such combination or set-off and application. The rights of the Agent and the Lenders under this SECTION 9.3 are in addition to other rights and remedies (including other rights of combination and set-off) which the Agent or the Lenders may have. 9.4 REMEDIES CUMULATIVE. The remedies provided for in this Agreement and each Ancillary Agreement are cumulative and do not exclude any other right or remedy provided by Law. ARTICLE 10 PAYMENTS, COMPUTATIONS AND INDEMNITIES 10.1 TIMING OF PAYMENTS UNDER THIS AGREEMENT, ETC. (1) Unless otherwise expressly provided in this Agreement, the Borrower shall make any payment required to be made by it to the Agent not later than 11:00 a.m. (Montreal time) on the date such payment is due. 53 - 48 - (2) Unless otherwise expressly provided in this Agreement, the Agent shall make any Accommodation or other payment to the Borrower hereunder by crediting or causing the crediting of the Borrower's Canadian Dollar Account or the Borrower's US Dollar Account, as the case may be, with the amount of such Accommodation not later than 2:00 p.m. (Montreal time) on the date such Accommodation is to be made. (3) The Borrower hereby authorizes the Agent, if and to the extent payment owed to the Agent by the Borrower is not made when due hereunder, to charge from time to time against the Borrower's accounts with the Agent any amount so due. (4) Unless otherwise expressly provided in this Agreement, each Lender shall make any payment required to be made by it to the Agent hereunder at the Agent's head office in Toronto not later than 11:00 a.m. (Montreal time) on the date such payment is due. 10.2 PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, as the case may be. If any such extension would cause payment of interest on a LIBOR Advance to be made in the next following calendar month, such payment shall be made on the last preceding Business Day. 10.3 OVERDUE AMOUNTS. All amounts owed by the Borrower to the Agent or any of the Lenders which are not paid when due (whether at stated maturity, on demand, by acceleration or otherwise) shall bear interest (both before and after judgment), from and including the date on which such amount is due until such amount is paid in full, calculated daily and payable for each calendar month period or part thereof, as the case may be, in arrears on the first day of the following month, at a rate per annum equal at all times, in the case of amounts payable in Canadian Dollars, to the rate per annum payable in respect of Floating Rate Advances plus 2% per annum and, in the case of amounts payable in US Dollars, to the rate per annum payable in respect of US Base Rate Advances plus 2% per annum. 10.4 APPLICATION OF PROCEEDS. (1) Subject to SECTION 2.10, all amounts received by the Agent after the occurrence of an Event of Default from or in respect of the Borrower or any of the Guarantors or as proceeds of the Collateral in connection with any realization or enforcement proceedings under the Security Documents, in respect of any contingent liability of the Agent or any of the Lenders which has not yet become due or expired (i) shall be held by the Agent in trust until such liability becomes due or expires, whichever is earlier; and (ii) shall be applied at such time in accordance with SECTION 10.4(2). (2) Subject to SECTION 2.10, all amounts received by the Agent after the occurrence of an Event of Default from or in respect of the Borrower or any of the Guarantors or as proceeds of the Collateral in connection with any realization or enforcement proceedings under the Security Documents, and not otherwise applied pursuant to this Agreement or any of the other Credit Documents, shall be applied by the Agent and the Lenders as follows: (a) first, in reduction of the Borrower's obligation to pay any reasonable expenses, costs or charges referred to in SECTION 9.2; 54 - 49 - (b) second, in reduction of the Borrower's obligation to pay any unpaid Drawing Fee and interest accrued on the principal amount of Advances or on any other amount owing hereunder; (c) third, in reduction of the Borrower's obligation to pay any Fees which are due and owing, and any reasonable costs, expenses, or Losses referred to in SECTIONS 10.7, 10.8, 10.9 OR 10.10; (d) fourth, in reduction of the Borrower's obligation to pay any amounts due and owing on account of any unpaid principal amount or Face Amount of any Accommodation which is due and owing; (e) fifth, in reduction of any other obligation of the Borrower or the Guarantors under this Agreement or any of the other Credit Documents; and (f) sixth, to the Borrower, the Guarantors or such other Persons as may lawfully be entitled to the remainder, or as any court of competent jurisdiction may otherwise direct. 10.5 COMPUTATIONS OF INTEREST AND FEES. (1) All computations of interest shall be made by the Agent according to its practice daily, taking into account the actual number of days occurring in the period for which such interest is payable pursuant to SECTION 3.3, and: (i) if based on the Floating Rate or the US Base Rate, on the basis of a year of 365 days (or 366 days); or (ii) if based on the LIBOR, on the basis of a year of 360 days. (2) All computations of Fees shall be made by the Agent on the basis of a year of 365 days (or 366 days), taking into account the actual number of days (including the first day but excluding the last day) occurring in the period for which such Fees are payable. (3) For purposes of the Interest Act (Canada): (i) whenever any interest under this Agreement is calculated using a rate based on a year of 360 days, such rate determined pursuant to such calculation, when expressed as an annual rate, is equivalent to (x) the applicable rate based on a year of 360 days, (y) multiplied by the actual number of days in the calendar year in which the period for which such interest is calculated ends, and (z) divided by 360; (ii) the principle of deemed reinvestment of interest shall not apply to any interest calculation under this Agreement; and (iii) the rates of interest stipulated in this Agreement are intended to be nominal rates and not effective rates or yields. (4) Notwithstanding any provision to the contrary contained in this Agreement, in no event shall the aggregate "interest" (as defined in Section 347 of the Criminal Code (Canada), as the same may be amended, replaced or re-enacted from time to time) payable under this Agreement exceed the maximum amount of interest on the "credit advanced" (as defined in that section) under this Agreement lawfully permitted under that section and, if any payment, collection or demand pursuant to this Agreement in respect of "interest" (as defined in that section) is determined to be contrary to the provisions of that section, such payment, collection or demand shall be deemed to have been made by mutual mistake of the Borrower and the 55 - 50 - Agent and the Lenders and the amount of such payment or collection shall be refunded to the Borrower. For purposes of this Agreement, the effective annual rate of interest shall be determined in accordance with generally accepted actuarial practices and principles over the term the Credit Facilities are outstanding on the basis of annual compounding of the lawfully permitted rate of interest and, in the event of any dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Agent will be conclusive for the purposes of such determination. (5) Each determination by the Agent of any amount payable by the Borrower, the Agent or any one or more of the Lenders shall be conclusive and binding for all purposes absent manifest error. 10.6 JUDGMENT CURRENCY. (1) If, for the purposes of obtaining judgment in any court, it is necessary to convert any sum due or owing hereunder or under any other Credit Document to the Agent or any one or more of the Lenders in any currency (the "ORIGINAL CURRENCY") into another currency (the "OTHER CURRENCY"), the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase the Original Currency with the Other Currency on the Business Day preceding that on which final judgment is granted. (2) The obligations of the Borrower in respect of any sum due in the Original Currency from it to the Agent or any one or more of the Lenders under any of the Credit Documents shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by the Agent of any sum adjudged to be so due or owing in such Other Currency, the Agent may in accordance with normal banking procedures purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due or owing to the Agent or any one or more of the Lenders in the Original Currency, the Borrower shall, as a separate obligation and notwithstanding any such judgment, indemnify the Agent or such Lender against such Loss, and if the amount of the Original Currency so purchased exceeds the sum originally due or owing to the Agent or such Lender in the Original Currency, the Agent or such Lender shall remit such excess to the Borrower. 10.7 COSTS AND EXPENSES. The Borrower shall, whether or not the transactions hereby contemplated are consummated, pay all reasonable costs and expenses, including reasonable legal fees: (a) of First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of Nova Scotia (until the date of this Agreement) or the Agent in connection with the preparation, execution, delivery, registration, filing, recording, or enforcement of, and refinancing, renegotiation or restructuring of, the Credit Documents (including the maintenance of the Liens provided for therein and all future registrations, filings, recordings and other actions in connection therewith); (b) of First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of Nova Scotia (until the date of this Agreement) or the Agent in 56 - 51 - connection with, prior to the Closing, all due diligence relating to the Acquisition, the Nomadic Acquisition and the Credit Facilities; (c) of the Agent in connection with, from and after the Closing, all reviews, monitoring, audits, examinations and inspections of the Property and affairs of the Borrower and its Subsidiaries contemplated hereby, including inspections and appraisals of the Collateral and the Business at reasonable intervals, provided that the Borrower shall not be responsible under this SECTION 10.7(C) for costs and expenses of more than $50,000 in aggregate during any Financial Year (excluding any costs and expenses incurred during the continuance of any Default in respect of which such limitations shall not apply); and (d) of each of the Lenders in connection with the enforcement of its rights under the Credit Documents after the occurrence of any Default or Event of Default. 10.8 INDEMNITY FOR CHANGE IN CIRCUMSTANCES. (1) If with respect to the Agent or any of the Lenders: (i) any change in Law, or any change in the interpretation or application by any Governmental Entity of any Law occurring or becoming effective after the date hereof; or (ii) any compliance by the Agent or any of the Lenders with any direction, request or requirement (whether or not having the force of Law and, if not having the force of Law, the observance of which is in accordance with the practice of banks generally in Canada or in the jurisdiction concerned) of any Governmental Entity made or becoming effective after the date hereof, in either case shall have the effect of causing Loss to the Agent or any of the Lenders by: (a) increasing the cost to the Agent or any of the Lenders of performing its obligations under this Agreement or in respect of any Advance, Bankers' Acceptance or BA Equivalent Note (including the costs of maintaining any capital, reserve or special deposit requirements in connection therewith); (b) requiring the Agent or any of the Lenders to maintain or allocate any capital or additional capital or affecting its allocation of capital in respect of its obligations under this Agreement or in respect of any Advances, Bankers' Acceptances or BA Equivalent Notes; (c) reducing any amount payable to the Agent or any of the Lenders under this Agreement or in respect of any Advance, Bankers' Acceptance or BA Equivalent Note by any amount it deems material (other than a reduction resulting from a higher rate of income tax or other special tax relating to the Agent's or any Lender's income in general); or (d) causing the Agent or any of the Lenders to make any payment or to forgo any return on, or calculated by reference to, any amount received or receivable by the Agent or any of the Lenders under this Agreement in respect of any Advance, Bankers' Acceptance or BA Equivalent Note; then the Agent may give notice to the Borrower within 90 days from the day on which the Agent or any Affected Lender has obtained knowledge of the occurrence giving rise to such 57 - 52 - Loss and specifying the nature of the event giving rise to such Loss and the Borrower shall, on demand, pay such amounts as the Affected Lender or the Agent may specify (and the Agent notifies the Borrower) to be necessary to compensate the Agent or any of the Lenders for any such Loss incurred after the date of such notice. A certificate as to the amount of any such Loss, submitted in good faith by the Agent to the Borrower shall be conclusive and binding for all purposes absent manifest error. (2) If any Lender (the "AFFECTED LENDER") seeks additional compensation pursuant to SECTION 10.8(1), then the Borrower may notify the Agent that it desires to replace the Affected Lender with one or more of the other Lenders, and the Agent shall then forthwith give notice to the other Lenders that any Lender or Lenders may, in the aggregate, acquire all (but not part) of the Affected Lender's Individual Commitment and all (but not part) of the rights and obligations of the Affected Lender under each of the other Credit Documents (but in no event shall any other Lender or the Agent be obliged to do so), provided that any discount to the price paid to such Affected Lender from the amounts outstanding hereunder shall first be approved by such Affected Lender. If one or more Lenders shall so agree in writing (each, an "ASSENTING LENDER"), each such Lender shall give notice to the Agent that it has agreed to make such acquisition, and shall acquire its pro rata share, determined on the basis of the relative Individual Commitments of the Assenting Lenders, of such Individual Commitment and of the rights and obligations hereunder of the Affected Lender under the Credit Document on a date mutually and on other terms and conditions acceptable to the Assenting Lenders and the Affected Lenders. On the date of such acquisition, the Agent shall give notice to each of the Assenting Lenders and the Borrower setting out the amount of the Individual Commitments of each of the Assenting Lenders and the amount of the Outstandings of the Affected Lender acquired by each of the Assenting Lenders and, upon the completion of such acquisition and the giving of such notice, the Affected Lender shall cease to be a "LENDER" for purposes of this Agreement and shall no longer have any rights or obligations under the Credit Documents and the Assenting Lenders shall have acquired and assumed all of such rights and obligations. Upon the assumption of the Affected Lender's Individual Commitment by an Assenting Lender, Schedule 1 shall be deemed to be amended to increase the Individual Commitment of such Assenting Lender by the amount of such assumption. 10.9 INDEMNITY RELATING TO ACCOMMODATIONS. Upon notice from the Agent to the Borrower (which notice shall be accompanied by a detailed calculation of the amount to be paid by the Borrower), the Borrower shall pay to the Agent such amount or amounts as will compensate the Agent or any of the Lenders for any loss, cost or expense incurred by them: (i) in the liquidation or redeposit of any funds acquired by the Agent or any of the Lenders to fund or maintain any portion of a LIBOR Advance as a result of (A) the failure of the Borrower to borrow or make repayments on the date specified under this Agreement or in any notice from the Borrower to the Agent, or (B) the repayment or prepayment (including under SECTIONS 2.5, 2.6, 2.7, 3.6, 8.2(2) OR 10.1) of any amounts on a day other than the last day of the Interest Period applicable thereto; or (ii) arising from any Claim with respect to any Bankers' Acceptance or BA Equivalent Note, including reasonable legal fees and disbursements, respecting the collection of amounts owing by the Borrower hereunder in respect of such Bankers' Acceptance or BA Equivalent Note or the enforcement of the Agent's or Lenders' rights hereunder in respect of such Bankers' Acceptance or BA Equivalent Note, including legal proceedings attempting to restrain the Agent or the Lenders from paying any amount under such Bankers' Acceptance or BA Equivalent Note. 58 - 53 - 10.10 INDEMNITY FOR TRANSACTIONAL AND ENVIRONMENTAL LIABILITY. (1) The Borrower hereby agrees to indemnify, exonerate and hold the Agent and each Lender and each of their respective officers, directors, employees, agents and other representatives (collectively, the "INDEMNIFIED PARTIES") free and harmless from and against any and all Claims and Losses, including all documentary, recording, filing or stamp taxes or duties (collectively, in this SECTION 10.10, the "INDEMNIFIED LIABILITIES") paid, incurred or suffered by, or asserted against, the Indemnified Parties or any of them, irrespective of whether such Indemnified Party is a party to the action for which such indemnification hereunder is sought, with respect to, or as a direct or indirect result of: (i) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Accommodation obtained hereunder; (ii) the execution, delivery, performance or enforcement of this Agreement or any Ancillary Agreement except for such Indemnified Liabilities that a court of competent jurisdiction determines arose on account of the relevant Indemnified Party's gross negligence or willful misconduct; or (iii) any Environmental Liabilities and Costs. (2) All obligations provided for in this SECTION 10.10 shall not be reduced or impaired by any investigation made by or on behalf of the Agent or any of the Lenders. (3) The Borrower hereby agrees that, for the purposes of effectively allocating the risk of loss placed on the Borrower by this SECTION 10.10, the Agent and each of the Lenders shall be deemed to be acting as the agent or trustee on behalf of and for the benefit of its officers, directors and agents. (4) If, for any reason, the obligations of the Borrower pursuant to this SECTION 10.10 shall be unenforceable, the Borrower agrees to make the maximum contribution to the payment and satisfaction of each obligation that is permissible under Law, except to the extent that a court of competent jurisdiction determines such obligations arose on account of the gross negligence or willful misconduct of any Indemnified Party. (5) Any Indemnified Party claiming indemnification hereunder shall give the Borrower prompt notice of any Claim asserted by third parties against it which is covered by the indemnities provided for herein (provided that the failure to give such notice shall not affect the Borrower's obligation to indemnify hereunder, except to the extent that such failure materially and adversely affects the right of the Borrower or the relevant Subsidiary to defend such Claim), and the Borrower shall, within 30 days, give notice to such Indemnified Party whether it wishes to defend such Claim at its sole cost and expense. No Indemnified Party shall settle or compromise such Claim without the written consent of the Borrower (which consent shall not be unreasonably withheld), unless the said 30 day period has expired without the Borrower having given notice of its intention to defend such Claim or, if such notice of intention is given, unless the Borrower fails diligently to defend such Claim by appropriate legal proceedings. If an Indemnified Party does not receive notice from the Borrower, that it wishes to defend such Claim as aforesaid, the Indemnified Party shall be entitled to defend, settle or otherwise deal with such Claim in such manner as it, in the reasonable exercise of its judgment, deems appropriate but at the sole risk and expense of the Borrower. If the Borrower gives such notice to the Indemnified Party that it does wish to defend such Claim, the Borrower shall have the obligation to contest or dispute such Claim in the name of or on behalf of the Person against whom it is made, at the Borrower's own cost and expense, and shall at its own cost and expense defend expeditiously the Person against whom such Claim is made from all such 59 - 54 - actions or proceedings to which the said indemnity applies (but shall not have the right to settle or compromise such Claim unless the prior written consent of the Indemnified Party has been obtained (such consent not to be unreasonably withheld)), and the Indemnified Party shall arrange that the Borrower has the right to carry on such actions or proceedings in its name, provided that counsel retained by the Borrower to prosecute such defence is approved by the Indemnified Party (which approval shall not be unreasonably withheld), and the Borrower shall keep the Indemnified Party fully advised as to the course of the proceedings, and the Borrower furnishes to the Indemnified Party such security or other assurances as such party may reasonably request in connection therewith, and such dispute is prosecuted or negotiations conducted by the Borrower in good faith and with due diligence. The Indemnified Party shall be entitled to participate in the defence of such indemnified Claims and, subject to the foregoing, shall make available to the Borrower all files, books, records and documents, information and data in the possession and control of the person against whom the Claim is made relevant to such actions or proceedings for the purposes of such defence (other than those which it is not entitled by Law to disclose) and shall cause such person to cooperate without expense to itself in all reasonable respects and to assist in the defence of any such actions or proceedings. 10.11 SURVIVAL OF INDEMNITIES: CONTRIBUTION. (1) The provisions of SECTIONS 10.7, 10.8, 10.9, 10.10 AND THIS SECTION 10.11 shall survive the termination of this Agreement and the repayment of all Outstandings. The Borrower acknowledges that neither its obligation to indemnify, nor any actual indemnification by it, of the Agent or any of the Lenders hereunder in respect of legal fees and disbursements shall in any way affect the confidentiality or privilege relating to any information communicated by the Agent or any Lender to its counsel. (2) If any provision in any of the Credit Documents providing for indemnification by the Borrower or any of the Guarantors (the "LNDEMNITOR") in favour of any Indemnified Party is found by reason of the occurrence of an event, other than the gross negligence or willful misconduct of the Indemnified Party, to be unenforceable by a court of competent jurisdiction in a final judgment that has become non-appealable, then the lndemnitor shall contribute to the amount paid or payable by the Indemnified Party which is subject to the indemnification provision in such proportion as is appropriate to reflect not only the relative benefits received by the lndemnitor on the one hand and the Indemnified Party on the other hand but also the relative fault of the lndemnitor and the Indemnified Party. The rights of contribution herein provided shall be in addition to and not in derogation of any other right to contribution which the Indemnitee may have under this Agreement or applicable Laws. ARTICLE 11 GENERAL PROVISIONS 11.1 NOTICES. (1) All Notices pursuant to this Agreement or the other Credit Documents shall be in writing and shall be personally delivered or sent by facsimile, charges prepaid, at or to the applicable addresses or facsimile numbers, as the case may be, set out opposite the party's name in SCHEDULE 2 hereto or at or to such other address or addresses or facsimile number or 60 - 55 - numbers as any party hereto may from time to time designate to the other parties in such manner. Any communication which is personally delivered as aforesaid shall be deemed to have been validly and effectively given on the date of such delivery if such date is a Business Day and such delivery was made during normal business hours of the recipient; otherwise, it shall be deemed to have been validly and effectively given on the Business Day next following such date of delivery. Any communication which is transmitted by facsimile as aforesaid shall be deemed to have been validly and effectively given on the date of transmission if such date is a Business Day and such transmission was made during normal business hours of the recipient; otherwise, it shall be deemed to have been validly and effectively given on the Business Day next following such date of transmission. (2) Each Accommodation Notice and any notice of a prepayment shall be irrevocable and binding on the Borrower. With respect to any Accommodation Notice, the Agent may act upon the basis of telephonic notice believed by it in good faith to be from an authorized officer of the Borrower if the Borrower has provided the Agent with a list of such authorized officers (or in any other event, believed by it in good faith to be from the Borrower) prior to receipt of an Accommodation Notice. In the event of conflict between the Agent's record of the applicable terms of any Accommodation based on any such telephonic notice and such Accommodation Notice, the Agent's record shall prevail and the Borrower hereby irrevocably waives its rights, if any, to dispute the terms of such Accommodation absent manifest error. 11.2 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement. 11.3 THIRD PARTY BENEFICIARIES. Each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any Person, other than the parties hereto, the Persons contemplated in SECTION 10.10 or any Eligible Assignee, and no Person, other than the parties hereto and the Persons contemplated in SECTION 10.10 or any Eligible Assignee, shall be entitled to rely on the provisions hereof in any action, suit, proceeding, hearing or other forum. 11.4 ENUREMENT. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their successors and any Person becoming a party to this Agreement. This Agreement shall be binding upon any assigns of the parties hereto and enure to the benefit of any permitted assigns of the parties hereto, including any Eligible Assignee. 11.5 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. 11.6 KNOWLEDGE. Where any representation or warranty contained in this Agreement or any Ancillary Agreement is expressly qualified by reference to the knowledge of the Borrower, or where any other reference is made herein or in any Ancillary Agreement to the knowledge of the Borrower, it shall be deemed to refer to the knowledge of each of the Borrower and its Subsidiaries. The Borrower confirms that it has made, and agrees that it shall hereafter at other relevant times make, due and diligent inquiry of those of its officers, agents and senior employees (including appropriate officers, agents and senior employees of its Subsidiaries) as it considers necessary as to the matters that are the subject of such representations, warranties or references. 61 - 56 - 11.7 ASSIGNMENT. Except as otherwise provided in this Agreement, none of the rights or obligations of the Borrower hereunder shall be assignable or transferable to any party without the prior written consent of each of the Lenders, which consent shall not be unreasonably withheld. Any Lender may assign, in whole or in part, any of its interest in the Credit Facilities to any Eligible Assignee. In such event, such Lender, the relevant Eligible Assignee and the Borrower shall enter into and execute an Assumption Agreement. 11.8 NON-MERGER. Except as otherwise expressly provided in this Agreement, the covenants, representations and warranties of the parties contained in this Agreement and the Ancillary Agreements shall not merge on and shall survive the Closing and the making of any Accommodation, and notwithstanding such Closing or Accommodation, or any investigation made by or on behalf of any party, shall continue in full force and effect. Neither the Closing nor the making of any Accommodation shall prejudice any right of one party against any other party in respect of anything done or omitted hereunder or under any of the Ancillary Agreements or in respect of any right to damages or other remedies. 11.9 CERTIFICATES AND OPINIONS. Whenever the delivery of a certificate or opinion is a condition precedent to the taking of any action by the Agent or under any of the Credit Documents, the truth and accuracy of the facts and opinion stated in such certificate or opinion shall in each case be conditions precedent to the right of the Borrower to have such action taken, and each statement of fact contained therein shall be deemed to be a representation and warranty of the Borrower for the purpose of this Agreement. Except as otherwise expressly provided in this Agreement, whenever any certificate or declaration is to be delivered by an officer or a senior officer of the Borrower, such certificate shall be signed on behalf of the Borrower by one or more of the Chairman, President, Chief Financial Officer, Treasurer, Secretary or any Vice President of the Borrower. 11.10 AMENDMENT. This Agreement may be amended only by written agreement of the parties hereto, provided that ARTICLE 12 and any other provision of any of the Credit Documents relating to arrangements among or the relative rights and obligations of the Agent and/or any of the Lenders may be amended without the agreement of the Borrower or any of the Guarantors. 11.11 AGENT'S AND LENDERS' CONFIDENTIALITY OBLIGATIONS. The Agent and each of the Lenders agrees that it shall use reasonable efforts to keep confidential all materials and information (other than publicly available material and information) obtained by or provided to it pursuant to the Credit Documents which are identified or designated by the Borrower in writing as confidential and which were not previously in the possession of or known to the recipient thereof on a non-confidential basis and that the Agent or such Lender, as the case may be, will use its reasonable efforts not to disclose any such information unless the same has previously been made public, provided that nothing in this Agreement shall prohibit the Agent or such Lender, as the case may be, from, or subject the Agent or such Lender to liability for, disclosing any of such information (i) pursuant to any order, writ, judgment, decree, injunction or ruling of any Governmental Entity (including any bank regulators) to whose jurisdiction the Agent or such Lender may be subject, (ii) pursuant to any applicable Law, (iii) to the auditors, counsel and other advisors of the Agent or such Lender to the extent required in connection with their services to the Agent or such Lender with respect to the Credit Documents or (iv) to the extent necessary in the enforcement of the Credit Documents after the occurrence of any Default. 62 - 57 - ARTICLE 12 THE AGENT 12.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby irrevocably appoints and authorizes, and hereby agrees that it will require any Eligible Assignee of any of its interest in the Credit Documents to irrevocably appoint and authorize, the Agent to take such actions as agent on its behalf and to exercise such powers under the Credit Documents as are provided for therein, together with such powers as are reasonably incidental thereto. Each Lender hereby irrevocably appoints and authorizes the Agent to be its attorney in its name and on its behalf to exercise all rights or powers granted to the Agent or the Lenders under the Security Documents (including, without limitation, the entering into and execution for and on behalf of the Lenders of an intercreditor agreement of even date herewith with NBD Bank, as administrative agent and collateral and documentation agent of the Lenders under the Amended and Restated Agreement, it being understood however that the Agent may not enter into and execute any amendment to such intercreditor agreement or waive the execution of the obligations of NBD Bank thereunder, in whole or in part, without the prior written consent of each of the Lenders). Neither the Agent nor any of its directors, officers, employees or agents shall be liable to any of the Lenders for any action taken or omitted to be taken by it or them thereunder or in connection therewith, except for its own gross negligence or willful misconduct and each Lender hereby acknowledges that the Agent is entering into the provisions of this SECTION 12.1 on its own behalf and as agent and trustee for its directors, officers, employees and agents. 12.2 INTEREST HOLDERS. The Agent and the Borrower may treat each Lender set forth in SCHEDULE 1 or the Eligible Assignee designated in the last notice delivered to it in connection with any assignment to such Eligible Assignee of any Lender's rights hereunder as the holder of all of the interests of such Lender under the Credit Documents. 12.3 CONSULTATION WITH COUNSEL. The Agent may consult with legal counsel selected by it as counsel for the Agent and the Lenders and shall not be liable for any action taken or not taken or suffered by it in good faith and in accordance with the advice and opinion of such counsel. 12.4 DOCUMENTS. The Agent shall not be under any duty to the Lenders to examine, enquire into or pass upon the validity, effectiveness or genuineness of the Credit Documents or any instrument, document or communication furnished pursuant to or in connection with the Credit Documents and the Agent shall, as regards the Lenders, be entitled to assume that the same are valid, effective and genuine, have been signed or sent by the proper parties and are what they purport to be. 12.5 AGENT AS LENDER. With respect to those portions of the Credit Facilities made available by it, the Agent shall have the same rights and powers under the Credit Documents as any other Lender and may exercise the same as though it were not the Agent. The Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower and its Affiliates and Persons doing business with the Borrower and any of its Affiliates as if it were not the Agent and without any obligation to account to the 63 - 58 - Lenders therefor and the Agent may exercise its rights and powers with respect thereto as though it were not the Agent. 12.6 RESPONSIBILITY OF AGENT. The duties and obligations of the Agent to the Lenders under the Credit Documents are only those expressly set forth herein. The Agent shall not have any duty to the Lenders to investigate whether a Default or an Event of Default has occurred. The Agent shall, as regards the Lenders, be entitled to assume that no Default or Event of Default has occurred and is continuing unless the Agent has actual knowledge or has been notified by the Borrower of such fact or has been notified by a Lender that such Lender considers that a Default or Event of Default has occurred and is continuing, such notification to specify in detail the nature thereof. In the event that, in the reasonable opinion of the Agent, there is any conflict or inconsistency between or among any requests, consents, approvals, instructions, waivers or other actions by the Majority Lenders at any time, the Agent may refrain from complying with or implementing such consents, approvals, instructions, waivers or actions until the conflict or inconsistency has been eliminated or resolved to the Agent's satisfaction. 12.7 ACTION BY AGENT. The Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights which may be vested in it on behalf of the Lenders by and under this Agreement or any of the other Credit Documents; except that, if the Majority Lenders have instructed the Agent to exercise or refrain from exercising any particular right, in no event shall the Agent act contrary to such instructions unless required by Law to do so. Any rights of the Agent expressed to be on behalf of or with the approval of the Majority Lenders shall be exercised by the Agent upon the request or instructions of the Majority Lenders. The Agent shall incur no liability to the Lenders under or in respect of any of the Credit Documents with respect to anything which it may do or refrain from doing in the reasonable exercise of its judgment or which may seem to it to be necessary or desirable in the circumstances, except for its gross negligence or willful misconduct. The Agent shall in all cases be fully protected in acting or refraining from acting under any of the Credit Documents in accordance with the instructions of the Majority Lenders and any action taken or failure to act pursuant to such instructions shall be binding on all Lenders. 12.8 NOTICE OF EVENTS OF DEFAULT. In the event that the Agent shall acquire actual knowledge or shall have been notified of any Default or Event of Default, the Agent shall promptly notify the Lenders and shall take such action and assert such rights under SECTION 9.1 of this Agreement and under the Credit Documents as the Majority Lenders shall request in writing and the Agent shall not be subject to any liability by reason of its acting pursuant to such request. If the Majority Lenders shall fail for five Business Days after receipt of the notice of any Default or Event of Default to request the Agent to take such action or to assert such rights under any of the Credit Documents in respect of such Default or Event of Default, the Agent may, but shall not be required to, take such action or assert such rights as it deems in its discretion to be advisable for the protection of the Lenders; except that, if the Majority Lenders have instructed the Agent to take or to refrain from taking any particular action or to assert or to refrain from asserting any particular right, in no event shall the Agent act contrary to such instructions unless required by Law to do so. 12.9 BENEFIT OF ARTICLE 12. Notwithstanding SECTION 10.5, the provisions of this ARTICLE 12 (except those of this SECTION 12.9 and the Sections referred to in SECTION 10.11) (including any obligations, restrictions and limitations imposed upon the Agent hereunder) shall not enure to the benefit of the Borrower or any of the Guarantors. 64 - 59 - 12.10 RESPONSIBILITY DISCLAIMED. The Agent shall be under no liability or responsibility whatsoever as agent hereunder: (a) to the Borrower or any other Person as a consequence of any failure or delay in the performance by, or any breach by, any Lender or Lenders (other than the Agent in such capacity) of any of its or their obligations under any of the Credit Documents; (b) to any Lender or Lenders as a consequence of any failure or delay in performance by, or any breach by, the Borrower of any of its obligations under any of the Credit Documents; or (c) to any Lender or Lenders for any statements, representations or warranties in any of the Credit Documents or in any other documents contemplated thereby, or in any other information provided pursuant to any of the Credit Documents, or any other documents contemplated thereby, or for the validity, effectiveness, enforceability or sufficiency of any of the Credit Documents or any other document contemplated thereby. 12.11 INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrower) pro rata according to the Pro Rata Share of each of them from and against any and all Claims and Losses and which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of any of the Credit Documents or any other document contemplated thereby or any action taken or omitted by the Agent under any of the Credit Documents or any document contemplated thereby, except that no Lender shall be liable to the Agent for any portion of such Claims and Losses resulting from the gross negligence or wilful misconduct of the Agent. 12.12 CREDIT DECISION. Each Lender represents and warrants to the Agent that: (a) in making its decision to enter into this Agreement and to make its Pro Rata Share of either of the Credit Facilities available to the Borrower, it is independently taking whatever steps it considers necessary to evaluate the financial condition and affairs of the Borrower and that it has made an independent credit judgment without reliance upon any information furnished by the Agent; and (b) so long as any portion of the Credit Facilities is being utilized by the Borrower, it will continue to make its own independent evaluation of the financial condition and affairs of the Borrower. 12.13 SUCCESSOR AGENT. Subject to the appointment and acceptance of a successor Agent as provided in this SECTION 12.13, the Agent: (i) may resign at any time by giving 30 days written notice thereof to the Lenders; or (ii) may be removed by the Borrower or the Majority Lenders at any time when any action taken or omitted to be taken by it under the Credit Documents or in connection therewith was taken or omitted to be taken in a manner which was grossly negligent or exhibited wilful misconduct. Upon any such resignation or removal, the Majority Lenders, with the consent of the Borrower (which consent shall not be unreasonably 65 - 60 - withheld and, furthermore, such consent shall not be required if a Default has occurred or is continuing at the time of such appointment) shall have the right to appoint a successor Agent who shall be one of the Lenders unless none of the Lenders wishes to accept such appointment. If no successor Agent shall have been so appointed and shall have accepted such appointment by the time of such resignation or removal, then the retiring or removed Agent may, on behalf of the Lenders, appoint a successor Agent with the consent of the Borrower (which shall not be unreasonably withheld and, furthermore, such consent shall not be required if a Default has occurred or is continuing at the time of such appointment) which shall be a Person organized under the Laws of Canada. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the retiring or removed Agent (other than in its capacity as a Lender) and the retiring or removed Agent shall be discharged from its duties and obligations hereunder (other than in its capacity as a Lender). After any retiring or removed Agent's resignation or removal hereunder as the Agent, the provisions of this ARTICLE 12 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent. 12.14 DELEGATION BY AGENT. The Agent shall have the right to delegate any of its duties or obligations hereunder as Agent to any Affiliate of the Agent so long as the Agent shall not thereby be relieved of such duties or obligations. 12.15 WAIVERS AND AMENDMENTS. (a) Subject to SECTIONS 12.15(B) AND (C), any term, covenant or condition of any of the Credit Documents may only be amended with the consent of the Borrower and the Majority Lenders or compliance therewith by the Borrower may be waived (either generally or in a particular instance and either retroactively or prospectively) by the Majority Lenders and in any such event the failure to observe, perform or discharge any such covenant, condition or obligation, so amended or waived (whether such amendment is executed or such consent or waiver is given before or after such failure), shall not be construed as a breach of such covenant, condition or obligation or as a Default or Event of Default. (b) Notwithstanding any other provision of the Credit Documents, without the prior written consent of each Lender, no such amendment or waiver shall directly: (i) increase the amount of either of the Credit Facilities or the amount of the Individual Commitment of any Lender; (ii) extend the term of either of the Credit Facilities or amend the provisions of this Agreement dealing with the types of Accommodations available hereunder; (iii) extend the time for the payment of the interest or the repayment or mandatory prepayment of principal under the Credit Facilities, forgive any portion of principal or reduce the stated rate of interest payable in respect of the Credit Facilities, or amend the requirement that the Agent apply all amounts received by it in respect of the Credit Facilities in accordance with the Pro Rata Shares of the Lenders or as otherwise provided hereunder; 66 - 61 - (iv) change the percentage of the Lenders' requirement to constitute the Majority Lenders or otherwise amend the definition of Majority Lenders; (v) reduce the stated amount of any Fees to be paid pursuant to this Agreement or any additional compensation to be paid pursuant to SECTION 10.8; (vi) permit any subordination of the Indebtedness hereunder; or (vii) alter the provisions of SECTION 5.1 hereof or the terms of this SECTION 12.15; or (viii) any amendment, waiver, release or discharge which relates to the Guarantees or the Security Documents (including the Liens, obligations and remedies thereunder) or the requirement to insure Collateral in accordance with SECTION 7.1(5). (c) Without the prior written consent of the Agent, no amendment to or waiver of any provision of this Agreement to the extent it affects the rights or obligations of the Agent shall be effective. 12.16 DETERMINATION BY AGENT CONCLUSIVE AND BINDING. Any determination to be made by the Agent on behalf of or with the approval of the Lenders or the Majority Lenders under this Agreement shall be made by the Agent in good faith and, if so made, shall be binding on all parties, absent manifest error. 12.17 REMITTANCE OF PAYMENTS. Forthwith after receipt by the Agent of any payment of principal, interest, Fees or other amounts for the benefit of the Lenders pursuant to this Agreement or forthwith after receipt of amounts received pursuant to the Guarantees or the Security Documents, the Agent shall, subject to SECTIONS 2.12 AND 3.1(2), remit to each Lender, in immediately available funds, such Lender's Pro Rata Share of such payment provided that if the Agent, on the assumption that it will receive, on any particular date, a payment of principal (including a prepayment), interest, Fees or other amount hereunder, remits to each Lender its Pro Rata Share of such payment and the Borrower fails to make such payment, each of the Lenders agrees to repay to the Agent, forthwith on demand, to the extent that such amount is not recovered from the Borrower on demand such Lender's Pro Rata Share of the payment made to it pursuant to this SECTION 12.17, together with interest thereon at the rate per annum determined by the Agent in accordance with its usual practice for making loans to financial institutions of similar standing as such Lender for each day from and including the date such amount is remitted to the Lenders until the date such amount is paid or repaid to the Agent, the exact amount of the repayment required to be made by the Lenders to this SECTION 12.17 to be as set forth in a certificate delivered by the Agent to each Lender, which certificate shall constitute prima facie evidence of such amount of repayment. 12.18 REDISTRIBUTION OF SET-OFF PAYMENT. If any Lender shall exercise any right of counterclaim, set-off or banker's lien or similar right with respect to the Property of the Borrower or any of the Guarantors or if under any applicable Insolvency Law it receives a secured claim the security for which is a debt owed by it to the Borrower or any of the Guarantors, it shall apportion the amount thereof proportionately between: 67 - 62 - (a) amounts outstanding at such time owed by the Borrower or any of the Guarantors to such Lender under or in respect of each of the Credit Facilities, which amounts shall be applied in accordance with this Agreement; and (b) amounts otherwise owed to it by the Borrower or any of the Guarantors. If a Lender shall, through the exercise of a right, or the receipt of a secured claim described above or otherwise receive payment (other than after the occurrence of an Event of Default from any of the Guarantors pursuant to any of the Guarantees or as proceeds of the Collateral in connection with any realization or enforcement proceedings under the Security Documents) of a portion of the aggregate amount of principal and interest due to it hereunder (after excluding any amount apportioned to such Lender under Clause (b) of this SECTION 12.18) which is greater than the proportion received by any other Lender in respect of the aggregate amount of principal and interest due in respect of either of the Credit Facilities (having regard to the respective Individual Commitments of the Lenders thereunder), the Lender receiving such proportionately greater payment shall purchase a participation (which shall be deemed to have been done simultaneously with receipt of such payment) in that portion of the aggregate Outstandings of the other Lender or Lenders under such Credit Facility (for the full amount thereof) so that the respective receipts shall be pro rata to their respective participation in the Outstandings under such Credit Facility; PROVIDED, HOWEVER, that if all or part of such proportionately greater payment received by such purchasing Lender shall be recovered from the Borrower or any of the Guarantors, such purchase shall be rescinded and the purchase price paid for such participation shall be returned by such selling Lender or Lenders to the extent of such recovery, but without interest. Each Lender shall exercise its rights in respect of any such secured claim in a manner consistent with the rights of the Lenders entitled under this SECTION 12.18 to share in the benefits of any recovery on such secured claims. If any Lender does any act or thing permitted by this SECTION 12.18, it shall promptly provide copies of particulars thereof to the other Lenders and to the Borrower. 12.19 REDISTRIBUTION OF PAYMENT UNDER SECURITY. If a Lender, after the occurrence of an Event of Default, receives any amount from any of the Guarantors pursuant to any of the Guarantees or as proceeds of the Collateral in connection with any realization or enforcement proceedings under the Security Documents (including under any Lien under Section 427 of the Bank Act (Canada)) in an aggregate amount of principal and interest due to it hereunder which, after excluding any amount apportioned to such Lender under SECTION 12.18(B), is greater than the proportion received by any other Lender or Lenders in respect of the aggregate amount of principal and interest due in respect of the Credit Facilities (having regard to the respective Individual Commitments of the Lenders thereunder), the Lender receiving such proportionately greater amount shall purchase a participation (which shall be deemed to have been done simultaneously with receipt of such payment) in that portion of the aggregate Outstandings in respect of the Credit Facilities of the other Lender or Lenders (for the full amount thereof) so that the respective receipts shall be pro rata to their respective participations in the Outstandings in respect of the Credit Facilities; PROVIDED, HOWEVER, that if all or part of such proportionately greater amount received by such purchasing Lender shall be recovered from the Borrower or any of the Guarantors, such purchase shall be rescinded and the purchase price paid for such participation shall be returned by such selling Lender or Lenders to the extent of such recovery, but without interest. Each Lender shall exercise its rights in respect of any such Guarantee or Security Document in a manner consistent with the rights of the Lenders entitled under this SECTION 12.19 to share in the 68 - 63 - benefits of any recovery thereon. If any Lender does any act or thing permitted by this SECTION 12.19, it shall promptly provide copies of particulars thereof to the other Lenders. 12.20 DISTRIBUTION OF NOTICES. Promptly upon receipt by the Agent of any notice or other document which is delivered to the Agent hereunder on behalf of the Lenders, the Agent shall provide a copy of such notice or other document to each of the Lenders, provided that the Agent shall deliver to each Lender a copy of each Borrowing Notice and each Drawing Notice within one Business Day of receipt thereof from the Borrower. 12.21 DEALINGS BETWEEN BORROWER AND AGENT. (a) Except as otherwise provided in the Credit Documents, the Borrower shall deal only with the Agent in respect of all matters arising under this Agreement, and in no event shall be concerned to inquire whether any notice provided by the Agent to the Borrower or action taken or purported or intended to be taken by the Agent has been duly authorized by all or any of the Lenders, or is otherwise within the authority of the Agent, or otherwise as to the propriety or regularity of any action taken or purported or intended to be taken by the Agent hereunder, or to see to the application of any monies paid to or realized by the Agent, and the Borrower shall be entitled to rely upon the notice provided to the Borrower by the Agent or action taken by the Agent acting within the scope of its authority. (B) Except as otherwise provided in the Credit Documents, any and all notices or other communications required or permitted to be given to the Borrower by any Lender pursuant to this Agreement shall be given by the Agent and for greater certainty shall be expressly subject to SECTION 12.21(A). 12.22 APPOINTMENT OF NBD BANK. Each Lender hereby irrevocably confirms, and hereby agrees that it will require any Eligible Assignee of any of its interest in the Credit Documents to irrevocably confirm, the appointment of NBD Bank as its administrative, collateral and documentation agent in respect of the Security Documents mentioned in Paragraphs 5 and 6 only of SCHEDULE 4 hereto, the whole pursuant to and in accordance with the provisions of Article X of the Amended and Restated Credit Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. SPORTRACK INTERNATIONAL INC. Per: ------------------------------------- Per: ------------------------------------- 69 - 64 - FIRST CHICAGO NBD BANK, CANADA, AS AGENT Per: ------------------------------------- Per: ------------------------------------- FIRST CHICAGO NBD BANK, CANADA Per: ------------------------------------- Per: ------------------------------------- THE CHASE MANHATTAN BANK OF CANADA Per: ------------------------------------- Per: ------------------------------------- THE BANK OF NOVA SCOTIA Per: ------------------------------------- Per: ------------------------------------- 70 SCHEDULE 1 INDIVIDUAL COMMITMENTS
LENDER INDIVIDUAL COMMITMENT (CAN. $) ------ ------------------------------ TOTAL REVOLVING INDIVIDUAL FACILITY TERM FACILITY COMMITMENT ---------- ------------- ---------- First Chicago NBD Bank, Canada $1,400,000 $7,000,000 $8,400,000 The Chase Manhattan Bank of Canada $1,400,000 $7,000,000 $8,400,000 The Bank of Nova Scotia $1,200,000 $6,000,000 $7,200,000
71 SCHEDULE 2 ADDRESSES FOR NOTICES AGENT To: First Chicago NBD Bank, Canada 161 Bay Street Suite 4240 Toronto, Ontario M5J 2S1 Attention: Lehong Zhang Fax No.: (416) 363-7574 LENDERS To: First Chicago NBD Bank, Canada 161 Bay Street Suite 4240 Toronto, Ontario M5J 2S1 Attention: Michael Tam Fax No.: (416) 363-7574 The Chase Manhattan Bank of Canada First Canadian Place 100 King Street West Suite 6900 Toronto, Ontario M5X 1A4 Attention: Arun Barry Fax No.: (416) 216-4161 The Bank of Nova Scotia 1002 Sherbrooke Street West Montreal, Quebec H3A 3M3 Attention: Stephane Dupont Fax No.: (514) 499-5504 72 - 2 - BORROWER To: SportRack International Inc. 700 Bernard Street Granby, Quebec J2Q 9H7 Attention: President Fax No.: (514) 777-3615 with copies to: Advanced Accessory Systems, LLC Sterling Town Center 12900 Hall Road Suite 2000 Sterling Heights, Michigan U.S.A. 48313 Attention: Chief Executive Officer Fax No.: (810) 997-2900 SportRack, LLC Sterling Town Center 12900 Hall Road Suite 2000 Sterling Heights, Michigan U.S.A. 48313 Attention: Chief Executive Officer Fax No.: (810) 997-2900 73 SCHEDULE 2.5 TERM LOAN REPAYMENT SCHEDULE
YEAR DATE TERM LOAN - ---- ---- --------- 1998 March 31 $534,726 June 30 $534,726 September 30 $534,726 December 31 $657,714 1999 March 31 $657,714 June 30 $657,714 September 30 $657,714 December 31 $862,692 2000 March 31 $862,692 June 30 $862,692 September 30 $862,692 December 31 $1,026,675 2001 March 31 $1,026,675 June 30 $1,026,675 September 30 $1,026,675 December 31 $1,026,675 2002 March 31 $1,026,675 June 30 $1,026,675 September 30 $1,026,675 December 31 $1,026,675 2003 March 31 $1,026,675 June 30 $1,026,675 October 30 $1,020,773 Total $20,000,000
74 SCHEDULE 3 VARIABLE PERCENTAGES The Variable Percentages shall be as follows:
REVOLVING FACILITY AND TERM FACILITY - -------------------------------------------------------------------------------- Floating Rate LIBOR Advances, Bankers' Advances and U.S. Acceptances or BA Senior Debt Ratio Base Rate Advances Equivalent Notes - -------------------------------------------------------------------------------- Greater or equal to 4.0 to 1.0 1.75% 2.75% - -------------------------------------------------------------------------------- Less than 4.0 to 1.0 and greater than or equal to 3.5 to 1.0 1.50% 2.50% - -------------------------------------------------------------------------------- Less than 3.5 to 1.0 and greater than or equal to 3.0 to 1.0 1.25% 2.25% - -------------------------------------------------------------------------------- Less than 3.0 to 1.0 and greater than or equal to 2.5 to 1.0 1.00% 2.00% - -------------------------------------------------------------------------------- Less than 2.5 to 1.0 and greater than or equal to 2.0 to 1.0 0.75% 1.75% - -------------------------------------------------------------------------------- Less than 2.0 to 1.0 0.50% 1.50% ================================================================================
75 SCHEDULE 4 SECURITY DOCUMENTS 1. Liens under Section 427 of the Bank Act (Canada) in favour of each of the Lenders, over all Inventory and other Collateral to which such Section is applicable, of the Borrower. 2. Movable hypothec providing for Liens in favour of the Agent and each of the Lenders on all the Collateral of the Borrower. 3. Pledge agreement made by SportRack in favour of the Agent over 100 Class A common shares in the capital stock of the Borrower. 4. General Security Agreement providing for Liens in favour of the Agent over the Accounts, the Inventory and all other Collateral of the Borrower. 5. Security agreement made by SportRack in favour of NBD Bank, as agent for the Lenders, over all of the personal property of SportRack. 6. Security agreement made by Holdings in favour of NBD Bank, as agent for the Lenders, over all of the personal property of Holdings. 76 SCHEDULE 5 FORM OF BORROWING NOTICE [Date] First Chicago NBD Bank, Canada, as Agent 161 Bay Street Suite 4240 Toronto, Ontario M5J 2S1 Attention: Dear Sirs: The undersigned, SportRack International Inc. (the "BORROWER"), refers to the First Amended and Restated Credit Agreement dated as of the 19th day of March, 1998 (the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined) among the Borrower, First Chicago NBD Bank, Canada, as agent, and the lenders which are parties thereto, and hereby gives you notice pursuant to Section 3.2 of the Credit Agreement that the Borrower hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "PROPOSED BORROWING") as required by Section 3.2 of the Credit Agreement: (i) The Business Day of the Proposed Borrowing is . (ii) The aggregate amount of the Proposed Borrowing is [insert currency, amount]. (iii) The type of Advance is a Floating Rate Advance or LIBOR Advance or U.S. Base Rate Advance under the [Revolving] or [Term] Facility. (iv) The initial Interest Period for the LIBOR Advance is .* The undersigned certifies that the conditions precedent under the Credit Agreement to the giving of this Notice and the making of the Accommodation contemplated hereby have been fully satisfied. - ----------- * Omit Clause (iv) if the Advance is not a LIBOR Advance. Yours truly, SPORTRACK INTERNATIONAL INC. By: -------------------------------- Title: 77 SCHEDULE 6 FORM OF ELECTION NOTICE [Date] First Chicago NBD Bank, Canada, as Agent 161 Bay Street Suite 4240 Toronto, Ontario M5J 2S1 Attention: Dear Sirs: The undersigned, SportRack International Inc. (the "BORROWER"), refers to the First Amended and Restated Credit Agreement dated as of the 19th day of March, 1998 (the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined) among the Borrower, First Chicago NBD Bank, Canada, as agent, and the lenders which are parties thereto, and hereby gives you notice pursuant to Section 3.4 of the Credit Agreement that the Borrower hereby [elects to convert Advances from one Type to another] or [elects an additional Interest Period for certain LIBOR Advances], and in that connection sets forth below the information relating to such election as required by Section 3.4 of the Credit Agreement: (i) The Business Day on which the conversion from one Type of Advance to another is to be made is [ ].* (ii) The type of Advance to be converted is [insert amount, currency and Type of Advance] under the [Revolving] or [Term] Facility.* (iii) The new Type of Advance selected is [ ].* (iv) The initial Interest Period for the LIBOR Advance is [ ].** (v) The LIBOR Advance which is to be continued as a LIBOR Advance is [specify amount].*** (vi) The current Interest Period for such LIBOR Advance expires on [specify date].*** (vii) The additional Interest Period selected for such LIBOR Advance is [ ].*** The undersigned certifies that the conditions precedent under the Credit Agreement to the giving of this Notice and the making of the Accommodation contemplated hereby have been fully satisfied. - ----------- * and ** Omit Clauses (i), (ii), (iii) and (iv) if the election does not involve a conversion of a Type of Advance. ** Omit Clause (iv) if the conversion of Type of Advance does not involve a conversion to a LIBOR Advance. *** Omit Clauses (v), (vi) and (vii) if the election does not involve the selection of an additional Interest Period for a LIBOR Advance. 78 - 2 - Yours truly, SPORTRACK INTERNATIONAL INC. By: ----------------------------- Title: 79 SCHEDULE 7 FORM OF DRAWING NOTICE [Date] First Chicago NBD Bank, Canada, as Agent 161 Bay Street Suite 4240 Toronto, Ontario M5J 2S1 Attention: Dear Sirs: The undersigned, SportRack International Inc. (the "BORROWER"), refers to the First Amended and Restated Credit Agreement dated as of the 19th day of March, 1998 (the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined) among the Borrower, First Chicago NBD Bank, Canada, as agent, and the lenders which are parties thereto, and hereby gives you notice pursuant to Section 4.2 of the Credit Agreement that the Borrower hereby requests a Drawing under the Credit Agreement, and in that connection sets forth below the information relating to such election as required by Section 4.2 of the Credit Agreement: (i) The Business Day of the Proposed Drawing is [ ]. (ii) The aggregate Face Amount of Drafts to be accepted and BA Equivalent Notes to be purchased is [insert amount in Canadian dollars] under the [Revolving] or [Term] Facility. (iii) The contract maturity date for such Drafts and BA Equivalent Notes is [ ] (days). The undersigned certifies that the conditions precedent under the Credit Agreement to the giving of this Notice and the making of the Accommodation contemplated hereby have been fully satisfied. Yours truly, SPORTRACK INTERNATIONAL INC. By: ------------------------------- Title: 80 SCHEDULE 8 ASSUMPTION AGREEMENT THIS AGREEMENT made the [] of [, 199.] TO: [] (the "BORROWER") AND TO: [] (collectively, the "LENDERS") AND TO: First Chicago NBD Bank, Canada, as agent for the Lenders (the "AGENT") WHEREAS the Borrower, First Chicago NBD Bank, Canada, and the other Lenders who are parties thereto (collectively, the "LENDERS") and First Chicago NBD Bank, Canada, as agent for the Lenders, entered into a first amended and restated credit agreement dated as of the 19th day of March, 1998 (the "CREDIT AGREEMENT"); AND WHEREAS the Credit Agreement contemplates that any Lender may, subject to the provisions of the Credit Agreement, assign all or any part of its respective interest in the Credit Facilities to an Assignee; AND WHEREAS SECTION 11.8 of the Credit Agreement provides that the assigning Lender must, upon the assignment of all or any part of an interest in the Credit Facilities, deliver an executed assumption agreement to the Borrower and the Agent (with sufficient copies for distribution to the Lenders) pursuant to which the Assignee shall assume the obligations and agree to be bound by all the terms and conditions of the Credit Agreement. NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants herein contained and the mutual covenants contained in the Credit Agreement, the undersigned hereby agrees as follows: 1. DEFINITIONS. In this Agreement, unless otherwise provided, all capitalised terms shall have the meanings respectively ascribed thereto in the Credit Agreement. 2. ASSUMPTION OF OBLIGATIONS. The undersigned hereby undertakes and agrees to assume, perform and discharge, from and after the date hereof, all duties, obligations, covenants and agreements of a Lender in accordance with the terms contained in the Credit Agreement and to be bound by the terms of the Credit Agreement in all respects as if the undersigned were a signatory thereto to the extent of the amount of the Individual Commitment assigned by [] to the undersigned, being []. 81 - 2 - 3. NOTICES. The address and facsimile number for Notices to the undersigned pursuant to the Credit Agreement shall be as set out below. 4. SUCCESSORS AND ASSIGNS. The terms of this Agreement shall be binding upon the undersigned and its successors and assigns and shall enure to the benefit of the Borrower, the Agent, the Lenders, the undersigned and their respective successors and permitted assigns. IN WITNESS WHEREOF this Agreement has been duly executed. [ ] By: ------------------------------ Authorised Signing Officer Notices to: Attention: --------------------------------- Fax No.: ( ) 82 SCHEDULE 9 LANDLORD'S LETTER NAME OF OWNER OF REAL PROPERTY -------------------------------------------------- (the "LANDLORD") ADDRESS OF REAL PROPERTY -------------------------------------------------------- - -------------------------------------------------------------------------------- (the "PREMISES") TO: First Chicago NBD Bank, Canada acting as Agent for certain lenders, including First Chicago NBD Bank, Canada as a lender The Landlord is the owner of the Premises and has entered into a lease transaction (the "LEASE") with [ ] (the "COMPANY") pursuant to which the Company has acquired a leasehold interest in all or a portion of the Premises. First Chicago NBD Bank, Canada, is acting as Agent (in such capacity, the "AGENT") for certain lenders (the "LENDERS"), including First Chicago NBD Bank, Canada, as a Lender, who will be providing a term acquisition facility and a revolving facility (collectively, the "CREDIT FACILITIES") to the Company. As security for the Credit Facilities, the Company has granted to the Agent, for the benefit of itself and the Lenders, a security interest in, among other things, all inventory and accounts, and general intangibles and books and records of the Company related thereto including, without limitation, all such inventory, accounts, general intangibles and books and records of the Company related thereto which are now, or in the future may become, located at, installed in, associated with or affixed to, the Premises (the "COLLATERAL"). As an inducement for the Agent and the Lenders to enter into such financing transactions, in consideration of the Landlord, on the one hand, and the Company, on the other hand, entering into the leases, agreements and arrangements in connection with the Premises and for other good and valuable consideration, the receipt and sufficiency of which each of the Landlord and the Company hereby acknowledges, EACH OF THE LANDLORD AND THE COMPANY HEREBY AGREES AS FOLLOWS: 1. The Collateral may be stored, placed, kept, utilized and/or located at or associated with the Premises and shall not be deemed a fixture or part of any immovable property but shall at all times be considered movable property, whether or not any of the Collateral becomes so related to any immovable property that an interest therein arises under law. 2. Until such time as the Credit Facilities have terminated and all of the indebtedness, liabilities and obligations of the Company to the Agent and Lenders are indefeasibly paid, performed and satisfied in full, the Landlord disclaims any interest in the Collateral, confirms 83 - 2 - that it has no lien, hypothec, prior claim or security interest therein, and agrees not to levy or distrain upon any of the Collateral or to assert any claim against the Collateral. 3. The Agent, including its officers, employees and representatives, and any agent, receiver, manager, receiver and manager, monitor, trustee, liquidator or similar official acting on behalf of the Agent or the Lenders (each a "Receiver"), shall have access to and may enter upon the Premises at any time and from time to time during normal business hours to inspect, take possession of, preserve, protect, repair, process, use, maintain, sell, lease, dispose of, liquidate or remove the Collateral. 4. The Lease is in full force and effect and, to the best of the Landlord's knowledge, the Company is not in default under the Lease. The Landlord agrees to provide the Agent, for the benefit of itself and the Lenders and any Receiver, with written notice of any default or claimed default by the Company under the Lease upon or as soon as practicable after becoming aware thereof and, prior to termination of the Lease, to permit the Agent, on behalf of itself and the Lenders, and any Receiver, the same opportunity, without obligation, to cure or cause to be cured such default as is granted the Company under the Lease. 5. The Landlord will permit the Agent and any Receiver to remain on the Premises for a period of up to one-hundred and fifty (150) days following receipt by the Agent of written notice from the Landlord that the Landlord has terminated the Lease, subject, however, to the payment to the Landlord by the Agent, on behalf of the Lenders, or by the Receiver, as the case may be, of the rent and other monetary amounts due under the Lease for the actual period of occupancy by the Agent or the Receiver, as the case may be, prorated on a per diem basis determined on the basis of a thirty (30) day month. The Agent's and Receiver's right to occupy the Premises under the preceding sentence shall be extended for any time period during which the Agent or Receiver is prohibited from selling the Collateral or any part thereof due to the imposition of the automatic stay by the filing of bankruptcy proceedings by or against the Company or by the Company proposing an arrangement under the Companies' Creditors Arrangement Act (Canada) or any similar legislation. 6. Notwithstanding any other provision of this agreement, none of the Agent, Receiver or any Lender shall be under any obligation to make any payment or cure any default by the Company under the Lease. 7. This agreement shall enure to the benefit of the Agent, the Lenders and any Receiver, and each of their respective successors and assigns, and shall be binding upon the Company and the Landlord, and each of their respective successors and assigns. 8. Neither the Company nor the Landlord shall amend, modify, add to or terminate this agreement without the prior written consent of the Agent. 9. All notices to the Agent hereunder shall be in writing and shall be personally delivered to an officer or other responsible employee of the Agent or sent by facsimile, charges prepaid, at or to the address or facsimile number, as the case may be, set out below, or at or to such other address or addresses or facsimile number or numbers as the Agent may from time to time designate to the Landlord and the Company. Any communication which is personally delivered as aforesaid shall be deemed to have been validly and effectively given on the date of such delivery, if such date is a business day in Montreal, Quebec (a "Business Day") and such delivery was made during normal business hours of the Agent; otherwise, it shall be 84 - 3 - deemed to have been validly and effectively given on the Business Day next following such date of delivery. Any communication which is transmitted by facsimile as aforesaid shall be deemed to have been validly and effectively given on the date of transmission if such date is a Business Day and such transmission was made during normal business hours of the Agent; otherwise, it shall be deemed to have been validly and effectively given on the Business Day next following such date of transmission. 10. The parties hereto have requested that this agreement and all documents relating thereto be drafted in the English Language. Les parties soussignees ont exige que cette convention et tous documents y relatifs soient rediges en langue anglaise. First Chicago NBD Bank, Canada Attention: ------------------------------------- Telecopier No.: ( ) DATED this day of , 199 . ---------- --------------- LANDLORD By: ---------------------- Title: By: ---------------------- Title: 85 SCHEDULE 10 DEPOSITARY'S LETTER [DEPOSITARY] [ADDRESS] Gentlemen: The undersigned, [ ] (the "COMPANY"), has from time to time in the past delivered and/or may from time to time in the future deliver certain inventory or other goods owned by it (the "GOODS") to you for storage, deposit, processing or use at your facilities located at the address shown above. First Chicago NBD Bank, Canada, is acting as Agent (in such capacity, the "AGENT") for certain lenders (the "LENDERS"), including First Chicago NBD Bank, Canada, as a Lender, who will be providing a term acquisition facility and revolving facility (collectively, the "CREDIT FACILITIES") to the Company. The Credit Facilities will be secured by a hypothec and a security interest in, among other things, all accounts and inventory of the Company, including, without limitation, the Goods. The Company has agreed that the Agent's hypothec and security interest in the Goods, for the benefit of itself and the Lenders and the Lenders' hypothec in the Goods shall rank prior to all other liens, prior claims, claims, hypothecs and interests including, without limitation, any hypothecs under the Civil Code of Quebec or other similar legislation. Until such time as the Credit Facilities have terminated and all of the indebtedness, liabilities and obligations of the Company to the Lenders have been indefeasibly paid, performed and satisfied in full, you disclaim any interest in the Goods, confirm that you have no lien, prior claim, claim, hypothec or security interest in any of the Goods and agree not to levy or distrain on any of the Goods or to assert any claim against any of the Goods, regardless of whether any such Goods are installed in, affixed to or commingled with any other goods, materials or substances, or manufactured, processed, assembled or otherwise dealt with so as to result in any change to such Goods whatsoever. To protect the Agent's hypothec and security interest in the Goods, for the benefit of itself and the Lenders, and the Lenders' hypothec in the Goods, if you issue storage receipts or other documents or title which evidence any Goods now or hereafter delivered by the Company to you, you will make those documents non-negotiable and clearly note on them that they are non-negotiable. If at any time the Agent requests copies of any such documents, you agree to provide them to it. Until further notice, you may release any of the Goods to any authorised agent of the Company upon the Company's request. However, upon written direction from the Agent, you 86 - 2 - agree not to deliver the Goods to the Company or its designated agent and, instead, you agree to hold the Goods subject to the Agent's further direction and to deliver the Goods as may be directed by the Agent. The Agent, including its officers, employees and representatives, and any agent, receiver, manager, receiver and manager, monitor, trustee, liquidator or similar official acting on behalf of the Agent or the Lenders (each, a "RECEIVER") shall have access to the Goods at any time and from time to time during normal business hours to inspect, take possession of, preserve, protect, repair, process, use, maintain, sell, lease, dispose of, liquidate or remove the Goods. The Company agrees that it will continue to pay all storage, processing or manufacturing expenses related to the storage and/or processing of the Goods upon its agreed terms with you. The Company further agrees that you shall have no liability to the Company if you comply with any written direction from Agent. Any failure of the Company to pay any of the foregoing expenses shall not affect any of your obligations to the Agent hereunder. All notices to the Agent hereunder shall be in writing and shall be personally delivered to an officer or other responsible employee of the Agent or sent by facsimile, charges prepaid, at or to the address or facsimile number, as the case may be, set out below, or at or to such other address or addresses or facsimile number or numbers as the Agent may from time to time designate. Any communication which is personally delivered as aforesaid shall be deemed to have been validly and effectively given on the date of such delivery, if such date is a business day in MONTReAL, QUeBEC ("BUSINESS DAY") and such delivery was made during normal business hours of the Agent; otherwise, it shall be deemed to have been validly and effectively given on the Business Day next following such date of delivery. Any communication which is transmitted by facsimile as aforesaid shall be deemed to have been validly and effectively given on the date of transmission if such date is a Business Day and such transmission was made during normal business hours of the Agent; otherwise, it shall be deemed to have been validly and effectively given on the Business Day next following such date of transmission. First Chicago NBD Bank, Canada Attention: ------------------------------------- Telecopier No.: ( ) Neither we nor you shall amend, modify, add to or terminate this agreement without the prior written consent of the Agent. Please confirm receipt of this letter and your agreement to the instructions and other terms contained herein by signing the enclosed copy of this letter as indicated and returning it 87 - 3 - to us as soon as possible. Your agreement hereto shall enure to the benefit of the Agent, the Lenders and any Receiver, and each of their respective successors and assigns, and shall be binding upon you and your successors and assigns. The parties hereto have requested that this agreement and all documents relating thereto be drafted in the English language. Les parties soussignees ont exige que cette convention et tous documents y relatifs soient rediges en langue anglaise. Yours very truly, By: -------------------------- Title: ACKNOWLEDGED AND AGREED TO this day of , 199 . ----- ---------- [DEPOSITARY] By: ------------------------------ Title: 88 EXHIBIT 6.1(4)(A) to the First Amended and Restated Credit Agreement dated as of March 19, 1998 among SportRack International Inc., as borrower, First Chicago NBD Bank, Canada, as agent, and First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of Nova Scotia, as lenders LOCATIONS WHICH ARE NOT REAL ESTATE OF THE BORROWER Location Address: 700 Bernard Street Granby, Quebec J2G 9H7 Name of Landlord: Societe Immobiliere Enertech Inc. Name of Sub-Lessee: Bell Sports Canada Inc. Landlord's Address: 448 Edward Street Granby, Quebec J2G 2Z8 89 EXHIBIT 6.1(4)(B) to the First Amended and Restated Credit Agreement dated as of March 19, 1998 between SportRack International Inc., as borrower, First Chicago NBD Bank, Canada, as agent, and First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of Nova Scotia, as lenders LOCATIONS WHICH ARE REAL ESTATE OF THE BORROWER NONE 90 EXHIBIT 6.1(7) to the First Amended and Restated Credit Agreement dated as of March 19, 1998 between SportRack International Inc., as borrower, First Chicago NBD Bank, Canada, as agent, and First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of Nova Scotia, as lenders BANK ACCOUNTS OF THE BORROWER National Bank of Canada 193 rue Principale Granby, Quebec J2G 2V5 Transit #: 0205-1 CDN $ Accounts #: 1-822-28 1-918-20 U.S. $ Account #: 117-68 EX-10.9 16 EX-10.9 1 EXHIBIT 10.9 EMPLOYMENT AGREEMENT dated as of September 28, 1995, between ADVANCED ACCESSORY SYSTEMS, LLC, a Delaware limited liability company (the "Company"), and RICHARD BORGHI (the "Executive"). Reference is made to the Asset Purchase Agreement dated as of September 28, 1995, as amended (the "Purchase Agreement"), among MascoTech, Inc., a Delaware corporation ("MascoTech"), the Company, AAS Holdings, LLC (the "Parent") and the other parties thereto. Pursuant to the Purchase Agreement, the Company is acquiring substantially all of the assets of the Accessories Group of MascoTech Automotive Systems Group, Inc. and MascoTech Industrial Components, Inc. The Company desires to enter into this Agreement in order to assure itself of the continued service of the Executive following the Closing (the "Closing") under the Purchaser Agreement, and the Executive desires to accept employment with the Company, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties agree as follows: Section 1. Employment. The Company hereby employs the Executive, and the Executive hereby accepts employment by the Company, upon the terms and conditions hereinafter set forth. Section 2. Term. The employment of the Executive hereunder shall be for a period commencing on the date hereof (the "Commencement Date") and ending on December 31, 2000 (the "Initial Term") or such earlier date upon which the employment of the Executive shall terminate in accordance with the provisions hereof. Unless terminated earlier in accordance with the provisions hereof, at the end of the Initial Term and at the end of each term thereafter, the employment of the Executive hereunder shall automatically renew for successive two-year periods unless the Company shall give the Executive written notice of its desire not to renew the term or the Initial Term no later than 30 days prior to the termination of the then current term. The period commencing on the Commencement Date and ending on the date of termination of the Executive's employment hereunder shall be called the "Term of Employment" for the Executive, and the date on which the Executive's employment hereunder shall terminate shall be called the "Termination Date". Section 3. Duties. During the Term of Employment, the Executive shall be employed as the Executive Vice President - Operations/Engineering of the Company and shall perform such duties as are consistent therewith as the Board of Managers of the Company (the "Board") or its designee shall designate. The Executive 2 shall use his best efforts to perform well and faithfully the foregoing duties and responsibilities. The Executive shall not be required by the Company to relocate his principal business office or his principal residence outside the Southeast Michigan area. Section 4. Time to be Devoted to Employment. During the Term of Employment, the Executive shall devote all of his business time, attention and energies to the business of the Company and its subsidiaries and the Parent (except for vacations to which he is entitled pursuant to Section 6(b)) and periods of illness or incapacity). During the Term of Employment, the Executive shall not engage in any business activity which, in the reasonable judgment of the Board, conflicts with the duties of the Executive hereunder, whether or not such activity is pursued for gain, profit or other pecuniary advantage. Section 5. Compensation. (a) The Company (or at the Company's option, any subsidiary or affiliate thereof) shall pay to the Executive an annual base salary (the "Base Salary") during the Term of Employment of not less than $161,200, payable in such installments (but not less often than monthly) as is generally the policy of the Company with respect to its executive officers, which Base Salary shall be subject to such increases as the Board, in its sole discretion, may from time to time determine. The Executive's performance shall be reviewed at least annually by the Board. (b) During the Term of Employment, the Executive shall be eligible to participate in incentive compensation or bonus plans that are generally made available to the Company's senior executives which will generally provide the Executive the opportunity to receive an annual cash bonus in the range of 30-50% of the Base Salary subject to the achievement by the Company of performance goals established by the Board in its sole discretion. (c) In addition to the compensation provided under Sections 5(a) and 5(b), the Company shall pay the Executive a bonus of $100,000 on the earlier of (i) September 30, 2002, (ii) the Termination Date and (iii) a Sale of the Company (as defined in the Members' Agreement dated the date hereof, among the Parent and certain owners of membership units of the Parent). Section 6. Business Expenses; Benefits. The Company (or, at the Company's option, any subsidiary or affiliate thereof) shall reimburse the Executive, in accordance with the practice from time to time for executive officers of the Company, for all reasonable and necessary expenses and other disbursements incurred by the Executive for or on behalf of the Company in the performance of the Executive's duties hereunder. The Executive shall provide such appropriate documentation of expenses and disbursements as may from time to time be required by the Company. (a) During the Term of Employment, the Executive shall be entitled to four weeks vacation per year. 2 3 (b) During the Term of Employment, the Company shall continue to provide the Executive with the group health, life and disability insurance benefits that were provided by MascoTech to the Executive prior to the Closing. (c) It is further acknowledged that the Company shall be obligated to pay on behalf of the Executive during the Term of Employment the annual premiums with respect to a term life insurance policy (the "Insurance Policy") on the life of the Executive providing for a payment of 300% of the Executive's current Base Salary to the beneficiaries of such policy and appropriate disability insurance (the "Disability Policy") for the Executive providing for a payment of 60-70% of the Executive's current Base Salary to the beneficiaries of such policy; provided, however, that the Company shall not be required to spend more than $6,000 in the aggregate for the annual premiums with respect to the Insurance Policy and the Disability Policy. Section 7. Involuntary Termination. (a) If the Executive is incapacitated or disabled (such condition being hereinafter referred to as a "Disability") in a manner that would qualify the Executive for benefits under the Disability Policy, the Term of Employment and the employment of the Executive under this Agreement shall cease (such termination, as well as a termination under Section 7(b), being hereinafter referred to as an "Involuntary Termination") and the Executive shall be entitled to receive the benefits payable under the Disability Policy. (b) If the Executive dies during the Term of Employment, the Term of Employment and the Executive's employment hereunder shall cease as of the date of the Executive's death and the beneficiaries designated by the Executive under the Insurance Policy shall be entitled to receive the proceeds of the Insurance Policy. Section 8. Termination For Cause. The Company may terminate the Term of Employment and the employment of the Executive hereunder at any time for Cause (as hereinafter defined) (such termination being referred to herein as a "Termination For Cause") by giving the Executive written notice of such termination, effective immediately upon the giving of such notice to the Executive. As used in this Agreement, "Cause" means the Executive's (a) commission of an act (i) constituting a felony or (ii) involving fraud, theft or dishonesty which is not a felony and which materially adversely affects the Company or could reasonably be expected to materially adversely affect the Company, (b) repeated failure to be reasonably available to perform his duties, which, if curable, shall not have been cured within 10 business days of written notice thereof from the Company, (c) repeated failure to follow the lawful directions of the Board, which, if curable, shall not have been cured within 10 business days of written notice thereof from the Company, (d) material breach of any agreement with the Company (including the noncompete provisions) which, if curable, shall not have been cured within 10 business days of written notice thereof from the Company or (e) resignation. Section 9. Termination Without Cause. The Company may terminate the Term of Employment and the employment of the Executive hereunder without Cause 3 4 (such termination being hereinafter referred to as a "Termination Without Cause") by giving the Executive written notice of such termination, which notice shall be effective on the date specified therein but not earlier than the date on which such notice is given. Section 10. Effect of Termination. (a) Upon the termination of the Term of Employment and the Executive's employment hereunder due to an Involuntary Termination or Termination for Cause, neither the Executive nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement, except to receive (i) the unpaid portion, if any, of the Base Salary provided for in Section 5(a), computed on a pro rata basis to the Termination Date (based on the actual number of days elapsed over the actual number of days of the year in which such termination occurs), (ii) any unpaid accrued benefits of the Executive, and (iii) reimbursement for any expenses for which the Executive shall not have been reimbursed as provided in Section 6(a). (b) Upon the termination of the Executive's employment hereunder due to an Termination Without Cause, neither the Executive nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement except the right to receive (i) the amounts set forth in Section 10(a), (ii) the prorated portion of any bonus earned by the Executive in such year under any Company incentive compensation plan in which the Executive participates, (iii) the Base Salary through the date which is 12 months from the Termination Date, payable in such installments over the applicable period as the base salary is generally paid to the Executive and (iv) the costs to the Executive under COBRA to receive insurance coverage from the Company during the period commencing on the Termination Date through the date which is the earlier to occur of (1) the first anniversary of the Termination Date and (2) the day prior to the date on which the Executive shall be included in any insurance program provided by any other employer. The Executive shall have no duty to mitigate the Company's obligations under this Section 10(b). Section 11. Insurance. The Company may, for its own benefit, in its sole discretion, maintain "key-man" life and disability insurance policies covering the Executive. The Executive will cooperate with the Company and provide such information or other assistance as the Company may reasonably request in connection with the Company's obtaining and maintaining such policies. Section 12. Disclosure of Information. The Executive shall not, at any time during the Term of Employment or thereafter, disclose to any person, firm, corporation or other business entity, except as required by law, any non-public information (including, without limitation, non-public information obtained prior to the date hereof) concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof for any reason or purpose whatsoever, nor shall the Executive make use of any of such non-public information for his own purpose or for the benefit of any person, firm, corporation or other business entity except the Company or any subsidiary or affiliate thereof. Upon the termination of the Term of Employment, the executive shall return to the Company all property of the Company or any subsidiary or affiliate thereof 4 5 then in the possession of the Executive and all books, records, computer tapes or discs and all other material containing non-public information concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof. Section 13. Right to Inventions. The Executive shall promptly disclose, grant and assign to the Company for its sole use and benefit any and all marks, designs, logos, inventions, improvements, technical information and suggestions relating in any way to the business conducted by the Company, which he may develop or which may be acquired by the Executive during the Term of Employment (whether or not during usual working hours), together with all trademarks, patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or upon any such mark, design, logo, invention, improvement or technical information. In connection therewith: (i) the Executive shall without charge, but at the expense of the Company, promptly at all times hereafter execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Company to vest title to any such marks, designs, logos, inventions, improvements, technical information, trademarks, patent applications, patents, copyrights or reissues thereof in the Company and to enable it to obtain and maintain the entire right and title thereto throughout the world; (ii) the Executive shall render to the Company at its expense (including a reasonable payment for the time involved in case he is not then in its employ based on his last per diem earnings) all such assistance as it may require in the prosecution of applications for said trademarks, patents, copyrights or reissues thereof, in the prosecution or defense of interferences which may be declared involving any said trademarks, applications, patents or copyrights and in any litigation in which the Company may be involved relating to any such trademarks, patents, inventions, improvements or technical information; and (iii) for the avoidance of doubt, the foregoing provisions shall be deemed to include an assignment of future copyright in accordance with Section 37 of the Copyright Act of 1986 and any amendment or re-enactment thereof. Section 14. Restrictive Covenant. (a) The Executive acknowledges and recognizes that the Business (as defined in the Purchase Agreement) has been conducted, and substantial sales of its products have been made, throughout the United States and Europe, and the Executive further acknowledges and recognizes the highly competitive nature of the industry in which the Business is involved. Accordingly, in consideration of the premises contained herein, the consideration to be received hereunder, stock options to be granted to the Executive and in consideration of and as an inducement to the Company to consummate the transactions contemplated by the Purchase Agreement, the Executive shall not during the Non-Competition Period (as defined below) (i) directly or indirectly engage, whether or not such engagement shall be as a partner, stockholder, affiliate or other participant, in 5 6 any Competitive Business, or represent in any way any Competitive Business, whether or not such engagement or representation shall be for profit, (ii) interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any other person or entity, including, without limitation, any customer, supplier or employee of the Company, (iii) induce any employee of the Company or the Business to terminate his employment with the Company or the Business or to engage in any Competitive Business in any manner described in the foregoing clause (i) (as well as an officer or director of any Competitive Business), or (iv) affirmatively assist or induce any other person or entity to engage in any Competitive Business in any manner described in the foregoing clause (i) (as well as an officer or director of any Competitive Business). Anything contained in this Section 14 to the contrary notwithstanding, an investment by the Executive in any entity in which the Executive and his affiliates exercise no operational or strategic control and which constitutes less than 2% of the capital of such entity shall not constitute a breach of this Section 14. (b) As used herein, "Non-Competition Period" shall mean the period commencing on the date hereof and terminating on the fifth anniversary of the Termination Date; provided, however, that if the Term of Employment shall have been terminated pursuant to Section 9, then "Non-Competition Period" shall mean the period commencing on the date hereof and terminating on the later of (i) the second anniversary of the Termination Date and (ii) the end of the period following the Termination Date which is equal to the period of the Term of Employment (assuming that the Term of Employment shall not exceed five years for purposes of this clause (ii)); and "Competitive Business" shall mean any business in any State of the United States or anywhere outside the United States engaged in designing, engineering, manufacturing, selling or distributing (x) systems or components thereof (such as roof racks, deck racks and other systems) intended to facilitate the carriage or storage of cargo, luggage, bicycles, skis, snowboards, sailboards, sailboats, and other items or property on a vehicle or (y) drip rails for the Pontaic F-car or Chrysler XJ vehicle. (c) The Executive understands that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the business of the Company or any subsidiary or affiliate thereof, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits as an employee of the Company and as otherwise provided hereunder and pursuant to other agreements between the Company and the Executive to justify clearly such restrictions which, in any event (given his education, skills and ability), the Executive does not believe would prevent him from earning a living. 6 7 Section 15. Enforcement; Severability; Etc. It is the desire and intent of the parties that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. Section 16. Remedies. The Executive acknowledges and understands that the provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by the Executive of the provisions of this Agreement, the Company shall be entitled to an injunction restraining him from such breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from or limiting the Company in pursuing any other remedies available for any breach or threatened breach of this Agreement. Section 17. Notices. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given and delivered if personally delivered or if sent by nationally-recognized overnight courier, by telecopy, or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: if to the Company, to: 265 16th Street Port Huron, MI 48060 Telecopier: (810) 987-2212; with copies to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, NY 10112 Attention: John J. Suydam, Esq. Telecopier: (212) 408-2420; if to the Executive, to: Richard Borghi 5128 Aintree Rochester, MI 48306; or to such other address as the party to whom notice is to be given may have furnished to the other party or parties in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (a) in the case of personal 7 8 delivery, on the date of such delivery, (b) in the case of nationally-recognized overnight courier, on the next business day after the date when sent, (c) in the case of telecopy transmission, when received, and (d) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. Section 18. Binding Agreement; Benefit. Subject to Section 23, the provisions of this Agreement will be binding upon, and will inure to the benefit of, the respective heirs, legal representatives, successors and assigns of the parties. Section 19. Governing Law. This Agreement will be governed by, and construed and enforced in accordance with, the laws of the State of Michigan (without giving effect to principles of conflicts of laws). Section 20. Waiver of Breach. The waiver by either party of a breach of any provision of this Agreement must be in writing and shall not operate or be construed as a waiver of any other breach. Section 21. Entire Agreement; Amendments. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements or understandings between the parties with respect thereto. This Agreement may be amended only by an agreement in writing signed by the parties. Section 22. Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 23. Assignment. This Agreement is personal in its nature and the parties shall not, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that the Company may assign this Agreement to any of its subsidiaries and affiliates. Section 24. Counterparts. This Agreement may be executed in counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Section 25. Gender. Any reference to the masculine gender shall be deemed to include the feminine and neuter genders unless the context otherwise requires. 8 9 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Employment Agreement as of the date first written above. ADVANCED ACCESSORY SYSTEMS, LLC By:_____________________________ Name: Title: ________________________________ RICHARD BORGHI 9 EX-10.10 17 EX-10.10 1 EXHIBIT 10.10 EMPLOYMENT AGREEMENT dated as of September 28, 1995, between ADVANCED ACCESSORY SYSTEMS,LLC, a Delaware limited liability company (the "Company"), and MARSHALL GLADCHUN (the "Executive"). Reference is made to the Asset Purchase Agreement dated as of September 28, 1995, as amended (the "Purchase Agreement"), among MascoTech, Inc., a Delaware corporation ("MascoTech"), the Company, AAS Holdings, LLC (the "Parent") and the other parties thereto. Pursuant to the Purchase Agreement, the Company is acquiring substantially all of the assets of the Accessories Group of MascoTech Automotive Systems Group, Inc. and MascoTech Industrial Components, Inc. The Company desires to enter into this Agreement in order to assure itself of the continued service of the Executive following the Closing (the "Closing") under the Purchaser Agreement, and the Executive desires to accept employment with the Company, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties agree as follows: SECTION 1. EMPLOYMENT. The Company hereby employs the Executive, and the Executive hereby accepts employment by the Company, upon the terms and conditions hereinafter set forth. SECTION 2. TERM. The employment of the Executive hereunder shall be for a period commencing on the date hereof (the "Commencement Date") and ending on December 31, 2000 (the "Initial Term") or such earlier date upon which the employment of the Executive shall terminate in accordance with the provisions hereof. Unless terminated earlier in accordance with the provisions hereof, at the end of the Initial Term and at the end of each term thereafter, the employment of the Executive hereunder shall automatically renew for successive two-year periods unless the Company shall give the Executive written notice of its desire not to renew the term or the Initial Term no later than 30 days prior to the termination of the then current term. The period commencing on the Commencement Date and ending on the date of termination of the Executive's employment hereunder shall be called the "Term of Employment" for the Executive, and the date on which the Executive's employment hereunder shall terminate shall be called the "Termination Date" SECTION 3. DUTIES. During the Term of Employment, the Executive shall be employed as the President and Chief Executive Officer of the Company and shall perform such duties as are consistent therewith as the Board of Managers of the Company (the "Board") or its designee shall designate. The Executive shall use his best efforts to perform well and faithfully the foregoing duties and responsibilities. The Executive shall not be 2 required by the Company to relocate his principal business office or his principal residence outside the Southeast Michigan area. SECTION 4. TIME TO BE DEVOTED TO EMPLOYMENT. During the Term of Employment, the Executive shall devote all of his business time, attention and energies to the business of the Company and its subsidiaries and the Parent (except for vacations to which he is entitled pursuant to Section 6(b) and periods of illness or incapacity). During the Term of Employment, the Executive shall not engage in any business activity which, in the reasonable judgment of the Board, conflicts with the duties of the Executive hereunder, whether or not such activity is pursued for gain, profit or other pecuniary advantage. SECTION 5. COMPENSATION. (a) The Company (or at the Company's option, any subsidiary or affiliate thereof) shall pay to the Executive an annual base salary (the "Base Salary") during the Term of Employment of not less than $277,304, payable in such installments (but not less often than monthly) as is generally the policy of the Company with respect to its executive officers, which Base Salary shall be subject to such increases as the Board, in its sole discretion, may from time to time determine. The Executive's performance shall be reviewed at least annually by the Board. (b) During the Term of Employment, the Executive shall be eligible to participate in incentive compensation or bonus plans that are generally made available to the Company's senior executives which will generally provide the Executive the opportunity to receive an annual cash bonus in the range of 50-70% of the Base Salary subject to the achievement by the Company of performance goals established by the Board in its sole discretion. (c) In addition to the compensation provided under Sections 5(a) and 5(b), the Company shall pay the Executive a bonus of $400,000 on the earlier of (i) September 30, 2002, (ii) the Termination Date and (iii) a Sale of the Company (as defined in the Members Agreement dated the date hereof, among the Parent and certain owners of membership units of the Parent). SECTION 6. BUSINESS EXPENSES; BENEFITS. (a) The Company (or, at the Company's option, any subsidiary or affiliate thereof) shall reimburse the Executive, in accordance with the practice from time to time for executive officers of the Company, for all reasonable and necessary expenses and other disbursements incurred by the Executive for or on behalf of the Company in the performance of the Executive's duties hereunder. The Executive shall provide such appropriate documentation of expenses and disbursements as may from time to time be required by the Company. (b) During the Term of Employment, the Executive shall be entitled to four weeks vacation per year. -2- 3 (c) During the Term of Employment, the Company shall continue to provide the Executive with the group health, life and disability insurance benefits that were provided by MascoTech to the Executive prior to the Closing. (d) It is further acknowledged that the Company shall be obligated to pay on behalf of the Executive during the Term of Employment the annual premiums with respect to a term life insurance policy (the "Insurance Policy") on the life of the Executive providing for a payment of 300% of the Executive's current Base Salary to the beneficiaries of such policy and appropriate disability insurance (the "Disability Policy") for the Executive providing for a payment of 60-70% of the Executive's current Base Salary to the beneficiaries of such policy; provided, however, that the Company shall not be required to spend more than $9,000 in the aggregate for the annual premiums with respect to the Insurance Policy and the Disability Policy. SECTION 7. INVOLUNTARY TERMINATION. (a) If the Executive is incapacitated or disabled (such condition being hereinafter referred to as a "Disability") in a manner that would qualify the Executive for benefits under the Disability Policy, the Term of Employment and the employment of the Executive under this Agreement shall cease (such termination, as well as a termination under Section 7(b), being hereinafter referred to as an "Involuntary Termination") and the Executive shall be entitled to receive the benefits payable under the Disability Policy. (b) If the Executive dies during the Term of Employment, the Term of Employment and the Executive's employment hereunder shall cease as of the date of the Executive's death and the beneficiaries designated by the Executive under the Insurance Policy shall be entitled to receive the proceeds of the Insurance Policy. SECTION 8. TERMINATION FOR CAUSE. The Company may terminate the Term of Employment and the employment of the Executive hereunder at any time for Cause (as hereinafter defined) (such termination being referred to herein as a "Termination For Cause") by giving the Executive written notice of such termination, effective immediately upon the giving of such notice to the Executive. As used in this Agreement, "Cause" means the Executive's (a) commission of an act (i) constituting a felony or (ii) involving fraud, theft or dishonesty which is not a felony and which materially adversely affects the Company or could reasonably be expected to materially adversely affect the Company, (b) repeated failure to be reasonably available to perform his duties, which, if curable, shall not have been cured within 10 business days of written notice thereof from the Company, (c) repeated failure to follow the lawful directions of the Board, which, if curable, shall not have been cured within 10 business days of written notice thereof from the Company, (d) material breach of any agreement with the Company (including the noncompete provisions) which, if curable, shall not have been cured within 10 business days of written notice thereof from the Company or (e) resignation. SECTION 9. TERMINATION WITHOUT CAUSE. The Company may terminate the Term of Employment and the employment of the Executive hereunder without Cause (such termination being hereinafter referred to as a "Termination Without Cause") by giving -3- 4 the Executive written notice of such termination, which notice shall be effective on the date specified therein but not earlier than the date on which such notice is given. SECTION 10. EFFECT OF TERMINATION. (a) Upon the termination of the Term of Employment and the Executive's employment hereunder due to an Involuntary Termination or Termination for Cause, neither the Executive nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement, except to receive (i) the unpaid portion, if any, of the Base Salary provided for in Section 5(a), computed on a pro rata basis to the Termination Date (based on the actual number of days elapsed over the actual number of days of the year in which such termination occurs), (ii) any unpaid accrued benefits of the Executive, and (iii) reimbursement for any expenses for which the Executive shall not have been reimbursed as provided in Section 6(a). (b) Upon the termination of the Executive's employment hereunder due to an Termination Without Cause, neither the Executive nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement except the right to receive (i) the amounts set forth in Section 10(a), (ii) the prorated portion of any bonus earned by the Executive in such year under any Company incentive compensation plan in which the Executive participates, (iii) the Base Salary through the date which is 12 months from the Termination Date, payable in such installments over the applicable period as the base salary is generally paid to the Executive, and (iv) the costs to the Executive under COBRA to receive insurance coverage from the Company during the period commencing on the Termination Date through the date which is the earlier to occur of (1) the first anniversary of the Termination Date and (2) the day prior to the date on which the Executive shall be included in any insurance program provided by any other employer. The Executive shall have no duty to mitigate the Company's obligations under this Section 10(b). SECTION 11. INSURANCE. The Company may, for its own benefit, in its sole discretion, maintain "key-man" life and disability insurance policies covering the Executive. The Executive will cooperate with the Company and provide such information or other assistance as the Company may reasonably request in connection with the Company's obtaining and maintaining such policies. SECTION 12. DISCLOSURE OF INFORMATION. The Executive shall not, at any time during the Term of Employment or thereafter, disclose to any person, firm, corporation or other business entity, except as required by law, any non-public information (including, without limitation, non-public information obtained prior to the date hereof) concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof for any reason or purpose whatsoever, nor shall the Executive make use of any of such non-public information for his own purpose or for the benefit of any person, firm, corporation or other business entity except the Company or any subsidiary or affiliate thereof. Upon the termination of the Term of Employment, the executive shall return to the Company all property of the Company or any subsidiary or affiliate thereof then in the possession of the Executive and all books, records, computer tapes or discs and all other material containing non-public information concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof. -4- 5 SECTION 13. RIGHT TO INVENTIONS. The Executive shall promptly disclose, grant and assign to the Company for its sole use and benefit any and all marks, designs, logos, inventions, improvements, technical information and suggestions relating in any way to the business conducted by the Company, which he may develop or which may be acquired by the Executive during the Term of Employment (whether or not during usual working hours), together with all trademarks, patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or upon any such mark, design, logo, invention, improvement or technical information. In connection therewith: (i) the Executive shall without charge, but at the expense of the Company, promptly at all times hereafter execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Company to vest title to any such marks, designs, logos, inventions, improvements, technical information, trademarks, patent applications, patents, copyrights or reissues thereof in the Company and to enable it to obtain and maintain the entire right and title thereto throughout the world; (ii) the Executive shall render to the Company at its expense (including a reasonable payment for the time involved in case he is not then in its employ based on his last per diem earnings) all such assistance as it may require in the prosecution of applications for said trademarks, patents, copyrights or reissues thereof, in the prosecution or defense of interferences which may be declared involving any said trademarks, applications, patents or copyrights and in any litigation in which the Company may be involved relating to any such trademarks, patents, inventions, improvements or technical information; and (iii) for the avoidance of doubt, the foregoing provisions shall be deemed to include an assignment of future copyright in accordance with Section 37 of the Copyright Act of 1986 and any amendment or re-enactment thereof. SECTION 14. RESTRICTIVE COVENANT. (a) The Executive acknowledges and recognizes that the Business (as defined in the Purchase Agreement) has been conducted, and substantial sales of its products have been made, throughout the United States and Europe, and the Executive further acknowledges and recognizes the highly competitive nature of the industry in which the Business is involved. Accordingly, in consideration of the premises contained herein, the consideration to be received hereunder, stock options to be granted to the Executive and in consideration of and as an inducement to the Company to consummate the transactions contemplated by the Purchase Agreement, the Executive shall not during the Non-Competition Period (as defined below) (i) directly or indirectly engage, whether or not such engagement shall be as a partner, stockholder, affiliate or other participant, in any Competitive Business, or represent in any way any Competitive Business, whether or not such engagement or representation shall be for profit, (ii) interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any other person -5- 6 or entity, including, without limitation, any customer, supplier or employee of the Company, (iii) induce any employee of the Company or the Business to terminate his employment with the Company or the Business or to engage in any Competitive Business in any manner described in the foregoing clause (i) (as well as an officer or director of any Competitive Business), or (iv) affirmatively assist or induce any other person or entity to engage in any Competitive Business in any manner described in the foregoing clause (i) (as well as an officer or director of any Competitive Business). Anything contained in this Section 14 to the contrary notwithstanding, an investment by the Executive in any entity in which the Executive and his affiliates exercise no operational or strategic control and which constitutes less than 2% of the capital of such entity shall not constitute a breach of this Section 14. (b) As used herein, "Non-Competition Period" shall mean the period commencing on the date hereof and terminating on the fifth anniversary of the Termination Date; provided, however, that if the Term of Employment shall have been terminated pursuant to Section 9, then "Non-Competition Period" shall mean the period commencing on the date hereof and terminating on the later of (i) the second anniversary of the Termination Date and (ii) the end of the period following the Termination Date which is equal to the period of the Term of Employment (assuming that the Term of Employment shall not exceed five years for purposes of this clause (ii)); and "Competitive Business" shall mean any business in any State of the United States or anywhere outside the United States engaged in designing, engineering, manufacturing, selling or distributing (x) systems or components thereof (such as roof racks, deck racks and other systems) intended to facilitate the carriage or storage of cargo, luggage, bicycles, skis, snowboards, sailboards, sailboats, and other items or property on a vehicle or (y) drip rails for the Pontiac F-car or Chrysler XJ vehicle. (c) The Executive understands that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the business of the Company or any subsidiary or affiliate thereof, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits as an employee of the Company and as otherwise provided hereunder and pursuant to other agreements between the Company and the Executive to justify clearly such restrictions which, in any event (given his education, skills and ability), the Executive does not believe would prevent him from earning a living. SECTION 15. ENFORCEMENT; SEVERABILITY; ETC. It is the desire and intent of the parties that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. SECTION 16. REMEDIES. The Executive acknowledges and understands that the provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or -6- 7 threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by the Executive of the provisions of this Agreement, the Company shall be entitled to an injunction restraining him from such breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from or limiting the Company in pursuing any other remedies available for any breach or threatened breach of this Agreement. SECTION 17. NOTICES. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given and delivered if personally delivered or if sent by nationally-recognized overnight courier, by telecopy, or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: if to the Company, to: 265 16th Street Port Huron, MI 48060 Telecopier: (810) 987-2212; with copies to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, NY 10112 Attention: John J. Suydam, Esq. Telecopier: (212) 408-2420; if to the Executive, to: Marshall Gladchun 6050 Wild Rose Lane Port Huron, MI 48059; or to such other address as the party to whom notice is to be given may have furnished to the other party or parties in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of nationally-recognized overnight courier, on the next business day after the date when sent, (c) in the case of telecopy transmission, when received, and (d) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. SECTION 18. BINDING AGREEMENT; BENEFIT. Subject to Section 23, the provisions of this Agreement will be binding upon, and will inure to the benefit of, the respective heirs, legal representatives, successors and assigns of the parties. -7- 8 SECTION 19. GOVERNING LAW. This Agreement will be governed by, and construed and enforced in accordance with, the laws of the State of Michigan (without giving effect to principles of conflicts of laws). SECTION 20. WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement must be in writing and shall not operate or be construed as a waiver of any other breach. SECTION 21. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements or understandings between the parties with respect thereto. This Agreement may be amended only by an agreement in writing signed by the parties. SECTION 22. HEADINGS. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 23. ASSIGNMENT. This Agreement is personal in its nature and the parties shall not, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that the Company may assign this Agreement to any of its subsidiaries and affiliates. SECTION 24. COUNTERPARTS. This Agreement may be executed in counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. SECTION 25. GENDER. Any reference to the masculine gender shall be deemed to include the feminine and neuter genders unless the context otherwise requires. -8- 9 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Employment Agreement as of the date first written above. ADVANCED ACCESSORY SYSTEMS, LLC By: ----------------------------- Name: Donald J. Hofmann Title: President /s/ Marshall Gladchun ----------------------------- MARSHALL GLADCHUN EX-10.11 18 EX-10.11 1 EXHIBIT 10.11 MANAGEMENT CONSULTING AGREEMENT dated as of September 28, 1995, between ADVANCED ACCESSORY SYSTEMS, LLC, a Delaware limited liability company (the "Company"), and BARRY BANDUCCI (the "Consultant"). Reference is made to the Asset Purchase Agreement dated as of September 28, 1995, as amended (the "Purchase Agreement"), among MascoTech, Inc., a Delaware corporation ("MascoTech"), the Company and the other parties thereto. Pursuant to the Purchase Agreement, the Company has acquired substantially all of the assets of the Accessories Group of MascoTech Automotive Systems Group, Inc. and MascoTech Industrial Components, Inc. The Company desires to retain the Consultant to perform management consulting services for the Company and its parent company, AAS Holdings, LLC (the "Parent"), and the Consultant desires to perform such management consulting services for the Company and the Parent, in each case, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties agree as follows: SECTION 1 RETENTION OF CONSULTANT. The Company hereby retains the Consultant as a consultant, and the Consultant hereby accepts such retention by the Company, upon the terms and conditions hereinafter set forth. The Consultant shall perform all such services as an independent contractor to the Company and not as an employee, agent or representative of the Company. SECTION 2 TERM. The retention of the Consultant hereunder shall be for a period commencing on the date hereof (the "Commencement Date") and ending at the end of the eighteenth month after the date hereof or such earlier date upon which the retention of the Consultant shall terminate in accordance with the provisions hereof. Unless terminated earlier in accordance with the provisions hereof, the retention of the Consultant hereunder shall continue after the end of such eighteenth month for successive six-month periods unless the Company shall give the Consultant notice to terminate such retention no later than 30 days prior to the commencement of any such six-month period. The period commencing on the Commencement Date and ending on the date of termination of the Consultant's retention hereunder shall be called the "Term", and the date on which the Consultant's retention hereunder shall terminate shall be called the "Termination Date". 2 SECTION 3 DUTIES. During the Term, the Consultant shall advise the Company concerning such matters that relate to the business and affairs of the Company and its affiliates, in each case as the Company shall reasonably request, and shall perform such duties as are consistent therewith as the Board of Managers of the Company (the "Board") shall designate. During the Term, the Consultant shall also serve on the Board and on the Board of Managers of the Parent. Following the Termination Date, the Consultant shall continue to serve on such Boards in accordance with the provisions of the Members' Agreement of even date herewith among the Parent, the Consultant and the other parties named therein. SECTION 4 TIME TO BE DEVOTED TO SERVICES. During the Term, the Consultant shall not be required to devote any specified amount of time to the provisions of services hereunder and shall only be required to devote such reasonable amount of time to the business of the Company and its subsidiaries and parent company as the Consultant shall reasonably determine to be necessary to fulfill his duties hereunder. SECTION 5 COMPENSATION. The Company (or at the Company's option, any subsidiary or affiliate thereof) shall pay to the Consultant an annual consulting fee (the "Fee") during the Term of $50,000, payable in equal monthly installments. (b) Anything contained in this Agreement to the contrary notwithstanding, during the continuation of any payment default by the Company under the Acquisition Indebtedness, the Company's obligation to pay the Fee shall be accrued and deferred until such payment default shall have been cured. Any portion of the Fee so deferred shall be paid as soon as practical after such payment default shall be cured but in any event within one year thereafter. As used herein, (i) "Acquisition Indebtedness" shall mean any indebtedness (a) under the Credit Agreement dated the date hereof, among the Parent, the Company and the financial institutions from time to time party thereto, as amended, restated, modified or supplemented (the "Credit Agreement"), (b) under the Senior Subordinated Loan Agreement dated the date hereof between the Company and London Pacific Life & Annuity Company (the "Subordinated Loan Agreement") and (c) used to refinance the indebtedness evidenced by the Credit Agreement and the Subordinated Loan Agreement and (ii) "payment default" shall mean the failure to pay any amount in a timely fashion. (c) Following the Termination Date and for so long as the Consultant shall continue to serve on the Boards of the Company and Parent, the Consultant shall receive an annual Board fee of no less than 10% of the aggregate purchase price for all Units of the Parent acquired by him, payable in equal monthly installments. SECTION 6 BUSINESS EXPENSES; BENEFITS. (a) The Company (or, at the Company's option, any subsidiary or affiliate thereof) shall reimburse the Consultant, in accordance with its practice from time to time, for all reasonable and necessary expenses and other disbursements incurred by the Consultant for or on behalf of the Company in the performance of the Consultant's duties hereunder. The Consultant shall provide such appropriate documentation of expenses and disbursements as may from time to time be required by the Company. -2- 3 (b) The Company shall have no obligation to provide any benefits to Consultant, including, without limitation, any health, life or disability benefits. SECTION 7 EARLY TERMINATION. (a) If the Consultant is incapacitated or disabled in a manner that would prevent the Consultant from performing his duties hereunder for a period of 90 consecutive days, the Term and the retention of the Consultant under this Agreement shall cease and the Company shall have no further obligations hereunder. (b) If the Consultant dies during the Term, the Term and the Consultant's retention hereunder shall cease as of the date of the Consultant's death and the Company shall have no further obligations hereunder. SECTION 8 DISCLOSURE OF INFORMATION. The Consultant shall not, at any time during the Term or thereafter, disclose to any person, firm, corporation or other business entity, except as required by law, any non-public information (including, without limitation, non-public information obtained prior to the date hereof) concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof for any reason or purpose whatsoever, nor shall the Consultant make use of any of such non-public information for his own purpose or for the benefit of any person, firm, corporation or other business entity except the Company or any subsidiary or affiliate thereof. Upon the termination of the Term, the Consultant shall return to the Company all property of the Company or any subsidiary or affiliate thereof then in the possession of the Consultant and all books, records, computer tapes or discs and all other material containing non-public information concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof. Notwithstanding the foregoing, the Consultant shall be entitled to retain any records and information he would otherwise be entitled to possess by virtue of his status as a Member of the Parent. SECTION 9 NOTICES. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given and delivered if personally delivered or if sent by nationally-recognized overnight courier, by telecopy, or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: if to the Company, to: 265 16th Street Port Huron, MI 48060 Telecopier: (810) 987-2212; -3- 4 with copies to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, NY 10112 Attention: John J. Suydam, Esq. Telecopier: (212) 408-2420; if to the Consultant, to: Barry Banducci c/o The Equion Corporation 741 Boston Post Road, Suite 101 Guilford, CT 06437 or to such other address as the party to whom notice is to be given may have furnished to the other party or parties in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of nationally-recognized overnight courier, on the next business day after the date when sent, (c) in the case of telecopy transmission, when received, and (d) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. SECTION 10. BINDING AGREEMENT; BENEFIT. Subject to Section 15, the provisions of this Agreement will be binding upon, and will inure to the benefit of, the respective heirs, legal representatives, successors and assigns of the parties. SECTION 11. GOVERNING LAW. This Agreement will be governed by, and construed and enforced in accordance with, the laws of the State of Michigan (without giving effect to principles of conflicts of laws). SECTION 12. WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement must be in writing and shall not operate or be construed as a waiver of any other breach. SECTION 13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements or understandings between the parties with respect thereto. This Agreement may be amended only by an agreement in writing signed by the parties. SECTION 14. HEADINGS. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. -4- 5 SECTION 15. ASSIGNMENT. This Agreement is personal in its nature and the parties shall not, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that the Company may assign this Agreement to any of its subsidiaries and affiliates. SECTION 16. COUNTERPARTS. This Agreement may be executed in counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. SECTION 17. GENDER. Any reference to the masculine gender shall be deemed to include the feminine and neuter genders unless the context otherwise requires. 6 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Management Consulting Agreement as of the date first written above. ADVANCED ACCESSORY SYSTEMS, LLC By: /s/ Max Liechtenstein ---------------------------- Name: M. Liechtenstein Title: Vice President /s/ Barry Banducci ---------------------------- Barry Banducci -6- EX-10.12 19 EX-10.12 1 EXHIBIT 10.12 MANAGEMENT CONSULTING AGREEMENT dated as of September 28, 1995, between ADVANCED ACCESSORY SYSTEMS, LLC, a Delaware limited liability company (the "Company"), and F. ALAN SMITH (the "Consultant"). Reference is made to the Asset Purchase Agreement dated as of September 28, 1995, as amended (the "Purchase Agreement"), among MascoTech, Inc., a Delaware corporation ("MascoTech"), the Company and the other parties thereto. Pursuant to the Purchase Agreement, the Company has acquired substantially all of the assets of the Accessories Group of MascoTech Automotive Systems Group, Inc. and MascoTech Industrial Components, Inc. The Company desires to retain the Consultant to perform management consulting services for the Company and its parent company AAS Holdings, LLC (the "Parent"), and the Consultant desires to perform such management consulting services for the Company and the Parent, in each case, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties agree as follows: SECTION 1. RETENTION OF CONSULTANT. The Company hereby retains the Consultant as a consultant, and the Consultant hereby accepts such retention by the Company, upon the terms and conditions hereinafter set forth. The Consultant shall perform all such services as an independent contractor to the Company and not as an employee, agent or representative of the Company. SECTION 2. TERM. The retention of the Consultant hereunder shall be for a period commencing on the date hereof (the "Commencement Date") and ending at the end of the eighteenth month after the date hereof or such earlier date upon which the retention of the Consultant shall terminate in accordance with the provisions hereof. Unless terminated earlier in accordance with the provisions hereof, the retention of the Consultant hereunder shall continue after the end of such eighteenth month for successive six-month periods unless the Company shall give the Consultant notice to terminate such retention no later than 30 days prior to the commencement of any such six-month period. The period commencing on the Commencement Date and ending on the date of termination of the Consultant's retention hereunder shall be called the "Term", and the date on which the Consultant's retention hereunder shall terminate shall be called the "Termination Date". 2 SECTION 3. DUTIES. During the Term, the Consultant shall serve as the Chairman of the Board of Managers of the Company and the Parent and shall advise the Company concerning such matters that relate to the business and affairs of the Company and its affiliates, in each case as the Company shall reasonably request, and shall perform such duties as are consistent therewith as the Board of Managers of the Company (the "Board") shall designate. Following the Termination Date, the Consultant shall continue to serve on such Boards in accordance with the provisions of the Members Agreement of even date herewith among the Parent, the Consultant and the other parties named therein. SECTION 4. TIME TO BE DEVOTED TO SERVICES. During the Term, the Consultant shall devote no less than five business days per month to the business of the Company, its subsidiaries and the Parent. SECTION 5. COMPENSATION. (a) The Company (or at the Company's option, any subsidiary or affiliate thereof) shall pay to the Consultant an annual consulting fee (the "Base Fee") during the Term of $150,000, payable in equal monthly installments. (b) During the Term, the Consultant shall be eligible to participate in incentive compensation or bonus plans that the Board has implemented for its senior executives which will generally provide the Consultant the opportunity to receive an annual cash bonus in the range of 30-50% of the Base Fee subject to the achievement by the Company of performance goals established by the Board in its sole discretion. (c) Anything contained in this Agreement to the contrary notwithstanding, during the continuation of any payment default by the Company under the Acquisition Indebtedness, the Company's obligation to pay the Fee shall be accrued and deferred until such payment default shall have been cured. Any portion of the Fee so deferred shall be paid as soon as practical after such payment default shall be cured but in any event within one year thereafter. As used herein, (i) "Acquisition Indebtedness" shall mean any indebtedness (a) under the Credit Agreement dated the date hereof, among the Parent, the Company and the financial institutions from time to time party thereto, as amended, restated, modified or supplemented (the "Credit Agreement"), (b) under the Senior Subordinated Loan Agreement dated the date hereof between the Company and London Pacific Life & Annuity Company (the "Subordinated Loan Agreement") and (c) used to refinance the indebtedness evidenced by the Credit Agreement and the Subordinated Loan Agreement and (ii) "payment default" shall mean the failure to pay any amount in a timely fashion. (d) Following the Termination Date and for so long as the Consultant shall continue to serve on the Boards of the Company and Parent, the Consultant shall receive an annual Board fee of no less than 10% of the aggregate purchase price for all Units of the Parent acquired by him, payable in equal monthly installments. SECTION 6. BUSINESS EXPENSES; BENEFITS. (a) The Company (or, at the Company's option, any subsidiary or affiliate thereof) shall reimburse the Consultant, in accordance with its practice from time to time, for all reasonable and necessary expenses and other disbursements incurred by the Consultant for or on behalf of the Company in the -2- 3 performance of the Consultant's duties hereunder. The Consultant shall provide such appropriate documentation of expenses and disbursements as may from time to time be required by the Company. (b) The Company shall have no obligation to provide any benefits to Consultant, including, without limitation, any health, life or disability benefits. SECTION 7. INVOLUNTARY TERMINATION. (a) If the Consultant is incapacitated or disabled in a manner that would prevent the Consultant from performing his duties hereunder for a period of 90 consecutive days, the Term and the retention of the Consultant under this Agreement shall cease and the Company shall have no further obligation hereunder. (b) If the Consultant dies during the Term, the Term and the Consultant's retention hereunder shall cease as of the date of the Consultant's death and the Company shall have no further obligation hereunder. SECTION 8. DISCLOSURE OF INFORMATION. The Consultant shall not, at any time during the Term or thereafter, disclose to any person, firm, corporation or other business entity, except as required by law, any non-public information (including, without limitation, non-public information obtained prior to the date hereof) concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof for any reason or purpose whatsoever, nor shall the Consultant make use of any of such non-public information for his own purpose or for the benefit of any person, firm, corporation or other business entity except the Company or any subsidiary or affiliate thereof. Upon the termination of the Term, the Consultant shall return to the Company all property of the Company or any subsidiary or affiliate thereof then in the possession of the Consultant and all books, records, computer tapes or discs and all other material containing non-public information concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof. Notwithstanding the foregoing, the Consultant shall be entitled to retain any records and information he would otherwise be entitled to possess by virtue of his status as a Member of the Parent. SECTION 9. NOTICES. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given and delivered if personally delivered or if sent by nationally-recognized overnight courier, by telecopy, or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: if to the Company, to: 265 16th Street Port Huron, MI 48060 Telecopier: (810) 987-2212; -3- 4 with copies to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, NY 10112 Attention: John J. Suydam, Esq. Telecopier: (212) 408-2420; if to the Consultant, to: F. Alan Smith 674 Franklyn Avenue Indialantic, FL 32903 or to such other address as the party to whom notice is to be given may have furnished to the other party or parties in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of nationally-recognized overnight courier, on the next business day after the date when sent, (c) in the case of telecopy transmission, when received, and (d) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. SECTION 10. BINDING AGREEMENT; BENEFIT. Subject to Section 15, the provisions of this Agreement will be binding upon, and will inure to the benefit of, the respective heirs, legal representatives, successors and assigns of the parties. SECTION 11. GOVERNING LAW. This Agreement will be governed by, and construed and enforced in accordance with, the laws of the State of Michigan (without giving effect to principles of conflicts of laws). SECTION 12. WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement must be in writing and shall not operate or be construed as a waiver of any other breach. SECTION 13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements or understandings between the parties with respect thereto. This Agreement may be amended only by an agreement in writing signed by the parties. SECTION 14. HEADINGS. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 15. ASSIGNMENT. This Agreement is personal in its nature and the parties shall not, without the consent of the other, assign or transfer this Agreement or any -4- 5 rights or obligations hereunder; provided, however, that the Company may assign this Agreement to any of its subsidiaries and affiliates. SECTION 16. COUNTERPARTS. This Agreement may be executed in counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. SECTION 17. GENDER. Any reference to the masculine gender shall be deemed to include the feminine and neuter genders unless the context otherwise requires. 6 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Consulting Agreement as of the date first written above. ADVANCED ACCESSORY SYSTEMS, LLC By: /s/ M. Liechtenstein ---------------------------- Name: M. Liechtenstein Title: Vice President /s/ F. Alan Smith -------------------------------- F. Alan Smith -6- EX-10.13 20 EX-10.13 1 EXHIBIT 10.13 EMPLOYMENT AGREEMENT dated as of January 22, 1996, between ADVANCED ACCESSORY SYSTEMS, LLC, a Delaware limited liability company (the "Company"), and TERENCE C. SEIKEL (the "Executive"). The Company desires to enter into this Agreement in order to assure itself of the continued service of the Executive following the date hereof, and the Executive desires to accept employment with the Company, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties agree as follows: Section 1. Employment. The Company hereby employs the Executive, and the Executive hereby accepts employment by the Company, upon the terms and conditions hereinafter set forth. Section 2. Term. The employment of the Executive hereunder shall be for a period commencing on the date hereof (the "Commencement Date") and ending on December 31, 2000 (the "Initial Term") or such earlier date upon which the employment of the Executive shall terminate in accordance with the provisions hereof. Unless terminated earlier in accordance with the provisions hereof, at the end of the Initial Term and at the end of each term thereafter, the employment of the Executive hereunder shall automatically renew for successive two-year periods unless the Company shall give the Executive written notice of its desire not to renew the term or the Initial Term no later than 30 days prior to the termination of the then current term. The period commencing on the Commencement Date and ending on the date of termination of the Executive's employment hereunder shall be called the "Term of Employment" for the Executive, and the date on which the Executive's employment hereunder shall terminate shall be called the "Termination Date". Section 3. Duties. During the Term of Employment, the Executive shall be employed as the Chief Financial Officer of the Company and shall perform such duties as are consistent therewith as the Board of Managers of the Company (the "Board") or its designee shall designate. The Executive shall use his best efforts to perform well and faithfully the foregoing duties and responsibilities. The Executive shall not be required by the Company to relocated his principal business office or his principal residence outside the Southeast Michigan area. Section 4. Time to be Devoted to Employment. During the Term of Employment, the Executive shall devote all of his business time, attention and energies to the business of the Company and its subsidiaries and the Parent (except for vacations to which he is entitled pursuant to Section 6(b)) and periods of illness or incapacity). During the Term of Employment, the Executive shall not engage in any business activity 2 which, in the reasonable judgment of the Board, conflicts with the duties of the Executive hereunder, whether or not such activity is pursued for gain, profit or other pecuniary advantage. Section 5. Compensation. (a) The Company (or at the Company's option, any subsidiary or affiliate thereof) shall pay to the Executive an annual base salary (the "Base Salary") during the Term of Employment of not less than $165,000, payable in such installments (but not less often than monthly) as is generally the policy of the Company with respect to its executive officers, which Base Salary shall be subject to such increases as the Board, in its sole discretion, may from time to time determine. The Executive's performance shall be reviewed at least annually by the Board. (b) During the Term of Employment, the Executive shall be eligible to participate in incentive compensation or bonus plans that are generally made available to the Company's senior executives which will generally provide the Executive the opportunity to receive an annual cash bonus in the range of 30-50% of the Base Salary subject to the achievement by the Company of performance goals established by the Board in its sole discretion. Section 6. Business Expenses; Benefits. (a) The Company (or, at the Company's option, any subsidiary or affiliate thereof) shall reimburse the Executive, in accordance with the practice from time to time for executive officers of the Company, for all reasonable and necessary expenses and other disbursements incurred by the Executive for or on behalf of the Company in the performance of the Executive's duties hereunder. The Executive shall provide such appropriate documentation of expenses and disbursements as may from time to time be required by the Company. (b) During the Term of Employment, the Executive shall be entitled to four weeks vacation per year. (c) During the Term of Employment, the Company shall continue to provide the Executive with the option to either (i) elect to receive the group health, life and disability insurance benefits that are presently provided by the Company to the executives of the Company, or (ii) elect to receive the cash equivalent of the group health, life and disability insurance benefits that are presently provided by the Company to the senior executives of the Company. (d) During the Term of Employment, the Executive shall be entitled to reasonable reimbursement on a per mile basis for expenses incurred by the Executive in connection with his use of an automobile pursuant to the performance of his duties hereunder. (e) It is further acknowledged that the Company shall be obligated to pay 2 3 on behalf of the Executive during the Term of Employment the annual premiums with respect to a term life insurance policy (the "Insurance Policy") on the life of the Executive providing for a payment of 300% of the Executive's current Base Salary to the beneficiaries of such policy and appropriate disability insurance (the "Disability Policy") for the Executive providing for a payment of 60-70% of the Executive's current Base Salary to the beneficiaries of such policy; provided, however, that the Company shall not be required to spend more than $6,000 in the aggregate for the annual premiums with respect to the Insurance Policy and the Disability Policy. Section 7. Involuntary Termination. (a) If the Executive is incapacitated or disabled (such condition being hereinafter referred to as a "Disability") in a manner that would qualify the Executive for benefits under the Disability Policy, the Term of Employment and the employment of the Executive under this Agreement shall cease (such termination, as well as a termination under Section 7(b), being hereinafter referred to as an "Involuntary Termination") and the Executive shall be entitled to receive the benefits payable under the Disability Policy. (b) If the Executive dies during the Term of Employment, the Term of Employment and the Executive's employment hereunder shall cease as of the date of the Executive's death and the beneficiaries designated by the Executive under the Insurance Policy shall be entitled to receive the proceeds of the Insurance Policy. Section 8. Termination For Cause. The Company may terminate the Term of Employment and the employment of the Executive hereunder at any time for Cause (as hereinafter defined) (such termination being referred to herein as a "Termination For Cause") by giving the Executive written notice of such termination, effective immediately upon the giving of such notice to the Executive. As used in this Agreement, "Cause" means the Executive's (a) commission of an act (i) constituting a felony or (ii) involving fraud, theft or dishonesty which is not a felony and which materially adversely affects the Company or could reasonably be expected to materially adversely affect the Company, (b) repeated failure to be reasonably available to perform his duties, which, if curable, shall not have been cured within 10 business days of written notice thereof from the Company, (c) repeated failure to follow the lawful directions of the Board, which, if curable, shall not have been cured within 10 business days of written notice thereof from the Company, (d) material breach of any agreement with the Company (including the noncompete provisions) which, if curable, shall not have been cured within 10 business days of written notice thereof from the Company or (e) resignation. Section 9. Termination Without Cause. The Company may terminate the Term of Employment and the employment of the Executive hereunder without Cause (such termination being hereinafter referred to as a "Termination Without Cause") by giving the Executive written notice of such termination, which notice shall be effective on the date specified therein but not earlier than the date on which such notice is given. 3 4 Section 10. Effect of Termination. (a) Upon the termination of the Term of Employment and the Executive's employment hereunder due to an Involuntary Termination or Termination for Cause, neither the Executive nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement, except to receive (i) the unpaid portion, if any, of the Base Salary provided for in Section 5(a), computed on a pro rata basis to the Termination Date (based on the actual number of days elapsed over the actual number of days of the year in which such termination occurs), (ii) any unpaid accrued benefits of the Executive, and (iii) reimbursement for any expenses for which the Executive shall not have been reimbursed as provided in Section 6(a). (b) Upon the termination of the Executive's employment hereunder due to an Termination Without Cause, neither the Executive nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement except the right to receive (i) the amounts set forth in Section 10(a), (ii) the prorated portion of any bonus earned by the Executive in such year under any Company incentive compensation plan in which the Executive participates, (iii) the Base Salary through the date which is 12 months from the Termination Date, payable in such installments over the applicable period as the base salary is generally paid to the Executive and (iv) the costs to the Executive under COBRA to receive insurance coverage from the Company during the period commencing on the Termination Date through the date which is the earlier to occur of (1) the first anniversary of the Termination Date and (2) the day prior to the date on which the Executive shall be included in any insurance program provided by any other employer. The Executive shall have no duty to mitigate the Company's obligations under this Section 10(b). Section 11. Insurance. The Company may, for its own benefit, in its sole discretion, maintain "key-man" life and disability insurance policies covering the Executive. The Executive will cooperate with the Company and provide such information or other assistance as the Company may reasonably request in connection with the Company's obtaining and maintaining such policies. Section 12. Disclosure of Information. The Executive shall not, at any time during the Term of Employment or thereafter, disclose to any person, firm, corporation or other business entity, except as required by law or pursuant to the ordinary course of conduct of the Executive's responsibilities under this Agreement, any non-public information (including, without limitation, non-public information obtained prior to the date hereof) concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof for any reason or purpose whatsoever, nor shall the Executive make use of any of such non-public information for his own purpose or for the benefit of any person, firm, corporation or other business entity except the Company or any subsidiary or affiliate thereof. Upon the termination of the Term of Employment, the executive shall return to the Company all property of the Company or any subsidiary or affiliate thereof then in the possession of the Executive and all books, records, computer tapes or discs 4 5 and all other material containing non-public information concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof. Section 13. Right to Inventions. The Executive shall promptly disclose, grant and assign to the Company for its sole use and benefit any and all marks, designs, logos, inventions, improvements, technical information and suggestions relating in any way to the business conducted by the Company, which he may develop or which may be acquired by the Executive during the Term of Employment (whether or not during usual working hours), together with all trademarks, patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or upon any such mark, design, logo, invention, improvement or technical information. In connection therewith: (i) the Executive shall without charge, but at the expense of the Company, promptly at all times hereafter execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Company to vest title to any such marks, designs, logos, inventions, improvements, technical information, trademarks, patent applications, patents, copyrights or reissues thereof in the Company and to enable it to obtain and maintain the entire right and title thereto throughout the world; (ii) the Executive shall render to the Company at its expense (including a reasonable payment for the time involved in case he is not then in its employ based on his last per diem earnings) all such assistance as it may require in the prosecution of applications for said trademarks, patents, copyrights or reissues thereof, in the prosecution or defense of interferences which may be declared involving any said trademarks, applications, patents or copyrights and in any litigation in which the Company may be involved relating to any such trademarks, patents, inventions, improvements or technical information; and (iii) for the avoidance of doubt, the foregoing provisions shall be deemed to include an assignment of future copyright in accordance with Section 37 of the Copyright Act of 1986 and any amendment or re-enactment thereof. Section 14. Restrictive Covenant. (a) The Executive acknowledges and recognizes that the Business (as defined in the Purchase Agreement) has been conducted, and substantial sales of its products have been made, throughout the United States and Europe, and the Executive further acknowledges and recognizes the highly competitive nature of the industry in which the Business is involved. Accordingly, in consideration of the premises contained herein, the consideration to be received hereunder, stock options to be granted to the Executive and in consideration of and as an inducement to the Company to consummate the transactions contemplated by the Purchase Agreement, the Executive shall not during the Non-Competition Period (as defined below) (i) directly or indirectly engage, whether 5 6 or not such engagement shall be as a partner, stockholder, affiliate or other participant, in any Competitive Business, or represent in any way any Competitive Business, whether or not such engagement or representation shall be for profit, (ii) interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any other person or entity, including, without limitation, any customer, supplier or employee of the Company, (iii) induce any employee of the Company or the Business to terminate his employment with the Company or the Business or to engage in any Competitive Business in any manner described in the foregoing clause (i) (as well as an officer or director of any Competitive Business), or (iv) affirmatively assist or induce any other person or entity to engage in any Competitive Business in any manner described in the foregoing clause (i) (as well as an officer or director of any Competitive Business). Anything contained in this Section 14 to the contrary notwithstanding, an investment by the Executive in any entity in which the Executive and his affiliates exercise no operational or strategic control and which constitutes less than 2% of the capital of such entity shall not constitute a breach of this Section 14. (b) As used herein, "Non-Competition Period" shall mean the period commencing on the date hereof and terminating on the fifth anniversary of the Termination Date; provided, however, that if the Term of Employment shall have been terminated pursuant to Section 9, then "Non-Competition Period" shall mean the period commencing on the date hereof and terminating on the later of (i) the second anniversary of the Termination Date and (ii) the end of the period following the Termination Date which is equal to the period of the Term of Employment (assuming that the Term of Employment shall not exceed five years for purposes of this clause (ii)); and "Competitive Business" shall mean any business in any State of the United States or anywhere outside the United States engaged in designing, engineering, manufacturing, selling or distributing (x) systems or components thereof (such as roof racks, deck racks and other systems) intended to facilitate the carriage or storage of cargo, luggage, bicycles, skis, snowboards, sailboards, sailboats, and other items or property on a vehicle or (y) drip rails for the Pontiac F-car or Chrysler XJ vehicle. (c) The Executive understands that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the business of the Company or any subsidiary or affiliate thereof, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits as an employee of the Company and as otherwise provided hereunder and pursuant to other agreements between the Company and the Executive to justify clearly such restrictions which, in any event (given his education, skills and ability), the Executive does not believe would prevent him from earning a living. Section 15. Enforcement; Severability; Etc. It is the desire and intent of the parties that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such 6 7 deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. Section 16. Remedies. The Executive acknowledges and understands that the provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by the Executive of the provisions of this Agreement, the Company shall be entitled to an injunction restraining him from such breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from or limiting the Company in pursuing any other remedies available for any breach or threatened breach of this Agreement. Section 17. Notices. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given and delivered if personally delivered or if sent by nationally-recognized overnight courier, by telecopy, or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: if to the Company, to: Advanced Accessory Systems, LLC 2655 16th Street Port Huron, MI 48060 Attention: President Telecopier: (810) 987-2212; with copies to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, NY 10112 Attention: John J. Suydam, Esq. Telecopier: (212) 408-2420; if to the Executive, to: Terence C. Seikel 661 Heritage Lane Rochester Hills, MI 48309 or to such other address as the party to whom notice is to be given may have furnished to the other party or parties in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of nationally-recognized overnight courier, on the next business day after the date when sent, (c) in the case of telecopy transmission, when received, and (d) in the case of mailing, on the third business day 7 8 following that on which the piece of mail containing such communication is posted. Section 18. Binding Agreement; Benefit. Subject to Section 23, the provisions of this Agreement will be binding upon, and will inure to the benefit of, the respective heirs, legal representatives, successors and assigns of the parties. Section 19. Governing Law. This Agreement will be governed by, and construed and enforced in accordance with, the laws of the State of Michigan (without giving effect to principles of conflicts of laws). Section 20. Waiver of Breach. The waiver by either party of a breach of any provision of this Agreement must be in writing and shall not operate or be construed as a waiver of any other breach. Section 21. Entire Agreement; Amendments. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements or understandings between the parties with respect thereto. This Agreement may be amended only by an agreement in writing signed by the parties. Section 22. Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 23. Assignment. This Agreement is personal in its nature and the parties shall not, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that the Company may assign this Agreement to any of its subsidiaries and affiliates. Section 24. Counterparts. This Agreement may be executed in counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Section 25. Gender. Any reference to the masculine gender shall be deemed to include the feminine and neuter genders unless the context otherwise requires. 8 9 IN WITNESS WHEREOF, The parties hereto have executed and delivered this Employment Agreement as of the date first written above. ADVANCED ACCESSORY SYSTEMS, LLC By:_____________________________ Name: Title: ________________________________ TERENCE C. SEIKEL EX-10.14 21 EX-10.14 1 EXHIBIT 10.14 EMPLOYMENT AGREEMENT dated as of August 5, 1997 between VALLEY INDUSTRIES, LLC, a Delaware limited liability company (the "Company"), and ROGER T. MORGAN (the "Executive"). Reference is made to the Asset, Purchase Agreement dated as of the date hereof (as amended, the "Asset Purchase Agreement"), among the Company, Valley Industries, Inc., a Delaware corporation ("Valley"), and certain affiliates of Valley. Pursuant to the Asset Purchase Agreement, the Company is, among other things, acquiring substantially all of the assets of Valley. The Company desires to enter into this Agreement in order to assure itself of the continued service of the Executive following the Closing (as such term is defined in the Asset Purchase Agreement), and the Executive desires to accept employment with the Company, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties agree as follows: Section 1. Employment. The Company hereby employs the Executive, and the Executive hereby accepts employment by the Company, upon the terms and conditions hereinafter set forth. Section 2. Term. The employment of the Executive hereunder shall be for a period commencing on the date hereof (the "Commencement Date") and ending on August 5, 2000 (the "Initial Term") or such earlier date upon which the employment of the Executive shall terminate in accordance with the provisions hereof. Unless terminated earlier in accordance with the provisions hereof, at the end of the Initial Term and at the end of each term thereafter, the employment of the Executive hereunder shall automatically renew for successive one-year periods unless the Company or the Executive shall give the other written notice of its desire not to renew the term or the Initial Term no later than six months prior to the termination of the then current term. The period commencing on the Commencement Date and ending on the date of termination of the Executive's employment hereunder shall be called the "Term of Employment" for the Executive, and the date on which the Executive's employment hereunder shall terminate shall be called the "Termination Date." Section 3. Duties. During the Term of Employment, the Executive shall be employed as the President and Chief Executive Officer of the Company and shall perform such duties as are consistent therewith as the respective Boards of Directors of the Company and AAS Holdings, LLC, a Delaware limited liability company ("Holdings") (each, a "Board" and together, the "Boards") or their respective designees shall designate. The Executive shall use his best efforts to perform well and faithfully the foregoing duties and responsibilities. Section 4. Time to be Devoted to Employment. During the Term of Employment, the Executive shall devote all of his business time, attention and energies to the business of the Company and its subsidiaries (except for vacations to which he is entitled pursuant to Section 2 6(b)) and periods of illness or incapacity). During the Term of Employment, the Executive shall not engage in any business activity which, in the reasonable judgment of either of the Boards, conflicts with the duties of the Executive hereunder, whether or not such activity is pursued for gain, profit or other pecuniary advantage. Section 5. Compensation. (a) The Company (or at the Company's option, any subsidiary or affiliate thereof) shall pay to the Executive an annual base salary (the "Base Salary") during the Term of Employment of not less than $250,000, payable in such installments (but not less often than monthly) as is generally the policy of the Company with respect to its executive officers, which Base Salary shall be subject to such increases as the Company's Board, in its sole discretion, may from time to time determine. The Executive's performance shall be reviewed at least annually by the Boards. (b) During the Term of Employment, the Executive shall be eligible to participate in a bonus plan in the range which will provide the Executive with an annual cash bonus of 50%-70% of the Base Salary subject to the achievement by the Company of performance goals established by Holdings' Board in its sole discretion, provided, however, that the Executive shall be eligible to receive an annual cash bonus of 20.8% - 29.2% of the Base Salary for the fiscal year ending December 31, 1997, subject to the achievement of such performance goals. Section 6. Business Expenses; Benefits. (a) The Company (or, at the Company's option, any subsidiary or raffiliate thereof) shall reimburse the Executive, in accordance with the practice from time to time for executive officers of the Company, for all reasonable and necessary expenses and other disbursements incurred by the Executive for or on behalf of the Company in the performance of the Executive's duties hereunder. The Executive shall provide such appropriate documentation of expenses and disbursements as may from time to time be required by the Company. (b) During the Term of Employment, the Executive shall be entitled to five weeks vacation per year. (c) During the Term of Employment, the Company shall continue to provide the Executive with the group health, life and disability insurance benefits, and retirement plan benefits that were provided by the Company to the Executive prior to the Closing. In the event that the Executive completes the Term of Employment hereunder and is terminated (other than due to a Termination for Cause), the Company shall, so long as it is permitted to provide benefits to non-employees pursuant to its existing employee benefits plans, continue to provide the Executive with his and his existing spouse's medical benefits on substantially the same terms as provided during the Term of Employment until each such person reaches the age of 65 ; provided that the Executive shall reimburse the Company for its provision of such benefits in an amount no less than the maximum amount that the Executive and/or his spouse would have to pay for such benefits pursuant to the Congressional Omnibus Budget Reconciliation Act of 1985, as may be amended from time to time. 2 3 (d) During the Term of Employment, the Company shall continue to reimburse the Executive for his membership expenses at the Great Oaks Country Club. (e) During the Term of Employment, the Company shall continue to reimburse the Executive for his reasonable automobile expenses up to seven hundred dollars ($700) per month. Section 7. Involuntary Termination. (a) If the Executive is incapacitated or disabled (such condition being hereinafter referred to as a "Disability") in a manner that would qualify the Executive for benefits under the disability policy of the Company (the "Disability Policy"), the Term of Employment and the employment of the Executive under this Agreement shall cease (such termination, as well as a termination under Section 7(b), being hereinafter referred to as an "Involuntary Termination") and the Executive shall be entitled to receive the benefits payable under the Disability Policy. (b) If the Executive dies during the Term of Employment, the Term of Employment and the Executive's employment hereunder shall cease as of the date of the Executive's death. Section 8. Termination For Cause. The Company may terminate the Term of Employment and the employment of the Executive hereunder at any time for Cause (as hereinafter defined) (such termination being referred to herein as a "Termination For Cause") by giving the Executive written notice of such termination, effective immediately upon the giving of such notice to the Executive. As used in this Agreement, "Cause" means the Executive's (a) commission of an act (i) constituting a felony or (ii) involving fraud, theft or dishonesty which is not a felony and which materially adversely affects the Company or could reasonably be expected to materially adversely affect the Company, (b) repeated failure to be reasonably available to perform his duties, which, if curable, shall not have been cured within 10 business days of written notice thereof from the Company, (c) repeated failure to follow the lawful directions of the Boards, which, if curable, shall not have been cured within 10 business days of written notice thereof from the Company, (d) material breach of any agreement with the Company (including any noncompete provisions of this or any agreement between the Executive and the Company) which, if curable, shall not have been cured within 10 business days of written notice thereof from the Company, or (e) resignation. Section 9. Termination Without Cause. The Company may terminate the Term of Employment and the employment of the Executive hereunder without Cause (such termination being hereinafter referred to as a "Termination Without Cause") by giving the Executive written notice of such termination, which notice shall be effective on the date specified therein but not earlier than the date on which such notice is given. Section 10. Effect of Termination. (a) Upon the termination of the Term of Employment and the Executive's employment hereunder due to an Involuntary Termination or Termination for Cause, neither the Executive nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement, except to receive (i) the unpaid portion, if any, of the Base 3 4 Salary provided for in Section 5(a), computed on a pro rata basis to the Termination Date (based on the actual number of days elapsed over the actual number of days of the year in which such termination occurs), (ii) any unpaid accrued benefits of the Executive, and (iii) reimbursement for any expenses for which the Executive shall not have been reimbursed as provided in Section 6(a). (b) Upon the termination of the Executive's employment hereunder due to a Termination Without Cause, neither the Executive nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement except the right to receive (i) the amounts set forth in Section 10(a), (ii) the prorated portion of any bonus earned by the Executive in such year under any Company incentive compensation plan in which the Executive participates, (iii) the Base Salary through the date which is twelve (12) months from the Termination Date, payable in such installments over the applicable period as the base salary is generally paid to the Executive and (iv) the costs to the Executive under COBRA to receive insurance coverage from the Company during the period commencing on the Termination Date through the date which is the earlier to occur of (1) the first anniversary of the Termination Date and (2) the day prior to the date on which the Executive shall be included in any insurance program provided by any other employer. The Executive shall have no duty to mitigate the Company's obligations under this Section 10(b). Section 11. Insurance. The Company may, for its own benefit, in its sole discretion, maintain "key-man" life and disability insurance policies covering the Executive. The Executive will cooperate with the Company and provide such information or other assistance as the Company may reasonably request in connection with the Company's obtaining and maintaining such policies. Section 12. Disclosure of Information. The Executive shall not, at any time during the Term of Employment or thereafter, disclose to any person, firm, corporation or other business entity, except as required by law, any non-public information (including, without limitation, non-public information obtained prior to the date hereof) concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof for any reason or purpose whatsoever, nor shall the Executive make use of any of such non-public information for his own purpose or for the benefit of any person, firm, corporation or other business entity except the Company or any subsidiary or affiliate thereof. Upon the termination of the Term of Employment, the executive shall return to the Company all property of the Company or any subsidiary or affiliate thereof then in the possession of the Executive and all books, records, computer tapes or discs and all other material containing non-public information concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof. Section 13. Right to Inventions. The Executive shall promptly disclose, grant and assign to the Company for its sole use and benefit any and all marks, designs, logos, inventions, improvements, technical information and suggestions relating in any way to the business conducted by the Company, which he may develop or which may be acquired by the Executive during the Term of Employment (whether or not during usual working hours), together with all trademarks, patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or upon any such mark, design, logo, invention, improvement or technical information. In connection therewith: 4 5 (i) the Executive shall without charge, but at the expense of the Company, promptly at all times hereafter execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Company to vest title to any such marks, designs, logos, inventions, improvements, technical information, trademarks, patent applications, patents, copyrights or reissues thereof in the Company and to enable it to obtain and maintain the entire right and title thereto throughout the world; (ii) the Executive shall render to the Company at its expense (including a reasonable payment for the time involved in case he is not then in its employ based on his last per diem earnings) all such assistance as it may require in the prosecution of applications for said trademarks, patents, copyrights or reissues thereof, in the prosecution or defense of interferences which may be declared involving any said trademarks, applications, patents or copyrights and in any litigation in which the Company may be involved relating to any such trademarks, patents, inventions, improvements or technical information; and (iii) for the avoidance of doubt, the foregoing provisions shall be deemed to include an assignment of future copyright in accordance with Section 37 of the Copyright Act of 1986 and any amendment or re-enactment thereof. Section 14. Restrictive Covenant. (a) The Company is in the business of designing, engineering manufacturing, selling and distributing towing products including trailer hitches, trailer bells, bell mounts, couples, tow bars and brush guards (the "Business"). The Executive acknowledges and recognizes that the Business has been conducted, and substantial sales of its products have been made, throughout the United States, and the Executive further acknowledges and recognizes the highly competitive nature of the industry in which the Business is involved. Accordingly, in consideration of the premises contained herein, the consideration to be received hereunder, stock options to be granted to the Executive and in consideration of and as an inducement to the Company to consummate the transactions contemplated by the Purchase Agreement, the Executive shall not during the Non-Competition Period (as defined below) (i) directly or indirectly engage, whether or not such engagement shall be as a partner, stockholder, affiliate or other participant, in any Competitive Business (as defined below), or represent in any way any Competitive Business, whether or not such engagement or representation shall be for profit, (ii) interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any other person or entity, including, without limitation, any customer, supplier or employee of the Company, (iii) induce any employee of the Company or the Business to terminate his employment with the Company or the Business or to engage in any Competitive Business in any manner described in the foregoing clause (i) (as well as an officer or director of any Competitive Business), or (iv) affirmatively assist or induce any other person or entity to engage in any Competitive Business in any manner described in the foregoing clause (i) (as well as an officer or director of any Competitive Business). Anything contained in this Section 14 to the contrary notwithstanding, an investment by the Executive in any entity in which the Executive and his affiliates exercise no operational or strategic control and which constitutes less than 2% of the capital of such entity shall not constitute a breach of this Section 14. 5 6 (b) As used herein, "Non-Competition Period" shall mean the period commencing on the date hereof and terminating on the fifth anniversary of the Termination Date; provided, however, that if the Term of Employment shall have been terminated pursuant to Section 9, then "Non-Competition Period" shall mean the period commencing on the date hereof and terminating on the later of (i) the second anniversary of the Termination Date and (ii) the end of the period following the Termination Date which is equal to the period of the Term of Employment (assuming that the Term of Employment shall not exceed five years for purposes of this clause (ii)); and "Competitive Business" shall mean any business in any State of the United States or anywhere outside the United States engaged in designing, engineering, manufacturing, selling or distributing systems or components thereof (such as trailer hitches, trailer balls , ball mounts, couplers, tow bars and two brushes) intended to facilitate towing. (c) The Executive understands that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the business of the Company or any subsidiary or affiliate thereof, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits as an employee of the Company and as otherwise provided hereunder and pursuant to other agreements between the Company and the Executive to justify clearly such restrictions which, in any event (given his education, skills and ability), the Executive does not believe would prevent him from earning a living. Section 15. Enforcement; Severability; Etc. It is the desire and intent of the parties that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. Section 16. Remedies. The Executive acknowledges and understands that the provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by the Executive of the provisions of this Agreement, the Company shall be entitled to an injunction restraining him from such breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from or limiting the Company in pursuing any other remedies available for any breach or threatened breach of this Agreement. Section 17. Notices. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given and delivered if personally delivered or if sent by nationally-recognized overnight courier, by telecopy, or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: if to the Company, to: 6 7 Valley Industries, LLC 32501 Dequindre Road Madison Heights, Michigan 48071 Telecopier: (810) 588-0027; with copies to: AAS Holdings, LLC 12900 Hall Road Suite 200 Sterling Heights, Michigan 48313 Attention: Chief Executive Officer Telecopier: (810) 997-6839 with copies to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Attention: John J. Suydam, Esq. Telecopier: (212) 408-2420; if to the Executive, to: Roger T. Morgan 3496 Summit Ridge Rochester Hills, Michigan 48306 Telecopier: (810) 373-6949 with copies to: David A. Widlak P.O. Box 482 Washington, Michigan 48094 Telecopier: (810) 786-3933 or to such other address as the party to whom notice is to be given may have furnished to the other party or parties in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of nationally-recognized overnight courier, on the next business day after the date when sent, (c) in the case of telecopy transmission, when received, and (d) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. Section 18. Binding Agreement; Benefit. Subject to Section 23, the provisions of this Agreement will be binding upon, and will inure to the benefit of, the respective heirs, legal representatives, successors and assigns of the parties. 7 8 Section 19. Governing Law. This Agreement will be governed by, and construed and enforced in accordance with, the laws of the State of New York (without giving effect to principles of conflicts of laws). Section 20. Waiver of Breach. The waiver by either party of a breach of any provision of this Agreement must be in writing and shall not operate or be construed as a waiver of any other breach. Section 21. Entire Agreement; Amendments. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements or understandings between the parties with respect thereto. This Agreement may be amended only by an agreement in writing signed by the parties. Section 22. Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 23. Assignment. This Agreement is personal in its nature and the parties shall not, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that the Company may assign this Agreement to any of its subsidiaries and affiliates. Section 24. Counterparts. This Agreement may be executed in counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Section 25. Gender. Any reference to the masculine gender shall be deemed to include the feminine and neuter genders unless the context otherwise requires. 8 9 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Employment Agreement as of the date first written above. VALLEY INDUSTRIES, LLC By:_____________________________ Name: Title: ________________________________ ROGER T. MORGAN 9 EX-10.15 22 EX-10.15 1 EXHIBIT 10.15 EMPLOYMENT AGREEMENT The Undersigned: 1. The private limited liability company BRINK B.V., established and having an office at Industrieweg 5, Staphorst and represented legally in this matter by company director W. Rengelink who shall be referred to hereinafter as; "the Company"; AND 2. G. de Graaf, born on September 27, 1963 and resident in Spakennburg and who shall be referred to hereinafter as: "Employee": WHEREAS: - The shareholders in the Company have, in accordance with a written decision taken by shareholders on 30 October 1996, appointed the Employee as Managing Director under the Articles of Association; - The parties wish to record the employment agreement entered into between the Employee and the Company in writing; AGREEMENT HAVING BEEN REACHED AS FOLLOWS: Article 1: Commencing date, duration and termination 1. The Employee will be employed with effect from November 1, 1996 for an indefinite period of time. The Employment can be terminated by either party provided that 3 months notice is given. Notice can only be given in writing. 2. Employment will in any case terminate without any notice of termination being required on the last day of the month in which the Employee becomes 65 years of age. 3. If the company terminates the employment of the Employee either with a view to or within the framework of a merger or take-over, or for other reasons, and this terminations is for the Employee not voluntary, then the Company is obliged to pay the Employee compensation which will be calculated as follows: (50% + years in service x 20%) x (annual salary + holiday allowance + bonus) with a maximum of 1 x (annual salary + holiday allowance + bonus). 4. The Company will transfer its rights and obligations resulting from this agreement to the company which will, within the framework of the reorganisation of the Company proposed by shareholder, continue to carry on the business of the Company and its subsidiaries. The Employee already agrees now with the transfer of rights and obligations and is prepared to accept dismissal as Managing Director under the 2 Articles of Association of the Company and to be appointed as Managing Director under the Articles of Association of the new company. Article 1.3 will not apply to this termination of employment. Article 2: Function 1. The Company will employ the Employee as Managing Director under the Articles of Association. 2. The Employee is obliged to perform his duties to the best of his ability in the expected of a conscientious Director; the Employee will do everything in his power to promote expansion of the Company. 3. The Employee has all the rights and obligations which are granted to or imposed on, as the case may be, the Director by the Articles of Association of the Company. 4. The Employee will not, without prior written permission from the Company to do so, carry out any other work during the lifetime of the employment agreement for which he is paid or establish a company which completes with the Company, conduct business, conduct business with others or, either directly or indirectly, have an interest in such a company any way whatsoever or be employed in any way whatsoever by such a company either for payment or for no consideration. 5. The Employee is prepared if asked by the Company to do so to work for a company associated with the Company. Article 3: Salary 1. The Employee will be paid a salary of NLG 170.000, -- gross per year including 8% holiday allowance. The salary will be paid out minus the 8% holiday allowance in 13 equal instalments in arrears. 2. The holiday allowance will be paid in arrears in the month of May in the current year. If the Employee has only been employed for part of the calendar year then the holiday allowance will be paid proportionately. 3. In addition to the fixed salary the employee is granted a non-fixed salary, which starting January 1, 1997 will be based upon realisation of the goals as included in the Company's budget. This non-fixed salary will amount to NLG 30.000 (gross) per year if full achievement of the goals as included in the Company's budget has been realised. 4. The payment of the non-fixed salary as mentioned in the previous paragraph will be made as soon as possible after approval of the statutory accounts by the general 2 3 meeting of shareholders. For 1996, this non-fixed salary will amount to NLG 7.500 (gross) which will be paid in the second quarter of 1997. Article 3: Salary 1. The Employee will be paid NLG 500, -- each month as compensation for the expenses incurred by him in connection with carrying out his duties. 2. The Employee will be reimbursed each month for the expenses incurred by him in the interests of the Company. The Employee must, as far as possible, pay the expenses meant by means of a Credit Card made available by the Company. 3. The expenses referred to in section 2 will only be paid on the basis of a declaration approved by the Company. 4. The Company will compensate the Employee for the subscription charges and telephone charges incurred by the Employee for the telephone connection t his home but with the exception of that part which cannot be paid without being taxed by the fiscal authorities. 5. The employee will be reimbursed for the moving expenses incurred by him due to this appointment. The expenses will be paid on the basis of a declaration. The reimbursement is in no case more than 12% of the fixed gross salary per year. The reimbursement is related to the actual incurred expenses for as long as the Employee has not been compensation for these expenses by any other sources. Article 5: Car 1. The Company will make a leased car (with a maximum catalogue value of NLG 85.000,--incl. Sales Tax) available to the Employee for carrying out his duties. 2. The conditions laid down in the Company's car-scheme will apply to use of the leased car. The Employee has been given a copy of that car-scheme. Article 6: Pension 1. The Company will take out pension insurance and industrial disability insurance c over for the Employee. The cost of that insurance will be paid by the Company and the Employee jointly. The Employee will pay 40% of the cost. The Employee empowers the company to deduct his contribution in equal, successive installments from each payment of salary. The Company will arrange for payment of the total premium to the insurance company. 2. The above is based on the assumption that the fixed final salary of the Employee is insured at 65 years of age. The insurance provides a widow's, orphans and old age pension. That part of the premium paid by Employee is tax-deductible. 3 4 Article 7: Holidays 3. The Employee is entitled to 25 days holiday per year. Article 8: Illness and Industrial Disability 1. The Employee is obliged if he is ill or if he cannot carry out his duties for other reasons to notify the Company of that fact on the first day that he is unable to work. 2. The Company will continue to pay the gross salary agreed together with the emoluments in full for a maximum period of 52 weeks if the Employee is unable to work because of illness. 3. If the illness or industrial disability should last longer than one year then the Industrial Disability Act will come into effect. An extra Industrial Disability Act will also be made for the employee. The combined benefits paid in the case of illness or industrial disability will amount after the first year to a maximum of 70% of the last salary earned. The premium for the extra Industrial Disability Act arrangement will be paid by the Company. That specified in this Article is subject to acceptance by the insurance company concerned. Article 9: Health Insurance 1. The Company will pay, in accordance with the regulations contained in the guide, the Employee a contribution to the premium owed by him for health insurance. Article 10: Secrecy 1. The Employee is forbidden, both during the period when he is employed by the Company as well as after that employment has terminated, to make known in any form whatsoever either directly or indirectly information, which the Employee understands or should understand within reason that the information is not intended to be made known to third parties and which he has about the business conducted by the Company or a company associated with the Company or connected therewith or about any special circumstances, to third parties (which also includes employees employed by the Company or companies associated with it). The Employee will note, unless he has been given permission to do so, keep in his possession or show to third parties or take outside the company any texts, copies, drawings, models and other matters in the widest sense of the word. 2. The Employee must, if he infringes that specified in section 1, pay the company a fine which is payable on demand and which amounts to NLG 50.000 for every infringement and notwithstanding other claims made by the company and including the right of the Company to claim full compensation. Article 11: Non competition clause 4 5 1. The employee is forbidden, unless he has prior written permission from the Company to do so, for a period of 2 years after his employment with the Company has terminated, to compete in any way whatsoever either directly or indirectly with the Company or a company associated with the Company by establishing a company which competes with the Company or to conduct business or to jointly conduct business which competes with the Company or to have any interest in such a company or to be employed in any way whatsoever by such company either for payment or for consideration. 2. The employee is forbidden, unless he has prior written permission from the Company to do so, for a period of 2 years after his employment with the Company has terminated to encourage employees of the Company or a company associated with it to terminate their employment contract for the purpose of competing in any way whatsoever with the Company or a company associated with it. 3. The employee must, if he fails to comply with any one of the stipulations referred to above, pay the Company a fine which is payable on demand and which amounts to NLG 50.000 for every infringement as well as NLG 1.000 for each day that he fails to comply and including the right of the Company to claim full compensation. 4. The period of time referred to in sections 1 and 2 will be extended by the duration of each infringement of one of the stipulations referred to above. Article 12: Intellectual and industrial property rights 1. The Employee agrees to transfer herewith to the Company and transfers as far as possible - for as far as the rights referred to below do not go to the company according to law and which arise from the employment connection existing between the parties - all rights of any kind whatsoever both in The Netherlands as well as elsewhere pertaining to and resulting from inventions made by the Employee while carrying out his duties. 2. The Employee acknowledges that the salary earned by him contains reasonable compensation for the lack of intellectual and industrial property rights. Article 13: Regulations 1. The Employee declares that he has received a copy of the Company Regulations. Article 14: Relevant legislation This agreement is subject of the laws of The Netherlands. Agreed and drawn up in duplicate in Staphorst on 1 November 1996. Brink B.V. W. Rengelink G. de Graaf 5 EX-10.16 23 EX-10.16 1 EXHIBIT 10.16 MANAGEMENT CONSULTING AGREEMENT dated as of July 2, 1997, between ADVANCED ACCESSORY SYSTEMS CANADA INC./LES SYSTEMES D'ACCESSOIRE ADVANCED CANADA INC., a corporation existing under the laws of Quebec (the "Company") and LES PLACEMENTS JEAN MAYNARD INC., a corporation existing under the laws of Canada (the "Consultant"). Reference is made to the Asset Purchase Agreement dated as of the date hereof (as amended, the "Purchase Agreement"), among Bell Sports Corp., a Delaware corporation ("Bell Sports"), Bell Sports Canada Inc., a corporation existing under the laws of Quebec ("Bell Canada"), and the Company. Pursuant to the Purchase Agreement, the Company has acquired substantially all of the assets of the SportRack division of Bell Canada. WHEREAS the Company desires to retain the Consultant to perform management consulting services for the Company and the Consultant desires to perform such management consulting services for the Company upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: SECTION 1. RETENTION OF CONSULTANT. The Company hereby retains the Consultant as a consultant, and the Consultant hereby accepts such retention by the Company, and hereby agrees to perform such services for the Company in respect of its business, as directed by the Board of Directors of the Company ("the Board"). SECTION 2. TERM. The retention of the Consultant hereunder shall be for a period (the "Initial Period") commencing on the date hereof (the "Commencement Date") and ending on June 30, 2000 or such earlier date upon which the retention of the Consultant shall terminate in accordance with the provisions hereof. Unless terminated earlier in accordance with the provisions hereof, the retention of the Consultant hereunder shall continue after the end of the Initial Period for an additional two (2) year period upon thirty (30) days written notice to the Company prior to the termination of the Initial Period from the Consultant and, if the Consultant has so exercised its right to renew its retention for such additional two (2) year period, for successive one (1) year periods unless the Company or the Consultant shall give the other party written notice to terminate such retention no later than thirty (30) days prior to the commencement of any such one (1) year period. The period commencing on the Commencement Date and ending on the date of termination of the Consultant's retention hereunder shall be called the "Term", and the date on which the Consultant's retention hereunder shall terminate shall be called the "Termination Date". 2 SECTION 3. DUTIES. (a) The Consultant hereby acknowledges and agrees that it is an essential condition of this Agreement that the Consultant make available to the Company the services of an individual to be jointly designated in writing by the Consultant and the Company (the "Designated Person") in connection with the Consultant's performance of its services hereunder. The Consultant shall make the Designated Person available to provide such services throughout the Term and, subject to Section 3(b), on a full-time basis. (b) The Consultant covenants and agrees that it shall, and shall cause the Designated Person to, faithfully and diligently serve the Company during the Term and act in all respects as a good manager and administrator of the affairs of the Company, and shall, and shall cause the Designated Person to, use its/his best efforts to promote and advance the interests of the Company and, in particular, to increase the profits thereof. The Consultant shall cause the Designated Person to devote substantially all of his business time, attention and ability to the business of the Company and to be subject to and abide by the polices and procedures generally applicable to employees of the Company and/or any of its affiliates. (c) During the Term, the Designated Person shall serve as the President of the Company and shall advise the Company concerning such matters that relate to the business and affairs of the Company and its affiliates as the Company shall reasonably request, and shall perform such duties as are consistent therewith as the Board shall designate. SECTION 4. [INTENTIONALLY OMITTED] SECTION 5. COMPENSATION. (a) The Company (or, at the Company's option, any subsidiary or affiliate thereof) shall pay to the Consultant an annual consulting fee (the "Base Fee") during the Term of one hundred and seventy-six thousand Canadian dollars (Cnd. $176,000), payable in equal monthly installments, plus all applicable "GST" and "QST" (as such terms are defined in the Purchase Agreement). (b) During the Term, the Consultant shall be eligible to participate in incentive compensation or bonus plans that the Board shall implement for the Consultant, which will generally provide the Consultant the opportunity to receive an annual cash bonus in the range of up to fifty percent (50 %) of the Base Fee, subject to the achievement by the Consultant of performance goals established by the Board in its sole discretion. - 2 - 3 SECTION 6. BUSINESS EXPENSES: BENEFITS. The Company (of, at the Company's option, any subsidiary or affiliate thereof) shall reimburse the Consultant, in accordance with its practice from time to time, for all reasonable and necessary documented expenses and other disbursements incurred by the Designated Person for or on behalf of the Company in the performance of the Consultant's duties hereunder. SECTION 7. INVOLUNTARY TERMINATION. (a) If the Designated Person is incapacitated or disabled in a manner that would prevent him from performing the Consultant's duties hereunder for a period of one hundred and eighty (180) consecutive days, the Term and the retention of the Consultant under this Agreement shall cease and the Company shall have no further obligation hereunder. (b) If the Designated Person dies during the Term, the Term and the Consultant's retention hereunder shall cease as of the date of the Designated Person's death and the Company shall have no further obligation hereunder. SECTION 8. TERMINATION FOR CAUSE. The Company may terminate the Term and the retention of the Consultant hereunder at any time for Cause (as hereinafter defined) (such termination being referred to herein as a "Termination For Cause") by giving the Consultant written notice of such termination, effective immediately upon the giving of such notice to the Consultant. As used in this Agreement, "Cause" means (a) the Designated Person's (i) commission of an act (x) constituting a felony or (y) involving fraud, theft or dishonesty which is not a felony and which materially and adversely affects the Company or could reasonably be expected to materially and adversely affect the Company, (ii) repeated failure to be reasonably available to perform the Consultant's duties, which, if curable, shall not have been cured within ten (10) business days of written notice thereof from the Company, (iii) repeated failure to follow the lawful directions of the Company, which, if curable, shall not have been cured within ten (10) business days of written notice thereof from the Company, (iv) material breach of any agreement with the Company (including the noncompete provisions set forth in Section 14 hereof) which, if curable, shah not have been cured within ten (10) business days of written notice thereof from the Company, (v) the resignation from, or termination for any reason whatsoever by, the Consultant or the Designated Person, or (b) the sale of all or substantially all of the assets of the Consultant or the occurrence of a Change of Control. As used herein, the term "Change of Control" shall mean the Designated Person ceasing to own beneficially and of record fifty-one percent (51%) of all classes of voting capital stock of the Consultant. - 3 - 4 SECTION 9. TERMINATION WITHOUT CAUSE. The Company may terminate the Term and the retention of the Consultant hereunder without Cause (such termination being hereinafter referred to as a "Termination Without Cause") by giving the Consultant written notice of such termination, which notice shall be effective on the date specified therein but not earlier than the date on which such notice is given. SECTION 10. EFFECT OF TERMINATION. (a) Upon the termination of the Term and the retention of the Consultant hereunder due to an Involuntary Termination or Termination for Cause, neither the Consultant, the Designated Person nor his beneficiary or estate shall have any, further rights or claims against the Company under this Agreement, except to receive (i) the unpaid portion, if any, of the Base Fee provided for in Section 5(a), computed on a pro rata basis to the Termination Date (based on the actual number of days elapsed over the actual number of days of the year in which such termination occurs), (ii) any unpaid accrued benefits of the Designated Person due hereunder, and (iii) reimbursement for any expenses for which the Consultant or the Designated Person shall not have been reimbursed as provided in Section 6. (b) Upon the termination of the retention of the Consultant hereunder due to a Termination Without Cause, neither the Consultant, the Designated Person nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement except the right to receive (i) the amounts set forth in Section 10(a), (ii) the prorated portion of any bonus earned by the Consultant in such year under any Company incentive compensation or bonus plan in which the Consultant participates, and (iii) the Base Fee through the date which is twelve (12) months from the Termination Date, payable in such installments over the applicable period as the Base Fee is generally paid to the Consultant. SECTION 11. INSURANCE. The Company may, for its own benefit, in its sole discretion, maintain "key-man" life and disability insurance policies covering the Designated Person. The Designated Person will cooperate with the Company and provide such information or other assistance as the Company may reasonably request in connection with the Company's obtaining and maintaining such policies. SECTION 12. DISCLOSURE OF INFORMATION. The Consultant shall not, at any time during the Term or thereafter, disclose to any person, firm, corporation or other business entity, except as required by law, any non-public information (including, without limitation, non-public information obtained prior to the date - 4 - 5 hereof) concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof for any reason or purpose whatsoever (except as incident to its performance of this Agreement), nor shall the Consultant make use of any of such non-public information for its own purpose or for the benefit of any person, firm, corporation or other business entity except the Company or any subsidiary or affiliate thereof. Upon the termination of the Term, the Consultant shall return to the Company all property of the Company or any subsidiary or affiliate thereof then in its possession and all books, records, computer tapes or discs and all other material containing non-public information concerning the business, clients or affairs of the Company or any subsidiary or affiliate thereof. SECTION 13. RIGHT TO INVENTIONS. The Consultant shall promptly disclose, grant and assign to the Company for its sole use and benefit any and all marks, designs, logos, inventions, improvements, technical information and suggestions relating in any way to the Business (as defined in the Purchase Agreement) conducted by the Company, which it may develop or which may be acquired by the Consultant during the Term (whether or not during usual working hours), together with all trademarks, patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or upon any such mark, design, logo, invention, improvement or technical information. In connection therewith: (i) the Consultant shall, without charge, but at the expense of the Company, promptly at all times hereafter execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Company to vest title to any such marks, designs, logos, inventions, improvements, technical information, suggestions, trademarks, patent applications, patents, copyrights or reissues thereof in the Company and to enable it to obtain and maintain the entire right and title thereto throughout the world; (ii) the Consultant shall render to the Company at its expense (including a reasonable payment for the time involved in case the Consultant is no longer being retained by the Company based on the appropriate pro rata portion of the Base Fee) all such assistance as it may require in the prosecution of applications for said trademarks, patents, copyrights or reissues thereof, in the prosecution or defense of interferences which may be declared involving any said trademarks, applications, patents or copyrights and in any litigation in which the Company may be involved relating to any such trademarks, patents, inventions, improvements or technical information; and (iii) for the avoidance of doubt, the foregoing provisions shall be deemed to include an assignment of future copyright in accordance with Section 37 of the Copyright Act of 1986 and any amendment or re-enactment thereof or any similar Canadian law. - 5 - 6 SECTION 14. RESTRICTIVE COVENANT. (a) The Consultant acknowledges and recognizes that the Business (as defined in the Purchase Agreement) has been conducted, and substantial sales of its products have been made, throughout the United States and Europe, and further acknowledges and recognizes the highly competitive nature of the industry in which the Business is involved. Accordingly, in consideration of the premises contained herein, the consideration to be received hereunder and in consideration of and as an inducement to the Company to consummate the transactions contemplated by the Purchase Agreement, the Consultant shall not, during the Non-Competition Period (as defined below) (i) directly or indirectly engage, whether or not such engagement shall be as a partner, stockholder, affiliate, director, officer, employee, independent contractor or other participant, in any Competitive Business, or represent in any way any Competitive Business, whether or not such engagement or representation shall be for profit, (ii) interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any other person or entity, including, without limitation, any customer, supplier or employee of the Company, (iii) induce any employee of the Company or the Business to terminate his or her employment with the Company or the Business or to engage in any Competitive Business in any manner described in the foregoing clause (i) (including as an officer or director of any Competitive Business), or (iv) assist or induce any other person or entity to engage in any Competitive Business in any manner described in the foregoing clause (i) (including as an officer or director of any Competitive Business). (b) As used herein, the term "Non-Competition Period" shall mean the period commencing on the date hereof and terminating on the fifth anniversary of the Termination Date; and the term "Competitive Business" shall mean any business in any State of the United States or anywhere in the world outside the United States engaged in the Business. (c) The Consultant understands that the foregoing restrictions may limit its ability to earn a livelihood in a business similar to the business of the Company or any subsidiary or affiliate thereof, but it nevertheless believes that it has received and will receive sufficient consideration and other benefits to justify clearly such restrictions. SECTION 15. ENFORCEMENT: SEVERABILITY; ETC. It is the desire and intent of the parties that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. - 6 - 7 SECTION 16. REMEDY. The Consultant acknowledges and understands that the provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by the Consultant of the provisions of this Agreement, the Company shall be entitled to an injunction restraining it and the Designated Person from such breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from or limiting the Company in pursuing any other remedies available for any breach or threatened breach of this Agreement. SECTION 17. NOTICES. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given and delivered if personally delivered or if sent by nationally-recognized overnight courier, by telecopy, or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: if to the Company, to the address set forth in the Purchase Agreement: with copies to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, NY 10112 Attention: John J. Suydam, Esq. Telecopier: (212) 408-2420; if to the Consultant, to: Les Placements Jean Maynard Inc. 100 de Gaspe Street Suite 1101 Nuns Island, Quebec Canada H3E 1E5 Telephone: (514) 766-7011 Telecopier: (514) 766-5227 or to such other address as the party to whom notice is to be given may have furnished to the other party or parties in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of nationally-recognized overnight courier, on the next business day after the date when sent, (iii) in the case of telecopy transmission, when received, and (iv) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. - 7 - 8 SECTION 18. BINDING-AGREEMENT; BENEFIT. The provisions of this Agreement will be binding upon, and will inure to the benefit of, the respective heirs, legal representatives, successors and assigns of the parties. SECTION 19. GOVERNING LAW. This Agreement will be governed by, and construed and enforced in accordance with, the laws of the Province of Quebec and the laws of Canada applicable therein (without giving effect to principles of conflicts of laws). SECTION 20. WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement must be in writing and shall not operate or be construed as a waiver of any other breach. SECTION 21. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements or understandings between the parties with respect thereto. The parties hereto hereby agree to terminate and cancel the Consulting Agreement between the Consultant and Bell Sports Canada Inc. (as assigned to the Company by the Purchase Agreement) dated May 12, 1995. SECTION 22. HEADINGS. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 23. ASSIGNMENT. This Agreement is personal in its nature and the parties shall not, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that the Company may assign this Agreement to any of its subsidiaries and affiliates. SECTION 24. COUNTERPARTS. This Agreement may be executed in counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. - 8 - 9 SECTION 25. GENDER. Any reference to the masculine gender shall be deemed to include the feminine and neuter genders unless the context otherwise requires. SECTION 26. GENERAL. (a) The parties acknowledge and covenant to have been represented by legal counsel in the discussion, negotiation and execution of this Agreement. The parties further acknowledge and covenant that the provisions of this Agreement have been freely and fully discussed and negotiated and that the execution of this Agreement constitutes and is deemed to constitute full and final proof of the foregoing. The parties acknowledge and covenant to have read, examined, understood and approved all the provisions of this Agreement, including, without restriction, any schedules attached hereto and forming part hereof. (b) The Consultant acknowledges having obtained all information useful or necessary to take an enlightened decision to execute this Agreement. SECTION 27. CURRENCY. All references herein to dollars or $ mean the lawful currency of Canada. SECTION 28. COMPLIANCE. The Consultant, to the extent permissible under applicable law, hereby covenants to cause the Designated Person to comply with all of the provisions of this Agreement. SECTION 29. LANGUAGE. The parties acknowledge that they have requested that this Agreement be drawn up in the English language only. Les parties reconnaissent avoir exige que cette convention soit redigee en anglais seulement. - 9 - 10 IN WITNESS WHEREOF, the parties-hereto have executed and delivered this Agreement as of the date first written above. ADVANCED ACCESSORY SYSTEMS CANADA INC./LES SYSTEMS D'ACCESSOIRE ADVANCED CANADA INC. By: --------------------------------------- Name: Title: LES PLACEMENTS JEAN MAYNARD INC. By: --------------------------------------- Name: Title: EX-10.17 24 EX-10.17 1 EXHIBIT 10.17 LEASE ----- THIS LEASE is made this 24th day of January, 1997, between VALLEY INDUSTRIES REALTY L.P., a Delaware limited partnership (hereinafter called the "Lessor") and VALLEY INDUSTRIES, INC., a Delaware corporation (hereinafter called the "Lessee"). WITNESSETH: ----------- ARTICLE I - GRANT AND TERM -------------------------- 1.1 Premises. In consideration of the rents, covenants and agreements herein contained, the Lessor hereby demises and leases unto the Lessee and the Lessee rents from the Lessor those certain parcels of land known for street location purposes as 32451 and 32501 DeQuindre Road, Madison Heights, Michigan and more fully described on the attached Exhibit A incorporated herein by this reference, along with all buildings, improvements and fixtures now or hereafter placed in or on the property and all rights, easements and appurtenances related thereto, which property is hereinafter referred to as the "Premises" or "Leased Premises". 1.2 Purpose and Term. The Leased Premises shall be used by the Lessee for office and manufacturing purposes. The term of this Lease shall commence on the date hereof and ending on the 31st day of December, 2002. A "Lease Year" shall mean a period of twelve (12) consecutive months commencing January 1st of each year and ending December 31st of such year. 1.3 Replacement Lease. This Lease shall replace and supercede that certain Lease between the Lessor and Lessee dated May 27, 1993 (the "Prior Lease") which related solely to the property located at 32501 DeQuindre Road in Madison Heights, Michigan. Notwithstanding the foregoing, the rights and obligations of the Lessor and Lessee under the terms of the Prior Lease as related to events, occurrences and conditions which occurred or otherwise arose during the term thereof. ARTICLE II ---------- RENT-TAXES-UTILITIES -------------------- 2.1 Minimum Rent. Lessee covenants and agrees with Lessor to pay as minimum rent (the "Minimum Rent") the sum of Twenty-One Thousand and 00/100 Dollars ($21,000.00) per month, subject to adjustment as set forth in Sections 2.4 and 2.5 hereof, payable at such address as Lessor shall designate, in advance, commencing on the date on which Lessor takes fee simple title to the Premises (the "Rent Commencement Date") and thereafter on the 1st day of each calendar month during the continuation of this Lease; provided, however, that if the Rent Commencement Date occurs other 2 than the first day of a calendar month, then the Minimum Rent Payment for the first month shall be prorated according to the number of days remaining in the first month. 2.2 Rent Tax and Real Estate Taxes. Lessee covenants and agrees to pay all real estate taxes and assessments due or to become due on the Leased Premises during the continuation of this Lease as and when such taxes and assessments become due and payable. Any sales, gross rental, net rental or other duly imposed tax which is measured by or imposed upon the rent and other charges herein provided to be paid to Lessor, shall be borne by Lessee, except that Lessee shall not thereby be required to pay any inheritance, franchise, income, personal property or similar taxes levied on the business or operation of Lessor. 2.3 Utilities. Lessee covenants and agrees with Lessor to pay for, as and when due, all electric current, all gas, all water charges, including sewer taxes, rentals and surcharges, and all rubbish removal charges, incurred in or related to the Leased Premises during the term of this Lease, at the rates of the utility company, municipality or other entity supplying the services and according to the rules, readings of the meters or submeters measuring the quantity furnished to the Leased Premises. Any failure to pay such utility charges within ten (10) days of the date they are due shall constitute a default by Lessee under the terms of this Lease. 2.4 Monthly Adjustments. The Minimum Rent due hereunder in respect of each month during the term of this Lease shall be subject to monthly adjustment (the "Monthly Adjustment") by an amount equal to the "Excess Interest." For purposes of this Lease, Excess Interest shall mean any interest payable by Lessor during the continuation of this Lease on any mortgage indebtedness encumbering the Leased Premises to the extent such interest payment exceeds an interest payment computed on a base rate of interest of nine percent (9%) per annum. Lessor shall notify Lessee in writing of any Monthly Adjustment and the Minimum Rent shall be increased by such Monthly Adjustment commencing with the next succeeding Minimum Rent payment and continuing thereafter. 2.5 Increased Annual Adjustment. The Minimum Rent due hereunder shall be further adjusted annually each Lease Year during the continuation of this Lease as follows: (a) On or before November 1st of each Lease Year, Lessor and Lessee shall use their best efforts to agree on the amount of increased rent, if any, to be paid by Lessee to Lessor during the next succeeding Lease Year. (b) If pursuant to paragraph (a) above, Lessor and Lessee fail to agree on an amount of increased rent, then the Minimum Rent due hereunder shall be increased annually as of January 1st of each Lease Year during the continuation of this Lease in proportion to the increase, if any, in the Detroit All Items Consumer Price Index for Urban Consumers ("CPIU - 1967 = 100") (the "Index") for the month of December of each year over the Index for the month of December of the immediately preceding year, In the event the Indexes for December are not available by January 1st, earlier corresponding monthly Indexes -2- 3 shall be used. In the event the Index is no longer available, the Lessee agrees to accept any rent increase based upon comparable statistics tending to fairly present such increases in the costs of living in the Detroit area calculated by the Lessor acting in good faith with respect thereto. One twelfth (1/12) of the increased annual rent, if any, as determined in this paragraph 2.5, shall be paid by Lessee to Lessor monthly during the Lease Year for which such increased rent is so determined, along with and in addition to the Minimum Rent, provided, however, that in no event and at no time during the continuation of this Lease, shall rent paid by Lessee to Lessor be less than the Minimum Rent. 2.6 Security Deposit. Lessee shall deposit with Lessor the additional sum of Ten Thousand Eight Hundred Seventy-Five and 00/100 Dollars ($10,875.00), receipt of which is hereby acknowledged by Lessor, as security for the full and faithful performance by Lessee of the terms, conditions, and covenants of this Lease on Lessee's part to be performed and kept and for the cost of any repair or correction of damage in excess of normal wear and tear. If at any time during the term hereof Lessee shall be in default in the payment of rent or other sums due hereunder, or any portion thereof, or of any other sums expressly constituting rent hereunder, Lessor may appropriate and apply any portion of the security deposit as may be necessary to the payment of the overdue rent or other sums due hereunder. If at any time during the term hereof Lessee should fail to repair any damage to the Premises that it is required to repair pursuant to the terms hereof, Lessor may appropriate and apply any portion of the security deposit as may be reasonably necessary to make such repairs. The security deposit or any balance thereof shall be returned without interest after the Lessee has surrendered the Premises in an acceptable condition (following a personal inspection by Lessor). If Lessor determines that any loss, damage, or injury chargeable to the Lessee hereunder exceeds the security deposit, the Lessor, at its option, may retain the said sum as liquidated damages or may apply the sum against any actual loss, damage, or injury and the balance thereof will be the responsibility of Lessee. Lessor's determination of the amount, if any, to be returned to the Lessee shall be final. It is further understood and agreed that the said security deposit is not to be considered as the last payment under the Lease. -3- 4 ARTICLE III ----------- POSSESSION, USE AND SURRENDER OF PREMISES ----------------------------------------- 3.1 Possession and Surrender. Lessee shall take possession of the Premises, in the condition in which they are at the beginning of the term, shall not permit the Premises to be vacant during the term, and at the end of the term shall deliver all keys to Lessor and leave the Premises broom clean and in as good condition as received and/or thereafter improved by Lessor, except for reasonable wear and tear, or damage arising from causes covered under standard policies of fire and extended coverage insurance. Lessee shall be obligated to remove any alterations or improvements to the Leased Premises done by Lessee upon the written request of the Lessor and Lessee shall repair any damage caused by such renewal. Any merchandise, material or waste left in the Premises or adjacent interior or exterior areas by Lessee after the end of the term may be summarily removed by Lessor without notice to Lessee, and Lessee agrees to reimburse Lessor for the cost of such removal. 3.2 Use of Premises. Lessee shall use and occupy the Premises in a safe and careful manner, conforming to good housekeeping practices in Lessee's trade or industry and to reasonable recommendations of the fire insurance underwriters insuring the Leased Premises. Lessee shall make all alterations or improvements to the Leased Premises, necessary and proper for the conduct of its business, in a good and workmanlike manner free of liens of contractors, materialmen or laborers. Any structural alterations or improvements shall be at Lessee's sole cost and expense and with the consent of the Lessor first obtained. Lessee shall conform to and obey all laws, ordinances, rules, regulations, requirements and orders of all governmental bodies or authorities respecting its use of the Premises. Lessee agrees not to use the Premises in any manner deemed specially hazardous because of fire risk or otherwise, or unless Lessor shall first consent in writing for any purpose other than hereinbefore stated. If Lessee installs equipment which unbalances or overloads electrical equipment or wiring in or about the Premises, Lessee shall correct such unbalanced or overloaded condition and replace equipment or wiring damaged at Lessee's own expense. If Lessee deposits grease, toxic materials or other substances in sewers or drains serving the Premises, Lessee shall have such sewers and drains cleaned at Lessee's expense as often as Lessor considers necessary for the continuous and unrestricted operation of such sewers. Lessee warrants that it shall not make any use of the Premises or any other portion of the Premises which may cause contamination of the soil, the subsoil, air, or ground water. Lessee shall keep and maintain the Premises in compliance with, and shall not cause or permit the Premises to be in violation of any federal, state or local laws, ordinances, rules or regulations pertaining to health, industrial hygiene or the environmental conditions on, under or about the Premises, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq. the Clean Air Act, 42 U.S.C. Section 7401 et seq., and such state counterparts or supplements as may from time to time be enacted, and all regulations pertaining thereto (herein collectively referred to as "Environmental Laws"). -4- 5 Lessee shall indemnify and hold harmless Lessor, its partners and their officers, employees, agents, successors and assigns from and against any and all loss, cost, damage, expense, liability and claims arising from Lessee's use of the Premises for the conduct of its business or from any activity, work or other things done or suffered by the Lessee in or about the Premises, specifically including any violation of any Environmental Laws. 3.3 Removal of Trade Fixtures. If Lessee be not in default hereunder, all trade fixtures and/or equipment installed in the Premises by Lessee may, and if Lessor so requests, shall, be removed at the end of the term; provided, however, that Lessee shall repair, at its own expense, any injury to the Premises resulting from such removal. If removed equipment includes lighting fixtures, Lessee shall restore and leave in operating order and with operating bulbs or tubes the equivalent of the lighting equipment in the Premises at the beginning of the term. ARTICLE IV ---------- MAINTENANCE OF THE PREMISES --------------------------- 4.1 Maintenance by Lessee. Lessee covenants and agrees to keep and maintain the Premises in good order, condition and repair, and, except as provided in Article 4.3, to promptly make all repairs or replacements becoming necessary during the term hereof including, but without limitation, repairs or replacements of windows, doors, glass (which shall be replaced with glass of the same size and quality), electrical, plumbing and sewage lines and fixtures within the Premises, and all heating, air conditioning and ventilating equipment and ducts and vents attached thereto, including any of such equipment which may, with Lessor's consent, be mounted on the roof of the Premises; all walls, floor covering, ceilings and roof and all fire extinguishers and building appliances of every kind. Lessee shall make no alterations in or to the Premises nor shall Lessee cause or permit any equipment or apparatus to be installed or put upon or through the roof, walls or floors of the Premises without, in each case, Lessor's prior written consent, which consent shall not be unreasonably withheld. Lessee shall at all times maintain sufficient heat in the Premises to prevent freezing of water lines. If Lessee installs or moves partitions or walls in the Premises, Lessee shall also make, at its own expense but subject to Lessor's approval, all additions to or changes in location of heating, plumbing, sprinkler or electrical equipment in the Premises made necessary by those installations. 4.2 Lessor's Right to Access. Lessee covenants and agrees to permit Lessor to enter the Premises at all reasonable or necessary times to examine their condition or to make repairs and improvements as provided hereunder. During the last six (6) months of the term of this Lease, Lessor shall have the right to show the Premises to prospective tenants at all reasonable times and to maintain a "for rent" sign on the exterior thereof. 4.3 Casualty Damage. Lessor and Lessee agree that if the Premises shall be materially damaged or destroyed by fire or other casualty covered under the policies of fire and extended coverage insurance on the Leased Premises, and such damage or destruction could reasonably be repaired within one hundred twenty (120) days from the happening thereof, then Lessee shall proceed with all reasonable speed to repair such damage or destruction and to restore the Premises as nearly as practicable to their condition immediately preceding such damage or destruction to the extent of the -5- 6 available net insurance proceeds and subject to the approval by Lessor of all plans and specifications for such repair. If the Premises cannot reasonably be restored within the number of days set forth above but can be restored within one hundred eighty (180) days, then Lessee may, but shall not be required to, restore the Premises in accordance with the foregoing. If Lessee does not elect to restore the Premises pursuant to the preceding sentence, then Lessor may, by prompt written notice to Lessee, elect to restore the Premises at its sole cost and expense using the net insurance proceeds to apply to the cost and expense necessary to restore the Premises. If neither party elects to restore the Premises, then this Lease shall terminate as of the date of such damage or destruction and both parties shall be released from further liability hereunder, without prejudice, however, to any rights accruing to either party prior to the date of such damage or destruction. If in any case Lessee elects or is required to restore the Premises and promptly commences and thereafter diligently pursues such restoration, this Lease shall not terminate, notwithstanding that the actual time required for such repairs or restoration may exceed that contemplated by the parties. The rent for the Premises during the time Lessee is deprived of possession on account of such damage or destruction or the repair or restoration thereof shall be abated on a per diem basis. 4.4 Liens. The Lessee shall not have the power to do any act or make any contract which may create or be the basis for any lien upon the interest, reversion or other estate of the Lessor in the Leased Premises and, as relates to construction, repairing, reconstruction, or the making of alterations or additions to the Leased Premises, by Lessee, it is expressly understood and agreed, and notice is hereby given, that no persons, firms, or corporations, furnishing labor, material, or services for such construction, repair, reconstruction, or the making of alternations or additions to the Leased Premises at any time during the term hereof shall have any lien upon the Lessor's interest in the Leased Premises or upon the appurtenances, equipment, machinery and fixtures thereof. If, because of any act or omission of Lessee or anyone claiming by, through, or under Lessee, any mechanic's or other lien or order for the payment of money shall be filed against the Leased Premises, or against Lessor (whether or not such lien or order is valid or enforceable as such), Lessee shall, at its own cost and expense, cause the same to be cancelled and discharged of record within thirty (30) days after the date of filing thereof, excluding any delay due to cause(s) beyond the control of Lessee, and shall also indemnify and save harmless Lessor from and against any and all costs, expenses, claims, losses or damages, including reasonable counsel fees, resulting therefrom or by reason thereof. -6- 7 ARTICLE V --------- INSURANCE AND LIABILITY ----------------------- 5.1 Indemnification and Insurance. Lessee covenants and agrees to indemnify and save Lessor free and harmless from and against any damage, loss or liability for injury to or death of persons and/or loss or damage to property, not compensated for by Lessor's insurance, occasioned by, growing out of, or arising or resulting from Lessee's default hereunder or from any act or omission of Lessee, its agents or employees. Lessee shall during the term hereof and at its own expense carry public liability insurance with at least $1,000,00.00 bodily injury and $500,000.00 property damage limits, with Lessor named as an additional insured, and a copy of such policy, or certificate thereof, shall be kept on deposit with Lessor. Lessee further covenants and agrees that during the term of this Lease it shall carry fire and extended coverage insurance on the Leased Premises at Lessee's expense, with companies qualified in the State of Michigan and approved by Lessor and any mortgagee of the Leased Premises, for the full insurable value of the building(s) and other improvements on the Leased Premises, naming the Lessor and any mortgagee of the Leased Premises as additional insureds. Lessee further agrees to exhibit such policies or certificates of such policies to Lessor and any mortgagee of the Leased Premises upon its request and agrees that such policies shall not be subject to cancellation unless sixty (60) days prior written notice of such cancellation is first provided Lessor and any mortgagee of the Leased Premises. 5.2 Lessor's Nonliabilitv. Lessor shall have no responsibility for the care or safety of merchandise or other property kept on the Premises by Lessee, and shall not be liable for any damage caused directly or indirectly by acts or omissions of others, or by water or steam leaking, escaping or bursting from any sprinkler equipment, water, steam or other pipes, washstands, tanks, water closets or sewers in, above, under, upon or about the Premises, or by water, snow or ice being upon or coming through the roof, skylights, windows, trapdoors or otherwise. 5.3 Mutual Waiver of Subrogation. To the extent they may do so without invalidating their respective policies of insurance, Lessor and Lessee each agree to and hereby do waive all rights of recovery and cause of action against the other for damage to property caused by any of the perils covered by any of their respective policies of insurance as now or thereafter in force, notwithstanding that any such damage or destruction may be due to the negligence of either party, or person claiming under or through them. 5.4 Limited Liability of Lessor. Lessee agrees to look solely to Lessor and Lessor's assets for the satisfaction of any claim, liability, or judgment obtained against Lessor and arising out of this Lease, and no partner of Lessor, whether general or limited, or his heirs, successors, personal representatives or assigns, shall have any personal liability or responsibility hereunder whatsoever. In the event of a sale of the Premises, or of the property in which they are contained, during the term, and an assumption by the purchaser of the Lessor's obligations hereunder, Lessor shall be immediately and automatically released from further liability under this Lease. -7- 8 ARTICLE VI EMINENT DOMAIN 6.1 Eminent Domain. Appropriation of all the Leased Premises shall terminate this Lease as of the date thereof. If part, but not all, of the Leased Premises be appropriated, and loss of the part appropriated would have a significant detrimental effect on Lessee's use of the Premises, then Lessee shall have the right to cancel this Lease by written notice to Lessor given within fifteen (15) days after such appropriation. Cancellation shall be as of the effective date of such appropriation. In the event Lessee elects to cancel this Lease pursuant to this Article 6.1, Lessee shall vacate the Premises as of the date the Premises are to be delivered to such appropriating agency or body and upon such vacation this Lease shall terminate. If Lessee does not exercise its cancellation right, Lessor shall, at the expiration of the fifteen (15) day period, proceed with all reasonable dispatch to repair any damage to the Premises caused by the appropriation, and Lessee shall be entitled to a reasonable adjustment in the rent accruing hereunder from the date of appropriation, proportionate to that part of the Premises so taken. 6.2 Allocation of Award. Lesee shall not be entitled to any part of an award or settlement of damages representing the value of land and building appropriated, or any estate therein, or damage to the residue of the Leased Premises or other property of Lessor, it being agreed that as between Lessor and Lessee any such award shall be the sole property of Lessor. However, in any condemnation proceeding, Lessee may claim and receive compensation from the condemning authority for damage to its fixtures, for the cost of removal and damage by reason thereof, and for any other loss or damage it may suffer by reason of the appropriation. No appropriation of part or all of the Leased Premises, or cancellation of this Lease pursuant to this Article shall be deemed an eviction of Lessee, or a breach of any covenant of Lessor hereunder. 6.3 Rent Reduction. For purposes of this Article, the terms "appropriation" or appropriated" shall mean a taking in condemnation proceedings by right of eminent domain, or a conveyance by Lessor to a public or quasi-public authority under threat of condemnation, and the date of appropriation shall be the date on which any such event occurs. Where a rent adjustment is provided for in this Article, the amount of the reduction shall be determined by agreement between Lessor and Lessee, or if they are unable to agree within thirty (30) days after appropriation, shall be determined by an arbitrator appointed under the rules of the American Arbitration Association, as then in effect. Ihe decision of such arbitrator shall be final and binding on the parties and the expense of arbitration shall be borne by them equally. -8- 9 ARTICLE VII DEFAULT BY LESSEE 7.1 Default by Lessee. If Lessee shall at any time be in default in the payment of rent or other charges or in the performance of any of its agreements hereunder, and if such default relates to the payment of money, shall fail to remedy it within ten (10) days after written notice from Lessor, or if the default relates to matters other than the payment of money, fails to commence to remedy it within thirty (30) days after written notice from Lessor and thereafter diligently to pursue correction thereof, or if a receiver of any property of Lessee on the Premises be appointed, or Lessee's interest in the Premises is levied upon by legal process, or Lessee be adjudged bankrupt, and Lessee fails within thirty (30) days to commence, and thereafter diligently to pursue proceedings for the vacation of such appointment, levy or adjudication, or if Lessee shall dispose of all or substantially all of its assets in bulk, or make an assignment for the benefit of its creditors, then, and in any such instance, without further notice to Lessee, Lessor may enter upon the Premises notwithstanding the provisions of this Lease, and in the event of such entry, Lessor may either: (a) Terminate this Lease, in which event the obligations of Lessee hereunder shall cease, without prejudice however to the right of Lessor to recover from Lessee for rent or otherwise to the date of entry, and in addition, as liquidated damages, a sum equal to any deficiency between the then rental value of the Premises for the unexpired portion of the term and the rent provided for that period, discounted at four per cent (4%) per annum to present net worth, plus the reasonable estimated expenses of reletting. If Lessee be adjudicated a bankrupt, Lessor shall in lieu of such liquidated damages be allowed a claim in the bankruptcy proceeding for future rent to the extent permitted by bankruptcy laws; or (b) Enter upon the Premises without terminating this Lease and relet them in its own name for the account of Lessee for the remainder of the term (and thereafter for its own account) at the highest rent then attainable, and make such alterations and repairs as may be necessary to effect reletting, and immediately recover from Lessee any deficiency for the balance of the term between the amount for which the Premises were relet and the rent provided hereunder discounted at four per cent (4%) per annum to present net worth plus any expense of reletting or alteration. Upon any such entry, Lessor may remove all persons and property from the Premises, and such property may be removed and stored at a public warehouse or elsewhere at the cost of and for the account of Lessee, all without service of notice or resort to legal process (all of which Lessee expressly waives), and without being deemed guilty of trespass, or becoming liable for any loss or damage which may be occasioned thereby. Upon default by Lessee, Lessor shall have a lien for the payment of all -9- 10 sums agreed to be paid by Lessee hereunder upon all Lessee's property and Lessee agrees to execute and deliver such financing statements as may be required by law to confirm and perfect such lien. ARTICLE VIII MISCELLANEOUS 8.1 Quiet Enjoyment. Lessor covenants and agrees that if Lessee pays the minimum and additional rent and other charges herein provided, and performs all the covenants and agreements herein stipulated to be performed on Lessee's part, Lessee shall, at all times during the term, have the peaceable and quiet enjoyment and possession of the Premises without any manner of hindrance from Lessor or from any other persons except as to any portion of the Premises that may be taken by eminent domain. 8.2 Assignment and Subletting. Lessee shall not, in each instance, (i) assign, convey, mortgage or hypothecate this Lease or any interest therein; (ii) allow any transfer hereof or any lien upon Lessee's interest by operation of law; (iii) sublet or license the Premises or any part thereof; or (iv) permit the use or occupancy of the Premises or any part thereof by anyone other than Lessee or for any purpose other than as provided herein. Any transfer of this Lease by merger, consolidation or liquidation, or by any change in ownership or power to vote a majority of its outstanding voting stock to a surviving corporation or continuing corporation with a net worth of less then Five Million Dollars ($5,000,000) shall constitute an assignment for purposes of this Lease. Consent to any such assignment, conveyance or subletting by Lessor shall not operate as a waiver of the necessity for a consent to any subsequent assignment, conveyance or subletting and the terms of such consent shall be binding upon any person holding by, under or through Lessee. Any such consent shall not relieve Lessee from liability hereunder for the payment of rental or performance or observance of any of the terms and conditions of this Lease. 8.3 Short Form Lease. This Lease shall not be recorded, but upon the request of Lessee, Lessor shall execute a short form or memorandum thereof for recording purposes which shall contain sufficient information to protect the leasehold estate of Lessee. 8.4 Subordination and Offset Certificate. Lessee covenants and agrees, within ten (10) days after Lessor's written request, to execute and deliver to Lessor: (a) Any documents necessary to subordinate this Lease to the lien of any mortgage Lessor desires to place on the Premises, provided the mortgagee agrees to allow Lessee to remain in possession provided Lessee is not in default under the terms of this Lease, and/or (b) A certificate to any proposed mortgagee or purchaser of the Premises certifying that this Lease is in full force and effect and that there are no defenses or offsets thereto on Lessee's part, if such be the case, or if not, stating those claimed by Lessee, and stating the date to which rent has been paid. -10- 11 8.5 Relationship of Parties. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent or of partnership, or of joint venture, or of any association whatsoever between Lessor and Lessee, it being expressly understood and agreed that neither the computation of rent nor any other provisions contained in this Lease, nor any act or acts of the parties hereto, shall be deemed to crete any relationship between Lessor and Lessee other than the relationship of landlord and tenant. 8.6 Holding Over. If Lessee shall remain in possession of all or any part of the Premises after the expiration of the term of this Lease or any extension or renewal thereof, then Lessee shall be deemed a Lessee of the Premises from year to year. Any holding over by Lessee shall be upon and subject to all of the terms and conditions of this Lease except as to the term of this Lease and rent for the period of such hold over tenancy shall be at the highest rate payable for any portion of the term. 8.7 No Waiver. No receipt of money by Lessor from Lessee with knowledge of the breach of any covenants of this Lease, or after the termination hereof, or after the service of any notice, or after the commencement of any suit, or after final judgment for possession of said Premises shall be deemed a waiver of such breach, nor shall it reinstate, continue or extend the term of this Lease or affect any such notice, demand or suit. No consent or waiver, express or implied, by Lessor to or for any other breach of any covenant, condition, or duty of Lessee shall be construed as a consent or waiver to or for any other breach of the same or any other covenant, condition or duty to be observed by Lessee. 8.8 Notices. Any notice required or permitted to be given to Lessee hereunder shall be sufficiently given if in writing, addressed to Lessee, and mailed certified mail, return receipt requested, to such address as Lessee may from time to time designate for that purpose in writing to Lessor, or in the absence of designation, left on the Premises. Any notice required or permitted to be given to Lessor hereunder shall be deemed sufficiently given if in writing, addressed to Lessor, and mailed certified mail, return receipt requested, or delivered to Lessor c/o Charles J. O'Toole, Esq., 1100 Huntington Building, Cleveland, Ohio 44115 or to such other address as Lessor may from time to time designate in writing to Lessee for that purpose. 8.9 Lessor's Consent. With respect to any consent of Lessor required under the terms of the Lease, Lessor agrees that its consent shall be in writing and not be unreasonably withheld. 8.10 Force Majeure. Except with respect to payment of rent, taxes, charges for utilities and insurance premiums, in the event that either party hereto shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of strikes, lockouts, inability to procure materials, failure of power, restrictive governmental laws or regulations, riots, insurrection, war or any other reason of a like nature not the fault of the party delayed in performing work or doing any act required under the terms of this Lease, then performance of such act shall be excused from the period of the delay and the period of the performance of any act shall be extended for a period equivalent to the period of such delay. -11- 12 ARTICLE IX ---------- SPECIAL PROVISIONS ------------------ 9.1 Parties and General Definitions. This Lease and all the covenants, provisions, and conditions herein contained shall inure to the benefit of and be binding upon the heirs, successors, and assigns of the parties; provided, however, that no assignment by, from, through or under Lessee in violation of any of the provisions hereof, shall vest in the assignee any right, title, or interest whatever. Neuter pronouns shall be read as masculine or feminine, and words in the singular person as plural, if the nature or number of the parties require. The word "term" when used to refer to the period for which the Premises are let and leased, including any period of holding over. Paragraph headings are for convenience only, and their presence or absence shall not be considered in the interpretation of this Lease. 9.2 Attorney's Fees. In the event it becomes necessary, for purposes of enforcing the terms of this Lease, for either Lessor or Lessee to institute an action at law or otherwise commence legal proceedings against the other, then, at all trial and appellate levels respecting such proceedings, the prevailing party shall be entitled to costs and attorney's fees from the other. 9.3 Governing Law and Venue. This Lease shall be construed in accordance with the laws of the State of Michigan and venue shall lie in Oakland County, Michigan. IN WITNESS WHEREOF, this instrument has been executed by Lessor and Lessee as of the day and year first above written. Signed and acknowledged VALLEY INDUSTRIES REALTY L.P., in the presence of: a Delaware limited partnership By: FISHER FINANCIAL SERVICES CORP. General Partner [SIG] By [SIG] - ---------------------------- ----------------------------- [SIG] Its Secretary - ---------------------------- ---------------------------- Lessor VALLEY INDUSTRIES, INC. [SIG] By [SIG] - ---------------------------- ---------------------------- [SIG] Its VP-Finance & Administration - ---------------------------- ---------------------------- Lessee -12- 13 STATE OF OHIO ) ) SS. COUNTY OF CUYAHOGA ) BEFORE ME, a Notary Public in and for said County and State, personally appeared VALLEY INDUSTRIES REALTY L.P., a Delaware limited partnership, by Charles J. O'Toole, the Secretary of FISHER FINANCIAL SERVICES CORP., the general partner of said partnership, who acknowledged that he did sign the foregoing instrument and that the same is his free act and deed and the free act and deed of said partnership. IN WITNESS WHEREOF, I have hereunder set my hand and official seal at Cleveland, Ohio this 23rd day of January, 1997. [SIG] -------------------------- Notary Public STATE OF MICHIGAN ) ) SS. COUNTY OF OAKLAND ) BEFORE ME, a Notary Public in and for said County and State, personally appeared VALLEY INDUSTRIES, INC., a Delaware corporation, by Mark S. Moriary, its VP-Finance & Admin, who acknowledged that he did sign the foregoing instrument and that the same is his free act and deed and the free act and deed of said corporation. IN WITNESS WHEREOF, I have hereunder set my hand and official seal at Madison Heights, Michigan this 24th day of January, 1997. Tracey M. Besola --------------------- Notary Public This instrument prepared by: TRACEY M. BESOLA Michael E. Elliott (Ohio Bar 0018761) NOTARY PUBLIC - MACOMB COUNTY, MI ARTER & HADDEN MY COMMISSION EXPIRES 09/27/99 1100 Huntington Building Cleveland, Ohio 44115 (216) 696-1100 205524.la -13- EX-10.18 25 EX-10.18 1 EXHIBIT 10.18 ADDENDUM TO SUBLEASE MADE AS OF JULY 2, 1997 (the "Sublease") BETWEEN BELL SPORTS CANADA INC. ("Sublessor") AND SPORTRACK INTERNATIONAL INC. (previously known as ADVANCED ACCESSORY SYSTEMS CANADA INC.) ("Sublessee") Reference is hereby made to that certain Sublease agreement dated July 2, 1997 between Bell Sports Canada Inc. and Advanced Accessory Systems Canada Inc. (hereinafter the "Sublease"). All defined terms used herein shall have the meanings ascribed thereto in the Sublease. The parties hereby agree to amend the Sublease as follows: 1.0 The Gross Leasable Area of the Sublease Area shall be 65,074 square feet situated on the ground floor. 1.1 The Gross Leasable Area of the Sublease Area shall be made up of the following areas:
a. Factory 46,772 sq. ft. b. Office Space (as presently occupied) 3,008 sq. ft. c. Cafeteria (Pro Rata Share) 1,149 sq. ft. d. Compressor (Pro Rate Share) 229 sq. ft. e. Tool Room 340 sq. ft. f. Holding Area 2,400 sq. ft. -------------- Subtotal A 53,898 sq. ft. f. New Distribution Centre 11,176 sq. ft. -------------- Subtotal B 11,176 sq. ft. -------------- Total Gross Leasable Area 65,074 sq. ft. ==============
2 2.0 The total basic rent per annum for the Subleased area shall be $254,510.39 plus GST and QST calculated on the basis of total Gross Leaseable Area (as set out above) on the following square footage rental charges. The rent is payable in equal consecutive monthly installments of $21,209.20 plus GST and QST due on the first day of each month in advance. a. Factory $3.64/sq. ft. $170,250.08 b. Office Space $3.64/sq. ft. $ 10,949.12 Leasehold Improvement fee $2.76/sq. ft. $ 8,302.08 c. Cafeteria $3.64/sq. ft. $ 4,182.36 Leasehold Improvement fee $3.07/sq. ft. $ 3,527.43 d. Compressor Room $3.64 sq. ft. $ 833.56 e. Tool Room $3.64 sq. ft. $ 1,237.60 f. Holding Area $3.64 sq. ft. $ 8,736.00 g. New Distribution Centre $4.16 sq. ft. $ 46,492.16 ----------- Total basic rent per annum $254,510.39 ===========
2.1 In the event that the Sublease is extended beyond June 30, 1998 and for each of the successive lease years thereafter the basic rent will be increased as set out in Article III, section 3.1.2 of the Lease. 2.2 In the event that the Sublease extends beyond December 31st, 2003 the Leasehold Improvement fees of $2.76 and $3.07 per square foot shall be canceled effective December 31, 2003. 3.0 In addition to the basic rent as set out in 2.0 and 2.1, the Sublessee shall pay to the Sublessor operating costs fixed at the sum of $1.12 per square foot for the total Gross Leasable Area of Subleased Area. This annual operating cost of $72,882.88 plus GST and QST shall be payable in equal consecutive monthly installments of $6,073.57 plus GST and QST due on the first day of each month in advance. 3.1 In the event that the Sublease is extended beyond June 30, 1998 and for each of the successive lease years thereafter the operating costs will be adjusted to reflect the actual increases of such operating costs to the Sublessor including business taxes (based on the value of the entire Leased Premises as assessed by the city of Granby), utilities, maintenance, etc. Within thirty (30) days following the commencement of any renewal period the Sublessor shall deliver to the Sublessee an estimate as to operating costs for such renewal period taking into account any increase as herein provided. The Sublessee 3 shall pay to the Sublessor operating costs fixed in accordance with such estimate which such estimate shall be reasonable in all regards. In the event that the city of Granby directly charges the Sublessee its share of the business taxes for the total Gross Leasable Area of the Subleased Area instead of charging the Sublessor for the entire Leased Premises as set out in the Lease, the Sublessor agrees to exclude the business taxes portion of the operating costs chargeable to the Sublessee. 3.2 The operating costs cover business taxes, utilities (e.g. hydro, water, gaz, etc.), building maintenance (internal and external) including but not limited to snow removal, grass cutting, landscaping, office cleaning, general garbage pickup (not including compactor charges or compactor garbage pickup), general repairs needed to the building, general repairs to the alarm system, repair to the air conditioning, ventilation and heating, and repairs to the compressors, transformers, electrical wiring and air lines. 4.0 The term of the Sublease shall begin from the Effective Time and expire on June 30, 1998. 4.1 The Sublease will be renewed for a further term of twelve (12) months from the date of expiration under the same terms and conditions of the existing Sublease as they exist on the date of expiration. Notwithstanding the foregoing, each of the Sublessee and Sublessor may terminate the Sublease or any renewal thereof by giving twelve (12) months prior written notice to the Sublessor or Sublessee as the case may be in which event the Sublease shall terminate twelve (12) months following the date of receipt of such notice. Written notice shall be hand delivered to Al McCaughen or Josh Greenberg if such notice is coming from the Sublessee and hand delivered to Jean Maynard or Richard Bedard if such notice is coming from the Sublessor. 5.0 The Sublessor and Sublessee agree to share on a pro rata basis of 2/3 and 1/3 respectively the costs of mail delivery and pickup, a receptionist, and the following office supplies: coffee and all coffee supplies such as cream, sugar, cups, etc., water, soap, toilet paper, paper towels for washrooms. 6.0 The Sublessor agrees to move the compactor to the Sublessor's manufacturing area at its own expense and costs. The Sublessee agrees not to use such compactor after it has been moved and agrees to make all arrangements by the time the compactor is moved to obtain a compactor for its own use including the equipment and periodic pick up all at its own expense and costs. 7.0 The Sublessor agrees to provide Sublessee 17 parking spaces in front of the building beginning from the north side of the main entrance doors and extending to the north end of the parking lot to be used for parking only of its employees and visitors without additional charge. The Sublessor shall use the remaining parking spaces beginning directly in front of the door and extending to the south end of the parking lot to be used only for its employees and visitors. 4 7.0.1 The Sublessee shall have the right at its own expense to affix a door to an opening of the drilling area and lock same door only after regular business hours and on weekends provided that the door is approved by the Sublessor prior to being affixed and that a key for the lock of same door be given to the Sublessor. The Sublessor shall have unrestricted access to the drilling area during regular business hours, and at other times upon prior request to the Sublessee, which request shall not be unreasonably withheld by the Sublessee. 7.0.2 The Sublessee shall have the right at its own expense to erect walls to close off the foam weighing area in a manner agreeable to the Sublessor subject to Article X of the Lease. The Sublessee shall also have the right at its own expense to extend the second floor, presently over the drilling area, over the foam weighing area at the same height and specification as the existing second floor subject to Article X of the Lease. 7.0.3 The Sublessee shall have the right at its own expense to make any improvements, alterations, additions or repairs to the Subleased Area subject to Article X of the Lease. 8.0 Throughout the term of this Sublease and any renewal thereof, Sublessee shall take out and keep in force: 8.0.1 comprehensive general liability insurance with respect to the business carried on in or from the Subleased Area and the use and occupancy thereof for bodily injury and death and damage to property of others in an amount of at least two millions dollars (2,000,000$) for each occurrence or such greater amount as Sublessor may from time to time reasonably require; 8.0.2 all risks insurance including the perils of fire, extended coverage, leakage from sprinkler and other fire protective devices, earthquake, collapse and flood in respect to furniture and other movables, equipment, inventory, securities and stock-in-trade, fixtures and leasehold improvements located within the Subleased Area and such other property located in or forming part of the Subleased Area, including all mechanical or electrical systems (or portions thereof) installed by Sublessee in the Subleased Area, the whole for the full replacement cost (without depreciation) in each such instance; 8.0.3 if any boiler or pressure vessel greater than fifteen (15) pounds of pressure is operated in the Subleased Area, boiler and pressure vessel insurance with respect thereto; 8.0.4 such additional insurance as Sublessor may request following a request to this effect by a lending institution or any other event; 8.1 All policies of insurance shall: 8.1.1 be in form satisfactory to Sublessor; 5 8.1.2 be placed with insurers reasonably acceptable to Sublessor; and 8.1.3 provide that they will not be canceled or permitted to lapse unless the insurer notifies Sublessor and its Landlord in writing at least thirty (30) days prior to the date of cancellation or lapse. Each such policy shall name Sublessor and its Landlord and the hypothecary creditor that the Sublessor may designate as additional named insured as its interest may appear. Each comprehensive general liability insurance policy will contain a provision of cross-liability or severability of interests as between Sublessor and Sublessee. All other policies referred to above shall contain a waiver of subrogation rights which Sublessee's insurers may have against Sublessor, Sublessor's insurers and persons under Sublessor's care and control. Sublessee hereby releases and waives, and will hold the Sublessor harmless, any and all claims against Sublessor and those for whom Sublessor is in law responsible with respect to occurrences required to be insured against by Sublessee hereunder, provided that the Sublessee shall retain its recourses against the Sublessor to the extent that any claim of the Sublessee is not covered by its insurance policies as herein stipulated, and to the extent it should not have been covered pursuit to this Sublease. Sublessee shall from time to time furnish Sublessor with certified copies of all such insurance policies or certificates thereof and the renewals thereof. 8.2 Sublessee agrees that should the Sublessee fail to take out or keep in force such insurance, Sublessor will have the right to do so and to pay the premiums therefor and in such event Sublessee shall repay to Sublessor on demand the amount paid as premiums. 9.0 The Sublessee agrees that its employees who wish to smoke will be restricted to smoking in their own offices, if they have an office, or in the cafeteria, if they do not have an office. 10.0 Sublessee agrees to defend, indemnify, and hold harmless Sublessor from and against any and all losses, damages, costs, claims, lawsuits, judgments, settlements and expenses including without limitation attorney's fees and court costs resulting from or in connection with any breach of this agreement by the Sublessee or any actions or omissions by the Sublessee, its directors, officers, employees, agents and other persons for which it is at law responsible. 11.0 Sublessor agrees to defend, indemnify, and hold harmless Sublessee from and against any and all losses, damages, costs, claims, lawsuits, judgments, settlements and expenses including without limitation attorney's fees and court costs resulting from or in connection with any breach of this agreement by the Sublessor or any actions or omissions by the Sublessor, its directors, officers, employees, agents and other persons for which it is at law responsible. 6 12.0 The Sublessor agrees and accepts to provide the Sublessee free usage and utilization of the following equipment a) compressor b) alarm system c) shipping doors #9 and #10 13.0 The Sublessor agrees and accepts that the Sublessee shall be allowed to post a sign or billboard on the exterior of the leased premises in conformity with zoning and municipal by-laws.. 14.0 The Sublessor agrees that the Sublessee shall have access at all times to its premises, without restrictions from the Sublessor. 15.0 If during the term of the Sublease, the building is completely or partially destroyed or damaged by fire or other cause and that destruction or damage prevents the Sublease to carry out business in the ordinary course for a period of three months or more, the Sublessee shall have the right to cancel the lease without having to pay compensation to the Sublessor, the whole with effect as of the date of such damage or destruction. Notwithstanding such right of cancellation, the Sublessee shall be responsible for such damage or destruction if the damage or destruction is determined to be caused by the Sublessee, its directors, officers, employees, agents and other persons for which it is at law responsible, through their actions, omissions, negligence or other. 16.0 The parties hereby agree that the provision of Article XX of the Lease shall apply to this Sublease, mutatis mutandis, provided however that section 20.1.8 shall be amended by inserting at the end of the phrase, "following written notice of 15 days." All of the terms and conditions of the Sublease shall remain in full force and effect as amended hereby. Signed this 23rd day of October, 1997, in the city of Granby, Quebec Sublessor Sublessee Bell Sports Canada Inc. SportRack International Inc. per: /s/ Al McCaughen per: /s/ Jean Maynard ---------------------------- -------------------------- Al McCaughen, President Jean Maynard, President EX-10.19 26 EX-10.19 1 EXHIBIT 10.19 LEASE AGREEMENT 1. The Property: Part of Fregatten 20, as appears from Exhibit 1 hereto. Address: Industrigatan 10, Vanersborg 2. Landlord: VBG Produkter AB, corporate registration number 556069-0751 3. Tenant: VBG Towbars AB, corporate registration number 556259-0298 4. Purpose: The Tenant shall use the rented property for industrial and office purposes. 5. Term of the Lease: From the Closing Date of the Principal Agreement entered into on this day between the Landlord and Brink B.V. until 31 May 2001. 6. Prolongation: The term shall be prolonged for further consecutive periods of 36 months each unless this Agreement is terminated by either party giving written notice to the other party not later than 9 months before the expiry of the term. 7. The Rent: The rent shall be SEK 2.000.000 per annum, payable quarterly in advance. The first rent shall cover the period from the commencement of the Term of the Lease set forth in 5 above until 2 2 June 30, 1994. The first rent shall be paid not later than ten days after the commencement of the Term of the Lease. The rent shall be adjusted annually in accordance with the following index formula: 50 per cent of the rent SEK 2.000.000 be adjusted for each period of the term of the lease of 12 months, such first term to commence on 6 June 1995. The said portion of the rent shall be adjusted in accordance with the changes of the Swedish Consumer Price Index of the year 1980 using the said index as per the month of the commencement of the Term of the Lease as the base index. In the event that the Consumer Price Index, during any of the said 12 months periods commencing after 6 June 1995, has changed by more than three units compared to the said base index, the said portion of the rent shall be adjusted by the percentage of the said change. The rent adjusted as aforesaid shall apply as from the first day of the fourth month following the 12 months period giving rise for the adjustment. 3 3 8. VAT: The rent does not include VAT, which shall be paid in excess of the rent. 9. Maintenance and repair: The Landlord shall be responsible for providing all necessary heating and ventilating of the rented property as well as for the supply of water, hot water and sewage. However, the Tenant shall bear all costs therefore. The Tenant shall at its own cost be responsible for providing electricity and for cleaning and collecting garbage. Whenever necessary the Tenant shall sand traffic areas and side walks. The Landlord shall at all times and at its own expense insure that the external of the rented property are properly maintained and repaired and in good operational condition. The Tenant shall be responsible and bear the costs for the inside maintenance of the rented property. 10. Insurance: The Landlord shall keep the rented property fully insured. 11. New taxes: Should the rented property become subject to a real estate tax not applicable at the date of the commencement of the Term of the Lease (other than income tax or VAT levied on the rent) the Tenant shall accept an increase of the rent by such portion 4 4 and during such period in time the tax is applicable to the rented property and is paid by the Landlord. 12. Sub-lease: The Tenant shall not be entitled to sub-lease the property or part of it without written permission thereto from the Landlord. 13. Collateral: In the event that Brink B.V. as a result of its option under the Principal Agreement referred to in 5 above becomes the owner of all shares of the Tenant the Tenant shall as collateral for its obligation to pay rent hereunder pledge to the benefit of the Landlord chattel mortgages of the businesses of the Tenant of SEK 1.000.000 within SEK 11.000.000 (Fore- tagshypotek a SEK 1.000.000 inom SEK 11.000.000). Such pledge shall be made 30 days after Brink B.V. has become the owner of all shares of the Tenant. Date: 25/5 1994 Place: Staphorst, NL LANDLORD TENANT VBG PRODUKTER AB VBG TOWBARS AB [SIG] [SIG] - --------------------------- ----------------------- EX-10.20 27 EX-10.20 1 EXHIBIT 10.20 LEASE AGREEMENT FOR COMMERCIAL USE With this confidential document, of which three copies shall be made, one for each of the parties and one to be registered, between the following parties: ELLEBI S.p.A., with headquarters in Reggio Emilia (RE) - Via Strada Statale 63, No. 189, district of S. Vittoria, C.F. (tax code) and P.I. 00356930354, here represented by the Legal Representative Mr. VITTORIO BENAGLIA, born in Gualtieri (RE) on Feb. 3, 1931, Tax Code BNGVTR31B03E2321, hereinafter referred to as the "Lessor"; and BRINK ITALIA S.r.l, with headquarters in Milano (MI) - Piazza Meda No. 5, C.F. (tax code) 12212400159, represented by its Deputy Administrator, Mr. Jan Wellem Rengelink, born in ____________________on______________19__, C.F., ____________, hereinafter referred to as the "Lessee": THE FOLLOWING IS AGREED TO AND STIPULATED: 1) The above-mentioned ELLEBI S.p.A. company grants the use of the following real properties to BRINK ITALIA S.r.l., which accepts and promises to lease them: a) A complex located in Gualtieri (RE), Santa Vittoria district, Via Strada Statale 63 No. 189-consisting of an industrial building, a two-story office building, and a meeting room, for a total of approx. 16,000 square meters, in addition to the boiler and storage rooms, covered parking and a court area. The complex, registered in the urban building cadastre on Page 31, maps 53, 309 and 310 (previously maps 3956, 8225, and 8226), 1 2 is bounded to the south by Pellegrini company holdings; to the north and east, by ELLEBI S.p.A. (surplus agricultural lands owned by the company); and to the west, by state road Statale 63; b) A complex located in San Giacomo di Guastalla (RE) - Via De Gasperi No. 17-consisting of an industrial building with a total area of approx. 10,000 square meters, an electrical equipment room, covered parking and a court area. The complex, registered in the urban building cadastre on Page 44, maps 159 sub 1-2-3-4-5, is bounded to the east by other lands owned by ELLEBI S.p.A. (industrial area, currently meadowland); to the north, by Via Togliatti; to the south, by Via de Gasperi; and to the south, by Via Morandi. 2) The length of the lease is set for a term of 6 (six) years starting from 01/01/1998, unless one of the two parties gives notice of termination by means of a registered letter sent at least 1 year before the lease expiration date. At the end of the first term on 12/31/2003, the Lessor shall be able to deny renewal of the lease only for the reasons described in article 29 of law L.27.07.78 no. 392. Early termination is expressly excluded, except as specified in the last clause of article 27, law L.392/78. 3) The annual rental charge (aside from the increment described in article 4) shall be Lire 1,000,000,000 (one billion) per annum plus IVA tax, to be paid in quarterly installments, in advance, at a financial institution designated by the Lessor. The parties agree that for the first 6 (six) years of the lease, the rent shall be reduced to the annual amount of Lire 750,000.000. 2 3 4) The above-described lease payment shall be automatically increased every year starting from the beginning of the second year of the lease, by the maximum percentage permitted by the laws currently in force. The entire annual adjustment shall be paid as one single payment by the 1st of July of each year of the lease. 5) Upon the signing of this Agreement, the Lessee shall pay to the Lessor a deposit in the amount of Lire 200,000,000 (two hundred million) which will be refunded at the expiration of the lease, after the property is returned normally to the Lessor. 6) Failure to pay the rental charge, even partially, within the provisions of the law and to the registered office of the Lessor, as well as illegal subletting or changes in the stated use of the premises, will ipso jure result in the termination of the Agreement by fault of the Lessee, without prejudice to the obligation to pay the amount due and damage compensation to the Lessor, in conformity with article 1456 of the civil code. Each time the payment is late more than one month, the Lessee shall pay interest as agreed; the amount shall be one third higher than the average overall effective rate calculated in the previous trimester, according to law L. 07.03.96 no. 108, starting on the day after the payment due date, without falling into arrears. 7) The premises are leased for industrial use; the Lessee is forbidden to change the stated use, even temporarily. In addition, the Lessee shall not sublet all or part of the premises, not even free of charge, without written permission by the Lessor. The Lessor's silence regarding, or acquiescence to, 3 4 changes in the agreed use and any transfer or subletting, shall be construed solely as tolerance without any favorable effects accruing to the Lessee. Any activity which involves direct contact with the users or final consumers is specifically prohibited. 8) The Lessee shall take custody of the leased premises and shall assume responsibility for any direct or indirect damages arising from the use of the leased premises, even when the damages involve a third party, therefore exonerating the Lessor. The Lessee shall not undertake any alteration, remodeling, addition or improvement, nor replace equipment without prior written approval of the Lessor. The Lessor shall have the right to retain any of the above without obligation to pay any indemnity or compensation. The Lessor's explicit waiver of any additions or improvements shall obligate the Lessee, to restore the premises to their original conditions, at the Lessee's expense, even during the term of the lease. 9) The Lessee shall be responsible for maintenance, within the limits of and in conformity with current legal regulations. In the event the Lessee does not perform maintenance in a timely manner, the Lessor will take over for the Lessee. The related costs shall be reimbursed by the Lessee within ten days of the completion of the work; otherwise, an amount equal to the costs incurred by the Lessor shall be withdrawn from the deposit, and the Lessee shall immediately replace said amount. 10) The Lessee has the obligation to observe, and ensure that its employees observe, a good neighbor policy and to not generate irritating noise. The Lessee is prohibited to act or behave 4 5 in a manner which could cause annoyance. 11) During the term of the lease the Lessor or his representative shall have the right to inspect, or cause to be inspected, the leased premises, after written notification, in order to verify the way the premises are used or to check the equipment, within the limits specified by the uses of the premises and by current regulations, and taking into account the needs of the Lessee. 12) The Lessee declares that, having examined the leased premises and having found them to be suitable for his purposes, in good conditions and free of problems which could affect the health of the occupants, shall take full possession upon delivery of the keys becoming therefore the custodian of said premises. In addition, the Lessee promises to return the premises in the same conditions at the expiration of the lease, except for normal wear and tear due to ordinary use. 13) The Lessee shall assume the obligation to purchase from a major insurance company, at his own expense, insurance policies relevant to his role of tenant. The amount of such policies shall be equal to the market value of the leased premises; in the event of a disagreement, the market value shall be determined by an expert designated by the Presiding Judge of the Tribunal of Reggio Emilia. The Lessor shall be named as beneficiary of said policy, and the Lessee shall ensure that it remains in effect by paying the premiums regularly, until the lease expires. 14) For topics not covered in this Agreement, refer to the provisions of the law. 15) This Agreement cannot be altered in any way except in writing. 5 6 16) This Agreement shall be liable to registration at a fixed tax rate because the contractual payments are subject to the IVA tax in conformity with the law; registration expenses shall be split equally between the Lessor and the Lessee, but the Lessee shall be officially responsible for obtaining the registration. 17) As required, the parties declare that with this Agreement even the terms that are in departure from the provisions of law L.392/78 have been settled. Milano, this ______________day of__________________199_ Lessor Lessee for ELLEBI S.p.A. For BRINK ITALIA S.r.l. The Chairman of the Board The Deputy Administrator (Vittorio Benaglia) (Jan Willem Rengelink) 6 EX-10.21 28 EX-10.21 1 Exhibit 10.21 ================================================================================ REGISTRATION RIGHTS AGREEMENT among ADVANCED ACCESSORY SYSTEMS, LLC, AAS CAPITAL CORPORATION, THE GUARANTORS NAMED HEREIN and CHASE SECURITIES INC. and FIRST CHICAGO CAPITAL MARKETS, INC. DATED OCTOBER 1, 1997 ================================================================================ 2 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is dated as of October 1, 1997, by and among ADVANCED ACCESSORY SYSTEMS, LLC, a Delaware limited liability company (the "Company"), AAS Capital Corporation ("Capital Corp."), a newly formed Delaware corporation and each of the Company's subsidiaries formed or acquired after the Closing Date required to become a guarantor hereunder, the "Guarantors," and, together with the Company and Capital Corp. the "Issuers", and CHASE SECURITIES INC. and FIRST CHICAGO CAPITAL MARKETS, INC. (the "Initial Purchasers"). This Agreement is entered into in connection with the Purchase Agreement, dated as of September 25, 1997, by and among the Issuers and the Initial Purchasers (the "Purchase Agreement") relating to the sale by the Company and Capital Corp. to the Initial Purchasers of $125,000,000 aggregate principal amount of the Company's and Capital Corp.'s 9 3/4% Senior Subordinated Notes due 2007 (the "Notes"). The Notes have been guaranteed (the "Guarantees") on a senior subordinated basis by each of the Guarantors. In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers have agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and their direct and indirect transferees. The execution and delivery of this Agreement is a condition to the Initial Purchasers' obligation to purchase the Notes under the Purchase Agreement. The parties hereby agree as follows: 1. DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: Additional Interest: See Section 4(a). Advice: See the last paragraph of Section 5. Applicable Period: See Section 2(b). Closing Date: The Closing Date as defined in the Purchase Agreement. Company: See the introductory paragraph to this Agreement. Effectiveness Date: The 270th day after the Closing Date; provided, however, that, with respect to the Initial Shelf Registration Statement, (i) if the Filing Date in respect thereof is fewer than 60 days prior to the 270th day after the Closing Date, then the Effectiveness Date in respect thereof shall be the 60th day after such Filing Date and (ii) if the Filing Date is after the filing of the Exchange Offer Registration Statement with the SEC, then the Effectiveness Date in respect thereof shall be the 60th day after such Filing Date. Effectiveness Period: See Section 3(a). Event Date: See Section 4(b). Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. 3 -2- Exchange Offer: See Section 2(a). Exchange Offer Registration Statement: See Section 2(a). Exchange Securities: See Section 2(a). Expiration Date: See Section 2(a). Filing Date: The 210th day after the Closing Date; provided, however, that, with respect to the Initial Shelf Registration Statement, (i) if a Shelf Registration Event shall have occurred fewer than 60 days prior to the 210th day after the Closing Date, then the Filing Date in respect thereof shall be the 60th day after such Shelf Registration Event and (ii) if a Shelf Registration Event shall have occurred after the filing of the Exchange Offer Registration Statement with the SEC, then the Filing Date in respect thereof shall be the 30th day after such Shelf Registration Event. Guarantees: See the second introductory paragraph to this Agreement. Guarantors: See the introductory paragraph to this Agreement. Holder: Any record holder of Registrable Securities. Indemnified Person: See the third paragraph of Section 7. Indemnifying Person: See the third paragraph of Section 7. Indenture: The Indenture, dated as of October 1, 1997, among the Company, Capital Corp., the Guarantors and First Union National Bank, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms thereof. Initial Purchasers: See the introductory paragraph to this Agreement. Initial Shelf Registration Statement: See Section 3(a). Inspectors: See Section 5(o). Issue Date: The date of original issuance of the Notes. Issuers: Section introductory paragraph to this Agreement. Market Maker: See Section 10. NASD: See Section 5(t). Notes: See the second introductory paragraph to this Agreement. Participant: See the first paragraph of Section 7. Participating Broker-Dealer: See Section 2(b). 4 -3- Person: An individual, corporation, limited or general partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. Private Exchange: See Section 2(b). Private Exchange Securities: See Section 2(b). Prospectus: The prospectus included in any Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act and a prospectus filed with the SEC pursuant to Section 10 hereof), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. Purchase Agreement: See the second introductory paragraph to this Agreement. Records: See Section 5(o). Registrable Securities: The Notes upon original issuance thereof and at all times subsequent thereto, each Exchange Security as to which Section 2(c)(v) hereof is applicable upon original issuance and at all times subsequent thereto and, if issued, the Private Exchange Securities, until in the case of any such Notes, Exchange Securities or Private Exchange Securities, as the case may be, (i) a Registration Statement (other than, with respect to any Exchange Security as to which Section 2(c)(v) hereof is applicable, the Exchange Offer Registration Statement) covering such Notes, Exchange Securities or Private Exchange Securities has been declared effective by the SEC and such Notes, Exchange Securities or Private Exchange Securities, as the case may be, have been disposed of in accordance with such effective Registration Statement, (ii) such Notes, Exchange Securities or Private Exchange Securities, as the case may be, are sold in compliance with Rule 144, (iii) such Note has been exchanged for an Exchange Security pursuant to the Exchange Offer and Section 2(c)(v) is not applicable thereto, or (iv) such Notes, Exchange Securities or Private Exchange Securities, as the case may be, cease to be outstanding. Registration Statement: Any registration statement of the Issuers, including, but not limited to, the Exchange Offer Registration Statement, that covers any of the Registrable Securities pursuant to the provisions of this Agreement and any registration statement filed with the SEC pursuant to Section 10 hereof, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. 5 -4- Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. Securities Act: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. Shelf Notice: See Section 2(c). Shelf Registration Statement: See Section 3(b). Shelf Registration Event: See Section 2(c). Subsequent Shelf Registration Statement: See Section 3(b). TIA: The Trust Indenture Act of 1939, as amended. Trustee: The trustee under the Indenture and, if applicable, the trustee under any indenture governing the Exchange Securities and Private Exchange Securities (if any). Underwritten registration or underwritten offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. 2. EXCHANGE OFFER (a) The Issuers agree to file with the SEC, on or before the Filing Date, an offer to exchange (the "Exchange Offer") any and all of the Registrable Securities for a like aggregate principal amount of senior subordinated debt securities of the Company and Capital Corp. which are identical to the Notes and are guaranteed, jointly and severally, by each of the Guarantors with terms identical to the Guarantees (the "Exchange Securities") (and which are entitled to the benefits of a trust indenture that is substantially identical to the Indenture (other than such changes as are necessary to comply with any requirements of the SEC to effect or maintain the qualification of such trust indenture under the TIA) and which has been qualified under the TIA), except that the Exchange Securities shall have been registered pursuant to an effective Registration Statement under the Securities Act and shall contain no restrictive legend thereon. The Exchange Offer will be registered under the Securities Act on the appropriate form (the "Exchange Offer Registration Statement") and will comply with all applicable tender offer rules and regulations under the Exchange Act. Each of the Issuers agrees to use its best efforts to (i) cause the Exchange Offer Registration Statement to become effective and to commence the Exchange Offer on or prior to the Effectiveness Date, (ii) keep the Exchange Offer open for 30 days (or longer if required by applicable law) (the last day of such period, the "Expiration Date") and (iii) exchange Exchange Securities for all Notes validly tendered and not withdrawn pursuant to the Exchange Offer on or prior to the fifth day following the Expiration Date. Each Holder who participates in the Exchange Offer will be deemed to represent that any Exchange Securities received by it will be acquired in the ordinary course of its business, that at the time of the 6 -5- consummation of the Exchange Offer such Holder will have no arrangement with any Person to participate in the distribution of the Exchange Securities in violation of the provisions of the Securities Act and that such Holder is not an affiliate of any of the Issuers within the meaning of the Securities Act. Upon consummation of the Exchange Offer in accordance with this Section 2, the provisions of this Agreement shall continue to apply, mutatis mutandis, solely with respect to Registrable Securities that are Private Exchange Securities, Exchange Securities to which Section 2(c)(v) is applicable and Exchange Securities held by Participating Broker-Dealers, and the Issuers shall have no further obligation to register Registrable Securities (other than Private Exchange Securities and other than Exchange Securities as to which Section 2(c)(v) hereof applies) pursuant to Section 3 of this Agreement. No securities other than the Exchange Securities shall be included in the Exchange Offer Registration Statement. (b) The Issuers shall include within the Prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the Staff of the SEC (and publicly disseminated) with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities received by such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of Distribution" section shall also allow the use of the prospectus by all Persons subject to the prospectus delivery requirements of the Securities Act, including all Participating Broker-Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Exchange Securities. Each of the Issuers shall use its best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein in order to permit such Prospectus to be lawfully delivered by all Persons subject to the prospectus delivery requirements of the Securities Act for at least 180 days following the first bona fide offering of securities under such Registration Statement (or such shorter time as such Persons must comply with such requirements in order to resell the Exchange Securities) (the "Applicable Period"). If, prior to consummation of the Exchange Offer, the Initial Purchasers hold any Notes acquired by it and having, or which are reasonably likely to be determined to have, the status of an unsold allotment in the initial distribution, the Issuers upon the request of the Initial Purchasers shall, simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue and deliver to the Initial Purchasers, in exchange (the "Private Exchange") for the Notes held by the Initial Purchasers, a like principal amount of debt securities of the Company and Capital Corp. that are identical to the Exchange Securities and are guaranteed, jointly and severally, by each of the Guarantors with terms identical to the Guarantees (the "Private Exchange Securities") (and which are issued pursuant to the same indenture as the Exchange Securities) (except for the placement of a restrictive legend on such Private Exchange Securities). The Private Exchange Securities shall bear the same CUSIP number as the Exchange Securities. Interest on the Exchange Securities and Private Exchange Securities will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the Issue Date. Any indenture under which the Exchange Securities or the Private Exchange Securities will be issued shall provide that the holders of any of the Exchange Securities and the Private Exchange Securities will vote and consent together on all matters to which such holders are entitled to vote or consent as one class and that none of the holders of the Exchange Securities and the Private Exchange Securities will have the right to vote or consent as a separate class on any matter. 7 -6- (c) If, (i) because of any change in law or in currently prevailing interpretations of the Staff of the SEC, the Company reasonably determines in good faith, after consultation with counsel, that it is not permitted to effect the Exchange Offer, (ii) the Exchange Offer is not commenced on or prior to the Effectiveness Date, (iii) the Exchange Offer is, for any reason, not consummated on or prior to the 5th day after the Expiration Date, (iv) any Holder of Private Exchange Securities so requests, or (v) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive Exchange Securities on the date of the exchange that may be sold without restriction under state and federal securities laws (the occurrence of any such event set forth in the foregoing clauses (i) through (v), a "Shelf Registration Event"), then, in the case of such events the Company shall promptly deliver to the Holders and the Trustee notice thereof (the "Shelf Notice") and thereafter the Issuers shall file an Initial Shelf Registration Statement pursuant to Section 3. 3. SHELF REGISTRATION If a Shelf Registration Event has occurred (and whether or not an Exchange Offer Registration Statement has been filed with the SEC or has become effective, or the Exchange Offer has been consummated), then: (a) Initial Shelf Registration Statement. The Issuers shall promptly prepare and file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Securities (the "Initial Shelf Registration Statement"). The Issuers shall file with the SEC the Initial Shelf Registration Statement on or prior to the Filing Date. The Initial Shelf Registration Statement shall be on Form S-1 or another appropriate form, if available, permitting registration of such Registrable Securities for resale by such holders in the manner designated by them (including, without limitation, in one or more underwritten offerings). The Issuers shall not permit any securities other than the Registrable Securities to be included in the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement (as defined below). Each of the Issuers shall use their best efforts to cause the Initial Shelf Registration Statement to be declared effective under the Securities Act on or prior to the Effectiveness Date, and to keep the Initial Shelf Registration Statement continuously effective under the Securities Act until the date which is 24 months from the Closing Date, or such shorter period ending when (i) all Registrable Securities covered by the Initial Shelf Registration Statement have been sold in the manner set forth and as contemplated in the Initial Shelf Registration Statement or (ii) a Subsequent Shelf Registration Statement covering all of the Registrable Securities has been declared effective under the Securities Act (such 24 month or shorter period, the "Effectiveness Period"). (b) Subsequent Shelf Registration Statements. If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), each of the Issuers shall use their best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event the Issuers shall within 30 days of such cessation of effectiveness amend the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Securities (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration Statement is filed, each of the Issuers shall use their best efforts to cause the Subsequent Shelf Registration Statement to be declared effective as soon as reasonably practicable after such filing and to keep such Registration Statement continuously effective until the end of the Effectiveness Period. As used herein the term "Shelf Registration Statement" means the Initial Shelf Registration Statement and any Subsequent Shelf Registration Statement. 8 -7- (c) Supplements and Amendments. The Issuers shall promptly supplement and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration Statement, if required by the Securities Act, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Securities covered by such Registration Statement or by any underwriter of such Registrable Securities. 4. ADDITIONAL INTEREST (a) The Issuers and the Initial Purchasers agree that the Holders of Notes will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Company and Capital Corp. agree to pay, as liquidated damages, additional interest on the Notes ("Additional Interest") under the circumstances and to the extent set forth below (each of which shall be given independent effect): (i) if either the Exchange Offer Registration Statement or the Initial Shelf Registration Statement has not been filed on or prior to the Filing Date (unless, with respect to the Exchange Offer Registration Statement, a Shelf Event described in clause (i) of Section 2(c) shall have occurred prior to the Filing Date), Additional Interest shall accrue on the Notes over and above the stated interest in an amount equal to $0.192 per week (or any part thereof) per $1,000 principal amount of Notes; (ii) if either the Exchange Offer Registration Statement or the Initial Shelf Registration Statement is not declared effective by the SEC on or prior to the Effectiveness Date (unless, with respect to the Exchange Offer Registration Statement, a Shelf Event described in clause (i) of Section 2(c) shall have occurred), Additional Interest shall accrue on the Notes over and above the stated interest in an amount equal to $0.192 per week (or any part thereof) per $1,000 principal amount of Notes; and (iii) if (A) the Issuers have not exchanged Exchange Securities for all Notes validly tendered and not withdrawn in accordance with the terms of the Exchange Offer on or prior to the fifth day after the Expiration Date, or (B) the Exchange Offer Registration Statement ceases to be effective at any time prior to the Expiration Date, or (C) if applicable, any Shelf Registration Statement has been declared effective and such Shelf Registration Statement ceases to be effective at any time during the Effectiveness Period, then Additional Interest shall accrue on the Notes over and above the stated interest in an amount equal to $0.192 per week (or any part thereof) per $1,000 principal amount of the Notes for the first 90 days commencing on (x) the sixth day after the Expiration Date, in the case of (A) above, or (y) the day the Exchange Offer Registration Statement ceases to be effective in the case of (B) above, or (z) the day such Shelf Registration Statement ceases to be effective in the case of (C) above; provided, however, that (1) upon the filing of the Exchange Offer Registration Statement or a Shelf Registration Statement as required hereunder (in the case of clause (i) of this Section 4(a)), (2) upon the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement as required hereunder (in the case of clause (ii) of this Section 4(a)) or (3) upon the exchange of Exchange Securities for all Notes validly tendered and not withdrawn (in the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness of the Exchange Offer Registration Statement which had ceased to remain effective (in the case of clause (iii)(B) of this Section 4(a)), or upon the effectiveness of the Shelf Registration Statement which had ceased to remain effective (in the case of clause (iii)(C) of this Section 4(a)), Additional Interest on the Notes as a result of such 9 -8- clause (or the relevant subclause thereof), as the case may be, shall cease to accrue (but any accrued amount shall be payable). (b) The Company shall notify the Trustee within one business day after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "Event Date"). The Company and Capital Corp. shall pay the Additional Interest due on the Registrable Securities by depositing with the Trustee, in trust, for the benefit of the Holders thereof, on or before the applicable semi-annual interest payment date, immediately available funds in sums sufficient to pay the Additional Interest then due to Holders of Registrable Securities. Each obligation to pay Additional Interest shall be deemed to accrue immediately following the occurrence of the applicable Event Date. Any accrued Additional Interest amount shall be due and payable on each interest payment date immediately after the applicable Event Date to the record Holder of Registrable Securities entitled to receive the interest payment to be made on such date as set forth in the Indenture. The parties hereto agree that the Additional Interest provided for in this Section 4 constitutes a reasonable estimate of the damages that may be incurred by Holders of Registrable Securities by reason of the failure of a Shelf Registration Statement or Exchange Offer Registration Statement to be filed or declared effective, or a Shelf Registration Statement or an Exchange Offer Registration Statement to remain effective, as the case may be, in accordance with this Section 4. (c) Each of the Guarantors, jointly and severally, guarantees the payment of the Additional Interest to the same extent and in the same manner as the guarantee provisions set forth in the Indenture, which provisions are incorporated herein by reference mutatis mutandis. 5. REGISTRATION PROCEDURES In connection with the registration of any Registrable Securities pursuant to Sections 2 or 3 hereof, each of the Issuers shall use their best efforts to effect such registrations to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Issuers shall: (a) prepare and file with the SEC on or before the Filing Date, a Registration Statement or Registration Statements as prescribed by Section 2 or 3, and to use their best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that, if (1) such filing is pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall furnish to and afford the Holders of the Registrable Securities and each such Participating Broker-Dealer, as the case may be, covered by such Registration Statement, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (at least five days prior to such filing); the Issuers shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders must be afforded a reasonable opportunity to review prior to the filing of such document, if the Holders of a majority in aggregate principal amount of the Registrable Securities covered by such Registration Statement, or each such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriters, if any, shall reasonably object by notice to the Company after a reasonable period to review unless the Company is advised by Counsel that such amendment or supplement is legally required; 10 -9- (b) prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration Statement or Exchange Offer Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period, in the case of a Shelf Registration Statement, or until the later of the Expiration Date and the Applicable Period, in the case of the Exchange Offer Registration Statement; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to it with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus; (c) if (1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, notify the selling Holders of Registrable Securities, or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, promptly (but in any event within five business days), and confirm such notice in writing, (i) when a Prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective (including in such notice a written statement that any Holder may, upon request, obtain, without charge, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits); (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose; (iii) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Securities the representations and warranties of any of the Issuers contained in any agreement (including any underwriting agreement) contemplated by Section 5(n) below cease to be true and correct; (iv) of the receipt by any of the Issuers of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Securities or the Exchange Securities to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose; (v) of the occurrence of any event or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that such notification need not specifically identify such event if notification of the occurrence thereof would, in the Company's reasonable judgment, involve the disclosure of confidential non-public information; and (vi) of the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; (d) if (1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, use their best efforts to prevent the issuance of any order suspending the effectiveness of 11 -10- a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Securities or the Exchange Securities to be sold by any Participating Broker-Dealer for sale in any jurisdiction, and, if any such order is issued, to use their best efforts to obtain the withdrawal of any such order at the earliest possible moment; (e) if a Shelf Registration Statement is filed pursuant to Section 3 and if requested by the managing underwriters, if any, or the Holders of a majority in aggregate principal amount of the Registrable Securities being sold in connection with an underwritten offering or any Participating Broker-Dealer, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriters, if any, such Holders, any Participating Broker-Dealer or their respective counsel reasonably request to be included therein; (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as reasonably practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment and (iii) supplement or make amendments to such Registration Statement; (f) if (1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, furnish to each selling Holder of Registrable Securities and to each such Participating Broker-Dealer who so requests and upon request to their respective counsel and each managing underwriter, if any, without charge, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference and all exhibits; (g) if (1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, deliver to each selling Holder of Registrable Securities, or each such Participating Broker-Dealer, as the case may be, their counsel, and the underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, each of the Issuers hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Securities or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Securities covered by or the sale by Participating Broker-Dealers of the Exchange Securities pursuant to such Prospectus and any amendment or supplement thereto; (h) prior to any public offering of Registrable Securities or any delivery of a Prospectus contained in the Exchange Offer Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, use their best efforts to register or qualify, and to cooperate with the selling Holders of Registrable Securities or each such Participating Broker-Dealer, as the case may be, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities or Exchange Securities, as the case may be, for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriters reasonably request in writing, provided , however, that where Exchange Securities held by Participating Broker-Dealers or Registrable Securities are offered other than through an underwritten offering, the Issuers shall cause their counsel to (i) 12 -11- perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h); (ii) use their best efforts to keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective hereunder; and (iii) do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Exchange Securities held by Participating Broker-Dealers or the Registrable Securities covered by the applicable Registration Statement, provided, further, however, that none of the Issuers shall in any case be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction; (i) if a Shelf Registration Statement is filed pursuant to Section 3, cooperate with the selling Holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or Holders may reasonably request; (j) use their best efforts to cause the Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities, except as may be required solely as a consequence of the nature of such selling Holder's business, in which case the Issuers will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals; (k) if (1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) above, as promptly as practicable prepare and (subject to Section 5(a) above) file with the SEC, solely at the expense of the Issuers, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder or to the purchasers of the Exchange Securities to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Issuers shall not be required to amend or supplement a Registration Statement, any related Prospectus or any document incorporated therein by reference, in the event that, and for a period not to exceed an aggregate of 30 days in any calendar year if, (i) an event occurs and is continuing as a result of which a Shelf Registration Statement would, in the Company's good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (ii) (a) the Company determines in its good faith judgment that the disclosure of such event at such time would have a material adverse effect on the business, operations or prospects of the Company or (b) the disclosure otherwise relates to a pending material business transaction that has not been publicly disclosed; (l) use their best efforts to cause the Registrable Securities covered by a Registration Statement or the Exchange Securities, as the case may be, to be rated with the appropriate rating agencies, if so 13 -12- requested by the Holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement or a Participating Broker-Dealer selling Exchange Securities, as the case may be, or the managing underwriters, if any; (m) prior to the effective date of the first Registration Statement relating to the Registrable Securities, (i) provide the Trustee with printed certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company; and (ii) provide a CUSIP number for the Registrable Securities; (n) in connection with an underwritten offering of Registrable Securities pursuant to a Shelf Registration Statement, enter into an underwriting agreement as is customary in underwritten offerings and take all such other actions as are reasonably requested by the managing underwriters in order to expedite or facilitate the registration or the disposition of such Registrable Securities, and in such connection, (i) make such representations and warranties to and covenants with, the underwriters, with respect to the business of the Company and its subsidiaries and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings, and confirm the same if and when reasonably requested; (ii) obtain the written opinions of counsel to the Issuers and updates thereof in form and substance reasonably satisfactory to the managing underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by underwriters; (iii) use their best efforts to obtain "cold comfort" letters and updates thereof in form and substance reasonably satisfactory to the managing underwriters from the independent certified public accountants of the Issuers (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company or any of its subsidiaries for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings and such other matters as reasonably requested by underwriters; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures comparable to those set forth in Section 7 hereof (or such other provisions and procedures reasonably acceptable to the Holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement and the managing underwriters or agents) with respect to all parties to be indemnified pursuant to said Section, all of which shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder; (o) if (1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, subject to the prior receipt by the Company of undertakings to use reasonable efforts to preserve the confidentiality of any information disclosed by the Issuers pursuant hereto in form and substance reasonably satisfactory to the Company, make available for inspection by any selling Holder of such Registrable Securities being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries (collectively, the "Records") as shall be necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information in each case requested by any such Inspector in connection with such Registration Statement; 14 -13- provided, however, that records which the Company determines, in good faith, to be confidential and any Records which the Company notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement; (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction; (iii) the information in such Records has been made generally available to the public; or (iv) release thereof is necessary or advisable in connection with any action, suit or proceeding involving any Holder or other Inspector; provided, further, however, that prior notice shall be provided as soon as practicable to the Company of the potential disclosure of any information by such Inspector pursuant to clauses (i), (ii), (iii) or (iv) of this sentence to permit the Company to obtain a protective order (or waive the provisions of this paragraph (o)) and that such Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector; each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Issuers unless and until such information is generally available to the public; each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company to undertake appropriate action to prevent disclosure of the Records deemed confidential at the Company's sole expense; (p) provide for an indenture trustee for the Registrable Securities or the Exchange Securities, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a), as the case may be, to be qualified under the TIA not later than the effective date of the Exchange Offer or the first Registration Statement relating to the Registrable Securities; and in connection therewith, cooperate with the trustee under any such indenture and the holders of the Registrable Securities to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner; (q) comply with all applicable rules and regulations of the SEC to the extent and so long as they are applicable to the Exchange Offer Registration Statement or the Shelf Registration Statement and make generally available to their securityholders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts underwritten offering; and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods; (r) upon consummation of an Exchange Offer or a Private Exchange, obtain an opinion of counsel to the Issuers in customary form, relating to the Exchange Securities or the Private Exchange Securities, as the case may be, addressed to the Trustee for the benefit of all Holders of Registrable Securities participating in the Exchange Offer or the Private Exchange, as the case may be, and which includes an opinion that (i) each of the Issuers have duly authorized, executed and delivered the Exchange Securities and Private Exchange Securities, the Guarantees to be endorsed thereon and the related indenture; and (ii) each of the Exchange Securities or the Private Exchange Securities, as the case may be, the Guarantees endorsed thereon and the related indenture and guarantees thereunder constitute valid and binding obligations of each of the Issuers 15 -14- party thereto, enforceable against each of the Issuers party thereto in accordance with their respective terms (with customary exceptions); (s) if an Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, mark, or caused to be marked, on such Registrable Securities that such Registrable Securities are being cancelled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall such Registrable Securities be marked as paid or otherwise satisfied; (t) cooperate with each seller of Registrable Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"); and (u) use their best efforts to take all other steps necessary to effect the registration of the Registrable Securities covered by a Registration Statement contemplated hereby. The Issuers may require each seller of Registrable Securities or Participating Broker-Dealer as to which any registration is being effected to furnish to the Issuers such information regarding such seller or Participating Broker-Dealer and the distribution of such Registrable Securities or Exchange Securities to be sold by such Participating Broker-Dealer, as the case may be, as the Issuers may, from time to time, reasonably request. The Issuers may exclude from such registration the Registrable Securities or Exchange Securities of any selling Holder or Participating Broker-Dealer, as the case may be, who unreasonably fails to furnish such information within a reasonable time after receiving such request. Each Holder of Registrable Securities and each Participating Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange Securities to be sold by such Participating Broker-Dealer, as the case may be, that, upon receipt of any notice from any Issuer of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi), such Holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus or Exchange Securities to be sold by such Participating Broker-Dealer, as the case may be, until such holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k), or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event that any Issuer shall give any such notice, each of the Effectiveness Period and the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement or Exchange Securities to be sold by such Participating Broker-Dealer, as the case may be, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y) the Advice. 6. REGISTRATION EXPENSES (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers shall be borne by the Issuers whether or not the Exchange Offer Registration Statement or a Shelf Registration Statement is filed or becomes effective, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue 16 -15- Sky laws (including, without limitation, reasonable fees and disbursements of counsel) in such jurisdictions (x) where the holders of Registrable Securities are located, in the case of the Exchange Securities, or (y) as provided in Section 5(h), in the case of Registrable Securities to be sold in a public offering or Exchange Securities to be sold by a Participating Broker-Dealer during the Applicable Period)); (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities or Exchange Securities in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriters, if any, or, in respect of Registrable Securities or Exchange Securities to be sold by any Participating Broker-Dealer during the Applicable Period, by the Holders of a majority in aggregate principal amount of the Registrable Securities included in any Registration Statement or a Participating Broker-Dealer selling Exchange Securities, as the case may be); (iii) messenger, telephone and delivery expenses incurred by the Issuers; (iv) fees and disbursements of counsel for the Issuers and reasonable fees and disbursements of special counsel for the sellers of Registrable Securities (subject to the provisions of Section 6(b)); (v) fees and disbursements of all independent certified public accountants referred to in Section 5(n)(iii) (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance); (vi) the reasonable fees and expenses of any "qualified independent underwriter" or other independent appraiser participating in an offering pursuant to Rule 2710 or Rule 2720 of the Conduct Rules of the NASD; (vii) rating agency fees; (viii) the fees and expenses incurred by the Issuers in connection with the listing of the Registrable Securities on any securities exchange; and (ix) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement. (b) In connection with any Shelf Registration Statement hereunder, the Issuers shall reimburse the Holders of the Registrable Securities being registered in such registration for the reasonable fees and disbursements of not more than one counsel (in addition to appropriate local counsel) chosen by the Holders of a majority in aggregate principal amount of the Registrable Securities to be included in such Registration Statement and other reasonable out-of-pocket expenses of the Holders of Registrable Securities incurred in connection with the registration of the Registrable Securities. 7. INDEMNIFICATION Each of the Issuers, jointly and severally, agrees to indemnify and hold harmless each Holder of Registrable Securities, each Participating Broker-Dealer selling Exchange Securities during the Applicable Period and Chase Securities Inc., in its capacity as Market Maker, the affiliates, officers, directors, employees, representatives and agents of each such Person, and each Person, if any, who controls any such Person within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from and against any and all losses, claims, damages and liabilities (including, without limitation, the reasonable legal fees and other expenses actually incurred in connection with any suit, action or proceeding or any claim asserted) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Issuers shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, with respect to the Prospectus, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to such Holder of Registrable Securities or 17 -16- Participating Broker-Dealer, as the case may be, furnished to the Company in writing by such Holder of Registrable Securities or Participating Broker-Dealer, as the case may be, expressly for use therein; provided, however, that the foregoing indemnity with respect to any preliminary prospectus shall not inure to the benefit of any Holder of Registrable Securities or Participating Broker-Dealer, as the case may be (or to the benefit of any officer or director of, or of any Person controlling, such Holder of Registrable Securities or Participating Broker-Dealer) from whom the Person asserting any such losses, claims, damages or liabilities purchased Registrable Securities or Exchange Securities, as the case may be, to the extent that such untrue statement or omission or alleged untrue statement or omission made in such preliminary prospectus is eliminated or remedied in the related Prospectus (as amended or supplemented if the Issuers shall have furnished any amendments or supplements thereto) and such Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission of a material fact and, to the extent required by applicable law, a copy of the related Prospectus (as so amended or supplemented) shall not have been furnished to such Person at or prior to the sale of such Registrable Securities or Exchange Securities, as the case may be, to such Person, unless such failure to furnish was a result of non-compliance by the Issuers with Section 5(g). Each Holder of Registrable Securities, the Market Maker and each Participating Broker-Dealer selling Exchange Securities during the Applicable Period will be required to agree, severally and not jointly, to indemnify and hold harmless each of the Issuers, its directors, officers, employees, representatives and agents who sign the Registration Statement and each Person who controls any Issuer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Issuers to each Participant, but only with reference to information relating to such Holder of Registrable Securities, Market Maker or Participating Broker-Dealer, as the case may be, furnished to the Company in writing by or on behalf of such Holder of Registrable Securities, Market Maker or Participating Broker-Dealer, as the case may be, expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus. The liability of any such Holder of Registrable Securities, Market Maker or Participating Broker-Dealer, as the case may be, under this paragraph shall in no event exceed the proceeds received by such Holder of Registrable Securities, Market Maker or Participating Broker-Dealer, as the case may be, from sales of Registrable Securities or Exchange Securities, as the case may be, giving rise to such obligations. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such Person (the "Indemnified Person") shall promptly notify the Person against whom such indemnity may be sought (the "Indemnifying Person") in writing, and the Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may designate in such proceeding and shall pay the reasonable fees and expenses incurred by such counsel related to such proceeding; provided, however, that the failure to so notify the Indemnifying Person shall not relieve it of any obligation or liability which it may have hereunder or otherwise (unless and only to the extent that the Indemnifying Person was otherwise unaware that such suit, action, proceeding, claim, or demand shall have been brought or asserted and such failure actually materially prejudices the Indemnifying Person (through the forfeiture of substantive rights or defenses)). In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but, other than in circumstances involving a conflict among Indemnified Persons, the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; or (iii) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to an actual or potential conflict of interest. It is understood that, other than in circumstances involving a conflict among Indemnified Persons, the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in 18 -17- addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm for the Participants shall be designated in writing by the Holders of Registrable Securities or Participating Broker-Dealers selling Exchange Securities during the Applicable Period, as the case may be, who sold a majority in interest of Registrable Securities or Exchange Securities, as the case may be, sold by all such Holders of Registrable Securities or Participating Broker-Dealers, as the case may be. Any such separate firm for the Issuers, its directors, officers, employees, representatives and agents and such control Persons of the Issuers shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, (which consent shall not be unreasonably withheld or deleted) effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party, and indemnity could have been sought hereunder by such indemnified party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional written release of such Indemnified Person in form and substance satisfactory to the Indemnified Persons from all liability on claims that are the subject matter of such proceeding and does not contain an admission of fault or culpability. If the indemnification provided for in the first and second paragraphs of this Section 7 is for any reason unavailable to, or insufficient to hold harmless, an Indemnified Person in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect (i) the relative benefits received by the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other from the initial offering of the Notes or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative benefits received by the Issuers on the one hand and the Holders of Registrable Securities or Participating Broker-Dealers selling Exchange Securities during the Applicable Period, as the case may be, on the other shall be deemed to be in the same proportion as the total proceeds from the initial offering (net of discounts and commissions but before deducting expenses) of the Notes received by the Issuers bears to the total proceeds received by such Holders of Registrable Securities or Participating Broker-Dealers, as the case may be, from the sale of Registrable Securities or Exchange Securities, as the case may be. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers, on the one hand, or such Holder of Registrable Securities or Participating Broker-Dealer, as the case may be, on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Participants were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed 19 -18- to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Holder of Registrable Securities or Participating Broker-Dealer be required to contribute any amount in excess of the amount by which proceeds received by such Holder of Registrable Securities or Participating Broker-Dealer, as the case may be, from sales of Registrable Securities or Exchange Securities, as the case may be, exceeds the amount of any damages that such Holder of Registrable Securities or Participating Broker-Dealer, as the case may be, has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. 8. RULE 144 AND RULE 144A Each of the Issuers, for so long as the Registrable Securities remain outstanding, covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner and, if at any time any of the Issuers is not required to file such reports, it will, upon the request of any Holder of Registrable Securities, make publicly available other information so long as necessary to permit sales pursuant to Rule 144 and Rule 144A under the Securities Act. Each of the Issuers further covenants that it will take such further action as any Holder of Registrable Securities may reasonably request, to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 and Rule 144A under the Securities Act. 9. UNDERWRITTEN REGISTRATIONS If any of the Registrable Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Securities included in such offering and reasonably acceptable to the Company. No Holder of Registrable Securities may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements (however the terms applicable to each Holder shall be identical in all respects) and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements applicable to all Holders. 10. MARKET MAKING (a) The Issuers will, for the sole benefit of Chase Securities Inc. (the "Market Maker"), and for so long as any of the Notes are outstanding and the Market Maker or any of its Affiliates (as defined in the rules and regulations of the SEC under the Securities Act) owns any equity securities of the Company and proposes to make a market in the Notes as part of its business in the ordinary course: 20 -19- (i) (A) Periodically amend the Registration Statement so that the information contained in the Registration Statement complies with the requirements of Section 19(a) under the Securities Act; (B) if requested by the Market Maker, within 45 days following the end of the Company's most recent fiscal quarter, file a supplement to the Prospectus which sets forth the financial results of the Company for the previous quarter; (C) amend the Registration Statement or supplement the Prospectus when necessary to reflect any material changes in the information provided therein; and (D) amend the Registration Statement when required to do so in order to comply with Section 10(a)(3) of the Securities Act; provided, however, that (1) prior to filing any post-effective amendment to the Registration Statement or any supplement to the Prospectus, the Company will furnish to the Market Maker copies of all such documents proposed to be filed, which documents will be subject to the review of the Market Maker and its counsel, (2) the Issuers will not file any post-effective amendment to the Registration Statement or any supplement to the Prospectus to which the Market Maker and its counsel shall reasonably object by notice to the Company after a reasonable period to review unless the Company is advised by counsel that such amendment or supplement is legally required and (3) the Company will provide the Market Maker and its counsel with copies of each amendment or supplement filed. (ii) Notify the Market Maker, and (if requested by the Market Maker) confirm such advice in writing, (A) when any Prospectus supplement or amendment or post-effective amendment to the Registration Statement has been filed, and, with respect to any post-effective amendment, when the same has become effective; (B) of any request by the SEC for any post-effective amendment to the Registration Statement, any supplement or amendment to the Prospectus or for additional information; (C) the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (D) of the receipt by any Issuer of any notification with respect to the suspension of the qualification of the Notes for sale in any jurisdiction or the initiation or threatening of any proceedings for such purpose; (E) of the occurrence of any event which makes any statement made in the Registration Statement, the Prospectus or any amendment or supplement thereto untrue or which requires the making of any changes in the Registration Statement, the Prospectus or any amendment or supplement thereto, in order to make the statements therein not misleading; and (F) of any advice from a nationally recognized statistical rating organization that such organization has placed the Company under surveillance or review with negative implications or has determined to downgrade the rating of the Notes or any other debt obligation of the Company whether or not such downgrade shall have been publicly announced. (iii) Furnish to the Market Maker, without charge, (i) at least one conformed copy of any post-effective amendment to the Registration Statement; and (ii) as many copies of any amendment or supplement to the Prospectus as the Market Maker may reasonably request. (iv) Consent to the use of the Prospectus or any amendment or supplement thereto by the Market Maker in connection with the offering and sale of the Notes. (v) For so long as the Notes shall be outstanding, furnish to the Market Maker (A) as soon as practicable after the end of each fiscal year, the number of copies reasonably requested by the Market Maker of the Company's annual report to stockholders for such year, (B) as soon as available, the number of copies reasonably requested by the Market Maker of each report (including, without limitation, Reports on Forms 10-K, 10-Q and 8-K) or definitive proxy statements of the Company filed under the Exchange Act or mailed to stockholders and (C) all public reports and all reports and financial statements furnished by the Company to the Nasdaq National Market System or any U.S. national securities exchange or quotation service upon which the Notes may be listed pursuant to requirements 21 -20- of or agreements with such exchange or quotation service or to the SEC pursuant to the Exchange Act or any rule or regulation of the SEC thereunder. (vi) In the event of the issuance of any stop order suspending the effectiveness of the Registration Statement or of any order suspending the qualification of the Notes for sale in any jurisdiction, to use promptly its best efforts to obtain its withdrawal. (b) The Issuers represent that any post-effective amendments to the Registration Statement, any amendments or supplements to the Prospectus and any documents filed under the Exchange Act will, when they become effective or are filed with the SEC, as the case may be, conform in all respects to the requirements of the Securities Act and the rules and regulations of the SEC thereunder and will not, as of the effective date of such post-effective amendments and as of the filing date of amendments or supplements to the Prospectus or filings under the Exchange Act contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that no representation or warranty is made as to information contained in or omitted from the Registration Statement or the Prospectus in reliance upon and in conformity with written information furnished to the Company by the Market Maker specifically for inclusion therein, which information the parties hereto agree will be limited to the statements concerning the market-making activities of the Market Maker to be set forth on the cover page and in the "Plan of Distribution" section of the Prospectus. (c) Each time that the Registration Statement or Prospectus shall be amended or the Prospectus shall be supplemented, the Company shall, concurrently with such amendment or supplement, furnish the Market Maker and its counsel with a certificate of its President or any Vice-President and its chief financial or accounting officer to the effect that: (i) The Registration Statement has been declared effective and such amendment has become effective under the Securities Act as of the date and time specified in such certificate; such amendment to the Prospectus (or such supplement to the Prospectus, as the case may be) was filed with the SEC pursuant to the subparagraph of Rule 424(b) under the Securities Act specified in such certificate on the date specified therein; and, to the knowledge of such officers, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the SEC; and (ii) Such officers have carefully examined the Registration Statement and the Prospectus and such amendment or supplement thereto and, in their opinion, as of the date of such amendment or supplement, the Registration Statement and the Prospectus, as amended or supplemented, as the case may be, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, in the case of the Prospectus, in light of the circumstances in which they were made. (d) Each time that the Registration Statement or Prospectus shall be amended, the Issuers, if reasonably requested by the Market Maker, shall, concurrently with such amendment, furnish to the Market Maker and its counsel (at the expense of the Market Maker) the written opinion of counsel for the Issuers satisfactory to the Market Maker to the effect that: (i) The Registration Statement has been declared effective and such amendment has become effective under the Securities Act, as of the date and time specified in such certificate; such amendment to the Prospectus was filed with the SEC pursuant to the subparagraph Rule 424(b) under 22 -21- the Securities Act specified in such opinion on the date specified therein; and, to the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose is pending or threatened in writing by the SEC; and (ii) Counsel for the Issuers has reviewed such amendment and participated with the officers of the Issuers and independent public accountants for the Issuers in the preparation of such amendment and has no reason to believe that the Registration Statement (or any post-effective amendment thereto), at the time of its effective date, contained any untrue statement of a material fact, or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (e) Each time that the Registration Statement or Prospectus shall be amended to include audited annual financial information, the Company, if requested by the Market Maker, shall, concurrently with such amendment, furnish the Market Maker and its counsel with a letter of Price Waterhouse, LLP (or other independent public accountants for the Issuers of nationally recognized standing), in form satisfactory to the Market Maker, addressed to the Market Maker and dated the date of delivery of such letter, (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the SEC and (ii) a letter substantially in the form of the letter delivered to the Initial Purchasers pursuant to Section5(f) of the Purchase Agreement with such changes as may be necessary to reflect the amended financial information. (f) The Issuers hereby agree to indemnify the Market Maker, and if applicable, contribute to the Market Maker, in accordance with Section 7 of this Agreement. (g) The Issuers will comply with the provisions of this Section 10 at their own expense. (h) The agreements contained in this Section 10 and the representations, warranties and agreements contained in this Agreement shall survive all offers and sales of the Notes and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. (i) For purposes of this Section 10, any reference to the terms "amend", "amendment" or "supplement" with respect to the Registration Statement or the Prospectus shall be deemed to refer to and include the filing under the Exchange Act on or after the date the Registration Statement is converted to Form S-3 of any document deemed to be incorporated therein by reference. 11. MISCELLANEOUS (a) Remedies. In the event of a breach by any of the Issuers of any of its obligations under this Agreement, each Holder of Registrable Securities, in addition to being entitled to exercise all rights provided herein, in the Indenture or, in the case of the Initial Purchasers, in the Purchase Agreement or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Issuers agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event 23 -22- of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) No Inconsistent Agreements. None of the Issuers has, as of the date hereof, entered into and each shall not, after the date of this Agreement, enter into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. (c) Adjustments Affecting Registrable Securities. The Issuers shall not, directly or indirectly, take any action with respect to the Registrable Securities as a class that would adversely affect the ability of the Holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement. (d) Joint and Several Obligations; Addition of Guarantors. The Guarantors agree that their obligations under this agreement are joint and several. So long as any Registrable Securities remain outstanding, the Company shall cause each of its subsidiaries that becomes a guarantor of the Notes under the Indenture to execute and deliver an instrument pursuant to which such subsidiary agrees to be bound by the provisions of this agreement as a Guarantor. (e) Amendments and Waivers. Except as provided in paragraph (d) above, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of (A) the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Securities and (B) in circumstances that would adversely affect the Participating Broker-Dealers, the Participating Broker-Dealers holding not less than a majority in aggregate principal amount of the Exchange Securities held by all Participating Broker-Dealers; provided, however, that Section 7 and this Section 11(e) may not be amended, modified or supplemented without the prior written consent of each Holder and each Participating Broker-Dealer (including any Person who was a Holder or Participating Broker-Dealer of Registrable Securities or Exchange Securities, as the case may be, disposed of pursuant to any Registration Statement) affected by any such amendment, modification or supplement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Securities may be given by Holders of at least a majority in aggregate principal amount of the Registrable Securities being sold by such Holders pursuant to such Registration Statement. (f) Notices. All notices and other communications (including without limitation any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or telecopier: (i) if to a Holder of Registrable Securities, at the most current address given by the Trustee to the Company; and (ii) if to the Issuers, at Advanced Accessory Systems, 12900 Hall Road, Suite 200, Sterling Heights, MI 48313, Attention: Chief Financial Officer. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if 24 -23- mailed; one business day after being timely delivered to a next-day air courier; and when receipt is acknowledged by the addressee, if telecopied. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the trustee under the Indenture at the address specified in such Indenture. (g) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Registrable Securities. (h) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (i) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (j) Governing Law. This agreement shall be governed by and construed in accordance with the laws of the state of New York, as applied to contracts made and performed within the state of New York, without regard to principles of conflicts of law. Each of the parties hereto agrees to submit to the jurisdiction of the courts of the state of New York in any action or proceeding arising out of or relating to this agreement. (k) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (l) Entire Agreement. This Agreement, together with the Purchase Agreement, is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. (m) Securities Held by the Issuers or Its Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by any of the Issuers or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be deemed to be not outstanding for purposes of determining whether such consent or approval was given by the Holders of such required percentage. [Signature Pages Follow] 25 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. ADVANCED ACCESSORY SYSTEMS, LLC By:____________________________ Name: Title: AAS CAPITAL CORPORATION By:____________________________ Name: Title: AAS HOLDINGS, INC. By:____________________________ Name: Title: SPORTRACK, LLC By:____________________________ Name: Title: VALLEY INDUSTRIES, LLC By:____________________________ Name: Title: CHASE SECURITIES INC. By:____________________________ Name: Title: 26 -2- FIRST CHICAGO CAPITAL MARKETS, INC. By:____________________________ Name: Title: EX-12.1 29 EX-12.1 1 ADVANCED ACCESSORY SYSTEMS, LLC EXHIBIT 12.1 -- STATEMENT REGARDING COMPUTATION OF RATIOS -- FIXED CHARGE COVERAGE RATIO FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996, AND THE PERIOD FROM SEPTEMBER 28, 1995 THROUGH DECEMBER 31, 1995
PERIOD FROM SEPTEMBER 28, TO DECEMBER 31, DECEMBER 31, 1995 1996 1997 --------------- ---- ---- Pre-tax income (loss) from continuing operations..... $ 870,000 $ 6,409,000 $ 712,000 Minority interest in the income of subsidiary with fixed charges...................................... 9,000 69,000 97,000 ---------- ----------- ----------- 879,000 6,478,000 809,000 ---------- ----------- ----------- Fixed charges: Interest expense and amortization of debt discount and premium on all indebtedness................. 975,000 4,312,000 12,627,000 Rentals(1)........................................... 11,000 223,000 751,000 ---------- ----------- ----------- Total fixed charges.................................. 986,000 4,535,000 13,378,000 ---------- ----------- ----------- Earnings before income taxes, minority interest and fixed charges...................................... $1,865,000 $11,013,000 $14,187,000 ========== =========== =========== Ratio of earnings to fixed charges(2)................ 1.89x 2.43x 1.06x ========== =========== ===========
- ------------------------- (1) Amount included in fixed charges for rentals is considered by management to be a reasonable approximation of the interest factor. (2) The Exchange Offer will not have a material impact on the ratio of earnings to fixed charges. EX-21.1 30 EX-21.1 1 EXHIBIT 21.1 SUBSIDIARIES OF ADVANCED ACCESSORY SYSTEMS, LLC
COMPANY LOCATION - ------- -------- Valley Industries, LLC Madison Heights, Michigan SportRack, LLC Sterling Heights, Michigan Nomadic Sport, Inc. Hammer Bay, Canada SportRack GmbH Sandhausen, Germany SportRack International, Inc. Granby, Canada Valtek, LLC Sterling Heights, Michigan AAS Capital Corp. Sterling Heights, Michigan AAS Holdings, Inc. Sterling Heights, Michigan Brink International BV Staphorst, Netherlands Brink BV Staphorst, Netherlands Brink Trekhaken BV Hoogevaeen, Netherlands Nordisk Komponent Holding A/S Naestved, Denmark Brink, A/S Naestved, Denmark Brink UK Ltd. Numeaton, United Kingdom Brink Sverige AB Vanersborg, Sweden Brink France Sarl Paris, France SCI 1'Elmontaise Alglemont France Societe de Fabrication Begheny, France d'Equipements et d' Accossries SA (SFEA) Brink Italia Srl Milian, Italy Brink Polska Sp. Z.o.o. Wolszyn, Poland
EX-23.2 31 EX-23.2 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-4 of Advanced Accessory Systems, LLC and AAS Capital Corporation of our report dated March 15, 1998 relating to the financial statements of Advanced Accessory Systems, LLC, which appears in such Prospectus. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ PRICE WATERHOUSE LLP Bloomfield Hills, Michigan March 30, 1998 EX-23.3 32 EX-23.3 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-4 of Advanced Accessory Systems, LLC and AAS Capital Corporation of our report dated August 25, 1997 relating to the financial statements of MascoTech Accessories (the "Predecessor"), a division of MascoTech, Inc., which appears in such Prospectus. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ PRICE WATERHOUSE LLP Bloomfield Hills, Michigan March 30, 1998 EX-23.4 33 EX-23.4 1 EXHIBIT 23.4 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-4 of Advanced Accessory Systems, LLC and AAS Capital Corporation of our report dated December 5, 1997 relating to the financial statements of Valley Industries, Inc., which appears in such Prospectus. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ PRICE WATERHOUSE LLP Bloomfield Hills, Michigan March 30, 1998 EX-23.5 34 EX-23.5 1 EXHIBIT 23.5 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-4 of Advanced Accessory Systems, LLC and AAS Capital Corporation of our report dated September 4, 1997 relating to the financial statements of Brink International B.V., which appears in such Prospectus. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ COOPERS & LYBRAND N.V. Zwolle, The Netherlands March 30, 1998 EX-23.6 35 EX-23.6 1 EXHIBIT 23.6 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated March 10, 1997, with respect to the financial statements of Valley Industries Inc. included in the Registration Statement (Form S-4 No. 333- ) and related Prospectus of Advanced Accessory Systems, LLC and AAS Capital Corporation for the registration of $125,000,000 of their 9 3/4% Series B Senior Subordinated Notes due 2007. /s/ ERNST & YOUNG LLP Detroit, Michigan March 30, 1998 EX-23.7 36 EX-23.7 1 EXHIBIT 23.7 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-4 of Advanced Accessory Systems, LLC and AAS Capital Corporation of our report dated March 13, 1998 relating to the financial statements of the towbar segment of Ellebi S.p.A., which appears in such Prospectus. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ AXIS S.r.l. Reggio Emelia, Italy March 30, 1998 EX-25.1 37 EX-25.1 1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM T-1 ------------------ STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)_______ ------------------------- FIRST UNION NATIONAL BANK (Exact name of trustee as specified in its charter) United States National Bank 56-0900030 (State of incorporation if I.R.S. employer not a national bank) identification no.) First Union National Bank 230 South Tryon Street, 9th Floor Charlotte, North Carolina 28288-1179 (Address of principal (Zip Code) executive offices) SAME AS ABOVE (Name, address and telephone number, including area code, of trustee's agent for service) ADVANCED ACCESSORY SYSTEMS, LLC AAS CAPITAL CORPORATION (Exact name of co-obligors as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 13-3848156 13-3969422 (I.R.S. employer identification nos.) 12900 Hall Road, Suite 200 Sterling Heights, Michigan 48313 (810) 997-2900 (Address, including zip code, of principal executive offices) ----------------------------------- US $125,000,000 ADVANCED ACCESSORY SYSTEMS, LLC AAS CAPITAL CORPORATION 9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007 (Title of the indenture securities) ----------------------------------- 2 Co-obligors as Guarantors on the 9 3/4% Series B Senior Subordinated Notes due 2007: AAS HOLDINGS, INC. (Exact name of obligors as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 38-3319226 (I.R.S. employer identification no.) 12900 Hall Road, Suite 200 Sterling Heights, Michigan 48313 (810) 997-2900 (Address, including zip code, of principal executive offices) SPORTRACK, LLC (Exact name of obligors as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 13-3848154 (I.R.S. employer identification no.) 12900 Hall Road, Suite 200 Sterling Heights, Michigan 48313 (810) 997-2900 (Address, including zip code, of principal executive offices) VALLEY INDUSTRIES, LLC (Exact name of obligors as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 38-3363492 (I.R.S. employer identification no.) 32501 Dequindre Road Madison Heights, Michigan 48071 (248) 588-6900 (Address, including zip code, of principal executive offices) 2 3 ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. - ------------------------------------------------------------------------------- Name Address - ------------------------------------------------------------------------------- Federal Reserve Bank of Richmond, VA Richmond, VA Comptroller of the Currency Washington, D.C. Securities and Exchange Commission Division of Market Regulation Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR AND UNDERWRITERS. If the obligor or any underwriter for the obligor is an affiliate of the trustee, describe each such affiliation. None. Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer this Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered correct unless amended by an amendment to this Form T-1. ITEMS 3-15. Not applicable ITEM 16. LIST OF EXHIBITS. All exhibits identified below are filed as a part of this statement of eligibility. 1. A copy of the Articles of Association of First Union National Bank as now in effect, which contain the authority to commence business and a grant of powers to exercise corporate trust powers. 2. A copy of the certificate of authority of the trustee to commence business, if not contained in the Articles of Association. 3. A copy of the authorization of the trustee to exercise corporate trust powers, if such authorization is not contained in the documents specified in exhibits (1) or (2) above. 4. A copy of the existing By-laws of First Union National Bank, or instruments corresponding thereto. 5. Inapplicable. 6. The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939. Included on signature page of this Form T-1 Statement. 3 4 7. A copy of the latest report of condition of the trustee published pursuant to law or to the requirements of its supervising or examining authority. 8. Inapplicable. 9. Inapplicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, First Union National Bank, a national association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Charlotte, and State of North Carolina, on the 30th day of March, 1998. FIRST UNION NATIONAL BANK (trustee) By:/s/ S. Schwartz ---------------------------- Name: Shannon Schwartz Title: Assistant Vice President CONSENT OF TRUSTEE Under section 321(b) of the Trust Indenture Act of 1939, as amended, and in connection with the proposed issuance by Advanced Accessory Systems, LLC and AAS Capital Corporation, as co-issuers of their 9 3/4% Series B Senior Subordinated Notes Due 2007, First Union National Bank as the trustee herein named, hereby consents that reports of examinations of said Trustee by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. FIRST UNION NATIONAL BANK By: /s/Shannon Schwartz ---------------------------- Name: Shannon Schwartz Title: Assistant Vice President Dated: March 30, 1998 4 5 ARTICLES OF ASSOCIATION OF FIRST UNION NATIONAL BANK Charter No. 22693 As Restated Effective February 26, 1998 6 Charter No. 22693 FIRST UNION NATIONAL BANK ARTICLES OF ASSOCIATION (as restated effective February 26, 1998) For the purpose of organizing an Association to carry on the business of banking under the laws of the United States, the undersigned do enter into the following Articles of Association: FIRST. The title of this Association shall be FIRST UNION NATIONAL BANK. SECOND. The main office of the Association shall be in Charlotte, County of Mecklenburg, State of North Carolina. The general business of the Association shall be conducted at its main office and its branches. THIRD. The Board of Directors of this Association shall consist of not less than five nor more than twenty-five directors, the exact number of directors within such minimum and maximum limits to be fixed and determined from time to time by resolution of a majority of the full Board of Directors or by resolution of the shareholders at any annual or special meeting thereof. Unless otherwise provided by the laws of the United States, any vacancy in the Board of Directors for any reason, including an increase in the number thereof, may be filled by action of the Board of Directors. FOURTH. The annual meeting of the shareholders for the election of directors and the transaction of whatever other business may be brought before said meeting shall be held at the main office or such other place as the Board of Directors may designate, on the day of each year specified therefor in the By-Laws, but if no election is held on that day, it may be held on any subsequent day according to the provisions of law; and all elections shall be held according to such lawful regulations as may be prescribed by the Board of Directors. Nominations for election to the Board of Directors may be made by the Board of Directors or by any stockholder of any outstanding class of capital stock of the bank entitled to vote for election of directors. Nominations, other than those made by or on behalf of the existing management of the bank, shall be made in writing and shall be delivered or mailed to the President of the bank and to the Comptroller of the Currency, Washington, D.C., not less than 14 days nor more than 50 days prior to any meeting of stockholders called for the election of directors, provided, however, that if less than 21 days' notice of the meeting is given to shareholders, such nomination shall be mailed or delivered to the President of the Bank and to the Comptroller of the Currency not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares of capital stock of the bank that will be voted for each proposed nominee; (d) the name and residence address of the notifying shareholder; and (e) the number of shares of capital stock of the bank owned by the notifying shareholder. Nominations not made in accordance herewith may, in his discretion, be disregarded by the Chairman of the meeting, and upon his instructions, the vote tellers may disregard all votes cast for each such nominee. FIFTH. (a) General. The amount of capital stock of this Association shall be (i) 25,000,000 shares of common stock of the par value of twenty dollars ($20.00) each (the "Common Stock") and (ii) 160,540 shares of preferred stock of the par value of one dollar ($ 1. 00) each (the "Non-Cumulative Preferred Stock"), having the rights, privileges and preferences set forth below, but said capital stock may be increased or decreased from time to time in accordance with the provisions of the laws of the United States. (b) Terms of the Non-Cumulative Preferred Stock. 1. General. Each share of Non-Cumulative Preferred Stock shall be identical in all respects with the other shares of Non-Cumulative Preferred Stock. The authorized number of shares of Non-Cumulative Preferred Stock may from time to time be increased or decreased (but not below the number then outstanding) by the Board of Directors. Shares of Non-Cumulative Preferred Stock redeemed by the Association shall be 7 canceled and shall revert to authorized but unissued shares of Non-Cumulative Preferred Stock. 2. Dividends. (a) General. The holders of Non-Cumulative Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, but only out of funds legally available therefor, non-cumulative cash dividends at the annual rate of $83.75 per share, and no more, payable quarterly on the first days of December, March, June and September, respectively, in each year with respect to the quarterly dividend period (or portion thereof) ending on the day preceding such respective dividend payment date, to shareholders of record on the respective date, not exceeding fifty days preceding such dividend payment date, fixed for that purpose by the Board of Directors in advance of payment of each particular dividend. Notwithstanding the foregoing, the cash dividend to be paid on the first dividend payment date after the initial issuance of Non-Cumulative Preferred Stock and on any dividend payment date with respect to a partial dividend period shall be $83.75 per share multiplied by the fraction produced by dividing the number of days since such initial issuance or in such partial dividend period, as the case may be, by 360. (b) Non-cumulative Dividends. Dividends on the shares of Non-cumulative Stock shall not be cumulative and no rights shall accrue to the holders of shares of Non-Cumulative Preferred Stock by reason of the fact that the Association may fail to declare or pay dividends on the shares of Non-Cumulative Preferred Stock in any amount in any quarterly dividend period, whether or not the earnings of the Association in any quarterly dividend period were sufficient to pay such dividends in whole or in part, and the Association shall have no obligation at any time to pay any such dividend. (c) Payment of Dividends. So long as any share of Non-Cumulative Preferred Stock remains outstanding, no dividend whatsoever shall be paid or declared and no distribution made on any junior stock other than a dividend payable in junior stock, and no shares of junior stock shall be purchased, redeemed or otherwise acquired for consideration by the Association, directly or indirectly (other than as a result of a reclassification of junior stock, or the exchange or conversion of one junior stock for or into another junior stock, or other than through the use of the proceeds of a substantially contemporaneous sale of other junior stock), unless all dividends on all shares of non-cumulative Preferred Stock and non-cumulative Preferred Stock ranking on a parity as to dividends with the shares of Non-Cumulative Preferred Stock for the most recent dividend period ended prior to the date of such payment or declaration shall have been paid in full and all dividends on all shares of cumulative Preferred Stock ranking on a parity as to dividends with the shares of Non-Cumulative Stock (notwithstanding that dividends on such stock are cumulative) for all past dividend periods shall have been paid in full. Subject to the foregoing, and not otherwise, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors may be declared and paid on any junior stock from time to time out of any funds legally available therefor, and the Non-Cumulative Preferred Stock shall not be entitled to participate in any such dividends, whether payable in cash, stock or otherwise. No dividends shall be paid or declared upon any shares of any class or series of stock of the Association ranking on a parity (whether dividends on such stock are cumulative or non-cumulative) with the Non-Cumulative Preferred Stock in the payment of dividends for any period unless at or prior to the time of such payment or declaration all dividends payable on the Non-cumulative Preferred Stock for the most recent dividend period ended prior to the date of such payment or declaration shall have been paid in full. When dividends are not paid in full, as aforesaid, upon the Non-Cumulative Preferred Stock and any other series of Preferred Stock ranking on a parity as to dividends (whether dividends on such stock are cumulative or non-cumulative) with the Non-Cumulative Preferred Stock, all dividends declared upon the Non-Cumulative Preferred Stock and any other series of Preferred Stock ranking on a parity as to dividends with the Non-Cumulative Preferred Stock shall be declared pro rata so that the amount of dividends declared per share on the Non-cumulative Preferred Stock and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Non-Cumulative Preferred Stock (but without any accumulation in respect of any unpaid dividends for prior dividend periods on the shares of Non-Cumulative Stock) and such other Preferred Stock bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Non-Cumulative Preferred Stock which may be in arrears. 3. Voting. The holders of Non-Cumulative Preferred Stock shall not have any right to vote for the election of directors or for any other purpose. 8 4. Redemption. (a) Optional Redemption. The Association, at the option of the Board of Directors, may redeem the whole or any part of the shares of Non-Cumulative Preferred Stock at the time outstanding, at any time or from time to time after the fifth anniversary of the date of original issuance of the Non-Cumulative Preferred Stock, upon notice given as hereinafter specified, at the redemption price per share equal to $1,000 plus an amount equal to the amount of accrued and unpaid dividends from the immediately preceding dividend payment date (but without any accumulation for unpaid dividends for prior dividend periods on the shares of Non-Cumulative Preferred Stock) to the redemption date. (b) Procedures. Notice of every redemption of shares of Non-Cumulative Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses as they shall appear on the books of the Association. Such mailing shall be at least 10 days and not more than 60 days prior to the date fixed for redemption. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the shareholder receives such notice, and failure duly to give such notice by mail, or any defect in such notice, to any holder of shares of Non-Cumulative Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Non-Cumulative Preferred Stock. In case of redemption of a part only of the shares of Non-Cumulative Preferred Stock at the time outstanding the redemption may be either pro rata or by lot or by such other means as the Board of Directors of the Association in its discretion shall determine. The Board of Directors shall have full power and authority, subject to the provisions herein contained, to prescribe the terms and conditions upon which shares of the Non-Cumulative Preferred Stock shall be redeemed from time to time. If notice of redemption shall have been duly given, and, if on or before the redemption date specified therein, all funds necessary for such redemption shall have been set aside by the Association, separate and apart from its other funds, in trust for the pro rata benefit of the holders of the shares called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, all shares so called for redemption shall no longer be deemed outstanding on and after such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to, receive the amount payable on redemption thereof, without interest. If such notice of redemption shall have been duly given or if the Association shall have given to the bank or trust company hereinafter referred to irrevocable authorization promptly to give such notice, and, if on or before the redemption date specified therein, the funds necessary for such redemption shall have been deposited by the Association with such bank or trust company in trust for the pro rata benefit of the holders of the shares called for redemption, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, from and after the time of such deposit, all shares so called for redemption shall no longer be deemed to be outstanding and all rights with respect to such shares shall forthwith cease and terminate, except only the right of the holders thereof to receive from such bank or trust company at any time after the time of such deposit the funds so deposited, without interest. The aforesaid bank or trust company shall be organized and in good standing under the laws of the United States of America or any state thereof, shall have capital, surplus and undivided profits aggregating at least $50,000,000 according to its last published statement of condition, and shall be identified in the notice of redemption. Any interest accrued on such funds shall be paid to the Association from time to time. In case fewer than all the shares of Non-Cumulative Preferred Stock represented by a stock certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. Any funds so set aside or deposited, as the case may be, and unclaimed at the end of the relevant escheat period under applicable state law from such redemption date shall, to the extent permitted by law, be released or repaid to the Association, after which repayment the holders of the shares so called for redemption shall look only to the Association for payment thereof. 9 5. Liquidation. (a) Liquidation Preference. In the event of any voluntary liquidation, dissolution or winding up of the affairs of the Association, the holders of Non-cumulative Preferred Stock shall be entitled, before any distribution or payment is made to the holders of any junior stock, to be paid in full an amount per share equal to an amount equal to $1,000 plus an amount equal to the amount of accrued and unpaid dividends per share from the immediately preceding dividend payment date (but without any accumulation for unpaid dividends for prior dividend periods on the shares of Non-cumulative Preferred Stock) per share to such distribution or payment date (the "liquidation amount"). In the event of any involuntary liquidation, dissolution or winding up of the affairs of the Association, then, before any distribution or payment shall be made to the holders of any junior stock, the holders of Non-Cumulative Preferred Stock shall be entitled to be paid in full an amount per share equal to the liquidation amount. If such payment shall have been made in full to all holders of shares of Non-Cumulative Preferred Stock, the remaining assets of the Association shall be distributed among the holders of junior stock, according to their respective rights and preferences and in each case according to their respective numbers of shares. (b) Insufficient Assets. In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the available assets of the Association are insufficient to pay such liquidation amount on all outstanding shares of Non-cumulative Preferred Stock, then the holders of Non-Cumulative Preferred Stock shall share ratably in any distribution of assets in proportion to the full amounts to which they would otherwise be respectively entitled. (c) Interpretation. For the purposes of this paragraph 5, the consolidation or merger of the Association with any other corporation or association shall not be deemed to constitute a liquidation, dissolution or winding up of the Association. 6. Preemptive Rights. The Non-Cumulative Preferred Stock is not entitled to any preemptive, subscription, conversion or exchange rights in respect of any securities of the Association. 7. Definitions. As used herein with respect to the Non-Cumulative Preferred Stock, the following terms shall have the following meanings: (a) The term "junior stock" shall mean the Common Stock and any other class or series of shares of the Association hereafter authorized over which the Non-Cumulative Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Association. (b) The term "accrued dividends", with respect to any share of any class or series, shall mean an amount computed at the annual dividend rate for the class or series of which the particular share is a part, from, if such share is cumulative, the date on which dividends on such share became cumulative to and including the date to which such dividends are to be accrued, less the aggregate amount of all dividends theretofore paid thereon and, if such share is noncumulative, the relevant date designated to and including the date to which such dividends are accrued, less the aggregate amount of all dividends theretofore paid with respect to such period. (c) The term "Preferred Stock" shall mean all outstanding shares of all series of preferred stock of the Association as defined in this Article Fifth of the Articles of Association, as amended, of the Association. 8. Restriction on Transfer. No shares of Non-Cumulative Preferred Stock, or any interest therein, may be sold, pledged, transferred or otherwise disposed of without the prior written consent of the Association. The foregoing restriction shall be stated on any certificate for any shares of Non-Cumulative Preferred Stock. 9. Additional Rights. The shares of Non-Cumulative Preferred Stock shall not have any relative, 10 participating, optional or other special rights and powers other than as set forth herein. SIXTH. The Board of Directors shall appoint one of its members President of this Association, who shall be Chairman of the Board, unless the Board appoints another director to be the Chairman. The Board of Directors shall have the power to appoint one or more Vice Presidents; and to appoint a cashier or such other officers and employees as may be required to transact the business of this Association. The Board of Directors shall have the power to define the duties of the officers and employees of the Association, to fix the salaries to be paid to them; to dismiss them, to require bonds from them and to fix the penalty thereof; to regulate the manner in which any increase of the capital of the Association shall be made; to manage and administer the business and affairs of the Association; to make all By-Laws that it may be lawful for them to make; and generally to do and perform all acts that it may be legal for a Board of Directors to do and perform. SEVENTH. The Board of Directors shall have the power to change the location of the main office to any other place within the limits of Charlotte, North Carolina, without the approval of the shareholders but subject to the approval of the Comptroller of the Currency; and shall have the power to establish or change the location of any branch or branches of the Association to any other location, without the approval of the shareholders but subject to the approval of the Comptroller of the Currency. EIGHTH. The corporate existence of this Association shall continue until terminated in accordance with the laws of the United States. NINTH. The Board of Directors of this Association, or any three or more shareholders owning, in the aggregate, not less than 10 percent of the stock of this Association, may call a special meeting of shareholders at any time. Unless otherwise provided by the laws of the United States, a notice of the time, place, and purpose of every annual and special meeting of the shareholders shall be given by first-class mail, postage prepaid, mailed at least ten days prior to the date of such meeting to each shareholder of record at his address as shown upon the books of this Association. TENTH. Each director and executive officer of this Association shall be indemnified by the association against liability in any proceeding (including without limitation a proceeding brought by or on behalf of the Association itself) arising out of his status as such or his activities in either of the foregoing capacities, except for any liability incurred on account of activities which were at the time taken known or believed by such person to be clearly in conflict with the best interests of the Association. Liabilities incurred by a director or executive officer of the Association in defending a proceeding shall be paid by the Association in advance of the final disposition of such proceeding upon receipt of an undertaking by the director or executive officer to repay such amount if it shall be determined, as provided in the last paragraph of this Article Tenth, that he is not entitled to be indemnified by the Association against such liabilities. The indemnity against liability in the preceding paragraph of this Article Tenth, including liabilities incurred in defending a proceeding, shall be automatic and self-operative. Any director, officer or employee of this Association who serves at the request of the Association as a director, officer, employee or agent of a charitable, not-for-profit, religious, educational or hospital corporation, partnership, joint venture, trust or other enterprise, or a trade association, or as a trustee or administrator under an employee benefit plan, or who serves at the request of the Association as a director, officer or employee of a business corporation in connection with the administration of an estate or trust by the Association, shall have the right to be indemnified by the Association, subject to the provisions set forth in the following paragraph of this Article Tenth, against liabilities in any manner arising out of or attributable to such status or activities in any such capacity, except for any liability incurred on account of activities which were at the time taken known or believed by such person to be clearly in conflict with the best interests of the Association, or of the corporation, partnership, joint venture, trust, enterprise, Association or plan being served by such person. In the case of all persons except the directors and executive officers of the Association, the determination of whether a person is entitled to indemnification under the preceding paragraph of this Article Tenth shall be made by and in the sole discretion of the Chief Executive Officer of the Association. In the case of the directors and executive officers of the Association, the indemnity against liability in the preceding paragraph of this Article Tenth shall be automatic and self-operative. 11 For purposes of this Article Tenth of these Articles of Association only, the following terms shall have the meanings indicated: (a) "Association" means First Union National Bank and its direct and indirect wholly-owned subsidiaries. (b) "Director" means an individual who is or was a director of the Association. (c) "Executive officer" means an officer of the Association who by resolution of the Board of Directors of the Association has been determined to be an executive officer of the Association for purposes of Regulation O of the Federal Reserve Board. (d) "Liability" means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses, including counsel fees and expenses, incurred with respect to a proceeding. (e) "Party" includes an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding. (f) "Proceeding" means any threatened, pending, or completed claim, action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal. The Association shall have no obligation to indemnify any person for an amount paid in settlement of a proceeding unless the Association consents in writing to such settlement. The right to indemnification herein provided for shall apply to persons who are directors, officers, or employees of banks or other entities that are hereafter merged or otherwise combined with the Association only after the effective date of such merger or other combination and only as to their status and activities after such date. The right to indemnification herein provided for shall inure to the benefit of the heirs and legal representatives of any person entitled to such right. No revocation of, change in, or adoption of any resolution or provision in the Articles of Association or By-laws of the Association inconsistent with, this Article Tenth shall adversely affect the rights of any director, officer, or employee of the Association with respect to (i) any proceeding commenced or threatened prior to such revocation, change, or adoption, or (ii) any proceeding arising out of any act or omission occurring prior to such revocation, change, or adoption, in either case, without the written consent of such director, officer, or employee. The rights hereunder shall be in addition to and not exclusive of any other rights to which a director, officer, or employee of the Association may be entitled under any statute, agreement, insurance policy, or otherwise. The Association shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, or employee of the Association, or is or was serving at the request of the Association as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, trade association, employee benefit plan, or other enterprise, against any liability asserted against such director, officer, or employee in any such capacity, or arising out of their status as such, whether or not the Association would have the power to indemnify such director, officer, or employee against such liability, excluding insurance coverage for a formal order assessing civil money penalties against an Association director or employee. Notwithstanding anything to the contrary provided herein, no person shall have a right to indemnification with respect to any liability (i) incurred in an administrative proceeding or action instituted by an appropriate bank regulatory agency which proceeding or action results in a final order assessing civil money penalties or requiring affirmative action by an individual or individuals in the form of payments to the Association, (ii) to the extent such person is entitled to receive payment therefor under any insurance policy or from any corporation, partnership, joint venture, trust, trade association, employee benefit plan, or other enterprise other than the Association, or (iii) to the extent that a court of competent jurisdiction determines that such indemnification is void or prohibited under state or federal law. 12 ELEVENTH. These Articles of Association may be amended at any regular or special meeting of the shareholders by the affirmative vote of the holders of a majority of the stock of this Association, unless the vote of holders of a greater amount of stock is required by law, and in that case, by the vote of the holders of such greater amount. 13 [LOGO] Comptroller of the Currency Administrator of National Banks Bank Organization and Structure, 3-8 Washington, D.C. 20219-0001 February 20, 1998 OCC Control Nr. 97-ML-02-0050 Mr. Robert L. Andersen Assistant General Counsel First Union Corporation 301 South College Street Charlotte, North Carolina 28288-0630 Dear Mr. Andersen: This letter is the official certification of the Office of the Comptroller of the Currency for the merger of First Union National Bank, Charlotte, North Carolina, Charter Nr. 15650, into and under the charter and title of First Union National Bank, Avondale, Pennsylvania, Charter Nr. 22693, with the resulting bank located in Charlotte, North Carolina, effective February 26, 1998. This letter also serves as the official authorization for First Union National Bank, Charter Nr. 22693, to operate its former head office in Avondale, Pennsylvania as a branch at the following location: Popular Name : Avondale Branch Certificate Nr : 111588A Address : 102 Pennsylvania Avenue Avondale, Pennsylvania Branch authorizations previously granted to First Union National Bank, Charter Nr. 15650 automatically convey to the resulting bank and will not be reissued. Please furnish a copy of this certificate to personnel responsible for branch administration. In the event of questions, please contact Senior Licensing Analyst Cindy L. Hausch-Booth at (202) 874-5060. Sincerely, /s/ Richard T. Erb Richard T. Erb Licensing Manager [SEAL OF THE COMPTROLLER OF THE CURRENCY] 14 [LOGO] Comptroller of the Currency Administrator of National Banks Bank Organization and Structure, 3-8 Washington, D.C. 20219-0001 CERTIFICATE I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that the document hereto attached is a true and correct copy, as recorded in this Office, of the Charter Certificate for "First Union National Bank," Charlotte, North Carolina, (Charter No. 22693). IN TESTIMONY WHEREOF, I have hereunto subscribed my name and caused my seal of office to be affixed to these presents at the Treasury Department in the City of Washington and District of Columbia, this 4th day of March, 1998. /s/ Eugene A. Ludwig ---------------------- Comptroller of the Currency [SEAL OF THE COMPTROLLER OF THE CURRENCY] 15 [LOGO] Comptroller of the Currency Administrator of National Banks Bank Organization and Structure, 3-8 Washington, D.C. 20219-0001 CERTIFICATE I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that: 1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and control of all records pertaining to the chartering of all National Banking Associations. 2. "First Union National Bank," Charlotte, North Carolina, (Charter No. 22693) is a National Banking Association formed under the laws of the United States and is authorized thereunder to transact the business of banking on the date of this Certificate. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and caused my seal of office to be affixed to these presents at the Treasury Department in the City of Washington and District of Columbia, this 4th day of March, 1998. /s/ Eugene A. Ludwig --------------------------- Comptroller of the Currency [SEAL OF THE COMPTROLLER OF THE CURRENCY] 16 [LOGO] Comptroller of the Currency Administrator of National Banks Bank Organization and Structure, 3-8 Washington, D.C. 20219-0001 Certificate of Fiduciary Powers I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that: 1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and control of all records pertaining to the chartering of all National Banking Associations. 2. "First Union National Bank," Charlotte, North Carolina, (Charter No. 22693) was granted, under the hand and seal of the Comptroller, the right to act in all fiduciary capacities authorized under the provisions of the Act of Congress approved September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a, and that the authority so granted remains in full force and effect on the date of the Certificate. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and caused my seal of office to be affixed to these presents at the Treasury Department in the City of Washington and District of Columbia, this 4th day of March, 1998. /s/ Eugene A. Ludwig -------------------- Comptroller of the Currency [SEAL OF THE COMPTROLLER OF THE CURRENCY] 17 BY-LAWS OF FIRST UNION NATIONAL BANK Charter No. 22693 As Restated Effective February 26, 1998 18 BY-LAWS OF FIRST UNION NATIONAL BANK ARTICLE I Meetings of Shareholders Section 1.1 Annual Meeting. The annual meeting of the shareholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on the third Tuesday of April in each year, commencing with the year 1998, except that the Board of Directors may, from time to time and upon passage of a resolution specifically setting forth its reasons, set such other date for such meeting during the month of April as the Board of Directors may deem necessary or appropriate; provided, however, that if an annual meeting would otherwise fall on a legal holiday, then such annual meeting shall be held on the second business day following such legal holiday. The holders of a majority of the outstanding shares entitled to vote which are represented at any meeting of the shareholders may choose persons to act as Chairman and as Secretary of the meeting. Section 1.2 Special Meetings. Except as otherwise specifically provided by statute, special meetings of the shareholders may be called for any purpose at any time by the Board of Directors or by any three or more shareholders owning, in the aggregate, not less than ten percent of the stock of the Association. Every such special meeting, unless otherwise provided by law, shall be called by mailing, postage prepaid, not less than ten days prior to the date fixed for such meeting, to each shareholder at his address appearing on the books of the Association, a notice stating the purpose of the meeting. Section 1.3 Nominations for Directors. Nominations for election to the Board of Directors may be made by the Board of Directors or by any stockholder of any outstanding class of capital stock of the bank entitled to vote for the election of directors. Nominations, other than those made by or on behalf of the existing management of the bank, shall be made in writing and shall be delivered or mailed to the President of the Bank and to the Comptroller of the Currency, Washington, D. C., not less than 14 days nor more than 50 days prior to any meeting of stockholders called for the election of directors, provided however, that if less than 21 days' notice of such meeting is given to shareholders, such nomination shall be mailed or delivered to the President of the Bank and to the Comptroller of the Currency not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares of capital stock of the bank that will be voted for each proposed nominee; (d) the name and residence address of the notifying shareholder; and (e) the number of shares of capital stock of the bank owned by the notifying shareholder. Nominations not made in accordance herewith may, in his discretion, be disregarded by the chairman of the meeting, and upon his instructions, the vote tellers may disregard all votes cast for each such nominee. Section 1.4 Judges of Election. The Board may at any time appoint from among the shareholders three or more persons to serve as Judges of Election at any meeting of shareholders; to act as judges and tellers with respect to all votes by ballot at such meeting and to file with the Secretary of the meeting a Certificate under their hands, certifying the result thereof. Section 1.5 Proxies. Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing, but no officer or employee of this Association shall act as proxy. Proxies shall be valid only for one meeting, to be specified therein, and any adjournments of such meeting. Proxies shall be dated and shall be filed with the records of the meeting. Section 1.6 Quorum. A majority of the outstanding capital stock, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, unless otherwise provided by law; but less than a quorum may adjourn any meeting, from time to time, and the meeting may be held, as adjourned, without further notice. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by law or by the Articles of Association. 19 ARTICLE II Directors Section 2.1 Board of Directors. The Board of Directors (hereinafter referred to as the "Board"), shall have power to manage and administer the business and affairs of the Association. Except as expressly limited by law, all corporate powers of the Association shall be vested in and may be exercised by said Board. Section 2.2 Number. The Board shall consist of not less than five nor more than twenty-five directors, the exact number within such minimum and maximum limits to be fixed and determined from time to time by resolution of a majority of the full Board or by resolution of the shareholders at any meeting thereof; provided, however, that a majority of the full Board of Directors may not increase the number of directors to a number which, (1) exceeds by more than two the number of directors last elected by shareholders where such number was fifteen or less, and (2) to a number which exceeds by more than four the number of directors last elected by shareholders where such number was sixteen or more, but in no event shall the number of directors exceed twenty-five. Section 2.3 Organization Meeting. The Secretary of the meeting upon receiving the certificate of the judges, of the result of any election, shall notify the directors-elect of their election and of the time at which they are required to meet at the Main Office of the Association for the purpose of organizing the new Board and electing and appointing officers of the Association for the succeeding year. Such meeting shall be held as soon thereafter as practicable. If, at the time fixed for such meeting, there shall not be a quorum present, the directors present may adjourn the meeting from time to time, until a quorum is obtained. Section 2.4 Regular Meetings. Regular meetings of the Board of Directors shall be held at such place and time as may be designated by resolution of the Board of Directors. Upon adoption of such resolution, no further notice of such meeting dates or the places or times thereof shall be required. Upon the failure of the Board of Directors to adopt such a resolution, regular meetings of the Board of Directors shall be held, without notice, on the third Tuesday in February, April, June, August, October and December, commencing with the year 1997, at the main office or at such other place and time as may be designated by the Board of Directors. When any regular meeting of the Board would otherwise fall on a holiday, the meeting shall be held on the next business day unless the Board shall designate some other day. Section 2.5 Special Meetings. Special meetings of the Board of Directors may be called by the President of the Association, or at the request of three (3) or more directors. Each member of the Board of Directors shall be given notice stating the time and place, by telegram, letter, or in person, of each such special meeting. Section 2.6 Quorum. A majority of the directors shall constitute a quorum at any meeting, except when otherwise provided by law; but a less number may adjourn any meeting, from time to time, and the meeting may be held, as adjourned, without further notice. Section 2.7 Vacancies. When any vacancy occurs among the directors, the remaining members of the Board, in accordance with the laws of the United States, may appoint a director to fill such vacancy at any regular meeting of the Board, or at a special meeting called for that purpose. Section 2.8 Advisory Boards. The Board of Directors may appoint Advisory Boards for each of the states in which the Association conducts operations. Each such Advisory Board shall consist of as many persons as the Board of Directors may determine. The duties of each Advisory Board shall be to consult and advise with the Board of Directors and senior officers of the Association in such state with regard to the best interests of the Association and to perform such other duties as the Board of Directors may lawfully delegate. The senior officer in such state, or such officers as directed by such senior officer, may appoint advisory boards for geographic regions within such state and may consult with the State Advisory Boards prior to such appointments. 20 ARTICLE III Committees of the Board Section 3.1 The Board of Directors, by resolution adopted by a majority of the number of directors fixed by these By-Laws, may designate two or more directors to constitute an Executive Committee and other committees, each of which, to the extent authorized by law and provided in such resolution, shall have and may exercise all of the authority of the Board of Directors and the management of the Association. The designation of any committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility or liability imposed upon it or any member of the Board of Directors by law. The Board of Directors reserves to itself alone the power to act on (1) dissolution, merger or consolidation, or disposition of substantially all corporate property, (2) designation of committees or filling vacancies on the Board of Directors or on a committee of the Board (except as hereinafter provided), (3) adoption, amendment or repeal of By-laws, (4) amendment or repeal of any resolution of the Board which by its terms is not so amendable or repealable, and (5) declaration of dividends, issuance of stock, or recommendations to stockholders of any action requiring stockholder approval. The Board of Directors or the Chairman of the Board of Directors of the Association may change the membership of any committee at any time, fill vacancies therein, discharge any committee or member thereof either with or without cause at any time, and change at any time the authority and responsibility of any such committee. A majority of the members of any committee of the Board of Directors may fix such committee's rules of procedure. All action by any committee shall be reported to the Board of Directors at a meeting succeeding such action, except such actions as the Board may not require to be reported to it in the resolution creating any such committee. Any action by any committee shall be subject to revision, alteration, and approval by the Board of Directors, except to the extent otherwise provided in the resolution creating such committee; provided, however, that no rights or acts of third parties shall be affected by any such revision or alteration. ARTICLE IV Officers and Employees Section 4.1 Officers. The officers of the Association may be a Chairman of the Board, a Vice Chairman of the Board, one or more Chairmen or Vice Chairmen (who shall not be required to be directors of the Association), a President, one or more Vice Presidents, a Secretary, a Cashier or Treasurer, and such other officers, including officers holding similar or equivalent titles to the above in regions, divisions or functional units of the Association, as may be appointed by the Board of Directors. The Chairman of the Board and the President shall be members of the Board of Directors. Any two or more offices may be held by one person, but no officer shall sign or execute any document in more than one capacity. Section 4.2 Election, Term of Office, and Qualification. Each officer shall be chosen by the Board of Directors and shall hold office until the annual meeting of the Board of Directors held next after his election or until his successor shall have been duly chosen and qualified, or until his death, or until he shall resign, or shall have been disqualified, or shall have been removed from office. Section 4.2(a) Officers Acting as Assistant Secretary. Notwithstanding Section 1 of these By-laws, any Senior Vice President, Vice President, or Assistant Vice President shall have, by virtue of his office, and by authority of the By-laws, the authority from time to time to act as an Assistant Secretary of the Bank, and to such extent, said officers are appointed to the office of Assistant Secretary. Section 4.3 Chief Executive Officer. The Board of Directors shall designate one of its members to be the President of this Association, and the officer so designated shall be an ex officio member of all committees of the Association except the Examining Committee, and its Chief Executive Officer unless some other officer is so designated by the Board of Directors. Section 4.4 Duties of Officers. The duties of all officers shall be prescribed by the Board of Directors. Nevertheless, the Board of Directors may delegate to the Chief Executive Officer the authority to prescribe the duties of other officers of the corporation not inconsistent with law, the charter, and these By-laws, and to 21 appoint other employees, prescribe their duties, and to dismiss them. Notwithstanding such delegation of authority, any officer or employee also may be dismissed at any time by the Board of Directors. Section 4.5 Other Employees. The Board of Directors may appoint from time to time such tellers, vault custodians, bookkeepers, and other clerks, agents, and employees as it may deem advisable for the prompt and orderly transaction of the business of the Association, define their duties, fix the salary to be paid them, and dismiss them. Subject to the authority of the Board of Directors, the Chief Executive Officer or any other officer of the Association authorized by him, may appoint and dismiss all such tellers, vault custodians, bookkeepers and other clerks, agents, and employees, prescribe their duties and the conditions of their employment, and from time to time fix their compensation. Section 4.6 Removal and Resignation. Any officer or employee of the Association may be removed either with or without cause by the Board of Directors. Any employee other than an officer elected by the Board of Directors may be dismissed in accordance with the provisions of the preceding Section 4.5. Any officer may resign at any time by giving written notice to the Board of Directors or to the Chief Executive Officer of the Association. Any such resignation shall become effective upon its being accepted by the Board of Directors, or the Chief Executive Officer. ARTICLE V Fiduciary Powers Section 5.1 Capital Management Group. There shall be an area of this Association known as the Capital Management Group which shall be responsible for the exercise of the fiduciary powers of this Association. The Capital Management Group shall consist of four service areas: Fiduciary Services, Retail Services, Investments and Marketing. The Fiduciary Services unit shall consist of personal trust, employee benefits, corporate trust and operations. The General Office for the Fiduciary Services unit shall be located in Charlotte, N.C., with City Trust Offices located in such cities within the State of North Carolina as designated by the Board of Directors. Section 5.2 Trust Officers. There shall be a General Trust Officer of this Association whose duties shall be to manage, supervise and direct all the activities of the Capital Management Group. Further, there shall be one or more Senior Trust Officers designated to assist the General Trust Officer in the performance of his duties. They shall do or cause to be done all things necessary or proper in carrying out the business of the Capital Management Group in accordance with provisions of applicable law and regulation. Section 5.3 Capital Management/General Trust Committee. There shall be a Capital Management/General Trust Committee composed of not less than four (4) members of the Board of Directors or officers of this Association who shall be appointed annually or from time to time by the Board of Directors of the Association. The General Trust Officer shall serve as an ex-officio member of the Committee. Each member shall serve until his successor is appointed. The Board of Directors or the Chairman of the Board may change the membership of the Capital Management/General Trust Committee at any time, fill vacancies therein, or discharge any member thereof with or without cause at any time. The Committee shall counsel and advise on all matters relating to the business or affairs of the Capital Management Group and shall adopt overall policies for the conduct of the business of the Capital Management Group including but not limited to: general administration, investment policies, new business development, and review for approval of major assignments of functional responsibilities. The Committee shall meet at least quarterly or as called for by its Chairman or any three (3) members of the Committee. A quorum shall consist of three (3) members. In carrying out its responsibilities, the Capital Management/General Trust Committee shall review the actions of all officers, employees and committees utilized by this Association in connection with the activities of the Capital Management Group and may assign the administration and performance of any fiduciary powers or duties to any of such officers or employees or to the Investment Policy Committee, Personal Trust Administration Committee, Account Review Committee, Corporate and Institutional Accounts Committee, or any other committees it shall designate. One of the methods to be used in the review process will be the thorough scrutiny of the Report of Examination by the Office of the Comptroller of the Currency and the reports of the Audit Division of First Union Corporation, as they relate to the activities of the Capital Management Group. These reviews shall be in addition to reviews of such reports by the Audit Committee of the Board of Directors. The Chairman of the Capital Management/General Trust Committee shall be appointed by the Chairman of the Board of Directors. He shall cause to be recorded in appropriate minutes all actions taken by the Committee. The minutes shall be signed by its Secretary and approved by its Chairman. Further, the Committee shall 22 summarize all actions taken by it and shall submit a report of its proceedings to the Board of Directors at its next regularly scheduled meeting following a meeting of the Capital Management/General Trust Committee. As required by Section 9.7 of Regulation 9 of the Comptroller of the Currency, the Board of Directors retains responsibility for the proper exercise of the fiduciary powers of this Association. The Fiduciary Services unit of the Capital Management Group will maintain a list of securities approved for investment in fiduciary accounts and will from time to time provide the Capital Management/General Trust Committee with current information relative to such list and also with respect to transactions in other securities not on such list. It is the policy of this Association that members of the Capital Management/General Trust Committee should not buy, sell or trade in securities which are on such approved list or in any other securities in which the Fiduciary Services unit has taken, or intends to take, a position in fiduciary accounts in any circumstances in which any such transaction could be viewed as a possible conflict of interest or could constitute a violation of applicable law or regulation. Accordingly, if any such securities are owned by any member of the Capital Management/General Trust Committee at the time of appointment to such Committee, the Capital Management Group shall be promptly so informed in writing. If any member of the Capital Management/General Trust Committee intends to buy, sell, or trade in any such securities while serving as a member of the Committee, he should first notify the Capital Management Group in order to make certain that any proposed transaction will not constitute a violation of this policy or of applicable law or regulation. Section 5.4 Investment Policy Committee. There shall be an Investment Policy Committee composed of not less than seven (7) officers and/or employees of this Association who shall be appointed annually or from time to time by the Board of Directors. Each member shall serve until his successor is appointed. Meetings shall be called by the Chairman or any two (2) members of the Committee. A quorum shall consist of five (5) members. The Investment Policy Committee shall exercise such fiduciary powers and perform such duties as may be assigned to it by the Capital Management/General Trust Committee. All actions taken by the Investment Policy Committee shall be recorded in appropriate minutes, signed by the Secretary thereof, approved by its Chairman and submitted to the Capital Management/General Trust Committee at its next ensuing regular meeting for its review and approval. Section 5.5 Personal Trust Administration Committee. There shall be a Personal Trust Administration Committee composed of not less than five (5) officers, who shall be appointed annually or from time to time by the Board of Directors. Each member shall serve until his successor is appointed. Meetings shall be called by the Chairman or any three (3) members of the Committee. A quorum shall consist of three (3) members. The Personal Trust Administration Committee shall exercise such fiduciary powers and perform such duties as may be assigned to it by the Capital Management/General Trust Committee. All action taken by the Personal Trust Administration Committee shall be recorded in appropriate minutes signed by the Secretary thereof, approved by its Chairman, and submitted to the Capital Management/General Trust Committee at its next ensuing regular meeting for its review and approval. Section 5.6 Account Review Committee. There shall be an Account Review Committee composed of not less than four (4) officers and/or employees of this Association, who shall be appointed annually or from time to time by the Board of Directors. Each member shall serve until his successor is appointed. Meetings shall be called by the Chairman or any two (2) members of the Committee. A quorum shall consist of three (3) members. The Account Review Committee shall exercise such fiduciary powers and perform such duties as may be assigned to it by the Capital Management/General Trust Committee. All actions taken by the Account Review Committee shall be recorded in appropriate minutes, signed by the Secretary thereof, approved by its Chairman and submitted to the Capital Management/General Trust Committee at its next ensuing regular meeting for its review and approval. Section 5.7 Corporate and Institutional Accounts Committee. There shall be a Corporate and Institutional Accounts Committee composed of not less than five (5) officers and/or employees of this Association, who shall be appointed annually, or from time to time, by the Capital Management/General Trust Committee and approved by the Board of Directors. Meetings may be called by the Chairman or any two (2) members of the Committee. A quorum shall consist of three (3) members. The Corporate and Institutional Accounts Committee shall exercise such fiduciary powers and duties as may be assigned to it by the General Trust Committee. All actions taken by the Corporate and Institutional Accounts Committee shall be recorded in appropriate minutes, signed by the Secretary thereof, approved by its Chairman and made available to the General Trust Committee at its next ensuing regular meeting for its review and approval. 23 ARTICLE VI Stock and Stock Certificates Section 6.1 Transfers. Shares of stock shall be transferable on the books of the Association, and a transfer book shall be kept in which all transfers of stock shall be recorded. Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all rights and liabilities of the prior holder of such shares. Section 6.2 Stock Certificates. Certificates of stock shall bear the signature of the Chairman, the Vice Chairman, the President, or a Vice President (which may be engraved, printed, or impressed), and shall be signed manually or by facsimile process by the Secretary, Assistant Secretary, Cashier, Assistant Cashier, or any other officer appointed by the Board of Directors for that purpose, to be known as an Authorized Officer, and the seal of the Association shall be engraved thereon. Each certificate shall recite on its face that the stock represented thereby is transferable only upon the books of the Association properly endorsed. ARTICLE VII Corporate Seal Section 7.1 The President, the Cashier, the Secretary, or any Assistant Cashier, or Assistant Secretary, or other officer thereunto designated by the Board of Directors shall have authority to affix the corporate seal to any document requiring such seal, and to attest the same. Such seal shall be substantially in the following form. ARTICLE VIII Miscellaneous Provisions Section 8.1 Fiscal Year. The fiscal year of the Association shall be the calendar year. Section 8.2 Execution of Instruments. All agreements, indentures, mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, notices, applications, schedules, accounts, affidavits, bonds, undertakings, proxies, and other instruments or documents may be signed, executed, acknowledged, verified, delivered or accepted in behalf of the Association by the Chairman of the Board, the Vice Chairman of the Board, any Chairman or Vice Chairman, the President, any Vice President or Assistant Vice President, the Secretary or any Assistant Secretary, the Cashier or Treasurer or any Assistant Cashier or Assistant Treasurer, or any officer holding similar or equivalent titles to the above in any regions, divisions or functional units of the Association, or, if in connection with the exercise of fiduciary powers of the Association, by any of said officers or by any Trust Officer or Assistant Trust Officer (or equivalent titles); provided, however, that where required, any such instrument shall be attested by one of said officers other than the officer executing such instrument. Any such instruments may also be executed, acknowledged, verified, delivered or accepted in behalf of the Association in such other manner and by such other officers as the Board of Directors may from time to time direct. The provisions of this Section 8.2 are supplementary to any other provision of these By-laws. Section 8.3 Records. The Articles of Association, the By-laws, and the proceedings of all meetings of the shareholders, the Board of Directors, standing committees of the Board, shall be recorded in appropriate minute books provided for the purpose. The minutes of each meeting shall be signed by the Secretary, Cashier, or other officer appointed to act as Secretary of the meeting. ARTICLE IX By-laws Section 9.1 Inspection. A copy of the By-laws, with all amendments thereto, shall at all times be kept in a convenient place at the Head Office of the Association, and shall be open for inspection to all shareholders, during banking hours. 24 Section 9.2 Amendments. The By-laws may be amended, altered or repealed, at any regular or special meeting of the Board of Directors, by a vote of a majority of the whole number of Directors. 25 Exhibit A First Union National Bank Article X Emergency By-laws In the event of an emergency declared by the President of the United States or the person performing his functions, the officers and employees of this Association will continue to conduct the affairs of the Association under such guidance from the directors or the Executive Committee as may be available except as to matters which by statute require specific approval of the Board of Directors and subject to conformance with any applicable governmental directives during the emergency. OFFICERS PRO TEMPORE AND DISASTER Section 1. The surviving members of the Board of Directors or the Executive Committee shall have the power, in the absence or disability of any officer, or upon the refusal of any officer to act, to delegate and prescribe such officer's powers and duties to any other officer, or to any director, for the time being. Section 2. In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of this Association by its directors and officers as contemplated by these By-laws, any two or more available members of the then incumbent Executive Committee shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Association in accordance with the provisions of Article II of these By-laws; and in addition, such Committee shall be empowered to exercise all of the powers reserved to the General Trust Committee under Section 5.3 of Article V hereof. In the event of the unavailability, at such time, of a minimum of two members of the then incumbent Executive Committee, any three available directors shall constitute the Executive Committee for the full conduct and management of the affairs and business of the Association in accordance with the foregoing provisions of this section. This By-law shall be subject to implementation by resolutions of the Board of Directors passed from time to time for that purpose, and any provisions of these By-laws (other than this section) and any resolutions which are contrary to the provisions of this section or to the provisions of any such implementary resolutions shall be suspended until it shall be determined by an interim Executive Committee acting under this section that it shall be to the advantage of this Association to resume the conduct and management of its affairs and business under all of the other provisions of these By-laws. Officer Succession BE IT RESOLVED, that if consequent upon war or warlike damage or disaster, the Chief Executive Officer of this Association cannot be located by the then acting Head Officer or is unable to assume or to continue normal executive duties, then the authority and duties of the Chief Executive Officer shall, without further action of the Board of Directors, be automatically assumed by one of the following persons in the order designated: Chairman President Division Head/Area Administrator - Within this officer class, officers shall take seniority on the basis of length of service in such office or, in the event of equality, length of service as an officer of the Association. Any one of the above persons who in accordance with this resolution assumes the authority and duties of the Chief Executive Officer shall continue to serve until he resigns or until five-sixths of the other officers who are attached to the then acting Head Office decide in writing he is unable to perform said duties or until the elected Chief Executive Officer of this Association, or a person higher on the above list, shall become available to perform the duties of Chief Executive Officer of the Association. BE IT FURTHER RESOLVED, that anyone dealing with this Association may accept a certification by any three officers that a specified individual is acting as Chief Executive Officer in accordance with this resolution; and that anyone accepting such certification may continue to consider it in force until notified in writing of a change, said notice of change to carry the signatures of three officers of the Association. 26 Alternate Locations The offices of the Association at which its business shall be conducted shall be the main office thereof in each city which is designated as a City Office (and branches, if any), and any other legally authorized location which may be leased or acquired by this Association to carry on its business. During an emergency resulting in any authorized place of business of this Association being unable to function, the business ordinarily conducted at such location shall be relocated elsewhere in suitable quarters, in addition to or in lieu of the locations heretofore mentioned, as may be designated by the Board of Directors or by the Executive Committee or by such persons as are then, in accordance with resolutions adopted from time to time by the Board of Directors dealing with the exercise of authority in the time of such emergency, conducting the affairs of this Association. Any temporarily relocated place of business of this Association shall be returned to its legally authorized location as soon as practicable and such temporary place of business shall then be discontinued. Acting Head Offices BE IT RESOLVED, that in case of and provided because of war or warlike damage or disaster, the General Office of this Association, located in Charlotte, North Carolina, is unable temporarily to continue its functions, the Raleigh office, located in Raleigh, North Carolina, shall automatically and without further action of this Board of Directors, become the "Acting Head Office of this Association"; BE IT FURTHER RESOLVED, that if by reason of said war or warlike damage or disaster, both the General Office of this Association and the said Raleigh Office of this Association are unable to carry on their functions, then and in such case, the Asheville Office of this Association, located in Asheville, North Carolina, shall, without further action of this Board of Directors, become the "Acting Head Office of this Association"; and if neither the Raleigh Office nor the Asheville Office can carry on their functions, then the Greensboro Office of this Association, located in Greensboro, North Carolina, shall, without further action of this Board of Directors, become the "Acting Head Office of this Association"; and if neither the Raleigh Office, the Asheville Office, nor the Greensboro Office can carry on their functions, then the Lumberton Office of this Association, located in Lumberton, North Carolina, shall, without further action of this Board of Directors, become the "Acting Head Office of this Association". The Head Office shall resume its functions at its legally authorized location as soon as practicable. 27 Legal Title of Bank: First Union National Bank Call Date: 12/31/97 Address: Two First Union Center ST-BK: 37-0351 FFIEC 031 City, State, Zip: Charlotte, NC 28288-0201 Page RC-1 FDIC Certificate #: 04885 CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1997 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
C400 Dollar Amount in Thousands RCFD Bil Mil Thou - ------------------------------------------------------------------------------------------------------------------ ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): /////////////////// a. Noninterest-bearing balances and currency and coin (1)........................ 0081 5,350,509 1.a. b.Interest-bearing balances (2).................................................. 0071 527,082 1.b. 2. Securities: /////////////////// a. Held-to-maturity securities (from Schedule RC-B, column A).................... 1754 1,679,050 2.a. b.Available-for-sale securities (from Schedule RC-B, column D)................... 1773 16,948,015 2.b. 3. Federal funds sold and securities purchased under agreements to resell........... 1350 2,626,508 3. 4. Loans and lease financing receivables ///////////////// a. Loans and leases, net of unearned income (from Schedule RC-C). RCFD 2122 83,315,758 ///////////////// 4.a. b. LESS: Allowance for loan and lease losses..................... RCFD 3123 1,005,217 ///////////////// 4.b. c. LESS: Allocated transfer risk reserve......................... RCFD 3128 0 ///////////////// 4.c. d. Loans and leases, net of unearned income, ///////////////// allowance, and reserve (item 4.a minus 4.b and 4.c)........................... 2125 82,310,541 4.d. 5. Trading assets (from Schedule RC-D).............................................. 3545 3,322,404 5. 6. Premises and fixed assets (including capitalized leases)......................... 2145 2,167,626 6. 7. Other real estate owned (from Schedule RC-M)..................................... 2150 70,835 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)............................................................. 2130 181,970 8. 9. Customers' liability to this bank on acceptances outstanding..................... 2155 761,776 9. 10. Intangible assets (from Schedule RC-M)........................................... 2143 2,539,719 10. 11. Other assets (from Schedule RC-F)................................................ 2160 6,508,589 11. 12. Total assets (sum of items 1 through 11)......................................... 2170 124,994,624 12.
- ---------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. 28 Legal Title of Bank: First Union National Bank Call Date: 12/31/97 Address: Two First Union Center ST-BK: 37-0351 FFIEC 031 City, State, Zip: Charlotte, NC 28288-0201 Page RC-2 FDIC Certificate #: 04885 Schedule RC--Continued
Dollar Amount in Thousands Bil Mil Thou - --------------------------------------------------------------------------------------------------------------------- LIABILITIES ///////////////////// 13. Deposits: ///////////////////// a.In domestic offices (sum of totals of columns A and C from Schedule RC-E, /////////////////////////// part I)..................................................................... RCON 2200 79,161,386 13.a. (1) Noninterest-bearing (1).......................RCON 6631 15,696,570 /////////////////////////13.a.(1) (2) Interest-bearing..............................RCON 6636 63,464,816 /////////////////////////13.a.(2) b.In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E,//////////////////// part II).................................................................... RCFN 2200 11,656,207 13.b. (1) Noninterest-bearing...........................RCFN 6631 0 //////////////////////// 13.b.(1) (2) Interest-bearing..............................RCFN 6636 11,656,207 //////////////////////// 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase...... RCFD 2800 13,333,348 14. 15. a. Demand notes issued to the U.S. Treasury..................................... RCON 2840 258,807 15.a. b. Trading liabilities (from Schedule RC-D)..................................... RCFD 3548 3,030,911 15.b. 16. Other borrowed money (includes mortgage indebtedness and obligations under ///////////////////////////// capitalized leases):............................................................ /////////////////////// a. With a remaining maturity of one year or less................................ RCFD 2332 2,092,679 16.a. b. With a remaining maturity of more than one year through three years.......... RCFD A547 325,781 16.b. c. With a remaining maturity of more than three years........................... RCFD A548 58,347 16.c. 17. Not applicable.................................................................. /////////////////////// 18. Bank's liability on acceptances executed and outstanding........................ RCFD 2920 761,776 18. 19. Subordinated notes and debentures (2)........................................... RCFD 3200 2,347,834 19. 20. Other liabilities (from Schedule RC-G).......................................... RCFD 2930 2,480,990 20. 21. Total liabilities (sum of items 13 through 20).................................. RCFD 2948 115,508,066 21. 22. Not applicable..................................................................//////////////////////// EQUITY CAPITAL //////////////////////// 23. Perpetual preferred stock and related surplus................................... RCFD 3838 0 23. 24. Common stock.................................................................... RCFD 3230 82,795 24. 25. Surplus (exclude all surplus related to preferred stock)........................ RCFD 3839 6,695,493 25. 26. a. Undivided profits and capital reserves....................................... RCFD 3632 2,498,515 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities....... RCFD 8434 209,755 26.b. 27. Cumulative foreign currency translation adjustments............................. RCFD 3284 0 27. 28. Total equity capital (sum of items 23 through 27)............................... RCFD 3210 9,486,558 28. 29. Total liabilities and equity capital (sum of items 21 and 28)................... RCFD 3300 124,994,624 29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external Number auditors as of any date during 1996............................................ RCFD 6724 N/A M.1.
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ---------- (1) Includes total demand deposits and noninterest-bearing time and savings deposit. (2) Includes limited-life preferred stock and related surplus. EX-27.1 38 FDS
5 0001057836 ADVANCED ACCESSORY SYSTEMS LLC 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 27,348 0 43,523 1,699 34,408 111,748 55,928 8,411 265,483 47,373 197,126 0 0 0 16,193 265,483 188,678 188,678 135,556 135,556 57,067 321 12,627 712 (2,856) 3,471 0 7,416 0 (3,945) 0 0
EX-99.1 39 EX-99.1 1 EXHIBIT 99.1 LETTER OF TRANSMITTAL TO TENDER FOR EXCHANGE 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007 OF ADVANCED ACCESSORY SYSTEMS, LLC AND AAS CAPITAL CORPORATION PURSUANT TO THE PROSPECTUS DATED ________ __, 1998 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. , NEW YORK CITY TIME, ON ________ __, 1998, UNLESS EXTENDED. To: First Union National Bank, as Exchange Agent 230 S. Tryon Street, 9th Floor Charlotte, North Carolina 23288-1179 Attention: Corporate Trust Administration Confirm by Telephone: (704) 374-2080 Confirm by Telecopier: (704) 383-7316 Delivery of this instrument to an address other than as set forth above or transmission via a facsimile number other than the one listed above will not constitute a valid delivery. The instructions accompanying this Letter of Transmittal should be read carefully before this Letter of Transmittal is completed. The undersigned acknowledges that he or she has received the Prospectus, dated ________ __, 1998 (the "Prospectus"), of Advanced Accessory Systems, LLC and AAS Capital Corporation (together, the "Issuers") and this Letter of Transmittal (the "Letter of Transmittal"), which together constitute the Issuers' offer (the "Exchange Offer") to exchange their 9 3/4% Series B Senior Subordinated Notes due 2007 (the "New Notes") for an equal principal amount of their 9 3/4% Senior Subordinated Notes due 2007 (the "Old Notes" and, together with the New Notes, the "Notes"). The terms of the New Notes are identical in all material respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended (the "Securities Act"), and, therefore, will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the Registration Rights Agreement (as defined in the Prospectus). The term "Expiration Date" shall mean 5:00 p. m., New York City time, on ________, 1998, unless the Exchange Offer is extended as provided in the Prospectus, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. Capitalized terms used but not defined herein have the meanings given to them in the Prospectus. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, this Letter of Transmittal or an Agent's Message (as defined in the Prospectus) or any other documents required by this Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth under the caption "The Exchange Offer - -- Guaranteed Delivery Procedures" in the Prospectus. See Instruction 5. The term "Holder" with respect to the Exchange Offer means any person in whose name Old Notes are registered on the books of the Issuers or any other person who has obtained a properly completed bond power from the registered holder. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their Old Notes must complete this Letter of Transmittal in its entirety. If the undersigned is a broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities (other than Old Notes acquired directly from the Issuers), the undersigned may be deemed to be an "underwriter" under the Securities Act and the undersigned acknowledges, therefore, that it will deliver a prospectus in connection with any resale of such New Notes. By so 2 acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING THIS LETTER OF TRANSMITTAL DESCRIPTION OF 9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
Principal Amount Tendered Names(s) and Addresses(es) of Aggregate Principal Amount in Integral Registered Holders(s) Certificate Represented Multiples of (Please Fill in, if Blank) Numbers By Certificate(s) $1,000)* - ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- Total - ----------------------------------------------------------------------------------------------------------------------------
*Unless indicated in the column labeled "Principal Amount Tendered," any tendering Holder of Old Notes will be deemed to have tendered the entire aggregate principal amount represented by the column labeled "Aggregate Principal Amount Represented by Certificate(s)." If the space provided above is inadequate, list the certificate numbers and principal amounts on a separate signed schedule and affix such schedule to this Letter of Transmittal. The minimum permitted tender is $1,000 in principal amount. All other tenders must be in integral multiples of $1,000. [ ]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING (SEE INSTRUCTION 5): Name(s) of Registered Holder(s): Window Ticket Number (if any): Date of Execution of Notice of Guaranteed Delivery: Name of Institution which Guaranteed Delivery: [ ]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO AND COMPLETE THE FOLLOWING: Name: ---------------------------------------------------- (Please Print) Address: --------------------------------------------------- (Include Zip Code) 3 SPECIAL REGISTRATION INSTRUCTIONS (SEE INSTRUCTIONS 7, 8 AND 9) To be completed ONLY if certificates for Old Notes in a principal amount not tendered, or New Notes issued in exchange for Old Notes accepted for exchange, are to be issued in the name of someone other than the undersigned. Issue certificate(s) to: Name ______________________________________________________ (Please Print) Address ____________________________________________________ (Include Zip Code) __________________________________________________________ (Tax Identification or Social Security Number) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 7, 8 AND 9) To be completed ONLY if certificates for Old Notes in a principal amount not tendered, or New Notes issued in exchange for Old Notes accepted for exchange, are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above. Deliver certificate(s) to: Name ____________________________________________________ (Please Print) Address ___________________________________________________ (Include Zip Code) __________________________________________________________ (Tax Identification or Social Security Number) 4 Ladies and Gentlemen: Subject to the terms and conditions of the Exchange Offer, the undersigned hereby tenders to the Issuers the principal amount of Old Notes indicated above. Subject to and effective upon the acceptance for exchange of the principal amount of Old Notes tendered in accordance with this Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon the order of, the Issuers all right, title and interest in and to the Old Notes tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Issuers) with respect to the tendered Old Notes with full power of substitution (i) to deliver certificates for such Old Notes to the Issuers and deliver all accompanying evidences of transfer and authenticity to, or upon the order of, the Issuers and (ii) to present such Old Notes for transfer on the books of the Issuers, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed to be irrevocable and coupled with an interest. The undersigned hereby represents and warrants that he or she has full power and authority to tender, sell, assign and transfer the Old Notes tendered hereby and that the Issuers will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are acquired by the Issuers. The undersigned and any beneficial owner of Old Notes tendered hereby further represent and warrant that (i) the New Notes acquired by the undersigned and any such beneficial owner of Old Notes pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, (ii) neither the undersigned nor any such beneficial owner has an arrangement with any person to participate in the distribution of such New Notes, (iii) neither the undersigned nor any such beneficial owner nor any such other person is engaging in or intends to engage in a distribution of such New Notes and (iv) neither the undersigned nor any such other person is an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Issuers. The undersigned and each beneficial owner acknowledge and agree that any person who is an affiliate of the Issuers or who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale transaction of the New Notes acquired by such person and may not rely on the position of the staff of the Securities and Exchange Commission set forth in the no-action letters discussed in the Prospectus under the caption "The Exchange Offer -- Purpose and Effect of the Exchange Offer." The undersigned and each beneficial owner will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Issuers to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. For purposes of the Exchange Offer, the Issuers shall be deemed to have accepted validly tendered Old Notes when, as and if the Issuers have given oral notice (confirmed in writing) or written notice thereof to the Exchange Agent. If any tendered Old Notes are not accepted for exchange pursuant to the Exchange Offer because of an invalid tender, the occurrence of certain other events set forth in the Prospectus or otherwise, any such unaccepted Old Notes will be returned, without expense, to the undersigned at the address shown below or at a different address as may be indicated herein under "Special Delivery Instructions" as promptly as practicable after the Expiration Date. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death, incapacity or dissolution of the undersigned, and every obligation of the undersigned under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. The undersigned understands that tenders of Old Notes pursuant to the procedures described under the caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Issuers upon the terms and subject to the conditions of the Exchange Offer, subject only to withdrawal of such tenders on the terms set forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of Tenders." Unless otherwise indicated under "Special Registration Instructions," please issue the certificates representing the New Notes issued in exchange for the Old Notes accepted for exchange and any certificates for Old Notes not tendered or not exchanged, in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," please send the certificates representing the New Notes issued in exchange for the Old Notes accepted for exchange and any certificates for Old Notes not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Registration Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the New Notes issued in exchange for the Old Notes accepted for exchange in the name(s) of, and return any certificates for Old Notes not tendered or not exchanged to, the person(s) so indicated. The undersigned understands that the Issuers have no obligation pursuant to the "Special Registration Instructions" and "Special Delivery Instructions" to transfer any Old Notes from the name of the registered Holder(s) thereof if the Issuers do not accept for exchange any of the Old Notes so tendered. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, this Letter of Transmittal or an Agent's Message and any other documents required by this Letter of Transmittal to the Exchange Agent prior to the Expiration Date may tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures. " See Instruction 5. 5 PLEASE SIGN HERE WHETHER OR NOT OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY X ________________________________ Date: ___________________________________ X ________________________________ Date: ___________________________________ (Signature(s) of Registered Holder(s) or Authorized Signatory Area Code and Telephone Number:________________________________________________ The above lines must be signed by the registered holder(s) as his or her name(s) appear(s) on the Old Notes or by person(s) authorized to become registered holder(s) by a properly completed bond power from the registered holder(s), a copy of which must be transmitted with this Letter of Transmittal. If the Old Notes to which this Letter of Transmittal relate are held of record by two or more joint holders, then all such holders must sign this Letter of Transmittal. If this Letter of Transmittal or any Old Notes or bond powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person must (i) so indicate and set forth his or her full title below and (ii) unless waived by the Issuers, submit evidence satisfactory to the Issuers of such person's authority to so act. See Instruction 7. Name(s): _______________________________________________________________________ ________________________________________________________________________________ (Please Print) Capacity:_______________________________________________________________________ Address: _______________________________________________________________________ (Include Zip Code) Signature(s) Guaranteed by an Eligible Institution: (If required by Instruction 7) ________________________________________________________________________________ (Authorized Signature) ________________________________________________________________________________ (Title) ________________________________________________________________________________ (Name of Person Date: ____________________, 1998 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. Procedures for Tendering. This Letter of Transmittal or a facsimile hereof, properly completed and duly executed, or an Agent's Message and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. In addition, either (i) certificates for tendered Old Notes must be received by the Exchange Agent along with the Letter of Transmittal or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is available, into the Exchange Agent's account at DTC pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date or (iii) the Holder must comply with the guaranteed delivery procedures described below. The method of delivery of Old Notes and this Letter of Transmittal and any other required documents to the Exchange Agent is at the election and risk of the Holder and, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that the Holder use an overnight or hand delivery service. In the case of physical delivery of Old Notes, if sent by mail, it is recommended that registered mail, return receipt requested, be used and proper insurance be obtained. In all cases, sufficient time should be allowed to assure delivery to the Exchange Agent before the Expiration Date. No Letter of Transmittal or Old Notes should be sent to the Issuers. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Old Notes will be determined by the Issuers in their sole discretion, which determination will be final and binding. The Issuers reserve the absolute right to reject any and all Old Notes not properly tendered or any Old Notes if the Issuers' acceptance of such Old Notes would, in the opinion of counsel for the Issuers, be unlawful. The Issuers also reserve the right to waive any defects, irregularities or conditions of tender as to particular Old Notes. The Issuers' interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Issuers shall determine. Although the Issuers intend to notify Holders of defects or irregularities with respect to tenders of Old Notes, neither the Issuers, the Exchange Agent nor any other person shall be under any duty to give any such notification, nor shall any of them incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that the Issuers determine are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering Holders, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. 2. Tender by Holder. Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such beneficial owner's own behalf, such beneficial owner must, prior to completing and executing this Letter of Transmittal and delivering such beneficial owner's Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such beneficial owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. 3. Partial Tenders. Tenders of Old Notes will be accepted only in integral multiples of $1,000. If less than the entire principal amount of any Old Notes is tendered, the tendering Holder should fill in the principal amount tendered in the fourth column of the box entitled "Description of 9 3/4% Senior Subordinated Notes due 2007" above. The entire principal amount of any Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all Old Notes is not tendered, then Old Notes for the principal amount of Old Notes not tendered and a certificate or certificates representing New Notes issued in exchange for any Old Notes accepted will be sent to the Holder at his or her registered address, unless a different address is provided in the appropriate box on this Letter of Transmittal, promptly after the Old Notes are accepted for exchange. 4. Book-Entry Transfer. Any financial institution that is a participant in DTC's system may make book-entry delivery of Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's account at DTC in accordance with DTC's procedures for transfer. However, although delivery of Old Notes may be effected through book-entry transfer at DTC, an Agent's Message must be transmitted to and received by the Exchange Agent on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. See "The Exchange Offer -- Procedures for Tendering" in the Prospectus. 5. Guaranteed Delivery Procedures. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, this Letter of Transmittal or an Agent's Message or any other documents required hereby to the Exchange Agent prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedure: (a) such tender must be made through an Eligible Institution (as defined below); (b) prior to the Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) 7 setting forth the name and address of the Holder, the certificate number(s) of such Old Notes and the principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, this Letter of Transmittal (or facsimile hereof) or an Agent's Message together with the certificate(s) representing the Old Notes, or a Book-Entry Confirmation, and any other required documents will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal (or facsimile hereof) or an Agent's Message, as well as the certificate(s) representing all tendered Old Notes in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and all other documents required by this Letter of Transmittal must be received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date, all as provided in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures. "Any Holder who wishes to tender his or her Old Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. 6. Withdrawal of Tenders. To withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate number or numbers and principal amount of such Old Notes), (iii) be signed by the Holder in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Old Notes register the transfer of such Old Notes into the name of the persons withdrawing the tender and (iv) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. If certificates for Old Notes have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates, the withdrawing Holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such Holder is an Eligible Institution. If Old Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Issuers in their sole discretion, which determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered by following one of the procedures described above in Instruction 1, under Procedures for Tendering, at any time prior to the Expiration Date. 7. Signatures on the Letter of Transmittal; Bond Powers and Endorsements; Guarantee of Signatures. If this Letter of Transmittal (or facsimile hereof) is signed by the registered holder(s) of the Old Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the Old Notes without alteration, enlargement or any change whatsoever. If this Letter of Transmittal (or facsimile hereof) is signed by the registered holder or holders of Old Notes tendered and the certificate or certificates for New Notes issued in exchange therefor is to be issued (or any untendered principal amount of Old Notes is to be reissued) to the registered holder or holders and neither the "Special Delivery Instructions" nor the "Special Registration Instructions" has been completed, then such holder or holders need not and should not endorse any tendered Old Notes, nor provide a separate bond power. In any other case, such holder or holders must either properly endorse the Old Notes tendered or transmit a properly completed separate bond power with this Letter of Transmittal with the signatures on the endorsement or bond power guaranteed by an Eligible Institution. If this Letter of Transmittal (or facsimile hereof) or any Old Notes or bond powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person must so indicate when signing, and, unless waived by the Issuers, submit evidence satisfactory to the Issuers of such person's authority to so act with this Letter of Transmittal. Endorsements on Old Notes or signatures on bond powers required by this Instruction 7 must be guaranteed by an Eligible Institution which is a member of (a) the Securities Transfer Agents Medallion Program, (b) the New York Stock Exchange Medallion Signature Program or (c) the Stock Exchange Medallion Program. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a firm that is a member of a registered national securities exchange or the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an "Eligible Institution"). Signatures on this Letter of Transmittal need not be guaranteed if (a) this Letter of Transmittal is signed by the registered holder(s) of the Old Notes tendered herewith and such holder(s) have not completed the box set forth herein entitled "Special Registration Instructions" or the box set forth herein entitled "Special Delivery Instructions" or (b) such Old Notes are tendered for the account of an Eligible Institution. 8 8. Special Registration and Delivery Information. Tendering holders should indicate, in the applicable box or boxes, the name and address to which New Notes or substitute Old Notes for principal amounts not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person singing this Letter of Transmittal. In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. 9. Transfer Taxes. The Issuers will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates representing New Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or on any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. Except as provided in this Instruction 9, it will not be necessary for transfer tax stamps to be affixed to the Old Notes listed in this Letter of Transmittal. 10. Waiver of Conditions. The Issuers reserve the right, in their sole discretion, to amend, waive or modify specified conditions in the Exchange Offer in the case of any Old Notes tendered. 11. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering Holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent by telephone at (__) ___-____ or by facsimile at (___) ___-____. 12. Requests for Assistance or Additional Copies. Questions and requests for assistance and requests for additional copies of the Prospectus or this Letter of Transmittal may be directed to the Exchange Agent at the address specified herein. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer. 9 IMPORTANT TAX INFORMATION The Holder is required to give the Exchange Agent the social security number or employer identification number of the Holder of the Notes. If the Notes are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. Name of Holder (if joint, list first and circle the name of the person or entity whose number you enter in Part I below). ___________________ Address (if Holder does not complete, signature below will constitute a certification that the above address is correct.) ___________________ PAYER'S NAME: ADVANCED ACCESSORY SYSTEMS, LLC and AAS CAPITAL CORPORATION.
SUBSTITUTE Part I-PLEASE PROVIDE YOUR TIN IN THE BOX Social Security Number(s) FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND ___-OR-___ DEPARTMENT OF THE TREASURY DATING BELOW. If you do not have a Employer Identification Number INTERNAL REVENUE SERVICE number, see How to Obtain a "TIN" in the enclosed Guidelines. Part PAYER'S REQUEST II-FOR PAYEES EXEMPT FROM BACKUP ____________________________ FOR TAXPAYER WITHHOLDING, SEE THE ENCLOSED IDENTIFICATION NUMBER GUIDELINES FOR CERTIFICATION OF ("TIN") TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 CERTIFICATION-Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued for me), and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS. You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.) SIGNATURE _______________________________ DATE NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31 PERCENT OF ANY PAYMENTS MADE TO YOU UNDER THE NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. (DO NOT WRITE IN SPACE BELOW) Certificate Surrendered Old Notes Tendered Old Notes Accepted _______________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________ Delivery Prepared By ________________________ Checked By __________________ Date ________________________
10 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A Corporation. - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency, or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An exempt charitable remainder trust, or a nonexempt trust described in section 4947(a)(1). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. 11 Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to non-resident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041(a), 6045, and 6050A. PRIVACY ACT NOTICE. --Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. --If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. --If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an underpayment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. --If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CIVIL PENALTY FOR FALSIFYING INFORMATION. --Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.2 40 EX-99.2 1 EXHIBIT 99.2 ADVANCED ACCESSORY SYSTEMS, LLC AND AAS CAPITAL CORPORATION Notice Of Guaranteed Delivery Of 9 3/4% Senior Subordinated Notes Due 2007 As set forth in the Prospectus dated _________ __, 1998 (the "Prospectus"), of Advanced Accessory Systems, LLC and AAS Capital Corporation. (together, the "Issuers") under the caption "The Exchange Offer -- Guaranteed Delivery Procedures," this form must be used to accept the Issuers' offer to exchange their 9 3/4% Series B Senior Subordinated Notes due 2007 (the "New Notes") for an equal principal amount of their 9 3/4% Senior Subordinated Notes due 2007 (the "Old Notes"), by Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, the Letter of Transmittal or an Agent's Message (as defined in the Prospectus) or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date. This form must be delivered by an Eligible Institution by mail or hand delivery or transmitted, via facsimile, to the Exchange Agent at its address set forth below not later than the Expiration Date. All capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Prospectus. The Exchange Agent is: First Union National Bank 230 S. Tryon Street, 9th Floor Charlotte, North Carolina 28288-1179 Attention: Corporate Trust Administration Confirm by Telephone: (704) 374-2080 Confirm by Telecopier: (704) 383-7316 Delivery Of This Instrument To An Address Other Than As Set Forth Above Or Transmission Via A Facsimile Number Other Than One Listed Above Will Not Constitute A Valid Delivery. Ladies And Gentlemen: The undersigned hereby tenders for exchange to the Issuers, upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures. " The undersigned understands and acknowledges that the Exchange Offer will expire at 5:00 p.m., New York City time, on __________ __, 1998, unless extended by the Issuers. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on _______ __, 1998, unless the Exchange Offer is extended as provided in the Prospectus, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. All authority conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death, incapacity or dissolution of the undersigned, and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. 2 SIGNATURE ___________________________________________________ Date: ________________ ___________________________________________________ Date: ________________ SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY Are Code and Telephone Number: ______________________________________________ Name(s): ____________________________________________________________________ _____________________________________________________________________________ (PLEASE PRINT) Capacity (full title), if signing in a fiduciary or representative capacity: _____________________________________________________________________________ Address:_____________________________________________________________________ (INCLUDING ZIP CODE) Taxpayer Identification or Social Security No.:_________________________________________________________ Principal Amount of Old Notes Tendered (must be in integral multiples of $1,000): $ _________________________________ Certificate Number(s) of Old Notes (if available): __________________________ _____________________________________________________________________________ Aggregate Principal Amount Represented by Certificate(s):$______________________________________________ IF TENDERED OLD NOTES WILL BE DELIVERED BY BOOK-ENTRY TRANSFER, PROVIDE THE DEPOSITORY TRUST COMPANY ("DTC") ACCOUNT NO. AND TRANSACTION CODE NUMBER (if available): Account No.:_________________________________________________________________ Transaction Number:__________________________________________________________ GUARANTEE OF DELIVERY (Not To Be Used For Signature Guarantee) The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent of a properly completed and executed Letter of Transmittal (or facsimile thereof) or an Agent's Message, as well as the certificate(s) representing all tendered Old Notes in proper form for transfer, or confirmation of the book-entry transfer of such Old Notes into the Exchange Agent's account at DTC as described in the Prospectus under the caption "The Exchange Offer -- Book-Entry Transfer" and any other documents required by the Letter of Transmittal, all by 5:00 p.m., New York City time, on the fifth New York Stock Exchange trading day following the Expiration Date. Name of Eligible Institution:___________________________________________________ (AUTHORIZED SIGNATURE) Address:________________________________________________________________________ Name:______________________________________________ Title:_____________________________________________ Area Code and Telephone No.:_____________________________________ Date:______________________________________________ NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE. ACTUAL SURRENDER OF OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, THE LETTER OF TRANSMITTAL. 3 SIGNATURE ______________________________________________ Date: ___________________________ ______________________________________________ Date: ___________________________ Signature(s) Of Holder(s) Or Authorized Signatory Area Code and Telephone Number:_________________________________________________ Name(s): ________________________________________________________________________________ ________________________________________________________________________________ (Please Print) Capacity (full title), if signing in a fiduciary or representative capacity: ________________________________________________________________________________ Address: ________________________________________________________________________________ (Including Zip Code) Taxpayer Identification or Social Security No.: ________________________________________________________________________________ Principal Amount of Old Notes Tendered (must be in integral multiples of $1,000): $_______________________________________ Certificate Number(s) of Old Notes (if available): ________________________________________________________________________________ Aggregate Principal Amount Represented by Certificate(s):$__________________________________________________________ IF TENDERED OLD NOTES WILL BE DELIVERED BY BOOK-ENTRY TRANSFER, PROVIDE THE DEPOSITORY TRUST COMPANY ("DTC") ACCOUNT NO. AND TRANSACTION CODE NUMBER (if available): Account No.:_________________________ Transaction Number:__________________ EX-99.3 41 EX-99.3 1 EXHIBIT 99.3 ADVANCED ACCESSORY SYSTEMS, LLC AND AAS CAPITAL CORPORATION Offer To Exchange Up To $125,000,000 Of Their 9 3/4% Series B Senior Subordinated Notes Due 2007 For Any And All Of Their Outstanding 9 3/4% Senior Subordinated Notes Due 2007 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ______ __, 1998, UNLESS EXTENDED. To Brokers, Dealers, Commercial Banks, _______ __ 1998 Trust Companies and Other Nominees: Advanced Accessory Systems, LLC and AAS Capital Corporation (together, the "Issuers"), are offering, upon the terms and subject to the conditions set forth in the Prospectus dated _________ __, 1998 (the "Prospectus") and the accompanying Letter of Transmittal enclosed herewith (which together constitute the "Exchange Offer"), to exchange their 9 3/4% Series B Senior Subordinated Notes due 2007 (the "New Notes") for an equal principal amount of their 9 3/4% Senior Subordinated Notes due 2007 (the "Old Notes" and together with the New Notes, the "Notes"). As set forth in the Prospectus, the terms of the New Notes are identical in all material respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended, and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the Registration Rights Agreement (as defined in the Prospectus). THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE "THE EXCHANGE OFFER -- CONDITIONS" IN THE PROSPECTUS. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. the Prospectus, dated ___________ __, 1998; 2. the Letter of Transmittal for your use (unless Old Notes are tendered by an Agent's Message) and for the information of your clients (facsimile copies of the Letter of Transmittal may be used to tender Old Notes); 3. a form of letter which may be sent to your clients for whose accounts you hold Old Notes registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 4. a Notice of Guaranteed Delivery; 5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. a return envelope addressed to First Union National Bank, the Exchange Agent. YOUR PROMPT ACTION IS REQUESTED. PLEASE NOTE THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ________ __, 1998, UNLESS EXTENDED. PLEASE FURNISH COPIES OF THE ENCLOSED MATERIALS TO THOSE OF YOUR CLIENTS FOR WHOM YOU HOLD OLD NOTES REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE AS QUICKLY AS POSSIBLE. In all cases, exchanges of Old Notes accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of (a) certificates representing such Old Notes, or a Book-Entry Confirmation (as defined in the Prospectus), as the case may be, (b) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, or an Agent's Message and (c) any other required documents. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, the Letter of Transmittal or an Agent's Message and in either case together with any other documents required by the 2 Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth under the caption "The Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus. The Exchange Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Old Notes residing in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. The Issuers will not pay any fees or commissions to brokers, dealers or other persons for soliciting exchanges of Notes pursuant to the Exchange Offer. The Issuers will, however, upon request, reimburse you for customary clerical and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. The Issuers will pay or cause to be paid any transfer taxes payable on the transfer of Notes to them, except as otherwise provided in Instruction 9 of the Letter of Transmittal. Questions and requests for assistance with respect to the Exchange Offer or for copies of the Prospectus and Letter of Transmittal may be directed to the Exchange Agent by telephone at (704) 374-2080 or by facsimile at (704) 383-7316. Very truly yours, ADVANCED ACCESSORY SYSTEMS, LLC AAS CAPITAL CORPORATION NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE ISSUERS, OR ANY AFFILIATE THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. EX-99.4 42 EX-99.4 1 EXHIBIT 99.4 ADVANCED ACCESSORY SYSTEMS, LLC AND AAS CAPITAL CORPORATION OFFER TO EXCHANGE UP TO $125,000,000 OF THEIR 9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007 FOR ANY AND ALL OF THEIR OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P. M. , NEW YORK CITY TIME, ON _______ __, 1998 UNLESS EXTENDED. To Our Clients: Enclosed for your consideration is a Prospectus dated ________ __, 1998 (the "Prospectus") and a Letter of Transmittal (which together constitute the "Exchange Offer") relating to the offer by Advanced Accessory Systems, LLC and AAS Capital Corporation (together, the "Issuers") to exchange their 9 3/4% Series B Senior Subordinated Note due 2007 (the "New Notes") for an equal principal amount of their 9 3/4% Senior Subordinated Notes due 2007 (the "Old Notes" and together with the New Notes, the "Notes"). As set forth in the Prospectus, the terms of the New Notes are identical in all material respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended, and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the Registration Rights Agreement (as defined in the Prospectus). Old Notes may be tendered only in integral multiples of $1,000. The enclosed material is being forwarded to you as the beneficial owner of Old Notes carried by us for your account or benefit but not registered in your name. An exchange of any Old Notes may only be made by us as the registered Holder and pursuant to your instructions. Therefore, the Issuers urge beneficial owners of Old Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such Holder promptly if they wish to exchange Old Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to exchange any or all such Old Notes held by us for your account or benefit, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to exchange your Old Notes. Your instructions to us should be forwarded as promptly as possible in order to permit us to exchange Old Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer expires at 5:00 p.m., New York City time, on ________ __, 1998, unless extended. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on __________ __, 1998, unless the Exchange Offer is extended as provided in the Prospectus, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. A tender of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for the exchange of $1,000 principal amount of the New Notes for each $1,000 principal amount of the Old Notes, of which $125,000,000 aggregate principal amount was outstanding as of _________ __, 1998. The terms of the New Notes are identical in all respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended, and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the Registration Rights Agreement. 2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE "THE EXCHANGE OFFER -- CONDITIONS" IN THE PROSPECTUS. 3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on ________ __, 1998, unless extended. 4. The Issuers have agreed to pay the expenses of the Exchange Offer. 5. Any transfer taxes incident to the transfer of Old Notes from the tendering Holder to the Issuers will be paid by the Issuers, except as provided in the Prospectus and the Letter of Transmittal. 2 The Exchange Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Old Notes residing in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. If you wish us to tender any or all of your Old Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the attached instruction form. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to exchange Old Notes held by us and registered in our name for your account or benefit. INSTRUCTIONS The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer of Advanced Accessory Systems, LLC and AAS Capital Corporation. This will instruct you to tender for exchange the aggregate principal amount of Old Notes indicated below (or, if no aggregate principal amount is indicated below, all Old Notes) held by you for the account or benefit of the undersigned, pursuant to the terms of and conditions set forth in the Prospectus and the Letter of Transmittal. Aggregate Principal Amount of Old Notes to be tendered for exchange: $________________________ * I (we) understand that if I (we) sign this instruction form without indicating an aggregate principal amount of Old Notes in the space above, all Old Notes held by you for my (our) account will be tendered for exchange. ________________________________________________________________________________ ________________________________________________________________________________ Signature(s) ________________________________________________________________________________ Capacity (full title), if signing in a fiduciary or representative capacity ________________________________________________________________________________ Name(s) and address, including zip code Date: _____________________________________ ________________________________________________________________________________ Area Code and Telephone Number ________________________________________________________________________________ ________________________________________________________________________________ Taxpayer Identification or Social Security No. -----END PRIVACY-ENHANCED MESSAGE-----