-----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, DPTjoydMa8CLr2OCd5SyMaWzFv3CbEpCWRZFcUgPp1EMVdFQbfFFxHyoBk9JgOE2 g+XzZiCq5GrLnoXdfauq3w== 0000950124-01-501324.txt : 20010517 0000950124-01-501324.hdr.sgml : 20010517 ACCESSION NUMBER: 0000950124-01-501324 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010401 FILED AS OF DATE: 20010516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARVINMERITOR INC CENTRAL INDEX KEY: 0001113256 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 383354643 STATE OF INCORPORATION: IN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-15983 FILM NUMBER: 1641828 BUSINESS ADDRESS: STREET 1: 2135 W MAPLE ROAD CITY: TROY STATE: MI ZIP: 48084 BUSINESS PHONE: 2484351000 FORMER COMPANY: FORMER CONFORMED NAME: MU SUB INC DATE OF NAME CHANGE: 20000501 10-Q 1 k62395e10-q.txt QUARTERLY REPORT DATED 4/01/01 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended April 1, 2001 -------------------------------- Commission file number 1-15983 -------------------------------- ArvinMeritor, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Indiana 38-3354643 - -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2135 West Maple Road, Troy, Michigan 48084-7186 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (248) 435-1000 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- -------- 65,868,313 shares of registrant's Common Stock, $1.00 par value, were outstanding on April 30, 2001. 2 ARVINMERITOR, INC. INDEX PART I. FINANCIAL INFORMATION:
Page Item 1. Financial Statements: No. Statement of Consolidated Income - - Three Months and Six Months Ended March 31, 2001 and 2000......... 2 Consolidated Balance Sheet - - March 31, 2001 and September 30, 2000................ 3 Statement of Consolidated Cash Flows - - Six Months Ended March 31, 2001 and 2000............. 4 Notes to Consolidated Financial Statements........... 5 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.......... 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk............................................... 20 PART II. OTHER INFORMATION: Item 2. Changes in Securities and Use of Proceeds................. 21 Item 4. Submission of Matters to a Vote of Security Holders....... 21 Item 5. Other Information......................................... 22 Item 6. Exhibits and Reports on Form 8-K.......................... 23
3 Part I. FINANCIAL INFORMATION ITEM 1. Financial Statements ARVINMERITOR, INC. STATEMENT OF CONSOLIDATED INCOME (Unaudited)
Three Months Ended Six Months Ended March 31, March 31, ------------------ ------------------ 2001 2000 2001 2000 ------- ------- ------- ------- (In millions, except per share amounts) Sales ............................... $ 1,787 $ 1,196 $ 3,446 $ 2,332 Cost of sales ....................... (1,598) (1,000) (3,085) (1,966) ------- ------- ------- ------- Gross margin ........................ 189 196 361 366 Selling, general and administrative . (104) (84) (206) (163) Amortization expense ................ (8) (4) (14) (8) Restructuring costs and other charges...................... (9) - (55) - Gain on sale of business ............ - - - 83 ------- ------- ------- ------- Operating income .................... 68 108 86 278 Equity in earnings of affiliates .... 4 8 9 17 Interest expense, net ............... (38) (18) (73) (35) ------- ------- ------- ------- Income before income taxes .......... 34 98 22 260 Provision for income taxes .......... (11) (37) (7) (100) Minority interests .................. (2) (4) (4) (6) ------- ------- ------- ------- Net income .......................... $ 21 $ 57 $ 11 $ 154 ======= ======= ======= ======= Basic and diluted earnings per share.......................... $ 0.32 $ 1.22 $ 0.17 $ 3.18 ======= ======= ======= ======= Cash dividends per common share ..... $ 0.22 $ 0.14 $ 0.44 $ 0.28 ======= ======= ======= ======= Average common shares outstanding: Basic ............................ 65.9 46.8 66.4 48.4 ======= ======= ======= ======= Diluted .......................... 65.9 46.9 66.4 48.4 ======= ======= ======= =======
See notes to consolidated financial statements. - -------------------------------------------------------------------------------- 2 4 ARVINMERITOR, INC. CONSOLIDATED BALANCE SHEET
March 31, 2001 September 30, (Unaudited) 2000 ----------------- ----------------- ASSETS (In millions) Current assets: Cash and cash equivalents............................................ $ 76 $ 116 Receivables (less allowance for doubtful accounts: March 31, 2001, $20; September 30, 2000, $22)................. 1,199 1,278 Inventories.......................................................... 520 583 Other current assets................................................. 216 212 ------- ------- Total current assets............................................. 2,011 2,189 Net property.............................................................. 1,232 1,348 Net goodwill (less accumulated amortization: March 31, 2001, $60; September 30, 2000, $48) ....................... 791 756 Other assets.............................................................. 498 427 ------- ------- TOTAL............................................... $ 4,532 $ 4,720 ======= ======= LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term debt...................................................... $ 79 $ 183 Accounts payable..................................................... 1,069 1,058 Accrued compensation and benefits.................................... 188 203 Accrued income taxes................................................. 2 27 Other current liabilities............................................ 305 254 ------- ------- Total current liabilities........................................ 1,643 1,725 ------- ------- Long-term debt............................................................ 1,534 1,537 Accrued retirement benefits............................................... 378 382 Other liabilities......................................................... 129 113 Minority interests........................................................ 73 96 Company-obligated mandatorily redeemable preferred capital securities..................................................... 64 74 Shareowners' equity: Common stock (March 31, 2001, 71.0 shares issued and 65.9 outstanding; September 30, 2000, 71.0 shares issued and 67.9 outstanding).......................................... 71 71 Additional paid-in-capital........................................... 544 546 Retained earnings.................................................... 448 466 Treasury stock (March 31, 2001, 5.1 shares; September 30, 2000, 3.1 shares) ................................. (79) (53) Unearned compensation................................................ (3) - Accumulated other comprehensive loss................................. (270) (237) ------- -------- Total shareowners' equity........................................ 711 793 ------- -------- TOTAL............................................... $ 4,532 $ 4,720 ======= ========
See notes to consolidated financial statements. - ------------------------------------------------------------------------------- 3 5 ARVINMERITOR, INC. STATEMENT OF CONSOLIDATED CASH FLOWS (Unaudited)
Six Months Ended March 31, ----------------------------- 2001 2000 --------- -------- (In millions) OPERATING ACTIVITIES Net income...................................................................... $ 11 $ 154 Adjustments to net income to arrive at cash provided by operating activities: Depreciation............................................................... 96 63 Amortization............................................................... 13 8 Restructuring, net of cash expenditures.................................... 50 - Gain on sale of business................................................... - (83) Pension and retiree medical contributions.................................. (38) (41) Other, net................................................................. 28 28 Sale of receivables........................................................ 100 - Changes in assets and liabilities, excluding effects of acquisitions, divestitures and foreign currency adjustments.............. 5 (103) ------- ------ CASH PROVIDED BY OPERATING ACTIVITIES............................................................. 265 26 ------- ------ INVESTING ACTIVITIES Capital expenditures............................................................ (103) (74) Proceeds from disposition of property and businesses............................ - 140 Other investing activities...................................................... (27) (28) ------- ------ CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES............................................................. (130) 38 ------- ------ FINANCING ACTIVITIES Net change in revolving and other debt.......................................... (99) 101 Purchase of preferred capital securities........................................ (10) - Cash dividends.................................................................. (29) (14) Purchases of treasury stock..................................................... (31) (119) ------- ------ CASH USED FOR FINANCING ACTIVITIES............................................................. (169) (32) ------- ------ Effect of exchange rate changes on cash......................................... (6) (9) ------- ------ CHANGE IN CASH.................................................................. (40) 23 CASH AT BEGINNING OF PERIOD..................................................... 116 68 ------- ------ CASH AT END OF PERIOD........................................................... $ 76 $ 91 ======= ======
See notes to consolidated financial statements. - -------------------------------------------------------------------------------- 4 6 ARVINMERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ArvinMeritor, Inc. (the company or ArvinMeritor) is a leading global supplier of a broad range of integrated systems, modules and components serving light vehicle, commercial truck, trailer and specialty original equipment manufacturers and certain aftermarkets. The company also provides coil coating applications to the transportation, appliance, construction and furniture industries. On July 7, 2000, Meritor Automotive, Inc. (Meritor) and Arvin Industries, Inc. (Arvin) merged into ArvinMeritor. The merger was accounted for utilizing the purchase method of accounting. The financial information for the periods prior to July 7, 2000, reflect the results of Meritor and its consolidated subsidiaries prior to the merger. The information for periods after July 7, 2000 represents the results of ArvinMeritor and its consolidated subsidiaries. All prior periods' share and per share data have been restated to conform with the exchange of Meritor shares to ArvinMeritor shares on a one to 0.75 basis in connection with the merger with Arvin (see Note 3). In the opinion of the company, the unaudited financial statements contain all adjustments, consisting solely of adjustments of a normal recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These statements should be read in conjunction with the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2000, including the financial statements incorporated by reference in the Form 10-K. The results of operations for the three- and six-month periods ended March 31, 2001 are not necessarily indicative of the results for the full year. It is the company's practice for each interim reporting period to make an estimate of the effective tax rate expected to be applicable for the full fiscal year. The rate so determined is used in providing for income taxes on a year-to-date basis. Effective October 1, 2000, the company changed the date for the end of its fiscal year to the Sunday nearest September 30. The company's fiscal quarters end on the Sundays nearest December 31, March 31, and June 30. The company's second quarter ended on April 1, 2001. All year and quarter references relate to the company's fiscal year and fiscal quarters unless otherwise stated. Certain prior period amounts have been reclassified to conform with current period presentation. 2. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 requires that all derivatives be recognized as either assets or liabilities in the consolidated balance sheet and be measured at fair value, and changes in the fair value be recorded in earnings, unless they are designated as hedges of an underlying transaction. The company adopted this standard, as amended, effective October 1, 2000. The adoption of this standard did not have a material impact on the financial position or results of operations of the company. 5 7 ARVINMERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The company uses forward exchange contracts to offset the effect of exchange rate fluctuations on foreign currency denominated payables and receivables. These contracts help minimize the risk of loss from changes in exchange rates, and are generally of short duration (less than three months). The foreign currency denominated payables and receivables are remeasured on a quarterly basis and the forward exchange contracts are utilized to help offset the earnings impact of the remeasurement. The company has elected not to designate the forward exchange contracts as hedges. The impact of fair valuing the foreign exchange contracts is recognized in operating income. The net income impact of recording these items in the three- and six-month periods ended March 31, 2001 was immaterial. Forward exchange contracts were also utilized to hedge the purchase of equipment payable in foreign currency and were designated as fair value hedges of the firm commitment. The fair value of the firm commitment was recorded as an asset, the value of the forward contracts was recorded as a liability, and there was no impact to earnings during the quarter. The value of both the firm commitment and the forward exchange contracts are determined using the forward exchange rates, with all other critical terms of the forward contracts and the hedged transaction being the same. Therefore, the company has determined the change in fair value attributable to the risk being hedged is expected to be completely offset by the change in fair value of the forward contracts. Future assessments of hedge effectiveness will include verifying and documenting if the critical terms of the forward contracts and the firm commitment have changed. The company's financial instruments include cash, short- and long-term debt and foreign currency forward exchange contracts. As of March 31, 2001, the carrying values of the company's financial instruments approximated their fair values based on prevailing market prices and rates. The notional amount of outstanding foreign currency forward exchange contracts aggregated $81 million at March 31, 2001 and $222 million at September 30, 2000. It is the policy of the company not to enter into derivative instruments for speculative purposes. 3. On July 7, 2000, Meritor and Arvin merged to form ArvinMeritor. Under the terms of the merger agreement, each share of Meritor common stock was converted into the right to receive 0.75 shares of common stock of ArvinMeritor, and each share of Arvin common stock was converted into the right to receive one share of common stock of ArvinMeritor plus $2.00 in cash. In total, approximately 62.3 million shares of Meritor, 24.3 million shares of Arvin and $48.5 million in cash were exchanged for approximately 71.0 million shares of ArvinMeritor. The merger was accounted for by the purchase method of accounting. Accordingly, the results of operations of Arvin are included with those of the company for the period subsequent to the date of the merger. The total estimated merger consideration of $576 million was allocated first to assets and liabilities based on their fair values as of the merger date, with the residual allocated to goodwill, which is being amortized on a straight-line basis over 40 years. Since the company assumed the stock options outstanding of Arvin, the fair value of these options was included in determining the fair value of the consideration. The purchase price allocation is preliminary and may be revised up to one year from the date of acquisition due to appraisals of fixed assets, other fair value adjustments and the finalization of any potential plans of restructuring. 6 8 ARVINMERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) A summary of the estimated fair market value of assets and liabilities acquired is as follows:
Fair Value -------- Current assets........................................... $ 945 Property, plant and equipment............................ 512 Goodwill................................................. 380 Other assets........................................... 253 ------- Total assets............................................. 2,090 Current liabilities...................................... (1,001) Other liabilities...................................... (114) Long-term debt and capital securities.................... (399) ------- Fair market value........................................ $ 576 =======
The allocation of the purchase price has been revised from previously reported amounts to reflect appraisals which are substantially complete and restructuring actions recorded under purchase accounting. The following unaudited pro forma consolidated results of operations for the six months ended March 31, 2000 assume that the ArvinMeritor merger occurred as of the beginning of fiscal 2000 (in millions, except per share amounts):
Six Months Ended March 31, 2000 ---------------- Net sales ............................... $3,985 ====== Net income .............................. $ 190 ====== Basic and diluted earnings per share .... $ 2.61 ======
The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable. The pro forma data is not necessarily indicative of the results of operations of ArvinMeritor that would have been achieved if the merger had in fact occurred on such date, or the results of operations of ArvinMeritor for any future period. The pro forma data does not give effect to any potential restructuring costs or to any potential cost savings or other synergies that could result from the merger. 7 9 ARVINMERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. In September 2000, the FASB issued Statement of Financial Accounting Standards No. 140 (SFAS 140), "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities - a replacement of FASB Statement No. 125". The new standard carries forward some of the provisions of SFAS 125, but modifies the methods of accounting for securitizations and other transfers of financial assets and collateral, in addition to requiring additional disclosures. SFAS 140 is effective for reporting periods after March 31, 2001, with the exception of certain collateral and disclosure provisions, which are effective for fiscal years ending after December 15, 2000. The company adopted SFAS 140 in the second quarter of fiscal 2001. The adoption of SFAS 140 did not have a material impact on the financial position or results of operations of the company. In the second quarter of fiscal 2001, the company sold substantially all of the trade receivables of four subsidiaries to ArvinMeritor Receivables Corporation (ARC), a wholly owned subsidiary of the company. ARC then entered into an agreement (asset securitization facility) to sell an undivided interest in up to $100 million of the receivables to ABN AMRO (the bank). As of March 31, 2001, $100 million of trade receivables had been sold and are excluded from receivables in the consolidated balance sheet. The company has no retained interest in the account receivables sold, but does retain collection and administrative responsibilities. The receivables were sold at fair market value, which approximated carrying value, and any loss, including the servicing liability, was not significant. The bank has a preferential interest in approximately $85 million of the remainder of the receivables held at ARC to secure the obligation under the asset securitization facility. 5. In the first and second quarters of fiscal 2001, the company recorded net charges for restructuring and other costs of $46 million ($30 million after-tax, or $0.45 per basic and diluted share), and $9 million ($6 million after-tax, or $0.09 per basic and diluted share), respectively. The second quarter charge was net of approximately $4 million of restructuring reserves, established primarily in the third quarter of fiscal 2000, that were reversed due to improved circumstances and opportunities of the company resulting from the ArvinMeritor merger in July, 2000 (see Note 3). The fiscal 2001 charges included severance and other employee costs of approximately $47 million related to a net reduction of approximately 1,200 employees, with the balance primarily associated with facility related costs from the rationalization of operations. As of March 31, 2001, approximately 350 employees had been terminated under this restructuring action. In the third quarter of fiscal 2000, the company recorded a restructuring charge of $26 million ($16 million after-tax, or $0.30 per basic and diluted share). The original charge included severance and other employee costs of approximately $19 million related to a net reduction of approximately 500 employees, with the balance primarily associated with facility related costs from the rationalization of operations. In the second quarter of fiscal 2001, approximately $4 million of restructuring reserves were reversed (discussed above), which changed the total employee costs incurred for the fiscal 2000 restructuring charge to be $15 million related to a net reduction of approximately 350 employees. As of March 31, 2001, approximately 300 employees had been terminated under this restructuring action. 8 10 ARVINMERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) A summary of the restructuring activity as of March 31, 2001 is as follows (in millions):
Employee Termination Asset Benefits Impairment Other Total -------- ---------- ----- ----- Fiscal 2000 charge......................... $ 19 $ 6 $ 1 $ 26 Reversal of charge......................... (4) - - (4) Write-down of assets....................... - (6) - (6) Cash payments through 3/31/01.............. (12) - (1) (13) ---------- --------- --------- ---------- Subtotal.............................. 3 - - 3 --------- --------- --------- --------- Fiscal 2001 gross charges.................. 47 10 2 59 Write-down of assets....................... - (10) - (10) Cash payments through 3/31/01.............. (4) - - (4) --------- --------- --------- ---------- Subtotal.............................. 43 - 2 45 --------- --------- --------- --------- Reserve balance at 3/31/01................. $ 46 $ - $ 2 $ 48 ========= ========= ========= =========
6. The company has reserved approximately 13.2 million shares of Common Stock in connection with its 1997 Long-Term Incentives Plan (the 1997 LTIP), Directors Stock Plan, Incentive Compensation Plan, 1988 and 1998 Stock Benefit Plans, and Employee Stock Benefit Plan for grants of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock and stock awards to key employees and the company's directors. At March 31, 2001, there were approximately 5.0 million shares available for future grants under these plans. In January 2001, the company granted shares of restricted stock to certain employees in accordance with the 1997 LTIP. The restricted shares are subject to continued employment by the employee for the period until January 1, 2004, and vest at the end of three years. The grant of shares was issued from treasury shares, and cash dividends on the restricted shares will be reinvested in additional shares of Common Stock during the period. The grant price of the restricted shares was the quoted market price of $11.375, and will be accounted for as compensation expense over the vesting period. 7. In July 2000, the company's board of directors authorized a program to repurchase up to $100 million of its common stock. Under the program, the company will purchase shares periodically in the open market or through privately negotiated transactions as market conditions warrant and in accordance with Securities and Exchange Commission rules. As of March 31, 2001, 5,426,215 shares of ArvinMeritor common stock had been purchased under this program at an aggregate cost of approximately $84 million, or an average of $15.39 per share. 9 11 ARVINMERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) In September 1999, Meritor's board of directors authorized the purchase of up to $125 million of Meritor's common stock and in February 2000, the board of directors authorized an additional $75 million for such purpose. Meritor purchased 5,120,400 shares at an aggregate cost of approximately $125 million, or an average of $24.51 per share, under these programs before they were suspended in February 2000 in anticipation of entering into a definitive agreement to merge with Arvin. The treasury stock was cancelled in connection with the merger. 8. Inventories are summarized as follows (in millions):
March 31, September 30, 2001 2000 ------------------- -------------------- Finished goods.............................................. $ 264 $ 298 Work in process............................................. 129 142 Raw materials, parts and supplies........................... 178 195 --------- ---------- Total.................................................. 571 635 Less allowance to adjust the carrying value of certain inventories to a last in, first-out (LIFO) basis........................................... 51 52 --------- ---------- Inventories............................................ $ 520 $ 583 ========= ==========
9. Other Current Assets are summarized as follows (in millions):
March 31, September 30, 2001 2000 ------------------ -------------------- Current deferred income taxes............................... $ 130 $ 122 Customer tooling............................................ 36 37 Prepaid expenses and other.................................. 50 53 --------- ---------- Other Current Assets................................... $ 216 $ 212 ========= ==========
10. Other Assets are summarized as follows (in millions):
March 31, September 30, 2001 2000 ------------------ -------------------- Investments in affiliates................................... $ 210 $ 200 Prepaid pension costs....................................... 79 78 Net capitalized computer software costs..................... 42 41 Patents, trademarks and licenses............................ 37 38 Long-term deferred income taxes............................. 35 9 Other....................................................... 95 61 --------- ---------- Other Assets........................................... $ 498 $ 427 ========= ==========
10 12 ARVINMERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 11. Other Current Liabilities are summarized as follows (in millions):
March 31, September 30, 2001 2000 ------------------ -------------------- Accrued product warranties.................................. $ 91 $ 95 Accrued restructuring....................................... 48 16 Accrued taxes other than income taxes....................... 46 36 Environmental reserves...................................... 14 11 Other....................................................... 106 96 --------- ---------- Other Current Liabilities.............................. $ 305 $ 254 ========= ==========
12. Other Liabilities are summarized as follows (in millions):
March 31, September 30, 2001 2000 ------------------ -------------------- Environmental reserves...................................... $ 27 $ 27 Deferred payments........................................... 24 34 Other....................................................... 78 52 --------- ---------- Other Liabilities...................................... $ 129 $ 113 ========= ==========
13. Long-term Debt, net of discount where applicable, is summarized as follows (in millions):
March 31, September 30, 2001 2000 ------------------ -------------------- 6 7/8 percent notes due 2001................................ $ - $ 75 7.94 percent notes due 2005................................. 50 50 6 3/4 percent notes due 2008................................ 100 100 7 1/8 percent notes due 2009................................ 150 150 6.8 percent notes due 2009.................................. 498 498 Commercial paper............................................ - 560 Bank revolving credit facilities............................ 706 194 Lines of credit and other................................... 109 93 ------ ------ Subtotal................................................. 1,613 1,720 Less: current maturities................................... (79) (183) ------ ------ Long-term Debt........................................... $1,534 $1,537 ====== ======
11 13 ARVINMERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The company has two unsecured credit facilities: a 364-day, $750-million credit facility which matures on June 27, 2001, with the option to convert borrowings there under to a two-year term loan, and a five-year $750-million revolving credit facility, which matures on June 27, 2005. Borrowings are subject to interest based on the company's credit rating. The company also has a commercial paper program with authorized borrowings of up to $1 billion. During the second quarter of fiscal 2001, Standard & Poor's and Moody's revised their credit ratings of the company's long-term debt and commercial paper. As a result of these actions, the company's borrowing costs under credit arrangements have increased, and it is effectively precluded from issuing commercial paper. 14. Accrued Retirement Benefits consisted of the following (in millions):
March 31, September 30, 2001 2000 ----------- --------------- Accrued retirement medical costs...................... $ 319 $ 325 Accrued pension costs................................. 77 76 Other................................................. 27 26 --------- ---------- Total.......................................... 423 427 Amount classified as current liability................ (45) (45) --------- ---------- Accrued Retirement Benefits.................... $ 378 $ 382 ========= ==========
15. ArvinMeritor currently has three reportable operating segments: Light Vehicle Systems (LVS), Commercial Vehicle Systems (CVS) and Light Vehicle Aftermarket (LVA). LVS is a major supplier of exhaust systems, aperture systems (primarily roof and door systems) and undercarriage systems (primarily suspension, ride and motion control, and wheel products) for passenger cars, light trucks and sport utility vehicles to original equipment manufacturers. CVS is a leading supplier of drivetrain systems and components, including axles, brakes, and drivelines, for medium- and heavy-duty trucks, trailers and off-highway equipment and specialty vehicles. LVA supplies exhaust, ride control, filter products and accessories to the light vehicle aftermarket. Business units that are not focused on automotive products are classified as "Other." The company's Coil Coating division is the primary component of this classification. 12 14 ARVINMERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Segment information is summarized as follows (in millions):
Three Months Ended Six Months Ended March 31, March 31, ------------------ ------------------ 2001 2000 2001 2000 ------- ------- ------- ------- Sales: Light Vehicle Systems ............... $ 951 $ 420 $ 1,821 $ 826 Commercial Vehicle Systems .......... 583 776 1,135 1,506 Light Vehicle Aftermarket ........... 216 - 413 - Other ............................... 37 - 77 - ------- ------- ------- ------- Total ..................... $ 1,787 $ 1,196 $ 3,446 $ 2,332 ======= ======= ======= ======= Operating income: Light Vehicle Systems ............... $ 62 $ 40 $ 114 $ 71 Commercial Vehicle Systems .......... 10 68 22 124 Light Vehicle Aftermarket ........... 8 - 11 - Other ............................... (3) - (6) - Restructuring costs and other charges...................... (9) - (55) - Gain on sale of business ............ - - - 83 ------- ------- ------- ------- Operating income ............... 68 108 86 278 Equity in earnings of affiliates .... 4 8 9 17 Interest expense, net ............... (38) (18) (73) (35) ------- ------- ------- ------- Income before income taxes .......... 34 98 22 260 Provision for income taxes .......... (11) (37) (7) (100) Minority interests .................. (2) (4) (4) (6) ------- ------- ------- ------- Net income .......................... $ 21 $ 57 $ 11 $ 154 ======= ======= ======= =======
16. Comprehensive income (loss) is summarized as follows (in millions):
Three Months Ended Six Months Ended March 31, March 31, --------------------------- -------------------------- 2001 2000 2001 2000 ---------- --------- --------- --------- Net income............................ $ 21 $ 57 $ 11 $ 154 Foreign currency translation.......... (38) (16) (33) (23) --------- --------- --------- --------- Comprehensive income (loss)........... $ (17) $ 41 $ (22) $ 131 ========= ========= ========= =========
13 15 ARVINMERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 17. On November 30, 1999, the company completed the sale of its Light Vehicle Systems seat adjusting systems business for approximately $135 million cash, resulting in a one-time gain of $83 million ($51 million after-tax, or $1.05 per basic and diluted share). The seat adjusting systems business had fiscal 1999 sales of approximately $130 million. 18. Various lawsuits, claims and proceedings have been or may be instituted or asserted against the company relating to the conduct of its business, including those pertaining to product liability, intellectual property, environmental, safety and health and employment matters. Included in these matters are claims for alleged asbestos-related personal injuries, which arose from products manufactured prior to 1977 by a subsidiary acquired by Arvin in 1986. During fiscal years 1995 through 2000, the company and its predecessors paid asbestos-related claims of approximately $35 million, substantially all of which were reimbursed by insurance. As of March 31, 2001, the company has accrued approximately $52 million for contingent asbestos-related liabilities, and recorded assets of $49 million for probable recoveries from third parties and insurance. Management believes that existing insurance coverage will reimburse substantially all of the potential liabilities and expenses related to pending cases. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to the company, management believes the disposition of matters which are pending or asserted will not have a material adverse effect on the company's financial statements. 14 16 ARVINMERITOR, INC. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition RESULTS OF OPERATIONS As is discussed in Note 1 of the notes to the consolidated financial statements, on July 7, 2000, Meritor and Arvin merged to form ArvinMeritor. The merger was accounted for as a purchase with Meritor designated as the acquirer. Accordingly, the historic financial information for periods prior to July 7, 2000, reflects only the results of Meritor and its consolidated subsidiaries. The information for the period after July 7, 2000, represents the results of ArvinMeritor and its consolidated subsidiaries. All prior periods' share and per share data have been restated to conform with the exchange of Meritor shares to ArvinMeritor shares on a one Meritor share for 0.75 ArvinMeritor shares basis, in connection with the merger. All references to pro forma amounts assume that the merger occurred at the beginning of each period presented, and do not give pro forma effect to any acquisitions or divestitures made by Arvin or Meritor. 2001 Second Quarter Compared to 2000 Second Quarter Sales for the second quarter of 2001 were $1,787 million, compared to $1,196 million in the same period last year. Excluding sales of $823 million attributable to the merger with Arvin, sales decreased $232 million due to reduced build rates for North American commercial vehicles and light vehicles, and weaker European currencies. Pro forma sales, as if Arvin and Meritor had operated as a merged company during the second quarter of fiscal 2000, declined $274 million, or 13 percent compared to $2,061 million in the second quarter of 2000. Softness in replacement markets, in addition to reduced build rates and weaker European currencies, contributed to the pro forma sales decline. Second quarter 2001 operating income was $68 million, down from $108 million in the second quarter of 2000. Operating income, before special items, declined 29 percent from last year's second quarter to $77 million, reflecting operating margins of 4.3 percent, down from 9.0 percent. Included in the second quarter of fiscal 2001 operating income is $39 million attributed to the merger with Arvin. The decline in operating income and margin continues to be driven primarily by revenue declines in the Commercial Vehicle Systems (CVS) segment. Special items in the second quarter of 2001 included net charges of $9 million ($6 million after-tax, or $0.09 per basic and diluted share), related to the company's restructuring actions announced in November 2000 (see below). There were no special items in the second quarter of fiscal year 2000. Operating income for the quarter, before special items, was down 48 percent from pro forma $149 million in last year's second quarter. Affiliate income for the quarter declined to $4 million, versus $8 million for the prior year's comparable period, continuing to reflect the drop in North American CVS production. Interest expense, net was $38 million, up $20 million primarily due to higher debt levels and increased borrowing rates resulting from a change in the company's debt rating (see Note 13). Second quarter 2000 affiliate income and interest expense on a pro forma basis were $11 million and $35 million, respectively. 15 17 ARVINMERITOR, INC. RESULTS OF OPERATIONS (Cont'd) Net income was $21 million, or $0.32 per basic and diluted shares for the quarter ended March 31, 2001. Before special items, net income was $27 million, or $0.41 per basic and diluted shares, down from $57 million for the same period last year, a decrease of 53 percent. The decrease in net income was driven by the reduced build rates for both heavy and light vehicles, as discussed above. Net income, before special items, decreased $49 million, or 64 percent from $76 million for the pro forma second quarter last year. Softness in the replacement markets along with the reduced build rates, discussed above, resulted in the decline from last year's pro forma results. The second quarter effective tax rate is 32.5 percent, reflecting a year to date effective rate of 33.5 percent, and is down from last year's 38.5 percent, and 37.0 percent on a pro forma basis as a direct result of the company's ongoing commitment to identifying and implementing strategic tax-planning initiatives. Light Vehicle Systems (LVS) sales were $951 million, an increase of $531 million over last year's second quarter. The merger with Arvin contributed $558 million of sales in the second quarter of 2001. Excluding these Arvin sales, LVS sales decreased $27 million. Operating margin was down from last year's second quarter margin of 9.5 percent, to 6.5 percent. Sales decreased from $978 million in the pro forma second quarter of 2000, and operating margin fell to 6.5 percent from 6.9 percent for last year's pro forma second quarter. Continuing margin pressures from the vehicle producers will make it difficult to improve margin levels throughout the full fiscal year, notwithstanding efforts to lower fixed costs through synergy savings and restructuring actions. CVS sales were $583 million, or 25 percent lower than $776 million in the same period last year. Operating income was $10 million in the second quarter of 2001, reflecting operating margin of 1.7 percent, down from $68 million and 8.8 percent in second quarter 2000. Volume decline outpaced the company's ability to lower its fixed costs in the North American Class 8 commercial truck market and was the major factor in the deteriorating margin in this segment. Contributing to the margin decline were start-up related costs associated with a CVS Aftermarket distribution center in Europe. The distribution center issues are not expected to continue into the remainder of the fiscal year. Sales and operating income were $794 million and $70 million, respectively, on a pro forma basis for second quarter 2000. Light Vehicle Aftermarket (LVA) sales were $216 million in the second quarter of fiscal 2001. This business is attributable to Arvin, and accordingly, is only included in the consolidated results for periods subsequent to the merger. Sales were down 11 percent from $244 million for pro forma second quarter last year. LVA operating margin was 3.7 percent, down from 4.1 percent on a pro forma basis for the quarter ended March 31, 2000. The light vehicle aftermarket continues to be plagued with depressed volumes generated by lower customer demand in all product lines. Operating margin in the second quarter did improve from first quarter 2001 margin of 1.5 percent as a result of cost reduction actions. Actions continue to be implemented to restore operating margins to their prior levels. 16 18 ARVINMERITOR, INC. RESULTS OF OPERATIONS (Cont'd) Six Months Ended March 31, 2001, Compared to Six Months Ended March 31, 2000 For the first six months of fiscal 2001, sales were $3,446 million, an increase of $1,114 million over the same period last year. Excluding $1,582 million of sales attributable to the merger with Arvin, sales decreased $468 million due to weak demand in the North American CVS markets and the negative impact of currency exchange. The sale of the LVS seat adjusting systems business in the first quarter of fiscal 2000 contributed to this decline, as this business added sales of $31 million in fiscal 2000. Sales declined $539 million, or 14 percent compared to pro forma sales of $3,985 million in the first six months of fiscal 2000. Weak demand in the LVA market, in addition to reductions in CVS and LVS production, contributed to the pro forma sales decline. For the first six months of fiscal 2001, operating income was $86 million, compared to $278 million in the same period last year. Before special items (see below), operating income decreased 28 percent from $195 million in the first six months of fiscal 2000, to $141 million. The merger with Arvin contributed $66 million of operating income in the first six months of fiscal 2001. The operating income decline was driven by a decrease in sales, primarily in CVS, as discussed above. Special items in the first six months of fiscal year 2001 included net charges of $55 million ($36 million after-tax, or $0.54 per basic and diluted share), related to the company's restructuring actions announced in November 2000 (see below). Special items in the prior year's first six months included a gain of $83 million ($51 million after-tax or $1.05 cents per basic and diluted share), due to the sale of the Light Vehicle Systems seat adjusting systems business. Operating income for the first six months, before special items, was down 49 percent from $274 million pro forma last year, resulting in a decrease in operating margins from 6.9 percent to 4.1 percent. The sales decline in all segments drove the decrease in pro forma operating income and margins. Affiliate income for the first six months of fiscal 2001 was $9 million, compared to $17 million in the same period last year. Interest expense was up $38 million to $73 million, primarily due to higher debt levels of the combined company, increased borrowing rates resulting from a change in the company's debt rating (see Note 13), and additional borrowings used to fund the share repurchase program. The first six months of fiscal 2000 affiliate income and interest expense on a pro forma basis were $23 million and $69 million, respectively. The first six months of fiscal 2001 earnings were impacted by net lower depreciation and amortization expense associated with appraisals of the Arvin fixed assets recorded at their fair market value under purchase accounting which increased earnings by $0.05 per share. In addition, earnings declined $0.03 per share due to the bankruptcy filing of a major steel customer in the coil coating business, and $0.07 per share due to foreign currency exchange. Net income was $11 million, or $0.17 per basic and diluted share for the first six months of fiscal 2001, down from $154 million and $3.18 per basic and diluted shares for the same period last year. Before special items, net income was $47 million, or $0.71 per basic and diluted shares, a decrease of $56 million, or $1.42 per basic and diluted shares, from the first six months fiscal 2000. Net income and earnings per share, before special items, decreased $94 million and $1.23 per basic and diluted shares from the first six months of fiscal 2000 pro forma net income of $141 million and $1.94 basic and diluted earnings per share. 17 19 ARVINMERITOR, INC. RESULTS OF OPERATIONS (Cont'd) The effective tax rate for the first six months of fiscal 2001 was 33.5 percent. The company expects the full year's effective tax rate to approximate this rate. LVS sales increased $995 million to $1,821 million for the first six months of fiscal 2001. Sales of $1,065 million in the first six months of fiscal 2001 are attributed to the merger with Arvin. Excluding these sales, LVS sales decreased $70 million. Included in this decrease is the impact of the sale of the LVS seat adjusting systems business during fiscal 2000, which contributed $31 million in the first six months of last year. Operating margin was down from 8.6 percent in the first six months of fiscal 2000 to 6.3 percent this year. Sales were down from pro forma sales of $1,883 million in first six months of fiscal 2000, and operating margin was up slightly from 6.2 percent pro forma last year. CVS sales were $1,135 million, down from $1,506 million, or 25 percent, compared to last year's first six months. Operating income and margin declined to $22 million and 1.9 percent for the first six months of this year, compared to $124 million and 8.2 percent last year. The steep decline experienced in the Class 8 North American truck volumes has resulted in a higher fixed-cost ratio, which negatively affected operating margins. Sales and operating income were $1,541 million and $129 million, respectively, on a pro forma basis for the first six months of fiscal 2000. LVA sales were $413 million, with no sales in the first six months of fiscal 2000 as this business is attributable to Arvin, and is only included in the consolidated results for periods subsequent to the merger. Sales on a pro forma basis were down from $473 million, or 13 percent. LVA operating margin was down from 4.7 percent on a pro forma basis for the first six months of fiscal 2000, to 2.7 percent. A continued downward trend in the North American market, and softer European volumes were major contributors to the decline in the pro forma year-over-year comparison of both sales and operating margin. In November 2000, the company announced a $90-million restructuring plan to realign operations to reflect the decline in the company's major markets. To comply with existing accounting rules, these charges are expected to be recorded throughout the fiscal year. Special charges related to restructuring actions were $55 million for the first six months of fiscal 2001 ($36 million after-tax or $0.54 per basic and diluted share). These charges were net of approximately $4 million of restructuring reserves, established primarily in the third quarter of fiscal 2000, that were reversed due to improved circumstances and opportunities of the company resulting from the ArvinMeritor merger in July 2000 (see Note 3). Anticipated restructuring-related charges of approximately $14 million will occur in the next two quarters of fiscal 2001, and a further $15 million in costs related to the former Arvin businesses is expected to be recorded in accordance with purchase accounting rules and will be charged against the balance sheet. That amount will be incremental to the goodwill resulting from the combination of Arvin and Meritor. The company continued its share repurchase program, pursuant to which it is authorized to repurchase up to $100 million in company stock. As of March 31, 2001, the company had acquired 5,426,215 shares of its outstanding common stock, at an aggregate cost of $84 million, or $15.39 per share. 18 20 ARVINMERITOR, INC. FINANCIAL CONDITION Cash provided by operating activities for the first six months of fiscal 2001 was $265 million. Excluding the impact of the accounts receivable securitization program (see below), operating cash flow increased $139 million compared to the first six months of fiscal 2000. Working capital contributed $91 million to this improvement. Depreciation and amortization expense was $109 million for the first six months of fiscal 2001. The company anticipates depreciation and amortization expense to be approximately $225 million for the entire fiscal year. During the second quarter of fiscal 2001, a wholly owned subsidiary of the company entered into an agreement to sell an undivided interest in up to $100 million of trade receivables to improve financial flexibility and lower financing costs. The accounts receivable sold are reflected as a reduction to accounts receivable in the consolidated balance sheet. As of March 31, 2001, the company has utilized $100 million of the asset securitization facility (see Note 4). Capital expenditures were $103 million in the first six months of fiscal 2001, an increase of $29 million from the same period last year. Increased capital expenditures associated with the merger with Arvin were partially offset by an overall reduction in capital expenditures by the company in the current year. The company anticipates full year fiscal 2001 capital expenditures of approximately $220 to $240 million. Cash provided by investing activities in the first six months of fiscal 2000 included $140 million in proceeds principally from the sale of the LVS seat adjusting systems business. Cash used for financing activities in the first six months of fiscal 2001 includes payments of $31 million for purchases of the company's common stock and $29 million for cash dividends. Cash used for financing activities for the first six months of fiscal 2001 included a net decrease in debt of $109 million, including purchases of the company's preferred capital securities of $10 million. The company's second quarter dividend of $0.22 cents per share was paid on March 19, 2001, to shareowners of record on February 26, 2001. On April 11, 2001, the board of directors declared a quarterly dividend of $0.22 cents per share, payable on June 11, 2001, to shareowners of record on May 21, 2001. The company's net debt to capitalization ratio increased to 67 percent at March 31, 2001, from 65 percent at September 30, 2000. In the second quarter of fiscal year 2001, Standard & Poor's and Moody's revised their credit ratings to BBB-/Baa3, respectively, for the company's long-term debt and A3/P3, respectively, for the company's commercial paper. As a result of these actions, the company's borrowing costs under its credit arrangements have increased, and it is effectively precluded from issuing commercial paper (see Note 13). Information with respect to the effect on the company and its manufacturing operations of compliance with environmental protection requirements and resolution of environmental claims is contained under the caption "Environmental Matters" in the Chief Financial Officer's Review, Management's Discussion and Analysis in the company's 2000 Annual Report to Shareowners, incorporated by reference into the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2000. Management believes that at March 31, 2001 there has been no material change to this information. 19 21 ARVINMERITOR, INC. INTERNATIONAL OPERATIONS On January 1, 1999, the Euro became the common currency of eleven countries of the European Union. During a three-year transition period, the present national currencies of these eleven countries will become sub-units of the Euro at fixed exchange rates. The European Union's current plans call for the transition period to be completed by July 1, 2002, at which time the Euro will become the sole legal tender in those participating countries. The company is engaged in business in some of the countries that participate in the European Monetary Union, and sales for fiscal 2000 in these countries were approximately 17 percent of the company's total sales. In addition, the company enters into foreign currency forward exchange contracts with respect to several of the existing currencies that will be subsumed into the Euro and has borrowings in participating currencies primarily under its revolving credit facility. The company has analyzed the potential effects of the Euro conversion on competitive conditions, information technology and other systems, currency risks, financial instruments and contracts, and has examined the tax and accounting consequences of Euro conversion, and believes that the conversion has not had and will not have a material adverse effect on its business, operations and financial condition. The company is making the necessary adjustments to accommodate the conversion, including modifications to its information technology systems and programs, pricing schedules and financial instruments. The company expects that all necessary actions will be completed in a timely manner, and that the costs associated with the conversion to the Euro will not be material. Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to foreign currency exchange rate risk inherent in its sales, purchases, assets and liabilities denominated in currencies other than the U.S. dollar and interest rate risk associated with the company's debt. The company does enter into foreign currency forward exchange contracts to minimize the risk of unanticipated gains and losses from currency rate fluctuations on foreign currency commitments entered into in the ordinary course of business (See Note 2 to the financial statements for information on accounting for these contracts). It is the policy of the company not to enter into derivative financial instruments for speculative purposes, and therefore, the company holds no derivative instruments for trading purposes. The company has performed a sensitivity analysis assuming a hypothetical 10 percent adverse movement in foreign currency exchange rates and interest rates applied to the underlying exposures described above. As of March 31, 2001, the analysis indicated that such market movements would not have a material effect on the company's consolidated financial position, results of operations or cash flows. Actual gains or losses in the future may differ significantly from that analysis, however, based on changes in the timing and amount of interest rate and foreign currency exchange rate movements and the company's actual exposures. 20 22 ARVINMERITOR, INC. PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds On January 2, 2001, the company issued 777 shares of Common Stock to James E. Perrella, a non-employee director of the company, pursuant to the terms of the company's Directors Stock Plan, in lieu of cash payment of the quarterly retainer fee for board service. In addition, on February 14, 2001, the company issued 1,000 shares of Common Stock to each of the thirteen non-employee directors of the company pursuant to the terms of the Directors Stock Plan. In each case, the issuance of these securities was exempt from registration under the Securities Act of 1933, as a transaction not involving a public offering under Section 4(2). Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of shareowners of the company was held February 14, 2001. The following matters were voted on and received the specified number of votes in favor, votes withheld or against, abstentions and broker non-votes: (i) Election of directors: The following five individuals were elected to the Board of Directors, with terms expiring at the annual meeting of shareowners in 2004. The number of shares noted below voted in favor of their election or were withheld. Abstentions and broker non-votes were not applicable.
Name of Nominee Votes in Favor Votes Withheld Joseph B. Anderson, Jr. 56,925,183 874,730 William D. George, Jr. 50,019,263 7,780,650 Richard W. Hanselman 56,844,269 955,644 Charles H. Harff 56,843,959 955,954 Larry D. Yost 56,832,248 967,665
(ii) Appointment of auditors: The shareowners approved the selection of Deloitte & Touche LLP as the company's auditors. A total of 57,255,024 votes were cast in favor, 312,208 votes were cast against, and 232,681 votes abstained from voting. Broker non-votes were not applicable. 21 23 ARVINMERITOR, INC. Item 5. Other Information Cautionary Statement This Quarterly Report on Form 10-Q contains statements relating to future results of the company (including certain projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "estimate," "should," "are likely to be" and similar expressions. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to global economic and market conditions; the demand for commercial, specialty and light vehicles for which the company supplies products; risks inherent in operating abroad; OEM program delays; demand for and market acceptance of new and existing products; successful development of new products; reliance on major OEM customers; labor relations of the company, its customers and suppliers; successful integration of acquired or merged businesses; achievement of the expected annual savings and synergies from past and future business combinations; competitive product and pricing pressures; the amount of the company's debt; as well as other risks and uncertainties, including but not limited to those detailed herein and from time to time in other filings of the company with the Securities and Exchange Commission. See Also "Management's Discussion and Analysis of Results of Operations and Financial Condition" and "Quantitative and Qualitative Disclosures about Market Risk" herein. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. 22 24 ARVINMERITOR, INC. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 3 - Bylaws of the company, as currently in effect. 10a - Receivables Sale Agreement, dated March 30, 2001, among ArvinMeritor Receivables Corporation, the company, ABN AMRO Bank N.V., the liquidity providers referred to therein and Amsterdam Funding Corporation. 10b - Purchase and Sale Agreement, dated March 30, 2001, among Arvin Exhaust LLC, Gabriel Ride Control Products, Inc., Maremont Exhaust Products, Inc., Purolator Products NA, Inc. and ArvinMeritor Receivables Corporation. 12 - Computation of ratio of earnings to fixed charges. (b) Reports on Form 8-K. The company filed Current Reports on Form 8-K on February 26, 2001 and April 6, 2001, reporting under Item 5, "Other Events," that on February 22, 2001 and March 23, 2001, respectively, Moody's and Standard & Poor's had changed their ratings on the Company's long-term debt. 23 25 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ARVINMERITOR, INC. ------------------------------------------ (Registrant) Date May 16, 2001 By V.G. Baker, II ----------------- --------------------------------------- V.G. Baker, II Senior Vice President, General Counsel and Secretary (For the Registrant) Date May 16, 2001 By W. M. Lowe ----------------- ---------------------------------------- W. M. Lowe Vice President and Controller (Principal Accounting Officer) 24 26 Exhibit Index
Exhibit No. Description - ----------- ----------- 3 Bylaws of the company, as currently in effect. 10a Receivables Sale Agreement, dated March 30, 2001, among ArvinMeritor Receivables Corporation, the company, ABN AMRO Bank N.V., the liquidity providers referred to therein and Amsterdam Funding Corporation. 10b Purchase and Sale Agreement, dated March 30, 2001, among Arvin Exhaust LLC, Gabriel Ride Control Products, Inc., Maremont Exhaust Products, Inc., Purolator Products NA, Inc. and ArvinMeritor Receivables Corporation. 12 Computation of ratio of earnings to fixed charges.
EX-3 2 k62395ex3.txt BYLAWS OF THE COMPANY 1 EXHIBIT 3 AMENDED BY-LAWS OF ARVINMERITOR, INC. (As of April 11, 2001) ARTICLE I OFFICE SECTION 1.1. Registered Office. The registered office of ArvinMeritor, Inc. (the "Corporation") in the State of Indiana shall be in the City of Indianapolis, County of Marion. SECTION 1.2. Principal Business Office. The principal business office of the Corporation shall be in the City of Troy, County of Oakland, in the State of Michigan. SECTION 1.3. Other Offices. The Corporation may also have an office or offices at such other place or places either in or outside the State of Indiana as the Board of Directors may from time to time determine or the business of the Corporation requires. ARTICLE 2 MEETING OF SHAREHOLDERS SECTION 2.1. Place of Meetings. Each meeting of shareholders of the Corporation shall be held at such place, in or outside of the State of Indiana, as the Board of Directors may designate in the notice of such meeting, but if no such designation is made, then at the principal business office of the Corporation. SECTION 2.2. Annual Meetings. An annual meeting of shareholders for the purpose of electing directors and transacting such other business as may properly be brought before the meeting, notice of which was given in the notice of meeting, shall be held on a date and time as the Board of Directors may determine. If for any reason any annual meeting shall not be held at the time herein provided, the same may be held at any time thereafter, upon notice as hereinafter provided, or the business thereof may be transacted at any special meeting of shareholders called for that purpose. The Board of Directors may, upon public notice given prior to the scheduled meeting date, postpone, for as long as and to the extent permitted by the Indiana Business Corporation Law, as amended (the "Act"), any previously scheduled annual or special meeting of shareholders. 2 SECTION 2.3. Special Meetings. Special meetings of shareholders, unless otherwise required by statute and subject to the rights of holders of any class of Preferred Stock of the Corporation, may be called only by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies (the "Whole Board"). Business transacted at any special meeting shall be confined to the purpose or purposes stated in the notice of such special meeting. Meetings may be held without notice if all shareholders entitled to vote are present or if notice is waived by those not present. SECTION 2.4. Notice of Shareholders' Meetings. Notice of each meeting of shareholders, whether annual or special, stating the date, time and place, and, in the case of special meetings, the purpose or purposes for which such meeting is called, shall be mailed, postage prepaid, to each shareholder entitled to vote thereat, at the shareholder's address as it appears on the records of the Corporation, not less than 10 nor more than 60 days before the date of the meeting unless otherwise prescribed by statute. Notice of any adjourned meeting of shareholders shall not be required to be given, except when expressly required by law. SECTION 2.5. Record Dates. (a) In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of shares or for the purpose of any other lawful action, the Board of Directors may designate a date as the record date which, for purposes of a meeting of shareholders or other event requiring shareholder action, shall not be more than 70 nor less than 10 days before the date of such meeting or event. (b) If a record date has not been fixed as provided in the preceding paragraph (a), then: (i) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders of the Corporation 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 is held; and (ii) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (c) Only those who shall be shareholders of record on the record date so fixed as aforesaid shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend or other distribution, or to receive such allotment of rights, or to exercise such rights, as the case may be, 2 3 notwithstanding the transfer of any shares on the books of the Corporation after the applicable record date, provided, however, the Board of Directors may fix a new record date for any adjourned meeting and shall fix a new record date if a meeting is adjourned to a date more than 120 days after the date originally fixed for the meeting. SECTION 2.6. List of Shareholders. The Secretary of the Corporation shall, from information obtained from the transfer agent, prepare and make, before each meeting of shareholders, an alphabetical list of shareholders entitled to vote thereat, arranged by voting group, showing the address and number of shares registered in the name of each shareholder. Such list shall be open to the examination of any such shareholder or such shareholder's agent or attorney authorized in writing ("shareholder agent"), for any purpose germane to the meeting, during ordinary business hours, for a period of at least 5 days prior to the meeting for which the list was prepared and continuing through the meeting, either at a place in the city where the meeting is being 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 be produced and kept at the time and place of meeting during the whole time thereof for inspection by any such shareholder or shareholder agent who is present. The stock ledger shall be the only evidence as to who are the shareholders entitled to examine the stock ledger, the list referred to in this section or the books of the Corporation, or to vote in person or by proxy at any meeting of shareholders. SECTION 2.7. Quorum and Adjournments. At each meeting of shareholders, the holders of a majority of the voting power of the shares of the Corporation entitled to vote, present in person or by proxy, shall constitute a quorum of shareholders for all purposes unless the presence of a larger proportion is required by statute or by the Corporation's Articles of Incorporation (the "Articles of Incorporation"), and, in such cases, the presence of the proportion so required shall constitute a quorum. Whether or not there is such a quorum, the Chairman of the meeting or the shareholders present in person or by proxy constituting a majority of the shares present may adjourn the meeting from time to time without notice other than an announcement at the meeting. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting, and only those shareholders entitled to vote at the meeting as originally called shall be entitled to vote at any adjournment or adjournments thereof. The absence from any meeting of the number of shareholders required by law or by the Articles of Incorporation or by these By-Laws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if the number of shareholders required in respect of such other matter or matters shall be present. SECTION 2.8. Voting by Shareholders; Proxies. Except as otherwise provided by law, the Articles of Incorporation or these By-Laws, each shareholder entitled to vote shall at every meeting of the shareholders have one vote for each share entitled to vote held by such shareholder. Any vote on shares may be given by the shareholder entitled thereto in person or by proxy appointed by an instrument in writing, subscribed (or 3 4 transmitted by electronic means and authenticated as provided by law) by such shareholder or by the shareholder's attorney thereunto authorized, and delivered to the Secretary; provided, however, that no proxy shall be voted after 11 months from its date unless the proxy provides for a shorter or longer period. Except as otherwise set forth in the Articles of Incorporation with respect to the right of the holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, election of directors at all meetings of shareholders at which directors are to be elected shall be by a plurality of the votes cast for the election of directors at the meeting. If a quorum exists, action on a matter (other than the election of directors) submitted to shareholders entitled to vote thereon at any meeting shall be approved if the votes cast favoring the action exceed the votes cast opposing the action, unless a greater number of affirmative votes is required by law, the Articles of Incorporation or these By-Laws. SECTION 2.8A. Participation in Meetings by Means of Conference or Similar Communications. Any shareholder may participate in an annual or special meeting of shareholders by or through use of any means of communications by which all shareholders participating may simultaneously hear each other during the meeting. A shareholder participating in such a meeting by this means is deemed to be present at the meeting. SECTION 2.9. Conduct of Business. (a) Presiding Officer. The Chairman of the Board of Directors shall preside as Chairman of shareholder meetings and shall determine the order and conduct of business and all matters of procedure at such meetings. The Chairman shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the shareholders will vote at the meeting. In the absence of the Chairman, the Vice Chairman of the Board of Directors (the "Vice Chairman"), or if the Vice Chairman is also absent, the President, shall assume the duties of the Chairman specified in this paragraph (a) of Section 2.9. If each of the Chairman, the Vice Chairman and the President is absent, a director or an officer of the Corporation chosen by the Board of Directors shall assume the duties of the Chairman specified in this paragraph (a) of Section 2.9. (b) Secretary. The Secretary, or, in his or her absence, an Assistant Secretary, shall act as Secretary at all meetings of the shareholders. In the absence from any such meeting of the Secretary and the Assistant Secretaries, the Chairman may appoint any person to act as Secretary of the meeting. (c) Annual Meetings of Shareholders. (i) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (A) pursuant to the Corporation's notice of meeting, (B) by or at the direction of the Board of Directors or (C) by any shareholder of 4 5 the Corporation who was a shareholder of record at the time of giving of notice provided for in this Section 2.9, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.9. (ii) For nominations or other business to be properly brought before any annual meeting by a shareholder pursuant to clause (C) of paragraph (c)(i) of this Section 2.9, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the case of the annual meeting to be held in 2001 or in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder's notice as described above. Such shareholder's notice shall set forth (A) as to each person whom the shareholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; (C) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (x) the name and address of such shareholder, as they appear on the Corporation's books, and of such beneficial owner and (y) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder and such beneficial owner. (iii) Notwithstanding anything in the second sentence of paragraph (c)(ii) of this Section 2.9 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 70 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this Section 2.9 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to the Secretary at the principal executive 5 6 offices of the Corporation not later than the close of business on the 10th day following the day on which public announcement is first made by the Corporation. (iv) Notwithstanding anything in the second sentence of paragraph (c)(ii) of this Section 2.9 to the contrary, in the event that any person nominated by the Board of Directors for election as a director (other than a person nominated to fill a vacancy created by the death of a director) was not a director or nominee named (A) in the Corporation's proxy statement for the preceding annual meeting or (B) in a public announcement made by the Corporation at least 70 days prior to the first anniversary of the preceding year's annual meeting (a "New Nominee"), a shareholder's notice required by this Section 2.9 shall also be considered timely if it is delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which public announcement is first made by the Corporation of the election or nomination of such New Nominee to the Board of Directors. (d) Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation's notice of meeting (A) by or at the direction of the Board of Directors or (B) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this Section 2.9, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.9. Nominations by shareholders of persons for election to the Board of Directors may be made at such a special meeting of shareholders if the shareholder's notice required by paragraph (c)(ii) of this Section 2.9 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the date on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a shareholder's notice as described above. (e) General. (i) Except where the terms of any class or series of Preferred Stock of the Corporation require the election of one or more directors by the holders of such Preferred Stock voting as a single class and except as provided in Section 3.2 of these By-Laws, only such persons who are nominated in accordance with the procedures set forth in this Section 2.9 shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in 6 7 accordance with the procedures set forth in this Section 2.9. Except as otherwise provided by law, the Articles of Incorporation of these By-Laws, the person presiding at the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed in accordance with the procedures set forth in this Section 2.9 and, if any nomination or business proposed is not in compliance with this Section 2.9, to declare that such defective nomination or proposal shall be disregarded. (ii) For purposes of this Section 2.9, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (iii) Notwithstanding the foregoing provisions of this Section 2.9, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.9. Nothing in this Section 2.9 shall be deemed to affect any rights of (x) shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (y) holders of any series of Preferred Stock to elect directors under specified circumstances. SECTION 2.10. Inspectors. There shall be appointed by the Board of Directors, before each meeting of shareholders, two inspectors of the vote. Such inspectors shall first take and subscribe an oath or affirmation faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of their ability. If two inspectors are not appointed in advance of any such meeting by the Board of Directors or one or both appointed inspectors fail or refuse to act, then one or both inspectors, as the case may be, shall be appointed for the meeting by the person presiding thereat. Such inspectors shall be responsible for tallying and certifying the vote taken on any matter at each meeting which is required to be tallied and certified by them in the resolution of the Board of Directors appointing them or the appointment of the person presiding at such meeting as the case may be. Except as otherwise provided by these By-Laws or the laws of the State of Indiana, such inspectors shall also decide all questions touching upon the qualification of voters, the validity of proxies and ballots, and the acceptance and rejection of votes. In the case of a tie vote by the inspectors on any question, the person presiding at the meeting shall decide such question. The Board of Directors shall have the authority to make rules establishing presumptions as to the validity and sufficiency of proxies. 7 8 ARTICLE 3 DIRECTORS SECTION 3.1. Number. Subject to the rights of the holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be set, and from time to time may be increased or decreased to the extent provided for in the Articles of Incorporation, exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board. A director need not be a shareholder. SECTION 3.2. Vacancies. Except where the terms of any class or series of Preferred Stock of the Corporation require the election of one or more directors by the holders of such Preferred Stock voting as a single class and except to the extent the Board of Directors determines otherwise, vacancies occurring on the Board of Directors and newly-created directorships resulting from any increase in the number of directors may be filled only by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and any director so chosen shall hold office for a term expiring at the annual meeting of shareholders at which the term of office of the class of directors to which such director has been elected expires and until his or her successor is duly elected and qualified or until the earlier of his or her death, resignation or removal in a manner permitted by statute or these By-Laws. No decrease in the number of authorized directors constituting the Whole Board shall shorten the term of any incumbent director. SECTION 3.3. Powers. The property, affairs and business of the Corporation shall be managed by the Board of Directors which may exercise all powers of the Corporation and do all lawful acts and things not by statute or by the Articles of Incorporation or these By-Laws directed or required to be exercised or done by the shareholders. SECTION 3.4. Place of Meetings. The place of any meeting of the Board of Directors may be either in or outside the State of Indiana as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof. SECTION 3.5. Annual Meetings. Annual meetings of the Board of Directors shall be held each year on the same day as the shareholder's annual meeting for such year, at the time and place determined by the Board of Directors. Notice of such meeting need not be given. Such meeting may be held at any other time or place which shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors. SECTION 3.6. Regular Meetings. Regular meetings of the Board of Directors shall be held at the dates, times and places designated by the Board of Directors from 8 9 time to time. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day not a legal holiday. Notice of regular meetings need not be given. SECTION 3.7. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman; and shall be called by the Chairman or the Secretary upon the written request of three directors of the Corporation. SECTION 3.8. Notice of Special Meetings. Notice of each special meeting of the Board of Directors shall be given to each director. The notice shall state the principal purpose or purposes of the meeting. SECTION 3.9. Quorum. Except as provided in Section 3.2, a whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business at all meetings of the Board of Directors, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors unless otherwise provided by law, the Articles of Incorporation or these By-Laws. If a quorum shall not be present at any meeting of the Board of Directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. Notice of any adjourned meeting need not be given. The directors shall act only as a board and the individual directors shall have no power as such. SECTION 3.10. Informal Action. Unless otherwise restricted by statute, the Articles of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all directors or by all members of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or of such committee. SECTION 3.11. Attendance by Conference Telephone. Members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of such Board of Directors or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION 3.12. Order of Business. At all meetings of the Board of Directors, business shall be transacted in the order determined by the Board. SECTION 3.13. Resignations. Any director of the Corporation may resign at any time by giving written notice to the Chairman of the Board or the Secretary of the Corporation. The resignation of any director shall take effect at the time of the receipt of 9 10 such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 3.14. Committees. (a) The Board of Directors may from time to time, in its discretion, by resolution passed by a majority of the Whole Board, designate, and appoint, from the directors, committees of one or more persons which shall have and may exercise such lawfully delegable powers and duties conferred or authorized by the resolutions of designation and appointment. (b) Each member of a committee shall continue in office until a director to succeed him or her shall have been elected and shall have qualified, or until he or she ceases to be a director or until he or she shall have resigned or shall have been removed in the manner hereinafter provided. Any vacancy in a committee shall be filled by the vote of a majority of the Whole Board at any regular or special meeting thereof. (c) The Board of Directors may, by resolution passed by a majority of the Whole Board, designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. (d) Unless otherwise provided by the Board of Directors, each committee shall appoint a chairman. Each committee shall keep a record of its acts and proceedings and report the same from time to time to the Board of Directors. (e) Any regular or alternate member of a committee may resign at any time by giving written notice to the Chairman of the Board or the Secretary of the Corporation. Such resignation shall take effect at the time of the receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. (f) Any regular or alternate member of a committee may be removed with or without cause at any time by resolution passed by a majority of the Whole Board at any regular or special meeting. (g) Regular meetings of each committee, of which no notice shall be necessary, shall be held on such days and at such places as the chairman of the committee shall determine or as shall be fixed by a resolution passed by a majority of all the members of such committee. Special meetings of each committee will be called by the Secretary at the request of any two members of such committee (or the sole member, if a committee of one), or in such other manner as may be determined by the committee. Notice of each special meeting of a committee shall be mailed to each member thereof at least two days before the meeting or shall be given personally or by telephone or other electronic transmission at least one day before the meeting. Every such notice shall state 10 11 the time and place, but need not state the purposes of the meeting. No notice of any meeting of a committee shall be required to be given to any alternate. (h) Unless the Board of Directors shall provide otherwise, the presence of a majority of the total membership of any committee of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of such committee and the act of a majority of those present shall be necessary and sufficient for the taking of any action thereat. SECTION 3.16. Compensation of Directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and at each meeting of a committee of the Board of Directors of which they are members. Unless otherwise provided in these By-Laws, the Board of Directors shall have the authority to fix compensation of all directors for their services to the Corporation as directors and for their services to the Corporation as regular or alternate members of committees of the Board of Directors. SECTION 3.17. Removal. Subject to the rights of the holders of any class or series of Preferred Stock, any director or the entire Board of Directors may be removed from office at any time, but only for cause and only by the affirmative vote by the holders of at least 80 percent of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote at an election of directors, voting together as a single class. ARTICLE 4 NOTICES SECTION 4.1. Notices. Notices to directors and shareholders shall be in writing and delivered personally or mailed to their addresses appearing on the records of the Corporation or, if to directors, by telegram, cable, telephone, telecopy, facsimile, other electronic transmission, wireless or a nationally recognized overnight delivery service or personally. Notice to directors by mail shall be given at least five days before the meeting. Notice to directors by telegram, cable, telephone, telecopy, facsimile, other electronic transmission, wireless or personal delivery, shall be given a reasonable time before the meeting, but in no event less than two days before the meeting. Notice by mail shall be deemed to be given when mailed to the director at his or her address appearing on the records of the Corporation. Notice by telegram or cable shall be deemed to be given when the telegram or cable addressed to the director at his or her address appearing on the records of the Corporation is delivered to the telegraph company. Notice by telephone, telecopy, facsimile, other electronic transmission or wireless shall be deemed to be given when transmitted by telephone, telecopy, facsimile, other electronic transmission or wireless to the number, electronic address or wireless call designation appearing on the records of the Corporation for the director (regardless of whether the director shall have 11 12 personally received such telephone call or wireless message), provided confirmation of transmission shall be made promptly by telegram or cable in the manner specified above. SECTION 4.2. Waiver of Notice. Whenever any notice is required, a waiver thereof signed by the person entitled to such notice and filed with the minutes or corporate records, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of any person at any meeting of shareholders or directors shall constitute a waiver of notice of such meeting, except when such person attends only for the express purpose of objecting, at the beginning of the meeting (or in the case of a director's meeting, promptly upon such director's arrival), to the transaction of any business at the meeting and does not thereafter vote for or assent to action taken at the meeting. ARTICLE 5 OFFICERS SECTION 5.1. Designation; Number; Election. The Board of Directors shall elect the officers of the Corporation. Such officers shall be a chairman of the Board of Directors, a vice chairman of the Board of Directors, a president, one or more vice presidents as the Board of Directors shall determine from time to time, a controller, a treasurer, and a secretary. In addition to any officer elected by the Board of Directors, the Board of Directors or the Chairman, at any time, may appoint and remove such additional officers and agents as the Board of Directors or the Chairman may determine from time to time. Such persons shall have such authority, and perform such duties as provided in these By-Laws or as the Board of Directors or the Chairman may from time to time prescribe. The Board of Directors or the Chairman may from time to time authorize any officer to appoint and remove agents and employees and to prescribe their powers and duties. One person may hold more than one office at the same time provided the duties of such officers as prescribed by these By-Laws may be properly and consistently performed by one person. SECTION 5.2. Term of Office; Removal; Resignations; Vacancies. The term of each officer shall be for one year and continue until his or her successor is chosen and qualified or until the earlier of his or her death, resignation or removal, except that any such officer elected by the Board of Directors, excluding the Chairman, the Vice Chairman and the President, at any time, may be suspended by the Chairman, the Vice Chairman or the President until the Board of Directors convenes, and any such officer, including the Chairman, the Vice Chairman and the President, may be removed at any time by the affirmative vote of a majority of the members of the Whole Board. 12 13 All appointed officers, agents and representatives of the Corporation shall hold office only during the pleasure of the Board of Directors or the officer appointing them. Any officer elected by the Board of Directors may resign at any time by giving written notice to the Chairman of the Board or the Secretary. Any other officer may resign at any time by giving written notice to the Chairman of the Board. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. A vacancy in any office because of death, resignation, removal or otherwise, shall be filled for the unexpired portion of the term in the manner provided in these By-Laws for regular election or appointment to such office. SECTION 5.3. Compensation of Officers. The Board of Directors or the compensation committee of the Board of Directors shall have the authority to fix compensation of all officers elected by the Board. The Chairman and/or such officer as the Chairman may designate shall have the authority to fix compensation of all other officers of the Corporation. SECTION 5.4. Chairman of the Board of Directors. The Chairman of the Board of Directors shall, subject to the Board of Directors, have general management and oversight of the administration and operation of the Corporation's business and general supervision of its policies and affairs. He or she shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect. He or she shall (a) preside at all meetings of the shareholders and of the Board of Directors, and shall have plenary power to set the agenda, determine the procedure and rules of order and make definitive rulings at meetings of shareholders; (b) have power to appoint officers for any division who, as such, shall not be officers of the Corporation; (c) subject to the Board of Directors, be in general and active charge of the entire business and all the affairs of the Corporation; and (d) have such other powers and perform such other duties as may be prescribed by the Board of Directors or provided in these By-Laws. SECTION 5.5. Vice Chairman of the Board of Directors. The Vice Chairman shall have the powers and duties prescribed in these By-Laws or assigned to him or her by the Board of Directors. In the absence or disability of the Chairman, the Vice Chairman shall preside at meetings of the Board of Directors and shall perform such other duties of the Chairman as may be assigned to him or her by the Board of Directors. SECTION 5.6. President. The President shall have the powers and duties prescribed in these By-Laws or assigned to him or her by the Board of Directors. In the absence or disability of the Chairman and the Vice Chairman, the President shall preside at meetings of the Board of Directors and shall perform such other duties of the Chairman 13 14 as may be assigned to him or her by the Board of Directors. In the absence or disability of the Chairman, the Vice Chairman and the President, on assembling for a regular or special meeting of the Board of Directors, the directors shall choose another member of the Board of Directors or another officer in attendance to preside at such meeting. SECTION 5.7. Vice Presidents. Each Vice President shall have the powers and duties prescribed in these By-Laws or assigned to him or her by the Board of Directors, the Chairman or the President. The Board of Directors may designate one or more of such Vice Presidents as executive, senior or assistant Vice Presidents. SECTION 5.8. Controller. Subject to control and supervision by the Chairman, the President and the Board of Directors, the Controller shall be in charge of the accounts of the Corporation and its subsidiaries; maintain adequate records of all assets, liabilities and business transactions; and have the other powers and duties prescribed by these By-Laws or by the Board of Directors, the Chairman or the President, and the usual powers and duties pertaining to his or her office. SECTION 5.9. Assistant Controllers. The Assistant Controllers shall have the powers and duties prescribed by these By-Laws or assigned by the Controller. In the absence or disability of the Controller, they shall have all his or her other powers and duties. SECTION 5.10. Treasurer. Subject to control and supervision by the Chairman, the President and the Board of Directors, the Treasurer shall have charge of and shall be responsible for the receipt, disbursement and safekeeping of all funds and securities of the Corporation (and shall deposit all such funds in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of these By-Laws), propose financial policies, negotiate loans, be responsible for the maintenance of proper insurance coverages and from time to time and whenever requested to do so, render statements of the condition of the finances of the Corporation to the Board of Directors; and have the other powers and duties prescribed by these By-Laws or by the Board of Directors, the Chairman or the President, and the usual powers and duties pertaining to his or her office. SECTION 5.11. Assistant Treasurers. The Assistant Treasurers shall have the powers and duties prescribed by these By-Laws or assigned by the Treasurer. In the absence of the Treasurer, they shall have all his or her other powers and duties. SECTION 5.12. Secretary. Subject to control and supervision by the Board of Directors and the Chairman, the Secretary shall attend and record proceedings of meetings of shareholders, the Board of Directors and any committee of the Board of Directors, keep or cause to be kept in books provided for such purpose such records of proceedings and have the other powers and duties prescribed by these By-Laws or by the Board of Directors, the Chairman or the President, and the usual powers and duties 14 15 pertaining to his or her office, including having custody of the corporate seal, if any, and affixing it to all documents as required to attest the same. SECTION 5.13. Assistant Secretaries. The Assistant Secretaries shall have the powers and duties prescribed by these By-Laws or assigned by the Secretary. In the absence or disability of the Secretary, they shall have all his or her powers and duties. SECTION 5.14. Certain Agreements. The Board of Directors shall have power to authorize or direct the proper officers of the Corporation, on behalf of the Corporation, to enter into valid and binding agreements in respect of employment, incentive or deferred compensation, stock options, and similar or related matters, notwithstanding the fact that a person with whom the Corporation so contracts may be a member of its Board of Directors. Any such agreement may validly and lawfully bind the Corporation for a term of more than one year, in accordance with its terms, notwithstanding the fact that one of the elements of any such agreement may involve the employment by the Corporation of an officer, as such, for such term. ARTICLE 6 CONDUCT OF BUSINESS SECTION 6.1. Contracts; Loans. The Board of Directors, except as in these By-Laws otherwise provided, may authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. No loan shall be contracted on behalf of the Corporation and no negotiable paper shall be issued in its name, unless authorized by the Board of Directors. SECTION 6.2. Checks. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, employee or employees, of the Corporation as shall from time to time be determined in accordance with authorization of the Board of Directors. SECTION 6.3. Banking. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may from time to time designate, or as may be designated by any officer or officers of the Corporation to whom such power may be delegated by the Board, and for the purpose of such deposit the officers and employees who have been authorized to do so in accordance with the determinations of the Board may endorse, assign and deliver checks, drafts, and other orders for the payment of money which are payable to the order of the Corporation. 15 16 SECTION 6.4. Voting of Stock. Except as otherwise provided in these By-Laws or in the Articles of Incorporation, and unless otherwise provided by resolution of the Board of Directors, the Chairman or any other officer elected by the Board of Directors may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation to cast the votes which the Corporation may be entitled to cast as a shareholder or otherwise in any other corporation any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation, or to consent in writing to any action by such other corporation, and may instruct the person or persons so appointed as to the manner of casting such vote or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises. ARTICLE 7 SHARE CERTIFICATES AND THEIR TRANSFER SECTION 7.1. Share Certificates. Certificates for shares of the Corporation shall be in such form as shall be approved by the Board of Directors and shall be signed by the Chairman, the Vice Chairman or the President, and by the Secretary or any Assistant Secretary, and shall not be valid unless so signed. Such certificates shall be appropriately numbered in order of issue, by class and series, and contain the name of the registered holder, the number of shares and the date of issue. If such certificates are countersigned (a) by a transfer agent other than the Corporation or its employee, or (b) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he, she or it were such officer, transfer agent, or registrar at the date of issue. The Board of Directors may by resolution or resolutions provide that some or all of any or all classes or series of the shares of stock of the Corporation shall be uncertificated shares. Notwithstanding the preceding sentence, every holder of uncertificated shares, upon request, shall be entitled to receive from the Corporation a certificate representing the number of shares registered in such shareholder's name on the books of the Corporation. During any period when more than one class of shares of the Corporation is authorized, there shall be set forth on the face or back of certificates issued to represent 16 17 each class or series of shares, a statement that the Corporation will furnish without charge to each shareholder who so requests, the designation, preferences and relative, participating, optional or other special rights of each class of shares or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. SECTION 7.2. Transfer of Shares. Upon surrender to the Corporation or a transfer agent of the Corporation by the holder of record or by such person's attorney or other duly constituted representative of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, as the Corporation may reasonably require, it shall be the duty of the Corporation and such transfer agent to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction on the books of the Corporation. No certificate shall be issued in exchange for any certificate until the former certificate for the same number of shares of the same class and series shall have been surrendered and canceled, except as provided in Section 7.4. SECTION 7.3. Regulations. The Board of Directors shall have authority to make rules and regulations concerning the issue, transfer and registration of certificates for shares of the Corporation and concerning the registration of pledges of uncertificated shares. SECTION 7.4. Lost, Stolen and Destroyed Certificates. The Corporation may issue a new certificate or certificates for shares or may register uncertificated shares, if then authorized by the Board of Directors, in place of any issued certificate alleged to have been lost, stolen or destroyed upon such terms and conditions as the Board of Directors may prescribe. SECTION 7.5. Record Ownership; Registered Shareholders. A record of the name and address of each holder of the shares of the Corporation, the number of shares held by such shareholder, the number or numbers of any share certificate or certificates issued to such shareholder and the number of shares represented thereby, and the date of issuance of the shares held by such shareholder shall be made on the Corporation's books. The Corporation shall be entitled to treat the holder of record (according to the books of the Corporation) of any share or shares (including any holder registered in a book-entry or direct registration system maintained by the Corporation or a transfer agent or a registrar designated by the Board of Directors) as the holder in fact thereof and owner for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not the Corporation shall have express or other notice thereof, except as expressly provided by applicable law. SECTION 7.6. Transfer Agents and Registrars. The Board of Directors may from time to time appoint a transfer agent and a registrar in one or more cities, may require all certificates evidencing shares of the Corporation to bear the signatures of a transfer agent and a registrar, may provide that such certificates shall be transferable in 17 18 more than one city, and may provide for the functions of transfer agent and registrar to be combined in one agency. ARTICLE 8 INDEMNIFICATION SECTION 8.1. Litigation Brought By Third Parties. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, formal or informal (other than an action by or in the right of the Corporation) (an "Action") by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation (a "Corporate Person"), or is or was serving at the request of the Corporation as a director, officer, employee, agent, partner, trustee or member or in another authorized capacity (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this Section 8.1) (collectively, an "Authorized Capacity") of or for another corporation, unincorporated association, business trust, estate, partnership, joint venture, individual, trust, employee benefit plan, or other legal entity, whether or not organized or formed for profit (collectively, "Another Entity"), against expenses (including attorneys' fees), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such Action ("Expenses") if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any Action by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe his or her conduct was unlawful. SECTION 8.2. Litigation by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any Action by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a Corporate Person, or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity against Expenses actually and reasonably incurred by him or her in connection with that defense or settlement of such Action if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or willful misconduct in the performance of his or her duty to the Corporation unless and only to the extent that a court of equity or the court in which such Action was pending shall determine upon application that, despite the adjudication of liability but in view of all the 18 19 circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court of equity or other court shall deem proper. SECTION 8.3. Successful Defense. To the extent that a person who is or was a Corporate Person or serving at the request of the Corporation in an Authorized Capacity of or for Another Entity has been successful on the merits or otherwise in defense of any Action, referred to in Section 8.1 and 8.2 of this Article, or in defense of any claim, issue or matter therein, he or she shall be indemnified against Expenses actually and reasonably incurred by or on behalf of him or her in connection therewith. If any such person is not wholly successful in any such Action but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters therein, the Corporation shall indemnify such person against all Expenses actually and reasonably incurred by or on behalf of such person in connection with each claim, issue or matter that is successfully resolved. For purposes of this Section 8.3 and without limitation, the termination of any claim, issue or matter by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. Notwithstanding any other provision of this section, to the extent any person is a witness in, but not a party to, any Action, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a Corporate Person or serving at the request of the Corporation in an Authorized Capacity of or for Another Entity, he or she shall be indemnified against all Expenses actually and reasonably incurred by or on behalf of him or her in connection therewith. SECTION 8.4. Determination of Conduct. (a) Any indemnification under Section 8.1 or 8.2 of this Article (unless ordered by a court) shall be made by the Corporation only upon a determination that indemnification of the person is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 8.1 or 8.2. Such determination shall be made (1) if a Change of Control (as hereinafter defined) shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of the Disinterested Directors (as hereinafter defined) or, if such a quorum cannot be obtained, by majority vote of a committee duly designated by the Board of Directors consisting solely of two (2) or more Disinterested Directors or (B) if there are no Disinterested Directors or, even if there are Disinterested Directors and a majority of such Disinterested Directors so directs, by (i) Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (ii) the shareholders of the Corporation, provided, however, that shares owned by or voted under the control of directors who are at the time not Disinterested Directors may not be voted on the determination; or (2) if a Change of Control shall have occurred, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, unless the claimant shall request that such determination be made by or at the direction of the Board of Directors, in which case it shall be made in accordance with clause (1) of this sentence. Any claimant shall be entitled to be 19 20 indemnified against the Expenses actually and reasonably incurred by such claimant in cooperating with the person or entity making the determination of entitlement to indemnification (irrespective of the determination as to the claimant's entitlement to indemnification) and, to the extent successful, in connection with any litigation or arbitration with respect to such claim or the enforcement thereof. (b) If a Change of Control shall not have occurred, or if a Change of Control shall have occurred and a director, officer, employee or agent requests pursuant to clause (2) of the second sentence in Section 8.4(a) that the determination whether the claimant is entitled to indemnification be made by or at the direction of the Board of Directors, the claimant shall be conclusively presumed to have been determined pursuant to Section 8.4(a) to be entitled to indemnification if (1)(a) within fifteen days after the next regularly scheduled meeting of the Board of Directors following receipt by the Corporation of the request therefor, the Board of Directors shall not have resolved by majority vote of the Disinterested Directors to submit such determination to (i) Independent Counsel for its determination or (ii) the shareholders for their determination at the next annual meeting, or any special meeting that may be held earlier, after such receipt, and (b) within sixty days after receipt by the Corporation of the request therefor (or within ninety days after such receipt if the Board of Directors in good faith determines that additional time is required by it for the determination and, prior to expiration of such sixty-day period, notifies the claimant thereof), the Board of Directors shall not have made the determination by a majority vote of the Disinterested Directors, or (2) after a resolution of the Board of Directors, timely made pursuant to clause (1)(a)(ii) above, to submit the determination to the shareholders, the shareholders meeting at which the determination is to be made shall not have been held on or before the date prescribed (or on or before a later date, not to exceed sixty days beyond the original date, to which such meeting may have been postponed or adjourned on good cause by the Board of Directors acting in good faith); provided, however, that this sentence shall not apply if the claimant has misstated or failed to state a material fact in connection with his or her request for indemnification. Such presumed determination that a claimant is entitled to indemnification shall be deemed to have been made (I) at the end of the sixty-day or ninety-day period (as the case may be) referred to in clause (1)(b) of the immediately preceding sentence or (II) if the Board of Directors has resolved on a timely basis to submit the determination to the shareholders, on the last date within the period prescribed by law for holding such shareholders meeting (or a postponement or adjournment thereof as permitted above). SECTION 8.5. Advance Payment. Expenses incurred in defending an Action shall be paid by the Corporation in advance of the final disposition of such Action to a director or officer, promptly after receipt of a request therefor stating in reasonable detail the expenses incurred, and to an employee or agent as authorized by the Board of Directors; provided that in each case (a) the Corporation shall have received an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation hereunder, (b) the indemnitee furnishes the Corporation a written affirmation of his or her good faith belief that he or she has satisfied the standard 20 21 of conduct in Section 8.1 or 8.2 and (c) a determination is made by those making the decision pursuant to Section 8.4 that the facts then known would not preclude indemnification under these By-Laws. SECTION 8.6. Procedures for Determination. The Board of Directors shall establish reasonable procedures for the submission of claims for indemnification hereunder, determination of the entitlement of any person thereto and review of any such determination. Such procedures shall be set forth in an appendix to these By-Laws and shall be deemed for all purposes to be a part hereof. SECTION 8.7. By-Law Not Exclusive. The indemnification provided by this Article 8 shall not be deemed exclusive of any other rights to which any person may be entitled under any by-law, agreement, vote of shareholders or Disinterested Directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, agent or participant and shall inure to the benefit of the heirs, executors and administrators of such a person. Notwithstanding any amendment, alteration or repeal of this section or any of its provisions, or of any of the procedures established by the Board of Directors pursuant to Section 8.6, any person who is or was a Corporate Person or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity shall be entitled to indemnification in accordance with the provisions hereof and thereof with respect to any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law. SECTION 8.8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a Corporate Person or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article or the Business Corporation Law of the State of Indiana. SECTION 8.9. Effect of Invalidity. The invalidity or unenforceability of any provision of this Article 8 shall not affect the validity or enforceability of the remaining provisions of this Article 8. SECTION 8.10. Definitions. For purposes of this Article 8: (a) "Change of Control" means a change of control of the Corporation at any time after the effective time of the merger of Arvin Industries, Inc. with and into the Corporation of a nature that would be required to be reported in a proxy statement pursuant to Section 14(a) of the Exchange Act or in a Form 8-K pursuant to Section 13 of the Exchange Act (or in any similar form or schedule under either of those provisions or any successor provision), whether or not the Corporation is then subject to such reporting requirement; provided, however, that, without limitation, a Change of Control shall be 21 22 deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) the Corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors immediately thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any director whose election became effective prior to or at the time of the merger of Arvin Industries, Inc. with and into the Corporation and any new director whose election or nomination for election by the Corporation's shareholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors. (b) "the Corporation" shall include, in addition to the surviving or resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify a director, officer, employee or agent of such constituent corporation, or any director, officer, employee or agent of such constituent corporation who is or was serving at the request of such constituent corporation as a director, officer, employee or agent of Another Entity shall stand in the same position under the provisions of this Article 8 with respect to the surviving or resulting corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. (c) "Disinterested Director" means a director of the Corporation who is not and was not a party to an action, suit or proceeding in respect of which indemnification is sought by a director, officer, employee or agent. (d) "Independent Counsel" means a law firm, or a member of a law firm, that (i) is experienced in matters of corporation law; (ii) neither presently is, nor in the past five years has been, retained to represent the Corporation, the director, officer, employee or agent claiming indemnification or any other party to the Action giving rise to a claim for indemnification under this section, in any matter material to the Corporation, the claimant or any such other party; and (iii) would not, under applicable standards of professional conduct then prevailing, have a conflict of interest in representing either the Corporation or such director, officer, employee or agent in an action to determine the Corporation's or such person's rights under this Article 8. SECTION 8.11. Actions Against the Corporation. No indemnification shall be payable to an officer, director, employee or agent pursuant to this Article 8 with respect to 22 23 any action against the Corporation commenced by such officer, director, employee or agent unless the Board of Directors shall have authorized the commencement thereof or unless and to the extent that this Article 8 or the procedures established pursuant to Section 8.6 shall specifically provide for indemnification of expenses relating to the enforcement of rights under this Article 8 and such procedures. SECTION 8.12. Change in Law. Notwithstanding the foregoing provisions of Article 8, the Corporation shall indemnify any person who is or was a Corporate Person or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity to the full extent permitted by the Act or by any other applicable law, as may from time to time be in effect. ARTICLE 9 GENERAL SECTION 9.1. Dividends. Subject to any provisions of any applicable statute or of the Articles of Incorporation, dividends may be declared upon the capital stock of the Corporation by the Board of Directors at any regular or special meeting thereof; and such dividends may be paid in cash, property or shares of the Corporation. SECTION 9.2. Fiscal Year. The fiscal year of the Corporation shall be the fifty-two or fifty-three week period beginning on the Monday following the Sunday closest to the last day of September of each year and ending on the Sunday closest to the last day of September of the following year. SECTION 9.3. Severability. If any provision of these By-Laws, or its application thereof to any person or circumstances, is held invalid, the remainder of these By-Laws and the application of such provision to other persons or circumstances shall not be affected thereby. SECTION 9.4. Amendments. These By-Laws may be amended, added to, rescinded or repealed only by an affirmative vote of at least a majority of the directors then in office at any meeting of the Board of Directors. SECTION 9.5. Control Shares. The terms "control shares" and "control share acquisition" used in this Section 9.5 shall have the meanings set forth in Section 23-1-42-1 et seq. of the Act. Control shares of the Corporation acquired in a control share acquisition shall have only such voting rights as are conferred by the Act. Control shares of the Corporation acquired in a control share acquisition with respect to which the acquiring person has not filed with the Corporation the statement required by the Act may, at any time during the period ending sixty days after the last acquisition of control shares by the acquiring person, be redeemed by the Corporation at 23 24 the fair value thereof pursuant to procedures authorized by a resolution of the Board of Directors. Such authority may be exercised generally or confined to specific instances. Control shares of the Corporation acquired in a control share acquisition with respect to which the acquiring person was not granted full voting rights by the shareholders as provided in the Act may, at any time after the shareholder vote required by the Act, be redeemed by the Corporation at the fair value thereof pursuant to procedures authorized by a resolution of the Board of Directors. Such authority may be exercised generally or confined to specific instances. 24 25 APPENDIX PROCEDURES FOR SUBMISSION AND DETERMINATION OF CLAIMS FOR INDEMNIFICATION PURSUANT TO ARTICLE 8 OF THE BY-LAWS. SECTION 1. Purpose. The Procedures for Submission and Determination of Claims for Indemnification Pursuant to Article 8 of the By-Laws (the "Procedures") are to implement the provisions of Article 8 of the By-Laws of the Corporation (the "By-Laws") in compliance with the requirement of Section 8.6 thereof. SECTION 2. Definitions. For purposes of these Procedures: (A) All terms that are defined in Article 8 of the By-Laws shall have the meanings ascribed to them therein when used in these Procedures unless otherwise defined herein. (B) "Expenses" include all reasonable attorneys' fees, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in, a Proceeding; and shall also include such retainers as counsel may reasonably require in advance of undertaking the representation of an indemnitee in a Proceeding. (C) "Indemnitee" includes any person who was or is, or is threatened to be made, a witness in or a party to any Proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under Article 8 of the By-Laws) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise. (D) "Proceeding" includes any action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee unless the Board of Directors shall have authorized the commencement thereof. 26 SECTION 3. Submission and Determination of Claims. (A) To obtain indemnification or advancement of Expenses under Article 8 of the By-Laws, an Indemnitee shall submit to the Secretary of the Corporation a written request therefor, including therein or therewith such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to permit a determination as to whether and what extent the Indemnitee is entitled to indemnification or advancement of Expenses, as the case may be. The Secretary shall, promptly upon receipt of a request for indemnification, advise the Board of Directors thereof in writing if a determination in accordance with Section 8.4 of the By-Laws is required. (B) Upon written request by an Indemnitee for indemnification pursuant to Section 3(A) hereof, a determination with respect to the Indemnitee's entitlement thereto in the specific case, if required by the By-Laws, shall be made in accordance with Section 8.4 of the By-Laws, and, if it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within ten days after such determination. The Indemnitee shall cooperate with the person, persons or entity making such determination, with respect to the Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination. (C) If entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8.4 of the By-Laws, the Independent Counsel shall be selected as provided in this Section 3(C). The Independent Counsel shall be selected by the Board of Directors by majority vote of a quorum consisting of Disinterested Directors, or, if such a quorum cannot be obtained, by majority vote of a committee duly designated by the Board of Directors consisting solely of two or more Disinterested Directors, or, if such a quorum cannot be obtained and such a committee cannot be designated, by a majority vote of the full Board of Directors (in which selection Directors who are not Disinterested Directors may participate), and the Corporation shall give written notice to the Indemnitee advising the Indemnitee of the identity of the Independent Counsel so selected. The Indemnitee may, within seven days after such written notice of selection shall have been given, deliver to the Corporation a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Article 8 of the By-Laws, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within twenty days after the next regularly scheduled Board of Directors meeting following submission by the Indemnitee of a written request for indemnification pursuant to Section 3(A) 26 27 hereof, no Independent Counsel shall have been selected and not objected to, either the Corporation or the Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is favorably resolved or the person so appointed shall act as Independent Counsel under Section 8.4 of the By-Laws. The Corporation shall pay any and all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 8.4 of the By-Laws, and the Corporation shall pay all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) incident to the procedures of Section 8.4 of the By-Laws and this Section 3(C), regardless of the manner in which Independent Counsel was selected or appointed. Upon the delivery of its opinion pursuant to Article 8 of the By-Laws or, if earlier, the due commencement of any judicial proceeding or arbitration pursuant to Section 4(A)(3) of these Procedures, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). (D) If a Change of Control shall have occurred, in making a determination with respect to entitlement to indemnification under the By-Laws, the person, persons or entity making such determination shall presume that an Indemnitee is entitled to indemnification under the By-Laws if the Indemnitee has submitted a request for indemnification in accordance with Section 3(A) hereof, and the Corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. SECTION 4. Review and Enforcement of Determination. (A) In the event that (1) advancement of Expenses is not timely made pursuant to Section 8.5 of the By-Laws, (2) payment of indemnification is not made pursuant to Section 8.3 of the By-Laws within ten days after receipt by the Corporation of written request therefor, (3) a determination is made pursuant to Section 8.4 of the By-Laws that an Indemnitee is not entitled to indemnification under the By-Laws, (4) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8.4 of the By-Laws and such determination shall not have been made and delivered in a written opinion within ninety days after receipt by the Corporation of the written request for indemnification, or (5) payment of indemnification is not made within ten days after a determination has been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is entitled to indemnification or within ten days after such determination is deemed to have been made pursuant to Section 8.4 of the By-Laws, the Indemnitee shall be entitled to an adjudication in an appropriate court of 27 28 the State of Indiana, or in any other court of competent jurisdiction, of the Indemnitee's entitlement to such indemnification or advancement of Expenses. Alternatively, the Indemnitee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within one year following the date on which the Indemnitee first has the right to commence such proceeding pursuant to this Section 4(A). The Corporation shall not oppose the Indemnitee's right to seek any such adjudication or award in arbitration. (B) In the event that a determination shall have been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 4 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and the Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, the Corporation shall have the burden of proving in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. (C) If a determination shall have been made or deemed to have been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 4, absent (1) a misstatement or omission of a material fact in connection with the Indemnitee's request for indemnification, or (2) a prohibition of such indemnification under applicable law. (D) The Corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the procedures and presumptions of these Procedures are not valid, binding and enforceable, and shall stipulate in any such judicial proceeding or arbitration that the Corporation is bound by all the provisions of these Procedures. (E) In the event that an Indemnitee, pursuant to this Section 4, seeks to enforce the Indemnitee's rights under, or to recover damages for breach of, Article 8 of the By-Laws or these Procedures in a judicial proceeding or arbitration, the Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all expenses (of the types described in the definition of Expenses in Section 2 of these Procedures) actually and reasonably incurred in such judicial proceeding or arbitration, but only if the Indemnitee prevails therein. If it shall be determined in such judicial proceeding or arbitration that the Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the expenses incurred by the Indemnitee in connection with such judicial proceeding or arbitration shall be appropriately prorated. 28 29 SECTION 5. Amendments. These Procedures may be amended at any time and from time to time in the same manner as any By-Law of the Corporation in accordance with the Articles of Incorporation, the By-Laws and the Act; provided, however, that notwithstanding any amendment, alteration or repeal of these Procedures or any provision hereof, any Indemnitee shall be entitled to utilize these Procedures with respect to any claim for indemnification arising out of any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law. 29 EX-10.(A) 3 k62395ex10-a.txt RECEIVABLES SALE AGREEMENT 1 EXHIBIT 10(a) ================================================================================ RECEIVABLES SALE AGREEMENT DATED AS OF MARCH 30, 2001 AMONG ARVINMERITOR RECEIVABLES CORPORATION, AS THE SELLER, ARVINMERITOR, INC., as the Initial Collection Agent, ABN AMRO BANK N.V., AS THE AGENT, THE LIQUIDITY PROVIDERS FROM TIME TO TIME PARTY HERETO, ABN AMRO BANK N.V., AS THE ENHANCER, AND AMSTERDAM FUNDING CORPORATION ================================================================================ 2 TABLE OF CONTENTS
PAGE ARTICLE I PURCHASES FROM SELLER AND SETTLEMENTS..................................................1 Section 1.1. Sales..................................................................................1 Section 1.2. Interim Liquidations...................................................................3 Section 1.3. Selection of Discount Rates and Tranche Periods........................................3 Section 1.4. Fees and Other Costs and Expenses......................................................4 Section 1.5. Maintenance of Sold Interest; Deemed Collection........................................4 Section 1.6. Reduction in Commitments...............................................................5 Section 1.7. Repurchases............................................................................5 Section 1.8. Security Interest......................................................................6 ARTICLE II SALES TO AND FROM AMSTERDAM; ALLOCATIONS...............................................6 Section 2.1. Required Purchases from Amsterdam......................................................6 Section 2.2. Purchases by Amsterdam.................................................................7 Section 2.3. Allocations and Distributions..........................................................7 ARTICLE III ADMINISTRATION AND COLLECTIONS.........................................................9 Section 3.1. Appointment of Collection Agent........................................................9 Section 3.2. Duties of Collection Agent.............................................................9 Section 3.3. Reports...............................................................................10 Section 3.4. Lock-Box Arrangements.................................................................10 Section 3.5. Enforcement Rights....................................................................11 Section 3.6. Collection Agent Fee..................................................................11 Section 3.7. Responsibilities of the Seller........................................................11 Section 3.8. Actions by Seller.....................................................................12 Section 3.9. Indemnities by the Collection Agent...................................................12 ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................13 Section 4.1. Representations and Warranties of the Seller..........................................13 Section 4.2. Representations and Warrants of the Initial Collection Agent..........................15 ARTICLE V COVENANTS.............................................................................16 Section 5.1. Covenants of the Seller...............................................................16 Section 5.2. Covenants of the Initial Collection Agent.............................................21 ARTICLE VI INDEMNIFICATION.......................................................................24 Section 6.1. Indemnities by the Seller.............................................................24 Section 6.2. Increased Cost and Reduced Return.....................................................26 Section 6.3. Other Costs and Expenses..............................................................26
-i- 3 Section 6.4. Withholding Taxes.....................................................................27 Section 6.5. Payments and Allocations..............................................................27 ARTICLE VII CONDITIONS PRECEDENT..................................................................28 Section 7.1. Conditions to Closing.................................................................28 Section 7.2. Conditions to Each Purchase...........................................................28 ARTICLE VIII THE AGENT.............................................................................29 Section 8.1. Appointment and Authorization.........................................................29 Section 8.2. Delegation of Duties..................................................................29 Section 8.3. Exculpatory Provisions................................................................30 Section 8.4. Reliance by Agent.....................................................................30 Section 8.5. Assumed Payments......................................................................30 Section 8.6. Notice of Termination Events..........................................................30 Section 8.7. Non-Reliance on Agent and Other Purchasers............................................30 Section 8.8. Agent and Affiliates..................................................................31 Section 8.9. Indemnification.......................................................................31 Section 8.10. Successor Agent.......................................................................31 ARTICLE IX MISCELLANEOUS.........................................................................32 Section 9.1. Termination...........................................................................32 Section 9.2. Notices...............................................................................32 Section 9.3. Payments and Computations.............................................................32 Section 9.4. Sharing of Recoveries.................................................................33 Section 9.5. Right of Setoff.......................................................................33 Section 9.6. Amendments............................................................................33 Section 9.7. Waivers...............................................................................34 Section 9.8. Successors and Assigns; Participations; Assignments...................................34 Section 9.9. Waiver of Confidentiality.............................................................36 Section 9.10. Confidentiality of Agreement..........................................................36 Section 9.11. Agreement Not to Petition.............................................................37 Section 9.12. Excess Funds..........................................................................37 Section 9.13. No Recourse...........................................................................37 Section 9.14. Headings; Counterparts................................................................38 Section 9.15. Cumulative Rights and Severability....................................................38 Section 9.16. Governing Law; Submission to Jurisdiction.............................................38 Section 9.17. Waiver of Trial by Jury...............................................................38 Section 9.18. Intended Tax Characterization.........................................................38 Section 9.19. Entire Agreement......................................................................38
-ii- 4 SCHEDULES DESCRIPTION Schedule I Definitions Schedule II Liquidity Providers and Commitments EXHIBITS DESCRIPTION Exhibit A Form of Incremental Purchase Request Exhibit B Form of Notification of Assignment from the Liquidity Providers and the Enhancer to Amsterdam Exhibit C Form of Periodic Report Exhibit D Addresses and Names of Seller Exhibit E Lock-Boxes and Lock-Box Banks Exhibit F Form of Lock-Box Letter Exhibit G Form of Compliance Certificate Exhibit H Credit and Collection Policy -iii- 5 RECEIVABLES SALE AGREEMENT RECEIVABLES SALE AGREEMENT, dated as of March 30, 2001, among ArvinMeritor Receivables Corporation, a Delaware corporation (the "Seller"), ArvinMeritor, Inc., an Indiana corporation (the "Initial Collection Agent," and, together with any successor thereto, the "Collection Agent"), the liquidity providers party hereto (the "Liquidity Providers"), Amsterdam Funding Corporation, a Delaware corporation ("Amsterdam") and ABN AMRO Bank N.V., as provider of the Program LOC (the "Enhancer"), and ABN AMRO Bank N.V., as agent for the Purchasers (the "Agent"). Certain capitalized terms used herein, and certain rules of construction, are defined in Schedule I. The Liquidity Providers and the Commitments of all Committed Purchasers are listed on Schedule II. The parties hereto agree as follows: ARTICLE I PURCHASES FROM SELLER AND SETTLEMENTS Section 1.1. Sales. (a) The Sold Interest. Subject to the terms and conditions hereof, the Seller may, from time to time before the Liquidity Termination Date, sell to Amsterdam or, only if Amsterdam declines to make the applicable purchase, ratably to the Committed Purchasers an undivided percentage ownership interest in the Receivables, the Related Security and all related Collections. Any such purchase (a "Purchase") shall be made by each relevant Purchaser remitting funds to the Seller, through the Agent, pursuant to Section 1.1(c) or by the Collection Agent remitting Collections to the Seller pursuant to Section 1.1(d). The aggregate percentage ownership interest so acquired by a Purchaser in the Receivables, the Related Security and related Collections (its "Purchase Interest") shall equal at any time the sum of the following percentages: I + PRP --------------- ER where: I = the outstanding Investment of such Purchaser at such time; ER = the Eligible Receivables Balance at such time; and PRP = the Purchaser Reserve Percentage at such time. Except during a Liquidation Period for a Purchaser, such Purchaser's Purchase Interest will change whenever its Investment, its Purchaser Reserve Percentage or the Eligible Receivables Balance changes. During a Liquidation Period for a Purchaser its Purchase Interest shall remain constant at the percentage in effect as of the day immediately preceding the commencement of 6 the relevant Liquidation Period, except for redeterminations to reflect Investment acquired from or transferred to another Purchaser under the Transfer Agreement. The sum of all Purchasers' Purchase Interests at any time is referred to herein as the "Sold Interest," which at any time is the aggregate percentage ownership interest then held by the Purchasers in the Receivables, the Related Security and Collections. (b) Amsterdam Purchase Option and Other Purchasers' Commitments. Subject to Section 1.1(d) concerning Reinvestment Purchases, at no time will Amsterdam have any obligation to make a Purchase. Each Liquidity Provider and the Enhancer (together, the "Committed Purchasers" and each, a "Committed Purchaser") severally hereby agrees, subject to Section 7.2 and the other terms and conditions hereof, (including, in the case of an Incremental Purchase (as defined below), that Amsterdam has refused to make a requested Purchase), to make Purchases before the Liquidity Termination Date, based on its Ratable Share of each Purchase, to the extent its Investment would not thereby exceed its Commitment, the Aggregate Investment would not thereby exceed the Purchase Limit, and the Matured Aggregate Investment would not thereby exceed the Aggregate Commitments. Each Purchaser's first Purchase and each additional Purchase by such Purchaser not made from Collections pursuant to Section 1.1(d) is referred to herein as an "Incremental Purchase." Each Purchase made by a Purchaser with the proceeds of Collections in which it has a Purchase Interest, which does not increase the outstanding Investment of such Purchaser, is referred to herein as a "Reinvestment Purchase." (c) Incremental Purchases. In order to request an Incremental Purchase from a Purchaser, the Seller must provide to the Agent an irrevocable written request (including by telecopier or other facsimile communication) substantially in the form of Exhibit A, by 10:00 a.m. (Chicago time) three Business Days before the requested date (the "Purchase Date") of such Purchase, specifying the requested Purchase Date (which must be a Business Day) and the requested amount (the "Purchase Amount") of such Purchase, which must be in a minimum amount of $1,000,000 and multiples thereof (or, if less, an amount equal to the Maximum Incremental Purchase Amount). An Incremental Purchase may only be requested from Amsterdam unless Amsterdam, in its sole discretion, determines not to make such Incremental Purchase. If Amsterdam determines that it will not make the Incremental Purchase, it will give notice to the Agent two Business Days prior to the Purchase Date. The Agent will promptly give notice to the Seller of Amsterdam's election not to fund, in which case the Seller may request such Incremental Purchase from the Committed Purchasers. The Agent shall promptly notify the contents of any such request to each Purchaser from which the Purchase is requested. If Amsterdam determines, in its sole discretion, to make all or any portion of the requested Purchase, Amsterdam shall transfer to the Agent's Account the Purchase Amount (or portion thereof) on the requested Purchase Date. If Amsterdam determines, in its sole discretion, not to make all or any portion of a requested Purchase and the Seller requests the Incremental Purchase from the Committed Purchasers subject to Section 7.2 and the other terms and conditions hereof, each Committed Purchaser shall transfer its Ratable Share of that portion of the requested Purchase Amount not funded by Amsterdam into the Agent's Account by no later than 12:00 noon (Chicago time) on the Purchase Date (which, in the case of a Purchase that is to accrue Discount at the Eurodollar Rate, in no event will be earlier than three Business Days after such -2- 7 request is made to the Committed Purchasers). The Agent shall transfer to the Seller Account the proceeds of any Incremental Purchase delivered into the Agent's Account. (d) Reinvestment Purchases. Unless Amsterdam has provided to the Agent, the Seller, and the Collection Agent a notice (which notice has not been revoked by Amsterdam) that it no longer wishes to make Reinvestment Purchases (in which case Amsterdam's Reinvestment Purchases, but not those of the Committed Purchasers, shall cease), on each day before the Liquidity Termination Date that any Collections are received by the Collection Agent and no Interim Liquidation is in effect, a Purchaser's Purchase Interest in such Collections shall automatically be used to make a Reinvestment Purchase by such Purchaser, but only to the extent such Reinvestment Purchase would not cause the Purchaser's Investment to increase above the amount of such Investment at the start of the day plus any Incremental Purchases made by the Purchaser on that day. Amsterdam may revoke any notice provided under the first sentence of this Section 1.1(d) by notifying the Agent, the Seller, and the Collection Agent that it will make Reinvestment Purchases. Section 1.2. Interim Liquidations. (a) Optional. The Seller may at any time direct that Reinvestment Purchases cease and that an Interim Liquidation commence for all Purchasers by giving the Agent and the Collection Agent at least three Business Days' prior written (including telecopy or other facsimile communication) notice specifying the date on which the Interim Liquidation shall commence and, if desired, when such Interim Liquidation shall cease (identified as a specific date prior to the Liquidity Termination Date or as when the Aggregate Investment is reduced to a specified amount). If the Seller does not so specify the date on which an Interim Liquidation shall cease, it may cause such Interim Liquidation to cease at any time before the Liquidity Termination Date, subject to Section 1.2(b) below, by notifying the Agent and the Collection Agent in writing (including by telecopy or other facsimile communication) at least three Business Days before the date on which it desires such Interim Liquidation to cease. (b) Mandatory. If at any time before the Liquidity Termination Date any condition in Section 7.2 is not fulfilled, the Seller shall immediately notify the Agent and the Collection Agent, whereupon Reinvestment Purchases shall cease and an Interim Liquidation shall commence, which shall only cease upon the Seller confirming to the Agent that the conditions in Section 7.2 are fulfilled. Section 1.3. Selection of Discount Rates and Tranche Periods. (a) Amsterdam. Amsterdam's Investment will accrue Funding Charges for each day on which it is outstanding. On each Settlement Date the Seller shall pay to the Agent (for the benefit of Amsterdam) an aggregate amount equal to all accrued and unpaid Funding Charges in respect of such Investment for the immediately preceding Discount Period. The Agent shall allocate the Investment of Amsterdam to Tranche Periods in its sole discretion. (b) Committed Purchasers. All Investment of the Committed Purchasers shall be allocated to one or more Tranches reflecting the Discount Rates at which such Investment accrues Discount and the Tranche Periods for which such Discount Rates apply. In each request for an Incremental Purchase from the Committed Purchasers and three Business Days before the expiration of any Tranche Period applicable to any Committed Purchaser's Investment, the Seller -3- 8 may request the Tranche Period(s) to be applicable to such Investment and the Discount Rate(s) applicable thereto. All Investment of the Committed Purchasers may accrue Discount at either the Eurodollar Rate or the Prime Rate, in all cases as established for each Tranche Period applicable to such Investment. Any Investment of the Committed Purchasers not allocated to a Tranche Period shall be a Prime Tranche. During the pendency of a Termination Event, the Agent may reallocate any outstanding Investment of the Committed Purchasers to a Prime Tranche. All Discount accrued on the Investment of the Committed Purchasers during a Tranche Period shall be payable by the Seller on the last day of such Tranche Period or, for a LIBOR Tranche with a Tranche Period of more than three months, three months after the commencement, and on the last day, of such Tranche Period. If, by the time required by this Section 1.3(b), the Seller fails to select a Discount Rate or Tranche Period for any Investment of the Committed Purchasers, such amount of Investment shall automatically accrue Discount at the Prime Rate for a three Business Day Tranche Period. Any Investment purchased from Amsterdam pursuant to the Transfer Agreement shall accrue interest at the Prime Rate and have an initial Tranche Period of three Business Days. (c) If any Committed Purchaser determines (i) that maintenance of any LIBOR Tranche would violate any applicable law or regulation, (ii) that deposits of a type and maturity appropriate to match fund any of such Purchaser's LIBOR Tranches are not available or (iii) that the maintenance of any LIBOR Tranche will not adequately and fairly reflect the cost of such Purchaser of funding LIBOR Tranches, then the Agent, upon the direction of such Purchaser, shall suspend the availability of future LIBOR Tranches until such time as the Agent or applicable Committed Purchaser provides notice that the circumstances giving rise to such suspension no longer exist, and, if required by any applicable law or regulation, terminate any outstanding, LIBOR Tranche so affected. All Investment allocated to any such terminated LIBOR Tranche shall be reallocated to a Prime Tranche. Section 1.4. Fees and Other Costs and Expenses. (a) The Seller shall pay to the Agent (i) for the ratable benefit of the Liquidity Providers, based on their Ratable Shares, the fees set forth in the Pricing Letter and (ii) for the account of the Agent and the Enhancer, such amounts as agreed to with the Agent in the Fee Letter. (b) If (i) the amount of Amsterdam's Investment is reduced (other than as a result of a Put) on any date other than the last day of a CP Tranche, (ii) the amount of Investment allocated to any LIBOR Tranche is reduced on any day other than the last day of its Tranche Period or (iii) if a requested Incremental Purchase at the Eurodollar Rate does not take place on its scheduled Purchase Date, the Seller shall pay the Early Payment Fee to each Purchaser that had its Investment so reduced or scheduled Purchase not made. (c) Investment and Discount shall be payable solely from Collections and from amounts payable under Sections 1.5, 1.7 and 6.1 (to the extent amounts paid under Section 6.1 indemnify against reductions in or non-payment of Receivables). The Seller shall pay, as a full recourse obligation, all other amounts payable hereunder. Section 1.5. Maintenance of Sold Interest; Deemed Collection. (a) General. If at any time before the Liquidity Termination Date the Eligible Receivables Balance is less than the sum -4- 9 of the Aggregate Investment (or, if a Termination Event exists, the Matured Aggregate Investment) plus the Total Reserve the Seller shall immediately pay to the Agent an amount equal to such deficiency for application to reduce the Investments of the Purchasers ratably in accordance with the principal amount of their respective Investments, applied first to Prime Tranches and second to the other Tranches with the shortest remaining maturities unless otherwise specified by the Seller. Any amount so applied to reduce Amsterdam's Investment shall be deposited in the Special Transaction Subaccount. (b) Deemed Collections. If on any day the outstanding balance of a Receivable is reduced or cancelled as a result of any defective or rejected goods or services, any cash discount or adjustment (including any adjustment resulting from the application of any special refund or other discounts or any reconciliation), any setoff or credit (whether such claim or credit arises out of the same, a related, or an unrelated transaction) or other reason not arising from the financial inability of the Obligor to pay undisputed indebtedness, the Seller shall be deemed to have received on such day a Collection on such Receivable in the amount of such reduction or cancellation. If on any day any representation, warranty, covenant or other agreement of the Seller related to a Receivable is not true or is not satisfied, the Seller shall be deemed to have received on such day a Collection in the amount of the outstanding balance of such Receivable. All such Collections deemed received by the Seller under this Section 1.5(b) shall be remitted by the Seller to the Collection Agent in accordance with Section 5.1(i). (c) Adjustment to Sold Interest. At any time before the Liquidity Termination Date that the Seller is deemed to have received any Collection under Section 1.5(b) ("Deemed Collections") that derives from a Receivable that is otherwise reported as an Eligible Receivable, so long as no Liquidation Period then exists, the Seller may satisfy its obligations to deliver such amount to the Collection Agent by instead notifying the Agent that the Sold Interest should be recalculated by decreasing the Eligible Receivables Balance by the amount of such Deemed Collections, so long as such adjustment does not cause the Sold Interest to exceed 100%. (d) Payment Assumption. Unless an Obligor otherwise specifies or another application is required by contract or law, any payment received by the Seller from any Obligor shall be applied as a Collection of Receivables of such Obligor (starting with the oldest such Receivable) and remitted to the Collection Agent as such. Section 1.6. Reduction in Commitments. The Seller may, upon thirty days' notice to the Agent, reduce the Aggregate Commitment in increments of $1,000,000, so long as the Aggregate Commitment as so reduced is no less than the Matured Aggregate Investment. Each such reduction in the Aggregate Commitment shall reduce the Commitment of each Committed Purchaser in accordance with its Ratable Share and shall reduce the Purchase Limit so that the Aggregate Commitment remains at least 102% of the Purchase Limit and the Purchase Limit is no less than the outstanding Aggregate Investment. Section 1.7. Optional Repurchases. At any time that the Aggregate Investment is less than 10% of the Aggregate Commitment in effect on the date hereof, the Seller may, upon thirty days' notice to the Agent, repurchase the entire Sold Interest from the Purchasers at a price equal to the outstanding Matured Aggregate Investment and all other amounts then owed hereunder. -5- 10 Section 1.8. Security Interest. (a) The Seller hereby grants to the Agent, for its own benefit and for the ratable benefit of the Purchasers, a security interest in all Receivables, Related Security, Collections and Lock-Box Accounts to secure the payment of all amounts other than Investment owing hereunder and (to the extent of the Sold Interest) to secure the repayment of all Investment. (b) The Seller hereby assigns and otherwise transfers to the Agent (for the benefit of the Agent, each Purchaser and any other Person to whom any amount is owed hereunder), all of the Seller's right, title and interest in, to and under the Purchase Agreement. The Seller shall execute, file and record all financing statements, continuation statements and other documents required to perfect or protect such assignment. This assignment includes (a) all monies due and to become due to the Seller from the Originators under or in connection with the Purchase Agreement (including fees, expenses, costs, indemnities and damages for the breach of any obligation or representation related to such agreements) and (b) all rights, remedies, powers, privileges and claims of the Seller against the Originators under or in connection with the Purchase Agreement. All provisions of the Purchase Agreement shall inure to the benefit of, and may be relied upon by, the Agent, each Purchaser and each such other Person. At any time that a Termination Event has occurred and is continuing, the Agent shall have the sole right to enforce the Seller's rights and remedies under the Purchase Agreement to the same extent as the Seller could absent this assignment, but without any obligation on the part of the Agent, any Purchaser or any other such Person to perform any of the obligations of the Seller under the Purchase Agreement (or the promissory note executed thereunder). All amounts distributed to the Seller under the Purchase Agreement from Receivables sold to the Seller thereunder shall constitute Collections hereunder and shall be applied in accordance herewith. (c) This agreement shall be a security agreement for purposes of the UCC. Upon the occurrence of a Termination Event, the Agent shall have all rights and remedies provided under the UCC as in effect in all applicable jurisdictions. ARTICLE II SALES TO AND FROM AMSTERDAM; ALLOCATIONS Section 2.1. Required Purchases from Amsterdam. (a) Amsterdam may, at any time, and on the earlier of the Amsterdam Termination Date and ten (10) Business Days following the Agent and Amsterdam learning of a continuing Termination Event, Amsterdam shall, sell to the Committed Purchasers pursuant to the Transfer Agreement any percentage designated by Amsterdam of Amsterdam's Investment and its related Amsterdam Settlement (each, a "Put"). (b) Any portion of Amsterdam's Investment and related Amsterdam Settlement purchased by a Committed Purchaser shall be considered part of such Purchaser's Investment and related Amsterdam Settlement from the date of the relevant Put. Immediately upon any purchase by the Committed Purchasers of any portion of Amsterdam's Investment, the Seller shall pay to the Agent (for the ratable benefit of such Purchasers) an amount equal to the sum of (i) the Assigned Amsterdam Settlement, (ii) all unpaid Discount owed to Amsterdam (whether or -6- 11 not then due) to the end of each applicable Tranche Period to which any Investment being Put has been allocated, (iii) all accrued but unpaid fees (whether or not then due) payable to Amsterdam in connection herewith at the time of such purchase and (iv) all accrued and unpaid costs, expenses and indemnities due to Amsterdam from the Seller in connection herewith. (c) The proceeds from each Put received by Amsterdam (other than amounts described in clauses (iii) and (iv) of the last sentence of Section 2.1(b)), shall be transferred into the Special Transaction Subaccount and used solely to pay that portion of the outstanding commercial paper of Amsterdam issued to fund or maintain the Investment of Amsterdam so transferred. Until used to pay commercial paper, all proceeds of any Put pursuant to this Section shall be invested in Permitted Investments. All earnings on such Permitted Investments shall be promptly remitted to the Seller. Section 2.2. Purchases by Amsterdam. Amsterdam may at any time deliver to the Agent and each Committed Purchaser a notification of assignment in substantially the form of Exhibit B. If Amsterdam delivers such notice, each Committed Purchaser shall sell to Amsterdam and Amsterdam shall purchase in full from each Committed Purchaser, the Investment of the Committed Purchasers on the last day of the relevant Tranche Periods, at a purchase price equal to such Investment plus accrued and unpaid Discount thereon. Any sale from any Committed Purchaser to Amsterdam pursuant to this Section 2.2 shall be without recourse, representation or warranty except for the representation and warranty that the Investment sold by such Committed Purchaser is free and clear of any Adverse Claim created or granted by such Committed Purchaser and that such Purchaser has not suffered a Bankruptcy Event. Section 2.3. Allocations and Distributions. (a) Amsterdam Termination and Non-Reinvestment Periods. Before the Liquidity Termination Date (unless an Interim Liquidation is in effect), on each day during a period that Amsterdam has an outstanding Investment and is not making Reinvestment Purchases (as established under Section 1.1(d)) and at all times on and after the Amsterdam Termination Date, the Collection Agent (i) shall set aside and hold in trust solely for the benefit of Amsterdam (or deliver to the Agent, if so instructed pursuant to Section 3.2(a)) Amsterdam's Purchase Interest in all Collections received on such day and (ii) shall distribute on each Settlement Date to the Agent (for the benefit of Amsterdam) the amounts so set aside up to the amount of Amsterdam's Investment allocated to such Tranche Period and, to the extent not already paid in full, all Funding Charges thereon and all other amounts then due from the Seller in connection with such Investment. If any part of the Sold Interest in any Collections is applied to pay any amounts that are obligations of the Seller pursuant to Section 1.4(c) and after giving effect to such application the Sold Interest is greater than 100%, the Seller shall pay for distribution as part of the Sold Interest in Collections, to the Collection Agent the amount so applied to the extent necessary so that after giving effect to such payment the Sold Interest is no greater than 100%. (b) Liquidity Termination Date and Interim Liquidations. On each day during any Interim Liquidation and on each day on and after the Liquidity Termination Date the Collection Agent shall set aside and hold in trust solely for the account of the Agent, for the benefit of the Agent and the Purchasers, (or deliver to the Agent, if so instructed pursuant to Section 3.2(a)) the -7- 12 Sold Interest in all Collections received on such day and such Collections shall be allocated as follows: (i) first, to the Collection Agent until all amounts owed to the Collection Agent under the Agreement have been paid in full; (ii) second, only so long as (A) the sum of the Matured Value of Amsterdam's Investment, the Matured Value of each Liquidity Provider's Investment, and the Enhancer's Investment is less than (B) the product of the Sold Interest multiplied by the Eligible Receivables Balance, to the payment of all Discount then due but not already paid to the Enhancer; (iii) third, to Amsterdam and to the Liquidity Providers (ratably, based on the Matured Value of their respective Investments) until all Investment of, and Funding Charges with respect to Amsterdam and Discount with respect to the Liquidity Providers, as applicable, due but not already paid to, the Liquidity Providers and Amsterdam have been paid in full; (iv) fourth, to the Enhancer until all Investment of, and Discount due but not already paid to, the Enhancer has been paid in full; (v) fifth, to the Purchasers until all other amounts owed to the Purchasers have been paid in full; (vi) sixth, to the Agent until all amounts owed to the Agent have been paid in full; (vii) seventh, to any other Person (other than the Seller, the Collection Agent or an Originator) to whom any amounts are owed under the Transaction Documents until all such amounts have been paid in full; and (viii) eighth, to the Seller (or as otherwise required by applicable law). On the last day of each Tranche Period (unless otherwise instructed by the Agent pursuant to Section 3.2(a)), the Collection Agent shall deposit into the Agent's Account, from such set aside Collections, all amounts allocated to such Tranche Period and all Tranche Periods that ended before such date that are due in accordance with the priorities in clauses (ii)-(iv) above. No distributions shall be made to pay amounts under clauses (v)-(viii) until sufficient Collections have been set aside to pay all amounts described in clauses (iii) and (iv) that may become payable for all outstanding Tranche Periods. All distributions by the Agent shall be made ratably within each priority level in accordance with the respective amounts then due each Person included in such level unless otherwise agreed by the Agent and all Purchasers. If any part of the Sold Interest in any Collections is applied to pay any amounts payable hereunder that are obligations of the Seller pursuant to Section 1.4(c) and after giving effect to such application the Sold Interest is greater than 100%, the Seller shall pay for distribution in respect of each applicable Purchaser's Investment as part of the Sold Interest in Collections, to the Collection -8- 13 Agent the amount so applied to the extent necessary so that after giving effect to such payment the Sold Interest is no greater than 100%. ARTICLE III ADMINISTRATION AND COLLECTIONS Section 3.1. Appointment of Collection Agent. (a) The servicing, administering and collecting of the Receivables shall be conducted by a Person (the "Collection Agent") designated to so act on behalf of the Purchasers under this Article III. As the Initial Collection Agent, the Parent is hereby designated as, and agrees to perform the duties and obligations of, the Collection Agent. The Initial Collection Agent acknowledges that the Agent and each Purchaser have relied on the Initial Collection Agent's agreement to act as Collection Agent (and the agreement of any of the sub-collection agents to so act) in making the decision to execute and deliver this Agreement and agrees that it will not voluntarily resign as Collection Agent nor permit any sub-collection agent to voluntarily resign as a sub-collection agent. At any time after the occurrence and during the continuance of a Termination Event, the Agent may designate a new Collection Agent to succeed the Initial Collection Agent (or any successor Collection Agent). (b) The Initial Collection Agent may, and if requested by the Agent shall, delegate its duties and obligations as Collection Agent to an Affiliate of the Initial Collection Agent (acting as a sub-collection agent). The Initial Collection Agent shall delegate certain duties with respect to Receivables originated by such respective Originator to that respective Originator pursuant to the terms of the Letter Agreement. Notwithstanding such delegation, the Initial Collection Agent shall remain primarily liable for the performance of the duties and obligations so delegated, and the Agent and each Purchaser shall have the right to look solely to the Initial Collection Agent for such performance. The Agent may at any time remove or replace any sub-collection agent. (c) If replaced, the Collection Agent agrees it will terminate, and will cause each existing sub-collection agent to terminate, its collection activities in a manner requested by the Agent to facilitate the transition to a new Collection Agent. The Collection Agent shall cooperate with and assist any new Collection Agent (including providing access to, and transferring, all Records and allowing (to the extent permitted by applicable law and contract) the new Collection Agent to use all licenses, hardware or software necessary or desirable to collect the Receivables). The Initial Collection Agent irrevocably agrees to act (if requested to do so) as the data-processing agent for any new Collection Agent (in substantially the same manner as the Initial Collection Agent conducted such data-processing functions while it acted as the Collection Agent). Section 3.2. Duties of Collection Agent. (a) The Collection Agent shall take, or cause to be taken, all action necessary or advisable to collect each Receivable in accordance with this Agreement, the Credit and Collection Policy and all applicable laws, rules and regulations using the skill and attention the Collection Agent exercises in collecting other receivables or obligations owed solely to it. The Collection Agent shall, in accordance herewith, set aside all -9- 14 Collections to which a Purchaser is entitled and pay from such Collections all Funding Charges and Discount when due. If so instructed by the Agent, the Collection Agent shall transfer to the Agent the amount of Collections to which the Agent and the Purchasers are entitled by the Business Day following receipt. Each party hereto hereby appoints the Collection Agent to enforce such Person's rights and interests in the Receivables, but (notwithstanding any other provision in any Transaction Document) the Agent shall at all times have the sole right to direct the Collection Agent to commence or settle any legal action to enforce collection of any Receivable. (b) If no Termination Event exists and the Collection Agent determines that such action is appropriate in order to maximize the Collections, the Collection Agent may, in accordance with the applicable Credit and Collection Policy, extend the maturity of any Receivable, and extend the maturity or adjust the outstanding balance of any Defaulted Receivables as the Collection Agent may determine to be appropriate to maximize collections thereof; provided, however, that if a Termination Event has occurred the Collection Agent may make such extension or adjustment only upon written approval of the Agent. Any such extension or adjustment shall not alter the status of a Receivable as a Defaulted Receivable, affect the computation of the Delinquency Ratio or limit any rights of the Agent or the Purchasers hereunder. If a Termination Event exists, the Collection Agent may make such extensions or adjustments only with the prior consent of the Instructing Group. (c) The Collection Agent shall turn over to the Seller (i) any percentage of Collections in excess of the Sold Interest, less all reasonable costs and expenses of the Collection Agent for servicing, collecting and administering the Receivables and (ii) subject to Section 1.5(d), the collections and records for any indebtedness owed to the Seller that is not a Receivable. The Collection Agent shall have no obligation to remit any such funds or records to the Seller until the Collection Agent receives evidence (satisfactory to the Agent) that the Seller is entitled to such items. The Collection Agent has no obligations concerning indebtedness that is not a Receivable other than to deliver the collections and records for such indebtedness to the Seller when required by this Section 3.2(c). Section 3.3. Reports. On or before the twentieth day of each month, and at such other times covering such other periods as is requested by the Agent or the Instructing Group (which such other periods shall not be shorter than a calendar month if no Termination Event has occurred), the Collection Agent shall deliver to the Agent a report reflecting information as of the close of business of the Collection Agent for the immediately preceding calendar month or such other preceding period as is requested (each a "Periodic Report"), containing the information described on Exhibit C (with such modifications or additional information as requested by the Agent or the Instructing Group). Section 3.4. Lock-Box Arrangements. The Agent is hereby authorized to give notice at any time to any or all Lock-Box Banks that the Agent is exercising its rights under the Lock-Box Letters and to take all actions permitted under the Lock-Box Letters. The Seller agrees to take any action requested by the Agent to facilitate the foregoing. After the Agent takes any such action under the Lock-Box Letters, the Seller shall immediately deliver to the Agent any Collections received by the Seller. If the Agent takes control of any Lock-Box Account, the -10- 15 Agent shall distribute Collections it receives in accordance herewith and shall deliver to the Collection Agent, for distribution under Section 3.2, all other amounts it receives from such Lock-Box Account. Section 3.5. Enforcement Rights. (a) The Agent may, at any time, direct the Obligors and the Lock-Box Banks to make all payments on the Receivables directly to the Agent or its designee. The Agent may, and the Seller shall at the Agent's request, withhold the identity of the Purchasers from the Obligors and Lock-Box Banks. Upon the Agent's request and only after a Potential Termination Event, the Seller (at the Seller's expense) shall (i) give notice to each Obligor of the Purchaser's ownership of the Sold Interest and direct that payments on Receivables be made directly to the Agent or its designee, (ii) assemble for the Agent all Records and collateral security for the Receivables and the Related Security and transfer to the Agent (or its designee), or (to the extent permitted by applicable law and contract) license to the Agent (or its designee) the use of, all software useful to collect the Receivables and (iii) segregate in a manner acceptable to the Agent all Collections the Seller receives and, promptly upon receipt, remit such Collections in the form received, duly endorsed or with duly executed instruments of transfer, to the Agent or its designee. (b) The Seller hereby irrevocably appoints the Agent as its attorney-in-fact coupled with an interest, with full power of substitution and with full authority in the place of the Seller, to take any and all steps deemed desirable by the Agent, in the name and on behalf of the Seller to (i) collect any amounts due under any Receivable, including endorsing the name of the Seller on checks and other instruments representing Collections and enforcing such Receivables and the Related Security, and (ii) exercise any and all of the Seller's rights and remedies under the Purchase Agreement. The Agent's powers under this Section 3.5(b) shall not subject the Agent to any liability if any action taken by it proves to be inadequate or invalid, nor shall such powers confer any obligation whatsoever upon the Agent. (c) Neither the Agent nor any Purchaser shall have any obligation to take or consent to any action to realize upon any Receivable or Related Security or to enforce any rights or remedies related thereto. Section 3.6. Collection Agent Fee. On or before the twentieth day of each calendar month, the Seller shall pay to the Collection Agent a fee for the immediately preceding calendar month as compensation for its services (the "Collection Agent Fee") equal to (a) at all times the Initial Collection Agent or an Affiliate of the Initial Collection Agent is the Collection Agent, the Seller Servicing Fee, the sufficiency of which is hereby acknowledged, and (b) at all times any other Person is the Collection Agent, the Outside Servicing Fee. The Agent may, with the consent of the Instructing Group, pay the Collection Agent Fee to the Collection Agent from the Sold Interest in Collections. The Seller shall be obligated to reimburse any such payment to the extent required by Section 1.5 or 2.3. Section 3.7. Responsibilities of the Seller. The Seller shall pay when due all Taxes payable in connection with the Receivables and the Related Security or their creation or satisfaction. The Seller shall cause each Originator to perform all of its obligations under agreements related to the Receivables and the Related Security to the same extent as if interests -11- 16 in the Receivables and the Related Security had not been transferred hereunder or under the Purchase Agreement. The Agent's or any Purchaser's exercise of any rights hereunder shall not relieve the Seller or an Originator from such obligations. Neither the Agent nor any Purchaser shall have any obligation to perform any obligation of the Seller or an Originator or any other obligation or liability in connection with the Receivables or the Related Security. Section 3.8. Actions by Seller. If any goods related to a Receivable are repossessed, the Seller agrees to resell, or to have the related Originator or another Affiliate resell, such goods in a commercially reasonable manner for the account of the Agent and remit, or have remitted, to the Agent the Purchasers' share in the gross sale proceeds thereof net of any out-of-pocket expenses and any equity of redemption of the Obligor thereon. Any such moneys collected by the Seller or the related Originator or other Affiliate of the Seller pursuant to this Section 3.8 shall be segregated and held in trust for the Agent and remitted to the Agent's Account within one Business Day of receipt as part of the Sold Interest in Collections for application as provided herein. Section 3.9. Indemnities by the Collection Agent. Without limiting any other rights any Person may have hereunder or under applicable law, the Collection Agent hereby indemnifies and holds harmless the Agent and each Purchaser and their respective officers, directors, agents and employees (each a "Collection Agent Indemnified Party") from and against any and all damages, losses, claims, liabilities, penalties, Taxes, costs and expenses (including attorneys' fees and court costs) (all of the foregoing collectively, the "Collection Agent Indemnified Losses") at any time imposed on or incurred by any Collection Agent Indemnified Party arising out of or otherwise relating to: (i) any representation or warranty made by, on behalf of or in respect of, the Collection Agent in this Agreement, any other Transaction Document, any Periodic Report or any other information or report delivered by the Collection Agent pursuant hereto, which shall have been false or incorrect in any material respect when made; (ii) the failure by the Collection Agent to comply with any applicable law, rule or regulation related to any Receivable or the Related Security; (iii) any loss of a perfected security interest (or in the priority of such security interest) as a result of any commingling by the Collection Agent of funds to which the Agent or any Purchaser is entitled hereunder with any other funds; (iv) the imposition of any Adverse Claim with respect to any Receivable, Related Security or Lock-Box Account as a result of any action taken by the Collection Agent; or (v) any failure of the Collection Agent to perform its duties or obligations in accordance with the provisions of this Agreement (including, without limitation, compliance with the Credit and Collection Policy) or any other Transaction Document to which the Collection Agent is a party; -12- 17 whether arising by reason of the acts to be performed by the Collection Agent hereunder or otherwise, excluding only Collection Agent Indemnified Losses to the extent (a) a final judgment of a court of competent jurisdiction determined that such Collection Agent Indemnified Losses resulted from gross negligence or willful misconduct of the Collection Agent Indemnified Party seeking indemnification, (b) solely due to the credit risk of the Obligor and for which reimbursement would constitute recourse to the Collection Agent for uncollected or uncollectible Receivables, or (c) such Collection Agent Indemnified Losses include Taxes on, or measured by, the overall net income of the Agent or any Purchaser computed in accordance with the Intended Tax Characterization; provided, however, that nothing contained in this sentence shall limit the liability of the Collection Agent or limit the recourse of the Agent and each Purchaser to the Collection Agent for any amounts otherwise specifically provided to be paid by the Collection Agent hereunder. ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.1. Representations and Warranties of the Seller. The Seller represents and warrants to the Agent and each Purchaser that: (a) Corporate Existence and Power. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all corporate power and authority and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted, except where failure to obtain such license, authorization, consent or approval would not have a material adverse effect on (i) its ability to perform its obligations under, or the enforceability of, any Transaction Document, (ii) its business or financial condition, (iii) the interests of the Agent or any Purchaser under any Transaction Document or (iv) the enforceability or collectibility of any material portion of the Receivables. (b) Corporate Authorization and No Contravention. The execution, delivery and performance by the Seller of each Transaction Document to which it is a party (i) are within its corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene or constitute a default under (A) any applicable law, rule or regulation, (B) its charter or by-laws or (C) any agreement, order or other instrument to which it is a party or its property is subject and (iv) will not result in any Adverse Claim on any Receivable, the Related Security or Collections (other than the Sold Interest) or give cause for the acceleration of any indebtedness of the Seller. (c) No Consent Required. No approval, authorization or other action by, or filings with, any Governmental Authority or other Person is required in connection with the execution, delivery and performance by the Seller of any Transaction Document or any transaction contemplated thereby. -13- 18 (d) Binding Effect. Each Transaction Document to which the Seller is a party constitutes the legal, valid and binding obligation of the Seller enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditor's rights generally. (e) Perfection of Ownership Interest. The Seller owns the Receivables free of any Adverse Claim other than the interests of the Agent and the Purchasers therein that are created hereby, and each Purchaser shall at all times have a valid undivided percentage ownership interest, which shall be a first priority perfected security interest for purposes of Article 9 of the applicable Uniform Commercial Code, in the Receivables and Collections to the extent of its Purchase Interest then in effect. (f) Accuracy of Information. All written information furnished by the Seller to the Agent or any Purchaser in connection with any Transaction Document, or any transaction contemplated thereby, is true and accurate in all material respects as of the date of such information or the date furnished, as applicable (and is not incomplete by omitting any information necessary to prevent such information from being materially misleading as of the date of such information or the date furnished, as applicable). (g) No Actions, Suits. There are no actions, suits or other proceedings (including matters relating to environmental liability) pending or threatened against or affecting the Seller or any of its properties, that (i) if adversely determined (individually or in the aggregate), may have a material adverse effect on the financial condition of the Seller or on the collectibility of the Receivables or (ii) involve any Transaction Document or any transaction contemplated thereby. The Seller is not in default of any contractual obligation or in violation of any order, rule or regulation of any Governmental Authority, which default or violation may have a material adverse effect upon (i) the financial condition of the Seller or (ii) the collectibility of the Receivables. (h) No Material Adverse Change. Since the date of its formation there has been no material adverse change in the collectibility of the Receivables or the Seller's (i) financial condition, business, operations or prospects or (ii) ability to perform its obligations under any Transaction Document. (i) Accuracy of Exhibits; Lock-Box Arrangements. All information on Exhibits D-E (listing offices of the Seller and the Originators and where they maintain Records; and Lock-Boxes) is true and complete, subject to any changes permitted by, and notified to the Agent in accordance with, Article V. The Seller has not granted any interest in any Lock-Box or Lock-Box Account to any Person other than the Agent and, upon execution and delivery of the Lock-Box Agreements and delivery to a Lock-Box Bank of the related Lock-Box Letter, the Agent will have exclusive ownership and control of the Lock-Box Account at such Lock-Box Bank. (j) Sales by an Originator. Each sale by each Originator to the Seller of an interest in Receivables originated by such Originator and Collections thereof has been -14- 19 made in accordance with the terms of the Purchase Agreement, including the payment by the Seller to such Originator of the purchase price described in the Purchase Agreement. Each such sale has been made for "reasonably equivalent value" (as such term is used in Section 548 of the Bankruptcy Code) and not for or on account of "antecedent debt" (as such term is used in Section 547 of the Bankruptcy Code) owed by such Originator to the Seller. Section 4.2. Representations and Warrants of the Initial Collection Agent. The Initial Collection Agent represents and warrants to the Agent and each Purchaser that: (a) Corporate Existence and Power. The Initial Collection Agent is a corporation duly organized, validly existing and in good standing under the laws of the State of Indiana and has all corporate power and authority and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted, except where failure to obtain such license, authorization, consent or approval would not have a material adverse effect on (i) its ability to perform its obligations under, or the enforceability of, any Transaction Document, (ii) its business or financial condition, (iii) the interests of the Agent or any Purchaser under any Transaction Document or (iv) the enforceability or collectibility of any material portion of the Receivables. (b) Corporate Authorization and No Contravention. The execution, delivery and performance by the Initial Collection Agent of each Transaction Document to which it is a party (i) are within its corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene or constitute a default under (A) any applicable law, rule or regulation, (B) its charter or by-laws or (C) any agreement, order or other instrument to which it is a party or its property is subject and (iv) will not result in any Adverse Claim on any Receivable, the Related Security or Collections other than the Sold Interest) or give cause for the acceleration of any indebtedness of the Initial Collection Agent. (c) No Consent Required. No approval, authorization or other action by, or filings with, any Governmental Authority or other Person is required in connection with the execution, delivery and performance by the Initial Collection Agent of any Transaction Document or any transaction contemplated thereby. (d) Binding Effect. Each Transaction Document to which the Initial Collection Agent is a party constitutes the legal, valid and binding obligation of the Initial Collection Agent enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditor's rights generally. (e) Accuracy of Information. All written information furnished by the Initial Collection Agent to the Agent or any Purchaser in connection with any Transaction Document, or any transaction contemplated thereby, is true and accurate in all material respects as of the date of such information or the date furnished, as applicable (and is not -15- 20 incomplete by omitting any information necessary to prevent such information from being materially misleading as of the date of such information or the date furnished, as applicable). (f) No Actions, Suits. There are no actions, suits or other proceedings (including matters relating to environmental liability) pending or threatened against or affecting the Initial Collection Agent, or any of its properties, that (i) if adversely determined (individually or in the aggregate), is likely to have a material adverse effect on the financial condition of the Initial Collection Agent and its Subsidiaries, taken as whole, or on the collectibility of the Receivables or (ii) involve any Transaction Document or any transaction contemplated thereby. The Initial Collection Agent is not in default of any contractual obligation or in violation of any order, rule or regulation of any Governmental Authority, which default or violation is likely to have a material adverse effect upon (i) the financial condition of the Initial Collection Agent and its Subsidiaries, taken as whole, or (ii) the collectibility of the Receivables. (g) No Material Adverse Change. Since December 31, 2000, there has been no material adverse change in the collectibility of the Receivables or the Initial Collection Agent's (i) financial condition, business, operations or prospects other than as publicly disclosed prior to the date hereof or (ii) ability to perform its obligations under any Transaction Document. (h) Accuracy of Exhibits; Lock-Box Arrangements. All information on Exhibits D-E (listing offices of the Initial Collection Agent and the Originators and where they maintain Records; and Lock-Boxes) is true and complete, subject to any changes permitted by, and notified to the Agent in accordance with, Article V. ARTICLE V COVENANTS Section 5.1. Covenants of the Seller. The Seller hereby covenants and agrees to comply with the following covenants and agreements, unless the Agent (with the consent of the Instructing Group) shall otherwise consent: (a) Financial Reporting. The Seller will maintain a system of accounting established and administered in accordance with GAAP and will furnish to the Agent and each Purchaser: (i) Annual Financial Statements. Within 120 days after each fiscal year of the Seller copies of its annual balance sheet (and an annual profit and loss statement), certified by a Designated Financial Officer thereof, prepared on a consolidated basis in conformity with GAAP; -16- 21 (ii) Quarterly Financial Statements. Within 60 days after each (except the last) fiscal quarter of each fiscal year of the Seller, copies of its quarterly balance sheet (and a profit and loss statement) for the period from the beginning of the fiscal year to the close of such quarter), certified by a Designated Financial Officer and prepared in a manner consistent with the financial statements described in clause (i) of this Section 5.l(a); (iii) Officer's Certificate. Each time financial statements are furnished pursuant to clause (i) or (ii) of Section 5.1(a), a compliance certificate (in substantially the form of Exhibit G) signed by a Designated Financial Officer, dated the date of such financial statements; (iv) Public Reports. Promptly upon becoming available, a copy of each report or proxy statement filed by the Parent with the Securities and Exchange Commission or any securities exchange; and (v) Other Information. With reasonable promptness, such other information (including non-financial information) respecting the Receivables or the conditions and operations, financial or otherwise, of the Seller and any Seller Entity as the Agent from time to time reasonably may request in order to protect the interests of the Agent or Committed Purchasers under this Agreement. (b) Notices. As soon as possible and in any event within 5 Business Days of becoming actually aware of any of the following the Seller will notify the Agent and provide a description of: (i) Potential Termination Events. The occurrence of any Potential Termination Event; (ii) Downgrading. The downgrading, withdrawal or suspension of any rating by any rating agency of any indebtedness of any Special Obligor or of the Parent; or (iii) Further Information. Any other information that the Parent is required to deliver pursuant to the Credit Agreement at the same time the Parent delivers such information to the required parties pursuant to the Credit Agreement. If the Agent receives such a notice, the Agent shall promptly give notice thereof to each Purchaser and, until Amsterdam has no Investment after the Amsterdam Termination Date, to each CP Dealer and each Rating Agency. (c) Conduct of Business. The Seller will perform all actions necessary to remain duly incorporated, validly existing and in good standing in its jurisdiction of incorporation and to maintain all requisite authority to conduct its business in each jurisdiction in which it conducts business. -17- 22 (d) Compliance with Laws. The Seller will comply with all laws, regulations, judgments and other directions or orders imposed by any Governmental Authority to which it or any Receivable, any Related Security or Collection may be subject. (e) Furnishing Information and Inspection of Records. The Seller will furnish to the Agent and the Purchasers such information concerning the Receivables and the Related Security as the Agent or a Purchaser may request. The Seller will, and will cause each Originator to, permit, at any time during regular business hours upon reasonable notice to the Seller, the Agent or any Purchaser (or any representatives thereof) (i) to examine and make copies of all Records, (ii) to visit the offices and properties of the Seller and each Originator for the purpose of examining the Records and (iii) to discuss matters relating hereto with any of the Seller's or such Originator's officers, directors, employees or independent public accountants having knowledge of such matters. No more than once during any three calendar years or any time after the occurrence of a Termination Event, the Agent may (at the expense of the Seller) or at any time (at the expense of the Purchasers) have an independent public accounting firm conduct an audit of the Records or make test verifications of the Receivables and Collections. (f) Keeping Records. (i) The Seller will, and will cause each Originator to, have and maintain (A) administrative and operating procedures (including an ability to recreate Records if originals are destroyed), (B) adequate facilities, personnel and equipment and (C) all Records and other information necessary or advisable for collecting the Receivables (including Records adequate to permit the immediate identification of each new Receivable and all Collections of, and adjustments to, each existing Receivable). The Seller will give the Agent prior notice of any material change in such administrative and operating procedures. (ii) The Seller will, (A) at all times from and after the date hereof, clearly and conspicuously mark its computer and master data processing books and records with a legend describing the Agent's and the Purchasers' interest in the Receivables and the Collections and (B) upon the request of the Agent, so mark each contract relating to a Receivable and deliver to the Agent all such contracts (including all multiple originals of such contracts), with any appropriate endorsement or assignment, or segregate (from all other receivables then owned or being serviced by the Seller) the Receivables and all contracts relating to each Receivable and hold in trust and safely keep such contracts so legended in separate filing cabinets or other suitable containers at such locations as the Agent may specify. (g) Perfection. (i) The Seller will, and will cause each Originator to, at its expense, promptly execute and deliver all instruments and documents and take all action necessary or requested by the Agent (including the execution and filing of financing or continuation statements, amendments thereto or assignments thereof) to enable the Agent to exercise and enforce all its rights hereunder and to vest and maintain vested in the Agent a valid, first priority perfected security interest in the Receivables, the Collections, the Related Security, the Purchase Agreement, the Lock-Box Accounts and proceeds thereof free and clear of any Adverse Claim other than the Seller's interest therein (and a -18- 23 perfected ownership interest in the Receivables and Collections to the extent of the Sold Interest). The Agent will be permitted to sign and file any continuation statements, amendments thereto and assignments thereof without the Seller's signature, but shall provide prompt notice to the Seller of any such filing. (ii) The Seller will only change its name, identity or corporate structure or relocate its chief executive office or the Records following notice to the Agent and the delivery to the Agent of all financing statements, instruments and other documents (including direction letters) requested by the Agent. (iii) The Seller will at all times maintain its chief executive offices within a jurisdiction in the USA (other than in the states of Alabama, Florida, Maryland and Tennessee) in which Article 9 of the UCC is in effect. If the Seller or an Originator moves its chief executive office to a location that imposes Taxes, fees or other charges to perfect the Agent's and the Purchasers' interests hereunder or the Seller's interests under the Purchase Agreement, the Seller will pay all such amounts and any other costs and expenses incurred in order to maintain the enforceability of the Transaction Documents, the Sold Interest and the interests of the Agent and the Purchasers in the Receivables, the Related Security, Collections, Purchase Agreement and Lock-Box Accounts. (h) Performance of Duties. The Seller will perform its duties or obligations in accordance with the provisions of each of the Transaction Documents. The Seller (at its expense) will (i) fully and timely perform in all material respects all agreements required to be observed by it in connection with each Receivable, (ii) comply in all material respects with the Credit and Collection Policy, and (iii) refrain from any action that may impair the rights of the Agent or the Purchasers in the Receivables, the Related Security, Collections, Purchase Agreement or Lock-Box Accounts. (i) Payments on Receivables, Accounts. The Seller will, and will cause each Originator to, at all times instruct all Obligors to deliver payments on the Receivables (including Deemed Collections) to a Lock-Box or Lock-Box Account. If any such payments or other Collections are received by the Seller, it shall hold such payments in trust for the benefit of the Agent and the Purchasers and promptly (but in any event within two Business Days after receipt) remit such funds into a Lock-Box Account. The Seller will cause each Lock-Box Bank to comply with the terms of each applicable Lock-Box Letter. The Seller will not permit the funds of any Affiliate (other than AVM Inc. during the period from the date hereof to and including April 30, 2001) to be deposited into any Lock-Box Account. If such funds are nevertheless deposited into any Lock-Box Account, the Seller will promptly identify and separate such funds for segregation. The Seller will not, and will not permit any Collection Agent or other Person to, commingle Collections or other funds to which the Agent or any Purchaser is entitled with any other funds (other than funds of Affiliates of the Seller in concentration accounts). The Seller shall only add, and shall only permit an Originator to add, a Lock-Box Bank, Lock-Box, or Lock-Box Account to those listed on Exhibit E if the Agent has received notice of and has consented to such addition, a copy of any new Lock-Box Agreement and an executed and acknowledged copy of a Lock-Box Letter substantially in the form of Exhibit F (with -19- 24 such changes as are acceptable to the Agent) from any new Lock-Box Bank. The Seller shall only terminate a Lock-Box Bank or Lock-Box, or close a Lock-Box Account, upon 30 days advance notice to the Agent. (j) Sales and Adverse Claims Relating to Receivables. Except as otherwise provided herein, the Seller will not (by operation of law or otherwise), dispose of or otherwise transfer, or create or suffer to exist any Adverse Claim upon, any inventory or goods (other than in the ordinary course of business) the sale of which may give rise to a Receivable or any proceeds thereof. (k) Extension or Amendment of Receivables. Except as otherwise permitted in Section 3.2(b) and then subject to Section 1.5, the Seller will not extend, amend, rescind or cancel any Receivable. (l) Change in Business or Credit and Collection Policy. The Seller will not make any change in its Credit and Collection Policy which change would impair the collectibility of any Receivable. (m) Accounting for Sale. Except as provided in Section 9.9, the Seller will not, account for, or otherwise treat, the transactions contemplated hereby other than as a sale of Receivables or inconsistent with the Purchasers' ownership interests in the Receivables and Collections. (n) Certain Agreements. Except as otherwise permitted by this Agreement, the Seller will not amend, modify, waive, revoke or terminate any Transaction Document to which it is a party or any provision of Seller's certificate of incorporation or by-laws. (o) Other Business. The Seller will not: (i) engage in any business other than the transactions contemplated by the Transaction Documents, (ii) create, incur or permit to exist any Debt of any kind (or cause or permit to be issued for its account any letters of credit or bankers' acceptances) other than pursuant to this Agreement and the Subordinated Notes, or (iii) form any Subsidiary or make any investments in any other Person; provided, however, that the Seller shall be permitted to incur minimal obligations to the extent necessary for the day-to-day operations of the Seller (such as expenses for stationery, audits, maintenance of legal status, etc.). (p) Lock-Box Letters. Not later than April 30, 2001 the Seller shall deliver to the Agent fully executed Lock-Box Letters with respect to each Lock-Box set forth on Exhibit E hereto. (q) Net Worth. The Seller shall not, as of the last day of each calendar quarter, permit Net Worth to be less than $9,000,000. (r) Nonconsolidation. The Seller will operate in such a manner that the separate corporate existence of the Seller and each Seller Entity and Affiliate thereof -20- 25 would not be disregarded in the event of the bankruptcy or insolvency of any Seller Entity and Affiliate thereof and, without limiting the generality of the foregoing: (i) the Seller will not engage in any activity other than those activities expressly permitted under the Seller's organizational documents and the Transaction Documents, nor will the Seller enter into any agreement other than this Agreement, the other Transaction Documents to which it is a party and, with the prior written consent of the Agent, any other agreement necessary to carry out more effectively the provisions and purposes hereof or thereof; (ii) the Seller will cause the financial statements and books and records of the Seller and each Seller Entity to reflect the separate corporate existence of the Seller; (iii) except as otherwise expressly permitted hereunder, under the other Transaction Documents and under the Seller's organizational documents, the Seller will not permit any Seller Entity or Affiliate thereof to (A) pay the Seller's expenses, (B) guarantee the Seller's obligations, or (C) advance funds to the Seller for the payment of expenses or otherwise; and (iv) the Seller will not act as agent for any Seller Entity or Affiliate, but instead will present itself to the public as a corporation separate from each such Person and independently engaged in the business of purchasing and financing Receivables. Section 5.2. Covenants of the Initial Collection Agent. The Initial Collection Agent hereby covenants and agrees to comply with the following covenants and agreements, unless the Agent (with the consent of the Instructing Group) shall otherwise consent: (a) Financial Reporting. The Initial Collection Agent will maintain a system of accounting established and administered in accordance with GAAP and will furnish to the Agent and each Purchaser: (i) Annual Financial Statements. Within 120 days after each fiscal year of the Parent copies of its annual audited financial statements (including a consolidated balance sheet, consolidated statement of income and retained earnings and statement of cash flows, with related footnotes) certified by Deloitte & Touche, LLP or another firm of independent certified public accountants of nationally recognized standing (which accountants shall have acknowledged the reliance of the Agent and the Purchasers on the financial statements audited by such accountants) and prepared on a consolidated basis in conformity with GAAP; (ii) Quarterly Financial Statements. Within 60 days after each (except the last) fiscal quarter of each fiscal year of the Parent, copies of its unaudited financial statements (including at least a consolidated balance sheet as of the close -21- 26 of such quarter and statements of earnings and sources and applications of funds for the period from the beginning of the fiscal year to the close of such quarter) certified by a Designated Financial Officer and prepared in a manner consistent with the financial statements described in clause (i) of this Section 5.l(a); (iii) Officer's Certificate. Each time financial statements are furnished pursuant to clause (i) or (ii) of Section 5.1(a), a compliance certificate (in substantially the form of Exhibit G) signed by a Designated Financial Officer, dated the date of such financial statements; (iv) Public Reports. Promptly upon becoming available, a copy of each report or proxy statement filed by the Parent with the Securities and Exchange Commission or any securities exchange; and (v) Other Information. With reasonable promptness, such other information (including non-financial information) respecting the Receivables or the conditions and operations, financial or otherwise, of the Initial Collection Agent and any Initial Collection Agent Entity as the Agent from time to time reasonably may request in order to protect the interests of the Agent or Committed Purchasers under this Agreement. (b) Notices. As soon as possible and in any event within 5 Business Days of becoming actually aware of any of the following the Initial Collection Agent will notify the Agent and provide a description of: (i) Potential Termination Events. The occurrence of any Potential Termination Event; (ii) Downgrading. The downgrading, withdrawal or suspension of any rating by any rating agency of any indebtedness of any Special Obligor or of the Parent; or (iii) Further Information. Any other information that the Parent is required to deliver pursuant to the Credit Agreement at the same time the Parent delivers such information to the required parties pursuant to the Credit Agreement. If the Agent receives such a notice, the Agent shall promptly give notice thereof to each Purchaser and, until Amsterdam has no Investment after the Amsterdam Termination Date, to each CP Dealer and each Rating Agency. (c) Conduct of Business. The Initial Collection Agent will perform all actions necessary to remain duly incorporated, validly existing and in good standing in its jurisdiction of incorporation and to maintain all requisite authority to conduct its business in each jurisdiction in which it conducts business. -22- 27 (d) Compliance with Laws. The Initial Collection Agent will comply with all laws, regulations, judgments and other directions or orders imposed by any Governmental Authority to which it or any Receivable, any Related Security or Collection may be subject. (e) Furnishing Information and Inspection of Records. The Initial Collection Agent will furnish to the Agent and the Purchasers such information concerning the Receivables and the Related Security as the Agent or a Purchaser may request. The Initial Collection Agent will, and will cause each Originator to, permit, at any time during regular business hours upon reasonable notice to the Initial Collection Agent, the Agent or any Purchaser (or any representatives thereof) (i) to examine and make copies of all Records, (ii) to visit the offices and properties of the Initial Collection Agent and each Originator for the purpose of examining the Records and (iii) to discuss matters relating hereto with any of the Initial Collection Agent's or such Originator's officers, directors, employees or independent public accountants having knowledge of such matters. No more than once during any three calendar years or any time after the occurrence of a Termination Event, the Agent may (at the expense of the Initial Collection Agent) or at any time (at the expense of the Purchasers) have an independent public accounting firm conduct an audit of the Records or make test verifications of the Receivables and Collections. (f) Keeping Records. (i) The Initial Collection Agent will, and will cause each Originator to, have and maintain (A) administrative and operating procedures (including an ability to recreate Records if originals are destroyed), (B) adequate facilities, personnel and equipment and (C) all Records and other information necessary or advisable for collecting the Receivables (including Records adequate to permit the immediate identification of each new Receivable and all Collections of, and adjustments to, each existing Receivable). The Initial Collection Agent will give the Agent prior notice of any material change in such administrative and operating procedures. (ii) The Initial Collection Agent will, (A) at all times from and after the date hereof, clearly and conspicuously mark its computer and master data processing books and records with a legend describing the Agent's and the Purchasers' interest in the Receivables and the Collections and (B) upon the request of the Agent, so mark each contract relating to a Receivable and deliver to the Agent all such contracts (including all multiple originals of such contracts), with any appropriate endorsement or assignment, or segregate (from all other receivables then owned or being serviced by the Initial Collection Agent) the Receivables and all contracts relating to each Receivable and hold in trust and safely keep such contracts so legended in separate filing cabinets or other suitable containers at such locations as the Agent may specify. (g) Performance of Duties. The Initial Collection Agent will perform its duties or obligations in accordance with the provisions of each of the Transaction Documents. The Initial Collection Agent (at its expense) will (i) fully and timely perform in all material respects all agreements required to be observed by it in connection with each Receivable, (ii) comply in all material respects with the Credit and Collection -23- 28 Policy, and (iii) refrain from any action that may impair the rights of the Agent or the Purchasers in the Receivables, the Related Security, Collections, Purchase Agreement or Lock-Box Accounts. (h) Payments on Receivables, Accounts. If any payments on Receivables or other Collections are received by the Initial Collection Agent, it shall hold such payments in trust for the benefit of the Agent and the Purchasers and promptly (but in any event within two Business Days after receipt) remit such funds into a Lock-Box Account. Except as set forth in Section 5.1(i) hereof, the Initial Collection Agent will not permit the funds of any Affiliate to be deposited into any Lock-Box Account. If such funds of any Affiliate or Seller Entity are deposited into any Lock-Box Account, the Initial Collection Agent will promptly identify and separate such funds for segregation. Except as set forth in Section 5.1(i) hereof, the Initial Collection Agent will not, and will not permit any other Person to, commingle Collections or other funds to which the Agent or any Purchaser is entitled with any other funds. (i) Extension or Amendment of Receivables. Except as otherwise permitted in Section 3.2(b) and then subject to Section 1.5, the Initial Collection Agent will not extend, amend, rescind or cancel any Receivable. (j) Change in Business or Credit and Collection Policy. The Initial Collection Agent will not make any change in the Originator's Credit and Collection Policy which change would impair the collectibility of any Receivable. ARTICLE VI INDEMNIFICATION Section 6.1. Indemnities by the Seller. Without limiting any other rights any such Person may have hereunder or under applicable law, the Seller hereby indemnifies and holds harmless, on an after-Tax basis, the Agent and each Purchaser and their respective officers, directors, agents and employees (each an "Indemnified Party") from and against any and all damages, losses, claims, liabilities, penalties, Taxes, costs and expenses (including reasonable attorneys' fees and court costs) (all of the foregoing collectively, the "Indemnified Losses") at any time imposed on or incurred by any Indemnified Party arising out of or otherwise relating to any Transaction Document, the transactions contemplated thereby or the acquisition of any portion of the Sold Interest, any commingling of funds, any failure of a Lock-Box Bank to comply with the terms of a Lock-Box Letter, any Receivables or Collections, or any action taken or omitted by any of the Indemnified Parties (including any action taken by the Agent as attorney-in-fact for the Seller pursuant to Section 3.5(b)), whether arising by reason of the acts to be performed by the Seller hereunder or otherwise, excluding only Indemnified Losses to the extent (a) such Indemnified Losses to the extent such losses result from gross negligence or willful misconduct of the Indemnified Party seeking indemnification, (b) solely due to the credit risk of the Obligor and for which reimbursement would constitute recourse to the Seller or the Collection Agent for uncollected or uncollectible Receivables or (c) such Indemnified Losses -24- 29 are, or include Taxes on, or measured by, the overall net income or gross receipts of the Agent or any Purchaser computed in accordance with the Intended Tax Characterization; provided, however, that nothing contained in this sentence shall limit the liability of the Seller or the Collection Agent or limit the recourse of the Agent and each Purchaser to the Seller or the Collection Agent for any amounts otherwise specifically provided to be paid by the Seller or the Collection Agent hereunder. Without limiting the foregoing indemnification, but subject to the limitation set forth in clauses (a), (b) and (c) of the previous sentence, the Seller shall indemnify the Agent and each Purchaser for Indemnified Losses (including losses in respect of uncollectible Receivables, regardless of whether reimbursement therefor would constitute recourse to the Seller or the Collection Agent) relating to or resulting from: (i) reliance on any representation or warranty made by the Seller or Collection Agent (or any officers of the Seller or the Collection Agent) under or in connection with this Agreement, any Periodic Report or any other information or report delivered by the Seller or the Collection Agent pursuant hereto, which shall have been false or incorrect in any material respect when made or deemed made; (ii) the failure by the Seller or any Seller Entity to comply with any applicable law, rule or regulation with respect to any Receivable, or the nonconformity of any Receivable with any such applicable law, rule or regulation; (iii) the failure of the Seller to vest and maintain vested in the Agent, for the benefit of the Purchasers, a perfected interest in the Sold Interest and the property conveyed pursuant to Section 1.1(a) and Section 1.8, free and clear of any Adverse Claim; (iv) any commingling of funds to which the Agent or any Purchaser is entitled hereunder with any other funds; (v) failure of any Lock Box Bank (if appointed or designated by the Seller or if otherwise a Lock Box Bank on the date hereof) to comply with the terms of the applicable Lock Box Letter; (vi) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable resulting from the sale or lease of goods or the rendering of services related to such Receivable or the furnishing or failure to furnish any such goods or services; (vii) any failure of the Seller or any Seller Entity to perform its duties or obligations in accordance with the provisions of this Agreement and each of the other Transaction Documents to which it is a party; or (viii) any environmental liability claim, products liability claim or personal injury or property damage suit or other similar or related claim or action of whatever sort, arising out of or in connection with any Receivable or any other suit, claim or action of whatever sort relating to any of the Transaction Documents. -25- 30 Section 6.2. Increased Cost and Reduced Return. By way of clarification, and not of limitation, of Section 6.1, if the adoption of any applicable law, rule or regulation not in effect as of the date hereof, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance by any Amsterdam Funding Source, the Agent or any Purchaser (collectively, the "Funding Parties") with any request or directive (whether or not having the force of law) of any such Governmental Authority (a "Regulatory Change") (a) subjects any Funding Party to any charge or withholding on or in connection with a Funding Agreement or this Agreement (collectively, the "Funding Documents") or any Receivable, (b) changes the basis of taxation of payments to any of the Funding Parties of any amounts payable under any of the Funding Documents (except for changes in the rate of Tax on the overall net income of such Funding Party), (c) imposes, modifies or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or any credit extended by, any of the Funding Parties, (d) has the effect of reducing the rate of return on such Funding Party's capital to a level below that which such Funding Party could have achieved but for such adoption, change or compliance (taking into consideration such Funding Party's policies concerning capital adequacy) or (e) imposes any other condition, and the result of any of the foregoing is (x) to impose a cost on, or increase the cost to, any Funding Party of its commitment under any Funding Document or of purchasing, maintaining or funding any interest acquired under any Funding Document, (y) to reduce the amount of any sum received or receivable by, or to reduce the rate of return of, any Funding Party under any Funding Document or (z) to require any payment calculated by reference to the amount of interests held or amounts received by it hereunder, then, upon demand by the Agent, the Seller shall pay to the Agent for the account of the Person such additional amounts as will compensate the Agent or such Purchaser (or, in the case of Amsterdam, will enable Amsterdam to compensate any Amsterdam Funding Source) for such increased cost or reduction. Without limiting the foregoing, the Seller acknowledges and agrees that the fees and other amounts payable by the Seller to the Purchasers and the Agent have been negotiated on the basis that the unused portion of each Liquidity Provider's Commitment is treated as a "short term commitment" for which there is no regulatory capital requirement and the Enhancer's Commitment carries the same capital requirement as a funded loan in the same amount. If any Liquidity Provider determines it is required to maintain capital against its Unused Commitment, or if the Enhancer is required to maintain capital on its Unused Commitment (or any Purchaser is required to maintain capital against its Investment) in excess of the amount of capital it would be required to maintain against a funded loan in the same amount, such Purchaser shall be entitled to compensation under this Section 6.2. Section 6.3. Other Costs and Expenses. Also by way of clarification, and not of limitation, of Section 6.1, the Seller shall pay to the Agent on demand all costs and expenses in connection with (a) the preparation, execution, delivery and administration (including amendments of any provision) of the Transaction Documents, (b) the sale of the Sold Interest, (c) the perfection of the Agent's rights in the Receivables and Collections, (d) the enforcement by the Agent or the Purchasers of the obligations of the Seller under the Transaction Documents or of any Obligor under a Receivable and (e) the maintenance by the Agent of the Lock-Boxes and Lock-Box Accounts, including fees, costs and expenses of legal counsel for the Agent and Amsterdam relating to any of the foregoing or to advising the Agent, Amsterdam and any Amsterdam Funding Source about its rights and remedies under any Transaction Document or -26- 31 any related Funding Agreement and all costs and expenses (including counsel fees and expenses) of the Agent, each Purchaser and each Amsterdam Funding Source in connection with the enforcement of the Transaction Documents or any Funding Agreement and in connection with the administration of the Transaction Documents following a Termination Event. The Seller shall reimburse the Agent and Amsterdam for the cost of the Agent's or Amsterdam's auditors (which may be employees of such Person) auditing the books, records and procedures of the Seller. The Seller shall reimburse Amsterdam for any amounts Amsterdam must pay to any Committed Purchaser pursuant to the Transfer Agreement, this Agreement and the Funding Agreements related thereto on account of any Tax. The Seller shall reimburse Amsterdam on demand for all other costs and expenses incurred by Amsterdam or any shareholder of Amsterdam in connection with the Transaction Documents or the transactions contemplated thereby, including the cost of auditing Amsterdam's books by certified public accountants, the cost of the Ratings and the fees and out-of-pocket expenses of counsel of the Agent, Amsterdam or any shareholder, or administrator, of Amsterdam for advice relating to Amsterdam's operation. Section 6.4. Withholding Taxes. (a) All payments made by the Seller hereunder shall be made without withholding for or on account of any present or future taxes (other than overall net income taxes on the recipient). If any such withholding is so required, the Seller shall make the withholding, pay the amount withheld to the appropriate authority before penalties attach thereto or interest accrues thereon and pay such additional amount as may be necessary to ensure that the net amount actually received by each Purchaser and the Agent free and clear of such taxes (including such taxes on such additional amount) is equal to the amount that Purchaser or the Agent (as the case may be) would have received had such withholding not been made. If the Agent or any Purchaser pays any such taxes, penalties or interest the Seller shall reimburse the Agent or such Purchaser for that payment on demand. If the Seller pays any such taxes, penalties or interest, it shall deliver official tax receipts evidencing that payment or certified copies thereof to the Purchaser or Agent on whose account such withholding was made (with a copy to the Agent if not the recipient of the original) on or before the thirtieth day after payment. (b) Before the first date on which any amount is payable hereunder for the account of any Purchaser not incorporated under the laws of the USA such Purchaser shall deliver to the Seller and the Agent each two (2) duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI (or successor applicable form) certifying that such Purchaser is entitled to receive payments hereunder without deduction or withholding of any United States federal income taxes. Each such Purchaser shall replace or update such forms when necessary to maintain any applicable exemption and as requested by the Agent or the Seller. Section 6.5. Payments and Allocations. If any Person seeks compensation pursuant to this Article VI, such Person shall deliver to the Seller and the Agent a certificate setting forth the amount due to such Person, a description of the circumstance giving rise thereto and the basis of the calculations of such amount, which certificate shall be conclusive absent manifest error. The Seller shall pay to the Agent (for the account of such Person) the amount shown as due on any such certificate within thirty (30) days after receipt of the notice. -27- 32 ARTICLE VII CONDITIONS PRECEDENT Section 7.1. Conditions to Closing. This Agreement shall become effective on the first date all conditions in this Section 7.1 are satisfied. On or before such date, the Seller (or, in the case of Section 7.1(e)(ii), the Enhancer and the applicable Liquidity Providers) shall deliver to the Agent the following documents in form, substance and quantity acceptable to the Agent: (a) A certificate of the Secretary of the Seller and each Seller Entity certifying (i) the resolutions of the Seller's and each Seller Entity's board of directors approving each Transaction Document to which it is a party, (ii) the name, signature, and authority of each officer who executes on the Seller's or each Seller Entity's behalf a Transaction Document (on which certificate the Agent and each Purchaser may conclusively rely until a revised certificate is received), (iii) the Seller's and each Seller Entity's certificate or articles of incorporation or limited liability company agreement, as applicable, certified by the Secretary or Assistant Secretary of such entity, (iv) a copy of the Seller's and each Seller Entity's by-laws and (v) good standing certificates issued by the Secretaries of State of each jurisdiction where the Seller and each Seller Entity is organized. (b) All instruments and other documents required, or deemed desirable by the Agent, to perfect the Agent's first priority interest in the Receivables, Collections, the Purchase Agreement and the Lock-Box Accounts in all appropriate jurisdictions. (c) UCC search reports from all jurisdictions the Agent requests. (d) Executed copies of (i) all consents and authorizations necessary in connection with the Transaction Documents (ii) direction letters executed by the Seller authorizing the Agent to inspect and make copies from the Seller's books and records maintained at any off-site data processing or storage facilities, (iii) a Periodic Report covering the month ended February 20, 2001, and (iv) each Transaction Document. (e) Favorable opinions of counsel to the Seller and each Seller Entity (and, if requested by Amsterdam, the Enhancer or any Liquidity Provider and then at the expense of the Seller) covering such matters as Amsterdam or the Agent may request. (f) Such other approvals, opinions or documents as the Agent or Amsterdam may reasonably request. Section 7.2. Conditions to Each Purchase. The obligation of each Committed Purchaser to make any Purchase, and the right of the Seller to request or accept any Purchase, are subject to the conditions (and each Purchase shall evidence the Seller's representation and warranty that clauses (a)-(d) of this Section 7.2 have been satisfied) that on the date of such Purchase before and after giving effect to the Purchase: -28- 33 (a) no Potential Termination Event shall then exist or shall occur as a result of the Purchase; (b) the Liquidity Termination Date has not occurred and, after giving effect to the application of the proceeds of such Purchase, the outstanding Matured Aggregate Investment would not exceed the Aggregate Commitment; (c) the representations and warranties of the Seller, each Originator and the Collection Agent contained herein or in any other Transaction Document are true and correct in all material respects on and as of such date (except to the extent such representations and warranties relate solely to an earlier date and then as of such earlier date); (d) each of the Seller and each Seller Entity is in full compliance with the Transaction Documents to which it is a party (including all covenants and agreements in Article V); and (e) all legal matters related to the Purchase are reasonably satisfactory to the Purchasers. Nothing in this Section 7.2 limits the obligations (including those in Section 2.1) of each Committed Purchaser to Amsterdam (including the Transfer Agreement). ARTICLE VIII THE AGENT Section 8.1. Appointment and Authorization. Each Purchaser hereby irrevocably designates and appoints ABN AMRO Bank N.V. as the "Agent" under the Transaction Documents and authorizes the Agent to take such actions and to exercise such powers as are delegated to the Agent hereby and to exercise such other powers as are reasonably incidental thereto. The Agent shall hold, in its name, for the benefit of each Purchaser, the Purchase Interest of the Purchaser. The Agent shall not have any duties other than those expressly set forth in the Transaction Documents or any fiduciary relationship with any Purchaser, and no implied obligations or liabilities shall be read into any Transaction Document, or otherwise exist, against the Agent. The Agent does not assume, nor shall it be deemed to have assumed, any obligation to, or relationship of trust or agency with, the Seller. Notwithstanding any provision of this Agreement or any other Transaction Document, in no event shall the Agent ever be required to take any action which exposes the Agent to personal liability or which is contrary to the provision of any Transaction Document or applicable law. Section 8.2. Delegation of Duties. The Agent may execute any of its duties through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. -29- 34 Section 8.3. Exculpatory Provisions. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted (i) with the consent or at the direction of the Instructing Group or (ii) in the absence of such Persons gross negligence or willful misconduct. The Agent shall not be responsible to any Purchaser or other Person for any recitals, representations, warranties or other statements made by the Seller, any Seller Entity or any of its Affiliates, (ii) the value, validity, effectiveness, genuineness, enforceability or sufficiency of any Transaction Document, (iii) any failure of the Seller, and Seller Entity or any of its Affiliates to perform any obligation or (iv) the satisfaction of any condition specified in Article VII. The Agent shall not have any obligation to any Purchaser to ascertain or inquire about the observance or performance of any agreement contained in any Transaction Document or to inspect the properties, books or records of the Seller, any Seller Entity or any of its Affiliates. Section 8.4. Reliance by Agent. The Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document, other writing or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person and upon advice and statements of legal counsel (including counsel to the Seller), independent accountants and other experts selected by the Agent. The Agent shall in all cases be fully justified in failing or refusing to take any action under any Transaction Document unless it shall first receive such advice or concurrence of the Purchasers, and assurance of its indemnification, as it deems appropriate. Section 8.5. Assumed Payments. Unless the Agent shall have received notice from the applicable Purchaser before the date of any Incremental Purchase that such Purchaser will not make available to the Agent the amount it is scheduled to remit as part of such Incremental Purchase the Agent may assume such Purchaser has made such amount available to the Agent when due (an "Assumed Payment") and, in reliance upon such assumption, the Agent may (but shall have no obligation to) make available such amount to the appropriate Person. If and to the extent that any Purchaser shall not have made its Assumed Payment available to the Agent, such Purchaser and the Seller) hereby agrees to pay the Agent forthwith on demand such unpaid portion of such Assumed Payment up to the amount of funds actually paid by the Agent, together with interest thereon for each day from the date of such payment by the Agent until the date the requisite amount is repaid to the Agent, at a rate per annum equal to the Federal Funds Rate plus 2%. Section 8.6. Notice of Termination Events. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Potential Termination Event unless the Agent has received notice from any Purchaser or the Seller stating that a Potential Termination Event has occurred hereunder and describing such Potential Termination Event. The Agent shall take such action concerning a Potential Termination Event as may be directed by the Instructing Group (or, if required for such action, all of the Purchasers), but until the Agent receives such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, as the Agent deems advisable and in the best interests of the Purchasers. Section 8.7. Non-Reliance on Agent and Other Purchasers. Each Purchaser expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, -30- 35 attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of the Seller or any Seller Entity, shall be deemed to constitute any representation or warranty by the Agent. Each Purchaser represents and warrants to the Agent that, independently and without reliance upon the Agent or any other Purchaser and based on such documents and information as it has deemed appropriate, it has made and will continue to make its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Seller, the Seller Entities and the Receivables and its own decision to enter into this Agreement and to take, or omit, action under any Transaction Document. The Agent shall deliver each month to any Purchaser that so requests a copy of the Periodic Report(s) received covering the preceding calendar month. Except for items specifically required to be delivered hereunder, the Agent shall not have any duty or responsibility to provide any Purchaser with any information concerning the Seller, any Seller Entity or any of its Affiliates that comes into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. Section 8.8. Agent and Affiliates. The Agent and its Affiliates may extend credit to, accept deposits from and generally engage in any kind of business with the Seller, any Seller Entity or any of their Affiliates and, in its roles as a Liquidity Provider and the Enhancer, ABN AMRO may exercise or refrain from exercising its rights and powers as if it were not the Agent. The parties acknowledge that ABN AMRO acts as agent for Amsterdam and subagent for Amsterdam's management company in various capacities, as well as providing credit facilities and other support for Amsterdam not contained in the Transaction Documents. Section 8.9. Indemnification. Each Committed Purchaser shall indemnify and hold harmless the Agent and its officers, directors, employees, representatives and agents (to the extent not reimbursed by the Seller or any Seller Entity and without limiting the obligation of the Seller or any Seller Entity to do so), ratably in accordance with its Ratable Share from and against any and all liabilities, obligations, losses, damages, penalties, judgments, settlements, costs, expenses and disbursements of any kind whatsoever (including in connection with any investigative or threatened proceeding, whether or not the Agent or such Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Agent or such Person as a result of or related to, any of the transactions contemplated by the Transaction Documents or the execution, delivery or performance of the Transaction Documents or any other document furnished in connection therewith (but excluding any such liabilities, obligations, losses, damages, penalties, judgments, settlements, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or such Person as finally determined by a court of competent jurisdiction). Section 8.10. Successor Agent. The Agent may, upon at least five (5) days notice to the Seller and each Purchaser, resign as Agent. Such resignation shall not become effective until a successor agent is appointed by an Instructing Group and has accepted such appointment. Upon such acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Transaction Documents. After any retiring Agent's resignation hereunder, the provisions of Article VI and -31- 36 this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent. ARTICLE IX MISCELLANEOUS Section 9.1. Termination. Amsterdam shall cease to be a party hereto when the Amsterdam Termination Date has occurred, Amsterdam holds no Investment and all amounts payable to it hereunder have been indefeasibly paid in full. This Agreement shall terminate following the Liquidity Termination Date when no Investment is held by a Purchaser and all other amounts payable hereunder have been indefeasibly paid in full, but the rights and remedies of the Agent and each Purchaser concerning any representation, warranty or covenant made, or deemed to be made, by the Seller, and under Article VI and Section 8.9, shall survive such termination. Section 9.2. Notices. Unless otherwise specified, all notices and other communications hereunder shall be in writing (including by telecopier or other facsimile communication), given to the appropriate Person at its address or telecopy number set forth on the signature pages hereof or at such other address or telecopy number as such Person may specify, and effective when received at the address specified by such Person. Each party hereto, however, authorizes the Agent to act on telephone notices of Purchases and Discount Rate and Tranche Period selections from any person the Agent in good faith believes to be acting on behalf of the relevant party and, at the Agent's option, to tape record any such telephone conversation. Each party hereto agrees to deliver promptly to the Agent a confirmation of each telephone notice given or received by such party (signed by an authorized officer of such party), but the absence of such confirmation shall not affect the validity of the telephone notice. The Agent's records of all such conversations shall be deemed correct and, if the confirmation of a conversation differs in any material respect from the action taken by the Agent, the records of the Agent shall govern absent manifest error. The number of days for any advance notice required hereunder may be waived (orally or in writing) by the Person receiving such notice and, in the case of notices to the Agent, the consent of each Person to which the Agent is required to forward such notice. Section 9.3. Payments and Computations. Notwithstanding anything herein to the contrary, any amounts to be paid or transferred by the Seller or the Collection Agent to, or for the benefit of, any Purchaser, or any other Person shall be paid or transferred to the Agent (for the benefit of such Purchaser or other Person). The Agent shall promptly (and, if reasonably practicable, on the day it receives such amounts) forward each such amount to the Person entitled thereto and such Person shall apply the amount in accordance herewith. All amounts to be paid or deposited hereunder shall be paid or transferred on the day when due in immediately available Dollars (and, if due from the Seller or Collection Agent, by 11:00 a.m. (Chicago time), with amounts received after such time being deemed paid on the Business Day following such receipt). The Seller hereby authorizes the Agent to debit the Seller Account for application to any amounts owed by the Seller hereunder. The Seller shall, to the extent permitted by law, pay to the Agent upon demand, for the account of the applicable Person, interest on all amounts not -32- 37 paid or transferred by the Seller or the Collection Agent when due hereunder at a rate equal to the Prime Rate plus 1%, calculated from the date any such amount became due until the date paid in full. Any payment or other transfer of funds scheduled to be made on a day that is not a Business Day shall be made on the next Business Day, and any Discount Rate or interest rate accruing on such amount to be paid or transferred shall continue to accrue to such next Business Day. All computations of interest, fees, Discount and Funding Charges shall be calculated for the actual days elapsed based on a 360 day year. Section 9.4. Sharing of Recoveries. Each Purchaser agrees that if it receives any recovery, through set-off, judicial action or otherwise, on any amount payable or recoverable hereunder in a greater proportion than should have been received hereunder or otherwise inconsistent with the provisions hereof, then the recipient of such recovery shall purchase for cash an interest in amounts owing to the other Purchasers (as return of Investment or otherwise), without representation or warranty except for the representation and warranty that such interest is being sold by each such other Purchaser free and clear of any Adverse Claim created or granted by such other Purchaser, in the amount necessary to create proportional participation by the Purchasers in such recovery (as if such recovery were distributed pursuant to Section 2.3). If all or any portion of such amount is thereafter recovered from the recipient, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Section 9.5. Right of Setoff. During a Termination Event, each Purchaser is hereby authorized (in addition to any other rights it may have) to setoff, appropriate and apply (without presentment, demand, protest or other notice which are hereby expressly waived) any deposits and any other indebtedness held or owing by such Purchaser (including by any branches or agencies of such Purchaser) to, or for the account of, the Seller against amounts owing by the Seller hereunder (even if contingent or unmatured). Section 9.6. Amendments. Except as otherwise expressly provided herein, no amendment or waiver hereof shall be effective unless signed by the Seller and the Instructing Group. In addition, no amendment of any Transaction Document shall, without the consent of (a) all the Liquidity Providers, (i) extend the Liquidity Termination Date or the date of any payment or transfer of Collections by the Seller to the Collection Agent or by the Collection Agent to the Agent, (ii) reduce the rate or extend the time of payment of Discount for any Eurodollar Tranche or Prime Tranche, (iii) reduce or extend the time of payment of any fee payable to the Liquidity Providers, (iv) except as provided herein, release, transfer or modify any Committed Purchaser's Purchase Interest or change any Commitment, (v) amend the definition of Required Liquidity Providers, Instructing Group, Termination Event or Section 1.1, 1.2, 1.5, 1.7(a), 2.1, 2.2, 2.3, 6.1, 6.2, 6.3, 7.2 or 9.6, Section 2.1 of the Transfer Agreement or any provision of the Limited Guaranty, (vi) consent to the assignment or transfer by the Seller or any Originator of any interest in the Receivables other than transfers hereunder, or (vii) amend any defined term relevant to the restrictions in clauses (i) through (vi) in a manner which would circumvent the intention of such restrictions or (b) the Agent, amend any provision hereof if the effect thereof is to affect the indemnities to, or the rights or duties of, the Agent or to reduce any fee payable for the Agent's own account. Notwithstanding the foregoing, the amount of any fee or other payment due and payable from the Seller to the Agent (for its own account), Amsterdam or the Enhancer may be changed or otherwise adjusted solely with the consent of the Seller and -33- 38 the party to which such payment is payable. Any amendment hereof shall apply to each Purchaser equally and shall be binding upon the Seller, the Purchasers and the Agent. Section 9.7. Waivers. No failure or delay of the Agent or any Purchaser in exercising any power, right, privilege or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right, privilege or remedy preclude any other or further exercise thereof or the exercise of any other power, right, privilege or remedy. Any waiver hereof shall be effective only in the specific instance and for the specific purpose for which such waiver was given. After any waiver, the Seller, the Purchasers and the Agent shall be restored to their former position and rights and any Potential Termination Event waived shall be deemed to be cured and not continuing, but no such waiver shall extend to (or impair any right consequent upon) any subsequent or other Potential Termination Event. Any additional Discount that has accrued after a Termination Event before the execution of a waiver thereof, solely as a result of the occurrence of such Termination Event, may be waived by the Agent at the direction of the Purchaser entitled thereto or, in the case of Discount owing to the Liquidity Providers, of the Required Liquidity Providers. Section 9.8. Successors and Assigns; Participations; Assignments. (a) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Except as otherwise provided herein, the Seller may not assign or transfer any of its rights or delegate any of its duties without the prior consent of the Agent and the Purchasers. (b) Participations. Any Purchaser may sell to one or more Persons affiliated with the Purchaser without the prior consent of the Seller, and to one or more other Persons with the prior consent of the Seller (which consent shall not be unreasonably withheld) (each a "Participant") participating interests in the interests of such Purchaser hereunder and under the Transfer Agreement. Such Purchaser shall remain solely responsible for performing its obligations hereunder, and the Seller and the Agent shall continue to deal solely and directly with such Purchaser in connection with such Purchaser's rights and obligations hereunder and under the Transfer Agreement. Each Participant shall be entitled to the benefits of Article VI and shall have the right of setoff through its participation in amounts owing hereunder and under the Transfer Agreement to the same extent as if it were a Purchaser hereunder and under the Transfer Agreement, which right of setoff is subject to such Participant's obligation to share with the Purchasers as provided in Section 9.4. A Purchaser shall not agree with a Participant to restrict such Purchaser's right to agree to any amendment hereto or to the Transfer Agreement, except amendments described in clause (a) of Section 9.6. (c) Assignments by Liquidity Providers. Any Liquidity Provider may assign to one or more Persons ("Purchasing Liquidity Providers"), acceptable to the Agent in its sole discretion, and, so long as no Potential Termination Event has occurred and is continuing, with the consent of the Seller which shall not be unreasonably withheld, any portion of its Commitment as a Liquidity Provider hereunder and under the Transfer Agreement and Purchase Interest pursuant to a supplement hereto and to the Transfer Agreement (a "Transfer Supplement") in form satisfactory to the Agent executed by each such Purchasing Liquidity Provider, such selling Liquidity Provider and the Agent. Any such assignment by a Liquidity Provider must be for an -34- 39 amount of at least Five Million Dollars. Each Purchasing Liquidity Provider shall pay a fee of Three Thousand Dollars to the Agent. Any partial assignment shall be an assignment of an identical percentage of such selling Liquidity Provider's Investment and its Commitment as a Liquidity Provider hereunder and under the Transfer Agreement. Upon the execution and delivery to the Agent of the Transfer Supplement, delivery to the Seller and the Agent of the forms identified in Section 6.4(b) hereof duly executed by such Purchasing Liquidity Provider and payment by the Purchasing Liquidity Provider to the selling Liquidity Provider of the agreed purchase price, such selling Liquidity Provider shall be released from its obligations hereunder and under the Transfer Agreement to the extent of such assignment and such Purchasing Liquidity Provider shall for all purposes be a Liquidity Provider party hereto and shall have all the rights and obligations of a Liquidity Provider hereunder to the same extent as if it were an original party hereto and to the Transfer Agreement with a Commitment as a Liquidity Provider, any Investment and any related Assigned Amsterdam Settlement described in the Transfer Supplement. (d) Replaceable Liquidity Providers. If any Liquidity Provider (a "Replaceable Liquidity Provider") shall (i) petition the Seller for any amounts under Section 6.2 or 6.4 (ii) cease to have a short-term debt rating of "A-1" by S&P and "P-1" by Moody's (unless such Liquidity Provider is also the Enhancer), the Seller or Amsterdam may designate a replacement financial institution (a "Replacement Liquidity Provider") acceptable to the Agent, in its sole discretion, to which such Replaceable Liquidity Provider shall, subject to its receipt of an amount equal to its Investment, any related Assigned Amsterdam Settlement, and accrued Discount and fees thereon (plus, from the Seller, any Early Payment Fee that would have been payable if such transferred Investment had been paid on such date) and all amounts payable under Section 6.2, promptly assign all of its rights, obligations and Liquidity Provider Commitment hereunder and under the Transfer Agreement, together with all of its Purchase Interest, and any related Assigned Amsterdam Settlement, to the Replacement Liquidity Provider in accordance with Section 9.8(c). (e) Assignment by Amsterdam. Each party hereto agrees and consents (i) to Amsterdam's assignment, participation, grant of security interests in or other transfers of any portion of, or any of its beneficial interest in, the Amsterdam Purchase Interest and the Amsterdam Settlement and (ii) to the complete assignment by Amsterdam of all of its rights and obligations hereunder to ABN AMRO or any other Person, and upon such assignment Amsterdam shall be released from all obligations and duties hereunder; provided, however, that Amsterdam may not, without the prior consent of the Required Liquidity Providers and the Enhancer, transfer any of its rights under the Transfer Agreement to cause the Liquidity Providers or the Enhancer to purchase the Amsterdam Purchase Interest and the Amsterdam Settlement unless the assignee (i) is a corporation whose principal business is the purchase of assets similar to the Receivables, (ii) has ABN AMRO as its administrative agent and (iii) issues commercial paper with credit ratings substantially comparable to the Ratings. Amsterdam shall promptly notify each party hereto of any such assignment. Upon such an assignment of any portion of Amsterdam's Purchase Interest and the Amsterdam Settlement, the assignee shall have all of the rights of Amsterdam hereunder relate to such Amsterdam Purchase Interest and Amsterdam Settlement. -35- 40 (f) Opinions of Counsel. If required by the Agent or to maintain the Ratings, each Transfer Supplement must be accompanied by an opinion of counsel of the assignee as to such matters as the Agent may reasonably request. Section 9.9. Waiver of Confidentiality. The Seller hereby consents to the disclosure of any nonpublic information relating thereto among the Agent and the Purchasers and by the Agent or the Purchasers to (i) any officers, directors, members, managers, employees or outside accountants, auditors or attorneys thereof, (ii) any prospective or actual assignee or participant, (iii) any rating agency, surety, guarantor or credit or liquidity enhancer to the Agent or any Purchaser, (iv) any entity organized to purchase, or make loans secured by, financial assets for which ABN AMRO provides managerial services or acts as an administrative agent, (v) Amsterdam's administrator, management company, referral agents, issuing agents or depositaries or CP Dealers and (vi) Governmental Authorities with appropriate jurisdiction. Section 9.10. Confidentiality of Agreement. (a) Unless otherwise required by applicable law, order of any court or administrative agency, or otherwise by any governmental authority, the Seller agrees to maintain the confidentiality of the Transaction Documents (and all drafts thereof) in its communications with third parties and otherwise; provided, however, that the Transaction Documents may be disclosed to third parties to the extent such disclosure is (i) required in connection with a sale of receivables of Seller, (ii) made solely to Persons who are legal counsel for the Purchaser of such receivables, and (iii) made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to the Agent; provided further, however, that the Transaction Documents may be disclosed to the Seller's legal counsel and independent auditors; and provided further, however, that neither the Seller nor the Servicer have any obligation of confidentiality in respect of any information which may be generally available to the public or becomes available to the public through no fault of the Seller or the Servicer. (b) Unless otherwise required by applicable law, order of any court or administrative agency, or otherwise by any governmental authority, the Agent agrees to maintain the confidentiality, in its communications with third parties and otherwise, of any information regarding the Seller obtained in connection with the Transaction Documents which has been identified by the Seller to the Agent as confidential in nature (the "Confidential Material"); provided, however, that the Confidential Material may be disclosed to third parties to the extent such disclosure is (i) to a rating agency, (ii) required in connection with the exercise of any remedy hereunder or under any related documents, instruments and agreements, or (iii) to any actual or proposed participant or assignee of all or part of its rights hereunder, or an actual or proposed liquidity or enhancement provider, in each case which has agreed in writing to be bound by the provisions of this Section, or (iv) to any Liquidity Provider; provided further, however, that the Transaction Documents may be disclosed to the Liquidity Providers' and the Agent's respective legal counsel and independent auditors; and provided further, however, that neither the Investor nor the Agent shall have any obligation of confidentiality in respect of any information which may be generally available to the public or becomes available to the public through no fault of such Person. -36- 41 Section 9.11. Agreement Not to Petition. Each party hereto agrees, for the benefit of the holders of the privately or publicly placed indebtedness for borrowed money for Amsterdam, not, prior to the date which is one (1) year and one (1) day after the payment in full of all such indebtedness, to acquiesce, petition or otherwise, directly or indirectly, invoke, or cause Amsterdam to invoke, the process of any Governmental Authority for the purpose of (a) commencing or sustaining a case against Amsterdam under any federal or state bankruptcy, insolvency or similar law (including the Federal Bankruptcy Code), (b) appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official for Amsterdam, or any substantial part of its property, or (c) ordering the winding up or liquidation of the affairs of Amsterdam. Section 9.12. Excess Funds. Other than amounts payable under Section 9.4, Amsterdam shall be required to make payment of the amounts required to be paid pursuant hereto only if Amsterdam has Excess Funds (as defined below). If Amsterdam does not have Excess Funds, the excess of the amount due hereunder (other than pursuant to Section 9.4) over the amount paid shall not constitute a "claim" (as defined in Section 101(5) of the Federal Bankruptcy Code) against Amsterdam until such time as Amsterdam has Excess Funds. If Amsterdam does not have sufficient Excess Funds to make any payment due hereunder (other than pursuant to Section 9.4), then Amsterdam may pay a lesser amount and make additional payments that in the aggregate equal the amount of deficiency as soon as possible thereafter. The term "Excess Funds" means the excess of (a) the aggregate projected value of Amsterdam's assets and other property (including cash and cash equivalents), over (b) the sum of (i) the sum of all scheduled payments of principal, interest and other amounts payable on publicly or privately placed indebtedness of Amsterdam for borrowed money, plus (ii) the sum of all other liabilities, indebtedness and other obligations of Amsterdam for borrowed money or owed to any credit or liquidity provider, together with all unpaid interest then accrued thereon, plus (iii) all taxes payable by Amsterdam to the Internal Revenue Service, plus (iv) all other indebtedness, liabilities and obligations of Amsterdam then due and payable, but the amount of any liability, indebtedness or obligation of Amsterdam shall not exceed the projected value of the assets to which recourse for such liability, indebtedness or obligation is limited. Excess Funds shall be calculated once each Business Day. Section 9.13. No Recourse. The obligations of Amsterdam, its management company, its administrator and its referral agents (each a "Program Administrator") under any Transaction Document or other document (each, a "Program Document") to which a Program Administrator is a party are solely the corporate obligations of such Program Administrator and no recourse shall be had for such obligations against any Affiliate, director, officer, member, manager, employee, attorney or agent of any Program Administrator. Section 9.14. Headings; Counterparts. Article and Section Headings in this Agreement are for reference only and shall not affect the construction of this Agreement. This Agreement may be executed by different parties on any number of counterparts, each of which shall constitute an original and all of which, taken together, shall constitute one and the same agreement. -37- 42 Section 9.15. Cumulative Rights and Severability. All rights and remedies of the Purchasers and Agent hereunder shall be cumulative and non-exclusive of any rights or remedies such Persons have under law or otherwise. Any provision hereof that is prohibited or unenforceable in any jurisdiction shall, in such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and without affecting such provision in any other jurisdiction. Section 9.16. Governing Law; Submission to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the internal laws (and not the law of conflicts) of the State of Illinois. The Seller hereby submits to the nonexclusive jurisdiction of the United States District Court for the Northern District of Illinois and of any Illinois state court sitting in Chicago, Illinois for purposes of all legal proceedings arising out of, or relating to, the Transaction Documents or the transactions contemplated thereby. The Seller hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the venue of any such proceeding and any claim that any such proceeding has been brought in an inconvenient forum. Nothing in this Section 9.16 shall affect the right of the Agent or any Purchaser to bring any action or proceeding against the Seller or its property in the courts of other jurisdictions. Section 9.17. Waiver of Trial by Jury. To the extent permitted by applicable law, each party hereto irrevocably waives all right of trial by jury in any action, proceeding or counterclaim arising out of, or in connection with, any transaction document or any matter arising thereunder. Section 9.18. Intended Tax Characterization. It is the intention of the parties hereto that, for the purposes of all Taxes, the transactions contemplated hereby shall be treated as a loan by the Purchasers (through the Agent) to the Seller that is secured by the Receivables (the "Intended Tax Characterization"). The parties hereto agree to report and otherwise to act for the purposes of all Taxes in a manner consistent with the Intended Tax Characterization. Section 9.19. Entire Agreement. The Transaction Documents constitute the entire understanding of the parties thereto concerning the subject matter thereof. Any previous or contemporaneous agreements, whether written or oral, concerning such matters are superceded thereby. -38- 43 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date hereof. ABN AMRO BANK N.V., as the Agent ABN AMRO BANK N.V., as the Enhancer By: By: -------------------------------------------------- ----------------------------------------------------- Title: Title: -------------------------------------------- ----------------------------------------------- By: By: -------------------------------------------------- ----------------------------------------------------- Title: Title: ------------------------------------------- ----------------------------------------------- Address: Address: Structured Finance, Asset Securitization Structured Finance, Asset Securitization 135 South LaSalle Street 135 South LaSalle Street Chicago, Illinois 60674-9135 Chicago, Illinois 60674-9135 Attention: Purchaser Agent-Amsterdam Attention: Enhancer-Amsterdam Telephone: (312) 904-2737 Telephone: (312) 904-2737 Telecopy: (312) 904-6376 Telecopy: (312) 904-6376 ABN AMRO BANK N.V., as a AMSTERDAM FUNDING CORPORATION Liquidity Provider By: By: -------------------------------------------------- ----------------------------------------------------- Title: Title: -------------------------------------------- ----------------------------------------------- By: -------------------------------------------------- Title: -------------------------------------------- Address: Address: Structured Finance, Asset Securitization Global Securitization Services, LLC 135 South LaSalle Street 114 West 47th Street Chicago, Illinois 60674-9135 New York, New York 10036 Attention: Purchaser Agent-Amsterdam Attention: Andrew Stidd Telephone: (312) 904-2737 Telephone: (212) 302-5151 Telecopy: (312) 904-6376 Telecopy: (212) 302-8767
Signature Page for Receivables Sale Agreement 44 with a copy to: ARVINMERITOR RECEIVABLES ABN AMRO BANK N.V. CORPORATION, as the Seller Address: Structured Finance, Asset Securitization 135 South LaSalle Street By: Chicago, Illinois 60674-9135 -------------------------------------------------- Title: Attention: Administrator- ----------------------------------------------- Amsterdam Address: 2135 West Maple Road Telephone: (312) 904-2737 Troy, Michigan 48084 Telecopy: (312) 904-6376 Attention: ------------------------------ Telephone: ------------------------------ Telecopy: ------------------------------- ARVINMERITOR, INC., as the Initial Collection Agent By: ----------------------------------------------- Title: ----------------------------------------- Address: 2135 West Maple Road Troy, Michigan 48084 Attention: ------------------------------ Telephone: ------------------------------ Telecopy: -------------------------------
Signature Page for Receivables Sale Agreement 45 SCHEDULE I DEFINITIONS The following terms have the meanings set forth, or referred to, below: "ABN AMRO" means ABN AMRO Bank N.V. in its individual capacity and not in its capacity as the Agent. "Adverse Claim" means, for any asset or property of a Person, a lien, security interest, charge, mortgage, pledge, hypothecation, assignment or encumbrance, or any other right or claim, in, of or on such asset or property in favor of any other Person, except those in favor of the Seller and the Agent. "Affiliate" means, for any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person. For purposes of this definition, "control" means the power, directly or indirectly, to either (i) vote ten percent (10%) or more of the securities having ordinary voting power for the election of directors of a Person or (ii) cause the direction of the management and policies of a Person. "Agent" is defined in the first paragraph hereof. "Agent's Account" means the account designated to the Seller and the Purchasers by the Agent. "Aggregate Commitment" means One Hundred Two Million Dollars ($102,000,000), as such amount may be reduced pursuant to Section 1.6. "Aggregate Investment" means the sum of the Investments of all Purchasers. "Amsterdam" is defined in the first paragraph hereof. "Amsterdam Funding Source" means any insurance company, bank or other financial institution providing liquidity, back-up purchase or credit support for Amsterdam. "Amsterdam Settlement" means the sum of all claims and rights to payment pursuant to Section 1.5 or 1.7 or any other provision owed to Amsterdam (or owed to the Agent or the Collection Agent for the benefit of Amsterdam) by the Seller that, if paid, would be applied to reduce Amsterdam's Investment. "Amsterdam Termination Date" means the earlier of (a) the Business Day designated by Amsterdam at any time to the Seller and (b) the Liquidity Termination Date. "Assigned Amsterdam Settlement" means, for each Committed Purchaser for any Put, the product of such Purchaser's Purchased Percentage and the amount of the Amsterdam Settlement being transferred pursuant to such Put. 46 "Average Receivables Turnover Ratio" means, at any time, the average of the Receivables Turnover Ratios calculated for the most recent three calendar months. "Bankruptcy Event" means, for any Person, that (a) such Person makes a general assignment for the benefit of creditors or any proceeding is instituted by or against such Person seeking to adjudicate it bankrupt or insolvent, or seeking the liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors and, if instituted against such Person, such proceeding remains undismissed and unstayed for a period of 30 days, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property or such Person generally does not pay its debts as such debts become due or admits in writing its inability to pay its debts generally or (b) such Person takes any corporate action to authorize any such action. "Business Day" means any day other than (a) a Saturday, Sunday or other day on which banks in New York, New York or Chicago, Illinois are authorized or required to close, (b) a holiday on the Federal Reserve calendar and, solely for matters relating to a Eurodollar Tranche, (c) a day on which dealings in Dollars are not carried on in the London interbank market. "Changeover Receivable" means a Receivable generated from the sale of merchandise not manufactured by Parent or one or its Subsidiaries which has been purchased by one of Seller's Subsidiaries from one of its customers. "Charge-Off" means any Receivable that has or should have been (in accordance with the Credit and Collection Policy) (i) charged off or written off by the Seller, or (ii) reserved against as a doubtful account by the Seller. "Collection" means any amount paid, or deemed paid, on a Receivable, including from the proceeds of collateral securing such Receivables or paid by the Seller as a Deemed Collection under Section 1.5(b). "Collection Agent" is defined in Section 3.1(a). "Collection Agent Fee" is defined in Section 3.6. "Commitment" means, for each Committed Purchaser, the amount set forth on Schedule II, as adjusted in accordance with Sections 1.6 and 9.8. "Committed Purchasers" is defined in Section 1.1(b). "Concentration Limit" means (i) an amount not to exceed 10% of the aggregate outstanding principal balance of all Eligible Receivables for Obligors with unsecured debt ratings of at least A- and A3 by S&P and/or Moody's, respectively, (ii) an amount not to exceed 5% of the aggregate outstanding principal balance of all Eligible Receivables for Obligors with unsecured debt ratings of at least BBB- and Baa3 but less than A- and A3 by S&P and/or Moody's, respectively, and (iii) an amount not to exceed 2.5% of the aggregate outstanding -2- 47 principal balance of all Eligible Receivables for Obligors with unsecured debt ratings of below BBB- and Baa3 by S&P and Moody's, respectively, or Obligors that are not rated by S&P or Moody's. "CP Dealer" means, at any time, each Person Amsterdam then engages as a placement agent or commercial paper dealer. "CP Discount" means, for any Discount Period, the amount of interest or discount accrued, during such Discount Period on all the outstanding commercial paper, or portion thereof, issued by Amsterdam to fund its Investment, including all dealer commissions and other costs of issuing commercial paper, whether any such commercial paper was issued specifically to fund such Investment or is allocated, in whole or in part, to such funding. "CP Rate" means, for any CP Tranche Period, a rate per annum equal to the weighted average of the rates at which commercial paper notes having a term equal to such CP Tranche Period may be sold by any CP Dealer selected by Amsterdam. If such rate is a discount rate, the CP Rate shall be the rate resulting from Amsterdam's converting such discount rate to an interest-bearing equivalent rate. If Amsterdam determines that it is not able, or that it is impractical, to issue commercial paper notes for any period of time, then the CP Rate shall be the Prime Rate. The CP Rate shall include all costs and expenses to Amsterdam of issuing the related commercial paper notes, including all dealer commissions and note issuance costs in connection therewith. "Credit Agreement" means that certain 5-Year Revolving Credit Agreement dated as of June 28, 2000, among the Parent, certain foreign subsidiaries, the lenders from time to time party thereto, Bank One, NA, as administrative agent, The Chase Manhattan Bank, as syndication agent, and Citicorp USA, Inc. and Bank of America, N.A., as documentation agents. "Credit and Collection Policy" means the Seller's credit and collection policy and practices relating to Receivables attached hereto as Exhibit H. "Deemed Collections" is defined in Section 1.5(b). "Default Ratio" means the average for the most recent three calendar month period, of the ratios for each calendar month in such period of (i) the aggregate outstanding balance of all Defaulted Receivables (minus Charge-Offs) for such calendar month to (ii) the sum of the aggregate outstanding balance of all Receivables at the end of such calendar month. "Defaulted Receivable" means any Receivable (a) on which any amount is unpaid more than 90 days past its original due date or (b) the Obligor on which has suffered a Bankruptcy Event. "Delinquency Ratio" means the average, for the most recent three calendar month period, of the ratios for each calendar month in such period of (a) the aggregate outstanding balance of all Delinquent Receivables on the last day of such calendar month to (b) the aggregate outstanding balance of all Receivables on the last day of such calendar month. -3- 48 "Delinquent Receivable" means any Receivable (other than a Defaulted Receivable), the outstanding balance on which any amount is 31 to 90 days past due. "Designated Financial Officer" means any Vice President and the Treasurer of the Seller. "Dilution Ratio" means the average, for the most recent three calendar month period, of the ratios for each calendar month in such period of (a) the aggregate amount of payments owed by the Seller pursuant to the first sentence of Section 1.5(b) during such calendar month to (b) the aggregate amount of Collections during such calendar month. "Dilution Reserve Percentage" means the greater of (i) 5% and (ii) the product of (a) the highest Dilution Ratio during the most recent twelve calendar months and (b) 3. "Discount" means, for any Tranche Period, (a) the product of (i) the Discount Rate for such Tranche Period, (ii) the total amount of Investment allocated to such Tranche Period, and (iii) the number of days elapsed during the Tranche Period divided by (b) 360. "Discount Period" means, with respect to any Settlement Date or the Liquidity Termination Date, the period from and including the preceding Settlement Date (or if none, the date that the first Incremental Purchase is made hereunder) to but not including such Settlement Date or Liquidity Termination Date, as applicable. "Discount Rate" means, for any Tranche Period, the CP Rate, the Eurodollar Rate or the Prime Rate, as applicable, but after the occurrence of a Termination Event each such rate shall be increased by 1.50% per annum with respect to the Investment of the Liquidity Provider, Amsterdam and the Enhancer. "Discount Reserve Percentage" means (a) the product of (i) the Prime Rate plus 1.50%, (ii) the average Receivables Turnover Ratio of the three calendar months preceding the date the Discount Rate Percentage is to be determined and (iii) 1.5 divided by (b) 360. "Downgrade" means, for any Person at any time, the downgrade of such Person's long-term unsecured, unsubordinated indebtedness by Moody's below "A3" or by S&P below "A-" (or Moody's or S&P has withdrawn or suspended such rating.). "Dollar" and "$" means lawful currency of the United States of America. "Early Payment Fee" means, if any Investment of a Purchaser allocated (or, in the case of a requested Purchase not made by the Committed Purchasers for any reason other than their default, scheduled to be allocated) to a Tranche Period for a CP Tranche or LIBOR Tranche is reduced or terminated before the last day of such Tranche Period (the amount of Investment so reduced or terminated being referred to as the "Prepaid Amount"), the cost to the relevant Purchaser of terminating or reducing such Tranche, which (a) for a CP Tranche means any compensation payable in prepaying the related commercial paper or, if not prepaid, any shortfall between the amount that will be available to Amsterdam on the maturity date of the related -4- 49 commercial paper from reinvesting the Prepaid Amount in Permitted Investments and the Face Amount of such commercial paper and (b) for a LIBOR Tranche will be determined based on the difference between the LIBOR applicable to such Tranche and the LIBOR applicable for a period equal to the remaining maturity of the Tranche on the date the Prepaid Amount is received. "Eligible Receivable" means, at any time, any Receivable: (i) the Obligor of which (a) is a resident of, or organized under the laws of, or with its chief executive office in, the USA; (b) is not an Affiliate of any of the parties hereto or any Originator; (c) is not a government or a governmental subdivision or agency; and (d) has not suffered a Bankruptcy Event; (ii) which is stated to be due and payable within 60 days after the invoice therefor; provided, however, up to 10% of the aggregate outstanding principal balance of all Eligible Receivables may be stated to be due and payable within 120 days after the invoice therefor; (iii) which is not a Defaulted Receivable, a Delinquent Receivable or a Charge-Off; (iv) which is an "account" or "chattel paper" within the meaning of Section 9-105 and Section 9-106, respectively of the UCC of all applicable jurisdictions; (v) which is denominated and payable only in Dollars in the USA; (vi) which arises under a contract that is in full force and effect and constitutes the legal, valid and binding obligation of the related Obligor enforceable against such Obligor in accordance with its terms subject to no offset, counterclaim, defense or other Adverse Claim, and is not an executory contract or unexpired lease within the meaning of Section 365 of the Bankruptcy Code; (vii) which arises under a contract that (A) contains an obligation to pay a specified sum of money, contingent only upon the sale or lease of goods or the provision of services by the Originator, (B) does not require the Obligor under such contract to consent to the transfer, sale or assignment of the rights of the related Originator under such contract, (C) does not contain a confidentiality provision that purports to restrict any Purchaser's exercise of rights under this Agreement, including, without limitation, the right to review such contract, and (D) directs that payment be made to a Lock-Box or other collection account; (viii) which does not, in whole or in part, contravene any law, rule or regulation applicable thereto (including, without limitation, those relating to usury, truth in lending, fair credit credit reporting, equal credit opportunity, fair debt collection billing, fair practices and privacy); -5- 50 (ix) which satisfies all applicable requirements of the Credit and Collection Policy and was generated in the ordinary course of the related Originator's business from the sale of goods or provision of services to a related Obligor solely by such Originator; (x) is not evidenced by any promissory note or other instrument; (xi) does not represent any amount due with respect to any sales or similar tax; (xii) is not a Changeover Receivable; and (xiii) is not due from any Obligor the Defaulted Receivables of which exceed 25% of such Obligor's Receivables. "Eligible Receivables Balance" means, at any time, the aggregate outstanding principal balance of all Eligible Receivables at such time, less the portion of the aggregate outstanding principal balance of (a) Eligible Receivables of any Obligor (other than a Special Obligor) at such time which exceed the Concentration Limit, and (b) Eligible Receivables of any Special Obligor which exceed the Special Limit, at such time. "Enhancer" is defined in the first paragraph hereof. "Enhancer Commitment Percentage" means ten percent (10%). "Eurodollar Rate" means, for any Tranche Period for a LIBOR Tranche, the sum of (a) LIBOR for such Tranche Period divided by 1 minus the "Reserve Requirement" plus (b) (i) for the Investment of a Liquidity Provider the amount specified in the Pricing Letter, or, (ii) for Investment of the Enhancer, the amount specified in the Fee Letter; where "Reserve Requirement" means, for any Tranche Period for a LIBOR Tranche, the maximum reserve requirement imposed during such Tranche Period on "eurocurrency liabilities" as currently defined in Regulation D of the Board of Governors of the Federal Reserve System. "Face Amount" means the face amount of any Amsterdam commercial paper issued on a discount basis or, if not issued on a discount basis, the principal amount of such note and interest scheduled to accrue thereon to its stated maturity. "Federal Funds Rate" means for any day the greater of (i) the average rate per annum as determined by ABN AMRO at which overnight Federal funds are offered to ABN AMRO for such day by major banks in the interbank market, and (ii) if ABN AMRO is borrowing overnight funds from a Federal Reserve Bank that day, the average rate per annum at which such overnight borrowings are made on that day. Each determination of the Federal Funds Rate by ABN AMRO shall be conclusive and binding on the Seller except in the case of manifest error. "Fee Letter" means the letter agreement, dated as of the date hereof, between the Seller and the Agent. The Fee Letter is a supplement hereto. -6- 51 "Funding Agreement" means any agreement or instrument executed by Amsterdam and executed by or in favor of any Amsterdam Funding Source or executed by any Amsterdam Funding Source at the request of Amsterdam (including the Program LOC). "Funding Charges" means, for any day, the product of (i) the per annum rate (inclusive of dealer fees and commissions) paid or payable by Amsterdam in respect of commercial paper notes on such day that are allocated, in whole or in part, to fund or maintain its Investment for such day, as determined by the Agent, and other costs allocated by a Purchaser to fund or maintain its Investment associated with the funding by Amsterdam of small or odd lot amounts that are not funded with commercial paper notes and (ii) Amsterdam's Investment as of the end of such day and (iii) 1/360. "GAAP" means generally accepted accounting principles in the USA, applied on a consistent basis. "Governmental Authority" means any (a) Federal, state, municipal or other governmental entity, board, bureau, agency or instrumentality, (b) administrative or regulatory authority (including any central bank or similar authority) or (c) court, judicial authority or arbitrator, in each case, whether foreign or domestic. "Incremental Purchase" is defined in Section 1.1(b). "Initial Collection Agent" is defined in the first paragraph hereof. "Instructing Group" means the Required Liquidity Providers, the Enhancer and, unless the Amsterdam Termination Date has occurred and Amsterdam has no Investment, Amsterdam. "Intended Tax Characterization" is defined in Section 9.18. "Interim Liquidation" means that no Reinvestment Purchases are made by any Purchaser at a time before the Liquidity Termination Date, as established pursuant to Section 1.2. "Investment" means, for each Purchaser, (a) the sum of (i) all Incremental Purchases by such Purchaser and (ii) the aggregate amount of any payments or exchanges made by, or on behalf of, such Purchaser to any other Purchaser to acquire Investment from such other Purchaser minus (b) all Collections, amounts received from other Purchasers, and other amounts received or exchanged and, in each case, applied by the Agent or such Purchaser to reduce such Purchaser's Investment pursuant to this Agreement. A Purchaser's Investment shall be restored to the extent any amounts so received or exchanged and applied are rescinded or must be returned for any reason. "Letter Agreement" means that certain Letter Agreement dated as of March 30, 2001 between ArvinMeritor, Inc. and the Originators. "LIBOR" means, for any Tranche Period for a LIBOR Tranche or other time period, the rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a -7- 52 percentage point) for deposits in Dollars for a period equal to such Tranche Period or other period, which appears on Page 3750 of the Telerate Service (or any successor page or successor service that displays the British Bankers' Association Interest Settlement Rates for Dollar deposits) as of 11:00 a.m. (London, England time) two Business Days before the commencement of such Tranche Period or other period. If for any Tranche Period for a LIBOR Tranche no such displayed rate is available (or, for any other period, if such displayed rate is not available or the need to calculate LIBOR is not notified to the Agent at least 3 Business Days before the commencement of the period for which it is to be determined), the Agent shall determine such rate based on the rates ABN AMRO is offered deposits of such duration in the London interbank market. "Limited Guaranty" means the Limited Guaranty, dated the date hereof, by the Parent in favor of the Agent. "Liquidation Period" for any Purchaser means all times (x) during an Interim Liquidation and (y) on and after the Liquidity Termination Date and, for Amsterdam only, also means all times when Amsterdam is not making Reinvestment Purchases pursuant to Section 1.1(d). "Liquidity Providers" is defined in the first paragraph hereof. "Liquidity Termination Date" means the earliest of (a) the date of the occurrence of a Termination Event described in clause (e) of the definition of Termination Event, (b) the date designated by the Agent to the Seller at any time after the occurrence of any other Termination Event, (c) the Business Day designated by the Seller with no less than thirty (30) Business Days prior notice to the Agent and (d) March 29, 2002. "Lock-Box" means each post office box or bank box listed on Exhibit E, as revised pursuant to Section 5.1(i). "Lock-Box Account" means each account maintained by the Seller at a Lock-Box Bank for the purpose of receiving or concentrating Collections. "Lock-Box Agreement" means each agreement between the Seller, Originator and a Lock-Box Bank concerning a Lock-Box Account. "Lock-Box Bank" means each bank listed on Exhibit E, as revised pursuant to Section 5.1(i). "Lock-Box Letter" means a letter in substantially the form of Exhibit F (or otherwise acceptable to the Agent) from the Seller or an Originator to each Lock-Box Bank, acknowledged and accepted by such Lock-Box Bank and the Agent. "Loss Reserve Percentage" means the greater of (i) 12.5% and (ii) the highest Delinquency Ratio during the most recent twelve calendar months times 4. -8- 53 "Loss-to-Liquidation Ratio" means, for the most recent calendar month, the ratio of the outstanding balance of Receivables that become Charge-Offs during such month to the aggregate amount of Collections during such calendar month. "Matured Aggregate Investment" means, at any time, the Matured Value of Amsterdam's Investment plus the total Investments of all other Purchasers then outstanding. "Matured Value" means, of any Investment, the sum of such Investment and all unpaid Discount, fees and other amounts scheduled to become due (whether or not then due) on such Investment during all Tranche Periods to which any portion of such Investment has been allocated. "Maximum Incremental Purchase Amount" means, at any time, the lesser of (a) the difference between the Purchase Limit and the Aggregate Investment then outstanding and (b) the difference between the Aggregate Commitment and the Matured Aggregate Investment then outstanding. "Maximum Receivables Turnover Ratio" is defined in clause (f) of the definition of "Termination Event" herein. "Moody's" means Moody's Investors Service, Inc. "Net Worth" means, at any time the same is to be determined, the total shareholders' equity (including capital stock, additional paid-in capital and retained earnings after deducting treasury stock) which would appear on the balance sheet of the Seller determined in accordance with GAAP. "Obligor" means, for any Receivable, each Person obligated to pay such Receivable and each guarantor of such obligation. "Originator" means Arvin Exhaust LLC, an Indiana limited liability company, Maremont Exhaust Products, Inc., a Delaware corporation, Purolater Products NA, Inc., a Delaware corporation, and Gabriel Ride Control Products, Inc., a Delaware corporation. "Outside Servicing Fee" means the fee agreed to by the Collection Agent, the Seller and the Agent. "Parent" means ArvinMeritor, Inc., an Indiana corporation. "Periodic Report" is defined in Section 3.3. "Permitted Investments" means (a) evidences of indebtedness, maturing within thirty (30) days after the date of purchase thereof, issued by, or guaranteed by the full faith and credit of, the federal government of the USA, (b) repurchase agreements with banking institutions or broker-dealers registered under the Securities Exchange Act of 1934 which are fully secured by obligations of the kind specified in clause (a), (c) money market funds (i) rated not lower than -9- 54 the highest rating category from Moody's and "AAA m" or "AAAm-g," from S&P or (ii) which are otherwise acceptable to the Rating Agencies or (d) commercial paper issued by any corporation incorporated under the laws of the USA and rated at least "A-1" (or the equivalent) by S&P and at least "P-1" (or the equivalent) by Moody's. "Person" means an individual, partnership, corporation, limited liability company, association, joint venture, Governmental Authority or other entity of any kind. "Potential Termination Event" means any Termination Event or any event or condition that with the lapse of time or giving of notice, or both, would constitute a Termination Event. "Pricing Letter" means the letter agreement, dated as of the date hereof, between the Seller and the Agent. The Pricing Letter is a supplement hereto. "Prime Rate" means, for any period, the daily average during such period of the greater of (a) the floating commercial loan rate per annum of ABN AMRO (which rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer by ABN AMRO) announced from time to time as its prime rate or equivalent for Dollar loans in the USA, changing as and when said rate changes and (b) the Federal Funds Rate plus 0.50%. "Program LOC" means that certain amended and restated irrevocable transferable letter of credit No. S579017, dated June 11, 1997, issued by the Enhancer at the request of Amsterdam, and each letter of credit issued in substitution or replacement therefor. "Program Unreimbursed Draw Amount" means the sum of all draws under the Program LOC in connection with this transaction which have not been reimbursed (whether through the payment of cash or the exchange of assets), together with all interest thereon and all other amounts, if any, payable in connection therewith. "Purchase" is defined in Section 1.1(a). "Purchase Agreement" means the Purchase and Sale Agreement dated as of the date hereof between the Seller and the Originators. "Purchase Amount" is defined in Section 1.1(c). "Purchase Date" is defined in Section 1.1(c). "Purchase Interest" means, for a Purchaser, the percentage ownership interest in the Receivables and Collections held by such Purchaser, calculated when and as described in Section 1.1(a); provided, however, that (except for purposes of computing a Purchase Interest or the Sold Interest in Section 1.5 or 1.7) at any time the Sold Interest would otherwise exceed 100% each Purchaser then holding any Investment shall have its Purchase Interest reduced by multiplying such Purchase Interest by a fraction equal to 100% divided by the Sold Interest otherwise then in effect, so that the Sold Interest is thereby reduced to 100%. -10- 55 "Purchase Limit" means as of any day, the Aggregate Commitment multiplied by 1/1.02. "Purchased Percentage" means, for any Put, for each Committed Purchaser, its Ratable Share or such lesser percentage as is necessary to prevent the Purchase Price of such Purchaser from exceeding its Unused Commitment (unless, in the case of the Enhancer, it elects not to reduce its Purchased Percentage in whole or in part). "Purchaser Reserve Percentage" means, for each Purchaser, the Total Reserve multiplied by a fraction, the numerator of which is such Purchaser's outstanding Investment and the denominator of which is the Aggregate Investment. "Purchasers" means the Liquidity Providers, the Enhancer and Amsterdam. "Put" is defined in Section 2.l(a). "Ratable Share" means, for each Committed Purchaser, such Purchaser's Commitment divided by the Aggregate Commitment. If, however, on the date any Incremental Purchase or payment for any Put is to be made by the Committed Purchasers, the aggregate amount of the outstanding Investment plus Program Unreimbursed Draw Amount of the Enhancer exceeds its Ratable Share of the outstanding Investment of all Committed Purchasers and Program Unreimbursed Draw Amount of the Enhancer, then for purposes of such Incremental Purchase or Put the Ratable Share of each Committed Purchaser shall be replaced with a percentage equal for each Committed Purchaser to (a) its Commitment minus its Investment before such Purchase or Put and Program Unreimbursed Draw Amount before such Purchase or Put (its "Existing Investment") divided by (b) the Aggregate Commitment minus the sum of the Existing Investments of all Committed Purchasers. "Rating Agency" means Moody's, S&P and any other rating agency Amsterdam chooses to rate its commercial paper notes. "Ratings" means the ratings by the Rating Agencies of the indebtedness for borrowed money of Amsterdam. "Receivable" means the obligation of an Obligor to pay for merchandise sold or services rendered by an Originator and includes the Seller's rights to payment of any interest or finance charges and in the merchandise (including returned goods) and contracts relating to such Receivable, all security interests, guaranties and property securing or supporting payment of such Receivable, all Records and all proceeds of the foregoing. During any Interim Liquidation and on and after the Liquidity Termination Date, the term "Receivable" shall only include receivables existing on the date such Interim Liquidation commenced or Liquidity Termination Date occurred, as applicable. Deemed Collections shall reduce the outstanding balance of Receivables hereunder, so that any Receivable that has its outstanding balance deemed collected shall cease to be a Receivable hereunder after (x) the Collection Agent receives payment of such Deemed Collections under Section 1.5(b) or (y) if such Deemed Collection is received before the Liquidity Termination Date, an adjustment to the Sold Interest permitted by Section 1.5(c) is made. -11- 56 "Receivables Turnover Ratio" means, with respect to a calendar month, an amount, expressed in days, obtained by multiplying (a) a fraction, (i) the numerator of which is equal to the aggregate outstanding principal balance of all Receivables as of the first day of such calendar month and (ii) the denominator of which is equal to Collections during the same such calendar month; times (b) 30. "Records" means, for any Receivable, all contracts, books, records and other documents or information (including computer programs, tapes, disks, software and related property and rights) relating to such Receivable or the related Obligor. "Reinvestment Purchase" is defined in Section 1.1(b). "Related Security" means all of each Originator's rights in the merchandise (including returned goods) and contracts relating to the Receivables, all security interests, guaranties and property securing or supporting payment of the Receivables, all Records and all proceeds of the foregoing. "Required Liquidity Providers" means Liquidity Providers having Liquidity Provider Commitments in excess of 66-2/3% of the Commitment of all Liquidity Providers or, if the Commitments of all Liquidity Providers shall then have been terminated, such Liquidity Providers as together shall then own in excess of sixty-six and two-thirds percent (66-2/3%) of the sum of the Investments for all the Liquidity Providers at such time. For purposes of this definition, prior to the Liquidity Termination Date, any Liquidity Provider that has funded a Collateral Account pursuant to Section 4.12(e) of the Transfer Agreement shall be deemed to have a Commitment equal to the sum of the amount on deposit in such Collateral Account (less any earnings therein) plus the outstanding amount of such Liquidity Provider's Investment. "Reserve Percentage" means, at any time, the quotient obtained by dividing (a) the Total Reserve by (b) the Eligible Receivables Balance. "Seller" is defined in the first paragraph hereof. "Seller Account" means an account designated by the Seller to the Agent with at least ten (10) days prior notice. "Seller Entity" means the Parent and each Originator. "Seller Servicing Fee" means, for each month, the fee agreed to by the Collection Agent, the Seller and the Agent. "Servicer Reserve Percentage" means the greater of (i) the Seller Servicing Fee or the Outside Servicing Fee, as applicable, and (ii) 0.50%. "Settlement Date" means the 20th day of each calendar month. -12- 57 "Sold Interest" is defined in Section 1.1(a); provided, however, that the Sold Interest shall not exceed one hundred percent (100%). "Special Limit" means an amount not to exceed 50% of the aggregate outstanding principal balance of all Eligible Receivables for the Special Obligors. "Special Obligors" means Ford Motor Company, General Motors Corporation and Daimler Chrysler Corporation; provided, however, that if at any time any such entity becomes subject to a Downgrade, such entity shall no longer be treated as a Special Obligor hereunder. "Special Transaction Subaccount" means the special transaction subaccount established for this Agreement pursuant to Amsterdam's depositary agreement. "S&P" means Standard & Poor's Ratings Services. "Subordinated Note" means each revolving promissory note issued by the Seller to an originator under the Purchase Agreement. "Subsidiary" means any Person of which at least a majority of the voting stock (or equivalent equity interests) is owned or controlled by the Parent or any Originator or by one or more other Subsidiaries of the Parent or any Originator. "Taxes" means all taxes, charges, fees, levies or other assessments (including income, gross receipts, profits, withholding, excise, property, sales, use, license, occupation and franchise taxes and including any related interest, penalties or other additions) imposed by any jurisdiction or taxing authority (whether foreign or domestic). "Termination Date" means (a) for Amsterdam, the Amsterdam Termination Date and (b) for the Liquidity Providers and the Enhancer, the Liquidity Termination Date. "Termination Event" means the occurrence of any one or more of the following: (a) any representation, warranty, certification or statement made, or deemed made by the Seller, the Parent or the Collection Agent in, or pursuant to, any Transaction Document proves to have been incorrect in any material respect when made or deemed made; or (b) the Collection Agent or the Seller fails to make any payment or other transfer of funds hereunder within five (5) Business Days when due; or (c) the Seller fails to observe or perform any covenant or agreement contained in Sections 5.1(b), (g), (i), (j) and (k), the Collection Agent fails to observe or perform any covenant or agreement contained in Sections 5.2(b), (g), (i) and (j) or an Originator fails to perform any covenant or agreement in Sections 5.1(b), (g), (h), (i) and (j) of the Purchase Agreement; or -13- 58 (d) the Seller or the Collection Agent (or any sub-collection agent) fails to observe or perform any other term, covenant or agreement under any Transaction Document, and such failure remains unremedied for ten Business Days; or (e) the Seller, the Collection Agent, any Seller Entity or any Subsidiary suffers a Bankruptcy Event; or (f) the Delinquency Ratio exceeds 6%, the Default Ratio exceeds 6%, the Dilution Ratio exceeds 10%, the Loss-to Liquidation Ratio exceeds 2.5% or the Average Receivables Turnover Ratio exceeds 90 days; or (g) (i) the Seller, any Seller Entity or any Affiliate, directly or indirectly, disaffirms or contests the validity or enforceability of any Transaction Document or (ii) any Transaction Document fails to be the enforceable obligation of the Seller, any Seller Entity or any Affiliate party thereto; or (h) the Seller, any Seller Entity or any Subsidiary generally does not pay its debts as such debts become due or admits in writing its inability to pay its debts generally; or (i) the occurrence of any event or the existence of any condition which is specified as a Default under the Credit Agreement shall constitute a "Termination Event" hereunder (regardless of whether any indebtedness is now or hereafter remains outstanding thereunder or whether the Credit Agreement shall have terminated); or (j) (i) the Parent's long-term unsecured, unsubordinated indebtedness is rated less than "BBB-" by S&P and "Baa3" by Moody's (or S&P and Moody's has withdrawn or suspended such ratings) or (ii) the Parent's long-term unsecured, unsubordinated indebtedness is rated less than "BB+" by S&P or "Ba1" by Moody's (or S&P or Moody's has withdrawn or suspended such rating); or (k) the Parent shall fail to own and control, directly or indirectly, 100% of the outstanding voting stock of the Seller and each Originator. Notwithstanding the foregoing, a failure of a representation or warranty or breach of any covenant described in clause (a), (c) or (d) above shall not constitute a Termination Event if the Seller has been deemed to have collected the affected Receivable pursuant to Section 1.5(b). "Total Reserve" means an amount equal to the sum of (i) the Discount Reserve Percentage multiplied by the Aggregate Commitment, (ii) the Dilution Reserve Percentage multiplied by the Eligible Receivables Balance, (iii) the Loss Reserve Percentage multiplied by the Eligible Receivables Balance and (iv) the Servicing Reserve Percentage multiplied by the Eligible Receivables Balance. "Tranche" means a portion of the Investment of a Amsterdam or of the Committed Purchasers allocated to a Tranche Period pursuant to Section 1.3. A Tranche is a (i) CP Tranche, -14- 59 (ii) LIBOR Tranche or (iii) Prime Tranche depending whether Discount accrues during its Tranche Period based on a (i) CP Rate, (ii) Eurodollar Rate or (iii) Prime Rate. "Tranche Period" means a period of days ending on a Business Day selected pursuant to Section 1.3, which (i) for a CP Tranche shall not exceed 270 days, (ii) for a LIBOR Tranche shall not exceed 180 days, and (iii) for a Prime Tranche shall not be less than 2 days and shall not exceed 30 days. "Transaction Documents" means this Agreement, the Fee Letter, the Limited Guaranty, the Pricing Letter, the Purchase Agreement, the Subordinated Note(s), the Transfer Agreement and all other documents, instruments and agreements executed or furnished in connection herewith and therewith. "Transfer Agreement" means the Amsterdam Transfer Agreement dated the date hereof between Amsterdam, ABN AMRO Bank N.V., in its capacity as the Amsterdam Agent, Amsterdam's Letter of Credit Provider and a Liquidity Provider and the Other Persons who become Liquidity Providers thereunder. "Transfer Supplement" is defined in Section 9.8. "UCC" means, for any state, the Uniform Commercial Code as in effect in such state. "USA" means the United States of America (including all states and political subdivisions thereof). "Unused Aggregate Commitment" means, at any time, the difference between the Aggregate Commitment then in effect and the outstanding Matured Aggregate Investment. "Unused Commitment" means, for any Committed Purchaser at any time, the difference between its Commitment and its Investment then outstanding. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. Unless otherwise inconsistent with the terms of this Agreement, all accounting terms used herein shall be interpreted, and all accounting determinations hereunder shall be made, in accordance with GAAP. Amounts to be calculated hereunder shall be continuously recalculated at the time any information relevant to such calculation changes. -15- 60 SCHEDULE II LIQUIDITY PROVIDERS AND COMMITMENTS OF COMMITTED PURCHASERS
NAME OF LIQUIDITY PROVIDER COMMITMENT -------------------------- ---------- ABN AMRO Bank N.V. $91,800,000 ENHANCER ABN AMRO Bank N.V. $10,200,000
EX-10.(B) 4 k62395ex10-b.txt PURCHASE AND SALE AGREEMENT 1 EXHIBIT 10(b) ================================================================================ PURCHASE AND SALE AGREEMENT Dated as of March 30, 2001 among ARVIN EXHAUST LLC, GABRIEL RIDE CONTROL PRODUCTS, INC, MAREMONT EXHAUST PRODUCTS, INC., and PUROLATOR PRODUCTS NA, INC., as Originators, and ARVINMERITOR RECEIVABLES CORPORATION, as Buyer ================================================================================ 2 TABLE OF CONTENTS
SECTION HEADING PAGE SECTION 1. DEFINITIONS AND RELATED MATTERS.....................................................................1 Section 1.1. Defined Terms......................................................................1 Section 1.2. Other Interpretive Matters.........................................................1 SECTION 2. AGREEMENT TO CONTRIBUTE, PURCHASE AND SELL..........................................................2 Section 2.1. Purchase and Sale..................................................................2 Section 2.2. Timing of Contribution, Purchases..................................................2 Section 2.3. Purchase Price.....................................................................2 Section 2.4. No Recourse or Assumption of Obligations...........................................3 SECTION 3. ADMINISTRATION AND COLLECTION.......................................................................3 Section 3.1. Collection Agent...................................................................3 Section 3.2. Deemed Collections.................................................................3 Section 3.3. Application of Collections.........................................................4 Section 3.4. Responsibilities of Originator.....................................................4 SECTION 4. REPRESENTATIONS AND WARRANTIES......................................................................4 Section 4.1. Mutual Representations and Warranties..............................................4 Section 4.2. Additional Representations by Each Originator......................................5 SECTION 5. GENERAL COVENANTS...................................................................................6 Section 5.1. Covenants..........................................................................6 Section 5.2. Organizational Separateness.......................................................10 SECTION 6. TERMINATION OF PURCHASES...........................................................................10 Section 6.1. Voluntary Termination.............................................................10 Section 6.2. Automatic Termination.............................................................10 SECTION 7. INDEMNIFICATION....................................................................................10 Section 7.1. Originators' Indemnity............................................................10 Section 7.2. Indemnification Due to Failure to Consummate Purchase.............................11 Section 7.3. Other Costs....................................................................... SECTION 8. MISCELLANEOUS ..................................................................................11 Section 8.1. Amendments, Waivers, etc..........................................................11 Section 8.2. Assignment of Receivables Purchase Agreement......................................12 Section 8.3. Binding Effect; Assignment.......................................................12 Section 8.4. Survival..........................................................................12
-i- 3 Section 8.5. Costs, Expenses and Taxes.........................................................12 Section 8.6. Execution in Counterparts; Integration............................................13 Section 8.7. Governing Law; Submission to Jurisdiction.........................................13 Section 8.8. No Proceedings....................................................................13 Section 8.9. Loans by Buyer to Originators....................................................13 Section 8.10. Notice............................................................................13 Section 8.11. Entire Agreement..................................................................13 SIGNATURE.........................................................................................................1
Exhibit A Purchase Price -ii- 4 THIS PURCHASE AND SALE AGREEMENT dated as of March 30, 2001 (this "Agreement") is among ARVIN EXHAUST LLC, an Indiana limited liability company, GABRIEL RIDE CONTROL PRODUCTS, INC., a Delaware corporation, MAREMONT EXHAUST PRODUCTS, INC. a Delaware corporation and PUROLATOR PRODUCTS NA, INC., a Delaware corporation (each an "Originator" and collectively, the "Originators"), and ARVINMERITOR RECEIVABLES CORPORATION, a Delaware corporation ("Buyer"). The parties agree as follows: SECTION 1. DEFINITIONS AND RELATED MATTERS. Section 1.1. Defined Terms. In this Agreement, unless otherwise specified or defined herein: (a) capitalized terms are used as defined in Schedule I to the Receivables Sale Agreement dated as of the date hereof (as amended or modified from time to time, the "Second Tier Agreement") among Buyer, ArvinMeritor, Inc., as collection agent (the "Initial Collection Agent"), Amsterdam Funding Corporation, the liquidity providers party thereto, and ABN AMRO Bank N.V. as the Enhancer and the Agent, as such agreement may be amended or modified from time to time; and (b) terms defined in Article 9 of the UCC and not otherwise defined herein are used as defined in such Article 9 as in effect on the date hereof. In addition, the following terms will have the meanings specified below: "Available Funds" is defined in Section 2.3(b) hereof. "Closing Date" means the date on which this Agreement and the Second Tier Agreement become effective in accordance with their terms. "Excluded Losses" is defined in Section 7.1 hereof. "Initial Funding Date" means March 30, 2001. "Settlement Date" means, with respect to any Settlement Period, the twentieth day of the immediately succeeding calendar month (or, if such day is not a Business Day, the next preceding Business Day). "Settlement Period" means a calendar month (or, in the case of the first Settlement Period, the period from the Initial Funding Date to the end of the next succeeding calendar month following the calendar month in which the Initial Funding Date occurs). "Trigger Event" means that (x) the outstanding principal amount of the Subordinated Note exceeds the value of Buyer's interest in the Receivables (determined in accordance with GAAP), and (y) such condition has continued for five Business Days. Section 1.2. Other Interpretive Matters. In this Agreement, unless otherwise specified: (a) references to any Section or Annex refer to such Section of, or Annex to, this Agreement, and references in any Section or definition to any subsection or clause refer to such subsection or clause of such Section or definition; (b) "herein," "hereof," "hereto," "hereunder" and similar 5 terms refer to this Agreement as a whole and not to any particular provision of this Agreement; (c) "including" means including without limitation, and other forms of the verb "to include" have correlative meanings; (d) the word "or" is not exclusive; and (e) captions are solely for convenience of reference and shall not affect the meaning of this Agreement. SECTION 2. AGREEMENT TO CONTRIBUTE, PURCHASE AND SELL. Section 2.1. Purchase and Sale. On the terms and subject to the conditions set forth in this Agreement, each Originator hereby sells to Buyer, and Buyer hereby purchases from each Originator, all of such Originator's right, title and interest in, to and under the Receivables originated by such Originator, all Related Security and all proceeds thereof (including all Collections with respect thereto), in each case whether now existing or hereafter arising or acquired. Section 2.2. Timing of Contribution, Purchases. All of the remaining Receivables and Related Security existing at the opening of the Originators' business on the Initial Funding Date are hereby sold to Buyer as of the Initial Funding Date. After the Initial Funding Date, each Receivable and Related Security shall be deemed to have been sold to Buyer immediately (and without further action by any Person) upon the creation of such Receivable. The proceeds with respect to each Receivable (including all Collections with respect thereto) shall be sold at the same time as such Receivable, whether such proceeds (or Collections) exist at such time or arise or are acquired thereafter. Section 2.3. Purchase Price. (a) The aggregate purchase price for the Receivables originated by an Originator sold on the Initial Funding Date shall be such amount as agreed upon prior to the Initial Funding Date between such Originator and Buyer to be the fair market value of such Receivables on such date, which shall equal the excess of the (i) estimated aggregate outstanding balance of such Receivables over (ii) an amount agreed upon by Buyer and such Originator representing the uncertainty of payment and cost of purchase of such Receivables. The purchase price for Receivables subsequently sold during any Settlement Period shall be calculated in accordance with the provisions set forth in Exhibit A hereto. (b) On the Initial Funding Date, Buyer shall pay each Originator the purchase price for the Receivables originated by it sold on that date. On each Business Day after the Initial Funding Date on which an Originator sells any Receivables originated by it to Buyer pursuant to the terms of Section 2.1, until the termination of the purchase and sale of Receivables under Section 6 hereof, Buyer shall pay to such Originator the purchase price of such Receivables (i) by depositing into such account as such Originator shall specify immediately available funds from monies then held by or on behalf of Buyer solely to the extent that such monies do not constitute Collections that are required to be identified or are deemed to be held by the Collection Agent pursuant to the Second Tier Agreement for the benefit of, or required to be distributed to, the Agent or the Purchasers pursuant to the Second Tier Agreement or required to be paid to the Collection Agent as the Collection Agent Fee, or otherwise necessary to pay current expenses of Buyer (in its reasonable discretion) (such available monies, the "Available Funds") and provided that such Originator has paid all amounts then due by such Originator hereunder or (ii) by increasing the principal amount owed to such Originator under a promissory note (as amended or -2- 6 modified from time to time, each a "Subordinated Note" and collectively the "Subordinated Notes") executed and delivered by Buyer to the order of such Originator as of the Initial Funding Date. The outstanding principal amount owed to an Originator under the related Subordinated Note may be reduced from time to time as provided in Section 3.2 hereof or by payments made by Buyer from Available Funds, provided that such Originator has paid all amounts then due by such Originator hereunder. Each Originator shall make all appropriate record keeping entries with respect to amounts due to such Originator under the related Subordinated Note to reflect payments by Buyer thereon and increases of the principal amount thereof, and such Originator's books and records shall constitute rebuttable presumptive evidence of the principal amount of and accrued interest owed to such Originator under the related Subordinated Note. Section 2.4. No Recourse or Assumption of Obligations. Except as specifically provided in this Agreement, the contribution, purchase and sale of Receivables under this Agreement shall be without recourse to the Originators. Each Originator and Buyer intend the transactions hereunder to constitute true sales of Receivables by such Originator to Buyer, providing Buyer with the full risks and benefits of ownership of the Receivables originated by such Originator (such that the Receivables would not be property of such Originator's estate in the event of such Originator's bankruptcy). If, however, despite the intention of the parties, the conveyances provided for in this Agreement are determined not to be "true sales" of Receivables from the Originators to Buyer, then this Agreement shall also be deemed to be a "security agreement" within the meaning of Article 9 of the UCC and each Originator hereby grants to Buyer a "security interest" within the meaning of Article 9 of the UCC in all of such Originator's right, title and interest in and to the Receivables (including the proceeds thereof) originated by it, now existing and thereafter created, to secure a loan in an amount equal to the aggregate purchase prices therefor and each of such Originator's other payment obligations under this Agreement. Buyer shall not have any obligation or liability with respect to any Receivable, nor shall Buyer have any obligation or liability to any Obligor or other customer or client of an Originator (including any obligation to perform any of the obligations of such Originator under any Receivable). SECTION 3. ADMINISTRATION AND COLLECTION. Section 3.1. Collection Agent. The Initial Collection Agent shall be responsible for the servicing, administration and collection of the Receivables, all on the terms set out in (and subject to any rights to terminate the Initial Collection Agent as Collection Agent pursuant to) the Second Tier Agreement. Pursuant to the terms of the Second Tier Agreement, the Initial Collection Agent has the right to appoint an Affiliate of the Initial Collection Agent to perform certain services set forth in Article III of the Second Tier Agreement. The Initial Collection Agent has appointed each Originator as a sub-collection agent with respect to the Receivables originated by it to perform certain duties as more fully set forth in the Letter Agreement. Section 3.2. Deemed Collections. If on any day the outstanding balance of a Receivable is reduced or cancelled as a result of any defective or rejected goods or services, any cash discount or adjustment (including any adjustment resulting from the application of any special refund or other discounts or any reconciliation), any setoff or credit (whether such claim or credit -3- 7 arises out of the same, a related, or an unrelated transaction) or other reason not arising from the financial inability of the Obligor to pay undisputed indebtedness, (i) the applicable Originator shall be deemed to have received on such day a Collection on such Receivable in the amount of such reduction or cancellation and (ii) such Receivable shall thereupon be, or be deemed to be reconveyed to an Originator. If on any day any representation, warranty, covenant or other agreement of an Originator related to a Receivable is not true or is not satisfied, (i) such Originator shall be deemed to have received on such day a Collection in the amount of the outstanding balance of such Receivable and (ii) such Receivable shall thereupon be, or be deemed to be reconveyed to such Originator. Not later than the first Settlement Date after an Originator is deemed pursuant to this Section 3.2 to have received any Collections, such Originator shall transfer to Buyer, in immediately available funds, the amount of such deemed Collections; provided, however, that if no such application is required under the Second Tier Agreement, Buyer and such Originator may agree to reduce the outstanding principal amount of the Subordinated Note in lieu of all or part of such transfer. To the extent that Buyer subsequently collects any payment with respect to any such "receivable," Buyer shall pay the applicable Originator an amount equal to the amount so collected, such amount to be payable not later than the first Settlement Date after Buyer has so collected such amount. Section 3.3. Application of Collections. Any payment by an Obligor in respect of any indebtedness owed by it to the related Originator shall, except as otherwise specified by such Obligor (including by reference to a particular invoice), or required by the related contracts or law, be applied, first, as a Collection of any Receivable or Receivables then outstanding of such Obligor in the order of the age of such Receivables, starting with the oldest of such Receivables, and, second, to any other indebtedness of such Obligor to such Originator. Section 3.4. Responsibilities of Originator. Each Originator shall pay when due all Taxes payable in connection with the Receivables originated by it or their creation or satisfaction. Each Originator shall perform all of its obligations under agreements related to the Receivables originated by it to the same extent as if interests in such Receivables had not been transferred hereunder. The Agent's or any Purchaser's exercise of any rights hereunder or under the Second Tier Agreement shall not relieve any Originator from such obligations. Neither the Agent nor any Purchaser shall have any obligation to perform any obligation of any Originator in connection with the Receivables. SECTION 4. REPRESENTATIONS AND WARRANTIES. Section 4.1. Mutual Representations and Warranties. Each of the Originators and Buyer represents and warrants to the others as follows: (a) Existence and Power. It is a corporation or limited liability company, as applicable, duly organized, validly existing and in good standing under the laws of its state of organization and has all company power and authority and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted, except where failure to obtain such license, authorization, consent or approval would not have a material adverse effect on (i) its ability to perform its obligations under, or the enforceability of, any Transaction -4- 8 Document to which it is a party, (ii) its business or financial condition, (iii) the interests of Buyer or its assigns under the Transaction Documents or (iv) the enforceability or collectibility of a material portion of the Receivables. (b) Authorization and No Contravention. Its execution, delivery and performance of each Transaction Document to which it is a party (i) are within its powers, (ii) have been duly authorized by all necessary company action, (iii) do not contravene or constitute a default under: (A) any applicable law, rule or regulation, (B) its charter or by-laws or operating agreement, as applicable, or (C) any material agreement, order or other instrument to which it is a party or its property is subject and (iv) will not result in any Adverse Claim on any Receivable, Related Security or Collection or give cause for the acceleration of any of its indebtedness. (c) No Consent Required. Other than the filing of financing statements no approval, authorization or other action by, or filings with, any Governmental Authority or other Person is required in connection with the execution, delivery and performance by it of any Transaction Document to which it is a party or any transaction contemplated thereby. (d) Binding Effect. Each Transaction Document to which it is a party constitutes the legal, valid and binding obligation of such Person enforceable against that Person in accordance with its terms, except as limited by bankruptcy, insolvency, or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally and subject to general principles of equity. Section 4.2. Additional Representations by Each Originator. Each Originator further represents and warrants to Buyer as follows: (a) Perfection of Ownership Interest. Immediately preceding its sale of Receivables to Buyer, such Originator was the owner of, and effectively sold, such Receivables to Buyer, free and clear of any Adverse Claim. Buyer owns the Receivables free of any Adverse Claim other than the interests of the Purchasers and the Agent therein that are created by the Second Tier Agreement and, in the case of Receivables not designated as Eligible Receivables, other Adverse Claims. (b) Accuracy of Information. All information furnished by each Originator in writing in connection with any Transaction Document, or any transaction contemplated thereby, is true and accurate in all material respects (and was not incomplete by omitting to state a material fact necessary to make such information not materially misleading). (c) No Actions, Suits. There are no actions, suits or other proceedings (including matters relating to environmental liability) pending or threatened against or affecting any Originator or any of its properties, that (i) if adversely determined (individually or in the aggregate), is likely to have a material adverse effect on the financial condition of the Parent and its subsidiaries, on a consolidated basis or on the collectibility of a material portion of the Receivables or (ii) involve any Transaction -5- 9 Document or any transaction contemplated thereby. No Originator is in default of any contractual obligation or in violation of any material order, rule or regulation of any Governmental Authority, which default or violation is likely to have a material adverse effect upon (i) the financial condition of the Parent and its subsidiaries, on a consolidated basis or (ii) the collectibility of a material portion of the Receivables. (d) No Material Adverse Change. Since December 31, 2000, there has been no material adverse change in (i) such Originator's financial condition, business, operations or prospects or (ii) such Originator's ability to perform its obligations under any Transaction Document. (e) Accuracy of Exhibits. All information on Exhibits E and F of the Second Tier Agreement (to the extent describing an Originator) is true and complete, subject to any changes permitted by, and notified to the Agent in accordance with the Second Tier Agreement. (f) Sales by Originator. Each sale by such Originator to Buyer of an interest in Receivables has been made for "reasonably equivalent value" (as such term is used in Section 548 of the Bankruptcy Code) and not for or on account of "antecedent debt" (as such term is used in Section 547 of the Bankruptcy Code) owed by such Originator to Buyer. SECTION 5. GENERAL COVENANTS. Section 5.1. Covenants. Each Originator hereby covenants and agrees to comply with the following covenants and agreements, unless Buyer (with the consent of the Agent) shall otherwise consent: (a) Financial Reporting. Each Originator will maintain a system of accounting established and maintained in accordance with GAAP and will furnish to Buyer: (i) Within 120 days after each fiscal year of the Parent copies of Parent's annual audited financial statements (including a consolidated balance sheet, consolidated statement of income and retained earnings and statement of cash flows, with related footnotes) certified by Deloitte & Touche or other independent certified public accountants of nationally recognized standing and prepared on a consolidated basis in conformity with GAAP; (ii) Within 45 days after each (except the last) fiscal quarter of each fiscal year of the Parent, copies of the Parent's unaudited financial statements (including at least a consolidated balance sheet as of the close of such quarter and statements of earnings and sources and applications of funds for the period from the beginning of the fiscal year to the close of such quarter) certified by the chief financial officer and prepared in a manner consistent with the financial statements described in part (A) of clause (i) of this Section 5.1(a); -6- 10 (iii) copies of all financial statements, reports and returns which the Parent shall send to its stockholders; (iv) Promptly upon becoming available, a copy of each report or proxy statement filed by the Parent with the Securities and Exchange Commission or any securities exchange; and (v) with reasonable promptness such other information (including non-financial information) as Buyer may reasonably request. (b) Notices. Promptly and in any event within three Business Days after a Responsible Officer of an Originator obtains knowledge of any of the following, such Originator will notify Buyer and provide a description of: (i) Potential Termination Events. The occurrence of any Potential Termination Event; (ii) Representations and Warranties. The failure of any representations or warranty herein to be true when made in any material respect; (iii) Litigation. The institution of any litigation, arbitration proceeding or governmental proceeding which is reasonably likely to be material to such Originator or the collectibility or quality of a material portion of the Receivables; or (iv) Judgments. The entry of any uninsured judgment or decree against such Originator if the aggregate amount of all such uninsured judgments then outstanding against such Originator exceeds $10,000,000. (c) Conduct of Business. Each Originator will perform all actions necessary to remain duly incorporated or organized, validly existing and in good standing in its jurisdiction of incorporation or organization and to maintain all requisite authority to conduct its business in each jurisdiction in which it conducts business. (d) Compliance with Laws. Each Originator will comply with all laws, regulations, judgments and other directions or orders imposed by any Governmental Authority to which each Originator or any Receivable, any Related Security or Collection may be subject. (e) Furnishing Information and Inspection of Records. Each Originator will furnish to Buyer such information concerning the Receivables originated by it as Buyer may reasonably request, subject to any confidentiality restrictions. Each Originator will permit, at any time during regular business hours, Buyer (or any representatives thereof) (i) to examine and make copies of all Records, (ii) to visit the offices and properties of such Originator or office of any other Person for the purpose of examining the Records and (iii) to discuss matters relating hereto with any of such Originator's officers, -7- 11 directors, employees or independent public accountants having knowledge of such matters. Once a year, Buyer may (at the expense of the applicable Originator) have an independent public accounting firm conduct an audit of the Records or make test verification of the Receivables and Collections in connection with the audit and test verifications conducted on behalf of the Agent under the Second Tier Agreement. (f) Keeping Records. (i) Each Originator will have and maintain (A) administrative and operating procedures (including an ability to recreate Records if originals are destroyed), (B) adequate facilities, personnel and equipment and (C) all Records and other information necessary or advisable for collecting the Receivables originated by it (including Records adequate to permit the immediate identification of each new Receivable originated by it and all Collections of, and adjustments to, each existing Receivable originated by it). Each Originator will give Buyer prior notice of any material change in such administrative operating procedures. (ii) Each Originator will, (A) at all times from and after the date hereof, clearly and conspicuously mark its computer and master data processing books and records with a legend describing Buyer's interest in the Receivables originated by it and the Collections. (g) Perfection. (i) Each Originator will at its expense, promptly execute and deliver all instruments and documents and take all action necessary or requested by the Buyer (including the execution and filing of financing or continuation statements, amendments thereto or assignments thereof) to enable the Buyer to exercise and enforce all its rights against the Receivables originated by it and to vest and maintain vested in the Buyer a valid, first priority perfected security interest in such Receivables, the related Collections, and proceeds thereof free and clear of any Adverse Claim (and a perfected ownership interest in such Receivables and Collections to the extent of the Sold Interest). To the extent permitted by applicable law, the Buyer will be permitted to sign and file any continuation statements, amendments thereto and assignments thereof without the Buyer's signature. (ii) The Buyer will not change its name, identity or corporate structure or relocate its chief executive office or the Records except after thirty (30) days advance notice to the Buyer and the delivery to the Buyer of all financing statements, instruments and other documents (including direction letters) requested by the Buyer. (iii) Each Originator will at all times maintain its chief executive offices within a jurisdiction in the USA in which Article 9 of the UCC (as it may be amended from time to time) is in effect. If any Originator moves its chief executive office to a location that imposes Taxes, fees or other charges to perfect the Buyer's interests hereunder, such Originator will pay all such amounts and any other costs and expenses incurred in order to maintain the enforceability of the Transaction Documents, the Sold Interest and the interests of the Buyer in the Receivables, the Related Security and Collections. -8- 12 (h) Payments on Receivables, Accounts. Each Originator will at all times instruct all Obligors to deliver payments on the Receivables to a Lock-Box. If any such payments or other Collections are received by an Originator, it shall hold such payments in trust for the benefit of the Buyer and promptly (but in any event within two Business Days after receipt) remit such funds at the direction of the Buyer. Each Originator will cause each Lock-Box Bank to comply with the terms of each applicable Lock-Box Letter. After the occurrence of a Termination Event or the Liquidity Termination Date, such Originator will not, and will not permit any Collection Agent or other Person to, commingle Collections or other funds to which the Buyer is entitled with any other funds. Each Originator shall only add a Lock-Box Bank, Lock-Box, or Lock-Box Account to those listed on Exhibit F of the Second Tier Agreement if the Buyer has received notice of such addition, a copy of any new Lock-Box Agreement and an executed and acknowledged copy of a Lock-Box Letter substantially in the form of Exhibit G of the Second Tier Agreement (with such changes as are acceptable to the Buyer) from any new Lock-Box Bank. Each Originator shall only terminate a Lock-Box Bank or Lock-Box, or close a Lock-Box Account, upon 30 days advance notice to the Buyer. (i) Sales and Adverse Claims Relating to Receivables. Except as otherwise provided herein, no Originator will (by operation of law or otherwise) dispose of or otherwise transfer, or create or suffer to exist any Adverse Claim upon, any Receivable or any proceeds thereof. (j) Extension or Amendment of Receivables. Except as otherwise permitted in the Second Tier Agreement and then subject to Section 1.5 of the Second Tier Agreement, no Originator will extend, amend, rescind or cancel any Receivable. (k) Performance of Duties. Each Originator will perform its duties or obligations in accordance with the provisions of each of the Transaction Documents to which it is a party. Each Originator (at its expense) will (i) fully and timely perform in all material respects all agreements, if any, required to be observed by it in connection with each Receivable originated by it, (ii) comply in all material respects with the Credit and Collection Policy, and (iii) refrain from any action that may impair the rights of Buyer in the Receivables, Collections or Lock-Box Accounts. (l) Change in Business or Credit and Collection Policy. No Originator will make any change in its Credit and Collection Policy which change would impair the collectibility of any Receivable. (m) Accounting for Sale. No Originator will account for, or otherwise treat, the transactions contemplated hereby other than as a sale of Receivables or inconsistent with the Purchasers' ownership interests in the Receivables and Collections. (n) Certain Agreements. Except as otherwise permitted by this Agreement, no Originator will amend, modify, waive, revoke or terminate any Transaction Document to which it is a party. -9- 13 Section 5.2. Organizational Separateness. Each Originator agrees not to take any action that would cause Buyer to violate its articles of incorporation or certification of incorporation, as appropriate, and bylaws or its limited liability company agreement or operating agreement, as applicable. Buyer agrees to conduct its business in a manner consistent with its articles of incorporation or certification of incorporation, as appropriate, and bylaws or its limited liability company agreement or operating agreement, as applicable. SECTION 6. TERMINATION OF PURCHASES. Section 6.1. Voluntary Termination. The purchase and sale of Receivables pursuant to this Agreement may be terminated by any party, upon at least five Business Days' prior written notice to the other parties. Section 6.2. Automatic Termination. The purchase and sale of Receivables pursuant to this Agreement shall automatically terminate upon the occurrence of (i) a Bankruptcy Event with respect to any Originator, (ii) a Trigger Event or (iii) the Liquidity Termination Date. SECTION 7. INDEMNIFICATION. Section 7.1. Originators' Indemnity. Without limiting any other rights any Person may have hereunder or under applicable law, each Originator, jointly and severally, hereby indemnifies and holds harmless Buyer and its officers, directors, agents and employees (each an "Indemnified Party") from and against any and all damages, losses, claims, liabilities, penalties, Taxes, costs and expenses (including reasonable attorneys' fees and court costs actually incurred) (all of the foregoing collectively, the "Indemnified Losses") at any time imposed on or incurred by any Indemnified Party arising out of or otherwise relating to any Transaction Document, the transactions contemplated thereby, or any action taken or omitted by any of the Indemnified Parties, whether arising by reason of the acts to be performed by such Originator hereunder or otherwise, excluding only Indemnified Losses ("Excluded Losses") to the extent (a) a final judgment of a court of competent jurisdiction holds such Indemnified Losses resulted solely from gross negligence or willful misconduct of the Indemnified Party seeking indemnification, (b) solely due to the credit risk or financial inability to pay of the Obligor and for which reimbursement would constitute recourse to such Originator or the Collection Agent for uncollected or uncollectible Receivables or (c) such Indemnified Losses include Taxes on, or measured by, the overall net income or gross receipts of the Buyer. Without limiting the foregoing indemnification, but subject to the limitations set forth in clauses (a), (b) and (c) of the previous sentence, each Originator, jointly and severally, shall indemnify each Indemnified Party for Indemnified Losses relating to or resulting from: (i) any representation or warranty made by or on behalf of an Originator under or in connection with this Agreement, any Periodic Report or any other information or report delivered by an Originator pursuant to the Transaction Documents, which shall have been false or incorrect in any material respect when made or deemed made; -10- 14 (ii) the failure by an Originator to comply with any applicable law, rule or regulation related to any Receivable, or the nonconformity of any such Receivable with any such applicable law, rule or regulation; (iii) the failure of an Originator to vest and maintain vested in Buyer, a perfected ownership or security interest in the Receivables and the other property conveyed pursuant hereto, free and clear of any Adverse Claim; (iv) any commingling of funds to which Buyer is entitled hereunder with any other funds; (v) any failure of a Lock-Box Bank to comply with the terms of the applicable Lock-Box Letter; (vi) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor or financial inability of the Obligor to pay) of the Obligor to the payment of any Receivable, or any other claim resulting from the sale or lease of goods or the rendering of services related to such Receivable or the furnishing or failure to furnish any such goods or services; (vii) any failure of an Originator to perform its duties or obligations in accordance with the provisions of this Agreement or any other Transaction Document to which an Originator is a party; or (viii) any environmental liability claim, products liability claim or personal injury or property damage suit or other similar or related claim or action of whatever sort, arising out of or in connection with any Receivable or any other suit, claim or action of whatever sort relating to any of any Originator's obligations under the Transaction Documents. Section 7.2. Indemnification Due to Failure to Consummate Purchase. Each Originator will indemnify Buyer on demand and hold it harmless against all costs (including, without limitation, breakage costs) and expenses incurred by Buyer resulting from any failure by such Originator to consummate a purchase after Buyer has requested a transfer of the applicable Receivables to the Purchasers under the terms of the Second Tier Agreement. SECTION 8. MISCELLANEOUS. Section 8.1. Amendments, Waivers, etc. No amendment of this Agreement or waiver of any provision hereof or consent to any departure by either party therefrom shall be effective without the written consent of the party that is sought to be bound. Any such waiver or consent shall be effective only in the specific instance given. No failure or delay on the part of either party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Each Originator agrees that the -11- 15 Purchasers may rely upon the terms of this Agreement, and that the terms of this Agreement may not be amended, nor any material waiver of those terms be granted, without the consent of the Agent; provided that such Originator and Buyer may agree to an adjustment of the purchase price for any Receivable originated by such Originator without the consent of the Agent provided that the purchase price paid for such Receivable shall be an amount not less than adequate consideration that represents fair value for such Receivable. Section 8.2. Assignment of Receivables Purchase Agreement. Each Originator hereby acknowledges that on the date hereof Buyer has collaterally assigned for security purposes all of its right, title and interest in, to and under this Agreement to the Agent for the benefit of the Purchasers pursuant to the Second Tier Agreement and that the Agent and the Purchasers are third party beneficiaries hereof. Each Originator hereby further acknowledges that after the occurrence and during the continuation of a Termination Event all provisions of this Agreement shall inure to the benefit of the Agent and the Purchasers, including the enforcement of any provision hereof to the extent set forth in the Second Tier Agreement, but that neither the Agent nor any Purchaser shall have any obligations or duties under this Agreement. No purchases shall take place hereunder at any time that the Agent has exercised its right to enforce Buyer's rights hereunder pursuant to Section 1.8 of the Second Tier Agreement. Each Originator hereby further acknowledges that the execution and performance of this Agreement are conditions precedent for the Agent and the Purchasers to enter into the Second Tier Agreement and that the agreement of the Agent and Purchasers to enter into the Second Tier Agreements will directly or indirectly benefit such Originator and constitutes good and valuable consideration for the rights and remedies of the Agent and each Purchaser with respect hereto. Section 8.3. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and shall also, to the extent provided herein, inure to the benefit of the parties to the Second Tier Agreement. Each Originator acknowledges that Buyer's rights under this Agreement are being assigned to the Agent under the Second Tier Agreement and consents to such assignment and to the exercise of those rights directly by the Agent, to the extent permitted by the Second Tier Agreement. Section 8.4. Survival. The rights and remedies with respect to any breach of any representation and warranty made by an Originator or Buyer pursuant to Section 4 and the indemnification provisions of Section 7 shall survive any termination of this Agreement. Section 8.5. Costs, Expenses and Taxes. In addition to the obligations of the Originators under Section 7, each party (the Originators being one party and the Buyer the other party) hereto agrees to pay on demand all costs and expenses incurred by the other party and its assigns (other than Excluded Losses) in connection with the enforcement of, or any actual or claimed breach of, this Agreement, including the reasonable fees and expenses of counsel to any of such Persons incurred in connection with any of the foregoing or in advising such Persons as to their respective rights and remedies under this Agreement in connection with any of the foregoing. Each Originator, jointly and severally, also agrees to pay on demand all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing, and recording of this Agreement. -12- 16 Section 8.6. Execution in Counterparts; Integration. This Agreement may be executed in any number of counterparts and by the different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Section 8.7. Governing Law; Submission to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the internal laws (and not the law of conflicts) of the State of Illinois. Each Originator hereby submits to the nonexclusive jurisdiction of the United States District Court for the Northern District of Illinois and of any Illinois state court sitting in Chicago for purposes of all legal proceedings arising out of, or relating to, the Transaction Documents or the transactions contemplated thereby. Each Originator hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the venue of any such proceeding and any claim that any such proceeding has been brought in an inconvenient forum. Nothing in this Section 8.7 shall affect the right of Buyer to bring any action or proceeding against an Originator or its property in the courts of other jurisdictions. Section 8.8. No Proceedings. Each Originator agrees, for the benefit of the parties to the Second Tier Agreement, that it will not institute against Buyer, or join any other Person in instituting against Buyer, any proceeding of a type referred to in the definition of Bankruptcy Event until one year and one day after no investment, loan or commitment is outstanding under the Second Tier Agreement. In addition, all amounts payable by Buyer to an Originator pursuant to this Agreement shall be payable solely from funds available for that purpose (after Buyer has satisfied all obligations then due and owing under the Second Tier Agreement). Section 8.9. Loans by Buyer to Originators. Buyer may make loans to an Originator from time to time if so agreed between such parties and to the extent that Buyer has funds available for that purpose after satisfying its obligations under this Agreement and the Second Tier Agreement. Any such loan shall be payable upon demand (and may be prepaid with penalty or premium) and shall bear interest at such rate as Buyer and such Originator shall from time to time agree. Section 8.10. Notices. Unless otherwise specified, all notices and other communications hereunder shall be in writing (including by telecopier or other facsimile communication), given to the appropriate Person at its address or telecopy number set forth in the Second Tier Agreement or at such other address or telecopy number as such Person may specify, and effective when received at the address specified by such Person. Section 8.11. Entire Agreement. This Agreement constitutes the entire understanding of the parties thereto concerning the subject matter thereof. Any previous or contemporaneous agreements, whether written or oral, concerning such matters are superseded thereby. -13- 17 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. ARVIN EXHAUST LLC, as Originator By Name: _______________________________________ Title:_______________________________________ GABRIEL RIDE CONTROL PRODUCTS, INC., as Originator By Name:________________________________________ Title:_______________________________________ MAREMONT EXHAUST PRODUCTS, INC., as Originator By Name:________________________________________ Title:_______________________________________ PUROLATOR PRODUCTS NA, INC., as Originator By Name:________________________________________ Title:_______________________________________ ARVINMERITOR RECEIVABLES CORPORATION, as Buyer By Name:________________________________________ Title:_______________________________________ The undersigned has caused this Agreement to be executed by its officers thereunto duly authorized, as of the date first above written solely for the purposes set forth in Section 3.1 of this Agreement. ARVINMERITOR, INC. By Name:________________________________________ Title:_______________________________________ Signature Page for Purchase and Sale Agreement 18 EXHIBIT A PURCHASE PRICE EX-12 5 k62395ex12.txt COMPUTATION OF RATIO OF EARNINGS 1 EXHIBIT 12 ArvinMeritor, Inc. Computation of Earnings to Fixed Charges Six Months Ended March 31, 2001
Earnings Available for Fixed Charges: Pre-tax income from continuing operations $ 22 Adjustments: Undistributed income of affiliates - ---- 22 Add fixed charges included in earnings: Interest expense 77 Interest element of rentals 4 Amortization of debt issuance costs - ---- Total 81 ---- Total earnings available for fixed charges: $103 ---- Fixed Charges: Fixed charges included in earnings $ 81 Capitalized interest 1 ---- Total fixed charges $ 82 ---- Ratio of Earnings to Fixed Charges (1) $1.3 ----
1 = "Earnings" are defined as pre-tax income from continuing operations, adjusted for undistributed earnings of less than majority owned subsidiaries and fixed charges excluding capitalized interest. "Fixed charges" are defined as interest on borrowings (whether expensed or capitalized), the portion of rental expense applicable to interest, and amortization of debt issuance costs. -----END PRIVACY-ENHANCED MESSAGE-----