-----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, VTXSg3F/SQ9/GCxkiEui93zOp0n+R23bJH3jBm2gS6Qy9zcyV63pHGwrCCBk8vB3 tchsHFGX+0MjDH3b9dHz5Q== 0000909012-98-000139.txt : 19980414 0000909012-98-000139.hdr.sgml : 19980414 ACCESSION NUMBER: 0000909012-98-000139 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980328 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980413 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANDARD MOTOR PRODUCTS INC CENTRAL INDEX KEY: 0000093389 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 111362020 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-04743 FILM NUMBER: 98592335 BUSINESS ADDRESS: STREET 1: 37 18 NORTHERN BLVD CITY: LONG ISLAND CITY STATE: NY ZIP: 11101 BUSINESS PHONE: 7183920200 MAIL ADDRESS: STREET 1: 3718 NORTHERN BLVD CITY: LONG ISLAND CITY STATE: NY ZIP: 11101 8-K 1 CURRENT REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange act of 1934 Date of Report (Date of earliest event reported) MARCH 28, 1998 -------------- STANDARD MOTOR PRODUCTS, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) NEW YORK I-4743 11-1362020 -------- ------ ---------- (State or other jurisdiction (Commission File Number) (IRS Employer incorporated) Identification Number 37-18 NORTHERN BLVD. LONG ISLAND CITY, N.Y. 11101 - ------------------------------------------- ----- (address of principal executive officers) (Zip Code) Registrant's telephone number, including area code (718) 392-0200 -------------- ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On March 28, 1998, Standard Motor Products, Inc. (the "Company") completed the exchange of their brake business for the Moog Automotive Temperature Control business of Cooper Industries. The brake business of Standard Motor Products includes a line of hydraulic and friction products, drums and rotors and hardware distributed under the EIS, Cali-Blok, Traffic King, Tru Tech and private label brand names. The temperature control business of Moog Automotive includes heating and cooling system parts and electric motors distributed under the Everco, Murray, Frostemp, Automotive Components and private label brand names. The Moog Automotive temperature control business will be merged into the Company's existing temperature control business over the next year. The assets exchanged consist primarily of inventory; property, plant and equipment and certain other assets and liabilities. The fair values of the related net assets at the date of the transaction approximate their respective net book values. The fair value of the net assets received is estimated to exceed the fair value of the assets disposed of by approximately $10 million and results in a $ 10 million payment due to Cooper Industries. Standard Motor Products will pay the $ 10 million owed to Cooper Industries as the Company sells the acquired finished goods inventory to third parties. Any remaining balance is payable in full one year after the closing date. Cooper Industries will initially retain title to approximately $ 15 million of such inventory, however, such interest will decrease as payments under the purchase obligation are made. The total exchange value assigned to each business and the payment due for differences in their related fair market value was arrived at by way of arms length negotiation between the parties. These exchange values may be adjusted based upon the results of post closing audits by both parties. Prior to the exchange described above, there was no material relationship between the directors or officers of Cooper Industries and the Company or any of its affiliates, any director or officer of the Company or any associate of any such director or officer. ITEM 5 OTHER EVENTS On March 27, 1998, the Company entered into a series of agreements with its senior note holders which provided waivers on defaults of certain covenants resulting from the year end 1997 adjustments for discontinued operations and the APS, Inc. bankruptcy filing and amended certain covenants through September 30, 1998. Subsequent to September 30, 1998, the covenants will revert back to the original covenants, prior to the amendment. The Company believes based upon its present financial condition that it should be in compliance with the amended covenants and subsequent to September 30, 1998 the original covenants. On March 30, 1998, the Company entered into an agreement for a new $108.5 million short-term bank facility. The committed revolving bank credit which has been syndicated to a group of six banks, expires on November 30, 1998. Prior to the expiration of this facility, it is the Company's intent to enter into a multi-year committed bank credit facility to meet its working capital requirements and raise additional capital to fund the future growth opportunities of the Company. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements and Exhibits: (1) None (b) Pro forma financial information: (1) The required pro forma financial information of the business acquired and the business disposed of, are not available as of the date this report is filed. Such information will be filed under cover of Form 8 no later than sixty (60) days from the date hereof. (c) Exhibits: 2.1 Asset Exchange Agreement dated as of March 28, 1998 among SMP Motor Products, LTD., Standard Motor Products, Inc., Cooper Industries (Canada) Inc., Moog Automotive Company and Moog Automotive Products, Inc., without exhibits and schedules to said agreement (filed herewith). 10.17 Letter Agreement of March 27, 1998 amending the Note Agreement between the Registrant and the American United Life Insurance Company, the Great American Life Insurance Company, the Jefferson- Pilot Life Insurance Company, the Ohio National Life Insurance Company, the Crown Insurance Company, the Great-West Life Insurance Company, the Security Mutual Life Insurance Company, Woodmen Accident and Life Insurance Company and Nomura Holding America, Inc. dated October 15, 1989 is included as Exhibit 10.17. 10.18 Letter Agreement of March 27, 1998 amending the Note Agreement between the Registrant and Kemper Investors Life Insurance Company, Federal Kemper Life Assurance Company, Lumbermens Mutual Casualty Company, Fidelity Life Association, American Motorists Insurance Company, American Manufacturers Mutual Insurance Company, Allstate Life Insurance Company, Teachers Insurance & Annuity Association of America, and Phoenix Home Life Mutual Insurance Company dated November 15, 1992 is included as Exhibit 10.18. 10.19 Letter Agreement of March 27, 1998 amending the Note Agreement between the Registrant and Metropolitan Life Insurance Company, the Travelers Insurance Company, Connecticut Life Insurance Company, CIGNA Property and Casualty Insurance Company, Life Insurance Company of North America and American United Life Insurance Company dated December 1, 1995 is included as Exhibit 10.19. 10.20 Revolving Credit and Guarantee Agreement dated March 30, 1998 among Standard Motor Products, Inc., Reno Standard Incorporated, Mardevco Credit Corp., Stanric, Inc., The Chase Manhattan Bank, The Bank of New York, Fleet Bank, National Association, NBD Bank, Canadian Imperial Bank of Commerce and Commerica Bank is included as Exhibit 10.20, without exhibits and schedules to said agreement. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. STANDARD MOTOR PRODUCTS, INC. (Michael J. Bailey) By: /s/ Michael J. Bailey Michael J. Bailey Senior Vice President, Administration and Finance Chief Financial Officer Dated as of March 28, 1998 EX-2.1 2 ASSET EXCHANGE AGREEMENT EXHIBIT 2.1 - -------------------------------------------------------------------------------- ASSET EXCHANGE AGREEMENT AMONG SMP MOTOR PRODUCTS, LTD. STANDARD MOTOR PRODUCTS, INC. COOPER INDUSTRIES (CANADA) INC. MOOG AUTOMOTIVE COMPANY AND MOOG AUTOMOTIVE PRODUCTS, INC. DATED AS OF MARCH 28, 1998 - -------------------------------------------------------------------------------- CLOSING EFFECTIVE AS OF 12:01 A.M. ON MARCH 28, 1998 TABLE OF CONTENTS ----------------- PAGE(S) ------- ARTICLE I CERTAIN DEFINITIONS..................................................... 21 - ------------------- ARTICLE II EXCHANGE OF ASSETS; ASSUMPTION OF LIABILITIES; ADJUSTMENTS............... 21 - ---------------------------------------------------------- 2.1 Basic Transaction .............................................. 21 2.2 Conveyance of TC Assets ........................................ 21 2.3 Conveyance of Brake Assets ..................................... 22 2.4 TC Assumed Liabilities ......................................... 22 2.5 Brake Assumed Liabilities ...................................... 22 2.6 TC Retained Liabilities ........................................ 22 2.7 Brake Retained Liabilities ..................................... 22 2.8 Pre-Closing Balance Sheets ..................................... 22 2.9 Closing Payment Amount and Final Closing Payment Amount ........ 22 2.10 Closing Balance Sheets ......................................... 23 2.11 Preliminary Closing Balance Sheet Review ....................... 23 2.12 Final Closing Balance Sheet .................................... 24 2.13 Payment ........................................................ 25 2.14 Transfer Costs ................................................. 25 ARTICLE III THE CLOSING............................................................ 25 - ----------- 3.1 Closing Date ................................................... 25 3.2 Moog Deliveries at the Closing ................................. 25 3.3 SMP Deliveries at the Closing .................................. 26 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MOOG................................ 28 - -------------------------------------- 4.1 Organization of Moog ............................................ 28 4.2 Authorization of Transaction .................................... 28 4.3 Non-contravention ............................................... 28 4.4 Moog Pre-Closing Balance Sheet and Financial Statements ......... 29 4.5 Undisclosed Liabilities ......................................... 29 4.6 Events After June 30, 1997 ...................................... 29 - i - Page(2) ------- 4.7 Tax Matters .................................................... 31 4.8 TC Leases for Real Property .................................... 31 4.9 TC Real Property ............................................... 32 4.10 TC Intellectual Property ....................................... 32 4.11 Inventory ...................................................... 34 4.12 Tangible TC Assets ............................................. 34 4.13 Certain Agreements ............................................. 35 4.14 Insurance ...................................................... 36 4.15 Litigation ..................................................... 36 4.16 Product Warranty ............................................... 36 4.17 Product Liability .............................................. 36 4.18 Employees ...................................................... 37 4.19 Moog Employee Plans; ERISA; Employees .......................... 37 4.20 Environmental Matters .......................................... 39 4.21 Legal Compliance ............................................... 41 4.22 Vehicles ....................................................... 41 4.23 Guaranties ..................................................... 41 4.24 All TC Assets Transferred ...................................... 41 4.25 Moog Permits ................................................... 42 4.26 Brokers' Fees .................................................. 42 4.27 Customers and Suppliers ........................................ 42 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SMP................................. 42 - ------------------------------------- 5.1 Organization of SMP ............................................ 42 5.2 Authorization of Transaction ................................... 42 5.3 Non-contravention .............................................. 43 5.4 SMP Pre-Closing Balance Sheet and Financial Statements ......... 43 5.5 Undisclosed Liabilities ........................................ 43 5.6 Events After June 30, 1997 ..................................... 44 5.7 Tax Matters .................................................... 45 5.8 Brake Leases for Real Property ................................. 46 5.9 Brake Real Property ............................................ 46 5.10 Brake Intellectual Property .................................... 47 5.11 Inventory ...................................................... 49 5.12 Tangible Brake Assets .......................................... 49 5.13 Certain Agreements ............................................. 49 5.14 Insurance ...................................................... 50 5.15 Litigation ..................................................... 50 5.16 Product Warranty ............................................... 51 5.17 Product Liability .............................................. 51 5.18 Employees ...................................................... 51 5.19 SMP Employee Plans; ERISA; Employees ........................... 52 5.20 Environmental Matters .......................................... 53 5.21 Legal Compliance ............................................... 55 - ii - Page(s) ------- 5.22 Vehicles ..................................................... 55 5.23 Guaranties ................................................... 55 5.24 All Brake Assets Transferred ................................. 56 5.25 SMP Permits .................................................. 56 5.26 Brokers' Fees ................................................ 56 5.27 Customers and Suppliers ...................................... 56 5.28 Industrial Development Revenue Bonds ......................... 56 ARTICLE VI PRE-CLOSING COVENANTS................................................. 57 - --------------------- 6.1 Reasonable Best Efforts ........................................ 57 6.2 Notices and Consents ........................................... 57 6.3 H-S-R Act ...................................................... 57 6.4 Operation of the TC Business and the Brake Business ............ 57 6.5 Full Access .................................................... 58 6.6 Title Insurance and Surveys .................................... 58 6.7 Exclusivity .................................................... 59 6.8 Supply Agreements .............................................. 60 6.9 Disclosure Supplements ......................................... 60 6.10 Disposal of Certain Hazardous Materials ........................ 60 6.11 Termination of Joint Venture Agreement with Dalian Yongfeng Car Parts Co. Ltd. ........................................... 60 ARTICLE VII POST-CLOSING COVENANTS.................................................. 61 - ---------------------- 7.1 Further Assurances ............................................... 61 7.2 Litigation Support ............................................... 61 7.3 Transitional Matters ............................................. 61 7.4 Confidentiality .................................................. 63 7.5 Consents ......................................................... 64 7.6 Press Releases ................................................... 64 7.7 Allocation ....................................................... 64 7.8 Tax Assistance ................................................... 64 7.9 Tax Proceedings .................................................. 64 7.10 Unemployment Tax Experience ...................................... 65 7.11 Employment Tax Compliance ........................................ 65 7.12 Product Returns Adjustment ....................................... 65 7.13 Uses of Excluded Trademarks and Trade Names ...................... 66 7.14 Existing Insurance Coverage ...................................... 66 7.15 Letters of Credit ................................................ 67 7.16 Non-Competition Agreement ........................................ 68 7.17 Compliance with Connecticut Transfer Act ......................... 70 7.18 Loan from Moog to SMP ............................................ 70 - iii - Page(s) ------- 7.19 Unprocessed Inventory as of the Closing Date ..................... 71 7.20 Consigned Inventory .............................................. 71 7.21 Product Returns Associated with Changeover of Trak Automotive .... 72 ARTICLE VIII EMPLOYEE MATTERS....................................................... 72 - ---------------- 8.1 Employment and Severance for Sales Persons ....................... 72 8.2 Employment and Severance for Non-Sales Persons ................... 73 8.3 Employee Benefit Plans ........................................... 76 8.4 Solicitation ..................................................... 78 ARTICLE IX ENVIRONMENTAL MATTERS.................................................. 79 - --------------------- 9.1 Environmental Indemnification and Remediation .................... 79 9.2 Limitations on Environmental Indemnification ..................... 79 9.3 Certain Procedures ............................................... 80 ARTICLE X CONDITIONS TO OBLIGATION TO CLOSE....................................... 81 - --------------------------------- 10.1 Conditions to Obligation of Both Parties ........................ 81 10.2 Conditions to Obligation of Moog ................................ 82 10.3 Conditions to Obligation of SMP ................................. 82 10.4 Waiver; Right to Proceed ........................................ 82 ARTICLE XI REMEDIES FOR BREACHES OF THIS AGREEMENT................................ 83 - --------------------------------------- 11.1 Survival......................................................... 83 - iv - Page(s) ------- 11.2 Assertion of Claims ............................................ 83 11.3 Indemnification Provisions for Benefit of Moog ................. 83 11.4 Indemnification Provisions for Benefit of SMP .................. 84 11.5 Matters Involving Third Parties ................................ 85 11.6 De Minimis Breaches of Representations and Warranties .......... 85 11.7 Tax Indemnification ............................................ 85 11.8 Other Indemnification Provisions ............................... 86 ARTICLE XII TERMINATION........................................................... 86 - ----------- 12.1 Termination of Agreement........................................ 86 12.2 Procedure and Effect of Termination............................. 87 ARTICLE XIII GENERAL MATTERS....................................................... 87 - --------------- 13.1 No Third-Party Beneficiaries................................... 87 13.2 Entire Agreement............................................... 88 13.3 Succession and Assignment...................................... 88 13.4 Counterparts................................................... 88 13.5 Headings....................................................... 88 13.6 Notices........................................................ 88 13.7 Amendments; Waivers; Consents.................................. 89 13.8 Severability................................................... 89 13.9 Expenses....................................................... 89 13.10 Construction................................................... 89 13.11 Specific Performance........................................... 90 13.12 Bulk Sales..................................................... 90 13.13 Governing Law.................................................. 90 ARTICLE XIV DISPUTE RESOLUTION.................................................... 90 - ------------------ 14.1 Senior Officers................................................. 90 14.2 Binding Arbitration............................................. 91 - v - Page(s) ------- EXHIBITS AND SCHEDULES ---------------------- Exhibit A -- Screw Machine Products Supply Agreement................... A-1 Exhibit B -- Brake Assignment and Assumption Agreement................. B-1 Exhibit C -- Rubber Supply Agreement................................... C-1 Exhibit D -- TC Assignment and Assumption Agreement.................... D-1 Exhibit E -- Moog Pre-Closing Balance Sheet............................ E-1 Exhibit F -- SMP Pre-Closing Balance Sheet............................. F-1 Exhibit G -- Balance Sheet Principles, Practices and Procedures........ G-1 Exhibit H -- TC Bill of Sale........................................... H-1 Exhibit I -- Moog FIRPTA Certificate................................... I-1 Exhibit J -- Brake Bill of Sale........................................ J-1 Exhibit K -- SMP FIRPTA Certificate.................................... K-1 Exhibit L -- Terms of TC Transitional Services......................... L-1 Exhibit M -- Terms of Brake Transitional Services...................... M-1 Exhibit N -- Intentionally Omitted..................................... N-1 Exhibit O -- Severance Policies........................................ O-1 Moog Disclosure Schedules SMP Disclosure Schedules - vi - ASSET EXCHANGE AGREEMENT ------------------------ ASSET EXCHANGE AGREEMENT, dated as of March 28, 1998, among SMP Motor Products, Ltd., a corporation organized under the laws of Canada ("SMP CANADA"), Standard Motor Products, Inc., a corporation organized under the laws of the State of New York ("SMP PARENT" and, together with SMP Canada, "SMP"), Cooper Industries (Canada) Inc., a corporation organized under the laws of the Province of Ontario ("COOPER CANADA"), Moog Automotive Company, a corporation organized under the laws of Delaware ("MOOG COMPANY"), and Moog Automotive Products, Inc., a corporation organized under the laws of the State of Missouri ("MOOG PARENT" and, together with Cooper Canada and Moog Company, "MOOG"). WHEREAS, Moog is engaged in the business of designing, developing, manufacturing, marketing, selling, servicing, supplying and distributing temperature control products and components to support vehicle systems designed to regulate temperature for passengers and the Everco product line of brass components and brake lines (the "TC BUSINESS"); WHEREAS, SMP is engaged in the business of designing, developing, manufacturing, marketing, selling, servicing, supplying and distributing brake products and components to support brake systems (the "BRAKE BUSINESS"); WHEREAS, SMP wishes to acquire from Moog the TC Assets (as hereinafter defined) and Moog wishes to acquire from SMP the Brake Assets (as hereinafter defined); and WHEREAS, this Agreement sets forth the terms and conditions pursuant to which Moog will convey to SMP the TC Assets and SMP will convey to Moog the Brake Assets in such a manner as to effect a like-kind exchange of assets under Section 1031 of the Code (as hereinafter defined). NOW, THEREFORE, in consideration of the foregoing premises and the respective representations and warranties, covenants, agreements and conditions hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I. CERTAIN DEFINITIONS ------------------- 1.1 "ACCOUNTING ARBITRATOR" shall have the meaning ascribed thereto in Section 2.11(d). 1.2 INTENTIONALLY OMITTED 1.3 "ACTIVE EMPLOYEES" means all employees actively employed on the Closing Date in the TC Business or the Brake Business, as the case may be, and all employees of such businesses on vacation, layoff and approved leave of absence other than for long term disability; PROVIDED, HOWEVER, Active Employees shall not include any employees located at Moog's facility in Ottumwa, Iowa or at SMP's facilities in Middletown, Connecticut and Rural Retreat, - 1 - Virginia. Barbara Umstreadt and Virginia Askew will be considered Inactive Employees for purposes of this Agreement, even though they are currently on short term disability, because they are not reasonably expected to return to work. 1.4 INTENTIONALLY OMITTED 1.5 "ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits, proceedings, hearings, investigations, claims, demands, judgments, orders, decrees, stipulations, injunctions, settlements, damages, dues, penalties, fines, costs, amounts paid in settlement, liabilities, obligations, Taxes (as hereinafter defined), liens, losses, expenses and fees, including all reasonable attorneys', experts' and consultants' fees and court costs as well as costs to enforce any indemnity provisions under this Agreement. 1.6 "AFFILIATE" means any Person (as hereinafter defined) that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the referenced Person. 1.7 "AGREEMENT" means this Asset Exchange Agreement, including all exhibits and schedules hereto, as it may be amended from time to time. 1.8 "ARBITRATOR" shall have the meaning ascribed thereto in Section 14.2(b). 1.9 "BRAKE ASSETS" shall mean: (a) all of the property and assets of SMP used exclusively in the conduct of the Brake Business whether or not reflected in the SMP Final Closing Balance Sheet (as hereinafter defined), including, without limitation, the Brake Real Properties (as hereinafter defined), the Brake Intellectual Property (as hereinafter defined), inventories, plants, machinery, equipment, tools, dies, data processing equipment, office equipment, supplies, furniture, fixtures, leasehold improvements, motor vehicles, prepaid expenses and security deposits (and including all items which would be included on the SMP Final Closing Balance Sheet except for the fact that such items are fully depreciated or expensed), and all items used exclusively in the conduct of the Brake Business which are acquired in the ordinary course of business consistent with past practice by the Brake Business between the date of the SMP Pre-Closing Balance Sheet (as hereinafter defined) and the Closing Date; (b) the Brake Books and Records (as hereinafter defined); (c) the Brake Contracts (as hereinafter defined); (d) the Brake Leases (as hereinafter defined); (e) the interest of SMP in the EISLINE Manufacturing Company joint venture pursuant to the Joint Venture Agreement between the EIS Brake Parts Division of Standard Motor Products, Inc. and Autoline Industries, Inc. dated January 1, 1994 and the related Supply - 2 - Agreement between EISLINE Manufacturing Company and the EIS Brake Parts Division of Standard Motor Products, Inc. dated January 1, 1994; (f) the Autoline re-man inventory receivable; and (g) computer software exclusively used by the Brake Business including the software for payroll catalogues, finite scheduling, shop floor labor reporting and MOST Industrial Engineering. Notwithstanding the foregoing, the Brake Assets shall not mean or include the Brake Retained Assets (as hereinafter defined). 1.10 "BRAKE ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the instrument of assignment and assumption substantially in the form attached hereto as Exhibit B. 1.11 "BRAKE ASSUMED LIABILITIES" shall mean and include only the following obligations and liabilities of the Brake Business: (a) all Liabilities (as hereinafter defined) of the Brake Business reflected on the SMP Final Closing Balance Sheet; (b) subject to Section 7.12, all Liabilities for warranty and customer service claims and other return obligations regarding products of the Brake Business; (c) all Liabilities for product liability claims (including claims for property damage, personal injury or death) relating to products manufactured or sold by the Brake Business based on or arising out of claims made or causes of action filed after the first anniversary of the Closing Date, PROVIDED, HOWEVER, that this subsection (c) shall not apply to any Liabilities based on or arising out of asbestos exposure which are covered by Section 1.26(d); (d) all Liabilities under the Brake Contracts and the Brake Leases, to the extent such Brake Contracts and Brake Leases are assigned to Moog; (e) all core Liabilities for the Brake Business; (f) all Liabilities of SMP with respect to a government grant in the amount of $450,000 provided to SMP pursuant to an Agreement By and Between the Town of Berlin, Connecticut and Standard Motor Products, Inc. Concerning a State Assistance Grant dated May 24, 1993; (g) the Promissory Note dated December 1, 1989 in the original principal amount of $2.5 million payable to the Arkansas Development Finance Authority pertaining to the Arkansas Development Finance Authority Industrial Development Revenue Bonds (Standard Motor Products, Inc. Project) Series 1989 and the related Loan Agreement, and the Mortgage and Security Agreement between SMP and the Arkansas Development Finance Authority; and - 3 - (h) the Lease Agreement dated as of June 1, 1990 from the City of Manila, Arkansas to Standard Motor Products, Inc. pertaining to the $1.8 million Industrial Development Revenue Bonds (Standard Motor Products, Inc. Project) Series 1990. Notwithstanding the foregoing, the Brake Assumed Liabilities shall not include the Brake Retained Liabilities (as hereinafter defined). 1.12 "BRAKE BILL OF SALE" shall have the meaning ascribed thereto in Section 3.3(b). 1.13 "BRAKE BOOKS AND RECORDS" shall mean originals or copies of all of the books and records of SMP relating to the operations of the Brake Business, including, without limitation, all books and records relating to the individuals employed by SMP who will be employed by Moog in the Brake Business following the Closing Date, and to the extent related exclusively to the Brake Business, all books and records related to the purchase of materials, the lease of equipment, supplies and services, advertising, financial, accounting and operations matters, product engineering, research and development, manufacture and sale of products, provision of services and dealings with customers or clients of the Brake Business. As used herein books and records shall include a hardcopy of all computerized books and records. 1.14 "BRAKE BUSINESS" shall have the meaning ascribed thereto in the recitals of this Agreement. 1.15 "BRAKE COMPETITIVE BUSINESS" shall have the meaning ascribed thereto in Section 7.16(b). 1.16 "BRAKE COMPETITIVE PRODUCTS" shall have the meaning ascribed thereto in Section 7.16(b). 1.17 "BRAKE CONTRACTS" shall mean all contracts, licenses, purchase orders, agreements and commitments of SMP exclusively relating to the Brake Business, including, without limitation, (i) the contracts, agreements and commitments listed in Section 5.13 of the SMP Disclosure Schedule and (ii) all contracts, agreements and commitments of SMP exclusively relating to the Brake Business which are entered into between the date of this Agreement and the Closing and expressly permitted by this Agreement, excluding, however, all contracts, agreements and commitments which expire or are cancelled in accordance with their terms prior to the Closing. 1.18 "BRAKE ENVIRONMENTAL COSTS" shall mean all Environmental Costs, whether direct or indirect, known or unknown, joint or several, whenever arising (including after Closing), based on, arising out of or otherwise in respect of the Brake Assets, the Brake Business, or property currently or formerly owned, operated, used or leased by SMP or its predecessors (including off-site locations) and arising out of: (i) conditions or Hazardous Materials existing on or originating from any such property or the Brake Assets on or prior to the Closing Date including, but not limited to, the Discharge or Disposal of Hazardous Materials at or from any such property on or prior to the Closing Date; (ii) the operation of the Brake Business by SMP - 4 - or its predecessors on or prior to the Closing Date; or (iii) non-compliance on or prior to the Closing Date with any requirements of Environmental Laws. 1.19 "BRAKE INTELLECTUAL PROPERTY" shall mean all letters patent, patents, trademarks, trade names, service marks, copyrights (including registrations and applications for any of the foregoing), licenses, technology, know-how, trade secrets, tangible or intangible proprietary information or material, formulae and inventions owned by SMP which are used exclusively in or relate exclusively to the Brake Business or the rights thereto (including rights under licenses) which belong to SMP and are used exclusively in or relate exclusively to the Brake Business, including, without limitation, (i) all items listed in Section 5.10(c) of the Brake Disclosure Schedule and (ii) all such intellectual property which is acquired or developed for use exclusively in the Brake Business between the date of this Agreement and the Closing. The Brake Intellectual Property shall not include the Excluded SMP Trademarks and Trade Names (as hereinafter defined). 1.20 "BRAKE LEASES" shall mean all leases of SMP for real or personal property exclusively relating to the Brake Business (whether entered into as lessor or lessee), including, without limitation, (a) the real estate leases listed in Section 5.8 of the SMP Disclosure Schedule and (b) all leases of SMP exclusively relating to the Brake Business which are entered into between the date of this Agreement and the Closing and expressly permitted by this Agreement, excluding, however, all leases which will expire in accordance with their terms prior to the Closing. 1.21 "BRAKE LETTERS OF CREDIT" shall have the meaning ascribed thereto in Section 7.15(b). 1.22 "BRAKE MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the Brake Assets or on the business, financial condition, operations or results of operations of the Brake Business. 1.23 "BRAKE PRODUCT LIABILITY CLAIM" shall have the meaning ascribed thereto in Section 5.17(a). 1.24 "BRAKE REAL PROPERTIES" shall mean the real properties owned by SMP and used exclusively in the Brake Business as listed in Section 5.9 of the SMP Disclosure Schedule (but excluding the real properties owned or held by SMP in Middletown, Connecticut and Rural Retreat, Virginia). 1.25 "BRAKE RETAINED ASSETS" shall mean all the following properties, assets and other rights of SMP: (a) all cash, cash equivalents and bank accounts; (b) all of SMP's accounts and notes receivable including, but not limited to, any inter- or intra-company receivables owed to the Brake Business from SMP or any of its Affiliates (but excluding the Autoline re-man inventory receivable which is included in the Brake Assets); - 5 - (c) the assets of the Brake Business which are owned or held by SMP or its Affiliates and which are located in Puerto Rico, subject to Moog's obligation to purchase such assets pursuant to the terms of the Rubber Supply Agreement; (d) the real properties owned or held by SMP in Middletown, Connecticut and Rural Retreat, Virginia including all improvements, structures and fixtures thereon and other tangible assets located at such properties; (e) the Excluded SMP Trademarks and Trade Names (as hereinafter defined); (f) all insurance policies, related prepaid expenses, refunds or proceeds and all rights relating thereto subject to Section 7.14(b); (g) the computer hardware set forth in Section 1.25(g) of the SMP Disclosure Schedule and any computer software which is not exclusively used by the Brake Business and leases, licenses or other arrangements therefor; (h) all assets, including inventory and equipment, used in SMP's rebuilt anti-lock brake system component business conducted by Blue Streak Electronics at Concord, Ontario, Canada (other than inventory related thereto located at SMP's EIS facilities in Manila, Arkansas and Ontario, California); (i) any assets of any Employee Pension Benefit Plans and Employee Welfare Benefit Plans and any rights under such plans relating to employee benefits, employment or compensation; and (j) any vehicles owned or leased by SMP for use by SMP sales personnel. 1.26 "BRAKE RETAINED LIABILITIES" shall mean the following: (a) all Liabilities to the extent arising out of Brake Retained Assets; (b) all accounts and notes payable of the Brake Business incurred on or prior to the Closing Date including, but not limited to, any inter- or intra-company payables due from the Brake Business to SMP or any of its Affiliates (but excluding the promissory note described in Section 1.11(g)); (c) all Liabilities for product liability claims (including claims for property damage, personal injury or death) relating to products manufactured or sold by the Brake Business based on or arising out of claims made or causes of action filed on or before the first anniversary of the Closing Date, PROVIDED, HOWEVER, that this Section (c) shall not apply to any Liabilities based on or arising out of asbestos exposure which are covered by Section 1.26(d); (d) any claims by third parties based on or arising out of asbestos exposure relating to products manufactured or sold on or prior to the Closing Date by the Brake Business and any claims by Active Employees or Inactive Employees of the Brake Business (including - 6 - worker's compensation claims) based on or arising out of such asbestos exposure on or prior to the Closing Date; (e) any claims by Active Employees or Inactive Employees of the Brake Business, including worker's compensation claims, based on or arising out of asbestos exposure after the Closing Date at the Brake Real Properties or real properties subject to the Brake Leases (subject to the indemnity in Section 11.4(h)); (f) all Brake Environmental Costs; (g) all Liabilities to Inactive Employees of the Brake Business and their beneficiaries and dependents including, without limitation, all Liabilities with respect to (i) salaries, wages, commissions, bonuses and vacation pay (except to the extent accrued on the SMP Final Closing Balance Sheet); (ii) severance pay and obligations (subject to Sections 8.1 and 8.2); (iii) Employee Pension Benefit Plans and Employee Welfare Benefit Plans (including any retiree medical and dental benefits) provided by SMP or its Affiliates to such employees; (iv) worker's compensation claims; (v) unemployment compensation claims; and (vi) claims or litigation relating to discrimination claims, unjust discharge, claims for additional compensation or benefits and claims for violation of health and safety laws; (h) all Liabilities to Active Employees of the Brake Business and their beneficiaries and dependents for (i) salaries, wages, commissions, bonuses and vacation pay relating to periods on or prior to the Closing Date (except to the extent accrued on the SMP Final Closing Balance Sheet); (ii) severance pay and obligations for Active Employees who do not become employees of Moog (subject to Sections 8.1 and 8.2); (iii) Employee Pension Benefit Plans and Employee Welfare Benefit Plans (including any retiree medical and dental benefits) provided by SMP or its Affiliates to such employees in accordance with the provisions of such plans; (iv) worker's compensation claims based on or resulting from incidents or events occurring before the Closing Date; (v) unemployment compensation claims for Active Employees who do not become employees of Moog; and (vi) claims or litigation relating to discrimination claims, unjust discharge, claims for additional compensation or benefits and violation of health and safety laws based upon or resulting from incidents or events occurring before the Closing Date; (i) all Liabilities for Taxes of SMP or the Brake Business for any period prior to the Closing Date except to the extent that a liability for non-income Taxes is accrued on the SMP Final Closing Balance Sheet; (j) all Liabilities of SMP or the Brake Business for borrowed money including notes payable, loans and revolving credits (but excluding the promissory note described in Section 1.11(g)); (k) all Liabilities of SMP or the Brake Business with respect to letters of credit and foreign exchange contracts or commitments, subject to Section 7.15; (l) all Liabilities of SMP or the Brake Business with respect to powers of attorney, financing agreements, security agreements, bid bonds, performance bonds, suretyship - 7 - agreements, guarantees or any other similar arrangement where SMP is or may become liable for the obligations of any other Person; (m) all Liabilities for Existing Brake Litigation and Claims (as hereinafter defined) including matters set forth in Section 5.15 of the SMP Disclosure Schedule and, except for matters described in Sections 1.11(b) and (c), all Liabilities for any actions, suits, proceedings, claims or investigations arising after the Closing Date that arise from or relate to matters, incidents, sets of facts or circumstances on or prior to the Closing Date including breach of contract, tort, infringement or violation of law; (n) all Liabilities relating to claims or lawsuits involving brake hose assemblies which were the subject of SMP's recall 96E-023 for brake hose assemblies which the National Highway Traffic Safety Administration determined to be non-compliant with regard to identification markings; (o) all Liabilities arising out of "wrap discounts", or other discounts, customer incentives or rebates relating to sales on or prior to the Closing Date; and (p) the Liability on the books of the Brake Business which represents free rent under the lease for the Ontario, California facility. 1.27 "BRAKE RETURNS SCHEDULE" shall have the meaning ascribed thereto in Section 7.12(a). 1.28 "BRAKE SCHEDULED SALES PERSONS" shall have the meaning ascribed thereto in Section 5.18(a). 1.29 "BRAKE TRANSFERRING SALES PERSON" shall have the meaning ascribed thereto in Section 8.1(a). 1.30 "BUSINESS DAY" means each day which is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. 1.31 "CLAIM" shall have the meaning ascribed thereto in Section 14.1. 1.32 "CLOSING" means the meeting held on the Closing Date at which the Parties complete the contemplated transactions. 1.33 "CLOSING DATE" means 12:01 a.m. on March 28, 1998. 1.34 "CODE" means the Internal Revenue Code of 1986, as amended. 1.35 "COOPER CANADA" shall have the meaning ascribed thereto in the introductory paragraph of this Agreement. - 8 - 1.36 "DEBT" means for any Person (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services for which such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which such Person otherwise assures a creditor against loss including any notes, bonds, debentures or other debt securities of such Person but excluding endorsements of negotiable instruments for collection in the ordinary course of business; and (ii) all obligations under leases which shall have been, or was required to have been, in accordance with GAAP (as hereinafter defined), recorded as capital leases in respect of which such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss. The term "Debt" shall not include any trade credit incurred in the ordinary course of business. 1.37 "DISCHARGE" means any accidental, unknowing or intentional spilling, leaking, seeping, pumping, pouring, emitting, leaching, escaping, depositing, placing, emptying, dumping, discharging, releasing, burying, injecting, abandoning, migrating, disposing, or other discharge or release of any Hazardous Material into or upon or under any land or Water or air, or otherwise into the indoor or outdoor Environment (including, without limitation, the abandonment or discarding of barrels, drums, containers, tanks and other receptacles containing or previously containing any Hazardous Material), and any threat of any of the foregoing. 1.38 "DISPOSAL" or "DISPOSED" means the disposal, arranging for disposal, carrying for disposal or Discharge of any Hazardous Material in a landfill, surface impoundment, waste pile, injection well, facility, salt dome or bed formation, underground mine or cave, vault, bunker or other location (whether authorized or unauthorized) for storage (whether temporary or permanent), disposal or any other purpose, from which Hazardous Materials have entered or may enter the Environment or be Discharged into the Environment. 1.39 "EMPLOYEE PENSION BENEFIT PLANS" shall have the meaning ascribed thereto under Section 3(2) of ERISA. 1.40 "EMPLOYEE WELFARE BENEFIT PLANS" shall have the meaning ascribed thereto under Section 3(1) of ERISA. 1.41 "ENVIRONMENT" means the environment, air, land, Water (as hereinafter defined), and any building, building interior, fixture or equipment. 1.41a "ENVIRONMENTAL CLAIM" means any investigation, notice, violation, demand, allegation by a third party, action, suit, injunction, judgment, order, consent decree, penalty, fine, lien, proceeding or claim (whether administrative, judicial, quasi-judicial or private in nature) arising (i) pursuant to or in connection with any actual violation of any Environmental Law or any violation of any Environmental Law alleged by a third party; or (ii) in connection with any Remedial Action. 1.42 "ENVIRONMENTAL COSTS" means all Adverse Consequences arising under or related in any way to Environmental Laws, or relating to the protection of health, safety, or the Environment, including, without limitation, any costs and/or expenses relating to (i) non- - 9 - compliance with Environmental Laws; (ii) assessment of environmental damage and preparation of clean-up plans and engineering and feasibility studies; (iii) required remediation of the Environment and treatment or disposal of Hazardous Materials; (iv) construction of facilities to prevent the spread of Hazardous Materials into the surrounding Environment; (v) procurement of financial assistance to the extent necessitated by or affected by the investigation and/or remediation of Hazardous Materials; (vi) investigations, actions and lawsuits instituted by private parties or Governmental Agencies in respect of any such matter; (vii) business disruption, relocation of equipment or place of business, and/or lost profits resulting from the performance of any Remedial Action which materially interferes with the operation of the business by the Indemnified Party; and/or (viii) material damage caused by, and the repair, replacement or restoration of any improvement materially affected by, any implementation, entry, performance, inspection, treatment, Disposal, excavation, operation, maintenance or other activity undertaken in order to comply with any Environmental Law or perform any Remedial Action (except to the extent any such damage is caused by the negligence of the Indemnified Party, its officers, employees, contractors or agents). 1.43 "ENVIRONMENTAL LAWS" means (a) any present or future federal, state or local law (including common law) or regulation relating to the handling, use, control, management, treatment, storage, disposal, release or threat of release of any Hazardous Material, including without limitation, the federal Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss.ss.9601 et seq., the federal Resource Conservation and Recovery Act, 42 U.S.C. ss.ss.6901 et seq., the federal Water Pollution Control Act, 33 U.S.C. ss.ss.1251 et seq., the federal Clean Air Act, 42 U.S.C. ss.ss.7401 et seq., the Toxic Substances Control Act, 7 U.S.C. ss.ss.136 et seq., the Safe Drinking Water Act, 42 U.S.C. ss.ss.300f et seq., the Occupation Safety and Health Act of 1970, 29 U.S.C. ss.ss.651 et seq., and (b) any and all requirements arising under applicable present and future federal, state or local laws, statutes, common law, rules, ordinances, codes, orders, licenses, permits, approvals, plans, authorizations, or the like, and all applicable judicial, administrative, and regulatory decrees, judgments, and orders, relating to the protection of human health or the Environment in connection with Hazardous Materials, including without limitation: (i) any and all federal, state or local law (including common law) or regulation pertaining to reporting, licensing, authorizing, approving, permitting, investigating, and remediating emissions, discharges, releases, or threat of releases of any Hazardous Materials into the indoor or outdoor air, surface water, groundwater, or land, or otherwise into the Environment, or relating to the manufacture, operation, processing, distribution, use, treatment, storage, disposal, transport, handling or management of any Hazardous Material; and (ii) any and all federal, state or local law (including common law) or regulation pertaining to the protection of the health and safety of employees or the public and/or the Environment. 1.43(a) "ENVIRONMENTAL PERMITS" shall have the meaning ascribed thereto in Section 4.20(b). 1.44 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.45 "EXCLUDED MOOG TRADEMARKS AND TRADE NAMES" shall have the meaning ascribed thereto in Section 7.13(a). - 10 - 1.46 "EXCLUDED SMP TRADEMARKS AND TRADE NAMES" shall have the meaning ascribed thereto in Section 7.13(b). 1.47 "EXISTING BRAKE LITIGATION AND CLAIMS" shall have the meaning ascribed thereto in Section 5.15. 1.48 "EXISTING TC LITIGATION AND CLAIMS" shall have the meaning ascribed thereto in Section 4.15. 1.49 "FIRST PERIOD SEVERANCE AMOUNT" shall have the meaning ascribed thereto in Section 8.2(b). 1.50 "FIFTH PERIOD SEVERANCE AMOUNT" shall have the meaning ascribed thereto in Section 8.2(g). 1.51 "FOURTH PERIOD SEVERANCE AMOUNT" shall have the meaning ascribed thereto in Section 8.2(f). 1.52 "GAAP" means generally accepted accounting principles in the United States as in effect at the relevant time. 1.53 "GOVERNMENTAL AGENCY" means any United States or foreign federal, provincial, state, municipal or local government, any subdivision, agency, court, entity, commission or authority thereof, or any arbitrator or quasi-governmental authority exercising any judicial or regulatory authority. 1.54 "HAZARDOUS MATERIALS" means any substance or material: (a) the presence of which requires investigation or remediation under any Environmental Law; (b) which is or becomes regulated by any federal, state or local governmental authority, including without limitation, any substance or waste material which is defined or listed as a "hazardous waste," "extremely hazardous waste," "restricted hazardous waste," "industrial waste," "hazardous substance," "solid waste," "hazardous material," "pollutant" or "contaminant" under any Environmental Law; (c) which contains gasoline, diesel fuel or other petroleum hydrocarbons or a petroleum derivative; (d) which contains polychlorinated biphenyls ("PCBS"), asbestos or urea formaldehyde; or (e) which is explosive, corrosive, flammable, infectious, radioactive or toxic. 1.55 "H-S-R ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and all regulations issued thereunder. 1.56 "INACTIVE EMPLOYEES" means all individuals who are not Active Employees on the Closing Date including, without limitation; (i) any former employees of the TC Business or the Brake Business (as the case may be) who retired, resigned or were terminated prior to the Closing Date or (ii) any employee of the TC Business or the Brake Business (as the case may be) receiving or entitled to long term disability benefits. Barbara Umstreadt and Virginia Askew - 11 - will be considered Inactive Employees for purposes of this Agreement, even though they are currently on short term disability, because they are not reasonably expected to return to work. 1.57 "INDEMNIFIED PARTY" shall mean the Party entitled to the benefits of (i) any indemnity provision or (ii) any Remedial Action under this Agreement. 1.58 "INDEMNIFYING PARTY" shall mean the Party obligated to indemnify another Party or to perform a Remedial Action pursuant to any provision under this Agreement. 1.59 "LIABILITY" means any Debt, adverse claim, liability, judgment, Tax and obligation, whether accrued, contingent or otherwise, and whether known or unknown, including those arising under any law (including the common law) or any rule, order or regulation of any Governmental Agency or imposed by any court or any arbitrator in a binding arbitration resulting from, arising out of or relating to the assets, activities, operations, actions or omissions of a Person or its Affiliates or its or their employees or agents, or products manufactured or sold thereby or services provided thereby, or under contracts, agreements (whether written or oral), leases, commitments or undertakings thereof, whether based on negligence, strict liability or other theory of liability. 1.60 "MOOG" and "MOOG COMPANY" shall have the meanings ascribed thereto in the introductory paragraph of this Agreement. 1.61 "MOOG DISCLOSURE SCHEDULE" shall have the meaning ascribed thereto in Section 4.3(a). 1.62 "MOOG EMPLOYEE PLANS" shall have the meaning ascribed thereto in Section 4.19(a). 1.63 "MOOG ERISA AFFILIATE" shall have the meaning ascribed thereto in Section 4.19(a). 1.64 "MOOG FINAL CLOSING BALANCE SHEET" shall have the meaning ascribed thereto in Section 2.12(a). 1.65 "MOOG FINAL CLOSING NET BOOK VALUE" shall have the meaning ascribed thereto in Section 2.12(a). 1.66 "MOOG FIRPTA CERTIFICATE" shall have the meaning ascribed thereto in Section 3.2(d). 1.67 "MOOG PARENT" shall have the meaning ascribed thereto in the introductory paragraph of this Agreement. 1.68 "MOOG PERMITS" shall have the meaning ascribed thereto in Section 4.25. - 12 - 1.69 "MOOG PRE-CLOSING BALANCE SHEET" shall have the meaning ascribed thereto in Section 2.8. 1.70 "MOOG PRE-CLOSING NET BOOK VALUE" shall mean the amount of the excess of "Total Assets" over "Total Liabilities" as reflected in the Moog Pre-Closing Balance Sheet. 1.71 "MOOG PRELIMINARY CLOSING BALANCE SHEET" shall have the meaning ascribed thereto in Section 2.10. 1.72 "MOOG'S ADJUSTMENT LETTER" shall have the meaning ascribed thereto in Section 2.11(a). 1.73 "MOOG'S INDEMNIFIED GROUP" shall have the meaning ascribed thereto in Section 11.3. 1.74 "MOOG'S KNOWLEDGE" or similar term means the actual knowledge of (i) the individuals listed in Section 1.74 of the Moog Disclosure Schedule and (ii) the highest ranking environmental compliance officer with responsibility for each of the facilities currently used in the operations of the TC Business. 1.75 "MOOG'S RESPONSE LETTER" shall have the meaning ascribed thereto in Section 2.11(b). 1.76 "MOOG SCHEDULED TC AND BRAKE SALARIED NON-SALES PERSONS" shall have the meaning ascribed thereto in Section 4.18(a). 1.77 "MOOG SEVERANCE SCHEDULE" shall have the meaning ascribed thereto in Section 8.2(d). 1.78 "OVERSTOCK BRAKE RETURNS AMOUNT" and "OVERSTOCK TC RETURNS AMOUNT" shall have the meanings ascribed thereto in Section 7.12(a). 1.79 "PARTY" means any of Cooper Canada, Moog Company, Moog Parent, SMP Parent, or SMP Canada; "PARTIES" means more than one Party. 1.80 "PERMITTED EXCEPTIONS" shall mean statutory liens for taxes or assessments not yet due or delinquent. Further, with respect to the Brake Real Properties and the TC Real Properties, Permitted Exceptions shall also include: (i) zoning and similar restrictions provided the current use of such real properties does not violate any of such restrictions; (ii) the matters set forth on Section 1.80 of the Moog Disclosure Schedule with respect to the TC Real Properties; (iii) the matters set forth on Section 1.80 of the SMP Disclosure Schedule with espect to the Brake Real Properties; and (iv) any other encumbrances or easements which individually or in the aggregate do not materially detract from the value of the property subject thereto or materially impair the use of such property as presently used by the Parties. - 13 - 1.81 "PERSON" means an individual, a corporation, a partnership, an association, a joint stock company, a trust, a joint venture, a limited liability company, an unincorporated organization, another entity or a Governmental Agency. 1.82 "REMEDIAL ACTION" shall mean such actions as are required under Environmental Law or required under any applicable provisions of the current real estate leases listed in Section 4.8 of the Moog Disclosure Schedule and Section 5.8 of the SMP Disclosure Schedule, to (i) clean up, remove, contain, treat or in any other way address, remediate or respond to any Discharge; (ii) prevent the dispersal of Hazardous Materials in the Environment so that they do not migrate or endanger public health or safety or the Environment; and/or (iii) perform studies, investigations, monitoring, or operation and maintenance functions in respect of any such matter. 1.83 "RESOLUTION OF PRE-CLOSING ENVIRONMENTAL ISSUES" shall have the meaning ascribed thereto in Section 9.3(a). 1.84 "RUBBER SUPPLY AGREEMENT" shall mean the Supply Agreement, between Moog and Stanric, Inc., a company organized under the laws of the Commonwealth of Puerto Rico, in the form attached hereto as Exhibit C. 1.85 "RULES" shall have the meaning ascribed thereto in Section 14.2(a). 1.86 "SECOND PERIOD SEVERANCE AMOUNT" shall have the meaning ascribed thereto in Section 8.2(c). 1.87 "SECURITY INTEREST" means any mortgage, pledge, security interest, encumbrance, charge, other lien or easement other than Permitted Exceptions. 1.88 "SMP" shall have the meaning ascribed thereto in the introductory paragraph of this Agreement. 1.89 "SMP CANADA" shall have the meaning ascribed thereto in the introductory paragraph of this Agreement. 1.90 "SMP DISCLOSURE SCHEDULE" shall have the meaning ascribed thereto in Section 5.3. 1.91 "SMP EMPLOYEE PLANS" shall have the meaning ascribed thereto in Section 5.19(a). 1.92 "SMP ERISA AFFILIATE" shall have the meaning ascribed thereto in Section 5.19(a). 1.93 "SMP FINAL CLOSING BALANCE SHEET" shall have the meaning ascribed thereto in Section 2.12(b). - 14 - 1.94 "SMP FINAL CLOSING NET BOOK VALUE" shall have the meaning ascribed thereto in Section 2.12(b). 1.95 "SMP FIRPTA CERTIFICATE" shall have the meaning ascribed thereto in Section 3.3(d). 1.96 "SMP PARENT" shall have the meaning ascribed thereto in the introductory paragraph of this Agreement. 1.97 "SMP PERMITS" shall have the meaning ascribed thereto in Section 5.25. 1.98 "SMP PRE-CLOSING BALANCE SHEET" shall have the meaning ascribed thereto in Section 2.8. 1.99 "SMP PRE-CLOSING NET BOOK VALUE" shall mean the amount of the excess of "Total Assets" over "Total Liabilities" as reflected in the SMP Pre-Closing Balance Sheet. 1.100 "SMP'S PRELIMINARY CLOSING BALANCE SHEET" shall have the meaning ascribed thereto in Section 2.10. 1.101 "SMP'S ADJUSTMENT LETTER" shall have the meaning ascribed thereto in Section 2.11(a). 1.102 "SMP'S INDEMNIFIED GROUP" shall have the meaning ascribed thereto in Section 11.4. 1.103 "SMP'S KNOWLEDGE" or similar term means the actual knowledge of (i) the individuals listed in Section 1.103 of the SMP Disclosure Schedule and (ii) the highest ranking environmental compliance officer with responsibility for each of the facilities currently used in the operations of the Brake Business. 1.104 "SMP'S RESPONSE LETTER" shall have the meaning ascribed thereto in Section 2.11(b). 1.105 "SMP SCHEDULED TC AND BRAKE SALARIED NON-SALES PERSONS" shall have the meaning ascribed thereto in Section 5.18(a). 1.106 "SMP SEVERANCE SCHEDULE" shall have the meaning ascribed thereto in Section 8.2(d). 1.107 "TARGET" shall have the meaning ascribed thereto in Section 7.16. 1.108 "TAXES" shall mean all United States or foreign federal, provincial, state, municipal, local income, profits, gross receipts, license, payroll, employment, franchise, unincorporated business, withholding, capital, general corporate, customs duties, environmental (including Taxes under Code Section 50A), disability, registration, alternative, add-on, - 15 - minimum, estimated, sales, use, occupation, property, severance, production, excise, recording, ad valorem, gains, transfer, value-added, unemployment compensation, social security, premium, privilege and any and all other taxes (including interest, additions to tax and penalties thereon, and interest on such additions to tax and penalties). 1.109 "TAX RETURN" means any return, declaration, report, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. 1.110 "TC ASSETS" shall mean: (a) all of the property and assets of Moog used exclusively in the conduct of the TC Business whether or not reflected in the Moog Final Closing Balance Sheet (as hereinafter defined), including, without limitation, the TC Real Properties (as hereinafter defined), the TC Intellectual Property (as hereinafter defined), plants, machinery, equipment, tools, dies, data processing equipment, office equipment, supplies, furniture, fixtures, leasehold improvements, motor vehicles, prepaid expenses and security deposits (and including all items which would be included on the Moog Final Closing Balance Sheet except for the fact that such items are fully depreciated or expensed), and all items used exclusively in the conduct of the TC Business which are acquired in the ordinary course of business consistent with past practice by the TC Business between the date of the Moog Pre-Closing Balance Sheet (as hereinafter defined) and the Closing Date; (b) the TC Books and Records (as hereinafter defined); (c) the TC Contracts (as hereinafter defined); (d) the TC Leases (as hereinafter defined); (e) the note receivable due from Elite Automotive Systems Limited dated July 3, 1997 in the original principal amount of (pound)300,000 together with the related Legal Charge dated July 3, 1997 granting a security interest in the assets of Elite Automotive Systems Limited to secure repayment of the note; and (f) inventories, other than the inventories to be consigned by Moog to SMP as determined under Section 7.20 of this Agreement. Notwithstanding the foregoing, the TC Assets shall not mean or include the TC Retained Assets (as hereinafter defined). 1.111 "TC ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the instrument of assignment and assumption substantially in the form attached hereto as Exhibit D. 1.112 "TC ASSUMED LIABILITIES" shall mean and include only the following obligations and liabilities of the TC Business: - 16 - (a) all Liabilities of the TC Business reflected on the Moog Final Closing Balance Sheet; (b) subject to Section 7.12, all Liabilities for warranty and customer service claims and other return obligations regarding products of the TC Business; (c) all Liabilities for product liability claims (including claims for property damage, personal injury or death) relating to products manufactured or sold by the TC Business based on or arising out of claims made or causes of action filed after the first anniversary of the Closing Date, PROVIDED, HOWEVER, that this subsection (c) shall not apply to any Liabilities based on or arising out of asbestos exposure which are covered by Section 1.127(d). (d) all Liabilities under the TC Contracts and the TC Leases, to the extent such TC Contracts and TC Leases are assigned to SMP; and (e) all core Liabilities of the TC Business. Notwithstanding the foregoing, the TC Assumed Liabilities shall not include the TC Retained Liabilities (as hereinafter defined). 1.113 "TC BILL OF SALE" shall have the meaning ascribed thereto in Section 3.2(b). 1.114 "TC BOOKS AND RECORDS" shall mean originals or copies of all of the books and records of Moog relating to the operations of the TC Business, including, without limitation, all books and records relating to the individuals employed by Moog who will be employed by SMP in the TC Business, following the Closing Date, and to the extent related exclusively to the TC Business, all books and records relating to the purchase of materials, the lease of equipment, supplies and services, advertising, financial, accounting and operations matters, product engineering, research and development, manufacture and sale of products, provision of services and dealings with customers or clients of the TC Business. As used herein books and records shall include a hardcopy of all computerized books and records. 1.115 "TC BUSINESS" shall have the meaning ascribed thereto in the recitals of this Agreement. 1.116 "TC COMPETITIVE BUSINESS" shall have the meaning ascribed thereto in Section 7.16(a). 1.117 "TC COMPETITIVE PRODUCTS" shall have the meaning ascribed thereto in Section 7.16(a). 1.118 "TC CONTRACTS" shall mean all contracts, licenses, purchase orders, agreements and commitments of Moog exclusively relating to the TC Business, including, without limitation, (i) the contracts, agreements and commitments listed in Section 4.13 of the Moog Disclosure Schedule and (ii) all contracts, agreements and commitments of Moog exclusively relating to the TC Business which are entered into between the date of this Agreement and the Closing Date - 17 - and expressly permitted by this Agreement, excluding, however, all contracts, agreements and commitments which expire or are cancelled in accordance with their terms prior to the Closing Date. 1.119 "TC ENVIRONMENTAL COSTS" shall mean all Environmental Costs, whether direct or indirect, known or unknown, joint or several, whenever arising (including after Closing), based on, arising out of or otherwise in respect of the TC Assets, the TC Business, or property currently or formerly owned, operated, used or leased by Moog or its predecessors (including off-site locations) and arising out of: (i) conditions or Hazardous Materials existing on or originating from any such property or the TC Assets on or prior to the Closing Date including, but not limited to, the Discharge or Disposal of Hazardous Materials at or from any such property on or prior to the Closing Date; (ii) the operation of the TC Business by Moog or its predecessors on or prior to the Closing Date; or (iii) non-compliance on or prior to the Closing Date with any requirements of Environmental Laws. 1.120 "TC INTELLECTUAL PROPERTY" shall mean all letters patent, patents, trademarks, trade names, service marks, copyrights (including registrations and applications for any of the foregoing), licenses, technology, know-how, trade secrets, tangible or intangible proprietary information or material, formulae and inventions owned by Moog which are used exclusively in or relate exclusively to the TC Business or the rights thereto (including rights under licenses) which belong to Moog and are used exclusively in or relate exclusively to the TC Business, including, without limitation, (i) all items listed in Section 4.10(c) of the Moog Disclosure Schedule and (ii) all such intellectual property which is acquired or developed for use exclusively in the TC Business between the date of this Agreement and the Closing. The TC Intellectual Property shall not include the Excluded Moog Trademarks and Trade Names. 1.121 "TC LEASES" shall mean all leases of Moog for real or personal property exclusively relating to the TC Business (whether entered into as lessor or lessee), including, without limitation, (a) the real estate leases listed in Section 4.8 of the Moog Disclosure Schedule and (b) all leases of Moog exclusively relating to the TC Business which are entered into between the date of this Agreement and the Closing and expressly permitted by this Agreement, excluding, however, all leases which will expire in accordance with their terms prior to the Closing. 1.122 "TC LETTERS OF CREDIT" shall have the meaning ascribed thereto in Section 7.15(a). 1.123 "TC MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the TC Assets or on the business, financial condition, operations, or results of operations of the TC Business. 1.124 "TC PRODUCT LIABILITY CLAIM" shall have the meaning ascribed thereto in Section 4.17(a). 1.125 "TC REAL PROPERTIES" shall mean all of the real properties owned by Moog and used exclusively in the TC Business as listed in Section 4.9 of the Moog Disclosure Schedule (but excluding the real property owned or held by Moog in Ottumwa, Iowa). - 18 - 1.126 "TC RETAINED ASSETS" shall mean all of the following properties, assets and other rights of Moog: (a) all cash, cash equivalents and bank accounts; (b) all of Moog's accounts and notes receivable including, but not limited to, any inter- or intra-company receivables owed to the TC Business from Moog or any of its Affiliates (but excluding the note receivable due from Elite Automotive Systems which is included in the TC Assets); (c) the real property owned or held by Moog in Ottumwa, Iowa including all improvements, structures and fixtures thereon and other tangible assets located at such property; (d) the Excluded Moog Trademarks and Trade Names; (e) all insurance policies, related prepaid expenses, refunds or proceeds and all rights relating thereto subject to Section 7.14(a); (f) all personal computers and servers used in the TC Business which were deployed by Moog to support SAP (but not wiring for the SAP system which is included in the TC Assets) and all personal computers used by the Moog sales force; (g) the computer software used by the TC Business and leases, licenses or other arrangements therefor; (h) any assets of any Employee Pension Benefit Plans and Employee Welfare Benefit Plans and any rights under such plans relating to employee benefits, employment or compensation; (i) any vehicles owned or leased by Moog for use by Moog sales personnel; (j) the inventories to be consigned by Moog to SMP as determined under Section 7.20 of this Agreement; and (k) any fixed assets located at Moog's facility in Boaz, Alabama related to the production of screw machine products for the TC Business. 1.127 "TC RETAINED LIABILITIES" shall mean the following: (a) all Liabilities to the extent arising out of TC Retained Assets; (b) all accounts and notes payable of the TC Business incurred on or prior to the Closing Date including, but not limited to, any inter- or intra-company payables due from the TC Business to Moog or any of its Affiliates; - 19 - (c) all Liabilities for product liability claims (including claims for property damage, personal injury or death) relating to products manufactured or sold by the TC Business based on or arising out of claims made or causes of action filed on or before the first anniversary of the Closing Date, PROVIDED, HOWEVER, that this Section (c) shall not apply to any Liabilities based on or arising out of asbestos exposure which are covered by Section 1.127(d); (d) any claims by third parties based on or arising out of asbestos exposure relating to products manufactured or sold on or prior to the Closing Date by the TC Business and any claims by Active Employees or Inactive Employees of the TC Business (including worker's compensation claims) based on or arising out of asbestos exposure on or prior to the Closing Date; (e) all TC Environmental Costs; (f) all Liabilities to Inactive Employees of the TC Business and their beneficiaries and dependents including, without limitation, all Liabilities with respect to (i) salaries, wages, commissions, bonuses and vacation pay (except to the extent accrued on the Moog Final Closing Balance Sheet); (ii) severance pay and obligations (subject to Sections 8.1 and 8.2); (iii) Employee Pension Benefit Plans and Employee Welfare Benefit Plans (including any retiree medical and dental benefits) provided by Moog or its Affiliates to such employees; (iv) worker's compensation claims; (v) unemployment compensation claims; and (vi) claims or litigation relating to discrimination claims, unjust discharge, claims for additional compensation or benefits and claims for violation of health and safety laws; (g) all Liabilities to Active Employees of the TC Business and their beneficiaries and dependents for (i) salaries, wages, commissions, bonuses and vacation pay relating to periods on or prior to the Closing Date (except to the extent accrued on the Moog Final Closing Balance Sheet); (ii) severance pay and obligations for Active Employees who do not become employees of SMP (subject to Sections 8.1 and 8.2); (iii) Employee Pension Benefit Plans and Employee Welfare Benefit Plans (including any retiree medical and dental benefits) provided by Moog or its Affiliates to such employees in accordance with the provisions of such plans; (iv) worker's compensation claims based on or resulting from incidents or events occurring before the Closing Date; (v) unemployment compensation claims for Active Employees who do not become employees of SMP; and (vi) claims or litigation relating to discrimination claims, unjust discharge, claims for additional compensation or benefits and violation of the health and safety laws based upon or resulting from incidents or events occurring before the Closing Date; (h) all Liabilities for Taxes of Moog or the TC Business for any period prior to the Closing Date except to the extent that a liability for non-income Taxes is accrued on the Moog Final Closing Balance Sheet; (i) all Liabilities of Moog or the TC Business for borrowed money including notes payable, loans and revolving credits; (j) all Liabilities of Moog or the TC Business with respect to letters of credit and foreign exchange contracts or commitments, subject to Section 7.15; - 20 - (k) all Liabilities of Moog or the TC Business with respect to powers of attorney, financing agreements, security agreements, bid bonds, performance bonds, suretyship agreements, guarantees or any other similar arrangement where Moog is or may become liable for the obligations of any other Person; (l) all Liabilities for Existing TC Litigation and Claims (as hereinafter defined) including matters set forth in Section 4.15 of the Moog Disclosure Schedule and, except for matters described in Sections 1.112(b) and (c), all Liabilities for any actions, suits, proceedings, claims or investigations arising after the Closing Date that arise from or relate to matters, incidents, sets of facts or circumstances on or prior to the Closing Date including breach of contract, tort, infringement or violation of law; and (m) all Liabilities arising out of "wrap discounts" or other discounts, customer incentives or rebates relating to sales on or prior to the Closing Date. 1.128 "TC RETURNS SCHEDULE" shall have the meaning ascribed thereto in Section 7.12(a). 1.129 "TC SCHEDULED SALES PERSONS" shall have the meaning ascribed thereto in Section 4.18(a). 1.130 "TC TRANSFERRING SALES PERSON" shall have the meaning ascribed thereto in Section 8.1(a). 1.131 "THIRD PERIOD SEVERANCE AMOUNT" shall have the meaning ascribed thereto in Section 8.2(e). 1.132 "TRANSITION PERIOD" shall have the meaning ascribed thereto in Section 7.3(c). 1.133 "WARRANTY BRAKE RETURNS AMOUNT" and "WARRANTY TC RETURNS AMOUNT" shall have the meanings ascribed thereto in Section 7.12(a). 1.134 "WATER" means surface water, ground water, wetlands, other water, or any of them. ARTICLE II. EXCHANGE OF ASSETS; ASSUMPTION OF LIABILITIES; ADJUSTMENTS ---------------------------------------------------------- 2.1 BASIC TRANSACTION. On and subject to the terms and conditions of ------------------ this Agreement, the Parties shall effect an exchange of the TC Assets and the Brake Assets as set forth below. 2.2 CONVEYANCE OF TC ASSETS. By means of appropriate documentation ------------------------ reasonably satisfactory to the Parties, at the Closing, Moog will sell, transfer, assign, convey and deliver - 21 - to SMP, free and clear of all Security Interests, all of its right, title and interest in and to the TC Assets, and SMP will purchase, acquire and accept, as provided herein, the TC Assets. 2.3 CONVEYANCE OF BRAKE ASSETS. By means of appropriate documentation --------------------------- reasonably satisfactory to the Parties, at the Closing, SMP will sell, transfer, assign, convey and deliver to Moog, free and clear of all Security Interests, all of its right, title and interest in and to the Brake Assets, and Moog will purchase, acquire and accept, as provided herein, the Brake Assets. 2.4 TC ASSUMED LIABILITIES. On and subject to the terms and conditions ----------------------- set forth in this Agreement, effective as of the Closing Date, Moog will transfer to SMP, and SMP will assume and undertake to perform when due, the TC Assumed Liabilities. 2.5 BRAKE ASSUMED LIABILITIES. On and subject to the terms and -------------------------- conditions set forth in this Agreement, effective as of the Closing Date, SMP will transfer to Moog, and Moog will assume and undertake to perform when due, the Brake Assumed Liabilities. 2.6 TC RETAINED LIABILITIES. The TC Retained Liabilities will be ------------------------ retained and performed when due by Moog. 2.7 BRAKE RETAINED LIABILITIES. The Brake Retained Liabilities will be --------------------------- retained and performed when due by SMP. 2.8 PRE-CLOSING BALANCE SHEETS. Attached hereto as Exhibit E is a --------------------------- balance sheet for the TC Business as of December 31, 1997 (the "MOOG PRE-CLOSING BALANCE SHEET") and attached hereto as Exhibit F is a balance sheet for the Brake Business as of December 31, 1997 (the "SMP PRE-CLOSING BALANCE SHEET"). Moog represents that the Moog Pre-Closing Balance Sheet and SMP represents that the SMP Pre-Closing Balance Sheet has been prepared in accordance with the principles, practices, methods and procedures set forth on Exhibit G. 2.9 CLOSING PAYMENT AMOUNT AND FINAL CLOSING PAYMENT AMOUNT. -------------------------------------------------------- (a) At Closing, SMP shall pay Moog an amount equal to the sum of: (i) the outstanding balance including any future principal payments due under the $2.5 million Arkansas Development Finance Authority Industrial Development Bonds (Standard Motor Products, Inc. Project) Series 1989, plus interest accrued to the Closing Date; and (ii) the outstanding balance including any future principal payments due under the $1.8 million Industrial Development Revenue Bonds (Standard Motor Products, Inc. Project) Series 1990, plus interest accrued to the Closing Date. (b) If the SMP Final Closing Net Book Value exceeds the Moog Final Closing Net Book Value, without giving effect to the consignment provisions of Section 7.20, then on or before the first anniversary of the Closing Date, Moog shall pay to SMP an amount equal to the difference between the SMP Final Closing Net Book Value and the Moog Final Closing Net Book Value. - 22 - (c) If Moog fails to timely make the payment described in Section 2.9(a), Moog shall pay to SMP interest on such amount at the rate of twelve percent (12%) per annum from the first anniversary of the Closing Date to the payment date. (d) If the Moog Final Closing Net Book Value exceeds the SMP Final Closing Net Book Value, without giving effect to the consignment provisions of Section 7.20, then on or before the first anniversary of the Closing Date, SMP shall pay Moog the amount determined under Section 7.20(e). 2.10 CLOSING BALANCE SHEETS. Within sixty (60) days following the ----------------------- Closing Date, (i) Moog will prepare and furnish to SMP a balance sheet for the TC Business as of the Closing Date (the "MOOG PRELIMINARY CLOSING BALANCE SHEET") and (ii) SMP will prepare and furnish to Moog a balance sheet for the Brake Business as of the Closing Date (the "SMP PRELIMINARY CLOSING BALANCE SHEET"). The Moog Preliminary Closing Balance Sheet, the Moog Final Closing Balance Sheet, the SMP Preliminary Closing Balance Sheet and the SMP Final Closing Balance Sheet shall be prepared in accordance with principles, practices, methods and procedures set forth on Exhibit G. 2.11 PRELIMINARY CLOSING BALANCE SHEET REVIEW. (a) Moog will have ----------------------------------------- thirty (30) days following receipt of the SMP Preliminary Closing Balance Sheet from SMP to review such SMP Preliminary Closing Balance Sheet and to determine if, in Moog's good faith reasonable judgment, it has been prepared in accordance with Exhibit G. If Moog does not raise any objections within such thirty (30) day period, then Moog will be deemed to have accepted the SMP Preliminary Closing Balance Sheet. If in Moog's good faith reasonable judgment adjustments are necessary for the SMP Preliminary Closing Balance Sheet to be so prepared, Moog shall notify SMP in writing of its proposed adjustments, including, in reasonable detail, the amount, nature and basis for the adjustments ("MOOG'S ADJUSTMENT LETTER") prior to the end of such thirty (30) day review period. SMP will have thirty (30) days following receipt of the Moog Preliminary Closing Balance Sheet from Moog to review such Moog Preliminary Closing Balance Sheet and to determine if, in SMP's good faith reasonable judgment, it has been prepared in accordance with Exhibit G. If SMP does not raise any objections within such thirty (30) day period, then SMP will be deemed to have accepted the Moog Preliminary Closing Balance Sheet. If in SMP's good faith reasonable judgment adjustments are necessary for the Moog Preliminary Closing Balance Sheet to be so prepared, SMP shall notify Moog in writing of its proposed adjustments, including, in reasonable detail, the amount, nature and basis for the adjustments ("SMP'S ADJUSTMENT LETTER") prior to the end of such thirty (30) day review period. (b) SMP will have fifteen (15) days following receipt of Moog's Adjustment Letter, if any, to review the proposed adjustments and within such period shall notify Moog in writing of SMP's position with respect to each of Moog's proposed adjustments ("SMP'S RESPONSE LETTER"). If SMP does not notify Moog in writing within such fifteen (15) day period of any objections to Moog's proposed adjustments, then SMP will be deemed to have accepted each of Moog's proposed adjustments set forth in Moog's Adjustment Letter. Moog will have fifteen (15) days following receipt of SMP's Adjustment Letter, if any, to review the proposed adjustments and within such period shall notify SMP in writing of Moog's position with respect to each of SMP's proposed adjustments ("MOOG'S RESPONSE LETTER"). If Moog does not notify - 23 - SMP in writing within such fifteen (15) day period of any objections to SMP's proposed adjustments, then Moog will be deemed to have accepted each of SMP's proposed adjustments set forth in SMP's Adjustment Letter. (c) Within ten (10) days after receipt of the response from each of the Parties pursuant to Section 2.11(b), the Parties shall meet and endeavor acting reasonably and in good faith, to resolve the adjustments, if any, which are in dispute. (d) If the Parties are unable to resolve all of the proposed adjustments in Moog's Adjustment Letter and SMP's Adjustment Letter, within the ten (10) day period provided in Section 2.11(c), the Parties shall jointly engage the accounting firm of Coopers & Lybrand (or their successor) (the "ACCOUNTING ARBITRATOR"), to act as arbitrator, subject to the Accounting Arbitrator confirming that it has no business or other relationship with either party which would cause it not to be independent of both Parties which has not been waived in writing by the Party not having such relationship in its sole discretion. If such accounting firm is unable to confirm its independence and no waiver is given, the Parties shall jointly engage an alternate mutually acceptable accounting firm that can confirm that it is independent of both Parties or such a waiver is given with respect to the alternate accounting firm. If the Parties have failed to engage the Accounting Arbitrator within such ten (10) day period either Party may request that an administrator designated by the American Arbitration Association appoint a nationally recognized independent accounting firm to act as the Accounting Arbitrator within fifteen (15) days of such request. The Accounting Arbitrator shall be furnished with a copy of the Agreement, the Moog Pre-Closing Balance Sheet, the SMP Pre-Closing Balance Sheet, the Moog Preliminary Closing Balance Sheet, the SMP Preliminary Closing Balance Sheet, Moog's Adjustment Letter (if any), SMP's Adjustment Letter (if any), Moog's Response Letter (if any), SMP's Response Letter (if any) and any other relevant correspondence between the Parties. The Accounting Arbitrator must, within sixty (60) days from the date all of such documents are furnished, complete its review and render a written report setting forth its conclusion with respect to each of the proposed adjustments that were unresolved between the Parties. The Accounting Arbitrator shall be granted access to the books and records of the Parties as well as the working papers or other documents which either Party or its accountants may have that relate to the Moog Preliminary Closing Balance Sheet or the SMP Preliminary Closing Balance Sheet and any other documents or information which the Accounting Arbitrator may deem appropriate. The Accounting Arbitrator's review shall be limited to determining, in respect of each disputed adjustment, which Party's position with respect to the proposed adjustment most closely compares with the terms of this Agreement. The Parties shall have the right to submit written materials to the Accounting Arbitrator all in accordance with procedures to be set forth in the engagement letter between the Parties and the Accounting Arbitrator. In arriving at its determination the Accounting Arbitrator must select one Party's position with respect to each proposed adjustment. The decision by the Accounting Arbitrator shall be in writing and delivered to both Parties. The Accounting Arbitrator's decision shall be conclusive and binding upon the Parties and may be entered and enforced in any court of competent jurisdiction. The Parties agree to submit to the jurisdiction of any such court for the enforcement of such award or decision. Each Party shall pay fifty percent (50%) of the fees and expenses of the Accounting Arbitrator. 2.12 FINAL CLOSING BALANCE SHEET. (a) The Moog Preliminary ---------------------------- Closing Balance Sheet as agreed to by the Parties pursuant to subsections 2.11(a), (b) or (c) or as modified by the - 24 - determination of the Accounting Arbitrator pursuant to subsection 2.11(d) will become the "MOOG FINAL CLOSING BALANCE SHEET," and the excess of "Total Assets" over "Total Liabilities" as reflected in the Moog Final Closing Balance Sheet shall be the "MOOG FINAL CLOSING NET BOOK VALUE." (b) The SMP Preliminary Closing Balance Sheet as agreed to by the Parties pursuant to subsections 2.11(a), (b) or (c) or as modified by the determination of the Accounting Arbitrator pursuant to subsection 2.11(d) will become the "SMP FINAL CLOSING BALANCE SHEET," and the amount of the excess of "Total Assets" over "Total Liabilities" as reflected in the SMP Final Closing Balance sheet shall be the "SMP FINAL CLOSING NET BOOK VALUE." 2.13 PAYMENT. Any amounts to be paid pursuant to this Article II shall -------- be paid in immediately available United States funds by wire transfer to an account designated by the Party to receive such funds, of which such Party shall advise the other Party not later than two (2) Business Days prior to the date payment is to be made. 2.14 TRANSFER COSTS. (i) Moog will pay all transfer, income, conveyance --------------- or other similar Taxes, stamps, duties or similar governmental charges imposed by any taxing jurisdiction on or with respect to the transfer of the TC Assets, (ii) SMP will pay all transfer, income, conveyance, or other similar Taxes, stamps, duties or similar governmental charges imposed by any taxing jurisdiction on or with respect to the transfer of the Brake Assets, (iii) SMP will pay any recording, filing or notarial fees incurred in connection with its acquisition of the TC Assets and (iv) Moog will pay any recording, filing or notarial fees incurred in connection with its acquisition of the Brake Assets. ARTICLE III. THE CLOSING ----------- 3.1 CLOSING DATE. The Closing shall take place on the seventh Business ------------- Day following the fulfillment of all the conditions precedent specified in Article X, at 10:00 a.m., at the offices of Cooper Industries, Inc., 600 Travis, Suite 5800, Houston, Texas, or at such other place, time or date as the Parties may mutually agree. The Closing shall be effective as of the close of business on that date. 3.2 MOOG DELIVERIES AT THE CLOSING. At the Closing, Moog shall deliver ------------------------------- to SMP the following: (a) Special warranty deeds (subject to Permitted Exceptions), in recordable form, with respect to the TC Real Properties owned by Moog; (b) A duly executed bill of sale substantially in the form of Exhibit H to this Agreement (the "TC BILL OF SALE"), together with such other appropriate instruments of transfer as SMP may reasonably request, transferring to SMP all of the personal and intangible property owned or held by Moog as of the Closing which is included in the TC Assets; - 25 - (c) Duly executed instruments of assignment of the TC Leases, which shall be in recordable form in the case of TC Leases of real property or interests therein; (d) Certification from Moog Company that it is not a foreign corporation, foreign trust, foreign partnership or foreign estate (as such terms are defined in the Code) and an affidavit of Moog Company in the form attached hereto as Exhibit I (the "MOOG FIRPTA CERTIFICATE"); (e) Estoppel certificates from each lessor of a TC Lease for real property in form and substance satisfactory to SMP; (f) Duly executed instruments of assignment or transfer of the TC Intellectual Property owned or held by Moog, in form suitable for recording in the appropriate office or bureau, and the original certificates, if available, of such TC Intellectual Property together with any powers of attorney necessary to make the conveyance effective; (g) The TC Books and Records; provided that any TC Books and Records located on any of the TC Real Property or leased property shall be deemed to be delivered upon transfer of such property as provided herein; (h) Copies of the consents obtained as contemplated by Section 10.3(c); (i) The TC Assignment and Assumption Agreement and the Brake Assignment and Assumption Agreement each duly executed by Moog; (j) Duly executed copies of each of the Rubber Supply Agreement (Exhibit C), and the Screw Machine Products Supply Agreement (Exhibit A); and (k) Such other and further instruments of conveyance, assignment and transfer as SMP may reasonably request for the more effective conveyance and transfer of any of the TC Assets and the assumption of any of the Brake Assumed Liabilities. 3.3 SMP DELIVERIES AT THE CLOSING. At the Closing, SMP shall deliver to ------------------------------ Moog the following: (a) Special warranty deeds (subject to Permitted Exceptions), in recordable form, with respect to the Brake Real Properties owned by SMP; (b) A duly executed bill of sale substantially in the form of Exhibit J to this Agreement (the "BRAKE BILL OF SALE"), together with such other appropriate instruments of transfer as Moog may reasonably request, transferring to Moog all of the personal and intangible property owned or held by SMP as of the Closing which is included in the Brake Assets; (c) Duly executed instruments of assignment of the Brake Leases (including an assignment of the Lease Agreement dated as of June 1, 1990 from the City of Manila to SMP pertaining to the $1.8 million Industrial Development Revenue Bonds), which shall be in recordable form in the case of Brake Leases of real property or interests therein; - 26 - (d) Certification from SMP Parent that it is not a foreign corporation, foreign trust, foreign partnership or foreign estate (as such terms are defined in the Code) and an affidavit of SMP in the form attached hereto as Exhibit K (the "SMP FIRPTA CERTIFICATE"); (e) Estoppel certificates from each lessor of a Brake Lease for real property in form and substance satisfactory to Moog; (f) Duly executed instruments of assignment or transfer of the Brake Intellectual Property owned or held by SMP, in form suitable for recording in the appropriate office or bureau, and the original certificates, if available, of such Brake Intellectual Property together with any powers of attorney necessary to make the conveyance effective; (g) The Brake Books and Records; provided that any Brake Books and Records located on any of the Brake Real Property or leased property shall be deemed to be delivered upon transfer of such property as provided herein; (h) Copies of the consents obtained as contemplated by Section 10.2(c); (i) The TC Assignment and Assumption Agreement and the Brake Assignment and Assumption Agreement each duly executed by SMP; (j) Duly executed copies of each of the Rubber Supply Agreement and the Screw Machine Products Supply Agreement; (k) Duly executed releases of all UCC financing statements filed against SMP by the following secured parties releasing all the Brake Assets from the collateral covered by the financing statements: The First National Bank of Chicago, as Collateral Agent (assignee of Clipper Receivables Corporation); SMP Credit Corporation; and Clipper Receivables Corporation (assignee of SMP Credit Corporation); (l) UCC financing statements executed by SMP pertaining to Moog's interest in the inventory consigned to SMP pursuant to Section 7.20 of this Agreement; (m) Duly executed instruments of assignment of the Promissory Note dated December 1, 1989 in the original principal amount of $2.5 million payable to the Arkansas Development Finance Authority and the related Loan Agreement and Mortgage and Security Agreement; and (n) Such other and further instruments of conveyance, assignment and transfer as Moog may reasonably request for the more effective conveyance and transfer of any of the Brake Assets and the assumption of the TC Assumed Liabilities. - 27 - ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF MOOG -------------------------------------- Moog represents and warrants to SMP that the statements contained in this Article IV are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article IV, except to the extent any representation or warranty relates to a specific date). 4.1 ORGANIZATION OF MOOG. Each of Moog Company, Moog Parent and Cooper --------------------- Canada is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization. Each of Moog Company, Moog Parent and Cooper Canada is duly authorized to conduct business and is in good standing under the laws of each jurisdiction in which the nature of the TC Business or the use, ownership or leasing of properties used in the TC Business requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a TC Material Adverse Effect. Each of Moog Company, Moog Parent and Cooper Canada has full corporate power and authority to carry on the TC Business and to use the properties used by it in the TC Business. 4.2 AUTHORIZATION OF TRANSACTION. Each of Moog Company, Moog Parent and ----------------------------- Cooper Canada has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, including the power to convey the TC Assets. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Moog Company, Moog Parent and Cooper Canada and no other corporate proceedings on the part of Moog Company, Moog Parent or Cooper Canada are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Moog Company, Moog Parent and Cooper Canada and constitutes the valid and legally binding obligation of Moog Company, Moog Parent and Cooper Canada, enforceable in accordance with its terms and conditions. 4.3 NON-CONTRAVENTION. (a) Except as set forth in Section 4.3(a) of the ------------------ disclosure schedule of Moog attached hereto (the "MOOG DISCLOSURE SCHEDULE"), and except for the applicable requirements of the H-S-R Act and any applicable "bulk sales" laws, there is no requirement applicable to Moog to make any filing with any Governmental Agency as a condition to the lawful consummation by Moog of the transactions contemplated by this Agreement. (b) Except as set forth in Section 4.3(b) of the Moog Disclosure Schedule, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) conflict with or result in any breach of any provision of the certificate or articles of incorporation or bylaws or other organizational document of Moog Company, Moog Parent or Cooper Canada, (ii) except for any applicable "bulk sales" laws, violate any statute, regulation, rule, judgment, order, decree, stipulation, injunction, charge or other restriction of any government, or Governmental Agency, to which Moog or any of the TC Assets is subject or (iii) conflict with, result in a breach of, constitute a default under, result in - 28 - the acceleration of, create in any Person the right to accelerate, terminate, modify, or cancel, or require any notice under any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed money or instrument of indebtedness, to which either Moog Company, Moog Parent or Cooper Canada is a party or by which Moog Company, Moog Parent or Cooper Canada is bound or to which any of the TC Assets is subject (or result in the imposition of any Security Interest upon any of such TC Assets), except, with respect to clauses (ii) and (iii), for such violations, conflicts, breaches or defaults which would not individually or in the aggregate have a TC Material Adverse Effect. 4.4 MOOG PRE-CLOSING BALANCE SHEET AND FINANCIAL STATEMENTS. (a) The -------------------------------------------------------- Moog Pre-Closing Balance Sheet has been prepared from the books and records of Moog in accordance with the principles, practices, methods and procedures set forth on Exhibit G and reasonably reflects the assets that are TC Assets and Liabilities that are TC Assumed Liabilities as of December 31, 1997. (b) Moog has previously delivered to SMP the balance sheet of the TC Business at December 31, 1996 and the income statement of the TC Business for the year then ended. Such financial statements (i) have been prepared based on the books and records of Moog in accordance with past practices applied on a consistent basis, with such differences from GAAP as are described in Section 4.4 of the Moog Disclosure Schedule, and (ii) present fairly, in all material respects, the financial position and results of operations of the TC Business as of such date or for such year. 4.5 UNDISCLOSED LIABILITIES. Except as set forth in Section 4.5 of the ------------------------ Moog Disclosure Schedule, Moog has no liabilities or obligations (whether absolute, accrued, contingent or otherwise) that are of the type required to be set forth in the Moog Pre-Closing Balance Sheet, except liabilities, obligations or contingencies which are adequately accrued or reserved against in such balance sheet or which were incurred after December 31, 1997, in the ordinary course of business consistent with past practice or which in the aggregate do not exceed $10,000. 4.6 EVENTS AFTER JUNE 30, 1997. Except for the loss of AutoZone as a --------------------------- customer of the TC Business, since June 30, 1997, there has not been a TC Material Adverse Effect. Except as set forth in Section 4.6 of the Moog Disclosure Schedule, without limiting the foregoing, since that date, Moog, with respect to the TC Business, has not: (a) (i) sold, leased, transferred, disposed of or assigned any of the TC Assets, other than finished goods sold in the ordinary course of business or the sale or transfer of other assets which are not material to the TC Business, all of which is consistent with past practice or (ii) mortgaged, pledged or otherwise encumbered any TC Assets, except for Permitted Exceptions; (b) made any capital expenditures in excess of $250,000 in the aggregate; (c) entered into any contract, agreement, arrangement, lease, sublease, license, sublicense which involves a certain (rather than contingent) obligation of or to Moog with respect to the TC Business of more than $100,000, except for purchase orders, sales orders and - 29 - similar contracts entered into in the ordinary course of business consistent with past practice which, in any individual case, did not exceed $500,000; (d) created, incurred or assumed any long-term Debt (including obligations in respect of capital leases), or, except in the ordinary course of business consistent with past practice, any short-term Debt if, in either case, such Debt would constitute a TC Assumed Liability; (e) made any capital investment in, any loan or advance to, or any acquisition of all or any substantial part of the assets, properties, business or capital stock of, any other Person or entity (or series of related capital investments, loans, advances and acquisitions); (f) delayed or postponed the payment of accounts payable and other Liabilities in any amount in the aggregate in excess of $200,000, except in the ordinary course of business consistent with past practices; (g) to Moog's Knowledge, cancelled, compromised, waived or released any material right or claim; (h) experienced any damage, destruction or loss (whether or not covered by insurance) of property either involving more than $100,000, singly, or $200,000, in the aggregate; (i) entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement except as set forth in Section 4.6(i) of the Moog Disclosure Schedule; (j) granted any increase in the compensation or employee benefits of any of the officers or employees of the TC Business, other than routine salary or hourly increases made pursuant to present salary review procedures in the ordinary course of business consistent with past practice; (k) adopted any (i) bonus, (ii) profit-sharing, (iii) incentive compensation, (iv) pension, (v) retirement, (vi) medical, hospitalization, life or other insurance, (vii) severance or (viii) other plan, contract or commitment for any of its officers or employees of the TC Business, or modified or terminated any such existing plan, contract or commitment; (l) failed to maintain any insurance relating to the TC Business in full force and effect, assigned or transferred such insurance or the proceeds thereof to any Person, failed to pay any premiums due thereunder, or caused, suffered or permitted any act or failure to act which could cause such insurance to be canceled or terminated; (m) failed to give any required notice or failed to present any claims of known occurrences under any insurance relating to the TC Business or failed to take any other required or appropriate action with respect thereto in due and timely fashion or cancelled those insurance policies for occurrences relating to the TC Business on or prior to Closing or caused or - 30 - permitted any retroactive cancellation of insurance coverage relating to the TC Business in effect prior to Closing or for occurrences prior to Closing; (n) made any change in accounting methods, principles, procedures or practices, except as required by GAAP, any such changes to be set forth on Section 4.6 of the Moog Disclosure Schedule; (o) amended its certificate or articles of incorporation or bylaws in a manner that adversely affects the transactions contemplated by this Agreement; (p) entered into any agreement, contract or commitment to do any of the foregoing; or (q) made or revoked any Tax election or settled or compromised any Tax Liability relating to the TC Business or the TC Assets. 4.7 TAX MATTERS. (a) Except liens for Taxes not yet due, there are no ------------ Tax liens upon, pending against or, to Moog's Knowledge, threatened in writing against any of the TC Assets that arose in connection with any failure to file a Tax Return or to pay any Taxes. (b) Moog has, in relation to the TC Business, withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other Person. (c) There is no dispute or claim concerning any Liability for Taxes relating to any of the TC Assets or the TC Business. 4.8 TC LEASES FOR REAL PROPERTY. Section 4.8 of the Moog Disclosure Schedule sets forth a true and correct list of each TC Lease which relates to real property, which constitutes all of the real property leased by Moog and used exclusively in the TC Business. Moog has delivered to SMP correct and complete copies of the leases and subleases (as amended to date) listed in Section 4.8 of the Moog Disclosure Schedule. Regarding each lease and sublease listed in Section 4.8 of the Moog Disclosure Schedule: (a) the lease or sublease is in full force and effect, is legal, valid, binding and enforceable against Moog, and, to Moog's Knowledge, is legal, valid, binding and enforceable against each other party thereto; (b) Except as set forth in Section 4.8 of the Moog Disclosure Schedule, Moog is not in breach or default, and no event has occurred which, with notice or lapse of time, or both, would constitute a breach or default, or would permit termination, modification, or acceleration thereunder, by the other party thereto, and, to Moog's Knowledge, no other party to the lease or sublease is in breach or default, and no event has occurred which, with notice or lapse of time, or both, would constitute a breach or default, or would permit termination, modification, or acceleration thereunder, by Moog. - 31 - (c) all facilities have received all approvals of Governmental Agencies (including Moog Permits) required of Moog in connection with the construction, leasing or operation thereof, and have been operated and maintained in accordance with applicable laws, rules and regulations, except where the failure to do so could not reasonably be expected to have a TC Material Adverse Effect; and (d) there are no (i) pending condemnation proceedings relating to the property against Moog or its Affiliates or, to Moog's Knowledge, pending condemnation proceedings relating to the property against any other parties or threatened against Moog, its Affiliates or any other parties, (ii) pending litigation or administrative actions relating to the property against Moog or its Affiliates or, to Moog's Knowledge, pending litigation or administrative actions relating to the property against any other parties or threatened against Moog, its Affiliates or any other parties, or (iii) to Moog's Knowledge, other matters materially and adversely affecting the current use, occupancy or value of the property. 4.9 TC REAL PROPERTY. (a) Section 4.9 of the Moog Disclosure Schedule ----------------- lists and describes the TC Real Property (except the property located in Ottumwa, Iowa) which constitutes all of the real property owned by Moog and used exclusively in the TC Business. Moog has on the date hereof good, valid and marketable title to such real property free and clear of all Security Interests. (b) Moog has not entered into any lease, subleases, licenses, or other agreements granting to any third party the right to use or occupy all or any portion of the TC Real Property. (c) Except pursuant to this Agreement, Moog has not granted any outstanding options or rights of first refusal to purchase, lease or license any TC Real Property. (d) Moog has not received any notice of any pending, threatened or contemplated condemnation proceeding affecting the TC Real Property and no proceedings or real estate tax certiorari protests are now pending for the reduction of the assessed valuation of the TC Real Property. (e) Moog has not received any written notice from any Governmental Agency (i) stating or alleging that any improvements at the TC Real Property has not been constructed in accordance with applicable law or (ii) requiring or advising as to the need for any material repair, alteration, restoration or improvement in connection with the TC Real Property. 4.10 TC INTELLECTUAL PROPERTY. (a) Moog owns or has the right to use ------------------------- pursuant to license, sublicense, agreement or permission all TC Intellectual Property and the TC Intellectual Property constitutes all the intellectual property necessary for the operation of the TC Business as presently conducted. Subject to Moog obtaining the consents of any third party required to transfer Moog's interest in the TC Intellectual Property to SMP as provided in Section 4.10(f) below, each item of TC Intellectual Property will be owned or available for use by SMP on identical terms and conditions effective upon the Closing. (b) To Moog's Knowledge, Moog has not, in the conduct of the TC Business or in its use of the TC Intellectual Property, interfered with, infringed upon, misappropriated, or - 32 - otherwise come into conflict with any intellectual property rights of third parties, except as set forth in Section 4.10(b) of the Moog Disclosure Schedule. Moog and the directors and officers (and employees with responsibility for TC Intellectual Property matters) of Moog, have not received during the five year period prior to this Agreement any charge, complaint, claim or notice alleging that the conduct by Moog of the TC Business or any use by Moog of the TC Intellectual Property constitutes any such interference, infringement, misappropriation or violation. To Moog's Knowledge, during the five year period prior to this Agreement, no third party has materially interfered with, infringed upon, misappropriated or otherwise come into conflict with any TC Intellectual Property. (c) Section 4.10(c) of the Moog Disclosure Schedule identifies: (i) each patent (including issuing country, number, current assignee of record, title and issue date), each trademark and service mark registration (including issuing country, number, description of mark, current owner of record and issue date), each unregistered trademark and service mark for which no application for registration is pending (including a description of the mark and the goods or services with which it is used) and each copyright registration (including issuing country, number, title or description of work, current owner of record and issue date) currently in effect, owned by Moog, and included in the TC Intellectual Property; (ii) each pending patent application (including country of filing, serial number, current owner of record, title and filing date), application for registration of a trademark or service mark (including country of filing, serial number, description of mark, current owner of record, classes of goods or services, and filing date), and application for copyright registration (including country of filing, serial number, title or description of work, current owner of record, and filing date), which Moog has made with respect to any TC Intellectual Property; and (iii) each license, agreement or other permission which Moog or its Affiliates has granted to any third party with respect to any of its or their owned TC Intellectual Property. Moog has delivered to SMP correct and complete copies of all such written (or if oral, a written summary of such) licenses, agreements and permissions (as amended to date). (d) With respect to each item of TC Intellectual Property: (i) the identified owner possesses all right, title and interest in and to the item; (ii) the item is not subject to any outstanding judgment, order, decree, stipulation, injunction or charge; and (iii) no charge, complaint, action, suit, proceeding, hearing, investigation, claim or demand is pending or, to Moog's Knowledge, threatened which challenges the legality, validity, enforceability, use or ownership of the item. - 33 - (e) Section 4.10(e) of the Moog Disclosure Schedule identifies each item of TC Intellectual Property (excluding computer software) that an Affiliate of Moog or any third party owns and that Moog uses in the conduct of the TC Business pursuant to license, subli- cense, agreement, registered user agreement or permission. Moog has delivered to SMP correct and complete copies of all such written (or if oral, a written summary of such) licenses, sublicenses, agreements, registered user agreements and permissions (as amended to date). With respect to each such item of TC Intellectual Property (excluding off-the-shelf computer software available in the open market) not owned by Moog but used by Moog in the conduct of the TC Business: (i) the license, sublicense, agreement, or permission covering the item is legal, valid, binding, enforceable, and in full force and effect; (ii) to Moog's Knowledge, no party to the license, sublicense, agreement, or permission is in breach or default, and no event has occurred which, with notice or lapse of time would constitute a breach or default or permit termination, modification, or acceleration thereunder; (iii) with respect to each sublicense, to Moog's Knowledge, the representa- tions and warranties set forth in subsections 4.10(e)(i) through 4.10(e)(iii) above are true and correct with respect to the underlying license; and (iv) Moog has not granted any sublicense or similar right with respect to the license, sublicense, agreement or permission. (f) Section 4.10(f) of the Moog Disclosure Schedule identifies each item of TC Intellectual Property with respect to which the consent of any third party is required to transfer Moog's interest in such TC Intellectual Property to SMP. 4.11 INVENTORY. The inventories of the TC Business included in the TC ---------- Assets to be transferred to SMP pursuant to this Agreement consist of raw materials and supplies, manufactured and purchased parts, goods in process, and finished goods which are not damaged or defective, except those items the value of which have been provided through adequate reserve including a valuation reserve for core inventories in the amount of $637,000 which is included in the purchase price adjustment described in Exhibit G, clause (m). The representation and warranty under this Section 4.11 shall only apply to inventory on hand which is identified by SMP as damaged or defective prior to the sale of such inventory to a customer. This representation and warranty shall not apply to any inventory which is sold to a customer even if the inventory is subsequently returned by the customer because the inventory is (or allegedly is) damaged or defective. The representation and warranty under Section 4.16 applies to inventory which is sold to a customer and is subsequently returned by the customer because the inventory is (or allegedly is) damaged or defective. 4.12 TANGIBLE TC ASSETS. Moog owns or has a valid leasehold in all TC ------------------- Assets necessary for the conduct of the TC Business as presently conducted. The machinery, equipment, tools and dies of Moog included in the TC Assets and used in the conduct of the TC Business are, in the aggregate, in satisfactory operating condition for their current use and are all located on the TC Real Properties or on real property subject to a TC Lease (except for tools - 34 - and dies located at the premises of various vendors). To Moog's Knowledge, Section 4.12 of the Moog Disclosure Schedule lists those vendors which have tools and dies which are included in the TC Assets. Section 4.12 of the Moog Disclosure Schedule lists all such tangible TC Assets having a net book value at September 30, 1997 of $10,000 or more and the net book value of each such asset. 4.13 CERTAIN AGREEMENTS. Section 4.13 of the Moog Disclosure Schedule ------------------- lists the following contracts and agreements which are included in the TC Contracts: (a) any TC Leases for the lease of personal property from third parties which involves any obligation to pay annual base rent of more than $25,000; (b) any agreement which involves a certain (rather than contingent) obligation of or to the TC Business of more than $100,000; (c) any agreement concerning a partnership, joint venture or other agreement involving a sharing of profits or expenses; (d) any agreement under which Moog has created, incurred, assumed, or guaranteed (or may create, incur, assume, or guarantee) Debt (including capitalized lease obligations) which are TC Assumed Liabilities, or under which Moog has incurred a Security Interest on any of the TC Assets; (e) any agreement concerning confidentiality; (f) any agreement which limits the ability of the TC Business to compete with any Person or in any geographical area; (g) sales agency or representative, manufacturer's representative and distributorship agreements; (h) any contract, agreement or arrangement between the TC Business and another division of Moog or an Affiliate of Moog which is a TC Assumed Liability; and (i) any other material contract, agreement or arrangement entered into other than in the ordinary course of business. Moog has made available to SMP a correct and complete copy of each written agreement (or a written summary if the agreement is oral) listed in Section 4.13 of the Moog Disclosure Schedule (as amended to date). Except as set forth in Section 4.13 of the Moog Disclosure Schedule, with respect to each agreement (written or oral) so listed (i) the agreement is in full force and effect, is legal, valid, binding and enforceable against Moog, and, to Moog's Knowledge, is legal, valid, binding and enforceable against any other party thereto; (ii) the legality, validity, enforceability and effectiveness of the agreement will not in any way be adversely affected by the Closing; (iii) Moog is not, and, to Moog's Knowledge, no other party thereto is in breach or default thereunder or has allowed an event to occur which with notice or lapse of time, or both, would constitute a breach or default by, or permit termination, - 35 - modification, or acceleration against, such party under such agreement; (iv) no consents are necessary from any third party for the assignment of any such agreements; and (v) each such agreement is terminable by its terms upon no more than 90 days notice. 4.14 INSURANCE. Section 4.14 of the Moog Disclosure Schedule sets forth ---------- the following information with respect to each insurance policy (including policies providing property, casualty, liability and workers' compensation coverage) to which Moog or its Affiliates have been a party, a named insured or otherwise the beneficiary of coverage currently in effect covering the TC Assets or otherwise applicable to the TC Business: (a) the name of the insurer and the name of the policyholder; (b) the period of coverage; and (c) the scope (including an indication of whether the coverage is or was on a claims made, occurrence, or other basis), coverage limits and amount of deductibles or self-insured retentions. Neither Moog nor, to Moog's Knowledge, any other party to the policy is in breach or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, or both, would constitute such a breach or default or permit termination, modification or acceleration, under the policy. 4.15 LITIGATION. Except for matters set forth in Section 4.15 of the ----------- Moog Disclosure Schedule, there is no (i) action, suit, inquiry, judicial or administrative proceeding, arbitration or investigation pending or, to Moog's Knowledge, threatened against Moog, with respect to the TC Business or any of the TC Assets, before any Governmental Agency, and (ii) judgment, decree, injunction, rule or order of any Governmental Agency outstanding against and unsatisfied by Moog with respect to the TC Business or any of the TC Assets (the matters described in (i) and (ii) including those matters set forth on Section 4.15 of the Moog Disclosure Schedule are collectively referred to as the "EXISTING TC LITIGATION AND CLAIMS"). 4.16 PRODUCT WARRANTY. To Moog's Knowledge, each product manufactured, ----------------- sold, leased or delivered by the TC Business has, subject to the amount of defective product returns and other matters set forth in Section 4.16 of the Moog Disclosure Schedule, been in material conformity with all applicable contractual commitments and all express and implied warranties. Section 4.16 of the Moog Disclosure Schedule includes (i) copies of the current standard terms and conditions of sale or lease for the TC Business (containing applicable guaranty, warranty and indemnity provisions) and (ii) the amounts of warranty and guaranty claims brought against the TC Business for the last 3 years. 4.17 PRODUCT LIABILITY. (a) Except as set forth in Section 4.17 of the ------------------ Moog Disclosure Schedule, none of Moog or its Affiliates, is currently, or has been at any time during the last three (3) years, party to any action, suit, proceeding, hearing or governmental investigation arising out of any injury to persons or damage to property as a result of the ownership, possession or use of any product manufactured, sold, leased or delivered by the TC - 36 - Business (a "TC PRODUCT LIABILITY CLAIM"). To Moog's Knowledge, no event has occurred which would be reasonably likely to give rise to a TC Product Liability Claim. (b) There are no outstanding warranty claims or any pending litigation relating thereto concerning the products of the TC Business that indicate a repeated pattern of product failure, product liability or product recall claims. To Moog's Knowledge, the products of the TC Business conform to the standards of safety customary in the industry of which the TC Business is a part. Except as set forth in Section 4.17 of the Moog Disclosure Schedule, none of the products of the TC Business currently are, or, to Moog's Knowledge, are currently threatened to be, the subject of a product recall. All products of the TC Business advertised or held out as listed or approved by any safety or rating agency comply fully with the requirements of such agencies and no such listing or approval has been or, to Moog's Knowledge, is threatened to be cancelled or withdrawn. 4.18 EMPLOYEES. (a) Section 4.18(a)(i) of the Moog Disclosure Schedule ---------- lists all sales personnel currently employed by Moog in the TC Business who Moog does not currently plan to employ following the Closing (the "TC SCHEDULED SALES PERSONS"), indicating such person's name, title or position, location of employment, current salary or compensation, and date of hire for the purpose of determining years of continuous service. Section 4.18(a)(ii) of the Moog Disclosure Schedule lists all salaried manufacturing, distribution, management and support personnel employed by Moog as of July 21, 1997 or thereafter in the TC Business or in the brake products business conducted by Moog (the "MOOG SCHEDULED TC AND BRAKE SALARIED NON-SALES PERSONS"), indicating such person's name, title or position, location of employment, current salary, and the date of hire for the purpose of determining years of continuous service. (b) Section 4.18(b) of the Moog Disclosure Schedule lists all collective bargaining agreements covering any employees of the TC Business, all pending grievances or other collective bargaining disputes, and any claims of unfair labor practices made within the last 3 years by employees of the TC Business. (c) Moog has not experienced any strikes or work stoppages within the last five years with respect to employees in the TC Business. (d) To Moog's Knowledge, except as described in the following sentence, there is no organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of the TC Business. In February, 1998 there was initial organizational activity by the Teamsters at the facility in Melrose Park, Illinois; to Moog's Knowledge, there has been no activity in the last 30 days. 4.19 MOOG EMPLOYEE PLANS; ERISA; EMPLOYEES. (a) Section 4.19(a) of the -------------------------------------- Moog Disclosure Schedule sets forth a complete and correct list of each bonus, deferred compensation, incentive compensation, stock purchase, stock option or other equity based, severance, termination, change in control, retention, employment, hospitalization or other medical, life insurance, disability, other welfare, supplemental unemployment benefits, profit-sharing, pension or retirement plan program, agreement or arrangement, and each other employee compensation or benefit plan, program, agreement or arrangement, sponsored, maintained or contributed to - 37 - by Moog or by any trade or business, whether or not incorporated (a "MOOG ERISA AFFILIATE"), that together with Moog would be deemed a "single employer" within the meaning of Section 4001 of ERISA, in each case covering current or former employees in the TC Business (the "MOOG EMPLOYEE PLANS"). (b) With respect to each Moog Employee Plan, Moog has heretofore delivered or made available to SMP true and complete copies of each of the following documents (including all amendments to such documents): (i) any Moog Employee Plan or a written description of any Moog Employee Plan not in writing; (ii) the most recent annual report and actuarial report if required under ERISA or if otherwise available; (iii) the most recent Summary Plan Description with respect thereto if required under ERISA or if otherwise available; (iv) if any Moog Employee Plan or any obligations thereunder are funded through a trust or any other funding vehicle, the trust or other funding agreement and the latest financial statements thereof; and (v) the most recent determination letter received from the Internal Revenue Service with respect to each Moog Employee Plan intended to qualify under Section 401(a) of the Code. (c) No liability under Title I or IV of ERISA, the penalty or excise tax provisions of the Code relating to employee plans or equivalent legislation of a foreign jurisdiction has been incurred by Moog or any of their Moog ERISA Affiliates that has not been satisfied in full, and no condition exists or event has occurred that presents a material risk to Moog or any of the Moog ERISA Affiliates of incurring any such liability. (d) No Moog Employee Plan is a "multiemployer plan," as defined in Section 3(37) of ERISA, nor is any Moog Employee Plan a plan described in Section 4063(a) of ERISA. (e) No Moog Employee Plan or any trust established thereunder has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived. Each Moog Employee Plan intended to be "qualified" within the meaning of Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified; no condition exists or event has occurred since the date of such initial determination that would adversely affect the qualified status of any such Moog Employee Plan; and each trust maintained thereunder has been determined by the Internal Revenue Service to be exempt from taxation under Section 501(a) of the Code. Each Moog Employee Plan has been operated and administered in all material respects in accordance with its terms and applicable law, including but not limited to ERISA, the Code and equivalent legislation of a foreign jurisdiction. There are no pending, or to Moog's Knowledge, threatened, claims by or on behalf of any Moog Employee Plan, by any employee or beneficiary covered under any such Moog Employee Plan or otherwise involving any such Moog - 38 - Employee Plan or the assets thereof (other than routine claims for benefits). (f) Neither Moog nor any of the Moog ERISA Affiliates would be liable for any amount pursuant to Sections 4063 or 4064 of ERISA if any Moog Employee Plan were to terminate. All contributions required to be made to each Moog Employee Plan under the terms of such Moog Employee Plan, applicable law or any applicable collective bargaining agreement have been paid in full when due. (g) Except as set forth in Section 4.19(g) of the Moog Disclosure Schedule, no Moog Employee Plan provides benefits, including without limitation death or medical benefits, with respect to Active Employees or Inactive Employees of Moog in the TC Business beyond their retirement or other termination of service, other than (i) coverage mandated by applicable law and (ii) benefits payable pursuant to any Moog Employee Plan qualified under Section 401(a) of the Code. Except as set forth in Section 4.19(g) of the Moog Disclosure Schedule, the execution, delivery, or consummation of the transactions contemplated by this Agreement will not entitle any employees of the TC Business to severance pay or unemployment compensation. 4.20 ENVIRONMENTAL MATTERS. ---------------------- (a) Except as set forth in Section 4.20(a) of the Moog Disclosure Schedule, to Moog's Knowledge, Moog is currently in compliance, and has complied at all times in the past, in all material respects with all Environmental Laws in the conduct of the TC Business. (b) Except as set forth in Section 4.20(b) of the Moog Disclosure Schedule, to the extent that the TC Business has on its premises, uses or Discharges Hazardous Materials, Moog has obtained all licenses, approvals, registrations, authorizations and permits ("ENVIRONMENTAL PERMITS") required with respect thereto and, to Moog's Knowledge, Moog has been and is in compliance with all material terms, conditions and requirements of such Environmental Permits, a list of which is set forth in Section 4.20 of the Moog Disclosure Schedule. Except as set forth in Section 4.20(b) of the Moog Disclosure Schedule, there are no proceedings to which any of Moog or its Affiliates is a party which are pending or, to Moog's Knowledge, threatened against Moog or its Affiliates seeking to revoke, cancel or suspend any Environmental Permit necessary for the conduct of the TC Business, except where the failure to have obtained such Environmental Permit, or to so comply, or where such proceedings could not reasonably be expected to have a TC Material Adverse Effect. All Environmental Permits relating to the conduct of the TC Business will be assigned by Moog to SMP in accordance with this Agreement, except to the extent the same are not transferable under applicable law. (c) Except as set forth in Section 4.20(c) of the Moog Disclosure Schedule, neither Moog nor any of its Affiliates has received any notice from any Governmental Agency or any other Person concerning any Environmental Claims in connection with the operation of the TC Business or with regard to any of the TC Assets and which is currently unresolved. Except as set forth in Section 4.20(c) of the Moog Disclosure Schedule, to Moog's Knowledge, (i) there is no investigational proceeding against Moog or its Affiliates by any federal, state or local environmental or health and safety enforcement agency in connection with the past or - 39 - present operation of the TC Business or with regard to any of the TC Assets; and (ii) neither Moog nor any of its Affiliates has any pending or contingent liability for any Environmental Claim in connection with the operation of the TC Business or with regard to any of the TC Assets. Except as set forth in Section 4.20(c) of the Moog Disclosure Schedule, neither Moog nor any of its Affiliates has been subject to any administrative or judicial enforcement action or any third party lawsuits pursuant to any Environmental Laws either now or at any time during the past five years in connection with the operation of the TC Business or with regard to any of the TC Assets. (d) Except as set forth in Section 4.20(d) of the Moog Disclosure Schedule, to Moog's Knowledge, there are no conditions at, on, under, near or originating from any of the TC Assets that reasonably and foreseeably (i) may result in the imposition of liability pursuant to any Environmental Law against Moog, or (ii) may result in any investigatory and/or remedial activities pursuant to any Environmental Law. (e) Except as set forth in Section 4.20(e) of the Moog Disclosure Schedule, neither Moog nor any of its Affiliates is subject to any remedial obligation under a currently issued and applicable administrative order, decree, or agreement pursuant to an Environmental Law in connection with the operation of the TC Business or with regard to any of the TC Assets. (f) Section 4.20(f) of the Moog Disclosure Schedule lists all contracts or other written arrangements currently in effect within the possession, custody or control of Moog relating to the collection, storage, transportation, treatment, recovery, recycling, or Disposal of Hazardous Materials associated with the TC Business to which any of Moog or its Affiliates is a party and, to Moog's Knowledge, any such contracts or written arrangements that are not currently in effect but to which any of Moog or its Affiliates has been a party during the past five years. (g) To Moog's Knowledge, except as set forth in Section 4.20(g) of the Moog Disclosure Schedule, no Hazardous Materials have been Discharged or Disposed of by or on behalf of Moog or its Affiliates on any real property currently or formerly owned or leased by Moog and used or previously used in the operation of the TC Business, and to Moog's Knowledge, Section 4.20(g) of the Moog Disclosure Schedule sets forth all off site locations where Hazardous Materials generated by Moog or its Affiliates in the conduct of the TC Business have been generated, used, collected, treated, stored, transported, recovered, recycled, Discharged or Disposed. (h) Except as set forth in Section 4.20(h) of the Moog Disclosure Schedule, no real property currently or formerly owned or leased or, to Moog's Knowledge, used by Moog or its Affiliates (including any off-site locations listed in Section 4.20(h) of the Moog Disclosure Schedule) in the TC Business is listed on any federal list of Superfund or National Priorities List sites or similar governmental lists regarding waste sites at which there has been Disposal of Hazardous Materials, nor to Moog's Knowledge is any such property subject to any environmentally-related liens of record. - 40 - (i) Except as set forth in Section 4.20(i) of the Moog Disclosure Schedule, to Moog's Knowledge, and other than as allowed by licenses, approvals and permits which have been obtained and are in full force and effect, the operation of the TC Business, as presently conducted, does not require the emission or Discharge of any Hazardous Material into the air, soil, or Water, or into any sewer system or storm water drainage system at concentrations in excess of permitted or regulatory limits. All equipment needed for the continued and uninterrupted operation of the TC Business as it is currently conducted without such Discharge of Hazardous Materials in excess of permitted or regulatory limits is in satisfactory operating condition. (j) Except as set forth in Section 4.20(j) of the Moog Disclosure Schedule, to Moog's Knowledge, all properties and equipment used in the TC Business are now free of friable asbestos and PCB's, and are now and at all times in the past have been free of any underground storage tank, any landfill, dump, hazardous waste management facility as defined pursuant to the federal Resource Conservation and Recovery Act or any comparable state law, or wells used for Disposal, injection or other Discharge. (k) Except as set forth in Section 4.20(k) of the Moog Disclosure Schedule, neither Moog nor any of its Affiliates has submitted any notice to any Governmental Agency or other Person, and to Moog's Knowledge none is required, regarding any Discharges of Hazardous Materials of reportable quantity (other than Discharges authorized by Environmental Permits) on, under or from the TC Assets within the past 5 years. (l) Except as set forth in Section 4.20(l) of the Moog Disclosure Schedule, none of the real property owned by Moog which is included in the TC Assets is subject to any environmental liens or deed restrictions based on Environmental Law. 4.21 LEGAL COMPLIANCE. Except with respect to environmental matters ----------------- (which are addressed in Section 4.20), to Moog's Knowledge, Moog has complied in all material respects with all laws (including rules and regulations thereunder) of Governmental Agencies applicable to it in connection with the operation of the TC Business. 4.22 VEHICLES. Section 4.22 of the Moog Disclosure Schedule sets out a --------- complete and correct list of all vehicles owned or operated by Moog for or on behalf of the TC Business included in the TC Assets. 4.23 GUARANTIES. Section 4.23 of the Moog Disclosure Schedule lists all ----------- guaranties, performance bonds, bid bonds, and foreign exchange contracts or commitments which relate to the TC Business. 4.24 ALL TC ASSETS TRANSFERRED. The TC Assets transferred to SMP at -------------------------- Closing shall include all of the assets, contracts, rights and properties of every kind and description, tangible or intangible, owned or leased, real, personal or mixed, necessary to conduct the TC Business, as currently conducted, free of all Security Interests, other than the TC Retained Assets. - 41 - 4.25 MOOG PERMITS. Except with respect to environmental permits, ------------- licenses and approvals (which are addressed in Section 4.20), Moog has in effect all material permits, licenses, approvals, and other authorizations necessary for the continued conduct of the TC Business as presently conducted (the "MOOG PERMITS"), a list of which is set forth in Section 4.25 of the Moog Disclosure Schedule, and there are no proceedings to which Moog is a party which are pending or, to Moog's Knowledge, threatened against Moog or the TC Business seeking to revoke, cancel or suspend any such Moog Permit. All Moog Permits will be assigned by Moog to SMP in accordance with this Agreement except to the extent that such assignment is not permissible under applicable law. 4.26 BROKERS' FEES. Neither SMP nor Moog has any liability or -------------- obligation to pay any fees or commissions to any broker, finder, investment banker or agent with respect to the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Moog. 4.27 CUSTOMERS AND SUPPLIERS. Section 4.27 of the Moog Disclosure ------------------------ Schedule contains a list of the 20 largest customers and suppliers of the TC Business (measured by dollar volume of purchases and sales, as applicable) during the past year and the dollar volume of such purchases and sales. To Moog's Knowledge, no such customer or supplier is threatening to terminate, non-renew or materially adversely change its arrangements with Moog with respect to the TC Business. ARTICLE V. REPRESENTATIONS AND WARRANTIES OF SMP ------------------------------------- SMP represents and warrants to Moog that the statements contained in this Article V are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article V, except to the extent any representation or warranty relates to a specific date). 5.1 ORGANIZATION OF SMP. Each of SMP Canada and SMP Parent is duly -------------------- organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization. Each of SMP Canada and SMP Parent is duly authorized to conduct business and is in good standing under the laws of each jurisdiction in which the nature of the Brake Business or the use, ownership or leasing of properties used in the Brake Business requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a Brake Material Adverse Effect. Each of SMP Canada and SMP Parent has full corporate power and authority to carry on the Brake Business and to use the properties used by it in the Brake Business. 5.2 AUTHORIZATION OF TRANSACTION. Each of SMP Canada and SMP Parent has ----------------------------- full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, including the power to convey the Brake Assets. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby - 42 - have been duly and validly authorized by the Board of Directors of SMP Canada and SMP Parent and no other corporate proceedings on the part of SMP Canada and SMP Parent are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by SMP Canada and SMP Parent and constitutes the valid and legally binding obligation of SMP Canada and SMP Parent, enforceable in accordance with its terms and conditions. 5.3 NON-CONTRAVENTION. (a) Except as set forth in Section 5.3(a) of the ------------------ disclosure schedule of SMP attached hereto (the "SMP DISCLOSURE SCHEDULE"), and except for the applicable requirements of the H-S-R Act and any applicable "bulk sales" laws, there is no requirement applicable to SMP to make any filing with any Governmental Agency as a condition to the lawful consummation by SMP of the transactions contemplated by this Agreement. (b) Except as set forth in Section 5.3(b) of the SMP Disclosure Schedule, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) conflict with or result in any breach of any provision of the certificate or articles of incorporation or bylaws or other organizational document of SMP Canada or SMP Parent, (ii) except for any applicable "bulk sales" laws, violate any statute, regulation, rule, judgment, order, decree, stipulation, injunction, charge or other restriction of any government, or Governmental Agency to which SMP or any of the Brake Assets is subject or (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any Person the right to accelerate, terminate, modify, or cancel, or require any notice under any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed money or instrument of indebtedness, to which either SMP Canada or SMP Parent is a party or by which SMP Canada or SMP Parent is bound or to which any of the Brake Assets is subject (or result in the imposition of any Security Interest upon any of such Brake Assets), except, with respect for clause (ii) and (iii), for such violations, conflicts, breaches or defaults which would not individually or in the aggregate have a Brake Material Adverse Effect. 5.4 SMP PRE-CLOSING BALANCE SHEET AND FINANCIAL STATEMENTS. (a) The SMP ------------------------------------------------------- Pre-Closing Balance Sheet has been prepared from the books and records of SMP in accordance with the principles, practices, methods and procedures set forth in Exhibit G and reasonably reflects the assets that are Brake Assets and Liabilities that are Brake Assumed Liabilities as of December 31, 1997. (b) SMP has previously delivered to Moog the balance sheet of the Brake Business at December 31, 1996 and the income statement of the Brake Business for the year then ended each of which have been prepared in conformity with GAAP, except as set forth in Section 5.4 of the SMP Disclosure Schedule. Such financial statements (i) have been prepared based on the books and records of SMP in accordance with past practices applied on a consistent basis and (ii) present fairly, in all material respects, the financial position and results of operations of the Brake Business as of such date or for such year. 5.5 UNDISCLOSED LIABILITIES. Except as set forth in Section 5.5 of the ------------------------ SMP Disclosure Schedule, SMP has no liabilities or obligations (whether absolute, accrued, contingent or otherwise) that are of the type required to be set forth in the SMP Pre-Closing Balance Sheet, - 43 - except liabilities, obligations or contingencies which are adequately accrued or reserved against in such balance sheet or which were incurred after December 31, 1997, in the ordinary course of business consistent with past practice or which in the aggregate do not exceed $10,000. 5.6 EVENTS AFTER JUNE 30, 1997. Since June 30, 1997, there has not been --------------------------- a Brake Material Adverse Effect. Except as set forth in Section 5.6 of the SMP Disclosure Schedule, without limiting the foregoing, since that date, SMP, with respect to the Brake Business, has not: (a) (i) sold, leased, transferred, disposed of or assigned any of the Brake Assets, other than finished goods sold in the ordinary course of business or the sale or transfer of other assets which are not material to the Brake Business, all of which is consistent with past practice, or (ii) mortgaged, pledged or otherwise encumbered any Brake Assets, except for Permitted Exceptions; (b) made any capital expenditures in excess of $250,000 in the aggregate; (c) entered into any contract, agreement, arrangement, lease, sublease, license, sublicense which involves a certain (rather than contingent) obligation of or to SMP with respect to the Brake Business of more than $100,000, except for purchase orders, sales orders and similar contracts entered into in the ordinary course of business consistent with past practice which, in any individual case, did not exceed $500,000; (d) created, incurred or assumed any long-term Debt (including obligations in respect of capital leases), or except in the ordinary course of business consistent with past practice, any short-term Debt if, in either case, such Debt would constitute a Brake Assumed Liability; (e) made any capital investment in, any loan or advance to, or any acquisition of all or any substantial part of the assets, properties, business or capital stock of, any other Person or entity (or series of related capital investments, loans, advances and acquisitions); (f) delayed or postponed the payment of accounts payable and other Liabilities in any amount in the aggregate in excess of $200,000, except in the ordinary course of business consistent with past practices; (g) to SMP's Knowledge, cancelled, compromised, waived or released any material right or claim; (h) experienced any damage, destruction or loss (whether or not covered by insurance) of property either involving more than $100,000, singly, or $200,000, in the aggregate; (i) entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement; - 44 - (j) granted any increase in the compensation or employee benefits of any of the officers or employees of the Brake Business, other than routine salary or hourly increases made pursuant to present salary review procedures in the ordinary course of business consistent with past practice; (k) except for "stay on" bonuses disclosed in Section 5.6 of the SMP Disclosure Schedule, adopted any (i) bonus, (ii) profit-sharing, (iii) incentive compensation, (iv) pension, (v) retirement, (vi) medical, hospitalization, life or other insurance, (vii) severance or (viii) other plan, contract or commitment for any of the officers or employees of the Brake Business, or modified or terminated any such existing plan, contract or commitment. (l) failed to maintain any insurance relating to the Brake Business in full force and effect, assigned or transferred such insurance or the proceeds thereof to any Person, failed to pay any premiums due thereunder, or caused, suffered or permitted any act or failure to act which could cause such insurance to be canceled or terminated; (m) failed to give any required notice or failed to present any claims of known occurrences under any insurance relating to the Brake Business or failed to take any other required or appropriate action with respect thereto in due and timely fashion or cancelled those insurance policies for occurrences relating to the Brake Business on or prior to Closing or caused or permitted any retroactive cancellation of insurance coverage relating to the Brake Business in effect prior to Closing or for occurrences prior to Closing; (n) made any change in accounting methods, principles, procedures or practices, except as required by GAAP, any such changes to be set forth on Section 5.6 of the SMP Disclosure Schedule; (o) amended its certificate or articles of incorporation or bylaws in a manner that adversely affects the transactions contemplated by this Agreement; (p) entered into any agreement, contract or commitment to do any of the foregoing; or (q) made or revoked any Tax election or settled or compromised any Tax Liability relating to the Brake Business or the Brake Assets. 5.7 TAX MATTERS. (a) Except liens for Taxes not yet due, there are no ------------ Tax liens upon, pending against or, to SMP's Knowledge, threatened in writing against any of the Brake Assets that arose in connection with any failure to file a Tax Return or to pay any Taxes. (b) SMP has, in relation to the Brake Business, withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other Person. (c) There is no dispute or claim concerning any Liability for Taxes relating to any of the Brake Assets or the Brake Business. - 45 - 5.8 BRAKE LEASES FOR REAL PROPERTY. Section 5.8 of the SMP Disclosure ------------------------------- Schedule sets forth a true and correct list of each Brake Lease which relates to real property, which constitutes all of the real property leased by SMP and used exclusively in the Brake Business. SMP has delivered to Moog correct and complete copies of the leases and subleases (as amended to date) listed in Section 5.8 of the SMP Disclosure Schedule. Regarding each lease and sublease listed in Section 5.8 of the SMP Disclosure Schedule: (a) the lease or sublease is in full force and effect, is legal, valid, binding and enforceable against SMP, and, to SMP's Knowledge, is legal, valid, binding and enforceable against each other party thereto; (b) SMP is not in breach or default, and no event has occurred which, with notice or lapse of time, or both, would constitute a breach or default, or would permit termination, modification, or acceleration thereunder, by the other party thereto, and, to SMP's Knowledge, no other party to the lease or sublease is in breach or default, and no event has occurred which, with notice or lapse of time, or both, would constitute a breach or default, or would permit termination, modification, or acceleration thereunder, by SMP; (c) all facilities have received all approvals of Governmental Agencies (including SMP Permits) required of SMP in connection with the construction, leasing or operation thereof, and have been operated and maintained in accordance with applicable laws, rules and regulations, except where the failure to do so could not reasonably be expected to have a Brake Material Adverse Effect; and (d) there are no (i) pending condemnation proceedings relating to the property against SMP or its Affiliates or, to SMP's Knowledge, pending condemnation proceedings relating to the property against any other parties or threatened against SMP, its Affiliates or any other parties, (ii) pending litigation or administrative actions relating to the property against SMP or its Affiliates or, to SMP's Knowledge, pending litigation or administrative actions relating to the property against any other parties or threatened against SMP, its Affiliates or any other parties, or (iii) to SMP's Knowledge, other matters materially and adversely affecting the current use, occupancy or value of the property. 5.9 BRAKE REAL PROPERTY. (a) Section 5.9 of the SMP Disclosure Schedule -------------------- lists and describes the Brake Real Property (other than the Real Property located in Middletown, CT and Rural Retreat, VA) which constitutes all of the real property owned by SMP and used exclusively in the Brake Business. SMP has on the date hereof good, valid and marketable title to such real property free and clear of all Security Interests. (b) SMP has not entered into any lease, subleases, licenses, or other agreements granting to any third party the right to use or occupy all or any portion of the Brake Real Property. (c) Except pursuant to this Agreement, SMP has not granted any outstanding options or rights of first refusal to purchase, lease or license any Brake Real Property. - 46 - (d) SMP has not received any notice of any pending, threatened or contemplated condemnation proceeding affecting the Brake Real Property and no proceedings or real estate tax certiorari protests are now pending for the reduction of the assessed valuation of the Brake Real Property. (e) SMP has not received any written notice from any Governmental Agency (i) stating or alleging that any improvements at the Brake Real Property have not been constructed in accordance with applicable law or (ii) requiring or advising as to the need for any material repair, alteration, restoration or improvement in connection with the Brake Real Property. 5.10 BRAKE INTELLECTUAL PROPERTY. (a) SMP owns or has the right to use ---------------------------- pursuant to license, sublicense, agreement or permission all Brake Intellectual Property and the Brake Intellectual Property constitutes all the intellectual property necessary for the operation of the Brake Business as presently conducted. Subject to SMP obtaining the consents of any third party required to transfer SMP's interest in the Brake Intellectual Property to Moog as provided in Section 5.10(f) below, each item of Brake Intellectual Property will be owned or available for use by Moog on identical terms and conditions effective upon the Closing. (b) To SMP's Knowledge, SMP has not, in the conduct of the Brake Business or in its use of the Brake Intellectual Property, interfered with, infringed upon, misappropriated, or otherwise come into conflict with any intellectual property rights of third parties. SMP and the directors and officers (and employees with responsibility for Brake Intellectual Property matters) of SMP, have not received during the five year period prior to this Agreement any charge, complaint, claim or notice alleging that the conduct by SMP of the Brake Business or any use by SMP of the Brake Intellectual Property constitutes any such interference, infringement, misappropriation or violation. To SMP's Knowledge, during the five year period prior to this Agreement, no third party has materially interfered with, infringed upon, misappropriated or otherwise come into conflict with any Brake Intellectual Property. (c) Section 5.10(c) of the SMP Disclosure Schedule identifies: (i) each patent (including issuing country, number, current assignee of record, title and issue date), each trademark and service mark registration (including issuing country, number, description of mark, current owner of record and issue date), each unregistered trademark and service mark for which no application for registration is pending (including a description of the mark and the goods or services with which it is used) and each copyright registration (including issuing country, number, title or description of work, current owner of record and issue date) currently in effect, owned by SMP, and included in the Brake Intellectual Property; (ii) each pending patent application (including country of filing, serial number, current owner of record, title and filing date), application for registration of a trademark or service mark (including country of filing, serial number, description of mark, current owner of record, classes of goods or services, and filing date), and application for copyright registration (including country of filing, serial number, title or description of work, current owner of record, and filing date), which SMP has made with respect to any Brake Intellectual Property; and - 47 - (iii) each license, agreement or other permission which SMP or its Affiliates has granted to any third party with respect to any of its or their owned SMP Intellectual Property. SMP has delivered to Moog correct and complete copies of all such written (or if oral, a written summary of such) licenses, agreements and permissions (as amended to date). (d) With respect to each item of Brake Intellectual Property: (i) the identified owner possesses all right, title and interest in and to the item; (ii) the item is not subject to any outstanding judgment, order, decree, stipulation, injunction or charge; and (iii) no charge, complaint, action, suit, proceeding, hearing, investigation, claim or demand is pending or, to SMP's Knowledge, threatened which challenges the legality, validity, enforceability, use or ownership of the item. (e) Section 5.10(e) of the SMP Disclosure Schedule identifies each item of Brake Intellectual Property (excluding computer software) that an Affiliate of SMP or any third party owns and that SMP uses in the conduct of the Brake Business pursuant to license, sublicense, agreement, registered user agreement or permission. SMP has delivered to Moog correct and complete copies of all such written (or if oral, a written summary of such) licenses, sublicenses, agreements, registered user agreements and permissions (as amended to date). With respect to each such item of Brake Intellectual Property (excluding off-the-shelf computer software available in the open market) not owned by SMP but used by SMP in the conduct of the Brake Business: (i) the license, sublicense, agreement, or permission covering the item is legal, valid, binding, enforceable, and in full force and effect; (ii) to SMP's Knowledge, no party to the license, sublicense, agreement, or permission is in breach or default, and no event has occurred which, with notice or lapse of time would constitute a breach or default or permit termination, modification, or acceleration thereunder; (iii) with respect to each sublicense, to SMP's Knowledge, the representations and warranties set forth in subsections 5.10(e)(i) through 5.10(e)(iii) above are true and correct with respect to the underlying license; and (iv) SMP has not granted any sublicense or similar right with respect to the license, sublicense, agreement or permission. (f) Section 5.10(f) of the SMP Disclosure Schedule identifies each item of Brake Intellectual Property with respect to which the consent of any third party is required to transfer SMP's interest in such Brake Intellectual Property to Moog. - 48 - 5.11 INVENTORY. The inventories of the Brake Business included in the ---------- Brake Assets to be transferred to Moog pursuant to this Agreement consist of raw materials and supplies, manufactured and purchased parts, goods in process and finished goods which are not damaged or defective, except those items the value of which have been provided through adequate reserve. The representation and warranty under this Section 5.11 shall only apply to inventory on hand which is identified by Moog as damaged or defective prior to the sale of such inventory to a customer. This representation and warranty shall not apply to any inventory which is sold to a customer even if the inventory is subsequently returned by the customer because the inventory is (or allegedly is) damaged or defective. The representation and warranty under Section 5.16 applies to inventory which is sold to a customer and is subsequently returned by the customer because the inventory is (or allegedly is) damaged or defective. 5.12 TANGIBLE BRAKE ASSETS. SMP owns or has a valid leasehold in all ---------------------- Brake Assets necessary for the conduct of the Brake Business as presently conducted. The machinery, equipment, tools and dies of SMP included in the Brake Assets used in the conduct of the Brake Business are, in the aggregate, in satisfactory operating condition for their current use and are all located on the Brake Real Properties or on real property subject to a Brake Lease (except for tools and dies located at the premises of various vendors). To SMP's Knowledge, Section 5.12 of the SMP Disclosure Schedule lists those vendors which have tools and dies which are included in the Brake Assets. Section 5.12 of the SMP Disclosure Schedule lists all such tangible TC Assets having a net book value at December 31, 1997 of $10,000 or more and the net book value of each such asset. 5.13 CERTAIN AGREEMENTS. Section 5.13 of the SMP Disclosure Schedule ------------------- lists the following contracts and agreements which are included in the Brake Contracts: (a) any Brake Leases for the lease of personal property from third parties which involves an obligation to pay annual base rent of more than $25,000; (b) any agreement which involves a certain (rather than contingent) obligation of or to the Brake Business of more than $100,000; (c) any agreement concerning a partnership, joint venture or other agreement involving a sharing of profits or expenses; (d) any agreement under which SMP has created, incurred, assumed, or guaranteed (or may create, incur, assume, or guarantee) Debt (including capitalized lease obligations) which are Brake Assumed Liabilities or under which SMP has incurred a Security Interest on any of the Brake Assets; (e) any agreement concerning confidentiality; (f) any agreement which limits the ability of the Brake Business to compete with any Person or in any geographical area; (g) sales agency or representative, manufacturer's representative and distributorship agreements; - 49 - (h) any contract, agreement or arrangement between the Brake Business and another division of SMP or an Affiliate of SMP which is a Brake Assumed Liability; and (i) any other material contract, agreement or arrangement entered into other than in the ordinary course of business. SMP has made available to Moog a correct and complete copy of each written agreement (or a written summary if the agreement is oral) listed in Section 5.13 of the SMP Disclosure Schedule (as amended to date). Except as set forth in Section 5.13 of the SMP Disclosure Schedule, with respect to each agreement (written or oral) so listed: (i) the agreement is in full force and effect, is legal, valid, binding and enforceable against SMP, and, to SMP's Knowledge, is legal, valid, binding and enforceable against any other party thereto; (ii) the legality, validity, enforceability and effectiveness of the agreement will not in any way be adversely affected by the Closing; (iii) SMP is not, and, to SMP's Knowledge, no other party thereto is in breach or default thereunder or has allowed an event to occur which with notice or lapse of time, or both, would constitute a breach or default by, or permit termination, modification, or acceleration against, such party under such agreement; (iv) no consents are necessary from any third party for the assignment of any such agreements; and (v) each such agreement is terminable by its terms upon no more than 90 days notice. 5.14 INSURANCE. Section 5.14 of the SMP Disclosure Schedule sets forth ---------- the following information with respect to each insurance policy (including policies providing property, casualty, liability and workers' compensation coverage) to which SMP or its Affiliates have been a party, a named insured or otherwise the beneficiary of coverage currently in effect in relation to the Brake Business: (a) the name of the insurer and the name of the policyholder; (b) the period of coverage; and (c) the scope (including an indication of whether the coverage is or was on a claims made, occurrence, or other basis), coverage limits and amount of deductibles or self-insured retentions. Neither SMP nor, to SMP's Knowledge, any other party to the policy is in breach or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, or both, would constitute such a breach or default or permit termination, modification or acceleration, under the policy. 5.15 LITIGATION. Except for matters set forth in Section 5.15 of the ----------- SMP Disclosure Schedule, there is no (i) action, suit, inquiry, judicial or administrative proceeding, arbitration or investigation pending or, to SMP's Knowledge, threatened against SMP, with respect to the Brake Business or any of the Brake Assets, before any Governmental Agency, and (ii) judgment, decree, injunction, rule or order of any Governmental Agency outstanding against and unsatisfied by SMP with respect to the Brake Business or any of the Brake Assets (the matters described in (i) and (ii) including those matters set forth on Section 5.15 of the SMP Disclosure Schedule are collectively referred to as the "EXISTING BRAKE LITIGATION AND CLAIMS"). - 50 - 5.16 PRODUCT WARRANTY. To SMP's Knowledge, each product manufactured, ----------------- sold, leased or delivered by the Brake Business has, subject to the amount of defective product returns set forth in Section 5.16 of the SMP Disclosure Schedule, been in material conformity with all applicable contractual commitments and all express and implied warranties. Section 5.16 of the SMP Disclosure Schedule includes (i) copies of the current standard terms and conditions of sale or lease for the Brake Business (containing applicable guaranty, warranty and indemnity provisions) and (ii) the amounts of warranty and guaranty claims brought against the Brake Business for the last 3 years. 5.17 PRODUCT LIABILITY. (a) Except as set forth in Section 5.17 of the ------------------ SMP Disclosure Schedule, none of SMP or its Affiliates, is currently, or has been at any time during the last three (3) years, party to any action, suit, proceeding, hearing or governmental investigation arising out of any injury to persons or damage to property as a result of the ownership, possession or use of any product manufactured, sold, leased or delivered by the Brake Business (a "BRAKE PRODUCT LIABILITY CLAIM"). To SMP's Knowledge, no event has occurred which would be reasonably likely to give rise to a Brake Product Liability Claim. (b) There are no outstanding warranty claims or any pending litigation relating thereto concerning the products of the Brake Business that indicate a repeated pattern of product failure, product liability or product recall claims. To SMP's Knowledge, the products of the Brake Business conform to the standards of safety customary in the industry of which the Brake Business is a part. None of the products of the Brake Business currently are, or, to SMP's Knowledge, are currently threatened to be, the subject of a product recall. All products of the Brake Business advertised or held out as listed or approved by any safety or rating agency comply fully with the requirements of such agencies and no such listing or approval has been or, to SMP's Knowledge, is threatened to be cancelled or withdrawn. 5.18 EMPLOYEES. (a) Section 5.18(a)(i) of the SMP Disclosure Schedule ---------- lists all sales personnel currently employed by SMP in the Brake Business who SMP does not currently plan to employ following the Closing (the "BRAKE SCHEDULED SALES PERSONS"), indicating such person's name, title or position, location of employment, current salary or compensation, and date of hire for the purpose of determining years of continuous service. Section 5.18(a)(ii) of the SMP Disclosure Schedule lists all salaried manufacturing, distribution, management and support personnel employed by SMP as of July 21, 1997 or thereafter in the Brake Business or in the temperature control products business conducted by SMP (the "SMP SCHEDULED TC AND BRAKE SALARIED NON-SALES PERSONS"), indicating such person's name, title or position, location of employment, current salary or compensation, and the date of hire for the purpose of determining years of continuous service. (b) Section 5.18(b) of the SMP Disclosure Schedule lists all collective bargaining agreements covering any employees of the Brake Business, all pending grievances 0r other collective bargaining disputes, and any claims of unfair labor practices made within the last 3 years by employees of the Brake Business. (c) SMP has not experienced any strikes or work stoppages within the last five years with respect to employees in the Brake Business. - 51 - (d) To SMP's Knowledge, there is no organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of the Brake Business. 5.19 SMP EMPLOYEE PLANS; ERISA; EMPLOYEES. (a) Section 5.19(a) of the ------------------------------------- SMP Disclosure Schedule sets forth a complete and correct list of each bonus, deferred compensation, incentive compensation, stock purchase, stock option or other equity based, severance, termination, change in control, retention, employment, hospitalization or other medical, life insurance, disability, other welfare, supplemental unemployment benefits, profit-sharing, pension or retirement plan program, agreement or arrangement, and each other employee compensation or benefit plan, program, agreement or arrangement, sponsored, maintained or contributed to by SMP or by any trade or business, whether or not incorporated (an "SMP ERISA AFFILIATE"), that together with SMP would be deemed a "single employer" within the meaning of Section 4001 of ERISA, in each case covering current or former employees of the Brake Business (the "SMP EMPLOYEE PLANS"). (b) With respect to each SMP Employee Plan, SMP has heretofore delivered or made available to SMP true and complete copies of each of the following documents (including all amendments to such documents): (i) any SMP Employee Plan or a written description of any SMP Employee Plan not in writing; (ii) the most recent annual report and actuarial report if required under ERISA or if otherwise available; (iii) the most recent Summary Plan Description with respect thereto if required under ERISA or if otherwise available; (iv) if any SMP Employee Plan or any obligations thereunder are funded through a trust or any other funding vehicle, the trust or other funding agreement and the latest financial statements thereof; and (v) the most recent determination letter received from the Internal Revenue Service with respect to each SMP Employee Plan intended to qualify under section 401(a) of the Code. (c) No liability under Title I or IV of ERISA, the penalty or excise tax provisions of the Code relating to employee plans or equivalent legislation of a foreign jurisdiction has been incurred by Moog or any of their SMP ERISA Affiliates that has not been satisfied in full, and no condition exists or event has occurred that presents a material risk to Moog or any of the SMP ERISA Affiliates of incurring any such liability. (d) No SMP Employee Plan is a "multiemployer plan," as defined in section 3(37) of ERISA, nor is any SMP Employee Plan a plan described in section 4063(a) of ERISA. - 52 - (e) No SMP Employee Plan or any trust established thereunder has incurred any "accumulated funding deficiency" (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived. Each SMP Employee Plan intended to be "qualified" within the meaning of section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified; no condition exists or event has occurred since the date of such initial determination that would adversely affect the qualified status of any such SMP Employee Plan; and each trust maintained thereunder has been determined by the Internal Revenue Service to be exempt from taxation under section 501(a) of the Code. Each SMP Employee Plan has been operated and administered in all material respects in accordance with its terms and applicable law, including but not limited to ERISA, the Code and equivalent legislation of a foreign jurisdiction. There are no pending, or to the SMP's Knowledge, threatened, claims by or on behalf of any SMP Employee Plan, by any employee or beneficiary covered under any such SMP Employee Plan or otherwise involving any such SMP Employee Plan or the assets thereof (other than routine claims for benefits). (f) Neither SMP nor any of its SMP ERISA Affiliates would be liable for any amount pursuant to Section 4063 or 4064 of ERISA if any SMP Employee Plan were to terminate. All contributions required to be made to each SMP Employee Plan under the terms of such SMP Employee Plan, applicable law or any applicable collective bargaining agreement have been paid in full when due. (g) Except as set forth in Section 5.19(g) of the SMP Disclosure Schedule, no SMP Employee Plan provides benefits, including without limitation death or medical benefits, with respect to Active Employees or Inactive Employees of SMP in the Brake Business beyond their retirement or other termination of service, other than (i) coverage mandated by applicable law and (ii) benefits payable pursuant to any SMP Employee Plan qualified under Section 401(a) of the Code. Except as set forth in Section 5.19(g) of the SMP Disclosure Schedule, the execution, delivery, or consummation of the transactions contemplated, by this Agreement will not entitle any employees of the Brake Business to severance pay or unemployment compensation. 5.20 ENVIRONMENTAL MATTERS. (a) Except as set forth in Section 5.20(a) ---------------------- of the SMP Disclosure Schedule, to SMP's Knowledge, SMP is currently in compliance, and has complied at all times in the past, in all material respects with all Environmental Laws in the conduct of the Brake Business. (b) Except as set forth in Section 5.20(b) of the SMP Disclosure schedule, to the extent that the Brake Business has on its premises, uses or Discharges Hazardous Materials, SMP has obtained all Environmental Permits required with respect thereto and, to SMP's Knowledge, SMP has been and is in compliance with all material terms, conditions and requirements of such Environmental Permits, a list of which is set forth in Section 5.20 of the SMP Disclosure Schedule. Except as set forth in Section 5.20(b) of the SMP Disclosure Schedule, there are no proceedings to which any of SMP or its Affiliates is a party which are pending or, to SMP's Knowledge, threatened against SMP or its Affiliates seeking to revoke, cancel or suspend any Environmental Permit necessary for the conduct of the Brake Business, except where the failure to have obtained such Environmental Permit or to so comply, or where such proceedings could not reasonably be expected to have a Brake Material Adverse Effect. All Environmental Permits relating to the conduct of the Brake Business will be assigned by SMP - 53 - to Moog in accordance with this Agreement, except to the extent the same are not transferable under applicable law. (c) Except as set forth in Section 5.20(c) of the SMP Disclosure Schedule, neither SMP nor any of its Affiliates has received any notice from any Governmental Agency or any other Person concerning any Environmental Claim in connection with the operation of the Brake Business or with regard to any of the Brake Assets and which is currently unresolved. To SMP's Knowledge, (i) there is no investigational proceeding against SMP or its Affiliates by any federal, state or local environmental or health and safety enforcement agency in connection with the past or present operation of the Brake Business or with regard to any of the Brake Assets; and (ii) neither SMP nor any of its Affiliates has any pending or contingent liability for any Environmental Claim in connection with the operation of the Brake Business or with regard to any of the Brake Assets. Except as set forth in Section 5.20(c) of the SMP Disclosure Schedule, neither SMP nor any of its Affiliates has been subject to any administrative or judicial enforcement action or any third party lawsuits pursuant to any Environmental Laws either now or at any time during the past five years in connection with the operation of the Brake Business or with regard to any of the Brake Assets. (d) Except as set forth in Section 5.20(d) of the SMP Disclosure Schedule, to SMP's Knowledge, there are no conditions at, on, under, near or originating from any of the Brake Assets that reasonably and foreseeably (i) may result in the imposition of liability pursuant to any Environmental Law against SMP, or (ii) may result in any investigatory and/or remedial activities pursuant to any Environmental Law. (e) Except as set forth in Section 5.20(e) of the SMP Disclosure Schedule, neither SMP nor any of its Affiliates is subject to any remedial obligation under a currently issued and applicable administrative order, decree, or agreement pursuant to an Environmental Law in connection with the operation of the Brake Business or with regard to any of the Brake Assets. (f) Section 5.20(f) of the SMP Disclosure Schedule lists all contracts or other written arrangements currently in effect and within the possession, custody or control of SMP relating to the collection, storage, transportation, treatment, recovery, recycling, or Disposal of Hazardous Materials associated with the Brake Business to which any of SMP or its Affiliates is a party and, to SMP's Knowledge, any such contracts or written arrangements that are not currently in effect but to which any of SMP or its Affiliates has been a party during the past five years. (g) To SMP's Knowledge, except as set forth in Section 5.20(g) of the SMP Disclosure Schedule, no Hazardous Materials have been Discharged or Disposed of by or on behalf of SMP or its Affiliates on any real property currently or formerly owned or leased by SMP and used or previously used in the operation of the Brake Business, and to SMP's Knowledge, Section 5.20(g) of the SMP Disclosure Schedule sets forth all off site locations where Hazardous Materials generated by SMP or its Affiliates in the conduct of the Brake Business have been generated, used, collected, treated, stored, transported, recovered, recycled, Discharged or Disposed. - 54 - (h) Except as set forth in Section 5.20(h) of the SMP Disclosure Schedule, no real property currently or formerly owned or leased or, to SMP's Knowledge, used by SMP or its Affiliates (including any off-site locations listed in Section 5.20(h) of the SMP Disclosure Schedule) in the Brake Business is listed on any federal list of Superfund or National Priorities List sites or similar governmental lists regarding waste sites at which there has been Disposal of Hazardous Materials, nor to SMP's Knowledge is any such property subject to any environmentally-relat- ed liens of record. (i) To SMP's Knowledge, and other than as allowed by licenses, approvals and permits which have been obtained and are in full force and effect, the operation of the Brake Business, as presently conducted, does not require the emission or Discharge of any Hazardous Material into the air, soil, or Water, or into any sewer system or storm water drainage system at concentrations in excess of permitted or regulatory limits. All equipment needed for the continued and uninterrupted operation of the Brake Business as it is currently conducted without such Discharge of Hazardous Materials in excess of permitted or regulatory limits is in satisfactory operating condition. (j) Except as set forth in Section 5.20(j) of the SMP Disclosure Schedule, to SMP's Knowledge, all properties and equipment used in the Brake Business are now free of friable asbestos and PCB's, and are now and at all times in the past have been free of any underground storage tank, any landfill, dump, hazardous waste management facility as defined pursuant to the federal Resource Conservation and Recovery Act or any comparable state law, or wells used for Disposal, injection or other Discharge. (k) Except as set forth in Section 5.20(k) of the SMP Disclosure Schedule, neither SMP nor any of its Affiliates has submitted any notice to any Governmental Agency or other Person, and to SMP's Knowledge none is required, regarding any Discharges of Hazardous Materials of reportable quantity (other than Discharges authorized by Environmental Permits) on, under or from the Brake Assets within the past 5 years. (l) Except as set forth in Section 5.20(l) of the SMP Disclosure Schedule, none of the real property owned by SMP which is included in the Brake Assets is subject to any environmental liens or deed restrictions based on Environmental Law. 5.21 LEGAL COMPLIANCE. Except with respect to environmental matters ----------------- (which are addressed in Section 5.20), to SMP's Knowledge, SMP has complied in all material respects with all laws (including rules and regulations thereunder) of Governmental Agencies applicable to it in connection with the operation of the Brake Business. 5.22 VEHICLES. Section 5.22 of the SMP Disclosure Schedule sets out a --------- complete and correct list of all vehicles owned or operated by SMP for or on behalf of the Brake Business included in the Brake Assets. 5.23 GUARANTIES. Section 5.23 of the SMP Disclosure Schedule lists all ----------- guaranties, performance bonds, bid bonds and foreign exchange contracts or commitments which relate to the Brake Business. - 55 - 5.24 ALL BRAKE ASSETS TRANSFERRED. The Brake Assets transferred to Moog ----------------------------- at Closing shall include all of the assets, contracts, rights and properties of every kind and description, tangible or intangible, owned or leased, real, personal or mixed, necessary to conduct the Brake Business as currently conducted, free of all Security Interests, other than the Brake Retained Assets. 5.25 SMP PERMITS. Except with respect to environmental permits, ------------ licenses and approvals (which are addressed in Section 5.20) SMP has in effect all material permits, licenses, approvals, and other authorizations necessary for the continued conduct of the Brake Business as presently conducted (the "SMP PERMITS"), a list of which is set forth in Section 5.25 of the SMP Disclosure Schedule, and there are no proceedings to which SMP is a party which are pending or, to SMP's Knowledge, threatened against SMP or the Brake Business seeking to revoke, cancel or suspend any such SMP Permit. All SMP Permits will be assigned by SMP to Moog in accordance with this Agreement except to the extent that such assignment is not permissible under applicable law. 5.26 BROKERS' FEES. Neither Moog nor SMP has any liability or -------------- obligation to pay any fees or commissions to any broker, finder, investment banker or agent with respect to the transactions contemplated by this Agreement based upon arrangements made by or on behalf of SMP. 5.27 CUSTOMERS AND SUPPLIERS. Section 5.27 of the SMP Disclosure ------------------------ Schedule contains a list of the 20 largest customers and suppliers of the Brake Business (measured by dollar volume of purchases and sales, as applicable) during the past year and the dollar volume of such purchases and sales. To SMP's Knowledge, no such customer or supplier is threatening to terminate, non-renew or materially adversely change its arrangements with SMP with respect to the Brake Business. 5.28 INDUSTRIAL DEVELOPMENT REVENUE BONDS. As of the date of this ------------------------------------- Agreement, the outstanding balance including any future payments due under the $2.5 million Arkansas Development Finance Authority Industrial Development Bonds (Standard Motor Products, Inc. Project) Series 1989, is $655,000 plus interest accrued to the Closing Date and the outstanding balance including any future payments due under the $1.8 million Industrial Development Revenue Bonds (Standard Motor Products, Inc. Project) Series 1990, is $685,000 plus accrued interest. SMP is not, and to SMP's Knowledge, no other party thereto is in breach or default under: (i) such $2.5 million bonds or any related agreements including the Promissory Note, Loan Agreement and Mortgage and Security Agreement between SMP and the Arkansas Development Finance Authority or (ii) such $1.8 million bonds or any related agreements including the Lease Agreement dated June 1, 1990 between SMP and the City of Manila. The tax exempt status of the bonds referred to in clauses (i) and (ii) above will not in any way be adversely affected by the Closing. - 56 - ARTICLE VI PRE-CLOSING COVENANTS --------------------- The Parties agree as follows regarding the period between the execution of this Agreement and the Closing (and where indicated following the Closing). 6.1 REASONABLE BEST EFFORTS. Each Party will use its commercially ------------------------ reasonable best efforts to take all action and to do all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement (including satisfying the Closing conditions set forth in Article X below at the earliest practicable time), subject to the qualifications expressly set forth in this Agreement. 6.2 NOTICES AND CONSENTS. Each Party will, and will cause its --------------------- Affiliates, to give any notices to third parties, and will, and will cause its Affiliates to, use all commercially reasonable efforts to obtain, or to assist the other Party with obtaining, any third-party consents that are required to consummate the transactions contemplated by this Agreement or that the other Party may reasonably request in connection with the matters disclosed or required to be disclosed in the Moog Disclosure Schedule or the SMP Disclosure Schedule, as the case may be. Each Party will file (and each of them will cause their Affiliates to file) any notification and report forms and related material that such party or its Affiliates may be required to file with any Governmental Agency, including, without limitation, under the H-S-R Act as provided in Section 6.3 below. 6.3 H-S-R ACT. (a) Each Party shall furnish to the other such necessary ---------- information and reasonable assistance as the other may request in connection with its preparation of any filing or submission which is necessary under the H-S-R Act. The Parties shall keep each other apprised of the status of any material communications with and any inquiries or requests for additional information made by any Governmental Agency. The Parties shall, upon request of the U.S. Federal Trade Commission, U.S. Department of Justice or any other Governmental Agency, supply such agency with any additional information requested as promptly as practicable and shall use their good faith reasonable efforts to cause the satisfaction or termination of the applicable waiting period under the H-S-R Act or any extension thereof. (b) Notwithstanding the foregoing, neither Party shall be required to: (i) divest or hold separate any assets, including any asset of the TC Business or Brake Business, (ii) agree to any limitation with respect to, or its ability to retain, the TC Business or Brake Business or any portion thereof or any of its other assets or businesses, or (iii) contest any suit or proceeding brought by the U.S. Federal Trade Commission or U.S. Department of Justice that seeks to restrain or prohibit the consummation of this Agreement or attempt to lift or rescind any injunction or restraining order obtained by the U.S. Federal Trade Commission or U.S. Department of Justice adversely affecting the ability of the Parties hereto to consummate the transactions contemplated hereby. 6.4 OPERATION OF THE TC BUSINESS AND THE BRAKE BUSINESS. (a) From the date hereof to the Closing, Moog agrees: (i) to operate the TC Business in the ordinary course consistent with past practices in all material respects, (ii) to use commercially reasonable efforts to preserve - 57 - the TC Business intact, to keep available to the TC Business the services of the key employees of such business, and to preserve the goodwill of the customers, suppliers and others having business relations with the TC Business, and (iii) not to take any of the actions described in Section 4.6 except as approved in advance in writing by SMP, such approval not to be unreasonably withheld or delayed. (b) From the date hereof to the Closing, SMP agrees: (i) to operate the Brake Business in the ordinary course consistent with past practices in all material respects, (ii) to use commercially reasonable efforts to preserve the Brake Business intact, to keep available to the Brake Business the services of the key employees of such business, and to preserve the goodwill of the customers, suppliers and others having business relations with the Brake Business, and (iii) not to take any of the actions described in Section 5.6 except as approved in advance in writing by Moog, such approval not to be unreasonably withheld or delayed. 6.5 FULL ACCESS. (a) Moog will permit representatives of SMP upon ------------ reasonable notice to have full access at all reasonable times, and in a manner so as not to interfere with the normal business operations of the TC Business, to all premises, properties, personnel, attorneys, accountants books and records of or pertaining to the TC Business and other aspects of the TC Business' operations which SMP shall reasonably request including providing access to the TC Real Properties and real properties subject to the TC Leases for environmental investigations such as conducting soil, groundwater and other intrusive sampling. (b) SMP will permit representatives of Moog upon reasonable notice to have full access at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Brake Business, to all premises, properties, personnel, attorneys, accountants books and records of or pertaining to the Brake Business, and other aspects of the Brake Business' operations which Moog shall reasonably request including providing access to the Brake Real Properties and real properties subject to the Brake Leases for environmental investigations such as conducting soil, groundwater and other intrusive sampling. (c) Between the date of this Agreement and the Closing Date, the Parties will hold and will cause their respective Affiliates, representatives, consultants and advisors to hold in strict confidence in accordance with the terms of the Letter of Intent between Moog and SMP dated July 21, 1997, all documents and information furnished by one Party to the other or its representatives in connection with the transactions contemplated by this Agreement. If the transactions contemplated by this Agreement are not consummated, such confidence shall be maintained in accordance with such Letter of Intent. 6.6 TITLE INSURANCE AND SURVEYS. Prior to Closing, Moog shall obtain ---------------------------- and deliver to SMP with respect to each parcel of TC Real Properties, and SMP shall obtain and deliver to Moog with respect to each parcel of Brake Real Properties, the following title insurance commitments, policies and surveys. (a) With respect to each such parcel of real estate, Moog or SMP, as the case may be, shall obtain and deliver an ALTA Owner's Policy of Title Insurance Form B-1987 (or an equivalent policy acceptable to the Party acquiring the real property if the real property is located in a jurisdiction in which an ALTA Owner's Policy of Title Insurance Form B-1987 is - 58 - not available) insuring title to such real property to be in the Party acquiring the real property as of the Closing (subject only to Permitted Exceptions). The title insurance policy shall be issued by a title insurer satisfactory to the Party acquiring the real property and the policy shall be in such amount as such Party may determine to be the fair market value of such real property (including all improvements located thereon). (b) Each title insurance policy delivered hereunder shall (i) insure title to the real property and all recorded easements benefitting such real property, (ii) contain an "extended coverage endorsement" insuring over the general exceptions contained customarily in such policies, (iii) contain an endorsement insuring that the real property described in the title insurance policy is the same real estate as shown on the survey delivered with respect to such property, (iv) contain an endorsement insuring that each street adjacent to the real property is a public street and that there is direct and unencumbered pedestrian and vehicular access to such street from the real property, and (v) if the real property consists of more than one record parcel, contain a "contiguity" endorsement insuring that all of the record parcels are contiguous to one another. (c) With respect to each such parcel of real property as to which a title insurance policy is to be procured pursuant to this Section 6.6, the Party transferring such property shall procure in preparation for the Closing a current survey of the real property certified to the Party acquiring such property, prepared by a licensed surveyor and conforming to current ALTA Minimum Detail Requirements for Land Title Surveys. The survey shall disclose the location of all improvements, easements, party walls, sidewalks, roadways, utility lines, and other matters shown customarily on such surveys, and shall show access affirmatively to public streets and roads. The survey shall not disclose any material survey defect or encroachment from or onto the real property which has not been cured or insured over prior to the Closing. (d) The cost of the title insurance commitments, policies and surveys obtained pursuant to this Section 6.6 shall be shared equally by the Parties. 6.7 EXCLUSIVITY. (a) Moog will not (and will cause its Affiliates and ------------ the TC Business not to), (i) solicit, initiate, respond to, entertain or encourage the submission of any proposal or offer from any Person relating to any transaction which, directly or indirectly, involves the TC Business or (ii) to participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner, any effort or attempt by any Person to do, or seek to do the foregoing. Moog will notify SMP immediately if any Person makes any proposal, offer, inquiry, expression of intent or contact with respect to the foregoing. (b) SMP will not (and will cause its Affiliates and the Brake Business not to), (i) solicit, initiate, respond to, entertain or encourage the submission of any proposal or offer from any Person relating to any transaction which, directly or indirectly, involves the Brake Business or (ii) to participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner, any effort or attempt by any Person to do or seek to do the foregoing. SMP will notify Moog immediately if any Person makes any proposal, offer, inquiry, expression of intent or contact with respect to the foregoing. - 59 - (c) Notwithstanding the foregoing, nothing contained in this Section 6.7 shall prohibit a Party from considering and responding to an unsolicited bid for itself or the TC Business or the Brake Business, as the case may be; provided, that such Party issues a negative response to the unsolicited bid. 6.8 SUPPLY AGREEMENTS. On or prior to the Closing, SMP shall enter into ------------------ the Rubber Supply Agreement and SMP shall enter into a Screw Machine Products Supply Agreement with Moog Company for screw machine products. 6.9 DISCLOSURE SUPPLEMENTS. From time to time after the date of this ----------------------- Agreement and prior to the Closing, Moog will promptly supplement or amend the Moog Disclosure Schedule with respect to any matter hereafter arising which, if existing or occurring at or prior to the date of this Agreement, would have been required to be set forth or described therein or which is necessary to correct any information therein or in any representation and warranty of Moog which has been rendered inaccurate thereby. From time to time after the date of this Agreement and prior to the Closing, SMP will promptly supplement or amend the SMP Disclosure Schedule with respect to any matter hereafter arising which, if existing or occurring at or prior to the date of this Agreement, would have been required to be set forth or described therein or which is necessary to correct any information therein or in any representation and warranty of SMP which has been rendered inaccurate thereby. For purposes of determining the accuracy of the representations and warranties of Moog contained in Article IV and the accuracy of the representations and warranties of SMP contained in Article V in order to determine the fulfillment of the conditions set forth in Sections 10.3(a) and 10.2(a), respectively, the Moog Disclosure Schedule and the SMP Disclosure Schedule shall be deemed to include only that information contained therein on the date of this Agreement and shall be deemed to exclude any information contained in any subsequent supplement or amendment thereto. 6.10 DISPOSAL OF CERTAIN HAZARDOUS MATERIALS. Prior to Closing, each ---------------------------------------- Party will remove and properly dispose at off-site locations all Hazardous Materials existing in any baghouses, tanks, drums, pails, sumps, filters or other collection devices or containers located at their respective facilities; PROVIDED, HOWEVER, that any Hazardous Materials properly stored in non-leaking containers for future use in the business as raw materials, manufacturing supplies or maintenance supplies need not be removed and disposed of. 6.11 TERMINATION OF JOINT VENTURE AGREEMENT WITH DALIAN YONGFENG CAR --------------------------------------------------------------- PARTS CO. LTD.. Prior to Closing, SMP shall use commercially reasonable efforts - -------------- to dissolve or otherwise terminate its joint venture with Dalian Yongfeng Car Parts Co. Ltd. and to have its joint venture partner return to SMP the equipment which SMP supplied to the joint venture. Any such equipment which Dalian Yongfeng Car Parts Co. Ltd. may return to SMP shall be delivered to Moog at no cost to Moog. - 60 - ARTICLE VII. POST-CLOSING COVENANTS ---------------------- The Parties agree as follows regarding the period following the Closing (and, where indicated, before the Closing). 7.1 FURTHER ASSURANCES. If, after the Closing, any further action is ------------------- necessary or desirable to carry out the purposes of this Agreement, each Party will take such further action (including the execution and delivery of such further instruments and documents) as the other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under Article XI). Moog acknowledges and agrees that from and after the Closing, SMP will be entitled, at its own expense, to reasonable access to all Brake Books and Records. SMP acknowledges and agrees that from and after the Closing, Moog will be entitled, at its own expense, to reasonable access to the TC Books and Records. 7.2 LITIGATION SUPPORT. In the event and for so long as any Party ------------------- actively is contesting or defending against any charge, complaint, action, suit, proceeding, hearing, investigation, claim or demand in connection with (i) any transaction contemplated under this Agreement, or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act or transaction on or prior to the Closing Date involving the TC Business or the Brake Business, the other Party will cooperate with it or its counsel in the contest or defense, make available its personnel and provide such testimony and access to its books, records and properties as shall be reasonably necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under Article XI). Notwithstanding the foregoing, this Section 7.2 shall not apply to any charge, complaint, action, suit, proceeding, hearing, investigation, claim or demand where both Parties (or their respective Affiliates) are or may be involved as contesting or defending parties and the Parties do or may have adverse interests. 7.3 TRANSITIONAL MATTERS. (a) Moog will not take any action that is --------------------- designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier or other business associate of the TC Business from maintaining the same business relationships with the TC Business after the Closing as it maintained with the TC Business prior to the Closing. Moog will refer all customer inquiries relating to the TC Business to SMP from and after the Closing. (b) SMP will not take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier or other business associate of the Brake Business from maintaining the same business relationships with the Brake Business after the Closing as it maintained with the Brake Business prior to the Closing. SMP will refer all customer inquiries relating to the Brake Business to Moog from and after the Closing. (c) For a period of up to six (6) months from the Closing Date (the "TRANSITION PERIOD"), Moog shall provide SMP with management information system services for the TC Business in accordance with the terms set forth on Exhibit L. If SMP notifies Moog in writing on or before 30 days before the expiration of the Transition Period that SMP will - 61 - continue to need Moog to provide management information services after the Transition Period, then Moog shall continue to provide such services for a period of up to 12 months from the Closing Date. If Moog provides management information services to SMP after the Transition Period: (i) SMP shall reimburse Moog for all out-of-pocket costs incurred by Moog to provide such services after the Transition Period including, but not limited to, the cost of Moog's employees and the cost of any temporary personnel retained by Moog to provide such services; and (ii) SMP shall indemnify Moog from all Adverse Consequences arising from or relating to claims by any Person who is leasing, licensing or otherwise providing software to Moog that the providing of such services by Moog, constitutes an assignment or transfer by Moog of its interest or rights to such software without such Person's consent, requires Moog to pay fees or other consideration to such Person in order to allow Moog to provide such services to SMP, or otherwise constitutes a violation of the terms of the lease, license or other arrangement between Moog and such Person. Moog shall use commercially reasonable efforts to provide SMP with management information services pursuant to the terms of this Section 7.3(c) but Moog shall not be responsible for any errors in reports, data or other information provided to SMP under this Section 7.3(c) including any errors resulting from the failure of the systems to be "Year 2000" compliant, other than errors caused by the negligence of Moog. (d) During the Transition Period, SMP shall provide Moog with management information system services for the Brake Business in accordance with the terms set forth on Exhibit M. SMP shall use commercially reasonable efforts to provide SMP with management information services pursuant to the terms of this Section 7.3(d), but SMP shall not be responsible for any errors in reports, data or other information provided to Moog under this Section 7.3(d) including any errors resulting from the failure of the systems to be "Year 2000" compliant, other than errors caused by the negligence of SMP. (e) Following Closing and for a period not to extend beyond December 31, 1998, Moog shall provide SMP with support for tech-line services, catalogue services and customer service for the TC Business transferred to SMP. SMP shall reimburse Moog for all out-of-pocket expenses incurred by Moog to provide such support. Moog shall issue an invoice to SMP for such support services on a monthly basis and SMP shall pay such invoice within 30 days of the date of such invoice. (f) Following Closing and for a period not to extend beyond June 30, 1998, SMP shall provide Moog with support for processing exports for the Brake Business transferred to Moog. Moog shall reimburse SMP for all out-of-pocket expenses incurred by SMP to provide such support. SMP shall issue an invoice to Moog for such support services on a monthly basis and Moog shall pay such invoice within 30 days of the date of such invoice. (g) Following Closing and for a period of up to 90 days thereafter, Moog shall provide SMP the following accounting services for the TC Business: accounts payable, order processing, invoicing, collection, accounts receivable and purchasing. Moog shall provide such services to SMP at no cost for the first 15 days following Closing. SMP shall reimburse Moog for all out-of-pocket expenses incurred by Moog to provide any such services after the 15th day following Closing. Moog shall issue and invoice to SMP for such services on a monthly basis and SMP shall pay such invoice within 30 days of the date of the invoice. - 62 - (h) At SMP's request, Moog has retained the services of Gary Hueser, Ken Spates and Bill Wallace to provide marketing services to SMP following Closing. SMP will reimburse Moog all out-of-pocket expenses incurred by Moog for such marketing services for a period of 4 months following Closing. SMP shall also indemnify Moog for any Adverse Consequences relating to the actions of the employees providing such marketing services after Closing. 7.4 CONFIDENTIALITY. (a) Moog will treat and hold as such all ---------------- confidential information concerning the TC Business or the TC Assets, refrain from using any of the confidential information except in connection with this Agreement and deliver promptly to SMP or (subject to applicable law) destroy, at the request of SMP, all tangible embodiments (and all copies) of the confidential information relating exclusively to the TC Business or the TC Assets which are in its possession. If Moog is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar process) to disclose any such confidential information, Moog will notify SMP promptly of the request or requirement so that SMP may seek an appropriate protective order or waive compliance with the provisions of this Section 7.4(a). If, in the absence of a protective order or the receipt of a waiver hereunder, Moog or its Affiliates is, on the advice of counsel, compelled to disclose any confidential information to any tribunal or else stand liable for contempt or suffer a substantial penalty, Moog or its Affiliates may disclose the confidential information to the tribunal. In such event, Moog or its Affiliates shall use its or their reasonable best efforts to obtain, at the reasonable request and expense of SMP, an order or other assurance that confidential treatment will be accorded to such portion of the confidential information required to be disclosed as SMP shall designate. Notwithstanding the foregoing, this Section 7.4(a) shall not apply to information which is or becomes generally available to the public other than as a result of disclosure after the Closing Date by Moog or the agents or representatives or Moog. (b) SMP will treat and hold as such all confidential information concerning the Brake Business, refrain from using any of the confidential information except in connection with this Agreement and deliver promptly to Moog or (subject to applicable law) destroy, at the request of Moog, all tangible embodiments (and all copies) of the confidential information relating exclusively to the Brake Business or the Brake Assets which are in its possession. If SMP is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar process) to disclose any such confidential information, SMP will notify Moog promptly of the request or requirement so that Moog may seek an appropriate protective order or waive compliance with the provisions of this Section 7.4(b). If, in the absence of a protective order or the receipt of a waiver hereunder, SMP or its Affiliates is, on the advice of counsel, compelled to disclose any confidential information to any tribunal or else stand liable for contempt, SMP or its Affiliates may disclose the confidential information to the tribunal. In such event, SMP or its Affiliates shall use its or their reasonable best efforts to obtain, at the reasonable request and expense of Moog, an order or other assurance that confidential treatment will be accorded to such portion of the confidential information required to be disclosed as Moog shall designate. Notwithstanding the foregoing, this Section 7.4(b) shall not apply to information which is or becomes generally available to the public other than as a result of disclosure after the Closing Date by SMP or the agents or representatives of SMP. - 63 - 7.5 CONSENTS. If any required consent or agreement is not obtained by --------- the Closing and the Party required to obtain such consent (and, if the obtaining of such consent is a condition to another Party's obligation to close, such other Party) desires to close the transaction anyway, the Parties will cooperate in any reasonable arrangement to provide such Party with the benefits under or with respect to the matter as to which the relevant consents or agreements were not obtained as if such consents or agreements were obtained. 7.6 PRESS RELEASES. Both before and after Closing, the Parties and --------------- their respective Affiliates will consult with each other before issuing any press release or news media release or otherwise make any public statements with respect to this Agreement and the transactions contemplated hereby, and no Party, without the prior written consent of the other Party (which consent will not be unreasonably withheld), will issue any such press release or news media release or make such public statement with respect to this Agreement or the transactions contemplated hereby, except as required by applicable law or stock exchange rules. 7.7 ALLOCATION. The Parties will agree upon the allocation of like-kind ----------- properties exchanged, liabilities assumed or relieved, adjusted bases of properties exchanged, and cash or other property transferred or received hereunder in accordance with Section 1031 and the Treasury regulations thereunder and Treasury Regulation ss. 1.1060-1T(h) which allocation shall be agreed upon within ninety (90) days of the Closing Date and shall specify an "exchange group" for each item as provided in Treasury Regulation ss.1.1031(j)-1. Each Party will report the exchange of the TC Assets and the Brake Assets, consistent with such allocation, to the Internal Revenue Service and any other Tax authority within the time period and in the manner required by law. Each Party agrees to file all Tax Returns consistent with such allocation and not to take any position inconsistent with such allocation, except as required by law. Each Party will promptly notify the other if a Tax authority disagrees with any aspect of such allocation. 7.8 TAX ASSISTANCE. Moog shall, and shall cause the employees of the --------------- Brake Business to, and SMP shall, and shall cause the employees of the TC Business to, (i) provide the other Party with such assistance as may reasonably be requested by any of them in connection with the preparation of any Tax Return, audit or other examination by any Tax authority or judicial or administrative proceedings relating to liability for Taxes, (ii) retain and provide the other Party any records or other information that may be relevant to such return, audit or examination, proceeding or determination and (iii) provide the other Party with any final determination of any such audit or examination, proceeding or determination that affects any amount required to be shown on any Tax Return of the other Party for any period. Without limiting the foregoing, Moog shall retain, and shall cause the employees of the Brake Business to retain, and SMP shall retain, and shall cause the TC Business to retain, until six (6) months following the expiration of the applicable statutes of limitation (including any extensions), copies of all Tax Returns, supporting work schedules and other records or information that may be relevant to such Tax Returns for all Tax periods or portions thereof ending before or including the Closing Date and shall not destroy or otherwise dispose of any such records without first providing the other Party with a reasonable opportunity to review and copy the same. 7.9 TAX PROCEEDINGS. Each Party shall exercise, at its expense, complete control over the handling, disposition and settlement of any governmental inquiry, examination or proceeding that could result in a determination with respect to Taxes due or payable by the other Party, for which such Party or its Affiliates may be liable or against which such Party may be required to indemnify the other Party pursuant to this Agreement. Each Party shall promptly - 64 - notify the other Party if, in connection with any such inquiry, examination or proceeding, any Governmental Agency proposes in writing to make any assessment or adjustment with respect to Tax items of such Party, which assessments or adjustments could affect the TC Business or the Brake Business, as the case may be, following the Closing Date, and shall consult with such other Party with respect to any such proposed assessment or adjustment. 7.10 UNEMPLOYMENT TAX EXPERIENCE. (a) The state unemployment tax ---------------------------- experience of the TC Business shall be transferred to SMP at the sole discretion of SMP. The decision to transfer such unemployment tax experience may be made separately for each state in which the TC Business is conducted. If SMP elects to transfer the aforementioned state unemployment tax experience in a particular state, Moog will timely execute the necessary governmental filings to accomplish this transfer. (b) The state unemployment tax experience of the Brake Business shall be transferred to Moog at the sole discretion of Moog. The decision to transfer such unemployment tax experience may be made separately for each state in which the Brake Business is conducted. If Moog elects to transfer the aforementioned state unemployment tax experience in a particular state, SMP will timely execute the necessary governmental filings to accomplish this transfer. 7.11 EMPLOYMENT TAX COMPLIANCE. Moog and SMP agree to use the -------------------------- alternative procedure described in Section 5 of Revenue Procedure 84-77, 1984-2 Cum. Bull. 753, for preparing and filing Forms W-2, W-3, W-4, W-5, and 941 for the calendar year in which the Closing occurs with respect to those individuals who are employed by one Party immediately preceding the Closing and by the other Party immediately thereafter. Each Party shall provide to the other Party such assistance, cooperation and access to such books and records as may be reasonably necessary to comply with this provision. 7.12 PRODUCT RETURNS ADJUSTMENT. (a) Not later than twenty (20) days --------------------------- after the period ending ninety (90) days following the Closing Date (i) Moog shall prepare and furnish to SMP a schedule (the "BRAKE RETURNS SCHEDULE") reflecting, for the 90 day period following the Closing Date, the actual amount of overstock returns (net of the average recovery rate over the prior 24 months) of products of the Brake Business (the "OVERSTOCK BRAKE RETURNS AMOUNT") and the actual amount of product warranty returns (with no reduction for any recoveries) of products of the Brake Business (the "WARRANTY BRAKE RETURNS AMOUNT"); and (ii) SMP shall prepare and furnish to Moog a schedule (the "TC RETURNS SCHEDULE") reflecting, for the 90 day period following the Closing Date, the actual amount of overstock returns (net of the average recovery rate over the prior 24 months) of products of the TC Business (the "OVERSTOCK TC RETURNS AMOUNT") and the actual amount of product warranty returns (with no reductions for any recoveries) of products of the TC Business (the "WARRANTY TC RETURNS AMOUNT"). Each Party shall promptly make available or provide to the other Party such books and records (or copies thereof) as are reasonably requested by the other Party to allow the other Party to confirm the information on the Brake Returns Schedule and TC Returns Schedule, as the case may be. (b) To the extent that (i) the sum of the Overstock Brake Returns Amount and Warranty Brake Returns Amount exceeds the sum of the amounts accrued for overstock and product warranty returns on the SMP Final Closing Balance Sheet, SMP shall pay to Moog in accordance with Section 2.14, an amount equal to fifty percent (50%) of such excess or (ii) the sum of the Overstock Brake Returns Amount and Warranty Brake Returns Amount is less than - 65 - the sum of the amounts accrued for overstock and product warranty returns on the SMP Final Closing Balance Sheet, Moog shall pay to SMP an amount equal to fifty percent (50%) of such deficit. (c) To the extent that (i) the sum of the Overstock TC Returns Amount and Warranty TC Returns Amount exceeds the sum of the amounts accrued for overstock and product warranty returns on the Moog Final Closing Balance Sheet, Moog shall pay to SMP in accordance with Section 2.14, an amount equal to fifty percent (50%) of such excess or (ii) the sum of the Overstock TC Returns Amount and Warranty TC Returns Amount is less than the sum of the amounts accrued for overstock and product warranty returns on the Moog Final Closing Balance Sheet, SMP shall pay to Moog an amount equal to fifty percent (50%) of such deficit. (d) Any Party may set-off any amounts due to such Party pursuant to Section 7.12(b) or 7.12(c) against any payment due from such Party pursuant to either such Section. Any payment to be made pursuant to this Section 7.12 shall be made within ten (10) Business Days following receipt of the Brake Returns Schedule and the TC Returns Schedule. 7.13 USE OF EXCLUDED TRADEMARKS AND TRADE NAMES. (a) Section 7.13 of ------------------------------------------- the Moog Disclosure Schedule sets forth the trademarks, service marks and trade names used by Moog in the TC Business, but which are not included in the TC Assets transferred to SMP because such trademarks, service marks and trade names are also used by Moog or its Affiliates in other businesses (the "EXCLUDED MOOG TRADEMARKS AND TRADE NAMES"). SMP may sell, use and distribute products and materials including all packages, sales aids, sales literature, signage and stationery which bear the Excluded Moog Trademarks and Trade Names for a period not to exceed one year after the Closing Date, provided SMP uses the Excluded Moog Trademark and Trade Names on the same products and materials and in the same manner as used by Moog in the TC Business prior to the Closing Date. (b) Section 7.13 of the SMP Disclosure Schedule sets forth the trademarks, service marks and trade names used by SMP in the Brake Business, but which are not included in the Brake Assets transferred to Moog because such trademarks, service marks and trade names are also used by SMP or its Affiliates in other businesses (the "EXCLUDED SMP TRADEMARKS AND TRADE NAMES"). Moog may sell, use and distribute products and materials including all packages, sales aids, sales literature, signage and stationery which bear the Excluded SMP Trademarks and Trade Names for a period not to exceed [one year] after the Closing Date, provided Moog uses the Excluded SMP Trademarks and Trade Names on the same products and materials and in the same manner as used by SMP in the Brake Business prior to the Closing Date. 7.14 EXISTING INSURANCE COVERAGE. (a) At Closing, Moog will cancel ---------------------------- insurance coverage applicable to the TC Business for occurrences or claims made after the Closing Date; PROVIDED, HOWEVER, that the remaining insurance coverage shall be available to SMP with respect to insured occurrences or claims made relating to the TC Business on or prior to the Closing Date, if and only to the extent that SMP has assumed or paid the loss or liability attributed to such occurrences. If, after the Closing, Moog actually receives from an insurer cash proceeds (excluding any return of premium or reimbursed attorneys or investigation or other fees) attributable to such insurance coverage with respect to any insured occurrences or any series of occurrences on or prior to the Closing Date or any claims that were asserted on - 66 - or prior to the Closing Date, then such cash proceeds shall be paid to SMP net of any deductible, co-payment, retro fees, self-insured premiums, defense costs or other charges paid or payable to the insurance carrier or obligations to reimburse the insurance carrier for which Moog is liable, to the extent that SMP has assumed or paid the loss or liability attributed to such occurrences. SMP shall reimburse Moog for any administrative costs, retro fees, premiums, self-insured or deductible loss costs or other expenses that Moog is charged after the Closing by such insurance carrier relating to claims paid to SMP subsequent to Closing under insurance coverage applicable to the TC Business prior to Closing. (b) At Closing, SMP will cancel insurance coverage applicable to the Brake Business for occurrences or claims made after the Closing Date; PROVIDED, HOWEVER, that the remaining insurance coverage shall be available to Moog with respect to insured occurrences or claims made relating to the Brake Business on or prior to the Closing Date, if and only to the extent that Moog has assumed or paid the loss or liability attributed to such occurrences. If, after the Closing, SMP actually receives from an insurer cash proceeds (excluding any return of premium or reimbursed attorneys or investigation or other fees) attributable to such insurance coverage with respect to any insured occurrences or any series of occurrences on or prior to the Closing Date or any claims that were asserted on or prior to the Closing Date, then such cash proceeds shall be paid to Moog net of any deductible, co-payment, retro fees, self-insured premiums, defense costs or other charges paid or payable to the insurance carrier or obligations to reimburse the insurance carrier for which SMP is liable, to the extent that Moog has assumed or paid the loss or liability attributed to such occurrences. Moog shall reimburse SMP for any administrative costs, retro fees, premiums, self-insured or deductible loss costs or other expenses that SMP is charged after the Closing by such insurance carrier relating to claims paid to Moog subsequent to Closing under insurance coverage applicable to the Brake Business prior to Closing. 7.15 LETTERS OF CREDIT. ------------------ (a) SMP shall use all commercially reasonable efforts to replace, on or as soon as practicable after the Closing Date, all "TC Letters of Credit" (as defined below) existing on the Closing Date, and SMP shall reimburse Moog and its Affiliates for any Liability that Moog or its Affiliates incur in connection with any TC Letter of Credit as a result of such TC Letter of Credit not being so replaced (or otherwise terminated) including the value of any payments made under a claim or drawing together with associated costs and fees to maintain, renew or extend such TC Letters of Credit to the extent such payments, costs and fees relate to the period after the Closing Date. "TC LETTERS OF CREDIT" shall mean, collectively, each commercial letter of credit or standby letter of credit that relates exclusively to the TC Business and is either specifically described in Section 7.15(a) of the Moog Disclosure Schedule or is created after the date of this Agreement in the ordinary course of conducting the TC Business consistent with past practices and as to which Moog has notified SMP in writing prior to the Closing Date. If by April 30, 1998, SMP has not effected the complete replacement of all outstanding TC Letters of Credit such that Moog and its Affiliates are fully released from any liability related thereto, SMP shall obtain and deliver to Moog letters of credit in favor of Moog, from financial institutions and on terms reasonably acceptable to Moog, which fully cover the liabilities under each such TC Letter of Credit then outstanding. Moog or its Affiliates may elect not to renew or extend any TC Letter of Credit if SMP has not obtained and delivered to Moog the letters of credit in favor of Moog required because of SMP's failure to effectuate any replacement required under this Section 7.15(a). Any election by Moog or its Affiliates not to - 67 - renew or extend a TC Letter of Credit shall not affect any of SMP's indemnification obligations hereunder. (b) Moog shall use all commercially reasonable efforts to replace, on or as soon as practicable after the Closing Date, all "Brake Letters of Credit" (as defined below) existing on the Closing Date, and Moog shall reimburse SMP and its Affiliates for any Liability that SMP or its Affiliates incur in connection with any Brake Letter of Credit as a result of such Brake Letter of Credit not being so replaced (or otherwise terminated) including the value of any payments made under a claim or drawing together with associated costs and fees to maintain, renew or extend such Brake Letters of Credit to the extent such payments, costs and fees relate to the period after the Closing Date. "BRAKE LETTERS OF CREDIT" shall mean, collectively, each commercial letter of credit or standby letter of credit that relates exclusively to the Brake Business and is either specifically described in Section 7.15(b) of the SMP Disclosure Schedule or is created after the date of this Agreement in the ordinary course of conducting the Brake Business consistent with past practices and as to which SMP has notified Moog in writing prior to the Closing Date. If by April 30, 1998, Moog has not effected the complete replacement of all outstanding Brake Letters of Credit such that SMP and its Affiliates are fully released from any liability related thereto, Moog shall obtain and deliver to SMP letters of credit in favor of SMP, from financial institutions and on terms reasonably acceptable to SMP, which fully cover the liabilities under each such Brake Letter of Credit then outstanding. SMP or its Affiliates may elect not to renew or extend any Brake Letter of Credit if Moog has not obtained and delivered to SMP the letters of credit in favor of SMP required because of Moog's failure to effectuate any replacement required under this Section 7.15(b). Any election by SMP or its Affiliates not to renew or extend a Brake Letter of Credit shall not affect any of Moog's indemnification obligations hereunder. 7.16 NON-COMPETITION AGREEMENT. -------------------------- (a) For a period of five years after the Closing Date, neither Moog nor any of its Affiliates shall directly or indirectly (except as contemplated by the Screw Machine Products Supply Agreement) (i) design, develop, manufacture, market, service, supply or distribute any temperature control products and components to support vehicle systems designed to regulate temperature for passengers ("TC COMPETITIVE PRODUCTS") in North America and any other country in which Moog conducted TC Business during the three years prior to the Closing Date or (ii) engage in, manage, operate, be connected with or acquire any interest in, as an employee, consultant, advisor, agent, owner, partner, co-venturer, principal, director, shareholder, lender or otherwise, any business competitive with the TC Business (as determined by whether such business manufacturers, markets or sells TC Competitive Products) as conducted on the date hereof or on the Closing Date, including the manufacturing and/or distributing of stand alone motors which are TC Competitive Products (a "TC COMPETITIVE BUSINESS") in North America or any other country in which Moog conducted TC Business during the three years prior to the Closing Date. Notwithstanding the foregoing, nothing herein shall be construed to prevent Moog and its Affiliates from: (i) designing, developing, manufacturing, marketing, servicing, supplying or distributing brass components and brake lines; (ii) owning, in the aggregate, no more than 5% of the outstanding shares of any publicly held corporation which is a TC Competitive Business which has shares listed for trading on a securities exchange registered with the Securities and Exchange Commission or through the automatic quotation system of a registered securities association, so long as such shares are held for passive investment purposes only and neither Moog nor any of its Affiliates in actively - 68 - involved in the management or operation of such TC Competitive Business; or (iii) acquiring a business (a "TARGET") which includes a TC Competitive Business provided the annual sales derived from the TC Competitive Business of such Target are not more than 20% of such Target's total annual sales based on the Target's most recent annual financial statements. Further, the restrictions in this Section 7.16(a) shall not apply to any Person who is not an Affiliate of Moog and who acquires all of the shares or substantially all of the assets of Moog Company, Moog Parent or Cooper Canada. (b) For a period of five years after the Closing Date, neither SMP nor any of its Affiliates shall directly or indirectly (except as contemplated by the Rubber Supply Agreement) (i) design, develop, manufacture, market, service, supply or distribute any brake products and components to support brake systems ("BRAKE COMPETITIVE PRODUCTS") in North America and any other country in which SMP conducted the Brake Business during the three years prior to the Closing Date or (ii) engage in, manage, operate, be connected with or acquire any interest in, as an employee, consultant, advisor, agent, owner, partner, co-venturer, principal, director, shareholder, lender or otherwise, any business competitive with the Brake Business (as determined by whether such business manufacturers, markets or sells Brake Competitive Products) as conducted on the date hereof or on the Closing Date (a "BRAKE COMPETITIVE BUSINESS"), in North America or any other country in which SMP conducted the Brake Business during the three years prior to the Closing Date. Notwithstanding the foregoing, nothing herein shall be construed to prevent SMP and its Affiliates from (i) designing, developing, manufacturing, marketing, servicing or supplying remanufactured anti-skid brake system control modules; (ii) owning, in the aggregate, no more than 5% of the outstanding shares of any publicly held corporation which is a Brake Competitive Business which has shares listed for trading on a securities exchange registered with the Securities and Exchange Commission or through the automatic quotation system of a registered securities association, so long as such shares are held for passive investment purposes only and neither SMP nor any of its Affiliates is actively involved in the management or operations of such Brake Competitive Business; or (iii) acquiring a business (a "TARGET") which includes a Brake Competitive Business provided the annual sales derived from the Brake Competitive Business of such Target are not more than 20% of such Target's total annual sales based on the Target's most recent annual financial statements. Further, the restrictions in this Section 7.16(b) shall not apply to any Person who is not an Affiliate of SMP and who acquires all of the shares or substantially all of the assets of SMP Parent or SMP Canada. (c) The Parties hereto agree that the duration and geographic scope of the non-competition provision set forth in this Section 7.16 are reasonable. In the event that any court or arbitrator determines that the duration or the geographic scope, or both, are unreasonable and that such provision is to that extent unenforceable, the Parties hereto agree that the provision shall remain in full force and effect for the greatest time period and in the greatest area that would not render it unenforceable. The Parties intend that this non-competition provision shall be deemed to be a series of separate covenants, one for each and every county of each and every state of the United States of America and each and every political subdivision of each and every country outside the United States of America where this provision is intended to be effective. Each Party agrees that damages are an inadequate remedy for any breach of this provision and that the non-breaching Party shall, whether or not it is pursuing any potential remedies at law, be entitled to equitable relief in the form of preliminary and permanent injunctions without bond or other security upon any actual or threatened breach of this non- - 69 - competition provision. The covenants contained in this Section 7.16 are deemed to be material and each Party is entering into this Agreement relying on such covenants. 7.17 COMPLIANCE WITH CONNECTICUT TRANSFER ACT. Within ten (10) days ----------------------------------------- following the Closing Date, SMP will, if required by the Connecticut Transfer Act, comply with such Act as it relates to the transfer of SMP's facility in Berlin, Connecticut to Moog including an acknowledgement that SMP will be the "certifying party" and SMP will provide Moog with copies of all required filings to comply with such act. 7.18 LOAN FROM MOOG TO SMP. No later than 10 days following the later ---------------------- of (i) the Closing Date; or (ii) the date that SMP closes its financing for the $108.5 million credit facility between SMP and the Bank of New York (as Documentation Agent) and Chase Manhattan Bank (as Administrative Agent) et. al., Moog Automotive Products, Inc. shall (or shall cause one of its Affiliates to) fund a loan to Standard Motor Products, Inc. in the amount of $22.5 million upon the delivery to Moog (or its Affiliate) of loan documents which, except for the principal payment terms which shall be governed by the formula provided in paragraph 6 of SMP's letter dated January 28, 1998, shall include the same provisions as the Revolving Credit and Guaranty Agreement among SMP, the Chase Manhattan Bank (as Administrative Agent) and The Bank of New York (as Documentation Agent) et. al. and any related agreements. The formula for principal payments to Moog provides for payments at a rate of 75% of SMP's paydown of any principal payments under the Revolving Credit and Guaranty Agreement on a pro-rata basis of the outstanding balance due under the loan from Moog. As an example, the formula for principal payments to Moog for a two month period would be calculated as follows: BANKS MOOG TOTAL Loan Balance at the end of Month 0 $100 $20 $120 Pro-rata Loan Percent 83.3% 16.7% 100% Principal payments Month 1 $ 10 Moog principal payment allocation at 75% 12.5%* Principal payments March 1 $ 8.75 $ 1.25 Loan Balance at end of Month 1 $ 91.25 $18.75 $110 Pro-rata Loan Percent 82.9% 17.1% 100% Principal payments Month 2 $ 15 Moog principal payment allocation at 75% 12.8%** Principal payments Month 2 $ 13.08 $ 1.92 Loan Balance at end of Month 2 $ 78.17 $16.83 $ 95 *.75 times 16.7% **.75 times 17.1% - 70 - 7.19 UNPROCESSED INVENTORY AS OF THE CLOSING DATE. --------------------------------------------- (a) Within fifteen (15) days following the Closing Date, Moog shall (i) process and identify any unprocessed inventory as of the Closing Date returned by customers of the Brake Business; and (ii) send SMP the processing documents for such inventory. SMP shall be responsible for issuing the credit to the customers which returned such unprocessed inventory. (b) Within fifteen (15) days following the Closing Date, SMP shall: (i) process and identify any unprocessed inventory as of the Closing Date returned by customers of the TC Business; and (ii) send Moog the processing documents for such inventory. Moog shall be responsible for issuing the credit to the customers which returned such unprocessed inventory. 7.20 CONSIGNED INVENTORY. -------------------- (a) As of Closing, Moog shall consign to SMP $15 million of inventory. The consigned inventory shall consist of air compressor finished goods inventory at the facilities at 2500 West Oak Street and at Tile Factory Road in Palestine, Texas and will be comprised of the following part numbers set forth in the order of priority on Section 7.20(a) of the Moog Disclosure Schedule. If the total of such inventory at Palestine is less than the total amount of consigned inventory, then inventory at the Dyersburg location (based on mutually agreed part numbers) will make up the difference. (b) SMP shall not permit the amount of consigned inventory on hand at any time to fall below the Minimum Consigned Inventory Amount. The "Minimum Consigned Inventory Amount" equals $10 million less the sum of: (i) the total principal payments made by SMP to Moog under the promissory note referred to in Section 7.18, and (ii) the total payments made by SMP to Moog for consigned inventory sold by SMP. If a sale of consigned inventory by SMP would reduce the consigned inventory below the Minimum Consigned Inventory Amount, then SMP shall not sell such consigned inventory unless Moog receives payment from SMP on or before the sale of such consigned inventory by SMP to its customer. (c) SMP shall conspicuously identify or otherwise segregate the consigned inventory from other inventory of SMP so it is evident to any third parties that the consigned inventory is owned by Moog. Within 15 days following the end of each month, SMP shall send Moog a report setting forth, as of the end of the preceding month the amount of consigned inventory on hand together with a calculation of the Minimum Consigned Inventory Amount. SMP shall also allow representatives of Moog access to the Palestine facility to inspect the consigned inventory. (d) Subject to the final sentence of paragraph (b) above, during the period of one year following Closing, SMP shall pay Moog for consigned inventory sold by SMP (i) no later than forty-five (45) days following the last day of the month in which SMP sells such inventory with respect to sales made during any gross calendar month on or before September 30, 1998; and (ii) no later than fifteen (15) days following the last day of the month in which SMP sells such inventory with respect to sales made during any given calendar month after September 30, 1998. The price for the consigned inventory shall be the value of such inventory as determined under Exhibit G clauses(c)(i), (ii) and (iii). SMP will sell consigned inventory - 71 - before SMP sells other inventory owned by SMP which is the same product as that included in the consigned inventory. At any time when the consigned inventory falls below $10 million, any amount of consigned inventory which exceeds the Minimum Consigned Inventory Amount will no longer be deemed consigned inventory under this Section 7.20 and may be commingled with SMP's inventory. (e) On or before the first anniversary of Closing, SMP shall pay Moog an amount equal to (i) the excess of the Moog Final Closing Net Book Value over the SMP Final Closing Net Book Value, without giving effect to the consignment provisions of this Section 7.20 hereof, less (ii) any amounts paid or to be paid under or in accordance with the provisions of subsection (d) above. (f) If SMP fails to timely make the payments described in paragraphs (b), (d) and (e) above, SMP shall pay Moog interest on such amount at the rate of twelve percent (12%) per annum from the due date of such payment. 7.21 PRODUCT RETURNS ASSOCIATED WITH CHANGEOVER OF TRAK AUTOMOTIVE. SMP -------------------------------------------------------------- shall be responsible for issuing a credit to CSK for any products returned by CSK relating to the changeover of the Trak Automotive stores. Moog shall process and identify any such products returned by CSK and Moog shall send SMP the processing documents for such product returns so SMP can issue the credit to CSK. Moog shall pay SMP an amount determined by a side letter from SMP to Moog dated March 30, 1998. ARTICLE VIII EMPLOYEE MATTERS ---------------- 8.1 EMPLOYMENT AND SEVERANCE FOR SALES PERSONS. (a) Within five (5) ------------------------------------------- days before the Closing Date: (i) Moog shall provide SMP a list of the Brake Scheduled Sales Persons that Moog wishes to employ following the Closing Date and shall offer employment to such individuals upon terms and conditions as Moog shall, in its sole discretion, deem appropriate, and (ii) SMP shall provide Moog a list of the TC Scheduled Sales Persons that SMP wishes to employ following the Closing Date and shall offer employment to such individuals upon terms and conditions as SMP shall, in its sole discretion, deem appropriate. Each TC Scheduled Sales Person who accepts the offer of employment from SMP is hereinafter referred to as an "TC TRANSFERRING SALES PERSON" and each Brake Scheduled Sales Person who accepts the offer of employment from Moog is hereinafter referred to as a "BRAKE TRANSFERRING SALES PERSON." (b) Moog shall be responsible for (i) all relocation expenses incurred by the Brake Transferring Sales Persons, (ii) all termination or severance payments and other Liabilities to TC Scheduled Sales Persons who do not become TC Transferring Sales Persons and (iii) all termination or severance payments and other Liabilities to any Brake Transferring Sales Person who is terminated by Moog following the Closing Date. (c) SMP shall be responsible for (i) all relocation expenses incurred by the TC Transferring Sales Persons, (ii) all termination or severance payments and other Liabilities to Brake Scheduled Sales Persons who do not become Brake Transferring Sales Persons and (iii) all termination or severance payments and other Liabilities to any TC Transferring Sales Person who is terminated by SMP following the Closing Date. - 72 - 8.2 EMPLOYMENT AND SEVERANCE FOR NON-SALES PERSONS. (a) Effective as of ----------------------------------------------- the Closing Date, Moog shall offer employment to all Active Employees of the Brake Business who are in manufacturing, distribution, management and support positions. Such offer of employment shall be upon such terms and conditions as Moog shall, in it sole discretion, deem appropriate. Effective as of the Closing Date, SMP shall offer employment to all Active Employees of the TC Business who are in manufacturing, distribution, management and support positions. Such offer of employment shall be upon such terms and conditions as SMP shall, in its sole discretion, deem appropriate. (b) Not later than fifteen (15) days following the Closing Date (i) Moog shall deliver to SMP a schedule setting forth the name of the individual and the amount of severance obligations actually paid by Moog during the period from July 21, 1997 to the Closing Date to or on behalf of each Moog Scheduled TC and Brake Salaried Non-Sales Person who was terminated by Moog other than for cause on or after July 21, 1997, and (ii) SMP shall deliver to Moog a schedule setting forth the name of the individual and the amount of severance obligations actually paid by SMP during the period from July 21, 1997 to the Closing Date to or on behalf of each SMP Scheduled TC and Brake Salaried Non-Sales Person who was terminated by SMP other than for cause on or after July 21, 1997. The aggregate amount of severance obligations reflected on both schedules is referred to herein as the "FIRST PERIOD SEVERANCE AMOUNT." Within fifteen (15) days of the receipt by the Parties of such schedules, the Party which paid the lesser amount of severance obligations as reflected on such schedules shall pay to the other Party, in the manner described in Section 2.14, an amount equal to the difference between fifty percent (50%) of the First Period Severance Amount and the amount of severance obligations actually paid by such Party as reflected on the schedule delivered thereby pursuant to this Section 8.2(b). (c) Not later than fifteen (15) days following the date which is six (6) months after Closing Date (i) Moog shall deliver to SMP a schedule setting forth the name of the individual and the amount of severance obligations actually paid by Moog during the period from the date immediately following the Closing Date to the date which is six (6) months after the Closing Date to or on behalf of each Moog Scheduled TC and Brake Salaried Non-Sales Person and to or on behalf of each SMP Scheduled TC and Brake Salaried Non-Sales Person who was terminated by Moog other than for cause on or after July 21, 1997, and (ii) SMP shall deliver to Moog a schedule setting forth the amount of severance obligations actually paid by SMP during the period from the date immediately following the Closing Date to the date which is six (6) months after the Closing Date to or on behalf of each Moog Scheduled TC and Brake Salaried Non-Sales Person and to or on behalf of each SMP Scheduled TC and Brake Salaried Non-Sales Person who was terminated by SMP other than for cause on or after July 21, 1997. The aggregate amount of severance obligations reflected on both schedules is referred to herein as the "SECOND PERIOD SEVERANCE AMOUNT." Within fifteen (15) days of the receipt by the Parties of such schedules, the Party which paid the lesser amount of severance obligations as reflected on such schedules shall pay to the other Party, in the manner described in Section 2.14, an amount equal to the difference between fifty percent (50%) of the Second Period Severance - 73 - Amount and the amount of severance obligations actually paid by such Party as reflected on the schedule delivered thereby pursuant to this Section 8.2(c). (d) On or prior to the date which is six (6) months following the Closing Date, (i) Moog shall deliver to SMP a list of the Moog Scheduled TC and Brake Salaried Non-Sales Persons and SMP Scheduled TC and Brake Salaried Non-Sales Persons who will be terminated by Moog between such date and the first anniversary of the Closing Date (the "MOOG SEVERANCE SCHEDULE") and (ii) SMP shall deliver to Moog a list of the Moog Scheduled TC and Brake Salaried Non-Sales Persons and SMP Scheduled TC and Brake Salaried Non-Sales Persons who will be terminated by SMP between such date and the first anniversary of the Closing Date (the "SMP SEVERANCE SCHEDULE"). Moog shall terminate each individual who is listed on the Moog Severance Schedule on or before the first anniversary of the Closing Date and SMP shall terminate each individual who is listed on the SMP Severance Schedule on or before the first anniversary of the Closing Date. (e) Not later than fifteen (15) days following the first anniversary of the Closing Date (i) Moog shall deliver to SMP a schedule setting forth the name of the individual and the amount of severance obligations actually paid by Moog during the period from and including six months after the Closing Date to the first anniversary of the Closing Date to and including each Moog Scheduled TC and Brake Salaried Non-Sales Persons and to or on behalf of each SMP Scheduled TC and Brake Salaried Non-Sales Person who was terminated by Moog other than for cause on or after July 21, 1997 and (ii) SMP shall deliver to Moog a schedule setting forth the name of the individual and the amount of severance obligations actually paid by SMP during the period from and including six months after the Closing Date to the first anniversary of the Closing Date to or on behalf of each Moog Scheduled TC and Brake Salaried Non-Sales Person and to or on behalf of each SMP Scheduled TC and Brake Salaried Non-Sales Person who was terminated by SMP other than for cause on or after July 21, 1997. The aggregate amount of severance obligations reflected in such schedules is referred to hereinafter as the "THIRD PERIOD SEVERANCE AMOUNT." Within fifteen (15) days of the receipt by the Parties of such schedules, the Party which paid the lesser amount of severance obligations as reflected on such schedules shall pay to the other Party, in the manner described in Section 2.14, an amount equal to the difference between fifty percent (50%) of the Third Period Severance Amount and the amount of severance obligations actually paid by such Party as reflected on the schedule delivered thereby pursuant to this Section 8.2(e). With respect to individuals terminated by the Parties during the period from and including six months after the Closing Date to the first anniversary of the Closing Date, the schedules delivered by the Parties pursuant to Sections 8.2(e), (f) and (g) shall only include individuals who appear on the Moog Severance Schedule or the SMP Severance Schedule. (f) Not later than fifteen (15) days following the date which is eighteen months after the Closing Date (i) Moog shall deliver to SMP a schedule setting forth the name of the individual and the amount of severance obligations actually paid by Moog during the period from the first anniversary of the Closing Date to the date which is eighteen months after the Closing Date to or on behalf of each Moog Scheduled TC and Brake Salaried Non-Sales Person and to or on behalf of each SMP Scheduled TC and Brake Salaried Non-Sales Person who was terminated by Moog other than for cause during the period from July 21, 1997 to the first - 74 - anniversary of the Closing Date, and (ii) SMP shall deliver to Moog a schedule setting forth the name of the individual and the amount of severance obligations actually paid by SMP during the period from the first anniversary of the Closing Date to the date which is eighteen months after the Closing Date to or on behalf of each Moog Scheduled TC and Brake Salaried Non-Sales Person and to or on behalf of each SMP Scheduled TC and Brake Salaried Non-Sales Person who was terminated by SMP other than for cause during the period from July 21, 1997 to the first anniversary of the Closing Date. The aggregate amount of severance obligations reflected On both schedules is referred to herein as the "FOURTH PERIOD SEVERANCE AMOUNT". Within fifteen (15) days of the receipt by the parties of such schedules, the Party which paid the lesser amount of severance obligations as reflected on such schedules shall pay to the other Party, in the manner described in Section 2.14, an amount equal to the difference between fifty percent (50%) of the Fourth Period Severance Amount and the amount of severance obligations actually paid by such Party as reflected on the schedule delivered thereby pursuant to this Section 8.2(f). (g) Not later than fifteen (15) days following the second anniversary of the Closing Date (i) Moog shall deliver to SMP a schedule setting forth the name of the individual and the amount of severance obligations actually paid by Moog during the period from the date which is eighteen months after the Closing Date to the second anniversary of the Closing Date to or on behalf of each Moog Scheduled PC and Brake Salaried Non-Sales Person and to or on behalf of each SMP Scheduled TC and Brake Salaried Non-Sales Person who was terminated by Moog other than for cause during the period from July 21, 1997 to the first anniversary of the Closing Date, and (ii) SMP shall deliver to Moog a schedule setting forth the name of the individual and the amount of severance obligations actually paid by SMP during the period from the date which is eighteen months after the Closing Date to the second anniversary of the Closing Date to or on behalf of each Moog Scheduled TC and Brake Salaried Non-Sales Person and to or on behalf of each SMP Scheduled TC and Brake Salaried Non-Sales Person who was terminated by SMP other than for cause during the period from July 21, 1997 to the first anniversary of the Closing Date. The aggregate amount of severance obligations reflected in such schedules is referred to hereinafter as the "FIFTH PERIOD SEVERANCE AMOUNT". Within fifteen (15) days of the receipt by the parties of such schedules, the Party which paid the lesser amount of severance obligations as reflected on such schedules shall pay to the other Party, in the manner described in Section 2.14, an amount equal to the difference between fifty percent (50%) of the Fifth Period Severance Amount and the amount of severance obligations actually paid by such Party as reflected on the schedule delivered thereby pursuant to this Section 8.2(g). (h) Each Party shall promptly make available or provide to the other Party such books and records (or copies thereof) as are reasonably requested by the other Party to allow the other Party to confirm the severance obligations set forth on the schedules referred to in this Section 8.2. (i) For purposes of calculating the severance obligations under this Section 8.2, the severance obligations payable to or on behalf of employees who are terminated by Moog on or before the first anniversary of the Closing Date shall be determined as follows. Severance for salaried employees shall be determined by the severance policy in effect on the date of this Agreement, as set forth on Exhibit O, for the facility where the individual is employed on the date of termination. For example, SMP's current severance policy for its Berlin facility would apply to any salaried employees at the Berlin facility who are terminated by Moog on or before - 75 - the first anniversary of the Closing Date. For purposes of calculating the severance obligations under this Section 8.2, the severance obligations shall consist only of lump sum severance payments, salary continuation (or similar payments), stay-on bonuses and the out-of-pocket costs incurred by Moog to provide continued coverage under the benefit plans specified in Exhibit O including insurance premiums, self-insured costs and administrative fees paid to third parties. If an individual was an employee of SMP prior to the Closing Date, then the years of service for such individual for purposes of determining the severance obligations shall include such individual's continuous years of service with SMP as of the Closing Date. (j) For purposes of calculating the severance obligations under this Section 8.2, the severance obligations payable to or on behalf of employees who are terminated by SMP on or before the first anniversary of the Closing Date shall be determined as follows. Severance for salaried employees shall be determined by the severance policy in effect on the date of this Agreement, as set forth on Exhibit O, for the facility where the individual is employed on the date of termination. For example, Moog's current severance policy for its Fort Worth facility would apply to any salaried employees at the Fort Worth facility who are terminated by SMP on or before the first anniversary of the Closing Date. For purposes of calculating the severance obligations under this Section 8.2, the severance obligations shall consist only of lump sum severance payments, salary continuation (or similar payments), stay-on bonuses and the out-of-pocket costs incurred by SMP to provide continued coverage under the benefit plans specified in Exhibit O including insurance premiums, self-insured costs and administrative fees paid to third parties. The severance obligations for any Moog Scheduled TC and Brake Salaried Non- Sales Persons who are terminated by SMP shall include a 4% gross-up on the severance payment to compensate such persons for the amount which would have been contributed to the Cooper Industries Salaried Pension Plan on their behalf if such persons would have been terminated by Moog. In addition, any Moog Scheduled TC and Brake Salaried Non-Sales Persons who are terminated by SMP may participate in the Standard Motor Products 401(k) plan during the severance allowance period and shall receive medical insurance coverage under SMP's medical plan during the severance allowance period on the same terms as Active Employees of SMP. If an individual was an employee of Moog prior to the Closing Date, then the years of service for such individual for purposes of determining the severance obligations shall include such individual's continuous years of service with Moog as of the Closing Date. (k) Each Party shall be responsible for all severance obligations payable to any hourly employees terminated by such Party without any sharing of such costs by any other Party. 8.3 EMPLOYEE BENEFIT PLANS. ----------------------- (a) Benefit accruals of the Active Employees of Moog who become employees of SMP as of the Closing Date under the Moog Employee Plans which are Employee Pension Benefit Plans shall cease to be effective as of the Closing Date. Moog shall retain all assets and liabilities under the Moog Employee Plans which are Employee Pension Benefit Plans subject to the distribution rules of such plans. Benefits accruals of the Active Employees of SMP who become employees of Moog as of the Closing Date under the SMP Employee Plans which are Employee Pension Benefit Plans shall cease to be effective as of the Closing Date. SMP shall retain all assets and liabilities under the SMP Employee Plans which are Employee Pension Benefit Plans subject to the distribution rules of such plans. - 76 - (b) Moog shall, or shall cause its Affiliates to, take any and all necessary steps to fully vest the accrued benefits and to eliminate any and all service requirements related to the commencement of benefits under each Moog Employee Plan which is an Employee Pension Benefit Plan or an Employee Stock Ownership Plan (as defined under Section 407(c)(6) of ERISA) with respect to each Active Employee of Moog who becomes an employee of SMP as of the Closing Date. SMP shall, or shall cause its Affiliates to, take any and all necessary steps to fully vest the accrued benefits and to eliminate any and all service requirements related to the commencement of benefits under each SMP Employee Plan which is an Employee Pension Benefit Plan or an Employee Stock Ownership Plan (as defined under Section 407(c)(6) of ERISA) with respect to each Active Employee of SMP who becomes an employee of Moog as of the Closing Date. (c) Moog shall, or shall cause its Affiliates to, take any and all necessary steps to allow an Active Employee of Moog who becomes an employee of SMP on the Closing Date and who has an outstanding loan from a Moog Employee Plan to continue to repay the loan over its scheduled duration. SMP shall, or shall cause its Affiliates to, take any and all necessary steps to allow an Active Employee of SMP who becomes an employee of Moog on the Closing Date and who has an outstanding loan from a SMP Employee Plan to continue to repay the loan over its scheduled duration. (d) Moog shall, or shall cause its Affiliates to, retain all liability to provide retiree welfare benefits under Moog Employee Plans maintained for such purpose to Active Employees of Moog who become employees of SMP and are eligible for such benefits at the Closing Date (or would be eligible for such benefits if they retired as of the Closing Date). SMP shall, or shall cause its Affiliates to, retain all liability to provide retiree welfare benefits under SMP Employee Plans maintained for such purpose to Active Employees of SMP who become employees of Moog and are eligible for such benefits at the Closing Date (or would be eligible for such benefits if they retired as of the Closing Date). (e) Subject to Section 8.3(f) below, the participation of the Active Employees of Moog who become employees of SMP and their beneficiaries and dependents under the Moog Employee Plans which are Employee Welfare Benefit Plans shall cease to be effective as of the Closing Date and the participation of the Active Employees of SMP who become employees of Moog and their beneficiaries and dependents under the SMP Employee Plans which are Employee Welfare Benefit Plans shall cease to be effective as of the Closing Date. Moog shall retain all assets under the Moog Employee Plans which are Employee Welfare Benefit Plans and shall retain any liability to Active Employees who become employees of SMP and their beneficiaries and dependents for any claim resulting from an Incident occurring before the Closing Date (other than claims for ongoing treatment after the Closing Date of chronic ailments diagnosed by a physician before the Closing Date). SMP shall retain all assets under the SMP Employee Plans which are Employee Welfare Benefit Plans and shall retain any liability to Active Employees who become employees of Moog and their beneficiaries and dependents for any claim resulting from an Incident occurring before the Closing Date (other than claims for ongoing treatment after the Closing Date of chronic ailments diagnosed by a physician before the Closing Date). For purposes of this Agreement, "INCIDENT" shall mean the occurrence of an event, including without limitation, death, accident, disease, injury or disability, which gives - 77 - rise to a right to a benefit under an Employee Welfare Benefit Plan and which, if a disease or disability, shall be deemed to take place at the time of diagnosis by a physician. (f) At the request of SMP, Moog shall, or shall cause its Affiliates to, continue to provide coverage under the Moog Employee Plans which are Employee Welfare Benefit Plans and which are specified by SMP prior to the Closing Date, including the payment of premiums, administration of claims and payment of benefits, as appropriate, on behalf of the Active Employees of Moog who become employees of SMP on the Closing Date and their beneficiaries and dependents for a period not to exceed ninety (90) days after the Closing Date in order to allow SMP or its Affiliates time to install or establish welfare benefit plans for such employees. SMP shall reimburse Moog or its Affiliates for all premiums paid by Moog and for all payments relating to claims which are paid pursuant to this Section 8.3(f) and for all out-of-pocket costs and administrative expenses incurred by Moog or its Affiliates in connection with such claim administration services within thirty (30) days after an invoice for such reimbursement is mailed to SMP. At the request of Moog, SMP shall, or shall cause its Affiliates to, continue to provide coverage under the SMP Employee Plans which are Employee Welfare Benefit Plans and which are specified by Moog prior to Closing, including the payment of premiums, administration of claims and payment of benefits, as appropriate, on behalf of the Active Employees of SMP who become employees of Moog on the Closing Date and their beneficiaries and dependents for a period not to exceed ninety (90) days after the Closing Date in order to allow Moog or its Affiliates time to install or establish welfare benefit plans for such employees. Moog shall reimburse SMP or its Affiliates for all premiums paid by SMP and for all payments relating to claims which are paid pursuant to this Section 8.3(f) and for all out-of-pocket costs and administrative expenses incurred by SMP or its Affiliates in connection with such claim administration service within thirty (30) days after an invoice for such reimbursement is mailed to Moog. Moog agrees to indemnify and hold SMP harmless for any liability resulting from the continued operation of the Moog Employee Plans pursuant to this Section 8.3(f) and SMP agrees to indemnify and hold Moog harmless for any liability resulting from the continued operation of the SMP Employee Plans pursuant to this Section 8.3(f). 8.4 SOLICITATION. For two years immediately after the Closing, (i) without the prior written consent of Moog, SMP agrees not to employ or to solicit directly or indirectly for employment any of the Brake Transferring Sales Persons or any of the SMP Scheduled TC and Brake Salaried Non-Sales Persons who are employed by Moog upon Closing, unless the employment of any such person is terminated by Moog, and (ii) without the prior written consent of SMP, Moog agrees not to employ or to solicit directly or indirectly for employment any of the Moog Transferring Sales Persons or any of the Moog Scheduled TC and Brake Salaried Non- Sales Persons who are employed by SMP upon Closing, unless the employment of any such person is terminated by SMP. Each of SMP and Moog shall cause its Affiliates to honor this covenant. - 78 - ARTICLE IX ENVIRONMENTAL MATTERS --------------------- 9.1 ENVIRONMENTAL INDEMNIFICATION AND REMEDIATION. (a) Without limiting ---------------------------------------------- SMP's indemnity for Brake Environmental Costs pursuant to Section 11.3(a), but subject to Sections 9.1(b) and 9.2, from and after the Closing, SMP agrees to commence and perform in a reasonably timely manner all Remedial Actions with respect to Brake Environmental Costs in accordance with the procedures set forth in Section 9.3. Without limiting Moog's indemnity for TC Environmental Costs pursuant to Section 11.4(a), but subject to Sections 9.1(b) and 9.2, from and after the Closing, Moog agrees to commence and perform in a reasonably timely manner all Remedial Actions with respect to TC Environmental Costs in accordance with the procedures set forth in Section 9.3. (b) With respect to the Indemnifying Party's obligation pursuant to Section 9.1(a) above to undertake Remedial Actions, the Indemnified Party shall have the right, but not the obligation, to assume control over the Remedial Action, at the Indemnifying Party's expense, if the Indemnifying Party fails to satisfy the requirements of any Environmental Law for performing the Remedial Action within the deadlines established by a Governmental Authority (or, in the event that no such deadline is applicable, the Indemnifying Party fails to perform the Remedial Action in a reasonable timely manner) and the Indemnifying Party has not cured such failure within 30 days after receipt of written notice thereof from the Indemnified Party. However, if the failure to satisfy the deadline cannot with diligence be cured within such 30 day period and the Indemnifying Party promptly commences to cure the same and thereafter prosecutes the curing thereof with diligence, the time within which the Indemnifying Party's failure may be cured shall be extended for such period as is necessary to complete the curing thereof with diligence. (c) SMP shall indemnify Moog for any Liabilities relating to the tenant's obligations under Section 12.4 of the Agreement of Lease dated July 9, 1996 between 2832526 Canada Inc. and EIS Brake Manufacturing Ltd. for the facility at 11060 Parkway Blvd., Anjou, Quebec to the extent "Hazardous Substances" (as defined in such lease) were introduced in or upon the leased premises prior to Closing. Moog shall indemnify SMP for any Liabilities relating to the tenant's obligations under Section 12.4 of such lease to the extent "Hazardous Substances" were introduced in or upon the leased premises after the Closing Date. For purposes of allocating the Liabilities relating to the removal of asbestos from the leased premises, the Parties agree that (i) Moog shall be responsible only for that portion of the Liability determined by the ratio the numerator of which is the number of days which Moog used asbestos in its production process at the leased premises following the Closing Date and the denominator of which is the total number of days that asbestos was used (including use of asbestos by any third party) in the production process at the leased premises both before and after Closing Date; and (ii) SMP shall be responsible for the balance of the Liability. 9.2 LIMITATIONS ON ENVIRONMENTAL INDEMNIFICATION. (a) The Indemnified --------------------------------------------- Party shall not be entitled to indemnification for Environmental Costs hereunder or reimbursement under Section 9.1(b), and the Indemnifying Party in its performance of the Remedial Actions referred to in Section 9.1(a) shall not be required to take any actions, to the extent arising out of or - 79 - attributable to measures in excess of or in addition to those required under Environmental Law or required under any applicable provisions of the current real estate leases listed in Section 4.8 of the Moog Disclosure Schedule and Section 5.8 of the SMP Disclosure Schedule. Notwithstanding the foregoing, the Indemnifying Party shall be responsible for any additional measures and the costs related thereto resulting from the Indemnified Party's refusal to consent to the matters described in Sections 9.3(c)(v), (vii), (viii) and (ix), unless such consent was unreasonably withheld. (b) The Indemnified Party shall not be entitled to indemnification for Environmental Costs hereunder or reimbursement under Section 9.1(b) for measures regarding asbestos if the measures are not required under Environmental Law based on the condition of the asbestos as of the Closing Date or if the measures are required as the result of building modifications or renovations following the Closing Date. 9.3 CERTAIN PROCEDURES. (a) Subject to Sections 9.3(b), (c) and (d), ------------------- the Indemnifying Party shall have authority and control with respect to obtaining the resolution of issues involving any Remedial Action relating to Environmental Costs covered by the Indemnifying Party's indemnity hereunder, including but not limited to: (i) negotiating any compliance schedule, compliance orders, clean-up standards, permit, consent agreement, consent order, memorandum of understanding or other agreement, which may be required by any Governmental Agency; (ii) contesting, defending, settling or otherwise resolving complaints, directives or other demands by any such Governmental Agency; (iii) bringing claims against, defending against and settling or otherwise resolving claims brought by, or otherwise establishing liability of or to third parties; and (iv) implementing any measures necessary to satisfy the agreements or other terms resulting from any such negotiation, litigation, direction by a Governmental Agency, or other resolution (such matters, collectively, the "RESOLUTION OF PRE-CLOSING ENVIRONMENTAL ISSUES"). Subject to the parties agreeing to a site access agreement and subject to Sections 9.3(b), (c) and (d), the Indemnified Party hereby grants to the Indemnifying Party and the agents, employees, consultants and contractors of the Indemnifying Party, upon giving the Indemnified Party reasonable advance written notice, the right to enter the premises of the Indemnified Party to perform such Remedial Actions as are necessary to obtain information for, or to implement the terms of, any Resolution of Pre-Closing Environmental Issues. Prior to commencing any site work, the Indemnifying Party will provide the Indemnified Party with a description of the work and a schedule for completion of the work. (b) Notwithstanding any other provision in this Section 9, the Party managing the Resolution of Pre-Closing Environmental Issues shall keep the other Party reasonably informed of all material developments concerning the Resolution of Pre-Closing Environmental Issues including: (i) promptly furnishing the other Party a copy of all written correspondence and other documents to or from any Governmental Agency or other third party; (ii) giving the other Party reasonable advance notice of, and the opportunity to attend, any meeting with any Governmental Agency or other third party; and (iii) reasonably in advance of submission to a Governmental Agency or other third party, furnishing the other Party a copy of any draft pleading, compliance schedule, scope of work, Remedial Action plan, clean-up standard, permit, compliance order, consent agreement, consent order, memorandum of understanding or other agreement, consultant's report, and other material documents. - 80 - (c) Notwithstanding any other provision in this Section 9, the Party managing the Resolution of Pre-Closing Environmental Issues shall not, without prior consultation with the other Party (and, in the case of (v), (vii), (viii) and (ix) below, the consent of the Indemnified Party which consent shall not be unreasonably withheld): (i) conclude any compliance schedule, compliance order, scope of work, Remedial Action plan, clean-up standard, permit, consent agreement, consent order, memorandum of understanding or other agreement; (ii) settle or otherwise resolve complaints, directives or other demands by any Governmental Agency or other third party; (iii) bring a claim against or otherwise establish liability of or to third parties; (iv) extend schedules for remediation or other activities; (v) accept property, use or deed restrictions or affirmative cap maintenance or other similar property or use restrictions on property owned by the Indemnified Party; (vi) contest decisions by Governmental Agencies; (vii) treat, dispose of, transfer or excavate any sediment, soil, surface or groundwater or other material on the premises of the Indemnified Party or any off-site location; (viii) install any assessment, investigation, remediation or monitoring system, or design and construct any cap; or (ix) perform any Remedial Actions which will materially interfere with the operation of the business by the Indemnified Party or materially and adversely effect the valuation of the Indemnified Party's property. (d) When managing the Resolution of Pre-Closing Environmental Issues, the Indemnifying Party shall be liable for any Environmental Costs arising from any material damage caused by, and the restoration of any improvement materially affected by, any implementation, entry, performance, inspection, treatment, disposal, excavation, operation, or maintenance described herein. ARTICLE X CONDITIONS TO OBLIGATION TO CLOSE --------------------------------- 10.1 CONDITIONS TO OBLIGATION OF BOTH PARTIES. The obligation of each ----------------------------------------- Party to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction or waiver of the following conditions: (a) The waiting period (and any extensions thereof) under the H-S-R Act shall have expired or shall have been terminated and the Parties and their Affiliates shall have received all other material authorizations, consents and approvals of Governmental Agencies required for the consummation of the Closing, subject to no conditions which a party reasonably objects to. (b) There shall be no injunction, restraining order, stipulation, judgment, order, decree or ruling of any Governmental Agency of competent jurisdiction that is in effect, no litigation or proceeding brought by a Governmental Agency shall be pending, and no litigation or proceeding shall be threatened by a Governmental Agency, which in any case: (i) restrains or prohibits, or seeks to restrain or prohibit, the consummation of the transactions contemplated by this Agreement, or (ii) conditions or seeks to condition the consummation of the transactions contemplated by the Agreement on the matters referred to in clauses (i) or (ii) of Section 6.3(b). For the purposes of this Agreement, a litigation or proceeding shall be deemed to be "threatened" by (i) the U.S. Federal Trade Commission, only if the U.S. Federal Trade Commission shall have publicly announced or shall have advised Moog or SMP that the U.S. Federal Trade Commission has authorized its staff to commence administrative proceedings - 81 - or proceedings in Federal court or (ii) the Antitrust Division of the U.S. Department of Justice, only if the U.S. Department of Justice shall have publicly announced or shall have advised Moog or SMP that the Assistant Attorney General has determined to commence proceedings in Federal court, in either case, seeking any of the remedies described in the preceding sentence. 10.2 CONDITIONS TO OBLIGATION OF MOOG. The obligation of Moog to --------------------------------- consummate the transactions to be performed by it in connection with Closing is subject to satisfaction or waiver of the following conditions: (a) The representations and warranties of SMP set forth in Article V shall be true and correct in all material respects at and as of the Closing Date, without giving effect to any disclosures made by SMP or its Affiliates to Moog after the date of this Agreement through the Closing pursuant to Section 6.9 of this Agreement or otherwise. (b) SMP shall have performed and complied in all material respects with all of the covenants to be performed by it prior to Closing. (c) SMP and its Affiliates shall have procured all consents, releases or agreements specified in Section 10.2 of the Moog Disclosure Schedule. 10.3 CONDITIONS TO OBLIGATION OF SMP. The obligation of SMP to -------------------------------- consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction or waiver of the following conditions: (a) The representations and warranties of Moog set forth in Article IV shall be true and correct in all material respects at and as of the Closing Date, without giving effect to any disclosures made by Moog or its Affiliates to SMP after the date of this Agreement through the closing pursuant to Section 6.9 of this Agreement or otherwise. (b) Moog shall have performed and complied in all material respects with those covenants to be performed by it prior to Closing. (c) Moog and its Affiliates shall have procured all consents, releases or agreements specified in Section 10.3 or the SMP Disclosure Schedule. 10.4 WAIVER; RIGHT TO PROCEED. If any of the conditions specified in ------------------------- Section 10.2 hereof have not been satisfied, Moog, in addition to any other rights that may be available to it, may waive its rights to have such conditions satisfied at Closing and may proceed with the transactions contemplated hereby, and if any of the conditions specified in Section 10.3 hereof have not been satisfied at Closing, SMP, in addition to any other rights that may be available to it, may waive its rights to have such conditions satisfied and may proceed with the transactions contemplated thereby; PROVIDED, HOWEVER, that any such waiver by Moog or SMP, as the case may be, shall in no way diminish or eliminate any other rights that may be available to the waiving party related to or as a result of the waived condition or conditions not having been satisfied at Closing. - 82 - ARTICLE XI REMEDIES FOR BREACHES OF THIS AGREEMENT --------------------------------------- 11.1 SURVIVAL. All representations and warranties of the Parties --------- contained in this Agreement shall survive the Closing and continue in full force and effect but will expire one (1) year after the Closing Date, except for representations and warranties with respect to environmental matters and Taxes, which shall continue in full force and effect until six (6) months following the expiration of the applicable statute of limitations. All covenants and agreements of the Parties contained in this Agreement (including without limitation all covenants and agreements in Article VII hereof) shall survive in accordance with their terms or without termination if no termination date is specified or clearly evident from the context in which such provisions appear. 11.2 ASSERTION OF CLAIMS. Each Party must assert any claim involving a -------------------- representation or warranty against the other Party before expiration of any applicable survival period. Notwithstanding any contrary provision, as long as the claim is asserted timely, the claim will continue to be valid and assertible even though the survival period may subsequently expire before the claim is resolved. 11.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF MOOG. Subject to the ----------------------------------------------- requirements of Sections 11.2, 11.5 and 11.6, SMP agrees to defend, indemnify and save harmless Moog, its Affiliates and their directors, officers and employees ("MOOG'S INDEMNIFIED GROUP") from and against the entirety of any Adverse Consequences that any of Moog's Indemnified Group may suffer through and after the date of the claim for indemnification resulting from, arising out of, relating to, in the nature of, or caused by: (a) any Brake Retained Liability, including SMP's failure to pay or satisfy any such Brake Retained Liability; (b) the Brake Retained Assets; (c) any TC Assumed Liability, including SMP's failure to pay or satisfy any such TC Assumed Liability; (d) SMP's operation of, or any act or omission of SMP occurring in respect of, the TC Assets or the TC Business after the Closing Date; (e) the breach of a representation or warranty of SMP contained herein; (f) the breach or non-performance of any covenant or agreement of SMP contained herein; - 83 - (g) any Liability for expenses incurred by SMP in connection with or resulting from or attributable to the transactions contemplated by this Agreement; and (h) any Liability including lost wages or other benefits, based upon, arising from or related to the order of the National Labor Relations Board dated October 31, 1997 concerning unfair labor practices at Seller's facility in Berlin, Connecticut and any appeals thereof or related proceedings, to the extent such Liabilities relate to payments due or paid or benefits provided for the time of employment prior to Closing. 11.4 INDEMNIFICATION PROVISIONS FOR BENEFIT OF SMP. Subject to the ---------------------------------------------- requirements of Sections 11.2, 11.5 and 11.6, Moog agrees to defend, indemnify and save harmless SMP, its Affiliates and their directors, officers and employees ("SMP'S INDEMNIFIED GROUP") from and against the entirety of any Adverse Consequences that any of the SMP's Indemnified Group may suffer through and after the date of the claim for indemnification resulting from, arising out of, relating to, in the nature of, or caused by: (a) any TC Retained Liability, including Moog's failure to pay or satisfy any such TC Retained Liability; (b) the TC Retained Assets; (c) any Brake Assumed Liability, including Moog's failure to pay or satisfy any such Brake Assumed Liability; (d) Moog's operation of, or any act or omission of Moog occurring in respect of, the Brake Assets or the Brake Business after the Closing Date; (e) the breach of a representation or warranty of Moog contained herein; (f) the breach or non-performance of any covenant or agreement of Moog contained herein; (g) any Liability for expenses incurred by Moog in connection with or resulting from or attributable to the transactions contemplated by this Agreement; (h) any claims by Active Employees of the Brake Business (who become employees of Moog following the Closing Date) to the extent such claims are based on or arise out of asbestos exposure after the Closing Date at the facility of the Brake Business located at 11060 Parkway Blvd., Anjou, Quebec. Moog's liability to indemnify SMP under this subsection (h) shall in no event exceed the portion of such Active Employees' claim determined by multiplying such claim by a fraction the numerator of which is the number of full months that Moog continued to manufacture products containing asbestos at such facility after the Closing Date and the denominator of which is the aggregate number of full months that such employee was employed by SMP and Moog; and (i) any Liability including lost wages or other benefits, based upon, arising from or related to the order of the National Labor Relations Board dated October 31, 1997 concerning - 84 - unfair labor practices at Seller's facility in Berlin, Connecticut and any appeals thereof or related proceedings, to the extent such Liabilities relate to payments due or paid or benefits provided for the time of employment after the Closing. 11.5 MATTERS INVOLVING THIRD PARTIES. If any third party shall notify -------------------------------- the Indemnified Party with respect to any matter which may give rise to a claim for indemnification against the Indemnifying Party, then the Indemnified Party shall notify the Indemnifying Party thereof promptly; PROVIDED, HOWEVER, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any liability or obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is damaged. In the event any Indemnifying Party notifies the Indemnified Party within thirty (30) days after the Indemnified Party has given notice of the matter that the Indemnifying Party is assuming the defense thereof, (i) the Indemnifying Party will defend the Indemnified Party against the matter with counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may retain separate co-counsel at its sole cost and expense (except that the Indemnifying Party will be responsible for the fees and expenses of the separate co-counsel to the extent the third party seeks injunctive relief or criminal sanctions), (iii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the matter without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed), and (iv) the Indemnifying Party will not consent to the entry of any judgment with respect to the matter, or enter into any settlement which does not include a provision whereby the plaintiff or claimant in the matter releases the Indemnified Party from all liability with respect thereto, without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed). In the event the Indemnifying Party fails to notify the Indemnified Party within thirty (30) days after the Indemnified Party has given notice of the matter that the Indemnifying Party is assuming the defense thereof, the Indemnified Party may defend against, or enter into any settlement with respect to, the matter in any manner it reasonably may deem appropriate without waiving any right to indemnity therefor by the Indemnifying Party. 11.6 DE MINIMIS BREACHES OF REPRESENTATIONS AND WARRANTIES; DEFINITION ----------------------------------------------------------------- OF "MATERIAL." An Indemnifying Party will have no obligation to indemnify an - -------------- Indemnified Party pursuant to Section 11.3(e) or Section 11.4(e) as the case may be, until such time, if any, as the aggregate Adverse Consequences suffered by the Indemnified Party with respect to such breaches exceeds $100,000, and then only to the extent the aggregate Adverse Consequences suffered by the Indemnified Party exceed $100,000. Notwithstanding the foregoing, a breach of SMP's representations and warranties under Section 5.28 shall not be subject to this Section 11.6 and shall override the indemnity by Moog for Brake Assumed Liabilities under Sections 1.11(g) and (h). 11.7 TAX INDEMNIFICATION. (a) Notwithstanding any provisions herein to -------------------- the contrary, Moog agrees to indemnify and hold SMP harmless from and against any liability for Taxes of Moog or the TC Business for any period prior to the Closing Date, PROVIDED, HOWEVER, that such indemnification shall not apply to the extent that a liability for Taxes has been reserved and is reflected on the Moog Final Closing Balance Sheet. - 85 - (b) Notwithstanding any provisions herein to the contrary, SMP agrees to indemnify and hold Moog harmless from and against any liability for Taxes of SMP or the Brake Business for any period prior to the Closing Date, PROVIDED, HOWEVER, that such indemnification shall not apply to the extent that a liability for Taxes has been reserved and is reflected on the SMP Final Closing Balance Sheet. 11.8 OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification -------------------------------- provisions and any other indemnification provisions contained in this Agreement are the exclusive remedies for, and are specifically meant to be in derogation of, any statutory, common law or other remedy that a Party may have for breach of representation, warranty, or covenant hereunder. ARTICLE XII TERMINATION ----------- 12.1 TERMINATION OF AGREEMENT. Subject to the parties' obligations as ------------------------- provided in Section 6.1, this Agreement may be terminated at any time prior to the Closing: (a) by mutual written consent of Moog and SMP; (b) by Moog or SMP at any time after April 30, 1998, if the conditions set forth in Article X shall not have been satisfied or waived for any reason other than the failure or refusal of the party seeking to terminate to perform any of its obligations hereunder; (c) by Moog or SMP if any Governmental Agency having competent jurisdiction shall have issued an injunction, restraining order, stipulation, judgment, order, decree or ruling, restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement; (d) by Moog, if there has been a material violation or breach by SMP of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of Moog impossible and such violation or breach has not been waived by Moog; (e) by SMP, if there has been a material violation or breach by Moog of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of SMP impossible and such violation or breach has not been waived by SMP; (f) by Moog, if a Governmental Agency of competent jurisdiction has commenced administrative or court proceedings, or such proceedings have been "threatened" (as provided in Section 10.1(b)), seeking to restrain or prohibit the consummation of the transactions contemplated by this Agreement or seeking to condition the consummation of such transactions on matters referred to in clauses (i) or (ii) of Section 6.3(b) so as to materially reduce the benefits to Moog of the transactions contemplated by this Agreement or impose conditions that are reasonably unacceptable. - 86 - (g) by SMP, if a Governmental Agency of competent jurisdiction has commenced administrative or court proceedings, or such proceedings have been "threatened" (as provided in Section 10.1(b)), seeking to restrain or prohibit the consummation of the transactions contemplated by this Agreement or seeking to condition the consummation of such transactions on matters referred to in clauses (i) or (ii) of Section 6.3(b) so as to materially reduce the benefits to SMP of the transactions contemplated by this Agreement or impose conditions that are reasonably unacceptable. 12.2 PROCEDURE AND EFFECT OF TERMINATION. ------------------------------------ In the event of termination of this Agreement and abandonment of the transactions contemplated hereby by any or all of the Parties pursuant to Section 12.1, written notice thereof shall forthwith be given to the other Parties and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any of the Parties hereto. If this Agreement is terminated as provided herein: (a) upon request therefor, each Party will redeliver all documents, work papers and other material of any other Party relating to the transactions contemplated hereby, whether obtained before or after the execution hereof, to the party furnishing the same; (b) each Party hereto will use its best efforts to prevent disclosure to third persons of all information received by either Party with respect to the business of the other Party or its subsidiaries (other than information which is a matter of public knowledge or which has heretofore been or is hereafter published in any publication for public distribution or filed as public information with any Governmental Agency), except (i) as may be required by applicable law; and (ii) as is permitted by this Agreement; and (c) none of the Parties hereto shall have any liability or further obligation to the other Party to this Agreement pursuant to this Agreement except as stated in this Section 12.2 and in Sections 7.6 and 13.9, provided that nothing herein shall relieve any party from liability for any breach of this Agreement. ARTICLE XIII GENERAL MATTERS --------------- 13.1 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any ----------------------------- rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. Nothing contained herein shall be construed as constituting any change, modification or alteration in the at-will employment status of any employee employed by any of the Parties or their respective Affiliates. Nothing in this Agreement, expressed or implied, shall confer upon any employee of Moog or SMP, legal representative thereof, or any collective bargaining agent any rights or remedies, including, without limitation, any right to employment, or continued employment for any specified period or the benefits, terms and conditions thereof, of any nature or kind whatsoever under or by reason of this Agreement. - 87 - 13.2 ENTIRE AGREEMENT. This Agreement and the Confidentiality Agreement ----------------- referred to in Section 6.5(c) (including the Schedules, Exhibits and documents referred to herein) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, that relate to the subject matter hereof. Each of the Parties may rely on the representations and warranties contained in this Agreement, notwithstanding any due diligence done by such Party. 13.3 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon -------------------------- and inure to the benefit of the Parties and their respective successors and permitted assigns. Except as otherwise provided herein, no Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party. Any Party may (i) assign any of its rights and interests under this Agreement to one or more of its Affiliates and (ii) designate one or more of its Affiliates to perform its obligations under this Agreement (in any or all of which cases such Party nonetheless shall remain liable and responsible for the performance of all of its obligations under this Agreement). Except for assignments to Affiliates permitted by the previous sentence, any assignment without proper written approval of the other Party shall be null and void. 13.4 COUNTERPARTS. This Agreement may be executed in two (2) or more ------------- counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. 13.5 HEADINGS. The article and section headings contained in this --------- Agreement and in the Schedules are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 13.6 NOTICES. All notices and other communications under this Agreement -------- shall be in writing and shall be deemed given (i) when delivered by hand or 5 days after deposit in the mail, certified, return receipt requested, (ii) when transmitted by facsimile transmission, with written confirmation of receipt, or (iii) one day after being sent for overnight delivery by Express Mail, Federal Express or other nationally recognized express delivery service, to the addressee at the following addresses or fax numbers (or to such other address or fax number as a Party may specify from time to time by notice hereunder; provided that notices of a change of address shall be effective only upon receipt thereof): IF TO SMP: c/o Standard Motor Products, Inc. 37-18 Northern Boulevard Long Island City, New York 11101 Attention: Chief Financial Officer Telephone: (718) 392-0200 Facsimile: (718) 472-0794 WITH A COPY TO: Kelley Drye & Warren LLP 101 Park Avenue New York, New York 10178 Attention: Bud G. Holman Telephone: (212) 808-7800 Facsimile: (212) 808-7978 - 88 - IF TO MOOG: c/o Cooper Industries, Inc. Texas Commerce Tower 600 Travis Street, Suite 5800 Houston, Texas 77002 Attention: General Counsel Telephone: (713) 209-8400 Facsimile: (713) 209-8989 WITH A COPY TO: Moog Automotive Company 6565 Wells Avenue St. Louis, MO 63133 Attention: President Telephone: (314) 977-0500 Facsimile: (314) 977-0941 13.7 AMENDMENTS; WAIVERS; CONSENTS. No amendment or modification of or ------------------------------ supplement to any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the Parties hereto. Except as otherwise provided in this Agreement, any failure of the Parties to comply with any obligation, covenant, agreement or condition herein may be waived by the Party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of a Party, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 13.7. 13.8 SEVERABILITY. If for any reason any term or provision of this ------------- Agreement is held to be invalid or unenforceable, all other valid terms and provisions hereof shall remain in full force and effect, and all of the terms and provisions of this Agreement shall be deemed to be severable in nature. If for any reason any term or provision containing a restriction set forth herein is held to cover an area or to be for a length of time which is unreasonable, or in any other way is construed to be too broad or to any extent invalid, such term or provision shall not be determined to be null, void and of no effect, but to the extent the same is or would be valid or enforceable under applicable law, any court of competent jurisdiction shall construe and interpret or reform this Agreement to provide for a restriction having the maximum enforceable area, time period and other provisions (not greater than those contained herein) as shall be valid and enforceable under applicable law. 13.9 EXPENSES. Except as otherwise expressly provided herein, each --------- Party shall bear its own expenses (including all fees, costs and expenses of its attorneys, consultants, investment bankers, accountants, advisers or other agents or representatives) incident to or incurred in connection with the preparation, negotiation, execution and delivery of this Agreement and the performance of its obligations hereunder and thereunder. 13.10 CONSTRUCTION. The language used in this Agreement will be deemed ------------- to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party. Any reference to any federal, state, local, or foreign statute - 89 - or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. 13.11 SPECIFIC PERFORMANCE. Each Party acknowledges and agrees that the --------------------- other Party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Each Party agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any remedy to which they may be entitled, at law or in equity. 13.12 BULK SALES. ----------- (a) Moog acknowledges that SMP will not comply with the requirements of the bulk sales laws of any jurisdiction in connection with the transactions contemplated by this Agreement and Moog waives compliance with such laws. (b) SMP acknowledges that Moog will not comply with the requirements of the bulk sales laws of any jurisdiction in connection with the transactions contemplated by this Agreement and waives compliance with such laws. 13.13 GOVERNING LAW. This Agreement shall be governed by and be -------------- construed in accordance with the substantive laws of the State of Texas (regardless of the laws that might otherwise govern under applicable principles of conflicts of law) as to all matters, including matters of validity, construction, effect, performance and remedies. ARTICLE XIV DISPUTE RESOLUTION ------------------ 14.1 SENIOR OFFICERS. Any claim or dispute between Moog and SMP arising ---------------- out of or in connection with this Agreement or any alleged breach hereof or thereof except those to which the arbitration provisions in Section 2.12 apply (a "CLAIM") shall be submitted for resolution to a senior officer of each of SMP and Moog, as designated by their respective chief executive officers, who shall meet within thirty (30) days of such submission to seek in good faith an amicable settlement. - 90 - 14.2 BINDING ARBITRATION. -------------------- (a) GOVERNING PRINCIPLES. If any Claim not settled by the Parties --------------------- within sixty (60) days after written notice of the Claim is first given by either Party to the other, then either Party may submit a written demand for arbitration and the Claim shall be finally settled by arbitration under the Commercial Arbitration Rules and the Guidelines for Expediting Larger, Complex Commercial Arbitrations of the American Arbitration Association (the "RULES"), and judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction over it. (b) SELECTION AND QUALIFICATION OF THE ARBITRATOR. If the Claim ---------------------------------------------- does not exceed $1,000,000, there shall be one arbitrator. If the Claim is $1,000,000 or more, there shall be three arbitrators (all arbitrators are hereafter collectively referred to as the "ARBITRATOR"). The Parties shall endeavor to agree on the selection of an Arbitrator, but if no agreement has been reached within thirty (30) days of claimant's demand for arbitration the Arbitrator shall be selected by the American Arbitration Association. The Arbitration shall be held in New York, New York. The Arbitrator shall conduct himself or themselves as a neutral, and be subject to disqualification pursuant to Section 19 of the Rules. The Arbitrator shall be compensated at such Arbitrator's normal hourly or per diem rates for all time spent in connection with the arbitration proceeding, and pending final award, appropriate compensation and expenses shall be advanced equally by the Parties. (c) PRELIMINARY HEARING. Within thirty (30) days after the -------------------- Arbitrator has been appointed, a preliminary hearing among the Arbitrator and counsel for the Parties shall be held for the purpose of evolving a written plan for the management of the arbitration, that shall promote the efficient, expeditious and cost-effective conduct of the proceeding. (d) INTERIM RELIEF FROM A COURT. Either Party may request a court ---------------------------- to provide interim or provisional relief, and such request shall not be deemed incompatible with the agreement to arbitrate or as a waiver of that agreement. (e) POWERS OF THE ARBITRATOR AND ARBITRATION PROCEDURES. The ---------------------------------------------------- Arbitrator shall permit and facilitate such discovery as it determines is appropriate, including prehearing depositions, particularly of witnesses who will not appear, and orders to protect the confidentiality of proprietary information, trade secrets, and other sensitive information disclosed in discovery. Papers, documents and written communications shall be delivered by the Parties directly to each other, the Arbitrator, and the American Arbitration Association tribunal administrator. The Arbitrator shall actively manage the proceeding to make it fair, expeditious, economical and less burdensome and adversarial than litigation. The Arbitrator may limit the issues, limit the time for each Party to present its case, exclude testimony and other evidence that it deems irrelevant, cumulative or inadmissible, and order that the direct testimony of witnesses be furnished by written sworn statement. All documents that a Party proposes to offer in evidence, except for those objected to by an opposing Party, shall be self-authenticated. There shall be a stenographic transcript of the proceedings, the cost of which shall be borne equally by the Parties, pending the final award. Any Claim submitted to arbitration shall be resolved in accordance with Title 9 of the U.S. Code (U.S. Arbitration Act), which shall govern the interpretation, enforcement and proceedings pursuant to this arbitration provision. - 91 - (f) RENDERING OF AWARD. The award rendered by the Arbitrator shall ------------------- be itemized, shall not include punitive damages but may include all or a part of a Party's reasonable attorneys' fees, and shall state the reasoning on which it rests. Before rendering the final award, the Arbitrator shall submit to the Parties an unsigned draft of the proposed award, and each Party may deliver, within fifteen (15) days after receipt of such draft, a written statement of alleged errors of fact, computation, law or otherwise. The Arbitrator may disregard any Party's statement to the extent that it is in substance an application for reargument. Within twenty (20) days after receipt of such Party statements, the Arbitrator shall render the final award. * * * * * * * * * * * * - 92 - IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written. SMP MOTOR PRODUCTS, LTD. By:___________________________________ Name: MICHAEL J. BAILEY Title: SENIOR VICE PRESIDENT/ CFO STANDARD MOTOR PRODUCTS, INC. By:___________________________________ Name:: MICHAEL J. BAILEY Title: SENIOR VICE PRESIDENT/ CFO COOPER INDUSTRIES (CANADA) INC. By:___________________________________ Name: DAVID A. WHITE Title: SENIOR VICE PRESIDENT STRATEGIC PLANNING MOOG AUTOMOTIVE COMPANY By:___________________________________ Name: DAVID A. WHITE Title: SENIOR VICE PRESIDENT STRATEGIC PLANNING MOOG AUTOMOTIVE PRODUCTS, INC. By:___________________________________ Name: DAVID A. WHITE Title: SENIOR VICE PRESIDENT STRATEGIC PLANNING - 93 - EX-10.17 3 OVERRIDE AND AMENDMENT AGREEMENT EXHIBIT 10.17 OVERRIDE AND AMENDMENT AGREEMENT This OVERRIDE AND AMENDMENT AGREEMENT (this "Agreement") is made and entered into as of March 27, 1998, by and among STANDARD MOTOR PRODUCTS, INC. (the "Company") and each of the entities set forth on the signature pages hereto (collectively, the "1989 Noteholders"). All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Note Agreement dated as of October 15, 1989 (as amended from time to time prior to the date hereof, the "Existing Note Agreement", and as modified and overridden hereby, the "Note Agreement") among the Company and the 1989 Noteholders (or their respective predecessors in interest). R E C I T A L S --------------- WHEREAS, various Events of Default under the Existing Note Agreement presently exist, as more particularly set forth on Schedule 1 of this Agreement (collectively referred to herein as the "Current Events of Default"); and WHEREAS, as a result of the Current Events of Default, the 1989 Noteholders are entitled, among other things, to enforce their rights and remedies provided for in the Existing Note Agreement, including without limitation, the right to accelerate and immediately demand payment in full of the Notes; and WHEREAS, the Company has requested that the 1989 Noteholders waive the Current Events of Default and agree to certain modifications to the Existing Note Agreement; and WHEREAS, the 1989 Noteholders are willing to waive the Current Events of Default and make such modifications, but only upon full and complete compliance by the Company with the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the terms and conditions contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. As used in this Agreement, the following terms shall have the following respective meanings (or the meanings set forth in the Section of this Agreement referred to opposite such term) and the following definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined. Terms used herein and not defined shall have the respective meanings ascribed to them in the Note Agreement. ACCEPTABLE REPLACEMENT FACILITY -- shall mean, collectively, one or more financing transactions with one or more banks, insurance companies or other institutional investors, which transactions, 1 (i) constitute, in the aggregate, a legally binding commitment to provide to the Company unsecured revolving credit and/or term debt and/or equity financing in an aggregate amount of at least $100,000,000 and having a maturity not earlier than two years from the date the full $100,000,000 first becomes available to the Company; and (ii) do not (individually or in the aggregate) violate any provision of the Note Agreement in effect at the time any of such transactions is entered into. AGREEMENT -- the introductory paragraph hereof. AMENDMENT FEE -- one and one half percent (1.50%) of the outstanding principal amount of the Notes. BANK LOAN AGREEMENT -- the Revolving Credit and Guaranty Agreement dated as of March 30, 1998 among the Company as borrower, certain of its subsidiaries as guarantors, the Banks as lenders, The Chase Manhattan Bank, as Administrative Agent, and The Bank of New York, as Documentation Agent, as in effect on the date hereof. BANKS -- The Chase Manhattan Bank, The Bank of New York, Fleet Bank, National Association, NBD Bank, Comerica Bank, and Canadian Imperial Bank of Commerce. CIBC OTHER CREDITS -- the term loan in the outstanding principal amount of CDN $20,000,000 extended by Canadian Imperial Bank of Commerce to SMP Motor Products, Inc., and the letter of guaranty by Canadian Imperial Bank of Commerce for the account of SMP Motor Products, Inc., in the aggregate amount of CDN $60,000 evidenced by letter of guarantee No. T374406000 issued December 30, 1996, as in effect on the date hereof. CLIPPER FACILITY -- collectively, the Purchase and Sale Agreement dated as of March 19, 1997 between the Company and SMP Credit Corp., the Receivables Purchase Agreement dated as of March 19, 1997 among SMP Credit Corp., the Company, Clipper Receivables Corporation, State Street Boston Capital Corporation and State Street Bank and Trust Company and any other instrument or agreement executed and delivered in connection therewith, in each case as in effect on the date hereof. COMPANY -- the introductory paragraph hereof. COOPER -- collectively, Cooper Industries, Inc., an Ohio corporation, Cooper Industries (Canada) Inc., Moog Automotive Company, a Delaware corporation and Moog Automotive Products, Inc., a Missouri corporation. COOPER FINANCING -- a $22,500,000 loan from Cooper to the Company substantially on the terms set forth in that certain letter from Michael J. Bailey to Brad McWilliams, dated January 28, 1998. COOPER SWAP -- the proposed exchange of the assets of the Company's brake division for the assets of Cooper's climate control division, as more particularly described in the 2 "Standard Motor Products, Inc. Cooper Swap Deal Summary" signed on behalf of both the Company and Cooper on March 17, 1998, and all transactions between Cooper and its subsidiaries and the Company and its Subsidiaries related to such exchange. COSTS AND EXPENSES -- Section 10. CREDIT EXTENSION DATE -- October 31, 1998; PROVIDED that if on October 31, 1998 the Company is in compliance with Sections 6.15 and 6.16 of the Bank Loan Agreement, the Credit Extension Date shall be November 30, 1998; and PROVIDED FURTHER that if (a) the Maturity Date (as defined in the Bank Loan Agreement) is extended beyond November 30, 1998 and (b) the Banks receive no permanent reduction of the Tranche A Commitment (as defined in the Bank Loan Agreement), no collateral, and no increase in interest rates or fees as a result of such extension, the Credit Extension Date will be extended to the earlier of the extended Maturity Date under the Bank Loan Agreement or the date on which an Event of Default shall exist. CURRENT EVENTS OF DEFAULT -- the recitals hereof. EFFECTIVE DATE -- Section 6. EVENT OF DEFAULT -- means and includes any "Event of Default" as defined in the Note Agreement. EXISTING NOTE AGREEMENT -- the introductory paragraph hereof. FUEL PUMP TRANSACTION -- the proposed sale by the Company of certain assets of its fuel, pump product line, as more particularly described on Schedule 2 hereto. GUARANTORS -- Reno Standard, Incorporated, a Nevada corporation, Stanric, Inc., a Delaware corporation, and Mardevco Credit Corp., a New York corporation. INVESTMENT GRADE RATING -- a long term unsecured debt rating (which may be a private rating) of BBB- or better by Standard & Poor's, Duff & Phelps or Fitch IBCA, Inc., a rating of Baa3 or better by Moody's Investors Services, or such other rating as shall be reasonably acceptable to the holders of all of the Notes. 1992 NOTEHOLDERS -- the holders of the Company's $46,428,572 aggregate principal amount Notes, due December 15, 2002 (the "1992 Notes") issued pursuant to Note Agreement dated as of December 15, 1992, as amended. 1995 NOTEHOLDERS -- the holders of the Company's $73,000,000 aggregate principal amount Notes, due February 25, 2006 (the "1995 Notes") issued pursuant to Note Purchase Agreement dated as of December 1, 1995, as amended. NOTE AGREEMENT -- the introductory paragraph hereof. 3 NOTES -- the $30,000,000 aggregate principal amount Notes due November 1, 2004 issued pursuant to the Note Agreement. OTHER DOCUMENTS -- Section 7(a). REQUIRED HOLDERS -- means, at any time, the holders of more than fifty percent (50%) in aggregate principal amount of the Notes at the time outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary or any Affiliate). SERVICE LINE TRANSACTION -- the proposed sale by the Company of its Service Line division, as more particularly described on Schedule 2 hereto. SUBSIDIARY GUARANTY -- that certain guaranty of the Notes, dated the date hereof, executed by the Guarantors. 2. WAIVER OF EXISTING EVENTS OF DEFAULT. Subject to Section 6 of this Agreement, the 1989 Noteholders hereby waive the Current Events of Default. 3. CONSENT TO CERTAIN TRANSACTIONS. Subject to Section 6 of this Agreement, the 1989 Noteholders hereby consent to the Cooper Swap, the Cooper Financing, the Service Line Transaction and the Fuel Pump Transaction, provided that each such transaction is consummated (a) substantially in accordance with the descriptions thereof set forth in Schedule 2 hereto, and (b) the net after-tax cash proceeds, if any, of such dispositions are utilized for nonpermanent reductions of the amounts outstanding under the Bank Loan Agreement and for working capital. Other than the Amendment Fee payable in connection with this Agreement, no fee shall be payable by the Company to the holders of the Notes in connection with such transactions. 4. PAYMENTS OF INTEREST. The Company acknowledges and agrees that: (a) The aggregate outstanding principal amount of the Notes on the date hereof is $30,000,000. (b) Prior to April 1, 1998, interest on the Notes shall accrue in accordance with the terms of the Existing Note Agreement. From and after April 1, 1998, interest on the outstanding principal amount of the Notes shall accrue at the rate of 10.72% per annum, and interest shall accrue on any overdue principal, overdue Make-Whole Amount and (to the extent legally enforceable) on any overdue installment of interest on the Notes at a rate per annum equal to the greater of 12.72% or 3.25% over the prime rate of The Chase Manhattan Bank (or its successors) from time to time in effect. The rate of interest then payable upon the Notes shall decrease to 9.97% per annum 4 on the first day on which the Company shall have achieved an Investment Grade Rating and no Default or Event of Default shall exist. Upon the first to occur of (i) the closing of an Acceptable Replacement Facility, or (ii) the Company's being in compliance with all covenants contained in Section 5 of the Note Agreement at all times during the fourth fiscal quarter of 1998 and the first fiscal quarter of 1999, and, in either event, no Default or Event of Default shall exist, the rate of interest then payable upon the Notes shall decrease by 0.50% per annum; provided that the rate of interest shall never be less than 9.97% per annum. The rate of interest then payable upon the Notes shall increase by 0.25% per annum on October 1, 1998 if Consolidated EBITDA (as defined in Section 3 of Schedule 3 to this Agreement) for the first three fiscal quarters of 1998 is not at least $48,371,000 on a cumulative basis and the Company has not earlier obtained an Investment Grade Rating. (c) Accrued interest on the outstanding principal balance of the Notes shall be payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year beginning June 30, 1998. (d) For purposes of computing the Make-Whole Amount due at any time with respect to the Notes, the rate of interest payable on the Notes shall be assumed to be the rate determined in accordance with the Existing Note Purchase Agreement rather than the rate determined in accordance with Section 4(b) above. (e) The provisions of this Section 4 shall override and permanently supersede any provisions to the contrary contained in the Existing Note Agreement and the Notes, and the Existing Note Agreement and the Notes are hereby deemed amended to be consistent with this Section 4. 5. CERTAIN COVENANTS AND AGREEMENTS. (a) OVERRIDE OF CERTAIN COVENANTS. During the period from the Effective Date through September 30, 1998, Sections 5.7 and 5.9 of the Existing Note Agreement are hereby overridden and replaced by the financial covenants set forth in Schedule 3 to this Agreement. A breach of any of the covenants set forth on Schedule 3 shall constitute an immediate Event of Default under the Note Agreement; provided that no acceleration of the Notes may be effected as a result of any such breach unless the holders of a majority in aggregate principal amount of the Notes, the 1992 Notes and the 1995 Notes (voting as a single class) shall have consented in writing to such acceleration. On October 1, 1998, the covenants hereby overridden shall once again be in full force and effect and the enforcement rights of the 1989 Noteholders shall be as set forth in the Note Agreement without giving effect to this Section 5(a). The provisions of this Section 5(a) shall override and supersede any provisions to the contrary contained in the Existing Note Agreement and the Notes. (b) AMENDMENT OF CERTAIN COVENANTS. During the period from the Effective Date through September 30, 1998, certain covenants and related definitions in the Existing Note Agreement are amended in the manner set forth on Schedule 4 to this Agreement. A breach of any of such amended covenants shall constitute an immediate Event 5 of Default under the Note Agreement. On October 1, 1998, such amendments shall terminate, and the covenants and definitions hereby amended shall once again be in full force and effect as set forth in the Existing Note Agreement. (c) ADDITIONAL COVENANTS. The Company covenants with the 1989 Noteholders as follows. A failure to comply with any of the covenants set forth in this Section 5(c) shall constitute an immediate Event of Default under the Note Agreement. (i) The Company shall not at any time pay any additional consideration to any Bank, in respect of any financial accommodation required to be made available by such Bank pursuant to the Bank Loan Agreement as in effect on the Effective Date, without making a proportionate payment at such time (based on relative principal amounts then outstanding) in respect of the Notes, the 1992 Notes and the 1995 Notes. Additional consideration which would require a proportionate payment to the 1989 Noteholders pursuant to this subsection would include, without limitation, an increase in interest rate, or an increase or imposition (as the case may be) of any commitment fee, facility fee, or amendment fee, but would not include the payment of fees, interest rate stepups or other amounts provided for in the Bank Loan Agreement and usual and customary fees for administrative matters. (ii) On or before the Credit Extension Date, the Company shall have entered into an Acceptable Replacement Facility. (iii) The Company shall not at any time permit a permanent reduction of the Tranche A Commitment under (and as defined in) the Bank Loan Agreement (it being agreed that reductions contemplated by Sections 6.18, 6.19 and 6.20 of the Bank Loan Agreement shall not be deemed to constitute reductions of the Tranche A Commitment); provided that: (1) the Company may permit such a reduction if, contemporaneously therewith, the Company makes a proportionate payment (based on relative principal amounts then outstanding) in respect of the Notes, the 1992 Notes and the 1995 Notes, and (2) the Company may effect such a reduction in connection with the replacement of the Bank Loan Agreement by an Acceptable Replacement Facility. (iv) The Cooper Swap and the Cooper Financing shall be consummated not later than April 15, 1998. (v) Any reserve for losses from discontinued operations at any time established by the Company shall be applied only to losses related to the specific discontinued operations for which such reserve was originally established, and to no other losses. 6 (vi) As soon as practicable the Company shall furnish to each holder of the Notes the Company's strategic plan, including, when available, all material modifications thereto, and make its senior officers available to discuss the same with the holders of the Notes. (d) LIMITED CROSS DEFAULT TO BANK LOAN AGREEMENT. Notwithstanding anything in the Existing Note Agreement to the contrary, a failure to comply with any covenant contained in Section 5 or Section 6 of the Bank Loan Agreement during the period from the Effective date through October 31, 1998 shall not constitute an Event of Default under the Note Agreement so long as the Banks have not (i) accelerated the maturity of their indebtedness, or (ii) taken any enforcement action against the Company, (iii) terminated or reduced any of the Commitments (as defined in the Bank Loan Agreement), it being agreed that reductions contemplated by Sections 6.18, 6.19 and 6.20 of the Bank Loan Agreement shall not be deemed to constitute reductions of the Tranche A Commitment, or (iv) failed to make a requested advance under the Bank Loan Agreement. 6. CONDITIONS TO EFFECTIVENESS OF AGREEMENT. The effectiveness of this Agreement shall be subject to and conditioned upon satisfaction of all of the following conditions precedent (the date of such satisfaction being herein referred to as the "Effective Date"). (a) REPRESENTATIONS AND WARRANTIES TRUE. The warranties and representations set forth in Section 7 hereof shall be true and correct on and as of the Effective Date. (b) AUTHORIZATION OF TRANSACTIONS. The execution and delivery by the Company and the Guarantors of this Agreement, the Subsidiary Guaranty and each of the documents executed and delivered in connection herewith and therewith, shall have been duly authorized by all necessary corporate action. (c) EXECUTION AND DELIVERY OF THIS AGREEMENT. The Company and the holders of all of the Notes shall have executed and delivered a counterpart of this Agreement. (d) OTHER AMENDMENTS. The Company shall have entered into agreements substantially to the same effect as this Agreement with the 1992 Noteholders and the 1995 Noteholders, and such agreements shall be satisfactory to the 1989 Noteholders in all respects. (e) OTHER FINANCING. The transactions contemplated by the Bank Loan Agreement shall have closed; and the 1989 Noteholders shall have satisfied themselves that the Clipper Facility is in full force and effect. 7 (f) SUBSIDIARY GUARANTY. Each of the Guarantors shall have unconditionally guarantied the Company's obligations under the Note Purchase Agreement and the Notes by executing and delivering to each 1989 Noteholder a counterpart of the Subsidiary Guaranty. (g) PAYMENT OF INTEREST. The Company shall have paid all interest on the Notes accrued or accruing through March 31, 1998. (h) AMENDMENT FEE. The Company shall have paid the Amendment Fee to the 1989 Noteholders. (i) FINANCIAL AND OPERATING INFORMATION. The 1989 Noteholders shall have received copies of such financial statements, projections, budgets, reports, agings and other financial and business information relating to the Company as they may have reasonably requested, all in form and substance satisfactory to the 1989 Noteholders. (j) COMPANY COUNSEL'S OPINION. The 1989 Noteholders shall have received from Kelley Drye & Warren LLP, special counsel for the Company, a closing opinion dated the Effective Date in form and substance satisfactory to the 1989 Noteholders. The Company hereby requests and directs such counsel to deliver such closing opinion to the 1989 Noteholders. (k) PAYMENT OF EXPENSES. The Company shall have paid all of the Costs and Expenses, including, without limitation, the fees of Hebb & Gitlin and The Finley Group billed as of the Effective Date. (l) PROCEEDINGS SATISFACTORY. All proceedings taken in connection with this Agreement and the Other Documents and all documents and papers relating thereto shall be reasonably satisfactory to the 1989 Noteholders and their special counsel. The 1989 Noteholders and their special counsel shall have received copies of such documents and papers as they may reasonably request in connection therewith. 7. REPRESENTATIONS AND WARRANTIES. To induce the 1989 Noteholders to enter into this Agreement, the Company warrants and represents as follows: (a) ORGANIZATION, EXISTENCE AND AUTHORITY. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New York, and has all requisite power and authority (a) to execute and deliver (i) this Agreement and (ii) each of the other documents and instruments to be executed by it as contemplated by this Agreement (collectively referred to herein as the "Other Documents") and (b) to perform its respective obligations under this Agreement, the Note Agreement and the Other Documents. 8 (b) LITIGATION. Except for proceedings which have been adequately reserved for in the Company's financial statements delivered to the holders of the Notes, there are no proceedings pending, or to the knowledge of the Company threatened, against or affecting the Company or any Subsidiary or any of their respective properties in any court or before any governmental authority or arbitration board or tribunal which, either individually or in the aggregate, could (i) have a Material Adverse Effect, or (ii) conflict with or interfere with the ability of the Company to execute and deliver this Agreement or any of the Other Documents or to perform its obligations hereunder and thereunder. (c) AUTHORIZATION, EXECUTION AND ENFORCEABILITY. (i) THE COMPANY. The execution and delivery by the Company of this Agreement and the Other Documents and the performance by it of its obligations under this Agreement, the Note Agreement and the Other Documents have been duly authorized by all necessary action on the part of the Company. This Agreement and the Other Documents have been duly executed and delivered by the Company. Each of this Agreement, the Note Agreement and the Other Documents is a valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms, except that the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws affecting the enforceability of creditors' rights generally; and subject to the availability of equitable remedies. (ii) GUARANTORS. The execution and delivery of the Subsidiary Guaranty by each Guarantor and the performance by it of its obligations thereunder has been duly authorized by all necessary action on the part of each Guarantor. The Subsidiary Guaranty has been duly executed and delivered by each Guarantor, and is a valid and binding obligation of each Guarantor enforceable in accordance with its terms, except that the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws affecting the enforceability of creditors' rights generally, and subject to the availability of equitable remedies. (d) NO CONFLICTS OR DEFAULTS. Neither the execution and delivery by the Company of this Agreement and the Other Documents, nor the performance by the Company of its obligations under this Agreement, the Note Agreement and the Other Documents, conflicts with, results in any breach in any of the provisions of, constitutes a default under, violates, or results in the creation of any Lien upon any property of the Company under the provisions of: (i) the certificate of incorporation of the Company; (ii) any agreement, instrument or conveyance to which the Company or any of its properties may be bound; or 9 (iii) any statute, rule or regulation or any order, judgment or award of any court, tribunal or arbitrator by which the Company or any of its respective properties may be bound. (e) GOVERNMENTAL CONSENT. Neither the execution and delivery by the Company of this Agreement and the Other Documents, nor the performance by the Company of its obligations under this Agreement, the Note Agreement and the Other Documents, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Company as a condition thereto under the circumstances and conditions contemplated by this Agreement. (f) DISCLOSURE OF DEFAULTS UNDER NOTE AGREEMENTS AND OTHER AGREEMENTS. Except for the Current Events of Default listed on Schedule 1 of this Agreement, there exists no Default or Event of Default under the Existing Note Agreement. After giving effect to this Agreement, the similar agreements with the 1992 Noteholders and the 1995 Noteholders, the Bank Loan Agreement, and the amendments made contemporaneously herewith to the CIBC Other Credits, neither the Company nor any Subsidiary shall be in default with respect to any indebtedness for borrowed money or any contract which is material to the business of the Company or any Subsidiary. (g) COMPLIANCE WITH LAW. Neither the Company nor any Subsidiary: (i) is in violation of any law, ordinance, governmental rule or regulation to which it is subject; or (ii) has failed to obtain any license, permit, franchise or other governmental authorization necessary to the ownership of its property or to the conduct of its business; which violation or failure to obtain might, either individually or in the aggregate, (i) have a Material Adverse Effect, or (ii) materially adversely affect the ability of the Company to perform its obligations under this Agreement, the Note Agreement or the Other Documents. (h) SOLVENCY. After giving effect to this Agreement, to the best of the Company's knowledge, the fair saleable value of the assets of the Company, taken as a whole, exceeds, as of the Effective Date, the liabilities of the Company, taken as a whole as of such date. After giving effect to this Agreement, the Company will be able to meet its liabilities as they mature. The Company is entering into this Agreement without any intent to hinder, delay or defraud either current creditors or future creditors. 8. NO IMPLIED AMENDMENT. 10 The actions taken in Sections 2, 3 and 5 hereof shall be limited precisely as written, and neither such actions nor any other provision of this Agreement shall, or shall be deemed or construed to: (a) be a consent to any other waiver, amendment or modification of any term, provision or condition of the Existing Note Agreement, (b) impose upon any holder of Notes any obligation, express or implied, to consent to any further amendment or further modification of the Note Agreement, or (c) be a consent to any waiver of any future Event of Default. 9. ACKNOWLEDGEMENT OF VALIDITY AND ENFORCEABILITY OF NOTE AGREEMENT The Company acknowledges and agrees that the Note Agreement and the Notes constitute legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar law affecting creditors' rights generally, and the Company expressly reaffirms its obligations under the Note Agreement. 10. COSTS AND EXPENSES. Without in any way limiting the duties of the Company under Section 9.4 of the Note Agreement, the Company shall pay or, if paid by any holder of Notes reimburse such holder for, all reasonable out-of-pocket fees, costs and expenses (including reasonable fees of Hebb & Gitlin) paid or incurred by any holder of Notes in connection with the consideration, negotiation, preparation, drafting, implementation, amendment, modification, administration and enforcement of this Agreement, the Note Agreement, the Notes and the Other Documents, and for auditing, appraising, evaluating or otherwise monitoring any collateral or other credit support which at any time may secure the Notes (all such fees, costs and expenses, whether incurred in connection with this Agreement, the Note Agreement, any amendment or otherwise, being "Costs and Expenses"). All Costs and Expenses shall be due and payable by the Company fifteen (15) days following the Company's receipt of an invoice in reasonable detail reflecting such Costs and Expenses. Without limiting the generality of the foregoing, on the Effective Date the Company shall pay all Costs and Expenses for which an invoice in reasonable detail has been received, including, but not limited to, the statement for reasonable fees and disbursements of Hebb & Gitlin, the 1989 Noteholders' special counsel, and The Finley Group, the 1989 Noteholders' financial advisor. 11 11. AMENDMENTS; WAIVERS. No amendment or modification of any provision of this Agreement shall be effective without the written agreement of the Required Holders and the Company, and no termination or waiver of any provision of this Agreement, or consent to any departure therefrom, shall in any event be effective without the written concurrence of the Required Holders; provided that any waiver or amendment of Section 4 of this Agreement shall require the written consent of the holders of all of the Notes; and any amendment of Section 5(c)(ii) of this Agreement or the defined term "Acceptable Replacement Facility" may be effected only with the written agreement of the holders of a majority in aggregate principal amount of the Notes, the 1992 Notes and the 1995 Notes voting as a single class. No notice to or demand upon the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. Any failure, at any time or times hereafter, to require strict performance by the Company of any provision or term of this Agreement or the Note Agreement shall not waive, affect or diminish any right of any holder of Notes thereafter to demand strict compliance and performance herewith or therewith. 12. BENEFIT. This Agreement shall be binding upon and shall inure to the benefit of the 1989 Noteholders and the Company and their respective successors and assigns. This Agreement is solely for the benefit of the parties hereto and their respective successors and assigns, and no other Person shall have any right, benefit or interest under or because of the existence of this Agreement. 13. GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to conflict of law principles of such state other than General Obligations Law ss. 5-1401. 14. ASSIGNMENT. This Agreement shall not be assignable by the Company without the written consent of the 1989 Noteholders. The 1989 Noteholders may assign to one or more Persons all or any part of, or any participation interest in, its rights and benefits hereunder in connection with an assignment of, or sale of a participation interest in, the Notes held by it. 15. SECTION HEADINGS. The titles of the Sections and subsections hereof appear as a matter of convenience only, do not constitute a part of this Agreement and shall not affect the construction hereof. 16. COUNTERPARTS. 12 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 13 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on their behalf by a duly authorized officer or agent thereof, as the case may be, as of the date first above written. STANDARD MOTOR PRODUCTS, INC. By____________________________________________ Name: Title: AMERICAN UNITED LIFE INSURANCE COMPANY By____________________________________________ Name: Title: GENERAL AMERICAN LIFE INSURANCE COMPANY By____________________________________________ Name: Title: JEFFERSON-PILOT LIFE INSURANCE COMPANY By____________________________________________ Name: Title: THE OHIO NATIONAL LIFE INSURANCE COMPANY By____________________________________________ Name: Title: 14 CROWN LIFE INSURANCE COMPANY By____________________________________________ Name: Title: GREAT-WEST LIFE AND ANNUITY INSURANCE COMPANY By____________________________________________ Name: Title: THE SECURITY MUTUAL LIFE INSURANCE COMPANY OF LINCOLN By____________________________________________ Name: Title: WOODMEN ACCIDENT AND LIFE COMPANY By____________________________________________ Name: Title: NOMURA HOLDING AMERICA, INC. By____________________________________________ Name: Title: 15 Schedule 1-1 SCHEDULE 1 CURRENT EVENTS OF DEFAULT Section 5.7 Consolidated Tangible Net Worth Section 5.9 Fixed Charge Ratio Schedule 2-1 SCHEDULE 2 DESCRIPTION OF COOPER SWAP, FUEL PUMP TRANSACTION AND SERVICE LINE TRANSACTION ------------------------------------------------------------------------------ I. Cooper Financing: See definition in Section 1. II. Cooper Swap: See definition in Section 1. Schedule 3-2 SCHEDULE 3 OVERRIDE COVENANTS Capitalized terms used in this Schedule 3 and not defined shall have the meanings ascribed to such terms in the Bank Loan Agreement. 1. TANGIBLE NET WORTH. During each of the fiscal quarters set out below, the Company will not allow the remainder of Tangible Net Worth to be less than the amount set forth opposite such quarter: 1st Quarter 1998 $143,000,000 2nd Quarter 1998 $145,000,000 3rd Quarter 1998 $150,000,000 2. NET SALES. During each of the fiscal quarters set out below, Net Sales of the Company and its Subsidiaries shall be not less than the amount set forth below opposite such period: 1st Quarter 1998 $145,000,000 2nd Quarter 1998 $167,000,000 3rd Quarter 1998 $153,000,000 3. CUMULATIVE EBITDA. EBITDA on a cumulative basis for the periods set out below shall be not less than the amounts set out below opposite such period: First Quarter 1998 $ 8,300,000 First Two Quarters 1998 $22,400,000 First Three Quarters 1998 $36,300,000 4. CAPITAL EXPENDITURES. Capital Expenditures of the Company and its Subsidiaries on a cumulative basis shall not be in excess of the following amounts as of the end of the period set out below opposite such amount: First Quarter 1998 $ 4,100,000 First Two Quarters 1998 $ 9,700,000 First Three Quarters 1998 $13,300,000 Schedule 4-6 SCHEDULE 4 AMENDMENTS TO EXISTING COVENANTS 1. SECTION 5.8(A) OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 5.8(A) INDEBTEDNESS. (a) From and after March 31, 1998, neither the Company nor any Subsidiary shall incur or in any manner become liable in respect of any Funded Debt or Current Debt except: (i) the Notes, the 1992 Notes (as defined in the Override Agreement) and the 1995 Notes (as defined in the Override Agreement), (ii) Funded Debt or Current Debt outstanding pursuant to The Bank Loan Agreement and the Cooper Financing (as such terms are defined in the Override Agreement) (the "Bank Loan Agreement" and the "Cooper Financing" respectively), (iii) Funded Debt owed to the Company or a Wholly-Owned Subsidiary, (iv) Funded Debt secured by purchase money Liens or Capitalized Leases, provided that the aggregate principal amount thereof does not exceed $6,000,000. (v) Funded Debt and Current Debt the payment of which is subordinated to the payment of the Notes pursuant to subordination provisions acceptable to you in all respects, (vi) the CIBC Other Credits (as defined in the Override Agreement), (vii) obligations outstanding under the Clipper Facility (as such term is defined in the Override Agreement) not to exceed $25,000,000, (viii) Funded Debt or Current Debt of Intermotor Holdings Ltd. ( a corporation organized under the laws of the United Kingdom), provided that the principal amount thereof does not exceed (pound)5,000,000 over the amount such entity is presently permitted to borrow pursuant to the terms of its credit facility with The Royal Bank of Scotland, and none of such indebtedness is guarantied by the Company or any Subsidiary (the "Intermotor Loan"), and (ix) indebtedness associated with a consignment of $15,000,000 of inventory arising in connection with the Cooper Swap. 2. SECTION 5.8 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO ADD THERETO A NEW SUBSECTION (E) WHICH WILL READ IN ITS ENTIRETY AS FOLLOWS: (e) The Company will not permit any Subsidiary to create, assume, incur or otherwise become liable for, directly or indirectly, any Indebtedness, other than (i) Indebtedness of a Subsidiary to the Company or a Wholly-Owned Subsidiary, (ii) Guaranties of the Notes, the 1992 Notes (as defined in the Override Agreement), the 1995 Notes (as defined in the Override Agreement) and the Indebtedness outstanding pursuant to the Bank Loan Agreement and the Cooper Financing , (iii) the CIBC Other Credits (as such term is defined in the Override Agreement), (iv) the Intermotor Loan, and (v) obligations of SMP Credit Corp. in respect of the Clipper Facility. 3. SECTION 5.10 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 5.10 LIENS. The Company will not, and will not permit any Subsidiary to, permit to exist, create, assume or incur, directly or indirectly, any Lien on its properties or assets, whether now owned or hereafter acquired, except: (b) Liens existing on property or assets of the Company or any Subsidiary as of the date of this Agreement that are described on Schedule 3.06 of the Bank Loan Agreement; (c) Liens for taxes, assessments or governmental charges not then due and delinquent or the validity of which is being contested in good faith and as to which the Company has established adequate reserves on its books; (d) Deposits or pledges in connection with or to secure payment of workers' compensation, unemployment insurance, old-age pensions or other social security, or in connection with the good faith contest of any tax Lien; (e) Construction, mechanics', materialmen's or warehousemen's Liens securing obligations not due or, if overdue, being contested in good faith by appropriate proceedings; (f) Liens arising in connection with court proceedings, provided the execution of such Liens is effectively stayed, such Liens are being contested in good faith and the Company has established adequate reserves therefor on its books; (g) Liens arising in the ordinary course of business and not incurred in connection with the borrowing of money (including encumbrances in the nature of zoning restrictions, easements, rights and restrictions of record on the use of real property and landlord's and lessor's liens) that in the aggregate do not materially interfere with the conduct of the business of the Company and its Subsidiaries taken as a whole or materially impair the value of the property or assets subject thereto; (h) Liens securing Indebtedness of a Subsidiary to the Company or to a Wholly-Owned Subsidiary; (i) Liens or Capitalized Leases on fixed assets created within twelve (12) months of the date of acquisition or improvement thereof to secure or provide for all or a portion of the purchase price or cost of construction or improvement of such fixed assets, PROVIDED that such Liens do not extend to other property of the Company or any Subsidiary, the incurrence of the Indebtedness secured by such Liens is otherwise permitted by this Agreement, and the aggregate principal amount of Indebtedness secured by such Liens does not exceed $6,000,000; (j) Liens upon receivables sold pursuant to the Clipper Facility (as such term is defined in the Override Agreement); (k) Liens securing the Intermotor Loan provided that such Liens encumber only the property of Intermotor Holdings, Limited; and (l) a consignment of $15,000,000 of inventory arising in connection with the Cooper Swap. 4. SECTION 5.11 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 5.11 DIVIDENDS; STOCK PURCHASES. The Company will not declare or make any dividend or redemption on or of any of its capital stock unless, after giving effect thereto, (a) no Default or Event of Default would exist, (b) the Company would be in compliance with Section 6.06 of the Bank Loan Agreement. 5. SECTION 5.13 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: (a) MERGER OR CONSOLIDATION. Except for the Cooper Swap (as defined in the Override Agreement), the Company will not, and will not permit any Subsidiary to, merge or consolidate with, or sell all or substantially all of its assets to, any Person, except that any Subsidiary may (i) merge into the Company or a Wholly-Owned Subsidiary or (ii) sell, transfer or lease all or any part of its assets to the Company or to a Wholly-Owned Subsidiary or (iii) merge into any Person which, as a result of such merger, becomes a Wholly-Owned Subsidiary; provided in each such instance that immediately after giving effect thereto there shall exist no Default or Event of Default. (b) SALE OF ASSETS; SALE OF RECEIVABLES. The Company will not, and will not permit any Subsidiary to, sell, lease, transfer or otherwise (including by way of merger) dispose of (collectively a "Disposition") any assets (including capital stock of Subsidiaries) in one or a series of transactions to any Person other than the Company or a Wholly-Owned Subsidiary other than: (m) sales of inventory in the ordinary course of business; (n) Dispositions of other properties no longer used or useful in the business, provided that all such Dispositions shall be for fair market value, and the aggregate fair market value of the properties so disposed of does not exceed $5,000,000; (o) the Cooper Swap (as such term is defined in the Override Agreement); (p) the Service Line Transaction (as such term is defined in the Override Agreement); (q) the Fuel Pump Transaction (as such term is defined in the Override Agreement); (r) the sale or compromise of the Borrower's claim in the APS bankruptcy case; (s) sales of accounts receivable pursuant to the Clipper Facility (as such term is defined in the Override Agreement), and (h) dispositions of surplus or unneeded property obtained in connection with the Cooper Swap. (C) DISPOSITION OF STOCK OF SUBSIDIARIES. The Company will not, and will not permit any Subsidiary to, issue, sell or transfer the capital stock of a Subsidiary unless (i) all shares of capital stock of such Subsidiary and all Indebtedness of such Subsidiary owned by the Company and by every other Subsidiary shall simultaneously be sold, transferred or otherwise disposed of, (ii) such Subsidiary does not thereafter own any shares of capital stock or Indebtedness of the Company or another Subsidiary, (iii) such sale would be permitted by Section 5.13(b), and (iv) the board of directors of the Company shall have made a good faith determination that such sale or transfer is in the best interests of the Company. 6. SECTION 5.12 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 5.12 PERMITTED INVESTMENTS. The Company will not, and will not permit any Subsidiary to, make any Investment other than Investments of the type described in clauses (i) through (v) of the definition of Restricted Investment in Section 8.1. 7. SECTION 5.14 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 5.14 GUARANTIES. The Company will not, and will not permit any Subsidiary to, become or be liable in respect to any Guaranties of Indebtedness, except Guaranties of the Indebtedness outstanding under the Notes, the 1992 Notes, the 1995 Notes, the Bank Loan Agreement and the CIBC Other Credits (as such terms are defined in the Override Agreement). 8. A NEW SECTION 5.22 IS HEREBY ADDED TO THE EXISTING NOTE AGREEMENT AS FOLLOWS: 5.22 LIMITS ON MANAGEMENT COMPENSATION. Make or permit any material change from the 1997 Management Compensation Plan as approved by the Company's Board of Directors 9. SECTION 8.1 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED BY ADDING THERETO, IN PROPER ALPHABETICAL ORDER, THE FOLLOWING DEFINED TERM: Override Agreement -- That certain Override Amendment Agreement between you and the Company, dated as of March 27, 1998. EX-10.18 4 OVERRIDE AND AMENDMENT AGREEMENT EXHIBIT 10.18 OVERRIDE AND AMENDMENT AGREEMENT This OVERRIDE AND AMENDMENT AGREEMENT (this "Agreement") is made and entered into as of March 27, 1998, by and among STANDARD MOTOR PRODUCTS, INC. (the "Company") and each of the entities set forth on the signature pages hereto (collectively, the "1992 Noteholders"). All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Note Agreement dated as of November 15, 1992 (as amended from time to time prior to the date hereof, the "Existing Note Agreement", and as modified and overridden hereby, the "Note Agreement") among the Company and the 1992 Noteholders (or their respective predecessors in interest). R E C I T A L S --------------- WHEREAS, various Events of Default under the Existing Note Agreement presently exist, as more particularly set forth on Schedule 1 of this Agreement (collectively referred to herein as the "Current Events of Default"); and WHEREAS, as a result of the Current Events of Default, the 1992 Noteholders are entitled, among other things, to enforce their rights and remedies provided for in the Existing Note Agreement, including without limitation, the right to accelerate and immediately demand payment in full of the Notes; and WHEREAS, the Company has requested that the 1992 Noteholders waive the Current Events of Default and agree to certain modifications to the Existing Note Agreement; and WHEREAS, the 1992 Noteholders are willing to waive the Current Events of Default and make such modifications, but only upon full and complete compliance by the Company with the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the terms and conditions contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. As used in this Agreement, the following terms shall have the following respective meanings (or the meanings set forth in the Section of this Agreement referred to opposite such term) and the following definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined. Terms used herein and not defined shall have the respective meanings ascribed to them in the Note Agreement. ACCEPTABLE REPLACEMENT FACILITY -- shall mean, collectively, one or more financing transactions with one or more banks, insurance companies or other institutional investors, which transactions, (i) constitute, in the aggregate, a legally binding commitment to provide to the Company unsecured revolving credit and/or term debt and/or equity financing in an aggregate amount of at least $100,000,000 and having a maturity not earlier than two years from the date the full $100,000,000 first becomes available to the Company; and (ii) do not (individually or in the aggregate) violate any provision of the Note Agreement in effect at the time any of such transactions is entered into. AGREEMENT -- the introductory paragraph hereof. AMENDMENT FEE -- one and one half percent (1.50%) of the outstanding principal amount of the Notes. BANK LOAN AGREEMENT -- the Revolving Credit and Guaranty Agreement dated as of March 30, 1998 among the Company as borrower, certain of its subsidiaries as guarantors, the Banks as lenders, The Chase Manhattan Bank, as Administrative Agent, and The Bank of New York, as Documentation Agent, as in effect on the date hereof. BANKS -- The Chase Manhattan Bank, The Bank of New York, Fleet Bank, National Association, NBD Bank, Comerica Bank, and Canadian Imperial Bank of Commerce. CIBC OTHER CREDITS -- the term loan in the outstanding principal amount of CDN $20,000,000 extended by Canadian Imperial Bank of Commerce to SMP Motor Products, Inc., and the letter of guaranty by Canadian Imperial Bank of Commerce for the account of SMP Motor Products, Inc., in the aggregate amount of CDN $60,000 evidenced by letter of guarantee No. T374406000 issued December 30, 1996, as in effect on the date hereof. CLIPPER FACILITY -- collectively, the Purchase and Sale Agreement dated as of March 19, 1997 between the Company and SMP Credit Corp., the Receivables Purchase Agreement dated as of March 19, 1997 among SMP Credit Corp., the Company, Clipper Receivables Corporation, State Street Boston Capital Corporation and State Street Bank and Trust Company and any other instrument or agreement executed and delivered in connection therewith, in each case as in effect on the date hereof. COMPANY -- the introductory paragraph hereof. COOPER -- collectively, Cooper Industries, Inc., an Ohio corporation, Cooper Industries (Canada) Inc., Moog Automotive Company, a Delaware corporation and Moog Automotive Products, Inc., a Missouri corporation. COOPER FINANCING -- a $22,500,000 loan from Cooper to the Company substantially on the terms set forth in that certain letter from Michael J. Bailey to Brad McWilliams, dated January 28, 1998. COOPER SWAP -- the proposed exchange of the assets of the Company's brake division for the assets of Cooper's climate control division, as more particularly described in the -2- "Standard Motor Products, Inc. Cooper Swap Deal Summary" signed on behalf of both the Company and Cooper on March 17, 1998, and all transactions between Cooper and its subsidiaries and the Company and its Subsidiaries related to such exchange. COSTS AND EXPENSES -- Section 10. CREDIT EXTENSION DATE -- October 31, 1998; PROVIDED that if on October 31, 1998 the Company is in compliance with Sections 6.15 and 6.16 of the Bank Loan Agreement, the Credit Extension Date shall be November 30, 1998; and PROVIDED FURTHER that if (a) the Maturity Date (as defined in the Bank Loan Agreement) is extended beyond November 30, 1998 and (b) the Banks receive no permanent reduction of the Tranche A Commitment (as defined in the Bank Loan Agreement), no collateral, and no increase in interest rates or fees as a result of such extension, the Credit Extension Date will be extended to the earlier of the extended Maturity Date under the Bank Loan Agreement or the date on which an Event of Default shall exist. CURRENT EVENTS OF DEFAULT -- the recitals hereof. EFFECTIVE DATE -- Section 6. EVENT OF DEFAULT -- means and includes any "Event of Default" as defined in the Note Agreement. EXISTING NOTE AGREEMENT -- the introductory paragraph hereof. FUEL PUMP TRANSACTION -- the proposed sale by the Company of certain assets of the fuel pump product line, as more particularly described on Schedule 2 hereto. GUARANTORS -- Reno Standard, Incorporated, a Nevada corporation, Stanric, Inc., a Delaware corporation and Mardevco Credit Corp., a New York corporation. INVESTMENT GRADE RATING -- a long term unsecured debt rating (which may be a private rating) of BBB- or better by Standard & Poor's, Duff & Phelps or Fitch IBCA, Inc., a rating of Baa3 or better by Moody's Investors Services, or such other rating as shall be reasonably acceptable to the holders of all of the Notes. 1989 NOTEHOLDERS -- the holders of the Company's $30,000,000 aggregate principal amount Notes, due November 1, 2004 (the "1989 Notes") issued pursuant to Note Agreement dated as of October 15, 1989, as amended. 1995 NOTEHOLDERS -- the holders of the Company's $73,000,000 aggregate principal amount Notes, due February 25, 2006 (the "1995 Notes") issued pursuant to Note Purchase Agreement dated as of December 1, 1995, as amended. NOTE AGREEMENT -- the introductory paragraph hereof. -3- NOTES -- the $46,428,572 aggregate principal amount Notes due December 15, 2002 issued pursuant to the Note Agreement. OTHER DOCUMENTS -- Section 7(a). REQUIRED HOLDERS -- means, at any time, the holders of more than fifty percent (50%) in aggregate principal amount of the Notes at the time outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary or any Affiliate). SERVICE LINE TRANSACTION -- the proposed sale by the Company of its Service Line division, as more particularly described on Schedule 2 hereto. SUBSIDIARY GUARANTY -- that certain guaranty of the Notes, dated the date hereof, executed by the Guarantors. 2. WAIVER OF EXISTING EVENTS OF DEFAULT. Subject to Section 6 of this Agreement, the 1992 Noteholders hereby waive the Current Events of Default. 3. CONSENT TO CERTAIN TRANSACTIONS. Subject to Section 6 of this Agreement, the 1992 Noteholders hereby consent to the Cooper Swap, the Cooper Financing, the Service Line Transaction and the Fuel Pump Transaction, provided that each such transaction is consummated (a) substantially in accordance with the descriptions thereof set forth in Schedule 2 hereto, and (b) the net after-tax cash proceeds, if any, of such dispositions are utilized for nonpermanent reductions of the amounts outstanding under the Bank Loan Agreement and for working capital. Other than the Amendment Fee payable in connection with this Agreement, no fee shall be payable by the Company to the holders of the Notes in connection with such transactions. 4. PAYMENTS OF INTEREST. The Company acknowledges and agrees that: (a) The aggregate outstanding principal amount of the Notes on the date hereof is $46,428,572. (b) Prior to April 1, 1998, interest on the Notes shall accrue in accordance with the terms of the Existing Note Agreement. From and after April 1, 1998, interest on the outstanding principal amount of the Notes shall accrue at the rate of 9.10% per annum, and interest shall accrue on any overdue principal, overdue Make-Whole Amount and (to the extent legally enforceable) on any overdue installment of interest on the Notes at a rate per annum equal to the greater of 11.10% or 3.25% over the prime rate of The Chase Manhattan Bank (or its successors) from time to time in effect. The rate of interest then payable upon the Notes shall decrease to 8.35% per annum -4- on the first day on which the Company shall have achieved an Investment Grade Rating and no Default or Event of Default shall exist. Upon the first to occur of (i) the closing of an Acceptable Replacement Facility, or (ii) the Company's being in compliance with all covenants contained in Section 7 of the Note Agreement at all times during the fourth fiscal quarter of 1998 and the first fiscal quarter of 1999, and, in either event, no Default or Event of Default shall exist, the rate of interest then payable upon the Notes shall decrease by 0.50% per annum; provided that the rate of interest shall never be less than 8.35% per annum. The rate of interest then payable upon the Notes shall increase by 0.25% per annum on October 1, 1998 if Consolidated EBITDA (as defined in Section 3 of Schedule 3 to this Agreement) for the first three fiscal quarters of 1998 is not at least $48,371,000 on a cumulative basis and the Company has not earlier obtained an Investment Grade Rating. (c) Accrued interest on the outstanding principal balance of the Notes shall be payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year beginning June 30, 1998. (d) For purposes of computing the Make-Whole Amount due at any time with respect to the Notes, the rate of interest payable on the Notes shall be assumed to be the rate determined in accordance with the Existing Note Purchase Agreement rather than the rate determined in accordance with Section 4(b) above. (e) The provisions of this Section 4 shall override and permanently supersede any provisions to the contrary contained in the Existing Note Agreement and the Notes, and the Existing Note Agreement and the Notes are hereby deemed amended to be consistent with this Section 4. 5. CERTAIN COVENANTS AND AGREEMENTS. (a) OVERRIDE OF CERTAIN COVENANTS. During the period from the Effective Date through September 30, 1998, Sections 7.1 and 7.4 of the Existing Note Agreement are hereby overridden and replaced by the financial covenants set forth in Schedule 3 to this Agreement. A breach of any of the covenants set forth on Schedule 3 shall constitute an immediate Event of Default under the Note Agreement; provided that no acceleration of the Notes may be effected as a result of any such breach unless the holders of a majority in aggregate principal amount of the Notes, the 1989 Notes and the 1995 Notes (voting as a single class) shall have consented in writing to such acceleration. On October 1, 1998, the covenants hereby overridden shall once again be in full force and effect and the enforcement rights of the 1992 Noteholders shall be as set forth in the Note Agreement without giving effect to this Section 5(a). The provisions of this Section 5(a) shall override and supersede any provisions to the contrary contained in the Existing Note Agreement and the Notes. (b) AMENDMENT OF CERTAIN COVENANTS. During the period from the Effective Date through September 30, 1998, certain covenants and related definitions in the Existing Note Agreement are amended in the manner set forth on Schedule 4 to this Agreement. A breach of any of such amended covenants shall constitute an immediate Event -5- of Default under the Note Agreement. On October 1, 1998, such amendments shall terminate, and the covenants and definitions hereby amended shall once again be in full force and effect as set forth in the Existing Note Agreement. (c) ADDITIONAL COVENANTS. The Company covenants with the 1992 Noteholders as follows. A failure to comply with any of the covenants set forth in this Section 5(c) shall constitute an immediate Event of Default under the Note Agreement. (i) The Company shall not at any time pay any additional consideration to any Bank, in respect of any financial accommodation required to be made available by such Bank pursuant to the Bank Loan Agreement as in effect on the Effective Date, without making a proportionate payment at such time (based on relative principal amounts then outstanding) in respect of the Notes, the 1989 Notes and the 1995 Notes. Additional consideration which would require a proportionate payment to the 1992 Noteholders pursuant to this subsection would include, without limitation, an increase in interest rate, or an increase or imposition (as the case may be) of any commitment fee, facility fee, or amendment fee, but would not include the payment of fees, interest rate stepups or other amounts provided for in the Bank Loan Agreement and usual and customary fees for administrative matters. (ii) On or before the Credit Extension Date, the Company shall have entered into an Acceptable Replacement Facility. (iii) The Company shall not at any time permit a permanent reduction of the Tranche A Commitment under (and as defined in) the Bank Loan Agreement (it being agreed that reductions contemplated by Sections 6.18, 6.19 and 6.20 of the Bank Loan Agreement shall not be deemed to constitute reductions of the Tranche A Commitment); provided that: (1) the Company may permit such a reduction if, contemporaneously therewith, the Company makes a proportionate payment (based on relative principal amounts then outstanding) in respect of the Notes, the 1989 Notes and the 1995 Notes, and (2) the Company may effect such a reduction in connection with the replacement of the Bank Loan Agreement by an Acceptable Replacement Facility. (iv) The Cooper Swap and the Cooper Financing shall be consummated not later than April 15, 1998. (v) Any reserve for losses from discontinued operations at any time established by the Company shall be applied only to losses related to the specific discontinued operations for which such reserve was originally established, and to no other losses. -6- (vi) As soon as practicable the Company shall furnish to each holder of the Notes the Company's strategic plan, including, when available, all material modifications thereto, and make its senior officers available to discuss the same with the holders of the Notes. (d) LIMITED CROSS DEFAULT TO BANK LOAN AGREEMENT. Notwithstanding anything in the Existing Note Agreement to the contrary, a failure to comply with any covenant contained in Section 5 or Section 6 of the Bank Loan Agreement during the period from the Effective date through October 31, 1998 shall not constitute an Event of Default under the Note Agreement so long as the Banks have not (i) accelerated the maturity of their indebtedness, or (ii) taken any enforcement action against the Company, (iii) terminated or reduced any of the Commitments (as defined in the Bank Loan Agreement), it being agreed that reductions contemplated by Sections 6.18, 6.19 and 6.20 of the Bank Loan Agreement shall not be deemed to constitute reductions of the Tranche A Commitment, or (iv) failed to make a requested advance under the Bank Loan Agreement. (e) AMENDED DEFINED TERM. Section 5.1 of the Existing Note Agreement is hereby amended by deleting the present definition of Funded Debt appearing therein, and substituting in place thereof the following: FUNDED DEBT - shall mean (i) all Indebtedness of the Company and its Subsidiaries which by its terms matures more than one year from the date of creation thereof, excluding any portion thereof payable within one year and any portion thereof outstanding pursuant to a revolving credit or similar agreement that obligates the lender or lenders thereunder to extend credit over a period of more than one year, and (ii) amounts deemed to be Funded Debt pursuant to Section 7.2 of that certain Note Purchase Agreement, dated as of December 1, 1995, between the Company and certain institutional purchasers as such agreement is in effect on March 27, 1998, whether or not the notes issued under said agreement are at any time outstanding. 6. CONDITIONS TO EFFECTIVENESS OF AGREEMENT. The effectiveness of this Agreement shall be subject to and conditioned upon satisfaction of all of the following conditions precedent (the date of such satisfaction being herein referred to as the "Effective Date"). (a) REPRESENTATIONS AND WARRANTIES TRUE. The warranties and representations set forth in Section 7 hereof shall be true and correct on and as of the Effective Date. (b) AUTHORIZATION OF TRANSACTIONS. The execution and delivery by the Company and the Guarantors of this Agreement, the Subsidiary Guaranty and each of the documents executed and delivered in connection herewith and therewith, shall have been duly authorized by all necessary corporate action. -7- (c) EXECUTION AND DELIVERY OF THIS AGREEMENT. The Company and the holders of all of the Notes shall have executed and delivered a counterpart of this Agreement. (d) OTHER AMENDMENTS. The Company shall have entered into agreements substantially to the same effect as this Agreement with the 1989 Noteholders and the 1995 Noteholders, and such agreements shall be satisfactory to the 1992 Noteholders in all respects. (e) OTHER FINANCING. The transactions contemplated by the Bank Loan Agreement shall have closed; and the 1992 Noteholders shall have satisfied themselves that the Clipper Facility is in full force and effect. (f) SUBSIDIARY GUARANTY. Each of the Guarantors shall have unconditionally guarantied the Company's obligations under the Note Purchase Agreement and the Notes by executing and delivering to each 1992 Noteholder a counterpart of the Subsidiary Guaranty. (g) PAYMENT OF INTEREST. The Company shall have paid all interest on the Notes accrued or accruing through March 31, 1998. (h) AMENDMENT FEE. The Company shall have paid the Amendment Fee to the 1992 Noteholders. (i) FINANCIAL AND OPERATING INFORMATION. The 1992 Noteholders shall have received copies of such financial statements, projections, budgets, reports, agings and other financial and business information relating to the Company as they may have reasonably requested, all in form and substance satisfactory to the 1992 Noteholders. (j) COMPANY COUNSEL'S OPINION. The 1992 Noteholders shall have received from Kelley Drye & Warren LLP, special counsel for the Company, a closing opinion dated the Effective Date in form and substance satisfactory to the 1992 Noteholders. The Company hereby requests and directs such counsel to deliver such closing opinion to the 1992 Noteholders. (k) PAYMENT OF EXPENSES. The Company shall have paid all of the Costs and Expenses, including, without limitation, the fees of Hebb & Gitlin and The Finley Group billed as of the Effective Date. (l) PROCEEDINGS SATISFACTORY. All proceedings taken in connection with this Agreement and the Other Documents and all documents and papers relating thereto shall be reasonably satisfactory to the 1992 Noteholders and their special counsel. The 1992 Noteholders and their special counsel shall have received copies of such documents and papers as they may reasonably request in connection therewith. -8- 7. REPRESENTATIONS AND WARRANTIES. To induce the 1992 Noteholders to enter into this Agreement, the Company warrants and represents as follows: (a) ORGANIZATION, EXISTENCE AND AUTHORITY. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New York, and has all requisite power and authority (a) to execute and deliver (i) this Agreement and (ii) each of the other documents and instruments to be executed by it as contemplated by this Agreement (collectively referred to herein as the "Other Documents") and (b) to perform its respective obligations under this Agreement, the Note Agreement and the Other Documents. (b) LITIGATION. Except for proceedings which have been adequately reserved for in the Company's financial statements delivered to the holders of the Notes, there are no proceedings pending, or to the knowledge of the Company threatened, against or affecting the Company or any Subsidiary or any of their respective properties in any court or before any governmental authority or arbitration board or tribunal which, either individually or in the aggregate, could (i) have a Material Adverse Effect, or (ii) conflict with or interfere with the ability of the Company to execute and deliver this Agreement or any of the Other Documents or to perform its obligations hereunder and thereunder. (c) AUTHORIZATION, EXECUTION AND ENFORCEABILITY. (i) THE COMPANY. The execution and delivery by the Company of this Agreement and the Other Documents and the performance by it of its obligations under this Agreement, the Note Agreement and the Other Documents have been duly authorized by all necessary action on the part of the Company. This Agreement and the Other Documents have been duly executed and delivered by the Company. Each of this Agreement, the Note Agreement and the Other Documents is a valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms, except that the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws affecting the enforceability of creditors' rights generally; and subject to the availability of equitable remedies. -9- (ii) GUARANTORS. The execution and delivery of the Subsidiary Guaranty by each Guarantor and the performance by it of its obligations thereunder has been duly authorized by all necessary action on the part of each Guarantor. The Subsidiary Guaranty has been duly executed and delivered by each Guarantor, and is a valid and binding obligation of each Guarantor enforceable in accordance with its terms, except that the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws affecting the enforceability of creditors' rights generally, and subject to the availability of equitable remedies. (d) NO CONFLICTS OR DEFAULTS. Neither the execution and delivery by the Company of this Agreement and the Other Documents, nor the performance by the Company of its obligations under this Agreement, the Note Agreement and the Other Documents, conflicts with, results in any breach in any of the provisions of, constitutes a default under, violates, or results in the creation of any Lien upon any property of the Company under the provisions of: (i) the certificate of incorporation of the Company; (ii) any agreement, instrument or conveyance to which the Company or any of its properties may be bound; or (iii) any statute, rule or regulation or any order, judgment or award of any court, tribunal or arbitrator by which the Company or any of its respective properties may be bound. (e) GOVERNMENTAL CONSENT. Neither the execution and delivery by the Company of this Agreement and the Other Documents, nor the performance by the Company of its obligations under this Agreement, the Note Agreement and the Other Documents, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Company as a condition thereto under the circumstances and conditions contemplated by this Agreement. (f) DISCLOSURE OF DEFAULTS UNDER NOTE AGREEMENTS AND OTHER AGREEMENTS. Except for the Current Events of Default listed on Schedule 1 of this Agreement, there exists no Default or Event of Default under the Existing Note Agreement. After giving effect to this Agreement, the similar agreements with the 1989 Noteholders and the 1995 Noteholders, the Bank Loan Agreement, and the amendments made contemporaneously herewith to the CIBC Other Credits, neither the Company nor any Subsidiary shall be in default with respect to any indebtedness for borrowed money or any contract which is material to the business of the Company or any Subsidiary. -10- (g) COMPLIANCE WITH LAW. Neither the Company nor any Subsidiary: (i) is in violation of any law, ordinance, governmental rule or regulation to which it is subject; or (ii) has failed to obtain any license, permit, franchise or other governmental authorization necessary to the ownership of its property or to the conduct of its business; which violation or failure to obtain might, either individually or in the aggregate, (i) have a Material Adverse Effect, or (ii) materially adversely affect the ability of the Company to perform its obligations under this Agreement, the Note Agreement or the Other Documents. (h) SOLVENCY. After giving effect to this Agreement, to the best of the Company's knowledge, the fair saleable value of the assets of the Company, taken as a whole, exceeds, as of the Effective Date, the liabilities of the Company, taken as a whole as of such date. After giving effect to this Agreement, the Company will be able to meet its liabilities as they mature. The Company is entering into this Agreement without any intent to hinder, delay or defraud either current creditors or future creditors. 8. NO IMPLIED AMENDMENT. The actions taken in Sections 2, 3 and 5 hereof shall be limited precisely as written, and neither such actions nor any other provision of this Agreement shall, or shall be deemed or construed to: (a) be a consent to any other waiver, amendment or modification of any term, provision or condition of the Existing Note Agreement, (b) impose upon any holder of Notes any obligation, express or implied, to consent to any further amendment or further modification of the Note Agreement, or (c) be a consent to any waiver of any future Event of Default. -11- 9. ACKNOWLEDGEMENT OF VALIDITY AND ENFORCEABILITY OF NOTE AGREEMENT The Company acknowledges and agrees that the Note Agreement and the Notes constitute legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar law affecting creditors' rights generally, and the Company expressly reaffirms its obligations under the Note Agreement. 10. COSTS AND EXPENSES. Without in any way limiting the duties of the Company under Section 11.1 of the Note Agreement, the Company shall pay or, if paid by any holder of Notes reimburse such holder for, all reasonable out-of-pocket fees, costs and expenses (including reasonable fees of Hebb & Gitlin) paid or incurred by any holder of Notes in connection with the consideration, negotiation, preparation, drafting, implementation, amendment, modification, administration and enforcement of this Agreement, the Note Agreement, the Notes and the Other Documents, and for auditing, appraising, evaluating or otherwise monitoring any collateral or other credit support which at any time may secure the Notes (all such fees, costs and expenses, whether incurred in connection with this Agreement, the Note Agreement, any amendment or otherwise, being "Costs and Expenses"). All Costs and Expenses shall be due and payable by the Company fifteen (15) days following the Company's receipt of an invoice in reasonable detail reflecting such Costs and Expenses. Without limiting the generality of the foregoing, on the Effective Date the Company shall pay all Costs and Expenses for which an invoice in reasonable detail has been received, including, but not limited to, the statement for reasonable fees and disbursements of Hebb & Gitlin, the 1992 Noteholders' special counsel, and The Finley Group, the 1992 Noteholders' financial advisor. 11. AMENDMENTS; WAIVERS. No amendment or modification of any provision of this Agreement shall be effective without the written agreement of the Required Holders and the Company, and no termination or waiver of any provision of this Agreement, or consent to any departure therefrom, shall in any event be effective without the written concurrence of the Required Holders; provided that any waiver or amendment of Section 4 of this Agreement shall require the written consent of the holders of all of the Notes; and any amendment of Section 5(c)(ii) of this Agreement or the defined term "Acceptable Replacement Facility" may be effected only with the written agreement of the holders of a majority in aggregate principal amount of the Notes, the 1989 Notes and the 1995 Notes voting as a single class. No notice to or demand upon the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. Any failure, at any time or times hereafter, to require strict performance by the Company of any provision or term of this Agreement or the Note Agreement shall not waive, affect or diminish any right of any holder of Notes thereafter to demand strict compliance and performance herewith or therewith. -12- 12. BENEFIT. This Agreement shall be binding upon and shall inure to the benefit of the 1992 Noteholders and the Company and their respective successors and assigns. This Agreement is solely for the benefit of the parties hereto and their respective successors and assigns, and no other Person shall have any right, benefit or interest under or because of the existence of this Agreement. 13. GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to conflict of law principles of such state other than General Obligations Law ss. 5-1401. 14. ASSIGNMENT. This Agreement shall not be assignable by the Company without the written consent of the 1992 Noteholders. The 1992 Noteholders may assign to one or more Persons all or any part of, or any participation interest in, its rights and benefits hereunder in connection with an assignment of, or sale of a participation interest in, the Notes held by it. 15. SECTION HEADINGS. The titles of the Sections and subsections hereof appear as a matter of convenience only, do not constitute a part of this Agreement and shall not affect the construction hereof. 16. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.] -13- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on their behalf by a duly authorized officer or agent thereof, as the case may be, as of the date first above written. STANDARD MOTOR PRODUCTS, INC. By____________________________________________ Name: Title: ALLSTATE LIFE INSURANCE COMPANY By____________________________________________ Name: Title: By____________________________________________ Name: Title: PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY By____________________________________________ Name: Title: PRINCIPAL MUTUAL LIFE INSURANCE COMPANY By____________________________________________ Name: Title: TEACHERS INSURANCE AND ANNUITY ASSOCIATION By____________________________________________ Name: Title: Schedule 1-1 SCHEDULE 1 CURRENT EVENTS OF DEFAULT ------------------------- Section 7.1 Tangible Net Worth Section 7.3 Subsidiary Indebtedness Section 7.4 Fixed Charge Ratio Section 7.5 Liens Schedule 2-1 SCHEDULE 2 DESCRIPTION OF COOPER SWAP, FUEL PUMP TRANSACTION AND SERVICE LINE TRANSACTION ------------------------------------------------------------------------------ I. Cooper Financing: See definition in Section 1. II. Cooper Swap: See definition in Section 1. Schedule 3-2 SCHEDULE 3 OVERRIDE COVENANTS ------------------ Capitalized terms used in this Schedule 3 and not defined shall have the meanings ascribed to such terms in the Bank Loan Agreement. 1. TANGIBLE NET WORTH. During each of the fiscal quarters set out below, the Company will not allow the remainder of Tangible Net Worth to be less than the amount set forth opposite such quarter: 1st Quarter 1998 $143,000,000 2nd Quarter 1998 $145,000,000 3rd Quarter 1998 $150,000,000 2. NET SALES. During each of the fiscal quarters set out below, Net Sales of the Company and its Subsidiaries shall be not less than the amount set forth below opposite such period: 1st Quarter 1998 $145,000,000 2nd Quarter 1998 $167,000,000 3rd Quarter 1998 $153,000,000 3. CUMULATIVE EBITDA. EBITDA on a cumulative basis for the periods set out below shall be not less than the amounts set out below opposite such period: First Quarter 1998 $ 8,300,000 First Two Quarters 1998 $22,400,000 First Three Quarters 1998 $36,300,000 4. CAPITAL EXPENDITURES. Capital Expenditures of the Company and its Subsidiaries on a cumulative basis shall not be in excess of the following amounts as of the end of the period set out below opposite such amount: First Quarter 1998 $ 4,100,000 Schedule 3-1 First Two Quarters 1998 $ 9,700,000 First Three Quarters 1998 $13,300,000 Schedule 3-2 Schedule 4-5 SCHEDULE 4 AMENDMENTS TO EXISTING COVENANTS 1. SECTION 7.2 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.2 INDEBTEDNESS. From and after March 31, 1998, neither the Company nor any Subsidiary shall incur or in any manner become liable in respect of any Funded Debt or Current Debt except: (i) the Notes, the 1989 Notes (as defined in the Override Agreement) and the 1995 Notes (as defined in the Override Agreement), (ii) Funded Debt or Current Debt outstanding pursuant to The Bank Loan Agreement and the Cooper Financing (as such terms are defined in the Override Agreement) (the "Bank Loan Agreement" and the "Cooper Financing" respectively), (iii) Funded Debt owed to the Company or a Wholly-Owned Subsidiary, (iv) Funded Debt secured by purchase money Liens or Capitalized Leases, provided that the aggregate principal amount thereof does not exceed $6,000,000, (v) Funded Debt and Current Debt the payment of which is subordinated to the payment of the Notes pursuant to subordination provisions acceptable to you in all respects, (vi) the CIBC Other Credits (as defined in the Override Agreement), (vii) obligations outstanding under the Clipper Facility (as such term is defined in the Override Agreement) not to exceed $25,000,000, (viii) Funded Debt or Current Debt of Intermotor Holdings Ltd. ( a corporation organized under the laws of the United Kingdom), provided that the principal amount thereof does not exceed (pound)5,000,000 over the amount such entity is presently permitted to borrow pursuant to the terms of its credit facility with The Royal Bank of Scotland, and none of such indebtedness is guarantied by the Company or any Subsidiary (the "Intermotor Loan"), and Schedule 4-1 (ix) indebtedness associated with a consignment of $15,000,000 of inventory arising in connection with the Cooper Swap. 2. SECTION 7.3 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.3 SUBSIDIARY INDEBTEDNESS. The Company will not permit any Subsidiary to create, assume, incur or otherwise become liable for, directly or indirectly, any Indebtedness, other than (i) Indebtedness of a Subsidiary to the Company or a Wholly-Owned Subsidiary, (ii) Guaranties of the Notes, the 1989 Notes (as defined in the Override Agreement), the 1995 Notes (as defined in the Override Agreement) and the Indebtedness outstanding pursuant to the Bank Loan Agreement and the Cooper Financing , (iii) the CIBC Other Credits (as such term is defined in the Override Agreement), (iv) the Intermotor Loan, and (v) obligations of SMP Credit Corp. in respect of the Clipper Facility. 3. SECTION 7.5 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.5 LIENS. The Company will not, and will not permit any Subsidiary to, permit to exist, create, assume or incur, directly or indirectly, any Lien on its properties or assets, whether now owned or hereafter acquired, except: (b) Liens existing on property or assets of the Company or any Subsidiary as of the date of this Agreement that are described on Schedule 3.06 of the Bank Loan Agreement; (c) Liens for taxes, assessments or governmental charges not then due and delinquent or the validity of which is being contested in good faith and as to which the Company has established adequate reserves on its books; (d) Deposits or pledges in connection with or to secure payment of workers' compensation, unemployment insurance, old-age pensions or other social security, or in connection with the good faith contest of any tax Lien; (e) Construction, mechanics', materialmen's or warehousemen's Liens securing obligations not due or, if overdue, being contested in good faith by appropriate proceedings; Schedule 4-2 (f) Liens arising in connection with court proceedings, provided the execution of such Liens is effectively stayed, such Liens are being contested in good faith and the Company has established adequate reserves therefor on its books; (g) Liens arising in the ordinary course of business and not incurred in connection with the borrowing of money (including encumbrances in the nature of zoning restrictions, easements, rights and restrictions of record on the use of real property and landlord's and lessor's liens) that in the aggregate do not materially interfere with the conduct of the business of the Company and its Subsidiaries taken as a whole or materially impair the value of the property or assets subject thereto; (h) Liens securing Indebtedness of a Subsidiary to the Company or to a Wholly-Owned Subsidiary; (i) Liens or Capitalized Leases on fixed assets created within twelve (12) months of the date of acquisition or improvement thereof to secure or provide for all or a portion of the purchase price or cost of construction or improvement of such fixed assets, PROVIDED that such Liens do not extend to other property of the Company or any Subsidiary, the incurrence of the Indebtedness secured by such Liens is otherwise permitted by this Agreement, and the aggregate principal amount of Indebtedness secured by such Liens does not exceed $6,000,000; (j) Liens upon receivables sold pursuant to the Clipper Facility (as such term is defined in the Override Agreement). (k) Liens securing the Intermotor Loan, provided that such Liens encumber only the property of Intermotor Holdings Limited; and (l) a consignment of $15,000,000 of inventory arising, in connection with the Cooper Swap. 4. SECTION 7.6 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.6 RESTRICTED PAYMENTS. The Company will not declare or make any dividend or redemption on or of any of its capital stock unless, after giving effect thereto, (a) no Default or Event of Default would exist, (b) the Company would be in compliance with Section 6.06 of the Bank Loan Agreement. 5. SECTION 7.7 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.7 MERGER OR CONSOLIDATION. Schedule 4-3 Except for the Cooper Swap (as defined in the Override Agreement), the Company will not, and will not permit any Subsidiary to, merge or consolidate with, or sell all or substantially all of its assets to, any Person, except that any Subsidiary may (i) merge into the Company or a Wholly-Owned Subsidiary or (ii) sell, transfer or lease all or any part of its assets to the Company or to a Wholly-Owned Subsidiary or (iii) merge into any Person which, as a result of such merger, becomes a Wholly-Owned Subsidiary; provided in each such instance that immediately after giving effect thereto there shall exist no Default or Event of Default. 6. SECTION 7.8 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.8 SALE OF ASSETS; SALE OF RECEIVABLES. The Company will not, and will not permit any Subsidiary to, sell, lease, transfer or otherwise (including by way of merger) dispose of (collectively a "Disposition") any assets (including capital stock of Subsidiaries) in one or a series of transactions to any Person other than the Company or a Wholly-Owned Subsidiary other than: (m) sales of inventory in the ordinary course of business; (n) Dispositions of other properties no longer used or useful in the business, provided that all such Dispositions shall be for fair market value, and the aggregate fair market value of the properties so disposed of does not exceed $5,000,000; (o) the Cooper Swap (as such term is defined in the Override Agreement); (p) the Service Line Transaction (as such term is defined in the Override Agreement); (q) the Fuel Pump Transaction (as such term is defined in the Override Agreement); (r) the sale or compromise of the Borrower's claim in the APS bankruptcy case; (s) sales of accounts receivable pursuant to the Clipper Facility (as such term is defined in the Override Agreement), and (h) dispositions of surplus or unneeded property obtained in connection with the Cooper Swap. 7. SECTION 7.9 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.9 DISPOSITION OF STOCK OF SUBSIDIARIES. Schedule 4-4 The Company will not, and will not permit any Subsidiary to, issue, sell or transfer the capital stock of a Subsidiary unless (i) all shares of capital stock of such Subsidiary and all Indebtedness of such Subsidiary owned by the Company and by every other Subsidiary shall simultaneously be sold, transferred or otherwise disposed of, (ii) such Subsidiary does not thereafter own any shares of capital stock or Indebtedness of the Company or another Subsidiary, (iii) such sale would be permitted by Section 7.8, and (iv) the board of directors of the Company shall have made a good faith determination that such sale or transfer is in the best interests of the Company. 8. SECTION 7.10 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.10 PERMITTED INVESTMENTS. The Company will not, and will not permit any Subsidiary to, make any Investment other than a Permitted Investment; provided that the Company shall make no Permitted Investment of the type described in clause (iv), clause (vii) or clause (x) of the definition of Permitted Investment. 9. SECTION 7.14 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.14 GUARANTIES. The Company will not, and will not permit any Subsidiary to, become or be liable in respect to any Guaranties of Indebtedness, except Guaranties of the Indebtedness outstanding under the Notes, the 1989 Notes, the 1995 Notes, the Bank Loan Agreement and the CIBC Other Credits (as such terms are defined in the Override Agreement). 10. A NEW SECTION 7.15 IS HEREBY ADDED TO THE EXISTING NOTE AGREEMENT AS FOLLOWS: 7.15 LIMITS ON MANAGEMENT COMPENSATION. Make or permit any material change from the 1997 Management Compensation Plan as approved by the Company's Board of Directors 11. SECTION 5.1 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED BY ADDING THERETO, IN PROPER ALPHABETICAL ORDER, THE FOLLOWING DEFINED TERM: Override Agreement -- That certain Override Amendment Agreement between you and the Company, dated as of March 27, 1998. Schedule 4-5 EX-10.19 5 OVERRIDE AND AMENDMENT AGREEMENT EXHIBIT 10.19 OVERRIDE AND AMENDMENT AGREEMENT This OVERRIDE AND AMENDMENT AGREEMENT (this "Agreement") is made and entered into as of March 27, 1998, by and among STANDARD MOTOR PRODUCTS, INC. (the "Company") and each of the entities set forth on the signature pages hereto (collectively, the "1995 Noteholders"). All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Note Purchase Agreement dated as of December 1, 1995 (as amended from time to time prior to the date hereof, the "Existing Note Agreement", and as modified and overridden hereby, the "Note Agreement") among the Company and the 1995 Noteholders (or their respective predecessors in interest). R E C I T A L S --------------- WHEREAS, the Company has requested that the 1995 Noteholders agree to certain modifications to the Existing Note Agreement; and consent to the Cooper Swap, the Cooper Financing, the Service Line Transaction and the Fuel Pump Transaction; and WHEREAS, the 1995 Noteholders are willing to make such modifications and consent to the Cooper Swap, the Cooper Financing, the Service Line Transaction and the Fuel Pump Transaction, but only upon full and complete compliance by the Company with the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the terms and conditions contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: DEFINITIONS. As used in this Agreement, the following terms shall have the following respective meanings (or the meanings set forth in the Section of this Agreement referred to opposite such term) and the following definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined. Terms used herein and not defined shall have the respective meanings ascribed to them in the Note Agreement. ACCEPTABLE REPLACEMENT FACILITY -- shall mean, collectively, one or more financing transactions with one or more banks, insurance companies or other institutional investors, which transactions, (i) constitute, in the aggregate, a legally binding commitment to provide to the Company unsecured revolving credit and/or term debt and/or equity financing in an aggregate amount of at least $100,000,000 and having a maturity not earlier than two years from the date the full $100,000,000 first becomes available to the Company; and (ii) do not (individually or in the aggregate) violate any provision of the Note Agreement in effect at the time any of such transactions is entered into. AGREEMENT -- the introductory paragraph hereof. AMENDMENT FEE -- one and one half percent (1.50%) of the outstanding principal amount of the Notes. BANK LOAN AGREEMENT -- the Revolving Credit and Guaranty Agreement dated as of March 30, 1998 among the Company as borrower, certain of its subsidiaries as guarantors, the Banks as lenders, The Chase Manhattan Bank, as Administrative Agent, and The Bank of New York, as Documentation Agent, as in effect on the date hereof. BANKS -- The Chase Manhattan Bank, The Bank of New York, Fleet Bank, National Association, NBD Bank, Comerica Bank, and Canadian Imperial Bank of Commerce. CIBC OTHER CREDITS -- the term loan in the outstanding principal amount of CDN $20,000,000 extended by Canadian Imperial Bank of Commerce to SMP Motor Products, Inc., and the letter of guaranty by Canadian Imperial Bank of Commerce for the account of SMP Motor Products, Inc., in the aggregate amount of CDN $60,000 evidenced by letter of guarantee No. T374406000 issued December 30, 1996, as in effect on the date hereof. CLIPPER FACILITY -- collectively, the Purchase and Sale Agreement dated as of March 19, 1997 between the Company and SMP Credit Corp., the Receivables Purchase Agreement dated as of March 19, 1997 among SMP Credit Corp., the Company, Clipper Receivables Corporation, State Street Boston Capital Corporation and State Street Bank and Trust Company and any other instrument or agreement executed and delivered in connection therewith, in each case as in effect on the date hereof. COMPANY -- the introductory paragraph hereof. COOPER -- collectively, Cooper Industries, Inc., an Ohio corporation, Cooper Industries (Canada) Inc., Moog Automotive Company, a Delaware corporation and Moog Automotive Products, Inc., a Missouri corporation. COOPER FINANCING -- a $22,500,000 loan from Cooper to the Company substantially on the terms set forth in that certain letter from Michael J. Bailey to Brad McWilliams, dated January 28, 1998. COOPER SWAP -- the proposed exchange of the assets of the Company's brake division for the assets of Cooper's climate control division, as more particularly described in the "Standard Motor Products, Inc. Cooper Swap Deal Summary" signed on behalf of both the Company and Cooper on March 17, 1998, and all transactions between Cooper and its subsidiaries and the Company and its Subsidiaries related to such exchange. COSTS AND EXPENSES -- Section 10. CREDIT EXTENSION DATE -- October 31, 1998; PROVIDED that if on October 31, 1998 the Company is in compliance with Sections 6.15 and 6.16 of the Bank Loan Agreement, the -2- Credit Extension Date shall be November 30, 1998; and PROVIDED FURTHER that if (a) the Maturity Date (as defined in the Bank Loan Agreement) is extended beyond November 30, 1998 and (b) the Banks receive no permanent reduction of the Tranche A Commitment (as defined in the Bank Loan Agreement), no collateral, and no increase in interest rates or fees as a result of such extension, the Credit Extension Date will be extended to the earlier of the extended Maturity Date under the Bank Loan Agreement or the date on which an Event of Default shall exist. EFFECTIVE DATE -- Section 6. EVENT OF DEFAULT -- means and includes any "Event of Default" as defined in the Note Agreement. EXISTING NOTE AGREEMENT -- the introductory paragraph hereof. FUEL PUMP TRANSACTION -- the proposed sale by the Company of certain assets of its fuel, pump product line, as more particularly described on Schedule 2 hereto. GUARANTORS -- Reno Standard, Incorporated, a Nevada corporation, Stanric, Inc., a Delaware corporation and Mardevco Credit Corp., a New York corporation. INVESTMENT GRADE RATING -- a long term unsecured debt rating (which may be a private rating) of BBB- or better by Standard & Poor's, Duff & Phelps or Fitch IBCA, Inc., a rating of Baa3 or better by Moody's Investors Services, or such other rating as shall be reasonably acceptable to the holders of all of the Notes. 1989 NOTEHOLDERS -- the holders of the Company's $30,000,000 aggregate principal amount Notes, due November 1, 2004 (the "1989 Notes") issued pursuant to Note Agreement dated as of October 15, 1989, as amended. 1992 NOTEHOLDERS -- the holders of the Company's $46,428,572 aggregate principal amount Notes, due December 15, 2002 (the "1992 Notes") issued pursuant to Note Agreement dated as of December 15, 1992, as amended. NOTE AGREEMENT -- the introductory paragraph hereof. NOTES -- the $73,000,000 aggregate principal amount Notes due February 25, 2006 issued pursuant to the Note Agreement. OTHER DOCUMENTS -- Section 7(a). REQUIRED HOLDERS -- means, at any time, the holders of more than fifty percent (50%) in aggregate principal amount of the Notes at the time outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary or any Affiliate). -3- SERVICE LINE TRANSACTION -- the proposed sale by the Company of its Service Line division, as more particularly described on Schedule 2 hereto. SUBSIDIARY GUARANTY -- that certain guaranty of the Notes, dated the date hereof, executed by the Guarantors. INTENTIONALLY OMITTED. CONSENT TO CERTAIN TRANSACTIONS. Subject to Section 6 of this Agreement, the 1995 Noteholders hereby consent to the Cooper Swap, the Cooper Financing, the Service Line Transaction and the Fuel Pump Transaction, provided that each such transaction is consummated (a) substantially in accordance with the descriptions thereof set forth in Schedule 2 hereto, and (b) the net after-tax cash proceeds, if any, of such dispositions are utilized for nonpermanent reductions of the amounts outstanding under the Bank Loan Agreement and for working capital. Other than the Amendment Fee payable in connection with this Agreement, no fee shall be payable by the Company to the holders of the Notes in connection with such transactions. PAYMENTS OF INTEREST. The Company acknowledges and agrees that: The aggregate outstanding principal amount of the Notes on the date hereof is $73,000,000. Prior to April 1, 1998, interest on the Notes shall accrue in accordance with the terms of the Existing Note Agreement. From and after April 1, 1998, interest on the outstanding principal amount of the Notes shall accrue at the rate of 8.06% per annum, and interest shall accrue on any overdue principal, overdue Make-Whole Amount and (to the extent legally enforceable) on any overdue installment of interest on the Notes at a rate per annum equal to the greater of 10.06% or 3.25% over the prime rate of The Chase Manhattan Bank (or its successors) from time to time in effect. The rate of interest then payable upon the Notes shall decrease to 7.31% per annum on the first day on which the Company shall have achieved an Investment Grade Rating and no Default or Event of Default shall exist. Upon the first to occur of (i) the closing of an Acceptable Replacement Facility, or (ii) the Company's being in compliance with all covenants contained in Section 7 of the Note Agreement at all times during the fourth fiscal quarter of 1998 and the first fiscal quarter of 1999, and, in either event, no Default or Event of Default shall then exist, the rate of interest then payable upon the Notes shall decrease by 0.50% per annum; provided that the rate of interest shall never be less than 7.31% per annum. The rate of interest then payable upon the Notes shall increase by 0.25% per annum on October 1, 1998 if Consolidated EBITDA (as defined in Section 3 of Schedule 3 to this Agreement) for the first three fiscal quarters of 1998 is not at least $48,371,000 on a cumulative basis and the Company has not earlier obtained an Investment Grade Rating. -4- (c) Accrued interest on the outstanding principal balance of the Notes shall be payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year beginning June 30, 1998. (d) For purposes of computing the Make-Whole Amount due at any time with respect to the Notes, the rate of interest payable on the Notes shall be assumed to be the rate determined in accordance with the Existing Note Purchase Agreement rather than the rate determined in accordance with Section 4(b) above. (e) The provisions of this Section 4 shall override and permanently supersede any provisions to the contrary contained in the Existing Note Agreement and the Notes, and the Existing Note Agreement and the Notes are hereby deemed amended to be consistent with this Section 4. CERTAIN COVENANTS AND AGREEMENTS. (a) OVERRIDE OF CERTAIN COVENANTS. During the period from the Effective Date through September 30, 1998, Sections 7.1 and 7.4 of the Existing Note Agreement are hereby overridden and replaced by the financial covenants set forth in Schedule 3 to this Agreement. A breach of any of the covenants set forth on Schedule 3 shall constitute an immediate Event of Default under the Note Agreement; provided that no acceleration of the Notes may be effected as a result of any such breach unless the holders of a majority in aggregate principal amount of the Notes, the 1989 Notes and the 1992 Notes (voting as a single class) shall have consented in writing to such acceleration. On October 1, 1998, the covenants hereby overridden shall once again be in full force and effect and the enforcement rights of the 1995 Noteholders shall be as set forth in the Note Agreement without giving effect to this Section 5(a). The provisions of this Section 5(a) shall override and supersede any provisions to the contrary contained in the Existing Note Agreement and the Notes. (b) AMENDMENT OF CERTAIN COVENANTS. During the period from the Effective Date through September 30, 1998, certain covenants and related definitions in the Existing Note Agreement are amended in the manner set forth on Schedule 4 to this Agreement. A breach of any of such amended covenants shall constitute an immediate Event of Default under the Note Agreement. On October 1, 1998, such amendments shall terminate, and the covenants and definitions hereby amended shall once again be in full force and effect as set forth in the Existing Note Agreement. (c) ADDITIONAL COVENANTS. The Company covenants with the 1995 Noteholders as follows. A failure to comply with any of the covenants set forth in this Section 5(c) shall constitute an immediate Event of Default under the Note Agreement. The Company shall not at any time pay any additional consideration to any Bank, in respect of any financial accommodation required to be made available by such Bank pursuant to the Bank Loan Agreement as in effect on the Effective Date, without making a proportionate payment at such time (based on relative principal -5- amounts then outstanding) in respect of the Notes, the 1989 Notes and the 1992 Notes. Additional consideration which would require a proportionate payment to the 1995 Noteholders pursuant to this subsection would include, without limitation, an increase in interest rate, or an increase or imposition (as the case may be) of any commitment fee, facility fee, or amendment fee, but would not include the payment of fees, interest rate stepups or other amounts provided for in the Bank Loan Agreement and usual and customary fees for administrative matters. On or before the Credit Extension Date, the Company shall have entered into an Acceptable Replacement Facility. The Company shall not at any time permit a permanent reduction of the Tranche A Commitment under (and as defined in) the Bank Loan Agreement (it being agreed that reductions contemplated by Sections 6.18, 6.19 and 6.20 of the Bank Loan Agreement shall not be deemed to constitute reductions of the Tranche A Commitment); provided that: (1) the Company may permit such a reduction if, contemporaneously therewith, the Company makes a proportionate payment (based on relative principal amounts then outstanding) in respect of the Notes, the 1989 Notes and the 1992 Notes; and (2) the Company may effect such a reduction in connection with the replacement of the Bank Loan Agreement by an Acceptable Replacement Facility. The Cooper Swap and the Cooper Financing shall be consummated not later than April 15, 1998. Any reserve for losses from discontinued operations at any time established by the Company shall be applied only to losses related to the specific discontinued operation for which such reserve was originally established, and to no other losses. As soon as practicable the Company shall furnish to each holder of the Notes the Company's strategic plan, including, when available, all material modifications thereto, and make its senior officers available to discuss the same with the holders of the Notes. (d) LIMITED CROSS DEFAULT TO BANK LOAN AGREEMENT. Notwithstanding anything in the Existing Note Agreement to the contrary, a failure to comply with any covenant contained in Section 5 or Section 6 of the Bank Loan Agreement during the period from the Effective date through October 31, 1998 shall not constitute an Event of Default under the Note Agreement so long as the Banks have not (i) accelerated the maturity of their indebtedness, or (ii) taken any enforcement action against the Company, (iii) terminated or reduced any of the Commitments (as defined in the Bank Loan Agreement), it being agreed -6- that reductions contemplated by Sections 6.18, 6.19 and 6.20 of the Bank Loan Agreement shall not be deemed to constitute reductions of the Tranche A Commitment, or (iv) failed to make a requested advance under the Bank Loan Agreement. CONDITIONS TO EFFECTIVENESS OF AGREEMENT. The effectiveness of this Agreement shall be subject to and conditioned upon satisfaction of all of the following conditions precedent (the date of such satisfaction being herein referred to as the "Effective Date"). REPRESENTATIONS AND WARRANTIES TRUE. The warranties and representations set forth in Section 7 hereof shall be true and correct on and as of the Effective Date. AUTHORIZATION OF TRANSACTIONS. The execution and delivery by the Company and the Guarantors of this Agreement, the Subsidiary Guaranty and each of the documents executed and delivered in connection herewith and therewith, shall have been duly authorized by all necessary corporate action. EXECUTION AND DELIVERY OF THIS AGREEMENT. The Company and the holders of all of the Notes shall have executed and delivered a counterpart of this Agreement. OTHER AMENDMENTS. The Company shall have entered into agreements substantially to the same effect as this Agreement with the 1989 Noteholders and the 1992 Noteholders, and such agreements shall be satisfactory to the 1995 Noteholders in all respects. OTHER FINANCING. The transactions contemplated by the Bank Loan Agreement shall have closed; and the 1995 Noteholders shall have satisfied themselves that the Clipper Facility is in full force and effect. SUBSIDIARY GUARANTY. Each of the Guarantors shall have unconditionally guarantied the Company's obligations under the Note Purchase Agreement and the Notes by executing and delivering to each 1995 Noteholder a counterpart of the Subsidiary Guaranty. PAYMENT OF INTEREST. The Company shall have paid all interest on the Notes accrued or accruing through March 31, 1998. AMENDMENT FEE. The Company shall have paid the Amendment Fee to the 1995 Noteholders. FINANCIAL AND OPERATING INFORMATION. The 1995 Noteholders shall have received copies of such financial statements, projections, budgets, reports, agings -7- and other financial and business information relating to the Company as they may have reasonably requested, all in form and substance satisfactory to the 1995 Noteholders. COMPANY COUNSEL'S OPINION. The 1995 Noteholders shall have received from Kelley Drye & Warren LLP, special counsel for the Company, a closing opinion dated the Effective Date in form and substance satisfactory to the 1995 Noteholders. The Company hereby requests and directs such counsel to deliver such closing opinion to the 1995 Noteholders. PAYMENT OF EXPENSES. The Company shall have paid all of the Costs and Expenses, including, without limitation, the fees of Hebb & Gitlin and The Finley Group billed as of the Effective Date. PROCEEDINGS SATISFACTORY. All proceedings taken in connection with this Agreement and the Other Documents and all documents and papers relating thereto shall be reasonably satisfactory to the 1995 Noteholders and their special counsel. The 1995 Noteholders and their special counsel shall have received copies of such documents and papers as they may reasonably request in connection therewith. REPRESENTATIONS AND WARRANTIES. To induce the 1995 Noteholders to enter into this Agreement, the Company warrants and represents as follows: ORGANIZATION, EXISTENCE AND AUTHORITY. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New York, and has all requisite power and authority (a) to execute and deliver (i) this Agreement and (ii) each of the other documents and instruments to be executed by it as contemplated by this Agreement (collectively referred to herein as the "Other Documents") and (b) to perform its respective obligations under this Agreement, the Note Agreement and the Other Documents. LITIGATION. Except for proceedings which have been adequately reserved for in the Company's financial statements delivered to the holders of the Notes, there are no proceedings pending, or to the knowledge of the Company threatened, against or affecting the Company or any Subsidiary or any of their respective properties in any court or before any governmental authority or arbitration board or tribunal which, either individually or in the aggregate, could (i) have a Material Adverse Effect, or (ii) conflict with or interfere with the ability of the Company to execute and deliver this Agreement or any of the Other Documents or to perform its obligations hereunder and thereunder. -8- AUTHORIZATION, EXECUTION AND ENFORCEABILITY. THE COMPANY. The execution and delivery by the Company of this Agreement and the Other Documents and the performance by it of its obligations under this Agreement, the Note Agreement and the Other Documents have been duly authorized by all necessary action on the part of the Company. This Agreement and the Other Documents have been duly executed and delivered by the Company. Each of this Agreement, the Note Agreement and the Other Documents is a valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms, except that the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws affecting the enforceability of creditors' rights generally; and subject to the availability of equitable remedies. GUARANTORS. The execution and delivery of the Subsidiary Guaranty by each Guarantor and the performance by it of its obligations thereunder has been duly authorized by all necessary action on the part of each Guarantor. The Subsidiary Guaranty has been duly executed and delivered by each Guarantor, and is a valid and binding obligation of each Guarantor enforceable in accordance with its terms, except that the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws affecting the enforceability of creditors' rights generally, and subject to the availability of equitable remedies. NO CONFLICTS OR DEFAULTS. Neither the execution and delivery by the Company of this Agreement and the Other Documents, nor the performance by the Company of its obligations under this Agreement, the Note Agreement and the Other Documents, conflicts with, results in any breach in any of the provisions of, constitutes a default under, violates, or results in the creation of any Lien upon any property of the Company under the provisions of: the certificate of incorporation of the Company; any agreement, instrument or conveyance to which the Company or any of its properties may be bound; or any statute, rule or regulation or any order, judgment or award of any court, tribunal or arbitrator by which the Company or any of its respective properties may be bound. -9- GOVERNMENTAL CONSENT. Neither the execution and delivery by the Company of this Agreement and the Other Documents, nor the performance by the Company of its obligations under this Agreement, the Note Agreement and the Other Documents, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Company as a condition thereto under the circumstances and conditions contemplated by this Agreement. DISCLOSURE OF DEFAULTS UNDER NOTE AGREEMENTS AND OTHER AGREEMENTS. There exists no Default or Event of Default under the Existing Note Agreement. After giving effect to this Agreement, the similar agreements with the 1989 Noteholders and the 1992 Noteholders, the Bank Loan Agreement, and the amendments made contemporaneously herewith to the CIBC Other Credits, neither the Company nor any Subsidiary shall be in default with respect to any indebtedness for borrowed money or any contract which is material to the business of the Company or any Subsidiary. COMPLIANCE WITH LAW. Neither the Company nor any Subsidiary: is in violation of any law, ordinance, governmental rule or regulation to which it is subject; or has failed to obtain any license, permit, franchise or other governmental authorization necessary to the ownership of its property or to the conduct of its business; which violation or failure to obtain might, either individually or in the aggregate, (i) have a Material Adverse Effect, or (ii) materially adversely affect the ability of the Company to perform its obligations under this Agreement, the Note Agreement or the Other Documents. SOLVENCY. After giving effect to this Agreement, to the best of the Company's knowledge, the fair saleable value of the assets of the Company, taken as a whole, exceeds, as of the Effective Date, the liabilities of the Company, taken as a whole as of such date. After giving effect to this Agreement, the Company will be able to meet its liabilities as they mature. The Company is entering into this Agreement without any intent to hinder, delay or defraud either current creditors or future creditors. NO IMPLIED AMENDMENT. The actions taken in Sections 3 and 5 hereof shall be limited precisely as written, and neither such actions nor any other provision of this Agreement shall, or shall be deemed or construed to: -10- be a consent to any other amendment or modification of any term, provision or condition of the Existing Note Agreement, impose upon any holder of Notes any obligation, express or implied, to consent to any further amendment or further modification of the Note Agreement, or be a consent to any waiver of any Event of Default. ACKNOWLEDGEMENT OF VALIDITY AND ENFORCEABILITY OF NOTE AGREEMENT The Company acknowledges and agrees that the Note Agreement and the Notes constitute legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar law affecting creditors' rights generally, and the Company expressly reaffirms its obligations under the Note Agreement. COSTS AND EXPENSES. Without in any way limiting the duties of the Company under Section 11.1 of the Note Agreement, the Company shall pay or, if paid by any holder of Notes reimburse such holder for, all reasonable out-of-pocket fees, costs and expenses (including reasonable fees of Hebb & Gitlin) paid or incurred by any holder of Notes in connection with the consideration, negotiation, preparation, drafting, implementation, amendment, modification, administration and enforcement of this Agreement, the Note Agreement, the Notes and the Other Documents, and for auditing, appraising, evaluating or otherwise monitoring any collateral or other credit support which at any time may secure the Notes (all such fees, costs and expenses, whether incurred in connection with this Agreement, the Note Agreement, any amendment or otherwise, being "Costs and Expenses"). All Costs and Expenses shall be due and payable by the Company fifteen (15) days following the Company's receipt of an invoice in reasonable detail reflecting such Costs and Expenses. Without limiting the generality of the foregoing, on the Effective Date the Company shall pay all Costs and Expenses for which an invoice in reasonable detail has been received, including, but not limited to, the statement for reasonable fees and disbursements of Hebb & Gitlin, the 1995 Noteholders' special counsel, and The Finley Group, the 1995 Noteholders' financial advisor. -11- AMENDMENTS; WAIVERS. No amendment or modification of any provision of this Agreement shall be effective without the written agreement of the Required Holders and the Company, and no termination or waiver of any provision of this Agreement, or consent to any departure therefrom, shall in any event be effective without the written concurrence of the Required Holders; provided that any waiver or amendment of Section 4 of this Agreement shall require the written consent of the holders of all of the Notes; and any amendment of Section 5(c)(ii) of this Agreement or the defined term "Acceptable Replacement Facility" may be effected only with the written agreement of the holders of a majority in aggregate principal amount of the Notes, the 1989 Notes and the 1992 Notes voting as a single class. No notice to or demand upon the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. Any failure, at any time or times hereafter, to require strict performance by the Company of any provision or term of this Agreement or the Note Agreement shall not waive, affect or diminish any right of any holder of Notes thereafter to demand strict compliance and performance herewith or therewith. BENEFIT. This Agreement shall be binding upon and shall inure to the benefit of the 1995 Noteholders and the Company and their respective successors and assigns. This Agreement is solely for the benefit of the parties hereto and their respective successors and assigns, and no other Person shall have any right, benefit or interest under or because of the existence of this Agreement. GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to conflict of law principles of such state other than General Obligations Law ss. 5-1401. ASSIGNMENT. This Agreement shall not be assignable by the Company without the written consent of the 1995 Noteholders. The 1995 Noteholders may assign to one or more Persons all or any part of, or any participation interest in, its rights and benefits hereunder in connection with an assignment of, or sale of a participation interest in, the Notes held by it. SECTION HEADINGS. The titles of the Sections and subsections hereof appear as a matter of convenience only, do not constitute a part of this Agreement and shall not affect the construction hereof. COUNTERPARTS. -12- This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on their behalf by a duly authorized officer or agent thereof, as the case may be, as of the date first above written. STANDARD MOTOR PRODUCTS, INC. By____________________________________________ Name: Title: METROPOLITAN LIFE INSURANCE COMPANY By____________________________________________ Name: Title: By____________________________________________ Name: Title: CONNECTICUT GENERAL LIFE INSURANCE COMPANY By CIGNA Investments, Inc. By____________________________________________ Name: Title: CONNECTICUT GENERAL LIFE INSURANCE COMPANY, ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS By CIGNA Investments, Inc. -13- By____________________________________________ Name: Title: CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY By CIGNA Investments, Inc. By____________________________________________ Name: Title: LIFE INSURANCE COMPANY OF NORTH AMERICA By CIGNA Investments, Inc. By____________________________________________ Name: Title: THE TRAVELERS INSURANCE COMPANY By____________________________________________ Name: Title: AMERICAN UNITED LIFE INSURANCE COMPANY By____________________________________________ Name: Title: SCHEDULE 1 INTENTIONALLY OMITTED Schedule 1-1 SCHEDULE 2 DESCRIPTION OF COOPER SWAP, FUEL PUMP TRANSACTION AND SERVICE LINE TRANSACTION I. Cooper Financing: See definition in Section 1. II. Cooper Swap: See definition in Section 1. Schedule 2-1 SCHEDULE 3 OVERRIDE COVENANTS Capitalized terms used in this Schedule 3 and not defined shall have the meanings ascribed to such terms in the Bank Loan Agreement. 1. TANGIBLE NET WORTH. During each of the fiscal quarters set out below, the Company will not allow the remainder of Tangible Net Worth to be less than the amount set forth opposite such quarter: 1st Quarter 1998 $143,000,000 2nd Quarter 1998 $145,000,000 3rd Quarter 1998 $150,000,000 2. NET SALES. During each of the fiscal quarters set out below, Net Sales of the Company and its Subsidiaries shall be not less than the amount set forth below opposite such period: 1st Quarter 1998 $145,000,000 2nd Quarter 1998 $167,000,000 3rd Quarter 1998 $153,000,000 3. CUMULATIVE EBITDA. EBITDA on a cumulative basis for the periods set out below shall be not less than the amounts set out below opposite such period: First Quarter 1998 $ 8,300,000 First Two Quarters 1998 $22,400,000 First Three Quarters 1998 $36,300,000 4. CAPITAL EXPENDITURES. Schedule 3-1 Capital Expenditures of the Company and its Subsidiaries on a cumulative basis shall not be in excess of the following amounts as of the end of the period set out below opposite such amount: First Quarter 1998 $ 4,100,000 First Two Quarters 1998 $ 9,700,000 First Three Quarters 1998 $ 13,300,000 Schedule 3-2 SCHEDULE 4 AMENDMENTS TO EXISTING COVENANTS 1. SECTION 7.2(A) OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.2 INDEBTEDNESS. (a) From and after March 31, 1998, neither the Company nor any Subsidiary shall incur or in any manner become liable in respect of any Funded Debt or Current Debt except: the Notes, the 1989 Notes (as defined in the Override Agreement) and the 1992 Notes (as defined in the Override Agreement), Funded Debt or Current Debt outstanding pursuant to The Bank Loan Agreement and the Cooper Financing (as such terms are defined in the Override Agreement) (the "Bank Loan Agreement" and the "Cooper Financing" respectively), Funded Debt owed to the Company or a Wholly-Owned Subsidiary, Funded Debt secured by purchase money Liens or Capitalized Leases, provided that the aggregate principal amount thereof does not exceed $6,000,000, Funded Debt and Current Debt the payment of which is subordinated to the payment of the Notes pursuant to subordination provisions acceptable to you in all respects, the CIBC Other Credits (as defined in the Override Agreement), obligations outstanding under the Clipper Facility (as such term is defined in the Override Agreement) not to exceed $25,000,000, Funded Debt or Current Debt of Intermotor Holdings Ltd. ( a corporation organized under the laws of the United Kingdom), provided that the principal amount thereof does not exceed (pound) 5,000,000 over the amount such entity is presently permitted to borrow pursuant to the terms of its credit facility Schedule 4-1 with The Royal Bank of Scotland, and none of such indebtedness is guarantied by the Company or any Subsidiary (the "Intermotor Loan"), and indebtedness associated with a consignment of $15,000,000 of inventory arising in connection with the Cooper Swap. 2. SECTION 7.3 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.3 SUBSIDIARY INDEBTEDNESS. The Company will not permit any Subsidiary to create, assume, incur or otherwise become liable for, directly or indirectly, any Indebtedness, other than (i) Indebtedness of a Subsidiary to the Company or a Wholly-Owned Subsidiary, (ii) Guaranties of the Notes, the 1989 Notes, the 1992 Notes and the Indebtedness outstanding pursuant to the Bank Loan Agreement and the Cooper Financing , (iii) the CIBC Other Credits (as such term is defined in the Override Agreement), (iv) the Intermotor Loan, and (v) obligations of SMPJ Credit Corp. in respect of the Clipper Facility. 3. SECTION 7.5 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.5 LIENS. The Company will not, and will not permit any Subsidiary to, permit to exist, create, assume or incur, directly or indirectly, any Lien on its properties or assets, whether now owned or hereafter acquired, except: Liens existing on property or assets of the Company or any Subsidiary as of the date of this Agreement that are described on Schedule 3.06 of the Bank Loan Agreement; Liens for taxes, assessments or governmental charges not then due and delinquent or the validity of which is being contested in good faith and as to which the Company has established adequate reserves on its books; Deposits or pledges in connection with or to secure payment of workers' compensation, unemployment insurance, old-age pensions or other social security, or in connection with the good faith contest of any tax Lien; Schedule 4-2 Construction, mechanics', materialmen's or warehousemen's Liens securing obligations not due or, if overdue, being contested in good faith by appropriate proceedings; Liens arising in connection with court proceedings, provided the execution of such Liens is effectively stayed, such Liens are being contested in good faith and the Company has established adequate reserves therefor on its books; Liens arising in the ordinary course of business and not incurred in connection with the borrowing of money (including encumbrances in the nature of zoning restrictions, easements, rights and restrictions of record on the use of real property and landlord's and lessor's liens) that in the aggregate do not materially interfere with the conduct of the business of the Company and its Subsidiaries taken as a whole or materially impair the value of the property or assets subject thereto; Liens securing Indebtedness of a Subsidiary to the Company or to a Wholly-Owned Subsidiary; Liens or Capitalized Leases on fixed assets created within twelve (12) months of the date of acquisition or improvement thereof to secure or provide for all or a portion of the purchase price or cost of construction or improvement of such fixed assets, PROVIDED that such Liens do not extend to other property of the Company or any Subsidiary, the incurrence of the Indebtedness secured by such Liens is otherwise permitted by this Agreement, and the aggregate principal amount of Indebtedness secured by such Liens does not exceed $6,000,000; Liens upon receivables sold pursuant to the Clipper Facility (as such term is defined in the Override Agreement). Liens securing the Intermotor Loan, provided that such Liens encumber only the property of Intermotor Holdings Limited; and a consignment of $15,000,000 of inventory arising in connection with the Cooper Swap. 4. SECTION 7.6 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.6 RESTRICTED PAYMENTS. Schedule 4-3 The Company will not declare or make any Restricted Payment unless, after giving effect thereto, (a) no Default or Event of Default would exist, (b) the Company would be in compliance with Section 6.06 of the Bank Loan Agreement. 5. SECTION 7.7 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.7 MERGER OR CONSOLIDATION. Except for the Cooper Swap (as defined in the Override Agreement), the Company will not, and will not permit any Subsidiary to, merge or consolidate with, or sell all or substantially all of its assets to, any Person, except that any Subsidiary may (i) merge into the Company or a Wholly-Owned Subsidiary or (ii) sell, transfer or lease all or any part of its assets to the Company or to a Wholly-Owned Subsidiary or (iii) merge into any Person which, as a result of such merger, becomes a Wholly-Owned Subsidiary; provided in each such instance that immediately after giving effect thereto there shall exist no Default or Event of Default. 6. SECTION 7.8 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.8 SALE OF ASSETS; SALE OF RECEIVABLES. The Company will not, and will not permit any Subsidiary to, sell, lease, transfer or otherwise (including by way of merger) dispose of (collectively a "Disposition") any assets (including capital stock of Subsidiaries) in one or a series of transactions to any Person other than the Company or a Wholly-Owned Subsidiary other than: sales of inventory in the ordinary course of business; Dispositions of other properties no longer used or useful in the business, provided that all such Dispositions shall be for fair market value, and the aggregate fair market value of the properties so disposed of does not exceed $5,000,000; the Cooper Swap (as such term is defined in the Override Agreement); the Service Line Transaction (as such term is defined in the Override Agreement); the Fuel Pump Transaction (as such term is defined in the Override Agreement); Schedule 4-4 the sale or compromise of the Borrower's claim in the APS bankruptcy case; sales of accounts receivable pursuant to the Clipper Facility (as such term is defined in the Override Agreement); and (h) dispositions of surplus or unneeded property obtained in connection with the Cooper Swap. 7. SECTION 7.9 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.9 DISPOSITION OF STOCK OF SUBSIDIARIES. The Company will not, and will not permit any Subsidiary to, issue, sell or transfer the capital stock of a Subsidiary unless (i) all shares of capital stock of such Subsidiary and all Indebtedness of such Subsidiary owned by the Company and by every other Subsidiary shall simultaneously be sold, transferred or otherwise disposed of, (ii) such Subsidiary does not thereafter own any shares of capital stock or Indebtedness of the Company or another Subsidiary, (iii) such sale would be permitted by Section 7.8, and (iv) the board of directors of the Company shall have made a good faith determination that such sale or transfer is in the best interests of the Company. 8. SECTION 7.10 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.10 PERMITTED INVESTMENTS. The Company will not, and will not permit any Subsidiary to, make any Investment other than a Permitted Investment; provided that the Company shall make no Permitted Investment of the type described in clause (vi) of the definition of Permitted Investment. 9. SECTION 7.13 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS: 7.13 GUARANTIES. The Company will not, and will not permit any Subsidiary to, become or be liable in respect to any Guaranties of Indebtedness, except Guaranties of the Indebtedness outstanding under the Notes, the 1989 Notes, the 1992 Notes, the Bank Loan Agreement and the CIBC Other Credits (as such term is defined in the Override Agreement). Schedule 4-5 10. A NEW SECTION 7.14 IS HEREBY ADDED TO THE EXISTING NOTE AGREEMENT AS FOLLOWS: 7.14 LIMITS ON MANAGEMENT COMPENSATION. Make or permit any material change from the 1997 Management Compensation Plan as approved by the Company's Board of Directors 11. SECTION 5.1 OF THE EXISTING NOTE AGREEMENT IS HEREBY AMENDED BY ADDING THERETO, IN PROPER ALPHABETICAL ORDER, THE FOLLOWING DEFINED TERM: Override Agreement -- That certain Override Amendment Agreement between you and the Company, dated as of March 27, 1998. Schedule 4-6 Schedule 4-7 EX-10.20 6 REVOLVING CREDIT AGREEMENT EXHIBIT 10.20 ================================================================================ ================================================================================ REVOLVING CREDIT AND GUARANTY AGREEMENT ================================================================================ ================================================================================ Among STANDARD MOTOR PRODUCTS, INC. as Borrower, RENO STANDARD INCORPORATED, MARDEVO CREDIT CORP., STANRIC, INC., as Guarantors, THE BANKS PARTY HERETO, and THE CHASE MANHATTAN BANK, as Administrative Agent and THE BANK OF NEW YORK as Documentation Agent ================================================================================ ================================================================================ Dated as of March 30, 1998 ================================================================================ ================================================================================ REVOLVING CREDIT AND GUARANTY AGREEMENT TABLE OF CONTENTS PAGE NO. -------- INTRODUCTORY STATEMENT ....................................................1 SECTION 1. DEFINITIONS. ..................................................3 SECTION 1.01 DEFINED TERMS ..................................3 SECTION 1.02 TERMS GENERALLY................................20 SECTION 2. AMOUNT AND TERMS OF CREDIT...................................20 SECTION 2.01 RESTRUCTURING OF EXISTING EXTENSIONS OF CREDIT.......................................20 SECTION 2.02 COMMITMENT OF THE BANKS........................21 SECTION 2.03 BORROWING BASE.................................21 SECTION 2.04 MAKING OF LOANS................................22 SECTION 2.05 NOTES; REPAYMENT OF LOANS.....................23 SECTION 2.06 INTEREST ON LOANS .............................23 SECTION 2.07 DEFAULT INTEREST .............................24 SECTION 2.08 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENT.....................................25 SECTION 2.09 MANDATORY PREPAYMENT; COMMITMENT TERMINATION....................................25 i SECTION 2.10 OPTIONAL PREPAYMENT OF LOANS; REIMBURSEMENT OF BANKS .........................................26 SECTION 2.11 RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES..27 SECTION 2.12 PRO RATA TREATMENT, ETC........................27 SECTION 2.13 TAXES ........................................28 SECTION 2.14 FACILITY FEES .................................31 SECTION 2.15 AGENTS' FEE ...................................31 SECTION 2.16 NATURE OF FEES ................................31 SECTION 2.17 RIGHT OF SET-OFF ..............................31 SECTION 3. REPRESENTATIONS AND WARRANTIES ................31 SECTION 3.01 ORGANIZATION AND AUTHORITY ....................31 SECTION 3.02 DUE EXECUTION .................................32 SECTION 3.03 STATEMENTS MADE ..............................32 SECTION 3.04 FINANCIAL STATEMENTS ..........................32 SECTION 3.05 OWNERSHIP ....................................33 SECTION 3.06 LIENS ........................................33 SECTION 3.07 COMPLIANCE WITH LAW ...........................33 SECTION 3.08 INSURANCE ....................................34 SECTION 3.09 USE OF PROCEEDS ..............................34 SECTION 3.10 LITIGATION ...................................34 SECTION 3.11 LABOR MATTERS..................................34 SECTION 3.12 OWNERSHIP OF PROPERTY; LIENS ..................34 ii SECTION 3.13 TAXES .........................................34 SECTION 3.14 FILING OF STATEMENTS AND REPORTS...............34 SECTION 3.15 ERISA..........................................35 SECTION 3.16 MATERIAL AGREEMENTS............................35 SECTION 3.17 ENVIRONMENTAL MATTERS..........................35 SECTION 4. CONDITIONS OF LENDING.........................................36 SECTION 4.01 CONDITIONS PRECEDENT TO EFFECTIVENESS OF RESTRUCTURING .................................36 SECTION 4.02 CONDITIONS PRECEDENT TO EACH LOAN ............39 SECTION 5. AFFIRMATIVE COVENANTS.........................................40 SECTION 5.01 FINANCIAL STATEMENTS, REPORTS, ETC. ...........40 SECTION 5.02 CORPORATE EXISTENCE ..........................43 SECTION 5.03 INSURANCE ....................................43 SECTION 5.04 OBLIGATIONS AND TAXES ........................43 SECTION 5.05 NOTICE OF EVENT OF DEFAULT, ETC. ..............44 SECTION 5.06 ACCESS TO BOOKS AND RECORDS ..................44 SECTION 5.07 MAINTENANCE OF BANK ACCOUNTS ..................44 SECTION 5.08 BORROWING BASE CERTIFICATE.....................44 SECTION 5.09 STRATEGIC BUSINESS PLAN........................44 SECTION 5.10 MATERIAL ADVERSE EFFECT........................44 SECTION 5.11 MAINTENANCE OF PROPERTIES .....................45 iii SECTION 5.12 FISCAL YEAR; ACCOUNTING .......................45 SECTION 5.13 COMPLIANCE WITH TERMS OF LEASEHOLD ...........45 SECTION 5.14 RETENTION OF FINANCIAL ADVISORS................45 SECTION 5.15 MAINTENANCE OF CLIPPER RECEIVABLES FINANCING ..45 SECTION 5.16 APPLICATION OF ASSET SALE PROCEEDS.............45 SECTION 5.17 FURTHER ASSURANCES ............................45 SECTION 6. NEGATIVE COVENANTS...........................................46 SECTION 6.01 LIENS ........................................46 SECTION 6.02 MERGER, ETC. .................................46 SECTION 6.03 INDEBTEDNESS ..................................46 SECTION 6.04 CAPITAL EXPENDITURES .........................46 SECTION 6.05 GUARANTEES AND OTHER LIABILITIES ..............47 SECTION 6.06 DIVIDENDS; CAPITAL STOCK ......................47 SECTION 6.07 TRANSACTIONS WITH AFFILIATES ..................47 SECTION 6.08 INVESTMENTS, LOANS AND ADVANCES ...............47 SECTION 6.09 DISPOSITION OF ASSETS ........................48 SECTION 6.10 NATURE OF BUSINESS ............................48 SECTION 6.11 CHARTER AMENDMENTS ............................48 SECTION 6.12 ACCOUNTING CHANGES.............................48 SECTION 6.13 CHANGE IN MANAGEMENT COMPENSATION..............48 SECTION 6.14 MINIMUM CONSOLIDATED TANGIBLE NET WORTH .......48 iv SECTION 6.15 NON-CUMULATIVE EBITDA..........................49 SECTION 6.16 CUMULATIVE EBITDA..............................49 SECTION 6.17 NET SALES......................................49 SECTION 6.18 MAXIMUM LOAN BALANCES..........................49 SECTION 6.19 MAXIMUM PEAK BALANCES..........................50 SECTION 6.20 MAXIMUM BORROWED FUNDS.........................50 SECTION 6.21 SUBSIDIARIES...................................51 SECTION 6.22 ADDITIONAL INTERMOTOR DEBT.....................51 SECTION 6.23 INACTIVE SUBSIDIARIES..........................51 SECTION 7. EVENTS OF DEFAULT............................................51 SECTION 7.01 EVENTS OF DEFAULT ............................51 SECTION 8. THE AGENTS....................................................54 SECTION 8.01 ADMINISTRATION BY AGENTS ....................54 SECTION 8.02 ADVANCES AND PAYMENTS .........................55 SECTION 8.03 SHARING OF SETOFFS ............................55 SECTION 8.04 AGREEMENT OF REQUIRED BANKS ..................56 SECTION 8.05 LIABILITY OF AGENTS ...........................57 SECTION 8.06 REIMBURSEMENT AND INDEMNIFICATION .............57 SECTION 8.07 RIGHTS OF THE AGENTS ..........................58 SECTION 8.08 INDEPENDENT BANKS ............................58 v SECTION 8.09 NOTICE OF TRANSFER ...........................59 SECTION 8.10 SUCCESSOR AGENT ..............................59 SECTION 9. GUARANTY.....................................................59 SECTION 9.01 GUARANTY......................................59 SECTION 9.02 NO IMPAIRMENT OF GUARANTY .....................60 SECTION 9.03 SUBROGATION ...................................60 SECTION 10. MISCELLANEOUS...............................................60 SECTION 10.01 NOTICES ......................................60 SECTION 10.02 SURVIVAL OF AGREEMENT, REPRESENTATIONS AND WARRANTIES, ETC. ..............................61 SECTION 10.03 SUCCESSORS AND ASSIGNS .......................61 SECTION 10.04 CONFIDENTIALITY ..............................63 SECTION 10.05 EXPENSES .....................................64 SECTION 10.06 INDEMNITY ....................................64 SECTION 10.07 CHOICE OF LAW ................................64 SECTION 10.08 NO WAIVER ....................................65 SECTION 10.09 EXTENSION OF MATURITY ........................65 SECTION 10.10 AMENDMENTS, ETC. ..............................65 SECTION 10.11 SEVERABILITY .................................66 SECTION 10.12 HEADINGS .....................................66 SECTION 10.13 EXECUTION IN COUNTERPARTS ....................66 vi SECTION 10.14 PRIOR AGREEMENTS .............................66 SECTION 10.15 FURTHER ASSURANCES ...........................66 SECTION 10.16 WAIVER OF JURY TRIAL .........................66 ANNEX A - COMMITMENT AMOUNTS EXHIBIT A-1 - FORM OF TRANCHE A NOTE EXHIBIT A-2 - FORM OF TRANCHE B NOTE EXHIBIT B - FORM OF OPINION OF COUNSEL EXHIBIT C - FORM OF BORROWING BASE CERTIFICATE EXHIBIT D - FORM OF ASSIGNMENT AND ACCEPTANCE SCHEDULE 2.09(d) - BORROWER'S PERMITTED INVESTMENTS SCHEDULE 3.04 - MATERIAL ADVERSE CHANGES SCHEDULE 3.05 - SUBSIDIARIES SCHEDULE 3.06 - LIENS SCHEDULE 3.10 - LITIGATION SCHEDULE 3.15 - ERISA SCHEDULE 3.16 - MATERIAL AGREEMENTS SCHEDULE 5.07 - EXISTING DEPOSITORY ACCOUNTS SCHEDULE 6.03 - INDEBTEDNESS vii SCHEDULE 6.05 - GUARANTIES AND OTHER LIABILITIES SCHEDULE 6.07 - TRANSACTIONS WITH AFFILIATES SCHEDULE 6.08 - INVESTMENTS viii REVOLVING CREDIT AND GUARANTY AGREEMENT REVOLVING CREDIT AND GUARANTY AGREEMENT, dated as of March 30, 1998 among STANDARD MOTOR PRODUCTS, INC., a New York corporation (the "BORROWER"), RENO STANDARD INCORPORATED, a Nevada corporation, MARDEVCO CREDIT CORP., a New York corporation, and STANRIC, INC., a Delaware corporation (each, a "GUARANTOR" and collectively, the "GUARANTORS"), THE CHASE MANHATTAN BANK ("CHASE"), THE BANK OF NEW YORK ("BNY"), FLEET BANK, NATIONAL ASSOCIATION ("FLEET"), NBD BANK, formerly known as NBD Bank, N.A. ("NBD"), CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC") and COMERICA BANK ("COMERICA" and, together with BNY, Chase, Fleet, NBD and CIBC, the "BANKS") and THE CHASE MANHATTAN BANK, as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT") for the Banks and THE BANK OF NEW YORK, as documentation agent (in such capacity, the "DOCUMENTATION AGENT", and together with the Administrative Agent, the "AGENTS") for the Banks. W I T N E S S E T H : WHEREAS, the Borrower is obligated to Chase in respect of (i) demand loans in the aggregate outstanding principal amount of $3,000,000, together with accrued interest through March 29, 1998 in the amount of $2,125.00 and thereafter in accordance with the agreement between the parties (the "EXISTING CHASE LOANS") evidenced by that certain promissory note dated August 2, 1993 (the "EXISTING CHASE NOTE") and (ii) accrued and unreimbursed fees and expenses in the aggregate amount of $100,215.68 (the "EXISTING CHASE FEES AND EXPENSES" and together with the Existing Chase Loans, the "EXISTING CHASE OBLIGATIONS"); WHEREAS, the Borrower is obligated to BNY in respect of (i) demand loans in the aggregate outstanding principal amount of $9,100,000, together with accrued interest through March 29, 1998 in the amount of $6,779.17 and thereafter in accordance with the agreement between the parties (the "EXISTING BNY LOANS") evidenced by that certain promissory note dated June 14, 1995 (the "EXISTING BNY NOTE") and (ii) letters of credit issued by BNY for the account of the Borrower in the aggregate amount of $553,835 (the "EXISTING BNY L/C OBLIGATION") evidenced by that certain letter of credit No. S00030319 dated March 9, 1994 as amended by that certain amendment to letter of credit dated July 16, 1996 (the "EXISTING BNY L/C"), and (iii) accrued and unreimbursed fees and expenses in the aggregate amount of $0.00 (the "EXISTING BNY FEES AND EXPENSES" and together with the Existing BNY Loans and the Existing BNY L/C Obligation, the "EXISTING BNY OBLIGATIONS"); WHEREAS, the Borrower is obligated to Fleet in respect of (i) demand loans in the aggregate outstanding principal amount of $12,000,000, together with accrued interest through March 29, 1998 in the amount of $6,333.33 and thereafter in accordance with the agreement between the parties (the "EXISTING FLEET LOANS") evidenced by that certain promissory note dated September 30, 1997 (the "EXISTING FLEET NOTE") issued in connection with that certain letter agreement dated -1- July 31, 1996, as amended and (ii) accrued and unreimbursed fees and expenses in the aggregate amount of $9,567.23 (the "EXISTING FLEET FEES AND EXPENSES" and together with the Existing Fleet Loans, the "EXISTING FLEET OBLIGATIONS"); WHEREAS, the Borrower is obligated to NBD in respect of (i) demand loans in the aggregate outstanding principal amount of $13,800,000, together with accrued interest through March 29, 1998 in the amount of $418,765.28 and thereafter in accordance with the agreement between the parties (the "EXISTING NBD LOANS") evidenced by that certain promissory note dated February 28, 1994 (the "EXISTING NBD NOTE") issued in connection with that certain Credit Agreement dated as of December 20, 1991, as amended and (ii) accrued and unreimbursed fees and expenses in the aggregate amount of $13,341.09 (the "EXISTING NBD FEES AND EXPENSES" and together with the Existing NBD Loans, the "EXISTING NBD OBLIGATIONS"); WHEREAS, the Borrower is obligated to CIBC under a Guarantee dated June 7, 1996 in respect of (i) a term loan in the aggregate outstanding principal amount of C$20,000,000, together with accrued interest through March 29, 1998 in the amount of C$0.00 and thereafter in accordance with the agreement between the parties (the "CIBC TERM LOAN") extended by CIBC to SMP Motor Products, Inc. (as successor to Blue Streak-Hygrade Motor Products, Ltd., EIS Brake Manufacturing, Ltd. and Unimotor, Ltd. ("SMP CANADA")) evidenced by that certain promissory note dated May 1, 1996 (the "CIBC TERM NOTE") issued in connection with that certain Credit Agreement dated as of May 1, 1996, as amended, (ii) revolving loans in the aggregate outstanding amount of C$0.00 (the "EXISTING CIBC REVOLVING LOANS") evidenced by that certain promissory note dated May 1, 1996 (the "EXISTING CIBC REVOLVING NOTE") issued in connection with that certain Credit Agreement dated as of May 1, 1996, (iii) a letter of guarantee by CIBC for the account of SMP Canada in the aggregate amount of C$60,000 (the "EXISTING CIBC L/G OBLIGATION") evidenced by that certain letter of guarantee No. T374406000 issued December 30, 1996 (the "EXISTING CIBC L/G") under that certain Credit Agreement dated as of May 1, 1996 and (iv) accrued and unreimbursed fees and expenses in the aggregate amount of $9,336.33 (the "EXISTING CIBC FEES AND EXPENSES" and together with the CIBC Term Loan, the Existing CIBC Revolving Loans and the Existing CIBC L/G Obligation, the "EXISTING CIBC OBLIGATIONS"). WHEREAS, the Borrower is obligated to Comerica in respect of (i) demand loans in the aggregate outstanding principal amount of $15,000,000, together with accrued interest through March 29, 1998 in the amount of $12,499.98 and thereafter in accordance with the agreement between the parties (the "EXISTING COMERICA LOANS" and together with the Existing Chase Loans, the Existing BNY Loans, the Existing Fleet Loans, the Existing NBD Loans and the Existing CIBC Revolving Loans, the "EXISTING LOANS") evidenced by that certain promissory note dated as of February 19, 1998 (the "EXISTING COMERICA NOTE" and together with the Existing Chase Note, the Existing BNY Note, the Existing Fleet Note, the Existing NBD Note and the Existing CIBC Revolving Note, the "EXISTING NOTES") and (ii) accrued and unreimbursed fees and expenses in the aggregate amount of $7,800.00 (the "EXISTING COMERICA FEES AND EXPENSES" and together with the Existing Comerica Loans, the "EXISTING COMERICA OBLIGATIONS") (the Existing Chase Obligations, the Existing BNY Obligations, the Existing Fleet Obligations, the Existing NBD Obligations, the Existing -2- CIBC Obligations and the Existing Comerica Obligations are hereinafter collectively referred to as the "EXISTING OBLIGATIONS"); WHEREAS, concurrently with the execution of the Agreement, the terms of the CIBC Term Loan are being restructured; WHEREAS, the Borrower has requested the Banks, and the Banks have agreed to restructure the Existing Obligations other than the CIBC Term Loan, all on the terms and subject to the conditions set forth herein. NOW, THEREFORE, the parties hereto hereby agree to restructure the Existing Obligations other than the CIBC Term Loan and amend and restate the Existing Loan Documents as follows: SECTION 1. DEFINITIONS. SECTION 1.01 DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings specified below: "ABR" shall mean Alternate Base Rate. "ABR BORROWING" shall mean a Borrowing comprised of ABR Loans. "ABR LOAN" shall mean any Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Section 2. "APS" shall mean APS, Inc. "APS BANKRUPTCY CASE" shall mean the Chapter 11 cases of APS Holding Corp. and APS, Inc. currently pending in the United States Bankruptcy Court for the District of Delaware. "ACCOUNT DEBTOR" shall mean any person who is or who may become obligated to the Borrower or any of its Subsidiaries under, with respect to, or on account of, an Account Receivable. "ACCOUNTS RECEIVABLE" shall mean any and all rights of the Borrower or any of its Subsidiaries to payment for goods sold or leased, including any such right evidenced by chattel paper, or services rendered, whether due or to become due, whether or not it has been earned by performance, and whether now existing or hereafter acquired or arising in the future, which Account Receivable arose from the sale of goods and the rendering of services to unaffiliated parties in the ordinary course of business of the Borrower or its Subsidiaries, and which, to the best knowledge of the Borrower, is in full force and effect and constitutes a legal, valid and binding obligation of the Account Debtor with respect thereto enforceable in accordance with its terms. -3- "ADMINISTRATIVE AGENT" shall have the meaning given such term in the first paragraph of this Agreement. "AFFILIATE" shall mean, as to 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, a Person (a "CONTROLLED PERSON") shall be deemed to be "controlled by" another Person (a "CONTROLLING PERSON") if the Controlling Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of the Controlled Person whether by contract or otherwise. "AGENTS" shall have the meaning given such term in the first paragraph of this Agreement. "AGENTS' FEE" shall have the meaning given such term in Section 2.15 hereof. "AGREEMENT" shall mean this Revolving Credit and Guaranty Agreement, as the same may from time to time be amended, modified or supplemented. "ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof, "PRIME RATE" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced. "BASE CD RATE" shall mean the sum of (a) the quotient of (i) the Three-Month Secondary CD Rate divided by (ii) a percentage expressed as a decimal equal to 100% minus Statutory Reserves and (b) the Assessment Rate. "THREE-MONTH SECONDARY CD RATE" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Administrative Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it. "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any reason, including the inability or failure -4- of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. "AMOUNTS" shall have the meaning given such term in Section 2.13. "ASSESSMENT RATE" shall mean for any date the annual rate (rounded upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the Administrative Agent as the then current net annual assessment rate that will be employed in determining amounts payable by the Administrative Agent to the Federal Deposit Insurance Corporation (or any successor) for insurance by such Corporation (or any successor) of time deposits made in Dollars at the Administrative Agent's domestic offices. "ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance entered into by a Bank and an Eligible Assignee, and accepted by the Documentation Agent, substantially in the form of Exhibit D. "BNY" shall have the meaning given such term in the first paragraph of this Agreement. "BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of 1978, as heretofore and hereafter amended, and codified as 11 U.S.C. Section 101 ET SEQ. "BANKS" shall have the meaning given such term in the first paragraph of this Agreement. "BOARD" shall mean the Board of Governors of the Federal Reserve System of the United States. "BORROWED FUNDS" shall mean, on any day, the sum of (i) the then outstanding principal amount of Loans plus (ii) the then outstanding principal amount of the Cooper Loan. "BORROWER" shall have the meaning given such term in the first paragraph of this Agreement. "BORROWING" shall mean the incurrence of Tranche A Loans or Tranche B Loans made from all the Tranche A Banks or Tranche B Banks on a single date. "BORROWING BASE" shall mean, on any day, an amount equal to (a) the sum of (i) 85% of the then Eligible Accounts Receivable PLUS (ii) 35% of the Inventory PLUS (iii) 50% of PP&E PLUS (iv) 100% of the cash then held by the Borrower and its Subsidiaries in accounts maintained in the continental United States MINUS (b) the Borrowing Base Debt; PROVIDED, that during the period from April 1, 1998 through July 30, 1998, "Borrowing Base" shall mean, on any day during such period, -5- an amount equal to (a) the sum of (i) 85% of the then Eligible Accounts Receivable PLUS (ii) 50% of the Inventory PLUS (iii) 55% of PP&E PLUS (iv) 100% of the cash then held by the Borrower and its Subsidiaries in accounts maintained in the continental United States MINUS (b) the Borrowing Base Debt. The Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered pursuant to Sections 5.08 and 4.02(e), and shall be subject at all times to audit confirmation and review. "BORROWING BASE CERTIFICATE" shall mean a certificate substantially in the form of the Exhibit C (with such changes therein as may be required by the Administrative Agent to reflect the components of, and reserves against, the Borrowing Base as provided for hereunder from time to time), executed and certified by a Financial Officer of the Borrower and accompanied by appropriate supporting documentation that verifies the amounts shown thereon. "BORROWING BASE DEBT" shall mean, on any day, the sum of (i) the then outstanding principal amount of the Cooper Loan (ii) the then outstanding principal amount of the notes issued pursuant to the Note Agreements and (iii) all other long term debt (including the current portion thereof) of the Borrower and its Subsidiaries as set forth on Schedule 6.03 hereof, as same may be reduced from time to time. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other day on which banks in the State of New York are required or permitted to close. "CIBC" shall have the meaning given such term in the first paragraph of this Agreement. "CIBC TERM LOAN" shall have the meaning given such term in the recitals to this Agreement. "CANADIAN LENDER" shall have the meaning given to such term in Section 2.13(a). "CAPITAL EXPENDITURES" shall mean, for any period, the aggregate of all cash expenditures (whether paid in cash or accrued as liabilities during such period and excluding that portion of Capitalized Leases which is capitalized on the consolidated balance sheet of the Borrower and the Guarantors), net of cash amounts received by the Borrower and the Guarantors from other Persons during such period in reimbursement of Capital Expenditures made by the Borrower and the Guarantors, excluding interest capitalized during construction, made by the Borrower and the Guarantors during such period that, in conformity with GAAP, are required to be included in or reflected by the property, plant, equipment or similar fixed asset accounts reflected in the consolidated balance sheet of the Borrower and the Guarantors (including equipment which is purchased simultaneously with the trade-in of existing equipment owned by the Borrower or any of the Guarantors to the extent of the gross amount of such purchase price less the book value of the equipment being traded in at such time), but excluding expenditures made in connection with the replacement or restoration of assets, to the extent reimbursed or financed from insurance proceeds paid on account of the loss of or damage to the assets being replaced or restored, or from awards of compensation arising from the taking by condemnation or eminent domain of such assets being replaced. -6- "CAPITALIZED LEASE" shall mean, as applied to any Person, any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP. "CARL MARKS" shall mean The Carl Marks Consulting Group, Co. "CERTIFICATE" shall have the meaning given such term in Section 4.01(o) hereof. "CLIPPER RECEIVABLES FINANCING AGREEMENT" shall mean, collectively, that certain Purchase and Sale Agreement dated as of March 19, 1997 between the Borrower and SMP Credit Corp., that certain Receivables Purchase Agreement dated as of March 19, 1997 among SMP Credit Corp., the Borrower, Clipper Receivables Corporation, State Street Boston Capital Corporation and State Street Bank & Trust Company and any other instrument or agreement executed and delivered in connection therewith pursuant to which SMP Credit Corp. purchases receivables from the Borrower and sells up to a $25,000,000 interest therein. "CHASE" shall have the meaning given such term in the first paragraph of this Agreement. "CLOSING DATE" shall mean the date on which this Agreement has been executed and the conditions precedent to the making of the initial Loans set forth in Section 4.01 have been satisfied or waived. "CODE" shall mean the Internal Revenue Code of 1986, as from time to time amended. "COMERICA" shall have the meaning given such term in the first paragraph of this Agreement. "COMMITMENTS" shall mean, collectively, the Tranche A Commitments and the Tranche B Commitments. "COOPER" shall mean Cooper Industries, Inc. "COOPER LOAN" shall mean the loan to be made by Cooper or an Affiliate of Cooper to the Borrower in the principal amount of $22,500,000 in connection with the Cooper Transaction, on terms satisfactory to the Required Banks. "COOPER TRANSACTION" shall mean the contemplated exchange of the assets of the brake division of Borrower for the climate control division of Cooper and all transactions between Cooper and its Subsidiaries and the Borrower and its Subsidiaries related to such exchange. "DEFAULT" shall mean any event or condition which constitutes an Event of Default or which, upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "DISCONTINUED OPERATIONS" shall mean the EIS Brake Division and the Service Line. -7- "DOCUMENTATION AGENT" shall have the meaning given such term in the first paragraph of this Agreement. "DOLLARS" shall mean lawful money of the United States of America. "$" shall mean lawful money of the United States of America, except where the letter "C" appears before the dollar sign, as in "C$", which symbol shall mean lawful money of Canada. "EBITDA" shall mean, with respect to the Borrower and its Subsidiaries for any period, all as determined in accordance with GAAP except for the operating results and any reserve adjustments from Discontinued Operations, an amount equal to (i) Net Income for such period PLUS (ii) interest expense PLUS (iii) net total Federal, state, local and foreign income tax expense PLUS (iv) depreciation expense PLUS (v) amortization expense. "ELIGIBLE ACCOUNTS RECEIVABLE" shall mean all Accounts Receivable of the Borrower and its Subsidiaries which are and at all times shall continue to be reasonably acceptable to the Administrative Agent in all respects but (without duplication) shall not include: (i) Accounts Receivable which arise from a sale to an Account Debtor which is not a bona fide, valid or legally enforceable sale of goods or rendition of services or which does not arise from the actual sale and delivery of goods or rendition and acceptance of services in the ordinary course of business to such Account Debtor; (ii) Accounts Receivable which are not free and clear of any and all Liens except for Accounts Receivables subject to a Lien in favor of Clipper Receivables Corporation in an amount in excess of the amount of the Asset Interest as defined in the Clipper Receivables Financing Agreement, (iii) Accounts Receivable which do not constitute an enforceable obligation of the Account Debtor; (iv) Accounts Receivable which are not evidenced by an invoice issued in the ordinary course of business; (v) Accounts Receivable which are not recorded in the records of the Borrower or its Subsidiaries; (vi) Accounts Receivable which remain unpaid more than sixty (60) days after the due date thereof; (vii) Accounts Receivable where the customer is (a) insolvent or a debtor, voluntarily or involuntarily, in a case or proceeding under any bankruptcy, reorganization, insolvency, adjustment of debt, dissolution, liquidation or similar law of any jurisdiction or (b) experiencing financial difficulties and been given an extension of time to pay by the Borrower or any of its Subsidiaries; (viii) Accounts Receivable which have been sent by the Borrower or any of its Subsidiaries to a collection agency; (vix) Accounts Receivable which have been written off by the Borrower or any of its Subsidiaries; (ix) Accounts Receivable which are not denominated in Dollars or C$; (x) Accounts Receivable which are subject to any asserted defense, setoff, charge-back or any dispute to the extent of such asserted defense, setoff, chargeback or dispute; (xi) Accounts Receivable for which the Account Debtor is an Affiliate or a Subsidiary of the Borrower; (xii) Accounts Receivable from customers located outside the United States unless Accounts Receivable from such customer are paid, as a matter of course, from an office of such customer located in the United States or Canada; (xv) Accounts Receivable representing credits from Account Debtors which are over sixty (60) days past due; (xvi) if more than 50% of the Accounts Receivable of any Account Debtor are over sixty (60) days past due, the Accounts Receivable of such Account Debtor; (xvii) Accounts Receivable from an Account Debtor for which any trade payable, rebate obligation or other similar liability is owing to such Account Debtor by the Borrower or any of its Subsidiaries to the extent of -8- the amount of such trade payable, rebate obligation or similar liability, (xviii) Accounts Receivable for which the Borrower has established a reserve on its books and records and (xix) Accounts Receivable from a customer if the Administrative Agent is not satisfied with the credit standing of such customer in relation to the amount of credit extended. Notwithstanding the foregoing, the Administrative Agent, in its sole discretion, may determine eligibility based on such additional considerations as the Administrative Agent may deem appropriate. "ELIGIBLE ASSIGNEE" shall mean (i) a commercial bank having total assets in excess of $1,000,000,000; (ii) a finance company, insurance company or other financial institution or fund, in each case acceptable to the Agents, which in the ordinary course of business extends credit of the type similar to the Loans and has total assets in excess of $200,000,000 and whose becoming an assignee would not constitute a prohibited transaction under Section 4975 of ERISA; and (iii) any other financial institution satisfactory to the Borrower and the Agents. "ENVIRONMENTAL LAWS" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. "ENVIRONMENTAL LIABILITY" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Guarantor directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ENVIRONMENTAL LIEN" shall mean a Lien in favor of any Governmental Authority for (i) any liability under Environmental Laws, or (ii) damages arising from or costs incurred by such Governmental Authority in response to a release or threatened release of a hazardous or toxic waste, substance or constituent, or other substance into the environment. "EQUITY-RELATED AGREEMENTS" shall have the meaning given such term in Section 3.16 hereof. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA AFFILIATE" shall mean any trade or business (whether or not incorporated) which is a member of a group of which the Borrower is a member and which is under common control within the meaning of Section 414(b) or (c) of the Code and the regulations promulgated and rulings issued thereunder. -9- "EVENT OF DEFAULT" shall have the meaning given such term in Section 7.01. "EXISTING BNY FEES AND EXPENSES" shall have the meaning given such term in the recitals to this Agreement. "EXISTING BNY L/C" shall have the meaning given such term in the recitals to this Agreement. "EXISTING BNY L/C OBLIGATIONS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING BNY LOANS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING BNY NOTE" shall have the meaning given such term in the recitals to this Agreement. "EXISTING BNY OBLIGATIONS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING CIBC FEES AND EXPENSES" shall have the meaning given such term in the recitals to this Agreement. "EXISTING CIBC OBLIGATIONS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING CIBC REVOLVING LOANS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING CIBC REVOLVING NOTE" shall have the meaning given such term in the recitals to this Agreement. "EXISTING CHASE FEES AND EXPENSES" shall have the meaning given such term in the recitals to this Agreement. "EXISTING CHASE LOANS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING CHASE NOTE" shall have the meaning given such term in the recitals to this Agreement. "EXISTING CHASE OBLIGATIONS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING COMERICA FEES AND EXPENSES" shall have the meaning given such term in the recitals to this Agreement. -10- "EXISTING COMERICA LOANS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING COMERICA NOTE" shall have the meaning given such term in the recitals to this Agreement. "EXISTING COMERICA OBLIGATIONS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING FLEET FEES AND EXPENSES" shall have the meaning given such term in the recitals to this Agreement. "EXISTING FLEET LOANS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING FLEET NOTE" shall have the meaning given such term in the recitals to this Agreement. "EXISTING FLEET OBLIGATIONS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING LOAN DOCUMENTS" shall mean, collectively, the Existing Notes and any other documents evidencing or supporting the Existing Obligations. "EXISTING LOANS" shall have the meaning given to such term in the recitals to this Agreement. "EXISTING NBD FEES AND EXPENSES" shall have the meaning given such term in the recitals to this Agreement. "EXISTING NBD LOANS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING NBD NOTE" shall have the meaning given such term in the recitals to this Agreement. "EXISTING NBD OBLIGATIONS" shall have the meaning given such term in the recitals to this Agreement. "EXISTING NOTES" shall have the meaning given such term in the recitals to this Agreement. "EXISTING OBLIGATIONS" shall have the meaning given such term in the recitals to this Agreement. "FACILITY FEES" shall have the meaning given such term in Section 2.14 hereof. -11- "FEES" shall collectively mean the Facility Fees and the Agents' Fees. "FINANCIAL OFFICER" shall mean the Chief Financial Officer, Vice President Finance or the Treasurer of the Borrower. "FLEET" shall have the meaning given such term in the first paragraph of this Agreement. "FUEL PUMP SALE" shall mean the proposed sale by the Borrower of its fuel pump business. "GAAP" shall mean generally accepted accounting principles applied on a basis consistent with those used in preparing the financial statements referred to in Section 3.04. "GOVERNMENTAL AUTHORITY" shall mean any Federal, state, provincial, municipal or other governmental department, commission, board, bureau, agency or instrumentality or any court, in each case whether of the United States or foreign. "GUARANTORS" shall have the meaning given such term in the first paragraph of this Agreement. "HAZARDOUS MATERIALS" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "INACTIVE SUBSIDIARIES" shall have the meaning given such term in Section 6.23 hereof. "INDEBTEDNESS" shall mean, at any time and with respect to any Person, (i) all indebtedness of such Person for borrowed money; (ii) all indebtedness of such Person for the deferred purchase price of property or services (other than property, including inventory, and services purchased, and trade payables, other expense accruals (including coupon accruals) and deferred compensation items arising, in the ordinary course of business); (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeal bonds arising in the ordinary course of business); (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (v) all obligations of such Person under leases which are required to be, in accordance with GAAP, recorded as capital leases, to the extent required to be so recorded; (vi) all reimbursement, payment or similar obligations of such Person, contingent or otherwise, under acceptance, letter of credit or similar facilities and all obligations of such Person that would arise in respect of (x) currency swap agreements, currency future or option contracts and other similar agreements designed to hedge against fluctuations in foreign interest rates, and (y) interest rate swap, cap or collar agreements and interest rate future or option contracts; (vii) all Indebtedness referred to in clauses (i) through (vi) above guaranteed directly or indirectly by such Person, or in effect guaranteed directly or indirectly by such Person through an -12- agreement (A) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss in respect of such Indebtedness; (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (D) otherwise to assure a creditor against loss in respect of such Indebtedness; and (viii) all Indebtedness referred to in clauses (i) through (vii) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. "INSUFFICIENCY" shall mean, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities within the meaning of Section 4001(a)(18) of ERISA using reasonable actuarial assumptions as to interest rates and mortality. "INSURANCE COMPANIES" shall mean, at any date, the institutions that are then holders of the outstanding notes issued under the Note Agreements. "INTANGIBLE ASSETS" shall mean, on any day, all assets of the Borrower and its Subsidiaries which would be classified as intangible under GAAP including, without limitation, unamortized debt discount and expense, unamortized acquisition, organization and reorganization expense, experimental expense, patents, copyrights, trademarks, trade names, franchises, goodwill and other similar intangible assets, as determined on a consolidated basis in accordance with GAAP. "INTEREST EXPENSE" shall mean interest expense as determined in accordance with GAAP. "INTEREST PAYMENT DATE" shall mean the last calendar day of each month; PROVIDED, HOWEVER, that if any Interest Payment Date would fall on a day which shall not be a Business Day, such Interest Payment Date shall be the next preceding Business Day. "INTERMOTOR" shall mean Intermotor Holdings Limited. "INVENTORY" shall mean all goods now owned or hereafter acquired by the Borrower or any of its Subsidiaries (wherever located, whether in the possession of the Borrower or any Subsidiary or of a bailee or other person for sale, storage, transit, processing, use or otherwise consisting of whole goods, components, supplies, materials or consigned, returned or repossessed goods) which are held for sale or to be furnished (or have been furnished) under any contract of service or which are raw materials, work in process, or materials used or consumed in the Borrower's or its Subsidiaries' business or processed by or on behalf of the Borrower or its Subsidiaries; PROVIDED, that Inventory shall not include consigned Inventory received by the Borrower in connection with the Cooper Transaction. Inventory shall be based upon the Borrower's books and records, consistently -13- applied in accordance with the historical practices of the Borrower, which are updated monthly by no later than the tenth (10th) Business Day of each month for the end of the preceding month. "INVESTMENTS" shall have the meaning given such term in Section 6.08. "LIEN" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind whatsoever (including any conditional sale or other title retention agreement or any lease in the nature thereof). "LOANS" shall mean the Tranche A Loans and the Tranche B Loans. "LOAN DOCUMENTS" shall mean this Agreement, the Notes, and any other instrument or agreement executed and delivered in connection herewith. "MATERIAL ADVERSE EFFECT" shall mean (a) a materially adverse effect on the business, assets, operations, prospects or condition, financial or otherwise, of the Borrowers and the Guarantors taken as a whole, (b) material impairment of the ability of any of the Borrowers or Guarantors to perform any of its Obligations under any Loan Document to which it is or will be a party or (c) material impairment of the rights of or benefits and remedies available to the Agents or any of the Banks under any Loan Document. "MATURITY DATE" shall mean November 30, 1998. "MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "NBD" shall have the meaning given such term in the first paragraph of this Agreement. "NET INCOME" shall mean, with respect to any fiscal period, net income for the Borrower and its Subsidiaries for such fiscal period, as determined on a consolidated basis in accordance with GAAP except for the operating results and any reserve adjustments arising from Discontinued Operations. "NET INCOME TARGET" shall have the meaning given such term in Section 2.06. "NET SALES" shall mean, for any quarter, the amount of net sales as reported on the quarterly consolidated income statement of the Borrower and its Subsidiaries for such quarter which shall include net sales arising from Discontinued Operations. -14- "NET WORTH" shall mean, on any day, all amounts which would be included under stockholders' equity on the consolidated balance sheet of the Borrower and its Subsidiaries as at such date, as determined on a consolidated basis in accordance with GAAP. "NOTE AGREEMENTS" shall mean, collectively, (i) that certain Note Purchase Agreement dated as of December 1, 1995 among the Borrower and each of the purchasers listed therein pursuant to which notes in the aggregate principal amount of $73,000,000 were issued, (ii) that certain Note Agreement dated as of November 15, 1992 among the Borrower and each of the purchasers listed therein pursuant to which notes in the aggregate principal amount of $65,000,000 were issued and (iii) that certain Note Agreement dated as of October 15, 1989 among the Borrower and each of the purchasers listed therein pursuant to which notes in the aggregate principal amount of $30,000,000 were issued, each as amended from time to time. "NOTES" shall mean the promissory notes of the Borrower, substantially in the forms of Exhibit A-1 and A-2 hereto, each payable to the order of each Tranche A Bank or Tranche B Bank, respectively, evidencing Tranche A Loans or Tranche B Loans. "OBLIGATIONS" shall mean (a) the due and punctual payment of principal of and interest on the Loans and the Notes and the reimbursement of all amounts drawn under the Existing BNY L/C, and (b) the due and punctual payment of the Fees and all other present and future, fixed or contingent, monetary obligations of the Borrower and the Guarantors to the Banks and the Agents under the Loan Documents and in respect of Indebtedness permitted by Section 6.03 (vii). "OTHER TAXES" shall have the meaning given such term in Section 2.13. "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any successor agency or entity performing substantially the same functions. "PP&E" shall mean property, plant and equipment as reported on the Borrower's consolidated balance sheet net of depreciation and amortization. "PENSION PLAN" shall mean a defined benefit pension or retirement plan which meets and is subject to the requirements of Section 401(a) of the Code. "PERMITTED INVESTMENTS" shall mean: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within twelve months from the date of acquisition thereof; (b) without limiting the provisions of paragraph (d) below, investments in commercial paper maturing within six months from the date of acquisition thereof and having, at such date of -15- acquisition, a rating of at least "A" or the equivalent thereof from Standard & Poor's Corporation or of at least "A2" or the equivalent thereof from Moody's Investors Service, Inc.; (c) investments in certificates of deposit, banker's acceptances and time deposits (including Eurodollar time deposits) maturing within six months from the date of acquisition thereof issued or guaranteed by or placed with (i) any domestic office of the Administrative Agent or the bank with whom the Borrower and the Guarantors maintain their cash management system, or (ii) any domestic office of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $250,000,000 and is the principal banking Subsidiary of a bank holding company having a long-term unsecured debt rating of at least "A" or the equivalent thereof from Standard & Poor's Corporation or at least "A2" or the equivalent thereof from Moody's Investors Service, Inc.; (d) investments in commercial paper maturing within six months from the date of acquisition thereof and issued by (i) the holding company of the Administrative Agent or (ii) the holding company of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has (A) a combined capital and surplus in excess of $250,000,000 and (B) commercial paper rated at least "A" or the equivalent thereof from Standard & Poor's Corporation or of at least "A2" or the equivalent thereof from Moody's Investors Service, Inc.; (e) investments in repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any office of a bank or trust company meeting the qualifications specified in clause (c) above; and (f) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (a) through (e) above. "PERMITTED LIENS" shall mean (i) Liens imposed by law (other than Environmental Liens and any Lien imposed under ERISA) for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (ii) statutory and other Liens of landlords, Liens of tenants arising from occupancy rights and statutory Liens of carriers, warehousemen, mechanics, materialmen and other Liens (other than Environmental Liens and any Lien imposed under ERISA) imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (iii) Liens (other than any Lien imposed under ERISA) incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts; (iv) -16- easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded), which do not interfere materially with the ordinary conduct of the business of the Borrower or any Guarantor, as the case may be, and which do not materially detract from the value of the property to which they attach or materially impair the use thereof to the Borrower or any Guarantor, as the case may be; (v) purchase money Liens (including Capitalized Leases) upon or in any property acquired or held in the ordinary course of business to secure the purchase price of such property or to secure Indebtedness permitted by Section 6.03(iii) solely for the purpose of financing the acquisition of such property; and (vi) extensions, renewals or replacements of any Lien referred to in paragraphs (i) through (v) above, PROVIDED that the principal amount of the obligation secured thereby is not increased and that any such extension, renewal or replacement is limited to the property originally encumbered thereby. "PERSON" shall mean any natural person, corporation, division of a corporation, limited liability company, partnership, trust, joint venture, association, company, estate, unincorporated organization or Governmental Authority. "PLAN" shall mean a Single Employer Plan or a Multiemployer Plan. "REAL PROPERTY" shall have the meaning given such term in Section 3.17 hereof. "REGISTER" shall have the meaning given such term in Section 10.03(d). "REMAINING OBLIGATIONS" shall mean the obligations of the Borrower in respect of the Tranche A Loans and the CIBC Term Loan. "REQUIRED BANKS" shall mean, at any time, the Banks (including CIBC in its capacity as lender under the CIBC Term Loan) holding at least 51% of the then outstanding aggregate principal amount of the Loans (or, if no such Loans are outstanding, the Commitments) and the CIBC Term Loan. "SERVICE LINE" shall mean the Borrower's Service Line Division. "SERVICE LINE SALE" shall mean the proposed sale by the Borrower of the Service Line scheduled to take place on or before June 30, 1998. "SINGLE EMPLOYER PLAN" shall mean a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the Borrower or an ERISA Affiliate or (ii) was so maintained and in respect of which the Borrower could have liability under Section 4069 of ERISA in the event such Plan has been or were to be terminated. "STATUTORY RESERVES" shall mean on any date the percentage (expressed as a decimal) established by the Board and any other banking authority which is the then stated maximum rate of all reserves (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City, for new three -17- month negotiable nonpersonal time deposits in Dollars of $100,000 or more. Such reserve percentages shall include, without limitation, those imposed pursuant to Regulation D of the Board. The Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in such percentage. "SUBSIDIARY" shall mean, with respect to any Person (herein referred to as the "PARENT"), any corporation, association or other business entity (whether now existing or hereafter organized) of which at least a majority of the securities or other ownership interests having ordinary voting power for the election of directors is, at the time as of which any determination is being made, owned or controlled by the parent or one or more Subsidiaries of the parent or by the parent and one or more Subsidiaries of the parent. "TANGIBLE NET WORTH" shall mean, on any day, Net Worth MINUS Intangible Assets. "TAXES" shall have the meaning given such term in Section 2.13. "TAXES REGARDING BORROWER PAYMENTS TO CANADIAN LENDERS" shall have the meaning given such term in Section 2.13(a). "TERMINATION DATE" shall mean the earliest to occur of (i) the Maturity Date and (ii) the acceleration of the Loans and the termination of the Total Commitment in accordance with the terms hereof. "TERMINATION EVENT" shall mean (i) a "reportable event", as such term is described in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC under Section 4043 of ERISA or such regulations) or an event described in Section 4068 of ERISA excluding events described in Section 4043(c)(9) of ERISA or 29 CFR ss.ss.2615.21 or 2615.23, or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer", as such term is defined in Section 4001(c) of ERISA, or the incurrence of liability by the Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) providing notice of intent to terminate a Plan pursuant to Section 4041(c) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) any other event or condition which would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the imposition of any liability under Title IV of ERISA (other than for the payment of premiums to the PBGC). "TOTAL COMMITMENT" shall mean, at any time, the sum of the Total Tranche A Commitment and the Total Tranche B Commitment at such time. "TOTAL TRANCHE A COMMITMENT" shall mean, at any time, the sum of the Tranche A Commitments at such time. -18- "TOTAL TRANCHE B COMMITMENT" shall mean, at any time, the sum of the Tranche B Commitments at such time. "TRANCHE A BANK" shall mean each Bank having a Tranche A Commitment. "TRANCHE A COMMITMENT" shall mean the commitment of each Tranche A Bank to make Tranche A Loans hereunder in the amount set forth opposite its name on Annex A hereto or as may subsequently be set forth in the Register from time to time, as the same may be reduced from time to time pursuant to Section 2.08 and Section 2.09. "TRANCHE A COMMITMENT PERCENTAGE" shall mean at any time, with respect to each Tranche A Bank, the percentage obtained by dividing its Tranche A Commitment at such time by the Total Tranche A Commitment at such time. "TRANCHE A FACILITY" shall mean the Tranche A Loans made and committed to be made pursuant to Section 2.02(a). "TRANCHE A FACILITY FEE" shall have the meaning given such term in Section 2.14 hereof. "TRANCHE A LOANS" shall have the meaning given such term in Section 2.02(a). "TRANCHE B BANK" shall mean each Bank having a Tranche B Commitment. "TRANCHE B COMMITMENT" shall mean the commitment of each Tranche B Bank to make Tranche B Loans hereunder in the amount set forth opposite its name on Annex A hereto or as may subsequently be set forth in the Register from time to time, as the same may be reduced from time to time pursuant to Section 2.08 and Section 2.09. "TRANCHE B COMMITMENT PERCENTAGE" shall mean at any time, with respect to each Tranche B Bank, the percentage obtained by dividing its Tranche B Commitment at such time by the Total Tranche B Commitment at such time. "TRANCHE B FACILITY" shall mean the Tranche B Loans made and committed to be made pursuant to Section 2.02(b). "TRANCHE B FACILITY FEE" shall have the meaning given such term in Section 2.14 hereof. "TRANCHE B LOANS" shall have the meaning given such term in Section 2.02(b). "TRANSFEREE" shall have the meaning given such term in Section 2.13. "UNUSED TOTAL COMMITMENT" shall mean, at any time, (i) the Total Commitment LESS (ii) the aggregate outstanding principal amount of all Loans. "UNUSED TOTAL TRANCHE A COMMITMENT" shall mean, at any time, (i) the Total Tranche A Commitment LESS (ii) the aggregate outstanding principal amount of all Tranche A Loans. -19- "UNUSED TOTAL TRANCHE B COMMITMENT" shall mean, at any time, (i) the Total Tranche B Commitment LESS (ii) the aggregate outstanding principal amount of all Tranche B Loans. "WITHDRAWAL LIABILITY" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA. SECTION 1.02 TERMS GENERALLY. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references herein to Sections, Exhibits and Schedules shall be deemed references to Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, except for the operating results and any reserve adjustments arising from Discontinued Operations; PROVIDED, HOWEVER, that for purposes of determining compliance with any covenant set forth in Section 6, such terms shall be construed in accordance with GAAP as in effect on the date of this Agreement (except for the operating results and any reserve adjustments arising from Discontinued Operations), applied on a basis consistent with the application used in the Borrower's audited financial statements referred to in Section 3.04. SECTION 2. AMOUNT AND TERMS OF CREDIT. SECTION 2.01 RESTRUCTURING OF EXISTING EXTENSIONS OF CREDIT. Subject to the terms and conditions and relying upon the representations, warranties and covenants herein set forth, each of the parties hereby agrees that, as of the Closing Date, the Existing Obligations (other than the CIBC Term Loan) are hereby restructured as Tranche A Loans (as hereinafter defined), on the terms and conditions herein contained. Each of the Borrower and the Guarantors (i) confirms and agrees that the Borrower is truly and justly indebted to the Banks in the aggregate amount of the Existing Obligations without defense, offset or counterclaim of any kind or nature whatsoever; and (ii) reaffirms and admits the validity and enforceability of the Existing Notes and the other documents evidencing the Existing Obligations. Principal amounts outstanding on the Closing Date with respect to Existing Loans of each Bank (other than the CIBC Term Loan) shall be deemed to be Tranche A Loans for each such Bank as of the Closing Date. From and after the Closing Date the principal amounts of the Existing Obligations shall be evidenced by the Tranche A Notes and each Bank shall return the Existing Notes which it holds to the Borrower marked "canceled." SECTION 2.02 COMMITMENT OF THE BANKS. (a) Each Tranche A Bank severally and not jointly with the other Tranche A Banks agrees, upon the terms and subject to the conditions herein set forth (including, without limitation, the provisions of Section 4.02(e)) to make revolving credit loans (each a "TRANCHE A LOAN" and collectively, the "TRANCHE A LOANS") to the Borrower at any time and from time to time during the -20- period commencing on the Closing Date and ending on the Termination Date (or the earlier date, if any, of termination of the Total Tranche A Commitment) in an aggregate principal amount not to exceed the Tranche A Commitment of such Bank, which Tranche A Loans may be repaid and reborrowed in accordance with the provisions of this Agreement. Each Borrowing comprising a Tranche A Loan shall be funded by the Tranche A Banks as follows: (i) 95.5414% of a Borrowing shall be funded by each of the Tranche A Banks (except for CIBC), in a percentage amount equal to (x) the difference between (A) the outstanding amount of such Tranche A Bank's Tranche A Loans on the day such Tranche A Loan is to be made and (B) $15,000,000, divided by (y) the aggregate amounts to be funded by such Banks such that (assuming full usage by the Borrower) each Tranche A Bank (other than CIBC) would have extended $15,000,000 and (ii) 4.4586% by CIBC. At no time shall the sum of the then outstanding aggregate principal amount of the Tranche A Loans exceed the lesser of (i) the Total Tranche A Commitment, as the same may be reduced from time to time pursuant to Section 2.08 or 2.09, and (ii) the Borrowing Base. (b) Each Tranche B Bank severally and not jointly with the other Tranche B Banks agrees, upon the terms and subject to the conditions herein set forth to make revolving credit loans (each, a "TRANCHE B LOAN" and collectively, the "TRANCHE B LOANS") to the Borrower at any time and from time to time during the period commencing on the Closing Date and ending on the Termination Date (or the earlier date, if any, of termination of the Total Tranche B Commitment) in an aggregate principal amount not to exceed, the Tranche B Commitment of such Bank, which Tranche B Loans may be repaid and reborrowed in accordance with the provisions of this Agreement, PROVIDED, that (x) each Tranche B Loan shall be made PRO RATA among the Tranche B Banks in accordance with their Tranche B Commitment Percentages and (y) no Tranche B Loans shall be made by any Tranche B Bank so long as there exists any unused Total Tranche A Commitment. At no time shall the sum of the then outstanding aggregate principal amount of the Tranche B Loans exceed the lesser of (i) the Total Tranche B Commitment, as the same may be reduced from time to time pursuant to Section 2.08 or 2.09, and (ii) the Borrowing Base. (c) The failure of any Bank to make any Loan shall not relieve the other Banks of their obligations to lend. SECTION 2.03 BORROWING BASE. (a) Notwithstanding any other provision of this Agreement to the contrary, the aggregate principal amount of all outstanding Tranche A Loans shall not at any time exceed the Borrowing Base and no Tranche A Loan shall be made in violation of the foregoing. (b) Notwithstanding any other provision of this Agreement to the contrary, the aggregate principal amount of all outstanding Tranche B Loans shall not at any time exceed the Borrowing Base and no Tranche B Loan shall be made in violation of the foregoing. (c) Notwithstanding any other provision of this Agreement to the contrary, the aggregate principal amount of all outstanding Tranche A Loans and Tranche B Loans shall not at any time -21- exceed the Borrowing Base and no Tranche A Loans or Tranche B Loans shall be made in violation of the foregoing. SECTION 2.04 MAKING OF LOANS. (a) Each Tranche A Bank or Tranche B Bank may fulfill its respective Tranche A Commitment or Tranche B Commitment by causing any lending office of such Bank to make such Loan; PROVIDED that any such use of a lending office shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Each Bank shall, subject to its overall policy considerations, use reasonable efforts (but shall not be obligated) to select a lending office which will not result in the payment of increased costs by the Borrower pursuant to Section 2.11. (b) The Borrower shall give the Administrative Agent prior notice of each Borrowing hereunder of at least one Business Day; such notice shall be irrevocable and shall specify the amount of the proposed Borrowing (which shall not be less than $500,000) and the date thereof (which shall be a Business Day) and shall contain disbursement instructions. Such notice, to be effective, must be received by the Administrative Agent not later than 12:00 noon, New York City time, on the first Business Day preceding the date on which such Borrowing is to be made except as provided in the last sentence of this Section 2.04(b). Such notice shall specify whether the Borrowing then being requested is to be a Tranche A Loan or a Tranche B Loan (to the extent permitted pursuant to Section 4.02(h)). If no election is made as to whether the Loan is a Tranche A Loan or a Tranche B Loan, such notice shall be deemed a request for a Tranche A Loan, unless at that time, there is insufficient or no Unused Total Tranche A Commitment, in which event such notice shall be deemed to be a request for a Tranche B Loan to the extent of the Unused Total Tranche B Commitment and thereafter for a Tranche B Loan to the extent the Borrowing requested exceeds the Unused Total Tranche A Commitment. The Administrative Agent shall promptly notify each Tranche A Bank or Tranche B Bank (as applicable) of its proportionate share of such Borrowing and the date of such Borrowing. On the borrowing date specified in such notice, each Tranche A Bank or Tranche B Bank (as applicable) shall make its share of the Borrowing available in Dollars at the office of the Administrative Agent at 270 Park Avenue, New York, New York 10017, no later than 12:00 noon, New York City time, in immediately available funds. Upon receipt of the funds made available by the Banks to fund any borrowing hereunder, the Administrative Agent shall disburse such funds in the manner specified in the notice of borrowing delivered by the Borrower and shall use reasonable efforts to make the funds so received from the Banks available to the Borrower no later than 2:00 p.m. New York City time (other than as provided in the following sentence). With respect to Loans (whether Tranche A Loans or Tranche B Loans) of $5,000,000 or less, the Tranche A Banks or the Tranche B Banks, as the case may be, shall make such Borrowings available to the Borrower by 4:00 p.m., New York City time, on the same Business Day that the Borrower gives notice to the Administrative Agent of such Borrowing by 12:00 noon, New York City time. (c) Unless the Administrative Agent shall have received notice from a Bank prior to the proposed date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has -22- made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Bank has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Bank and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Bank, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to the Loans. If such Bank pays such amount to the Administrative Agent, then such amount shall constitute such Bank's Loan included in such Borrowing. SECTION 2.05 NOTES; REPAYMENT OF LOANS. The Loans made by each Bank shall be evidenced by a note, duly executed on behalf of the Borrower, dated the Closing Date or the date of the effectiveness of the applicable Assignment and Acceptance, as the case may be, in substantially the form attached hereto as Exhibit A-1 in the case of the Tranche A Loans or A-2 in the case of Tranche B Loans, payable to the order of the Tranche A Bank or Tranche B Bank (as the case may be) in the aggregate principal amount equal to such Bank's Tranche A Commitment or Tranche B Commitment, as the case may be. The outstanding principal balance of all of the Loans, as evidenced by such Notes, shall be payable on the Termination Date. Such Notes shall replace the Existing Notes. Each Note shall bear interest from the date thereof on the outstanding principal balance thereof as set forth in Section 2.06. Each Bank shall, and is hereby authorized by the Borrower to, endorse on the schedule attached to each Note delivered to such Bank (or on a continuation of such schedule attached to such Note and made a part thereof), or otherwise to record in such Bank's internal records, an appropriate notation evidencing the date and amount of each Loan from such Bank, each payment and prepayment of principal of any such Loan, each payment of interest on any such Loan and the other information provided for on such schedule; PROVIDED, HOWEVER, that the failure of any Bank to make such a notation or any error therein shall not affect the obligation of the Borrower to repay the Loans made by such Bank in accordance with the terms of this Agreement and the applicable Notes. SECTION 2.06 INTEREST ON LOANS. (a) Subject to the provisions of Section 2.07, each Tranche A Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Alternate Base Rate PLUS 1-1/2%; PROVIDED that in the event that the Borrower's Net Income shall exceed (i) $1,784,000 for the Borrower's fiscal quarter ending March 31, 1998, (ii) $7,013,000 for the Borrower's fiscal quarter ending June 30, 1998 and (iii) $6,914,000 for the Borrower's fiscal quarter ending September 30, 1998 (each, a "NET INCOME TARGET"), THEN, from the date following the delivery of the Borrower's quarterly statement pursuant to Section 5.01(b) reflecting the achievement of the Net Income Target for such quarter through the date of delivery of the Borrower's next quarterly statement, the interest rate on the Tranche A Loans shall be reduced to ABR plus 1%; PROVIDED, HOWEVER, that if Borrower's quarterly statement for the next quarter reflects that the Borrower has exceeded the Net Income Target for such quarter, the interest rate on the -23- Tranche A Loans shall be further reduced to ABR plus 1/2%, it being understood, however, that if at any time the Borrower delivers a quarterly statement that shows that the Net Income Target has not been achieved for such quarter, then the interest rate on the Tranche A Loans shall increase to ABR plus 1-1/2% for the period from the date following the delivery of such quarterly statement through the date of the delivery of the following quarterly statement reflecting the achievement of the Net Income Target. Notwithstanding anything to the contrary herein, (x) at no time shall the interest rate on the Tranche A Loans be reduced below ABR plus 1/2% and (y) if a quarterly statement is not received by the Administrative Agent by the 20th day after the close of such quarter, the interest rate on the Tranche A Loans shall increase to ABR plus 1-1/2% for the period from the 20th day after the close of such quarter until delivery of such quarterly statement (and thereafter if such quarterly statement shows that the Net Income Target has not been met). (b) Subject to the provisions of Section 2.07, each Tranche B Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Alternate Base Rate plus 1% , PROVIDED, that in the event that the Borrower achieves the Net Income Target for any quarter following the Closing Date, then from the date following the delivery of the Borrower's quarterly statement pursuant to Section 5.01(b) reflecting the achievement of the Net Income Target amount through the date of delivery of the Borrower's next quarterly statement, the interest rate on the Tranche B Loans shall be reduced to ABR plus 1/4%; it being understood, however, that if the Net Income Target has not been achieved for such quarter, then the interest rate on the Tranche B Loans shall increase to ABR plus 1% from the date following delivery of such quarterly statement through the date of the delivery of the following quarterly statement reflecting the achievement of the Net Income Target. Notwithstanding anything to the contrary herein, (i) at no time shall the interest rate on the Tranche B Loans be reduced below ABR plus 1/4% and (ii) if a quarterly statement is not timely received by the Administrative Agent by the 20th day after the close of the quarter, the interest rate on the Tranche B Loans shall increase to ABR plus 1%, for the period from the 20th day after the close of the quarter until delivery of such quarterly statement (and thereafter if such quarterly statements shows that the Net Income Target has not been met). (c) Accrued interest on all Loans shall be payable in arrears on each Interest Payment Date, at maturity (whether by acceleration or otherwise), and after such maturity on demand and upon any repayment or prepayment thereof (on the amount prepaid). SECTION 2.07 DEFAULT INTEREST. If the Borrower or any Guarantor, as the case may be, shall default in the payment of the principal of or interest on any Loan or in the payment of any other amount becoming due hereunder, whether at stated maturity, by acceleration or otherwise, the Borrower or such Guarantor, as the case may be, shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (after as well as before judgment) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to two percent (2%) above the then prevailing non-default rate of interest on such Loan. SECTION 2.08 OPTIONAL TERMINATION OR REDUCTION OF COMMITMENT. Upon at least two Business Days' prior written notice to the Administrative Agent and subject to compliance by the Borrower with the requirements of Section 2.09, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Total Tranche A Commitment or the Total Tranche B Commitment; PROVIDED, that at the time of any reduction or termination of the Total Tranche A Commitment, the Total Tranche B Commitment shall have been wholly and permanently terminated and all Tranche B Loans shall have been paid in full. Each such reduction of the Commitments shall be in the principal amount of $1,000,000 or any integral multiple thereof. Subject to the first sentence of this Section, any reduction of the Total Tranche A Commitment or the Total Tranche B Commitment pursuant to this Section shall be applied PRO RATA to reduce the Tranche A Commitment or Tranche B Commitment of each Tranche A Bank or Tranche B Bank. SECTION 2.09 MANDATORY PREPAYMENT; COMMITMENT TERMINATION. The outstanding Obligations shall be subject to mandatory prepayment as follows: (a) if at any time the aggregate principal amount of the outstanding Tranche A Loans exceeds the lesser of (x) the Total Tranche A Commitment and (y) the Borrowing Base, the Borrower will within one Business Day prepay the Tranche A Loans in an amount necessary to cause the aggregate principal amount of the outstanding Tranche A Loans to be equal to or less than the Total Tranche A Commitment and/or the Borrowing Base, as the case may be; (b) if at any time the aggregate principal amount of the outstanding Tranche B Loans exceeds the lesser of (x) the Total Tranche B Commitment and (y) the Borrowing Base, the Borrower will within one Business Day prepay the Tranche B Loans in an amount necessary to cause the aggregate principal amount of the outstanding Tranche B Loans to be equal to or less than the Total Tranche B Commitment and/or the Borrowing Base, as the case may be; (c) if at any time the aggregate principal amount of the Outstanding Loans exceeds the lesser of (x) the Total Commitment and (y) the Borrowing Base, the Borrower will within one Business Day prepay the Loans in an amount necessary to cause the aggregate principal amount of the outstanding Loans to be equal to or less than the Total Commitment and/or the Borrowing Base, as the case may be; (d) if at any time the sum of the amounts on deposit in the Borrower's operating, concentration or other depository accounts PLUS the amount of the Borrower's Permitted Investments as set forth on Schedule 2.09(d) exceeds $20,000,000, any such amounts in excess of $20,000,000 shall be applied by the Borrower to the mandatory prepayment of the Loans and the Administrative Agent may immediately debit such accounts in the amount of such mandatory prepayment; PROVIDED, that in the event that any of the Permitted Investments set forth on Schedule 2.09(d) mature, then the amount set forth in the preceding sentence shall be reduced by an amount equal to each such matured Permitted Investment; and -25- PROVIDED FURTHER, that the Borrower and its Subsidiaries shall use their best efforts to repatriate funds outside the continental United States; and (e) upon the Termination Date, the Total Commitment shall be terminated in full and the Borrower shall pay the Loans in full. SECTION 2.10 OPTIONAL PREPAYMENT OF LOANS; REIMBURSEMENT OF BANKS. (a) The Borrower shall have the right at any time and from time to time to prepay any Loans, in whole or in part, on the same Business Day if written, telex or facsimile notice is received by the Administrative Agent prior to 12:00 noon, New York City time, and thereafter upon at least one Business Day's prior written, telex or facsimile notice to the Administrative Agent; PROVIDED, HOWEVER, that each such partial prepayment shall be in integral multiples of $500,000. Each notice of prepayment shall specify the prepayment date and the principal amount of the Loans to be prepaid and shall be irrevocable and shall commit the Borrower to prepay such Loan by the amount and on the date stated therein. The Administrative Agent shall, promptly after receiving notice from the Borrower hereunder, notify each Tranche A Bank or Tranche B Bank of the principal amount of the Loans held by such Bank which are to be prepaid, the prepayment date and the manner of application of the prepayment; PROVIDED, that as long as Tranche B Loans shall be outstanding, any prepayments received shall be applied first PRO RATA to the Tranche B Banks in reduction of the then outstanding Obligations under such Tranche B Loans. (b) In the event the Borrower fails to prepay any Loan on the date specified in any prepayment notice delivered pursuant to Section 2.10(a), the Borrower on demand by any Bank shall pay to the Administrative Agent for the account of such Bank any amounts required to compensate such Bank for any loss incurred by such Bank as a result of such failure to prepay, including, without limitation, any loss, cost or expenses incurred by reason of the acquisition of deposits or other funds by such Bank to fulfill deposit obligations incurred in anticipation of such prepayment. Each Bank shall deliver to the Borrower from time to time one or more certificates setting forth the amount of such loss as determined by such Bank. (c) Any partial prepayment of the Loans by the Borrower pursuant to Sections 2.09 or 2.10 shall be applied FIRST, to the then outstanding Obligations under the Tranche B Loans PRO RATA and SECOND, to the then outstanding Obligations under the Tranche A Loans PRO RATA , as determined by the Administrative Agent. SECTION 2.11 RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES. (a) If any Bank shall have determined that the adoption or effectiveness after the date hereof of any law, rule, regulation or guideline regarding capital adequacy, or any change in any of the foregoing or in the interpretation or administration of any of the foregoing by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or any lending office of such Bank) or any Bank's holding company with any request or directive regarding capital adequacy (whether or not having the force -26- of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's capital or on the capital of such Bank's holding company, if any, as a consequence of this Agreement, the Loans made by such Bank pursuant hereto or such Bank's Commitment hereunder to a level below that which such Bank or such Bank's holding company could have achieved but for such adoption, change or compliance (taking into account such Bank's policies and the policies of such Bank's holding company with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank or such Bank's holding company for any such reduction suffered. (b) A certificate of each Bank setting forth such amount or amounts as shall be necessary to compensate such Bank or its holding company as specified in paragraph (a) above, shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay each Bank the amount shown as due on any such certificate delivered to it within 10 days after its receipt of the same. Any Bank receiving any such payment shall promptly make a refund thereof to the Borrower if the law, regulation, guideline or change in circumstances giving rise to such payment is subsequently deemed or held to be invalid or inapplicable. (c) Failure on the part of any Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of such Bank's right to demand compensation with respect to such period or any other period. The protection of this Section shall be available to each Bank regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed. SECTION 2.12 PRO RATA TREATMENT, ETC. (a) All payments, repayments and prepayments of principal and interest in respect of the Tranche A Loans or Tranche B Loans (whenever made and whether made before or after the occurrence of an Event of Default) and including, without limitation, by way of dividend or distribution in a case under the Bankruptcy Code or any other insolvency statute (state or federal) shall be made PRO RATA among the Tranche A Banks (which after the occurrence of an Event of Default shall be deemed to include CIBC in its capacity as lender under the CIBC Term Loan) or the Tranche B Banks (as the case may be) in accordance with the then outstanding principal amount of the Tranche A Loans (which after the occurrence of an Event of Default shall be deemed to include the outstanding principal amount of the CIBC Term Loan) or Tranche B Loans (as the case may be); PROVIDED, HOWEVER, that all payments and prepayments hereunder shall be applied FIRST, to the payment in full of all principal and interest accrued prior to the commencement of a case under the Bankruptcy Code on the Tranche B Loans, SECOND, to the payment in full of all principal and interest accrued prior to the commencement of a case under the Bankruptcy Code on the Tranche A Loans and THIRD, to the payment in full of any and all interest accrued after the commencement of a case under the Bankruptcy Code PRO RATA among the Tranche A Banks and the Tranche B Banks in accordance with their respective Tranche A Commitments and Tranche B Commitments and (b) all payments of the Tranche A Facility Fees and the Tranche B Facility Fees shall be made PRO RATA among the Tranche A Banks in accordance with their Tranche A Commitments or the Tranche B Banks in accordance with their Tranche B Commitments. All -27- payments of interest in respect of the CIBC Term Loan made prior to the occurrence of an Event of Default shall be retained by CIBC and all payments and repayments of principal and interest in respect of the CIBC Term Loan made after the occurrence of an Event of Default and including, without limitation, by way of dividend or distribution in a case under the Bankruptcy Code or any other insolvency statute (state or federal), shall be treated with the same priority and parity hereunder as if such payment or repayment had been received by a Tranche A Bank. All payments by the Borrower hereunder and under the Notes shall be (i) net of any tax applicable to the Borrower or a Guarantor and (ii) made in Dollars in immediately available funds at the office of the Administrative Agent by 12:00 noon, New York City time, on the date on which such payment shall be due. Interest in respect of any Loan hereunder shall accrue from and including the date of such Loan to but excluding the date on which such Loan is paid in full. SECTION 2.13 TAXES. (a) Any and all payments by the Borrower or any Guarantor hereunder shall be made free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING (i) taxes imposed on or measured by the net income or overall gross receipts of the Agents or any Bank (or any transferee or assignee thereof, including a participation holder (any such entity being called a "TRANSFEREE")) and franchise taxes imposed on the Agents or any Bank (or Transferee) by the United States or any jurisdiction under the laws of which the Agents or any such Bank (or Transferee) is organized or in which the applicable lending office of any such Bank (or Transferee) is located or any political subdivision thereof or by any other jurisdiction or by any political subdivision or taxing authority therein other than a jurisdiction in which the Agents or such Bank would not be subject to tax but for the execution and performance of this Agreement and (ii) taxes, levies, imposts, deductions, charges or withholdings ("AMOUNTS") with respect to payments hereunder to a Bank (or Transferee) in accordance with laws in effect on the later of the date of this Agreement and the date such Bank (or Transferee) becomes a Bank (or Transferee, as the case may be), but not excluding, with respect to such Bank (or Transferee), any increase in such Amounts solely as a result of any change in such laws occurring after such later date or any Amounts that would not have been imposed but for actions (other than actions contemplated by this Agreement) taken by the Borrower after such later date (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "TAXES"). If the Borrower or any Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the Banks (or any Transferee) or either of the Agents, (i) the sum payable shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) such Bank (or Transferee) or such Agent (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxing authority or other Governmental Authority in accordance with applicable law. Notwithstanding this Section 2.13(a) and the provisions of Sections 2.13(f) and 2.13(g), any and all payments by the Borrower to CIBC or to any assignee of CIBC which is not a non-resident of Canada within the meaning of the INCOME TAX ACT (Canada) (a "CANADIAN LENDER") hereunder or under the other Loan Documents shall be made free and clear of and without deduction for any and all present or future -28- taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto ("TAXES REGARDING BORROWER PAYMENTS TO CANADIAN LENDERS"). If any Taxes Regarding Borrower Payments to Canadian Lenders shall be required by law to be deducted from or in respect of any sum payable hereunder or under any other Loan Document to any Canadian Lender (i) the sum payable by the Borrower shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.13(a)), such Canadian Lender receives an amount equal to the amount it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower agrees to pay any current or future stamp or documentary taxes or any other excise or property taxes, charges, assessments or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "OTHER TAXES"). (c) The Borrower will indemnify each Bank (or Transferee) and each Agent for the full amount of Taxes and Other Taxes paid by such Bank (or Transferee) or such Agent, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant taxing authority or other Governmental Authority. Such indemnification shall be made within 30 days after the date any Bank (or Transferee) or any Agent, as the case may be, makes written demand therefor. If a Bank (or Transferee) or any Agent shall become aware that it is entitled to receive a refund in respect of Taxes or Other Taxes as to which it has been indemnified by the Borrower pursuant to this Section, it shall promptly notify the Borrower of the availability of such refund and shall, within 30 days after receipt of a request by the Borrower, apply for such refund at the Borrower's expense. If any Bank (or Transferee) or any Agent receives a refund in respect of any Taxes or Other Taxes as to which it has been indemnified by the Borrower pursuant to this Section, it shall promptly notify the Borrower of such refund and shall, within 30 days after receipt of a request by the Borrower (or promptly upon receipt, if the Borrower has requested application for such refund pursuant hereto), repay such refund to the Borrower (to the extent of amounts that have been paid by the Borrower under this Section with respect to such refund plus interest that is received by the Bank (or Transferee) or any Agent as part of the refund), net of all out-of-pocket expenses of such Bank (or Transferee) or such Agent and without additional interest thereon; PROVIDED that the Borrower, upon the request of such Bank (or Transferee) or such Agent, agrees to return such refund (plus penalties, interest or other charges) to such Bank (or Transferee) or such Agent in the event such Bank (or Transferee) or such Agent is required to repay such refund. Nothing contained in this subsection (c) shall require any Bank (or Transferee) or any Agent to make available any of its tax returns (or any other information relating to its taxes that it deems to be confidential). (d) Within 30 days after the date of any payment of Taxes or Other Taxes withheld by the Borrower in respect of any payment to any Bank (or Transferee) or any Agent, the Borrower will furnish to the Administrative Agent, at its address referred to on the signature pages hereof, the original or a certified copy of a receipt evidencing payment thereof. -29- (e) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section shall survive the payment in full of the principal of and interest on all Loans made hereunder. (f) Each Bank (or Transferee) that is organized under the laws of a jurisdiction outside the United States shall, if legally able to do so, prior to the immediately following due date of any payment by the Borrower hereunder, deliver to the Borrower such certificates, documents or other evidence, as required by the Code or Treasury Regulations issued pursuant thereto, including (A) Internal Revenue Service Form W-8 or W-9 and (B) Internal Revenue Service Form 1001 or Form 4224 and any other certificate or statement of exemption required by Treasury Regulation Section 1.1441-1, 1.1441-4 or 1.1441-6(c) or any subsequent version thereof or successors thereto, properly completed and duly executed by such Bank (or Transferee) establishing that such payment is (i) not subject to United States Federal withholding tax under the Code because such payment is effectively connected with the conduct by such Bank (or Transferee) of a trade or business in the United States or (ii) totally exempt from United States Federal withholding tax or subject to a reduced rate of such tax under a provision of an applicable tax treaty. Unless the Borrower and the Administrative Agent have received forms or other documents satisfactory to them indicating that such payments hereunder are not subject to United States Federal withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrower or the Administrative Agent shall withhold taxes from such payments at the applicable statutory rate. (g) The Borrower shall not be required to pay any additional amounts to any Bank (or Transferee) in respect of United States Federal withholding tax pursuant to subsection (a) above if the obligation to pay such additional amounts would not have arisen but for a failure by such Bank (or Transferee) to comply with the provisions of subsection (f) above. (h) Any Bank (or Transferee) claiming any additional amounts payable pursuant to this Section 2.13 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by the Borrower or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such additional amounts that may thereafter accrue and would not, in the sole reasonable determination of such Bank, be otherwise materially disadvantageous to such Bank (or Transferee). SECTION 2.14 FACILITY FEES. The Borrower agrees to pay to the Administrative Agent for the account of (a) the Tranche A Banks, a Facility Fee in the aggregate amount of $785,000 (the "TRANCHE A FACILITY FEE"), which fee shall be payable to each Tranche A Bank in accordance with its Tranche A Commitment Percentage, as set forth on Annex A hereto and (b) the Tranche B Banks, a Facility Fee in the aggregate amount of $600,000 (the "TRANCHE B FACILITY FEE" and, together with the Tranche A Facility Fee, the "FACILITY FEES"), which fee shall be payable to each Tranche B Bank in accordance with its Tranche B Commitment Percentage, as set forth on Annex A hereto. The Tranche A Facility Fee shall be payable on the Closing Date. The Tranche B Facility Fee shall be payable (i) one-half on the Closing Date and (ii) one-half on the date of the first drawing under the Tranche B Facility. -30- SECTION 2.15 AGENTS' FEE. The Borrower agrees to pay to (i) the Administrative Agent, an agency fee in the amount of $100,000 and (ii) to the Documentation Agent, an agency fee in the amount of $100,000 (collectively, the "AGENTS' FEE"), each for its own account, which fees shall be payable on the Closing Date. SECTION 2.16 NATURE OF FEES. All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for the respective accounts of the Administrative Agent, the Documentation Agent and the Banks, as provided herein. Once paid, none of the Fees shall be refundable under any circumstances. SECTION 2.17 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of any Event of Default, each of the Agents and each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agents and each such Bank to or for the credit or the account of the Borrower or any Guarantor against any and all of the obligations of such Borrower or Guarantor now or hereafter existing under the Loan Documents, irrespective of whether or not such Bank shall have made any demand under any Loan Document and although such obligations may be unmatured. Any such set-off shall be applied FIRST to the Tranche B Loans (and interest thereon) PRO RATA and SECOND to the Tranche A Loans (and interest thereon) PRO RATA. Each Bank and each of the Agents agrees promptly to notify the Borrower and Guarantors after any such set-off and application made by such Bank or by the Agents, as the case may be, PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Bank and the Agents under this Section are in addition to other rights and remedies which such Bank and the Agents may have upon the occurrence and during the continuance of any Event of Default. SECTION 3. REPRESENTATIONS AND WARRANTIES In order to induce the Banks to make Loans hereunder, the Borrower and each of the Guarantors jointly and severally represent and warrant as follows: SECTION 3.01 ORGANIZATION AND AUTHORITY. Each of the Borrower and the Guarantors (i) is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation or organization and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect; (ii) has the requisite corporate power and authority to effect the transactions contemplated hereby, and by the other Loan Documents to which it is a party; and (iii) has all requisite corporate power and authority and the legal right to own, pledge, mortgage, lease and operate its properties, and to conduct its business as now or currently proposed to be conducted. SECTION 3.02 DUE EXECUTION. The execution, delivery and performance by each of the Borrower and the Guarantors of each of the Loan Documents to which it is a party (i) are within the respective corporate powers of each of the Borrower and the Guarantors, have been duly -31- authorized by all necessary corporate action, including the consent of shareholders where required, and do not (A) contravene the charter or by-laws of any of the Borrower or the Guarantors, (B) violate any law (including, without limitation, the Securities Exchange Act of 1934) or regulation (including, without limitation, Regulations G, T, U or X of the Board), or any order, judgment or decree of any Governmental Authority, (C) violate or result in a breach of, or constitute a default under, any indenture, mortgage or deed of trust or any material lease, agreement or other instrument binding on the Borrower or the Guarantors or any of their properties, or (D) result in or require the creation or imposition of any Lien upon any of the property of any of the Borrower or the Guarantors; and (iii) do not require the consent, authorization by or approval of or notice to or filing or registration with any Governmental Authority. This Agreement has been duly executed and delivered by each of the Borrower and the Guarantors. This Agreement is, and each of the other Loan Documents to which the Borrower and each of the Guarantors is or will be a party, when delivered hereunder or thereunder, will be, a legal, valid and binding obligation of the Borrower and each Guarantor, as the case may be, enforceable against the Borrower and the Guarantors, as the case may be, in accordance with its terms. SECTION 3.03 STATEMENTS MADE. The information that has been delivered in writing, and the statements that have been made, whether written or oral, by the Borrower or any of the Guarantors to the Agents or to the Banks in connection with any Loan Document, and any financial statement delivered pursuant hereto or thereto (other than to the extent that any such statements constitute projections, financial or otherwise), taken as a whole and in light of the circumstances in which made, contains no untrue statement of a material fact and does not omit to state a material fact necessary to make such statements not misleading; and, to the extent that any such information constitutes projections, such projections were prepared in good faith on the basis of assumptions, methods, data, tests and information believed by the Borrower or such Guarantor to be reasonable at the time such projections were furnished. SECTION 3.04 FINANCIAL STATEMENTS. The Borrower has furnished the Banks with copies of (i) the audited consolidated financial statement and schedules of the Borrower and its consolidated Subsidiaries for the fiscal year ended December 31, 1996 and (ii) the unaudited consolidated financial statements of the Borrower and its consolidated Subsidiaries for the fiscal quarter(s) ended September 30, 1997. Such financial statements present fairly the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis as of such dates and for such periods; such balance sheets and the notes thereto disclose all liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the dates thereof required to be disclosed by GAAP and such financial statements were prepared in a manner consistent with GAAP, subject to normal year end adjustments. No material adverse change in the operations, business, properties, assets, prospects or condition (financial or otherwise) of the Borrower and its consolidated Subsidiaries, taken as a whole, has occurred from that set forth in the Borrower's audited consolidated financial statements for the year ended December 31, 1996 other than as set forth on (i) Schedule 3.04 or (ii) the draft financial statements delivered hereunder for the year ended December 31, 1997. -32- SECTION 3.05 OWNERSHIP. Each of the Persons listed on Schedule 3.05 is a direct or indirect Subsidiary of the Borrower, and the Borrower owns no other Subsidiaries, whether directly or indirectly, other than as set forth on Schedule 3.05 which also sets forth the ownership interest of the Borrower in such Subsidiaries. Except as set forth on Schedule 3.05, there are no wholly-owned direct or indirect domestic Subsidiaries of the Borrower other than the Guarantors. The Inactive Subsidiaries do not own or hold assets in excess of $10,000 in the aggregate. SECTION 3.06 LIENS. There are no Liens of any nature whatsoever on any assets of the Borrower or any of the Guarantors other than: (i) Permitted Liens; and (ii) other Liens permitted pursuant to Section 6.01. Neither the Borrower nor any Guarantor is party to any contract, agreement, lease or instrument the performance of which, either unconditionally or upon the happening of an event, will result in or require the creation of a Lien on any assets of the Borrower or any Guarantor or otherwise result in a violation of this Agreement except as set forth on Schedule 3.06 hereto. SECTION 3.07 COMPLIANCE WITH LAW. (a) Except as set forth in Section 3.17, (i) the operations of the Borrower and the Guarantors comply in all material respects with all applicable environmental, health and safety statutes and regulations, including, without limitation, regulations promulgated under the Resource Conservation and Recovery Act (42 U.S.C. ss.ss.6901 ET SEQ.); (ii) to the Borrower's and each of the Guarantor's knowledge, none of the operations of the Borrower or the Guarantors is the subject of any Federal or state investigation evaluating whether any remedial action involving a material expenditure by the Borrower or any Guarantor is needed to respond to a release of any Hazardous Waste or Hazardous Substance (as such terms are defined in any applicable state or Federal environmental law or regulations) into the environment; and (iii) to the Borrower's and each of the Guarantor's knowledge, the Borrower and the Guarantors do not have any material contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. (b) Neither the Borrower nor any Guarantor is, to the best of its knowledge, in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority the violation of which, or a default with respect to which, would have a Material Adverse Effect. SECTION 3.08 INSURANCE. All policies of insurance of any kind or nature owned by or issued to the Borrower and the Guarantors, including, without limitation, policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers' compensation, employee health and welfare, title, property and liability insurance, are in full force and effect and are of a nature and provide such coverage as is sufficient and as is customarily carried by companies of the same or similar size, engaged in the same or similar businesses of the Borrower and the Guarantors. -33- SECTION 3.09 USE OF PROCEEDS. The proceeds of the Loans shall be used for working capital and for other general corporate purposes of the Borrower and the Subsidiaries. SECTION 3.10 LITIGATION. Except as set forth on Schedule 3.10, there are no actions, suits or proceedings pending or, to the knowledge of the Borrower or the Guarantors, threatened against or affecting the Borrower or the Guarantors or any of their respective properties, before any court or governmental department, commission, board, bureau, agency, arbitration body or instrumentality, domestic or foreign, which have a reasonable possibility of being determined adversely to the Borrower or a Guarantor and which, if determined adversely, would have a Material Adverse Effect. SECTION 3.11 LABOR MATTERS. Neither the Borrower nor any Guarantor has experienced any strike, labor dispute, slowdown or work stoppage due to labor disagreements which could reasonably be expected to have a Material Adverse Effect, and to the best knowledge of the Borrower, there is no such strike, dispute, slowdown or work stoppage threatened against the Borrower or any Guarantor. SECTION 3.12 OWNERSHIP OF PROPERTY; LIENS. The Borrower and each of the Guarantors has good and marketable title to all of its properties and assets, real and personal, other than those leased by the Borrower or any Guarantor and there are no Liens (including Liens or retained security titles of conditional vendors) of any nature whatsoever on the assets of the Borrower or any of the Guarantors, other than as permitted under Section 6.01 hereof. SECTION 3.13 TAXES. The Borrower and each Guarantor has filed or caused to be filed all tax returns which to the knowledge of the Borrower and the Guarantors are required to be filed, and has paid all taxes shown to be due and payable on said returns or on any assessments made against each of them (other than those being contested in good faith by appropriate proceedings for which adequate reserves have been provided on the books of the Borrower or the Guarantors, as the case may be), and no tax liens have been filed and, to the best knowledge of the Borrower and the Guarantors, no claims are being asserted with respect to any taxes. SECTION 3.14 FILING OF STATEMENTS AND REPORTS. Each of the Borrower and the Guarantors has filed all statements and reports which, to the knowledge of the Borrower and the Guarantors, are required to be filed with any Governmental Authority and for which the failure to so file would have a Material Adverse Effect. SECTION 3.15 ERISA. Subject to the events described in Schedule 3.15 hereto, no Reportable Event has occurred during the immediately preceding six-year period with respect to any Plan, and each Plan has complied with and has been administered in all material respects in accordance with applicable provisions of ERISA and the Code. The present value of all accrued benefits under each Single Employer Plan maintained by the Borrower, any Subsidiary or any Commonly Controlled Entity (based on those assumptions used to fund such Plan) did not, as of the last annual valuation date applicable thereto, exceed the value of the assets of such Plan allocable to such benefits. Except as set forth on Schedule 3.15, neither the Borrower nor any Subsidiary nor any -34- Commonly Controlled Entity has during the immediately preceding six-year period participated in any Multiemployer Plans. The present value (determined using actuarial and other assumptions which are reasonable in respect of the benefits provided and the employees participating) of the liability of the Borrower, each Subsidiary and each Commonly Controlled Entity for post retirement benefits to be provided to their current and former employees during 1998 and 1999 under Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does not, in the aggregate, on an annual basis exceed $200,000. SECTION 3.16 MATERIAL AGREEMENTS. Schedule 3.16 accurately and completely lists all (i) material leases, contracts and agreements and (ii) subscriptions, options, warrants, calls (including pre-emptive rights) or other agreements or commitments of any nature relating to the capital stock of the Borrower (the "EQUITY-RELATED AGREEMENTS") to which the Borrower or any Guarantor and any other Person is a party, including those leases, contracts, agreements and Equity-Related Agreements which are presently in effect and involve the conduct of the Borrower and the Guarantors' businesses and under which, by the terms thereof, could require the Borrower or the Guarantors to make payments to any Person in excess of $50,000 per year. SECTION 3.17 ENVIRONMENTAL MATTERS. (a) Except for any matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any Guarantor (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (b) None of the real property owned or leased by the Borrower or any Guarantor (such property, the "REAL PROPERTY") contains, or to the best knowledge of the Borrower and the Guarantors, has contained, any Hazardous Materials or substances or underground storage tanks, except as is customary in the industry in which the Borrower and the Guarantors are engaged and in compliance with applicable laws and the presence of which has required, or is expected to require, an expenditure, which when added to any expenditures required under paragraphs (c), (d) and (f) hereof, is in excess of $1,000,000. (c) The Real Property is in compliance with applicable Environmental Laws and requirements affecting such Real Property except for non-compliance which does not require and is not expected to require an expenditure which, when added to any expenditures required under paragraphs (b), (d) and (f) hereof, is in excess of $1,000,000, and, to the knowledge of the Borrower and the Guarantors, there is no environmental condition which could interfere with the continued use of the Real Property. (d) No notice of violations or advisory action by regulatory agencies regarding environmental control matters or permit compliance is outstanding except for violations or actions which do not and would not require expenditures which, when added to any expenditures required under paragraphs (b), (c) and (f) hereof, are in excess of $1,000,000. -35- (e) Hazardous Materials have not been transferred by the Borrower or any of its Subsidiaries or to the best of the Borrower's knowledge by any third party engaged by the Borrower or any of its Subsidiaries from any of the Real Property to any other location which is not in compliance with all applicable Environmental Laws. (f) With respect to the Real Property, there is no proceeding, governmental administrative action or judicial proceeding pending or, to the best knowledge of the Borrower or any Guarantor, contemplated under any Federal, state or local law regulating the discharge of Hazardous Materials into the environment, to which the Borrower or any Guarantor is named as a party except for actions or proceedings which require or would be expected to require an expenditure which, when added to any expenditures required under paragraphs (b), (c) and (d) hereof, is in excess of $1,000,000. SECTION 4. CONDITIONS OF LENDING SECTION 4.01 CONDITIONS PRECEDENT TO EFFECTIVENESS OF RESTRUCTURING. The obligation of the Banks to close this restructuring and to make any Loans is subject to the following conditions precedent: (a) SUPPORTING DOCUMENTS. The Agents shall have received for each of the Borrower and the Guarantors: (i) a copy of such entity's certificate of incorporation, as amended, certified as of a recent date by the Secretary of State of the state of its incorporation; (ii) a certificate of such Secretary of State, dated as of a recent date, as to the good standing of and payment of taxes by, that entity and as to the charter documents on file in the office of such Secretary of State; and (iii) a certificate of the Secretary or an Assistant Secretary of that entity dated the Closing Date, and certifying (A) that attached thereto is a true and complete copy of the by-laws of that entity as in effect on the date of such certification, (B) that attached thereto is a true and complete copy of resolutions adopted by the Board of Directors of that entity authorizing the Borrowings hereunder, the execution, delivery and performance in accordance with their respective terms of this Agreement, the Loan Documents and any other documents required or contemplated hereunder or thereunder, (C) that the certificate of incorporation of that entity has not been amended since the date of the last amendment thereto indicated on the certificate of the Secretary of State furnished pursuant to clause (i) above and (D) as to the incumbency and specimen signature of each officer of that entity executing this Agreement and the Loan Documents or any other document delivered by it in connection herewith or therewith (such certificate to contain a certification by another -36- officer of that entity as to the incumbency and signature of the officer signing the certificate referred to in this clause (iii)). (b) AGREEMENT. This Agreement shall have been executed and delivered by the Borrower, the Banks and the Agents, and the Documentation Agent shall have received evidence satisfactory to it of such execution and delivery. (c) NOTES. Each of the Tranche A Banks shall have received a Tranche A Note executed by the Borrower in substantially the form of Exhibit A-1 hereof and each of the Tranche B Banks shall have received a Tranche B Note executed by the Borrower in substantially the form of Exhibit A-2 hereof. (d) OPINION OF COUNSEL TO THE BORROWER. The Agents and the Banks shall have received the favorable written opinion of counsel to the Borrower and the Guarantors reasonably acceptable to the Agents, dated the date of the Closing Date, substantially in the form of Exhibit B (e) PAYMENT OF FEES. The Borrower shall have paid to the Administrative Agent the then unpaid balance of all accrued and unpaid Fees then owed under and pursuant to this Agreement and all accrued interest due and owing under the Existing Notes and all fees and expenses outstanding under the Existing Agreements and this Agreement. (f) CORPORATE AND JUDICIAL PROCEEDINGS. All corporate proceedings and all instruments and agreements in connection with the transactions among the Borrower, the Guarantors, the Agents and the Banks contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Agents, and the Agents shall have received all information and copies of all documents and papers, including records of corporate and judicial proceedings, which the Agents may have reasonably requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate, governmental or judicial authorities. (g) INFORMATION. The Agents shall have received such information (financial or otherwise) as may be reasonably requested by the Agents. (h) COMPLIANCE WITH LAWS. The Borrower and the Guarantors shall have granted the Agents access to and the right to inspect all reports, audits and other internal information of the Borrower and the Guarantors relating to environmental matters, and any third party verification of certain matters relating to compliance with environmental laws and regulations requested by either of the Agents, and the Agents shall be reasonably satisfied that the Borrower and the Guarantors are in compliance in all material respects with all applicable environmental laws and regulations in accordance with Section 3.17 and be satisfied with the costs of maintaining such compliance. (i) COOPER LOAN ASSURANCES. Each of the Banks shall have received from the Borrower (i) information and documents relating to the Cooper Loan which shall be satisfactory to each of the Banks and (ii) reasonable assurances that, in fact, the Cooper Loan will be made by Cooper on terms and conditions satisfactory to each of the Banks. -37- (j) NO DEFAULT. No event shall have occurred and be continuing on the Closing Date, or would result from the extension of any Loan, which would constitute a Default or Event of Default under this Agreement or under any credit agreement, indenture or other agreement (including, without limitation, the Note Agreements) related to any indebtedness for borrowed money or any other material contract or purchase agreements (including collective bargaining agreements) to which the Borrower or any of the Guarantors is a party. (k) CIBC TERM LOAN AMENDMENT. The Borrower, CIBC and SMP Canada shall have executed and delivered an amendment to the CIBC Term Loan on terms satisfactory to each of the Banks. (l) AMENDMENT TO NOTE AGREEMENTS. The Borrower and the Insurance Companies shall have executed and delivered an amendment to the Note Agreements on terms satisfactory to each of the Banks which amendment shall include, among other things, the Insurance Companies' consent to the Cooper Transaction, the Cooper Loan, the Service Line Sale and the Fuel Pump Sale and waivers of existing defaults under the Note Agreements. (m) FINANCIAL REPORTS. The Agents shall have received from the Borrower in form satisfactory to the Banks rolling weekly cash flow projections for the following three month period from March 1, 1998 through May 31, 1998. (n) UCC-11 SEARCHES. The Agents shall have received results of UCC-11 searches satisfactory to the Banks (in each case dated as of a date reasonably satisfactory to the Banks) reflecting the absence of Liens on the Borrower's and the Guarantors' assets. (o) CERTIFICATE. The Documentation Agent shall have received a certificate (the "CERTIFICATE") dated the Closing Date and signed by the President or Chief Financial Officer of the Borrower and the Guarantors (i) identifying material adverse change in the business, operations, assets, properties, prospects or condition (financial or otherwise) of the Borrower from that disclosed in the Borrower's draft of the audited financial statements for the year ended December 31, 1997, and that the Borrower and the Guarantors are not aware, as of the Closing Date, of any material undisclosed liability which could result in a Material Adverse Effect, except as set forth in the Certificate satisfactory to the Banks delivered pursuant to this subsection, (ii) certifying that no Default or Event of Default exists, or would result from the extension of any Loan, under this Agreement or under any credit agreement, indenture or other agreement (including, without limitation, the Note Agreements) relating to any Indebtedness or any other material contract or purchase agreement to which the Borrower or any of the Guarantors is a party; and (iii) certifying that the Borrower has received all required consents necessary in connection with the execution, delivery and performance of this Agreement, the Company's entry into the Cooper Transaction and the Service Line Sale (including, without limitation, from the Insurance Companies). (p) REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in Article IV hereof shall be true and correct in all material respects on and as of the Closing Date. -38- (q) BOARD RESOLUTIONS. The Agents shall have received a certificate of the Secretary of the Borrower certifying the approval of the following resolutions of the Borrower's Board of Directors: (i) the engagement through November 30, 1998 of Carl Marks, or such other consultant of the Borrower's choosing who is reasonably satisfactory to the Banks, the full scope of whose engagement is satisfactory to the Banks, (ii) the development of a strategic plan, (iii) the implementation of the recommendations made by Peat Marwick in its management letter dated April 15, 1997, (iv) the Borrower's execution and delivery of this Agreement and the Notes and (v) the implementation of the organizational changes disclosed to the Banks during the meeting held on January 7, 1998. (r) BORROWING BASE CERTIFICATE. The Administrative Agent shall have received a Borrowing Base Certificate dated the Closing Date in substantially the form of Exhibit C demonstrating the ability of the Borrower to incur Loans advanced on the Closing Date. (s) CLOSING DOCUMENTS. The Agents shall have received all closing documents required by this Agreement reasonably satisfactory in form and substance to the Agents. SECTION 4.02 CONDITIONS PRECEDENT TO EACH LOAN. The obligation of the Banks to make each Loan is subject to the following conditions precedent: (a) NOTICE. The Administrative Agent shall have received a notice in accordance with Section 2.04 with respect to such borrowing or issuance, as the case may be. (b) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Agreement and the other Loan Documents or otherwise made in writing in connection herewith or therewith shall be true and correct in all material respects on and as of the date of each Borrowing hereunder with the same effect as if made on and as of such date except to the extent such representations and warranties expressly relate to an earlier date. (c) NO DEFAULT. On the date of each Borrowing of a Loan hereunder, the Borrower and Guarantors shall be in compliance with all of the terms and provisions set forth herein to be observed or performed and no Default or Event of Default shall have occurred and be continuing. (d) PAYMENT OF FEES. The Borrower shall have paid to the Administrative Agent the then unpaid balance of all accrued and unpaid Fees then payable under and pursuant to this Agreement. (e) BORROWING BASE CERTIFICATE. The Administrative Agent shall have received the timely delivery of the most recent Borrowing Base Certificate (dated no more than seven (7) days prior to the making of a Loan) required to be delivered hereunder demonstrating the Borrower's ability to incur Loans. -39- (f) COOPER LOAN. From and after April 13, 1998, the Cooper Loan shall have been made. (g) FULL TRANCHE A UTILIZATION. At the time of the making of a request for a Borrowing consisting of Tranche B Loans, there shall be no Unused Total Tranche A Commitment. The request by the Borrower for, and the acceptance by the Borrower of, each extension of credit hereunder shall be deemed to be a representation and warranty by the Borrower that the conditions specified in this Section have been satisfied or waived at that time and that after giving effect to such extension of credit under the Tranche A or Tranche B Facility the outstanding balance of the Loans shall not exceed the Borrowing Base. SECTION 5. AFFIRMATIVE COVENANTS From the date hereof and for so long as any Commitment shall be in effect, or any amount shall remain outstanding or unpaid under this Agreement, the Borrower and each of the Guarantors agrees that, unless the Required Banks shall otherwise consent in writing, it will: SECTION 5.01 FINANCIAL STATEMENTS, REPORTS, ETC. In the case of the Borrower and the Guarantors, deliver to the Administrative Agent and each of the Banks: (a) by March 31, 1998, the Borrower's consolidated and consolidating balance sheets and related statements of income and cash flows, showing the financial condition of the Borrower and its Subsidiaries on a consolidated and consolidating basis as of the close of the fiscal year ended December 31, 1997 and the results of their respective operations during such year, the consolidated statement of the Borrower to be audited for the Borrower and its consolidated Subsidiaries by KPMG Peat Marwick or by other independent public accountants of recognized national standing acceptable to the Required Banks and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) and a copy of any related management letter issued by such accountants, and the consolidating statement to be subjected to the auditing procedures applied to such audit of the consolidated statement, and to be certified by a Financial Officer of the Borrower to the effect that such consolidated financial statements fairly present the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis as at such date and for the period then ended in accordance with GAAP consistently applied; (b) within 20 days after the end of each of the first three fiscal quarters of 1998, the Borrower's unaudited consolidated and consolidating balance sheets and related statements of income and cash flows, showing the financial condition of the Borrower and its Subsidiaries on a consolidated and consolidating basis as of the close of such fiscal quarter and the results of their operations during such fiscal quarter and the then elapsed portion of the fiscal year, each certified by a Financial Officer as fairly presenting the financial condition and results of operations of the Borrower and it Subsidiaries on a consolidated and -40- consolidating basis as at the date thereof and for the period then ended, in accordance with GAAP consistently applied, subject to normal year-end audit adjustments; (c) (i) concurrently with any delivery of financial statements under (a) or (b) above, a certificate of a Financial Officer, (A) certifying that no Default or Event of Default has occurred, or, if such a Default or Event of Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (B) setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the provisions of Sections 6.04, 6.06, 6.14, 6.15, 6.16, 6.17, 6.18, 6.19 and 6.20, (ii) concurrently with the delivery of the audited consolidated financial statements under (a) above, a certificate (which certificate may be limited to accounting matters and disclaim responsibility for legal interpretations) of such accountants accompanying the audited consolidated financial statements certifying that, in the course of their audit of the financial statements of the Borrower and its consolidated Subsidiaries, such accountants have obtained no knowledge that an Event of Default has occurred and is continuing, or if, in the opinion of such accountants, an Event of Default has occurred and is continuing, specifying the nature thereof and all relevant facts with respect thereto; (d) no later than the twentieth (20th) day after the end of each fiscal month (commencing with the fiscal month ending on or about February 28, 1998), the unaudited monthly cash flow reports of the Borrower and its Subsidiaries on a consolidated basis as of the close of such fiscal month and for the then elapsed portion of the fiscal year, together with the Borrower's consolidated and consolidating statements of income, showing the financial condition of the Borrower and its Subsidiaries on a consolidated and consolidating basis as of the close of such fiscal month and the results of their operations during such fiscal month and the then elapsed portion of the fiscal year, all certified by a Financial Officer as fairly presenting the results of operations of the Borrower and the Guarantors on a consolidated basis as at the date thereof and the period then ended, subject to normal year-end audit adjustments; (e) no later than the twentieth (20th) day of each fiscal month, rolling weekly cash flow projections for the following three months with details of collections and disbursements (consisting of weekly cash flows, and monthly income and balance sheets), which shall have been reviewed by Carl Marks or such other financial advisors as shall be reasonably acceptable to the Banks; (f) no later than the twentieth (20th) day following the end of each fiscal month, an aging of the Borrower's accounts receivable and accounts payable as at the end of such month, which shall have been reviewed by Carl Marks or such other financial advisors as shall be reasonably acceptable to the Banks; (g) no later than the twentieth (20th) day following the end of each fiscal month, an unaudited financial package consisting of (i) unaudited earnings per share comparison, (ii) statement of consolidated earnings, (iii) analysis of inventory, (iv) defective and overstock -41- returns analysis, (v) stocklift and new business analysis, (vi) new customer changeover analysis, (vii) analysis of sales by market line and (viii) accounts payable aging, in each case relating to the immediately preceding fiscal period. (h) no later than Wednesday of each week, a summary of the preceding week's sales information and a report summarizing the collections, disbursements and accounts receivable for the preceding week; (i) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by it with the Securities and Exchange Commission, or any Governmental Authority succeeding to any of or all the functions of said commission, or with any national securities exchange, as the case may be; (j) as soon as available and in any event (A) within 30 days after the Borrower or any of its ERISA Affiliates knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Single Employer Plan of the Borrower or such ERISA Affiliate has occurred and (B) within 10 days after the Borrower or any of its ERISA Affiliates knows or has reason to know that any other Termination Event with respect to any such Plan has occurred, a statement of a Financial Officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or such ERISA Affiliate proposes to take with respect thereto; (k) promptly and in any event within 10 days after receipt thereof by the Borrower or any of its ERISA Affiliates from the PBGC copies of each notice received by the Borrower or any such ERISA Affiliate of the PBGC's intention to terminate any Single Employer Plan of the Borrower or such ERISA Affiliate or to have a trustee appointed to administer any such Plan; (l) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Single Employer Plan of the Borrower or any of its ERISA Affiliates; (m) within 10 days after notice is given or required to be given to the PBGC under Section 302(f)(4)(A) of ERISA of the failure of the Borrower or any of its ERISA Affiliates to make timely payments to a Plan, a copy of any such notice filed and a statement of a Financial Officer of the Borrower setting forth (A) sufficient information necessary to determine the amount of the lien under Section 302(f)(3), (B) the reason for the failure to make the required payments and (C) the action, if any, which the Borrower or any of its ERISA Affiliates proposed to take with respect thereto; (n) promptly and in any event within 10 days after receipt thereof by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor, a copy of each notice received by the Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability -42- by a Multiemployer Plan, (B) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (C) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (D) the amount of liability incurred, or which may be incurred, by the Borrower or any ERISA Affiliate in connection with any event described in clause (A), (B) or (C) above; and (o) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary as either of the Agents or any Bank may reasonably request. SECTION 5.02 CORPORATE EXISTENCE. Do or cause to be done, and cause each of the Guarantors to do or cause to be done, all things necessary to preserve, renew and keep in full force and effect its corporate existence, material rights, licenses, permits and franchises and comply in all material respects with all laws and regulations applicable to it. SECTION 5.03 INSURANCE. (a) Keep its insurable properties insured at all times, against such risks, including fire and other risks insured against by extended coverage, as is customary with companies of the same or similar size, engaged in the same or similar businesses; and maintain in full force and effect public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by the Borrower or any Guarantor, as the case may be, in such amounts and with such deductibles as are customary with companies of the same or similar size, engaged in the same or similar businesses; and (b) maintain such other insurance or self insurance as may be required by law. SECTION 5.04 OBLIGATIONS AND TAXES. With respect to the Borrower and each Guarantor, pay all its material obligations promptly and in accordance with their terms and pay and ischarge promptly all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property before the same shall become in default, as well as all material lawful claims for labor, materials and supplies or otherwise, which, if unpaid, might become a Lien or charge upon such properties or any part thereof; PROVIDED, HOWEVER, that the Borrower and each Guarantor shall not be required to pay and discharge or to cause to be paid and discharged any such obligation, tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings (if the Borrower and the Guarantors shall have set aside on their books adequate reserves therefor). For purposes of this Section 5.04, "MATERIAL OBLIGATIONS" means obligations, the breach of which would have a Material Adverse Effect. SECTION 5.05 NOTICE OF EVENT OF DEFAULT, ETC. Promptly give to the Administrative Agent notice in writing of any Default or Event of Default. SECTION 5.06 ACCESS TO BOOKS AND RECORDS. Maintain or cause to be maintained at all times true and complete books and records of the financial operations of the Borrower and the Guarantors; and provide the Agents and its representatives access to all such books and records during regular business hours, upon reasonable notice, in order that the Agents may examine and -43- make abstracts from such books, accounts, records and other papers for the purpose of verifying the accuracy of the various reports delivered by the Borrower or the Guarantors to the Agents or the Banks pursuant to this Agreement or for otherwise ascertaining compliance with this Agreement; and at any reasonable time and from time to time during regular business hours, upon reasonable notice, permit the Agents and any agents or representatives (including, without limitation, appraisers) thereof to visit the properties of the Borrower and the Guarantors. SECTION 5.07 MAINTENANCE OF BANK ACCOUNTS. Continue to maintain (i) with the Administrative Agent their existing account or accounts to be used by the Borrower as its principal concentration account or accounts, (ii) the existing lockbox accounts with NationsBank and Wachovia Bank or such other banks reasonably satisfactory to the Administrative Agent notice of which has been given to the Administrative Agent, and (iii) the existing depository accounts, as each is listed on Schedule 5.07 hereto. SECTION 5.08 BORROWING BASE CERTIFICATE. Furnish a Borrowing Base Certificate to the Administrative Agent as soon as available and in any event on or before the fifth Business Day of each month substantially in the form of Exhibit C. SECTION 5.09 STRATEGIC BUSINESS PLAN. As soon as practicable, furnish to the Agents the Borrower's strategic plan, including, when available, all material modifications thereto, and make its senior officers available to discuss the same with the Agents. SECTION 5.10 MATERIAL ADVERSE EFFECT. Promptly give to the Administrative Agent notice in writing of (a) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any of its Subsidiaries that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (b) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect; PROVIDED, that each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.11 MAINTENANCE OF PROPERTIES. Keep all properties useful and necessary in the business of the Borrower and its Subsidiaries in good working order and condition. SECTION 5.12 FISCAL YEAR; ACCOUNTING. Maintain its present fiscal year, method of accounting and current accounting policies (other than insignificant changes of method) except as permitted by GAAP. SECTION 5.13 COMPLIANCE WITH TERMS OF LEASEHOLDS. Make all payments and otherwise perform all obligations in respect of all leases of real property, and, except for leases of property that the Borrower determines are no longer necessary for the business of the Borrower and its Subsidiaries, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or canceled. -44- SECTION 5.14 RETENTION OF FINANCIAL ADVISORS. Continue to retain Carl Marks or such other financial advisors as are reasonably acceptable to the Banks to assist the Borrower and the Guarantors in reviewing cash flows and financial projections, advising the Borrower and the Guarantors on operating strategy and financial planning (including, without limitation, the development of a strategic plan), and to analyze and prepare reports in a form satisfactory to the Banks with respect to the foregoing and to make such advisors available to the Banks to discuss such projections, operating strategy, financial planning and strategic plan as may be reasonably requested by the Agents or any Bank. SECTION 5.15 MAINTENANCE OF CLIPPER RECEIVABLES FINANCING. The Borrower shall continue to maintain at least $25 million of receivables financing under the Clipper Receivables Financing Agreement or such other receivables financing arrangement which shall be acceptable to the Banks. SECTION 5.16 APPLICATION OF ASSET SALE PROCEEDS. Without modification to the provisions of Section 6.09, to the extent that the terms of the agreements to which the Borrower is a party as of the date hereof do not prohibit application of proceeds from sales of the Borrower's assets to the repayment of the Loans, apply the proceeds (net of reasonable taxes and costs payable or incurred in connection therewith) of such asset sales (other than the sale of inventory in the ordinary course of business, the Service Line Sale and the Fuel Pump Sale) to the repayment of the Loans in accordance with Section 2.12 hereof. SECTION 5.17 FURTHER ASSURANCES. At the Borrower's cost and expense, upon request of the Agents, duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts as may be necessary or desirable in the opinion of the Agents or their counsel to give effect to the provisions and purposes of this Agreement and the other Loan Documents. SECTION 6. NEGATIVE COVENANTS From the date hereof and for so long as any Commitment shall be in effect or any amount shall remain outstanding or unpaid under this Agreement, unless the Required Banks shall otherwise consent in writing, the Borrower and each of the Guarantors will not: SECTION 6.01 LIENS. Incur, create, assume or suffer to exist any Lien on any asset of the Borrower or the Guarantors (including, without limitation, any Inventory or Receivables), now owned or hereafter acquired by the Borrower or any of such Guarantors, other than (i) Liens existing on the date of this Agreement as reflected on Schedule 3.06 hereto and extensions, renewals, refinancings or replacements thereof, PROVIDED, HOWEVER, that no such extensions, renewals, refinancings or replacements will extend to or cover any property not theretofore subject to the Lien being extended, renewed, refinanced or replaced; (ii) Permitted Liens; and (iii) other Liens arising in the ordinary course of business upon or on any other assets of the Borrower or the Guarantors securing obligations (other than for borrowed money) in an aggregate amount not to exceed $500,000 at any time outstanding. -45- SECTION 6.02 MERGER, ETC. Merge with or into or consolidate with or into, or convey, transfer or otherwise dispose of (whether in one transaction or in a series of related transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to, any Person, except that any Guarantor may merge or consolidate with or transfer all or substantially all of its assets to any other Guarantor or the Borrower. SECTION 6.03 INDEBTEDNESS. Contract, create, incur, assume or suffer to exist any Indebtedness, except for (i) Indebtedness under this Agreement, (ii) Indebtedness existing on the date hereof and set forth on Schedule 6.03 and renewals, extensions, modifications or refinancings of such Indebtedness that do not increase the principal amount thereof, (iii) Indebtedness secured by purchase money Liens and Capitalized Leases in an aggregate amount not to exceed $6,000,000 at any one time outstanding, (iv) Indebtedness of the Borrower, the repayment of which is expressly subordinated to the repayment of the Loans; (v) Indebtedness of the Borrower to Cooper in the principal amount of approximately $22.5 million and in respect of purchase price adjustments not in excess of $15,000,000 in the aggregate arising in connection with the Cooper Transaction; (vi) guarantees permitted under Section 6.05; and (vii) Indebtedness owing to Chase or any banking Affiliate in respect of any overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing house transfers of funds. SECTION 6.04 CAPITAL EXPENDITURES. Make Capital Expenditures on a cumulative basis in excess of the following amounts as of the end of each of the fiscal quarters of the Borrower set forth below: QUARTER TOTAL AMOUNT ------- ------------ March 31, 1998 $ 4,100,000 June 30, 1998 $ 9,700,000 September 30, 1998 $13,300,000 SECTION 6.05 GUARANTEES AND OTHER LIABILITIES. Except as set forth on Schedule 6.05, purchase or repurchase (or agree, contingently or otherwise, so to do) the Indebtedness of, or assume, guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance of any obligation or capability of so doing, or otherwise), endorse or otherwise become liable, directly or indirectly, in connection with the obligations, stock or dividends of any Person, except (i) by endorsement of negotiable instruments for deposit or collection in the ordinary course of business and (ii) for any guaranty of Indebtedness or other obligations of the Borrower or any Guarantor if the Person issuing such guaranty could have incurred such Indebtedness or obligations under this Agreement. SECTION 6.06 DIVIDENDS; CAPITAL STOCK. Declare or pay, directly or indirectly, any dividends or make any other distribution or payment, whether in cash, property, securities or a combination thereof, with respect to (whether by reduction of capital or otherwise) any shares of -46- capital stock (or any options, warrants, rights or other equity securities or agreements relating to any capital stock), or set apart any sum for the aforesaid purposes, PROVIDED, that (i) any Guarantor may pay dividends or make any other such distribution or payments to the Borrower and (ii) so long as no Default or Event of Default shall have occurred and be continuing, commencing with the second quarter of 1998, the Borrower may pay dividends (x) of no more than $.04 per share for the fiscal quarter ending March 31, 1998 in the event that its Net Income for such fiscal quarter is equal to or greater than $1,400,000; and (y) of no more than $.08 per share for each of the fiscal quarters ending June 30, 1998 and September 30, 1998 in the event that its Net Income in respect of each of such fiscal quarters is equal to or greater than (A) $5,800,000 for the fiscal quarter ending June 30, 1998 and (B) $5,700,000 for the fiscal quarter ending September 30, 1998; PROVIDED, that in no event shall the Borrower pay dividends on a cumulative basis for the first three quarters of 1998 in excess of $.16 per share on a maximum of 13,500,000 shares in the aggregate. SECTION 6.07 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule 6.07, sell or transfer any property or assets to, or otherwise engage in any other transactions with, any of its Affiliates, other than in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Guarantor than could be obtained on an arm's-length basis from unrelated third parties. SECTION 6.08 INVESTMENTS, LOANS AND ADVANCES. Purchase, hold or acquire any capital stock, evidences of Indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment in, any other Person (all of the foregoing, "INVESTMENTS"), except for (i) ownership by the Borrower or the Guarantors of the capital stock of, and other Investments in, each of the Subsidiaries listed on Schedule 3.05 and other Investments set forth on Schedule 6.08, (ii) Permitted Investments and (iii) short-term loans and advances to the Borrower's wholly-owned Subsidiaries for the payment of ordinary course expenses in amounts not to exceed $500,000 in the aggregate at any time outstanding PROVIDED, that at no time shall the Borrower or any Guarantor make any short-term loans or advances to Reno Standard Incorporated in excess of $50,000 in the aggregate. SECTION 6.09 DISPOSITION OF ASSETS. Sell or otherwise dispose of any assets (including, without limitation, the capital stock of any Subsidiary) except for (i) sales of inventory, fixtures and equipment in the ordinary course of business, (ii) dispositions of other properties no longer used or useful in the business of the Borrower and the Guarantors, PROVIDED that all such dispositions shall be for fair market value and PROVIDED FURTHER that the aggregate fair market value of all such other properties disposed of shall not exceed $5,000,000 in the aggregate, (iii) the disposition of the Borrower's brake division in connection with the Cooper Transaction, (iv) the Service Line Sale on terms reasonably satisfactory to the Required Banks (v) the Fuel Pump Sale on terms reasonably satisfactory to the Required Banks, (vi) the disposition of real property and machinery acquired by the Borrower in connection with the Cooper Transaction, including the assets and business of the Frostemp business line (formerly known as Wynn's Climate Systems), as set forth in that certain letter dated March 25, 1998 from Michael Bailey to Michael Reilly and (vii) the sale or compromise of the Borrower's claim in the APS Bankruptcy Case on terms satisfactory to the Required Banks; it being understood that if the Required Banks consent to the sale by the Borrower -47- of any assets of the Borrower other than as described above, the Borrower shall (to the extent not prohibited by any other agreement for borrowed money to which the Borrower is a party) apply the proceeds of any such sale (net of taxes and reasonable costs payable or incurred in connection therewith) to the repayment of the Loans in accordance with Section 2.12 hereof. SECTION 6.10 NATURE OF BUSINESS. Except for the consummation of the Cooper Transaction, the Service Line Sale and the Fuel Pump Sale, modify or alter, in any material manner the nature and type of its business as conducted at or prior to the Closing Date or the manner in which such business is conducted at or prior to the Closing Date. SECTION 6.11 CHARTER AMENDMENTS. Amend its certificate of incorporation or bylaws. SECTION 6.12 ACCOUNTING CHANGES. Make or permit any change in accounting or reporting practices, except as allowed by GAAP. SECTION 6.13 CHANGE IN MANAGEMENT COMPENSATION. Make or permit any material change from the 1997 Management Compensation Plan as approved by the Borrower's Board of Directors. SECTION 6.14 MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Permit at any time the Borrower's Tangible Net Worth for any fiscal quarter of the Borrower set forth below to be less than the amount set forth opposite such fiscal quarter: FISCAL QUARTER ENDING AMOUNT --------------------- ------ March 31, 1998 $143,000,000 June 30, 1998 $147,000,000 September 30, 1998 $152,000,000 SECTION 6.15 NON-CUMULATIVE EBITDA. Permit EBITDA for any fiscal quarter of the Borrower ending on the last day of each fiscal quarter set forth below to be less than the amount set forth opposite such fiscal quarter: FISCAL QUARTER ENDING AMOUNT --------------------- ------ June 30, 1998 $14,000,000 September 30, 1998 $13,800,000 SECTION 6.16 CUMULATIVE EBITDA. Permit EBITDA for (i) the three-month period ending March 31, 1998 to be less than $9,400,000, (ii) the six-month period ending June 30, 1998 -48- to be less than $25,400,000 and (iii) the nine-month period ending September 30, 1998 to be less than $41,100,000. SECTION 6.17 NET SALES. Permit Net Sales for each fiscal quarter of the Borrower set forth below to be less than the amount set forth opposite such fiscal quarter: FISCAL QUARTER ENDING AMOUNT --------------------- ------ March 31, 1998 $145,000,000 June 30, 1998 $167,000,000 September 30, 1998 $153,000,000 SECTION 6.18 MAXIMUM LOAN BALANCES. Permit the maximum amount of Loans outstanding on the dates specified below to exceed the amount specified below for such date: DATE AMOUNT ---- ------ March 30, 1998 - $62,900,000 April 13, 1998 April 30, 1998 $71,700,000 May 31, 1998 $81,600,000 June 30, 1998 $85,000,000 July 31, 1998 $55,500,000 August 31, 1998 $37,600,000 September 30, 1998 $25,500,000 October 31, 1998 $18,100,000 November 30, 1998 $14,600,000 SECTION 6.19 MAXIMUM PEAK BALANCES. Permit the maximum amount of Borrowed Funds outstanding at any time during the month specified below to exceed the amount specified below for such month: -49- DATE AMOUNT ---- ------ April 1998 $ 94,200,000 May 1998 $124,200,000 June 1998 $127,400,000 July 1998 $ 94,900,000 August 1998 $ 74,000,000 September 1998 $ 59,600,000 October 1998 $ 50,500,000 November 1998 $ 46,200,000 SECTION 6.20 MAXIMUM BORROWED FUNDS. Permit the maximum amount of Borrowed Funds outstanding on the dates specified below to exceed the amount specified below for such date: DATE AMOUNT ---- ------ April 30, 1998 $ 94,200,000 May 31, 1998 $104,100,000 June 30, 1998 $107,500,000 July 31, 1998 $ 73,400,000 August 31, 1998 $ 51,500,000 September 30, 1998 $ 36,400,000 October 31, 1998 $ 26,700,000 November 30, 1998 $ 22,200,000 SECTION 6.21 SUBSIDIARIES. Create or permit the creation of any new Subsidiary of the Borrower or any Guarantor. SECTION 6.22 ADDITIONAL INTERMOTOR DEBT. Permit Intermotor to incur Indebtedness in excess of (pound)5,000,000 over the amount currently permitted under that certain agreement dated February 28, 1997, between Intermotor and The Royal Bank of Scotland PLC. -50- SECTION 6.23 INACTIVE SUBSIDIARIES. Make any Investments in Marathon Auto Parts & Products, Inc., Motortronics, Inc. and Industrial & Automotive Associates, Inc. (collectively, the "INACTIVE SUBSIDIARIES") or permit the Inactive Subsidiaries to engage in any business or own any assets the value of which is in excess of $10,000 in the aggregate. SECTION 7. EVENTS OF DEFAULT SECTION 7.01 EVENTS OF DEFAULT. In the case of the happening of any of the following events and the continuance thereof beyond the applicable period of grace if any (each, an "EVENT OF DEFAULT"): (a) any material representation or warranty made by the Borrower or any Guarantor in this Agreement or in any Loan Document or in connection with this Agreement or the credit extensions hereunder or any material statement or representation made in any report, financial statement, certificate or other document furnished by the Borrower or any Guarantor to the Banks under or in connection with this Agreement, shall prove to have been false or misleading in any material respect when made or delivered; or (b) default shall be made in the payment of any (i) Fees or interest on the Loans when due, and such default shall continue unremedied for more than two (2) Business Days or (ii) principal of the Loans or other amounts payable by the Borrower hereunder, when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; or (c) default shall be made by the Borrower or any Guarantor in the due observance or performance of any covenant, condition or agreement contained in Section 6 hereof and Section 5.15; or (d) default shall be made by the Borrower or any Guarantor in the due observance or performance of any other covenant, condition or agreement to be observed or performed pursuant to the terms of this Agreement or any of the other Loan Documents and such default shall continue unremedied for more than ten (10) days, (PROVIDED, that such period shall be three (3) Business Days in the case of Section 5.08) ; or (e) if the Borrower or any Guarantor shall (i) default in the payment of principal or interest on any Indebtedness, beyond the period of grace, if any, provided with respect thereto or (ii) default in the performance or observance of any other term, condition or agreement on its part to be performed under any agreement relating thereto if the effect thereof is to cause, or permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause, such obligation to become due prior to its stated maturity; or (f) (i) if the Borrower or any of the Guarantors shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered -51- with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property, or the Borrower or any of the Guarantors shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of the Guarantors any case, proceeding or other action of a nature referred to in clause (i) above or seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its property, which case, proceeding or other action (x) results in the entry of an order for relief or (y) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) the Borrower or any of the Guarantors shall take any action indicating its consent to, approval of, or acquiescence in, or in furtherance of, any of the acts set forth in clause (i) or (ii) above; or (iv) the Borrower or any of the Guarantors shall generally not, or shall be unable to, pay its debts as they become due or shall admit in writing its inability to pay its debts; (g) default by any Guarantor of its obligations hereunder or if any of the terms contained in Section 9 hereof shall cease to be in full force and effect or shall be declared to be null and void, or the validity or enforceability thereof shall be contested by any such Guarantor or such party shall deny that it has any further liability to the Banks with respect thereto; (h) there shall have occurred a material deterioration in the amount, value or marketability of the Borrower's and any of the Guarantors' assets and property taken as a whole; (i) any Person or group (as defined in the Securities Exchange Act of 1934, as amended) shall acquire for the first time the ownership of, or the direct or indirect power to vote, more than 40% of the issued outstanding voting stock of the Borrower; or (j) any material provision of any Loan Document shall, for any reason, cease to be valid and binding on the Borrower or any of the Guarantors, or the Borrower or any of the Guarantors shall so assert in any pleading filed in any court; or (k) any judgment or order as to a liability or debt for the payment of money in excess of $750,000 shall be rendered against the Borrower, any of the Guarantors or a combination thereof and either (i) enforcement proceedings shall have been commenced and shall be continuing by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (l) any non-monetary judgment or order shall be rendered against the Borrower, any of the Guarantors or a combination thereof, which does or would reasonably be expected to (i) cause a material adverse change in the financial condition, business, prospects, operations or assets of the Borrower and the Guarantors taken as a whole on a consolidated basis, (ii) have a Material Adverse Effect on the ability of the Borrower or any of the Guarantors to perform their respective obligations under any Loan Document, or (iii) have a Material Adverse Effect on the rights and remedies of either of the Agents or any Bank under any Loan Document, and there shall be any period of 10 consecutive -52- days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (m) the Cooper Transaction shall not have been consummated by April 3, 1998 on terms satisfactory to each Bank; or (n) the Cooper Loan shall not have been made by April 13, 1998; or (o) the Agents and the Banks shall not have received the favorable written opinions of counsel to Reno Standard Incorporated and Stanric, Inc. in form and substance reasonably acceptable to the Agents by April 30, 1998; or (p) any Termination Event described in clause (iii) or (iv) of the definition of such term shall have occurred and shall continue unremedied for more than 20 days and the sum (determined as of the date of occurrence of such Termination Event) of the Insufficiency of the Plan in respect of which such Termination Event shall have occurred and be continuing and the Insufficiency of any and all other Plans with respect to which such a Termination Event (described in such clause (iii) or (iv)) shall have occurred and then exist is equal to or greater than $200,000; or (q) (i) the Borrower or any ERISA Affiliate thereof shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan, (ii) the Borrower or such ERISA Affiliate does not have reasonable grounds to contest such Withdrawal Liability and is not in fact contesting such Withdrawal Liability in a timely and appropriate manner, and (iii) the amount of such Withdrawal Liability specified in such notice, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $200,000 or requires payments exceeding $200,000 per annum in excess of the annual payments made with respect to such MultiEmployer Plans by the Borrower or such ERISA Affiliate for the plan year immediately preceding the plan year in which such notification is received; or (r) the Borrower or any ERISA Affiliate thereof shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and its ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years that include the date hereof by an amount exceeding $750,000; or (s) the Borrower or any ERISA Affiliate shall have committed a failure described in Section 302(f)(1) of ERISA and the amount determined under Section 302(f)(3) of ERISA is equal to or greater than $200,000; or -53- (t) it shall be determined that the Borrower or any Guarantor is liable for the payment of claims arising out of any failure to comply (or to have complied) with applicable Environmental Laws, the payment of which will have a Material Adverse Effect; then, and in every such event and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Banks, shall, by notice to the Borrower, take one or more of the following actions, at the same or different times: (i) terminate forthwith the Total Commitment; (ii) declare the Loans then outstanding to be forthwith due and payable, whereupon the principal of the Loans together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower and the Guarantors, anything contained herein or in any other Loan Document to the contrary notwithstanding; (iii) set-off amounts in or any accounts maintained with either of the Agents or any of the Banks and apply such amounts to the obligations of the Borrower and the Guarantors hereunder and in the other Loan Documents, and (iv) exercise any and all remedies under the Loan Documents and under applicable law available to the Agents and the Banks. SECTION 8. THE AGENTS SECTION 8.01 ADMINISTRATION BY AGENTS. The general administration of the Loan Documents shall be by the Agents. Each Bank hereby irrevocably authorizes the Agents, at its discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or refrain from exercising such powers under the Loan Documents as are delegated by the terms hereof or thereof, as appropriate, together with all powers reasonably incidental thereto. The Agents shall have no duties or responsibilities except as set forth in this Agreement and the remaining Loan Documents. SECTION 8.02 ADVANCES AND PAYMENTS. (a) On the date of each Loan, the Administrative Agent shall be authorized (but not obligated) to advance, for the account of each of the Banks, the amount of the Loan to be made by it in accordance with its Commitment hereunder. Should the Administrative Agent do so, each of the Banks agrees forthwith to reimburse the Administrative Agent in immediately available funds for the amount so advanced on its behalf by the Administrative Agent, together with interest at the Federal Funds Effective Rate if not so reimbursed on the date due from and including such date but not including the date of reimbursement. (b) Any amounts received by either of the Agents in connection with this Agreement (other than amounts to which the Agents are entitled pursuant to Sections 2.15, 8.06, 10.05 and 10.06), the application of which is not otherwise provided for in this Agreement shall be applied, FIRST, in accordance with each Bank's Commitment Percentage to pay accrued but unpaid Facility Fees, and SECOND, in accordance with each Tranche B Bank's Tranche B Commitment Percentage to pay accrued but unpaid interest and the outstanding principal balance on each Tranche B Note and THIRD, in accordance with each Tranche A Bank's Tranche A Commitment Percentage to pay accrued but -54- unpaid interest and the outstanding principal balance on each Tranche A Note. All amounts to be paid to a Bank by either of the Agents shall be credited to that Bank, after collection by such Agent, in immediately available funds either by wire transfer or deposit in that Bank's correspondent account with such Agent, as such Bank and such Agent shall from time to time agree. SECTION 8.03 SHARING OF SETOFFS. Each Tranche A Bank, Tranche B Bank and CIBC in its capacity as lender under the CIBC Term Loan agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Borrower or any Guarantor or as a result of the exercise of rights in respect of collateral, other collection efforts or otherwise, obtain any payment in respect of Indebtedness owed to such bank by the Borrower or a Guarantor (including as a result of the purchase of a participation from another bank pursuant to this Section), such payment shall be treated as follows: (i) if the party receiving the payment is a Tranche B Bank and there are Tranche B Loans outstanding, and as a result of such payment the unpaid portion of its Tranche B Loans is proportionately less than the unpaid portion of the Tranche B Loans of any other Tranche B Bank, such Tranche B Bank shall promptly purchase at par (and shall be deemed to have thereupon purchased) from such other Tranche B Banks a participation in the Tranche B Loans of such other Tranche B Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Tranche B Loans held by the Tranche B Banks shall be shared by the Tranche B Banks PRO RATA; (ii) if the party receiving such payment is a Tranche A Bank or CIBC (as lender under the CIBC Term Loan ) and there are Tranche B Loans outstanding, such Tranche A Bank or CIBC, as the case may be, shall purchase a subordinated participation in the Tranche B Loans in the amount of such payment which shall be allocated PRO RATA among the Tranche B Banks (provided that such party shall not be entitled to receive any payments in respect of such participation until all Tranche B Loans in which participations have not been purchased pursuant to this Section shall have been paid in full); (iii) if no Tranche B Loans are outstanding, and the payment received by such party is of a proportion of the aggregate amount of principal and interest due with respect to the Remaining Obligations held by or owing to such party which is greater than the proportion received by any other such party in respect of the aggregate amount of principal and interest due with respect to the Remaining Obligations held by or owing to such other party, the party receiving such proportionately greater payment shall purchase such participations in the Remaining Obligations held by or owing to such other parties, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Remaining Obligations held by or owing to such parties be shared by such parties PRO RATA; and (iv) if no Tranche B Loans and Remaining Obligations are outstanding, then to the payment of any other Indebtedness of the Borrower or any Guarantor to any of the banks, PROVIDED, that in each case under (i), (ii), (iii) and (iv) above, if any such non-PRO RATA payment is thereafter recovered or otherwise set aside such purchase of participations shall be rescinded and each Bank which received such payment shall immediately reimburse the Bank which purchased such participation (all without the payment of interest). Any participations required to be purchased under REVOLV~1.WPD 53 this Section shall be effectuated by paying over the amount of such participations to the Administrative Agent for distribution in accordance with this Section. The Banks and CIBC in its capacity as lender under the CIBC Term Loan agree that prior to the date on which there shall be no Unused Total Tranche A Commitment for the first time, NBD shall not be required to share cash collateral in its possession. Nothing in this Agreement or otherwise shall obligate or require Comerica to share with any other Bank any -55- payments or proceeds paid to, or received or recovered by, Comerica in respect of any Indebtedness secured by a certain deed of trust held by Comerica on real estate located in Grapevine, Texas, whether such payments or proceeds result from the voluntary payment of all or any portion of such Indebtedness, the foreclosure of such deed of trust, the exercise of any rights in respect of any other collateral for such Indebtedness, other collection efforts or otherwise, with the sole exception that any right of banker's lien or setoff which Comerica may exercise shall be subject to this Section 8.03. The Borrower and each Guarantor expressly consents to the foregoing arrangements and agrees that any bank holding (or deemed to be holding) a participation in a Loan may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower to such bank as fully as if such bank held a Note and was the original obligee thereon, in the amount of such participation. SECTION 8.04 AGREEMENT OF REQUIRED BANKS. Upon any occasion requiring or permitting an approval, consent, waiver, election or other action on the part of the Required Banks, action shall be taken by the Administrative Agent for and on behalf of, or for the benefit of, all Banks upon the direction of the Required Banks, and any such action shall be binding on all Banks. No amendment, modification, consent, or waiver shall be effective except in accordance with the provisions of Section 10.10. SECTION 8.05 LIABILITY OF AGENTS. (a) Each Agent when acting on behalf of the Banks, may execute any of its respective duties under this Agreement by or through any of its respective officers, agents, and employees, and neither of the Agents nor its directors, officers, agents, employees or Affiliates shall be liable to the Banks or any of them for any action taken or omitted to be taken in good faith, or be responsible to the Banks or to any of them for the consequences of any oversight or error of judgment, or for any loss, unless the same shall happen through its gross negligence or willful misconduct. Each Agent and its respective directors, officers, agents, employees and Affiliates shall in no event be liable to the Banks or to any of them for any action taken or omitted to be taken by them pursuant to instructions received by them from the Required Banks or in reliance upon the advice of counsel selected by it. Without limiting the foregoing, neither of the Agents, nor any of its respective directors, officers, employees, agents or Affiliates shall be responsible to any Bank for the due execution, validity, genuineness, effectiveness, sufficiency, or enforceability of, or for any statement, warranty, or representation in, this Agreement, any Loan Document or any related agreement, document or order, or shall be required to ascertain or to make any inquiry concerning the performance or observance by the Borrower of any of the terms, conditions, covenants, or agreements of this Agreement or any of the Loan Documents. (b) Neither of the Agents nor any of its respective directors, officers, employees, agents or Affiliates shall have any responsibility to the Borrower or the Guarantors on account of the failure or delay in performance or breach by any Bank or by the Borrower or the Guarantors of any of their respective obligations under this Agreement or the Notes or any of the Loan Documents or in connection herewith or therewith. -56- (c) Each Agent, in its capacity as an Agent hereunder, shall be entitled to rely on any communication, instrument, or document reasonably believed by such person to be genuine or correct and to have been signed or sent by a person or persons believed by such person to be the proper person or persons, and such person shall be entitled to rely on advice of legal counsel, independent public accountants, and other professional advisers and experts selected by such person. SECTION 8.06 REIMBURSEMENT AND INDEMNIFICATION. Each Bank agrees (i) to reimburse (x) the Agents in accordance with such Bank's Tranche A Commitment Percentage and Tranche B Commitment Percentage of any expenses and fees incurred for the benefit of the Banks under this Agreement, the Notes and any of the Loan Documents, including, without limitation, fees of counsel referred to in Section 10.05 and compensation of agents and employees paid for services rendered on behalf of the Banks, and any other expense incurred in connection with the operations or enforcement thereof not reimbursed by the Borrower or the Guarantors and (y) the Agents in accordance with such Bank's Tranche A Commitment Percentage and Tranche B Commitment Percentage of any expenses of the Agents incurred for the benefit of the Banks that the Borrower has agreed to reimburse pursuant to Section 10.05 and has failed to so reimburse and (ii) to indemnify and hold harmless the Agents and any of their respective directors, officers, employees, agents or Affiliates, on demand, in the amount of its proportionate share, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against it or any of them in any way relating to or arising out of this Agreement, the Notes or any of the Loan Documents or any action taken or omitted by it or any of them under this Agreement, the Notes or any of the Loan Documents to the extent not reimbursed by the Borrower or the Guarantors (except such as shall result from their respective gross negligence or willful misconduct). SECTION 8.07 RIGHTS OF THE AGENTS. It is understood and agreed that each of the Agents shall have the same rights and powers hereunder (including the right to give such instructions) as the other Banks and may exercise such rights and powers, as well as its rights and powers under other agreements and instruments to which it is or may be party, and engage in other transactions with the Borrower or any Guarantor, as though it were not an Agent of the Banks under this Agreement. SECTION 8.08 INDEPENDENT BANKS. Each Bank acknowledges that it has decided to enter into this Agreement and to make the Loans hereunder based on its own analysis of the transactions contemplated hereby and of the creditworthiness of the Borrower and the Guarantors and agrees that neither of the Agents shall bear any responsibility therefor. SECTION 8.09 NOTICE OF TRANSFER. The Agents may deem and treat a Bank party to this Agreement as the owner of such Bank's portion of the Loans for all purposes, unless and until a written notice of the assignment or transfer thereof executed by such Bank shall have been received by the Documentation Agent. SECTION 8.10 SUCCESSOR AGENT. Either of the Agents may resign at any time by giving written notice thereof to the Banks and the Borrower. Upon any such resignation, the -57- Required Banks shall have the right to appoint a successor Agent, which shall be reasonably satisfactory to the Borrower. If no successor Agent shall have been so appointed by the Required Banks and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation, the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any state thereof and having a combined capital and surplus of a least $100,000,000 and a banking office in New York City, which shall be reasonably satisfactory to the Borrower. Upon the acceptance of any appointment as an Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as an Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement. SECTION 9. GUARANTY SECTION 9.01 GUARANTY (a) Each of the Guarantors unconditionally and irrevocably guarantees the due and punctual payment and performance by the Borrower and the other Guarantors of the Obligations. Each of the Guarantors further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and it will remain bound upon this guaranty notwithstanding any extension or renewal of any of the Obligations. The Obligations of the Guarantors shall be joint and several. Notwithstanding anything to the contrary herein, the maximum aggregate amount of the Obligations that are guaranteed hereunder by any Guarantor shall not exceed the maximum amount that can be so guaranteed without rendering this guaranty by such Guarantor voidable under applicable law relating to fraudulent conveyance or fraudulent transfer. (b) Each of the Guarantors waives presentation to, demand for payment from and protest to the Borrower or any other Guarantor, and also waives notice of protest for nonpayment. The Obligations of the Guarantors hereunder shall not be affected by (i) the failure of any Agent or a Bank to assert any claim or demand or to enforce any right or remedy against the Borrower or any other Guarantor under the provisions of this Agreement or any other Loan Document or otherwise; (ii) any extension or renewal of any provision hereof or thereof; (iii) any rescission, waiver, compromise, acceleration, amendment or modification of any of the terms or provisions of any of the Loan Documents; (iv) the failure of any Agent or a Bank to exercise any right or remedy against any other Guarantor; or (v) the release or substitution of any Guarantor or any other Guarantor. (c) Each of the Guarantors further agrees that this guaranty constitutes a guaranty of performance and of payment when due and not just of collection, and waives any right to require that any resort be had by the Agents or any Bank to any balance of any deposit, account or credit on the books of either of the Agents or any Bank in favor of the Borrower or any other Guarantor, or to any other Person. -58- (d) Each of the Guarantors hereby waives any defense that it might have based on a failure to remain informed of the financial condition of the Borrower and of any other Guarantor and any circumstances affecting the ability of the Borrower to perform under this Agreement. (e) Each Guarantor's guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations or any other instrument evidencing any Obligations, or by the existence, validity, enforceability, perfection, or extent of any collateral therefor or by any other circumstance relating to the Obligations which might otherwise constitute a defense to this Guaranty. Neither of the Agents, nor any of the Banks makes any representation or warranty in respect to any such circumstances or shall have any duty or responsibility whatsoever to any Guarantor in respect of the management and maintenance of the Obligations. (f) Upon the Obligations becoming due and payable (by acceleration or otherwise), the Banks shall be entitled to immediate payment of such Obligations by the Guarantors upon written demand by either of the Agents. SECTION 9.02 NO IMPAIRMENT OF GUARANTY. The obligations of the Guarantors hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations including, without limitation, the unenforceability or disallowance of any interest in a case under the Bankruptcy Code. Without limiting the generality of the foregoing, the obligations of the Guarantors hereunder shall not be discharged or impaired or otherwise affected by the failure of any Agent or a Bank to assert any claim or demand or to enforce any remedy under this Agreement or any other agreement, by any waiver or modification of any provision thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of the Guarantors or would otherwise operate as a discharge of the Guarantors as a matter of law, unless and until the Obligations are paid in full. SECTION 9.03 SUBROGATION. Upon payment by any Guarantor of any sums to either of the Agents or any Bank hereunder, all rights of such Guarantor against the Borrower arising as a result thereof by way of right of subrogation or otherwise, shall in all respects be subordinate and junior in right of payment to the prior final and indefeasible payment in full of all the Obligations. If any amount shall be paid to such Guarantor for the account of the Borrower, such amount shall be held in trust for the benefit of the Agents and the Banks and shall forthwith be paid to the Agents and the Banks to be credited and applied to the Obligations, whether matured or unmatured. SECTION 10. MISCELLANEOUS SECTION 10.01 NOTICES. Notices and other communications provided for herein shall be in writing (including telegraphic, telex, facsimile or cable communication) and shall be mailed, telegraphed, telexed, transmitted, cabled or delivered to the Borrower or any Guarantor at 37-18 -59- Northern Boulevard, Long Island City, NY 11101, Attention: Chief Financial Officer, facsimile number (718) 729-4549, and to a Bank or each of the Agents at its address or facsimile number set forth on the signature pages of this Agreement, or such other address or facsimile number as such party may from time to time designate by giving written notice to the other parties hereunder. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the fifth Business Day after the date when sent by registered or certified mail, postage prepaid, return receipt requested, if by mail; or when delivered to the telegraph company, charges prepaid, if by telegram; or when receipt is acknowledged, if by any telegraphic communications or facsimile equipment of the sender; in each case addressed to such party as provided in this Section 10.01 or in accordance with the latest unrevoked written direction from such party; PROVIDED, HOWEVER, that in the case of notices to the Agents notices pursuant to the preceding sentence and pursuant to Section 2 shall be effective only when received by such Agents. SECTION 10.02 SURVIVAL OF AGREEMENT, REPRESENTATIONS AND WARRANTIES, ETC. All warranties, representations and covenants made by the Borrower or any Guarantor herein or in any certificate or other instrument delivered by it or on its behalf in connection with this Agreement shall be considered to have been relied upon by the Banks and shall survive the making of the Loans herein contemplated and the issuance and delivery to the Banks of the Notes regardless of any investigation made by any Bank or on its behalf and shall continue in full force and effect so long as any amount due or to become due hereunder is outstanding and unpaid and so long as the Commitments have not been terminated. All statements in any such certificate or other instrument shall constitute representations and warranties by the Borrower and the Guarantors hereunder with respect to the Borrower. SECTION 10.03 SUCCESSORS AND ASSIGNS. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Agents and the Banks and their respective successors and assigns. Neither the Borrower nor any of the Guarantors may assign or transfer any of their rights or obligations hereunder without the prior written consent of all of the Banks. Each Bank may sell participations to any Person in all or part of any Loan, or all or part of its Note or Commitment, in which event, without limiting the foregoing, the provisions of Section 2.11 shall inure to the benefit of each purchaser of a participation (provided that such participant shall look solely to the seller of such participation for such benefits and the Borrower's and the Guarantors' liability, if any, under Sections 2.11 and 2.13 shall not be increased as a result of the sale of any such participation) and the PRO RATA treatment of payments, as described in Section 2.12, shall be determined as if such Bank had not sold such participation. In the event any Bank shall sell any participation, such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower and each of the Guarantors relating to the Loans, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement (provided that such Bank may grant its participant the right to consent to such Bank's execution of amendments, modifications or waivers which (i) reduce any Fees payable hereunder to the Banks, (ii) reduce the amount of any scheduled principal payment on any Loan or reduce the principal amount of any Loan or the rate of interest payable hereunder or (iii) extend the maturity of -60- the Borrower's obligations hereunder). The sale of any such participation shall not alter the rights and obligations of the Bank selling such participation hereunder with respect to the Borrower. (b) Each Bank may assign to one or more Banks or Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of its Tranche A Commitment or Tranche B Commitment and the same portion of the related Tranche A Loans or Tranche B Loans at the time owing to it and the related Note or Notes held by it), PROVIDED, HOWEVER, that (i) other than in the case of an assignment to a Person at least 50% owned by the assignor Bank, or by a common parent of both, or to another Bank, the Agents must give their prior written consent to such assignment, which consent will not be unreasonably withheld, (ii) the aggregate amount of the Tranche A Commitment or Tranche B Commitment and/or Tranche A Loans or Tranche B Loans of the assigning Bank subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Documentation Agent) shall, unless otherwise agreed to in writing by the Borrower (provided, however, that after the occurrence and continuance of an Event of Default, no agreement of the Borrower shall be necessary) and the Agents, in no event be less than $5,000,000 (or $1,000,000 in the case of an assignment between Banks) unless the Tranche A Commitment or Tranche B Commitment and/or Tranche A Loans or Tranche B Loans so assigned constitute 100% of such Tranche A Commitment or Tranche B Commitment and/or Tranche A Loans or Tranche B Loans of the assigning Bank and (iii) the parties to each such assignment shall execute and deliver to the Documentation Agent, for its acceptance and recording in the Register (as defined below), an Assignment and Acceptance with blanks appropriately completed, together with a processing and recordation fee of $3,500 (for which the Borrower shall have no liability). Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be within ten Business Days after the execution thereof (unless otherwise agreed to in writing by the Agents), (A) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Bank hereunder and (B) the Bank thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement with respect to its participation in the Tranche A or Tranche B Facility (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Bank's rights and obligations under this Agreement, such Bank shall cease to be a party hereto). (c) By executing and delivering an Assignment and Acceptance, the Bank assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, such Bank assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Loan Documents; (ii) such Bank assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any Guarantor or the performance or observance by the Borrower or any Guarantor of any of its obligations under this Agreement or any of the other Loan Documents or any other instrument or -61- document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement and the other Loan Documents, together with copies of the financial statements referred to in Section 3.04 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such Bank assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Agents to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agents by the terms thereto, together with such powers as are reasonably incidental hereof; and (vi) such assignee agrees that it will perform in accordance with their terms all obligations that by the terms of this Agreement are required to be performed by it as a Bank. (d) The Documentation Agent shall maintain at its office a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Banks and the Commitments of, and principal amount of the Loans owing to, each Bank from time to time (the "REGISTER"). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Guarantors, the Agents and the Banks shall treat each Person the name of which is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Bank at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and the assignee thereunder together with any Note subject to such assignment and the fee payable in respect thereto, the Documentation Agent shall, if such Assignment and Acceptance has been completed with blanks appropriately filled and consented to by the Documentation Agent (to the extent such consent is required hereunder), (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt written notice thereof to the Borrower (together with a copy thereof). No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. Within five Business Days after receipt of notice, the Borrower, at its own expense, shall execute and deliver to the Documentation Agent in exchange for the surrendered Note or Notes a new Note or Notes to the order of such assignee in an amount equal to the Tranche A Commitment or Tranche B Commitment and/or Tranche A Loans or Tranche B Loans assumed by it pursuant to such Assignment and Acceptance and, if the assigning Bank has retained Tranche A Commitments or Tranche B Commitments and/or Tranche A Loans or Tranche B Loans hereunder, a new Note or Notes to the order of the assigning Bank in an amount equal to the Tranche A Commitment or Tranche B Commitment and/or Tranche A Loans or Tranche B Loans retained by it hereunder. Such new Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the surrendered Note. Thereafter, such surrendered Note shall be marked canceled and replaced pursuant to this Agreement and shall be returned to the Borrower. -62- (f) Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 10.03, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower or any of the Guarantors furnished to such Bank by or on behalf of the Borrower or any of the Guarantors; PROVIDED, that prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall agree in writing to be bound by the provisions of Section 10.04. SECTION 10.04 CONFIDENTIALITY. Each Bank agrees to keep any information delivered or made available by the Borrower or any of the Guarantors to it confidential from anyone other than persons employed or retained by such Bank who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; PROVIDED, that nothing herein shall prevent any Bank from disclosing such information (i) to any other Bank or either Agent, (ii) upon the order of any court or administrative agency, (iii) upon the request or demand of any regulatory agency or authority having supervisory power over such Bank, (iv) which has been publicly disclosed other than as a result of a disclosure by either of the Agents or any Bank which is not permitted by this Agreement, (v) in connection with any litigation to which either of the Agents, any Bank, or their respective Affiliates may be a party to the extent reasonably required, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Bank's legal counsel and independent auditors, and (viii) to any actual or proposed participant or assignee of all or part of its rights hereunder subject to the proviso in Section 10.03(f) and PROVIDED FURTHER before such Bank complies with (iii) or (iv) above, it shall (to the extent practicable under the circumstances) use reasonable efforts to provide the Borrower with notice of such request. SECTION 10.05 EXPENSES. Whether or not the transactions hereby contemplated shall be consummated, the Borrower and the Guarantors agree to pay all reasonable out-of-pocket expenses incurred by the Agents and the Banks (including but not limited to the reasonable fees and disbursements of Zalkin, Rodin & Goodman LLP, counsel for the Agents (or other counsel retained by the Agents), in-house and outside counsel of the Banks, and any internal or third-party consultants and auditors advising the Agents) in connection with the preparation, execution, delivery and administration of this Agreement, the Notes and the other Loan Documents and the making of the Loans, the reasonable and customary costs, fees and expenses of the Agents in connection with their periodic monitoring of assets of the Borrower or the Guarantors (including reasonable and customary internal collateral monitoring fees) and publicity expenses, and, following the occurrence of an Event of Default, all reasonable out-of-pocket expenses incurred during the continuance of such Event of Default by the Banks and the Agents in the enforcement or protection of the rights of any one or more of the Banks or the Agents in connection with this Agreement, the Notes or the other Loan Documents, including but not limited to the reasonable fees and disbursements of any counsel for the Banks or the Agents. Such payments shall be made on the Closing Date and thereafter on demand upon delivery of a statement setting forth such costs and expenses. The Obligations of the Borrower and the Guarantors under this Section shall survive the termination of this Agreement and/or the payment of the Loans. SECTION 10.06 INDEMNITY. The Borrower and each of the Guarantors agree to indemnify and hold harmless each of the Agents and the Banks and their respective directors, officers, -63- employees, agents and Affiliates (each an "INDEMNIFIED PARTY") from and against any and all expenses, losses, claims, damages and liabilities incurred by such Indemnified Party arising out of claims made by any Person in any way relating to the transactions contemplated hereby, but excluding therefrom all expenses, losses, claims, damages, and liabilities arising out of or resulting from the gross negligence or willful misconduct of such Indemnified Party. The Obligations of the Borrower and the Guarantors under this Section shall survive the termination of this Agreement and/or the payment of the Loans. SECTION 10.07 CHOICE OF LAW. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE AND WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE OTHER THAN NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401. SECTION 10.08 NO WAIVER. No failure on the part of any Agent or any of the Banks to exercise, and no delay in exercising, any right, power or remedy hereunder or under the Notes or any of the other Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. SECTION 10.09 EXTENSION OF MATURITY. Should any payment of principal or interest on the Notes or any other amount due hereunder become due and payable on a day other than a Business Day, then, except as otherwise expressly provided herein, the maturity thereof shall be extended to the next succeeding Business Day and, in the case of principal, interest shall be payable thereon at the rate herein specified during such extension. SECTION 10.10 AMENDMENTS, ETC. No modification, amendment or waiver of any provision of this Agreement or the other Loan Documents, and no consent to any departure by the Borrower or any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Banks, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given; PROVIDED, HOWEVER, that no such modification or amendment shall without the written consent of the Bank affected thereby (x) increase the Tranche A Commitment of a Tranche A Bank or the Tranche B Commitment of a Tranche B Bank (it being understood that a waiver of an Event of Default shall not constitute an increase in the Tranche A Commitment of a Tranche A Bank or Tranche B Commitment of a Tranche B Bank), or (y) reduce the principal amount of any Loan or the rate of interest payable thereon, or extend any date for the payment of interest hereunder or reduce any Fees payable hereunder or extend the final maturity of the Borrower's obligations hereunder; and, PROVIDED, FURTHER, that no such modification or amendment shall without the written consent of all of the Banks (i) amend or modify any provision of this Agreement which provides for the unanimous consent or approval of the Banks, or (ii) amend this Section 10.10 or the definition of Required Banks, or (iii) release the obligations of any -64- Guarantor hereunder; and, PROVIDED, FURTHER, that no such modification or amendment shall amend or modify any provision of the Agreement relating to the CIBC Term Loan without the consent of CIBC. No such amendment or modification may adversely affect the rights and obligations of any Agent hereunder without its prior written consent. No notice to or demand on the Borrower or any Guarantor shall entitle the Borrower or any Guarantor to any other or further notice or demand in the same, similar or other circumstances. Each holder of a Note shall be bound by any amendment, modification, waiver or consent authorized as provided herein, whether or not a Note shall have been marked to indicate such amendment, modification, waiver or consent and any consent by a Bank or any holder of a Note shall bind any Person subsequently acquiring a Note. No amendment to this Agreement shall be effective against the Borrower or any Guarantor unless signed by the Borrower or such Guarantor, as the case may be. SECTION 10.11 SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 10.12 HEADINGS. Section headings used herein are for convenience only and are not to affect the construction of or be taken into consideration in interpreting this Agreement. SECTION 10.13 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same instrument. SECTION 10.14 PRIOR AGREEMENTS. This Agreement represents the entire agreement of the parties with regard to the subject matter hereof and the terms of any letters and other documentation entered into between the Borrower or a Guarantor and any Bank or any Agent prior to the execution of this Agreement which relate to Loans to be made hereunder shall be replaced by the terms of this Agreement. SECTION 10.15 FURTHER ASSURANCES. Whenever and so often as reasonably requested by either of the Agents, the Borrower and the Guarantors will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things as may be necessary and reasonably required in order to further and more fully vest in the Agents all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred by this Agreement and the other Loan Documents. SECTION 10.16 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE GUARANTORS, THE AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. -65- [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE] -66- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and the year first written. STANDARD MOTOR PRODUCTS, INC. By:______________________________ Title: RENO STANDARD INCORPORATED By:______________________________ Title: MARDEVCO CREDIT CORP. By:______________________________ Title: THE CHASE MANHATTAN BANK, INDIVIDUALLY AND AS ADMINISTRATIVE AGENT By:______________________________ Title: 270 Park Avenue New York, New York 10017 Facsimile No.: (212) 270-6238 and (718) 830-9310 THE BANK OF NEW YORK, INDIVIDUALLY AND AS DOCUMENTATION AGENT By:_______________________________ Title: One Wall Street New York, New York 10286 Facsimile No.: (516) 294-2770 and (212) 635-7498 -67- FLEET BANK, NATIONAL ASSOCIATION, AS A BANK By:_______________________________ Title: c/o Fleet Managed Assets 777 Main Street Hartford, Connecticut 06115 Facsimile No. (860) 986-2435 NBD BANK, AS A BANK By:_______________________________ Title: One First National Plaza Chicago, Illinois 60670-0631 COMERICA BANK, AS A BANK By:_______________________________ Title: 500 Woodward Avenue - 3rd Floor Detroit, Michigan 48275-32005 CANADIAN IMPERIAL BANK OF COMMERCE, AS A BANK AND AS LENDER UNDER THE CIBC TERM LOAN By:_________________________________ Title: One City Center Drive - Suite 200 Mississauga, Ontario L5B 1M2 -68- STANRIC, INC. By:_______________________________ Title: -69- -----END PRIVACY-ENHANCED MESSAGE-----