Document:

exv10w2

Exhibit 10.2

FENWICK ENTERPRISES INC.

JACK SHUSTER

MOTORCAR PARTS OF AMERICA, INC.

as Shareholders

and

GORDON FENWICK

PAUL FENWICK

JOEL FENWICK

STANLEY FENWICK

KAREN FENWICK

as Principals

and

FAPL HOLDINGS INC.

as Corporation

FENWICK AUTOMOTIVE PRODUCTS LIMITED

INTROCAN INC.

ESCAL HOLDINGS INC.

FENCITY HOLDINGS INC.

JOFEN HOLDINGS INC.

 

ADDENDUM TO UNANIMOUS SHAREHOLDERS AGREEMENT

August 24, 2010

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 

	ARTICLE 1

	INTERPRETATION

	 
	 	 	 	 	 	 
	Section 1.1

	 	Defined Terms
	 	 	1	 
	Section 1.2

	 	Gender and Number
	 	 	6	 
	Section 1.3

	 	Headings etc.
	 	 	6	 
	Section 1.4

	 	Currency
	 	 	6	 
	Section 1.5

	 	Certain Phrases, etc.
	 	 	6	 
	Section 1.6

	 	Accounting Terms
	 	 	6	 
	Section 1.7

	 	Statutory References
	 	 	6	 
	Section 1.8

	 	Reference to and Effect on the Shareholders Agreement
	 	 	6	 
	Section 1.9

	 	Schedules
	 	 	7	 
	Section 1.10

	 	Fully Diluted Basis
	 	 	7	 
	 
	 	 	 	 	 	 
	ARTICLE 2

	IMPLEMENTATION OF AGREEMENT AND TERM

	 
	 	 	 	 	 	 
	Section 2.1

	 	Actions in Accordance with Addendum
	 	 	7	 
	Section 2.2

	 	Conflicts
	 	 	7	 
	Section 2.3

	 	Corporation Consent
	 	 	7	 
	Section 2.4

	 	Share Certificates
	 	 	7	 
	Section 2.5

	 	Term of Addendum
	 	 	8	 
	Section 2.6

	 	Agreement to be Bound
	 	 	8	 
	Section 2.7

	 	Deemed Consent under Articles
	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE 3

	DIRECTOR OR OBSERVER

	Section 3.1

	 	General
	 	 	8	 
	Section 3.2

	 	Indemnification
	 	 	9	 
	Section 3.3

	 	Insurance
	 	 	9	 
	 
	 	 	 	 	 	 
	ARTICLE 4

	BUSINESS AND MANAGEMENT OF THE CORPORATION

	 
	 	 	 	 	 	 
	Section 4.1

	 	Business of the Corporation
	 	 	10	 
	Section 4.2

	 	Management of the Corporation
	 	 	10	 
	Section 4.3

	 	Approvals
	 	 	10	 
	Section 4.4

	 	Annual Business Plan
	 	 	12	 
	Section 4.5

	 	Financial Information
	 	 	12	 
	Section 4.6

	 	Adjusted Net Income
	 	 	13	 
	Section 4.7

	 	Books and Records
	 	 	14	 
	 
	 	 	 	 	 	 
	ARTICLE 5

	COVENANTS

	 
	 	 	 	 	 	 
	Section 5.1

	 	Transfer by Shareholders
	 	 	14	 

(i)

 

	 	 	 	 	 	 	 

	Section 5.2

	 	Encumbering of Shares
	 	 	14	 
	Section 5.3

	 	Financing
	 	 	14	 
	 
	 	 	 	 	 	 
	ARTICLE 6

	OPTION

	 
	 	 	 	 	 	 
	Section 6.1

	 	Option
	 	 	14	 
	Section 6.2

	 	Adjustment to Optioned Shares
	 	 	14	 
	Section 6.3

	 	Purchase Price
	 	 	15	 
	Section 6.4

	 	Closing
	 	 	15	 
	Section 6.5

	 	Assignment of Rights
	 	 	15	 
	 
	 	 	 	 	 	 
	ARTICLE 7

	PROCEDURE FOR ISSUANCE OF SHARES

	 
	 	 	 	 	 	 
	Section 7.1

	 	Closing Procedures
	 	 	15	 
	Section 7.2

	 	Non-Completion by the Corporation or Shareholders
	 	 	16	 
	Section 7.3

	 	Irrevocable Power of Attorney
	 	 	17	 
	 
	 	 	 	 	 	 
	ARTICLE 8

	CALL OPTION

	Section 8.1

	 	Call of MPA
	 	 	17	 
	Section 8.2

	 	Calculation of Purchase Price
	 	 	17	 
	Section 8.3

	 	Closing
	 	 	17	 
	Section 8.4

	 	Payment
	 	 	18	 
	 
	 	 	 	 	 	 
	ARTICLE 9

	SHAREHOLDERS PUT OPTION

	 
	 	 	 	 	 	 
	Section 9.1

	 	Put by Shareholders
	 	 	18	 
	Section 9.2

	 	Closing
	 	 	18	 
	Section 9.3

	 	Payment
	 	 	18	 
	 
	 	 	 	 	 	 
	ARTICLE 10

	REPRESENTATIONS AND WARRANTIES

	 
	 	 	 	 	 	 
	Section 10.1

	 	Representations and Warranties of the Shareholders and Principals
	 	 	19	 
	Section 10.2

	 	Representations and Warranties of the Corporation
	 	 	21	 
	Section 10.3

	 	Representations and Warranties of MPA
	 	 	22	 
	Section 10.4

	 	Survival
	 	 	23	 
	 
	 	 	 	 	 	 
	ARTICLE 11

	MISCELLANEOUS

	 
	 	 	 	 	 	 
	Section 11.1

	 	Notices
	 	 	23	 
	Section 11.2

	 	Time of the Essence
	 	 	25	 
	Section 11.3

	 	Announcements
	 	 	25	 
	Section 11.4

	 	Third Party Beneficiaries
	 	 	26	 
	Section 11.5

	 	Joint and Several Liability
	 	 	26	 

(ii)

 

	 	 	 	 	 	 	 

	Section 11.6

	 	No Agency or Partnership
	 	 	26	 
	Section 11.7

	 	Expenses
	 	 	26	 
	Section 11.8

	 	Amendments
	 	 	26	 
	Section 11.9

	 	Waiver
	 	 	27	 
	Section 11.10

	 	Entire Agreement
	 	 	27	 
	Section 11.11

	 	Successors and Assigns
	 	 	27	 
	Section 11.12

	 	Severability
	 	 	27	 
	Section 11.13

	 	Governing Law
	 	 	27	 
	Section 11.14

	 	Counterparts
	 	 	27	 
	Section 11.15

	 	Corporate Opportunities
	 	 	27	 
	Section 11.16

	 	Royal Bank of Canada
	 	 	28	 
	Section 11.17

	 	Non-Competition
	 	 	28	 
	Section 11.18

	 	Non-Solicitation of Customers
	 	 	28	 
	Section 11.19

	 	Non-Solicitation of Employees
	 	 	29	 
	Section 11.20

	 	English Language
	 	 	29	 

SCHEDULES

	 	 	 

	SCHEDULE 6.1

	 	Subscription Notice
	SCHEDULE 7.1(2)

	 	Life Insurance Policies
	SCHEDULE 8.1

	 	Form of Call Notice
	SCHEDULE 10.1(f)

	 	Share Ownership
	SCHEDULE 10.1(g)

	 	Principals
	SCHEDULE “A”

	 	Post Option Shareholders Agreement

(iii)

 

ADDENDUM TO UNANIMOUS SHAREHOLDERS AGREEMENT

     This Addendum to the Unanimous Shareholders Agreement dated August 24, 2010, between Fenwick
Enterprises Inc. (“FEI”), Escal Holdings Inc. (“Escal”), Fencity Holdings Inc. (“Fencity”), Jofen
Holdings Inc. (“Jofen”), Motorcar Parts of America, Inc. (“MPA”), Gordon Fenwick (“GF”), Paul
Fenwick (“PF”), Joel Fenwick (“JF”), Stanley Fenwick (“SF”), Karen Fenwick (“KF”), Jack Shuster
(“JS”), and FAPL Holdings Inc. (the “Corporation”).

RECITALS:

	 	(a)	 	FEI and JS are the registered and beneficial owners of the Shares of the
Corporation as set out in Schedule Error! Reference source not found.;
	 
	 	(b)	 	Escal, Fencity, Jofen, SF and KF are the registered and beneficial owners of
the shares of FEI;
	 
	 	(c)	 	GF, PF, JF, SF, and KF are Principals of FEI;
	 
	 	(d)	 	FEI, JS, Escal, Fencity, Jofen, GF, PF, JF, SF, KF and the Corporation are,
inter alia, parties to an Unanimous Shareholders Agreement made as of the
2nd day of July, 2010 (the “Shareholders Agreement”); and
	 
	 	(e)	 	The Parties have entered into this Addendum to supplement and amend the
Shareholders Agreement and to establish, among other things, rights in favour of MPA.

     In consideration of the above recitals and the mutual agreements contained in this Addendum
(the receipt and adequacy of which are acknowledged), the Parties agree as follows:

ARTICLE 1

INTERPRETATION

Section 1.1 Defined Terms.

As used in this Addendum, the following terms have the following meanings:

“Act” means the Business Corporations Act (Ontario).

“Addendum” means this addendum to the Shareholders Agreement and all schedules attached to
it as it may be amended, modified, restated, replaced or supplemented from time to time in
accordance with this Addendum.

“Adjusted Net Income” has the meaning specified in Section 4.6.

“Affiliate” has the meaning given to it in the Act on the date.

“Annual Business Plan” means, in respect of a Financial Year, the annual business plan
approved under Section 4.4(2).

 

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“Arm’s Length” has the meaning given to it in the Income Tax Act (Canada).

“Articles” means the certificate and articles of incorporation of the Corporation dated
March 23, 2004, as amended to the date of this Addendum, and as may be amended, replaced or
superseded from time to time in accordance with this Addendum.

“Auditor” means BDO Dunwoody LLP, or such other firm of chartered accountants appointed as
the auditors of the Corporation.

“Authorization” means, with respect to a Person, any order, permit, approval, consent,
waiver, licence or similar Authorization of any Governmental Entity having jurisdiction
over the Person.

“Board Nominee” means the person proposed by MPA, in its sole discretion, to be nominated
as a Director of the Corporation and any replacement therefor.

“Books and Records” means all information in any form relating to the operations of the
Corporation and its Subsidiaries, including books of account, financial and accounting
information and records, personnel records, tax records, sales and purchase records,
customer and supplier lists, lists of potential customers, referral sources, research and
development reports and records, production reports and records, equipment logs, operating
guides and manuals, business reports, plans and projections, marketing and advertising
materials and all other documents, files, correspondence and other information (whether in
written, printed, electronic or computer printout form, or stored on computer discs or
other data and software storage or media devices).

“Business” has the meaning specified in Section 4.1.

“Business Day” means any day of the year, other than a Saturday, Sunday or day on which
major banks are closed for business in Toronto, Ontario or Torrance, California.

“By-laws” means the by-laws of the Corporation, as amended to the date of this Addendum,
and as may be amended, replaced or superseded from time to time in accordance with this
Addendum.

“Call Option” has the meaning specified in Section 8.1.

“Call Purchase Price” has the meaning specified in Section 9.1.

“Closing Date” has the meaning specified in, Section 6.4.

“Contract” means any agreement, contract, licence, undertaking, engagement or commitment of
any nature, written or oral.

 

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“Corporation” means FAPL Holdings Inc. and any successor corporation resulting from any
amalgamation, merger, arrangement or other corporate reorganization.

“Debenture” means the debenture in the amount of US$1,894,034.09 issued by Fenwick
Automotive Products Limited, a Subsidiary of the Corporation, in favour of MPA.

“Directors” means the Persons who are elected or appointed as directors of the Corporation
in accordance with this Addendum.

“Financial Year” means the twelve month period commencing on April 1 of each year and
ending March 31 of the immediately following year, or such other twelve month period
approved by the Directors in accordance with the By-laws.

“Forbearance Agreement” means the forbearance agreement dated as of July 6, 2010 among
Royal Bank of Canada, the Corporation and the Subsidiaries;

“GAAP” means accounting principles generally accepted in Canada as recommended in the
Handbook of the Canadian Institute of Chartered Accountants, at the relevant time applied
on a consistent basis.

“Governmental Entity” means (i) any international, multinational, national, federal,
provincial, state, municipal, local or other governmental or public department, central
bank, court, commission, board, bureau, agency or instrumentality, domestic or foreign,
(ii) any subdivision or authority of any of the above, (iii) any stock exchange and (iv)
any quasi-governmental or private body exercising any regulatory, expropriation or taxing
authority under or for the account of any of the above.

“Indebtedness” has the meaning specified in the Forbearance Agreement.

“Introcan” means Introcan Inc., a Delaware corporation.

“Laws” means applicable (i) laws, constitutions, treaties, statutes, codes, ordinances,
principles of common and civil law and equity, orders, decrees, rules, regulations and
municipal by-laws, whether domestic, foreign or international, (ii) judicial, arbitral,
administrative, ministerial, departmental and regulatory judgments, orders, writs,
injunctions, decisions, rulings, decrees and awards of any Governmental Entity, and (iii)
policies, practices and guidelines of, or Contracts with, any Governmental Entity, which,
although not actually having the force of law, are considered by such Governmental Entity
as requiring compliance as if having the force of law, in each case binding on or affecting
the Person, or the assets of the Person, referred to in the context in which such word is
used.

“Lien” means (i) any mortgage, charge, pledge, hypothecation, security interest, assignment
by way of security, encumbrance, lien (statutory or otherwise), hire purchase agreement,
conditional sale agreement, deposit arrangement, title retention agreement or arrangement;
(ii) any trust arrangement, (iii) any arrangement which

 

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creates a right of set-off out of the ordinary course of business, (iv) any option,
warrant, right or privilege capable of becoming a Transfer or (v) any agreement to grant
any such rights or interests.

“Material Agreement” means any agreement to which the Corporation or any Subsidiary thereof
is a party with a value of greater than $175,000.00;

“Non-Active Principals” means SF and KF.

“Notice” has the meaning specified in Section 11.1.

“Observer” has the meaning specified in Section 3.1(2).

“Opco” means Fenwick Automotive Products Limited.

“Option Exercise Period” means the period beginning on the date hereof and expiring at
11:59 p.m. on the second anniversary of the date hereof.

“Optioned Shares” has the meaning specified in Section 6.1.

“Option Transaction” has the meaning specified in Section 6.4.

“Parties” means the Corporation, MPA, the Principals and the Shareholders.

“Permitted Transferee” means, in respect of any Person, any one or more of:

	 	(a)	 	his or her Spouse or Co-Vivant;
	 
	 	(b)	 	his or her natural born and legally adopted children and all
natural born or legally adopted descendants of such children;
	 
	 	(c)	 	a trust, the sole beneficiaries of which are Persons specified
in any one or more subsections of this definition, provided that the terms of
the trust include a valid condition precedent that any Shares or securities of
a Shareholder will vest in the beneficiaries of such trust only if such
beneficiaries have complied with the provisions of Section 2.6;
	 
	 	(d)	 	another Person, all of the voting securities or other ownership
interests of which are owned by him, her or it or Persons specified in any one
or more subsections of this definition, and in respect of Escal, Fencity,
Jofen, GF, PF, JF and GF, any of them; and
	 
	 	(e)	 	in the case of a Transfer of shares of FEI, any Person who, as
of the date hereof, already owned shares in the capital stock of FEI.

“Person” means a natural person, partnership, limited partnership, limited liability
partnership, corporation, limited liability company, unlimited liability company, joint
stock company, trust, unincorporated association, joint venture or other entity or
Governmental Entity, and pronouns have a similarly extended meaning.

 

-5-

“Post Option Shareholders Agreement” means the Unanimous Shareholders Agreement
substantially in the form attached hereto as Schedule Error! Reference source not found..

“Principal” means, in respect of a Shareholder, a Person listed on Schedule Error!
Reference source not found. as a principal of the Shareholder.

“Purchase Price” has the meaning specified in Section 8.2.

“Put Closing Date” has the meaning specified in Section 9.2.

“Put Notice” has the meaning specified in Section 9.1.

“Put Option” has the meaning specified in Section 9.1.

“Put Shares” has the meaning specified in Section 9.1.

“Put Transaction” has the meaning specified in Section 9.2.

“Shares” means the common shares of the Corporation, and where the context permits,
includes (i) any securities into which such shares may be converted, reclassified,
redesignated, subdivided, consolidated or otherwise changed, (ii) any securities of the
Corporation or of any other Person received by the holders of such shares as a result of
any merger, amalgamation, reorganization, arrangement or other similar transaction
involving the Corporation, (iii) any securities of the Corporation which are received by
any one or more Persons as a stock dividend or distribution on or in respect of such shares, and (iv) any security, other instrument or right that is exercisable, exchangeable
or convertible into, or evidences the right to acquire, any shares of the Corporation or
any of the other above securities.

“Shareholders” means FEI and JS and any Person who acquires Shares in accordance with the
Shareholders Agreement and “Shareholder” means any one of them.

“Shareholders Agreement” has the meaning ascribed to it in the recitals.

“Subscription Notice” has the meaning specified in Section 6.1.

“Subsidiary” has the meaning given to it in the Securities Act (Ontario).

“Time of Closing” means 10:00 a.m. (Toronto time) or such other time on the Closing Date as
the parties to the Option Transaction agree.

“Transfer” means (i) any transfer, sale, assignment, exchange, gift, donation or other
disposition of securities where possession, legal title, beneficial ownership or the
economic risk or return associated with such securities passes directly or indirectly from
one Person to another or to the same Person in a different legal capacity, whether or not
for value, whether or not voluntary and however occurring, and for

 

-6-

greater certainty includes the granting of a security interest, and (ii) any agreement,
undertaking or commitment to effect any of the foregoing.

Section 1.2 Gender and Number.

     Any reference in this Addendum to gender includes all genders. Words importing the singular
number only include the plural and vice versa.

Section 1.3 Headings etc.

     The provision of a Table of Contents, the division of this Addendum into Articles and Sections
and the insertion of headings are for convenient reference only and do not affect its
interpretation.

Section 1.4 Currency.

     All references in this Addendum to dollars or to “$” are expressed in Canadian currency unless
otherwise specifically indicated.

Section 1.5 Certain Phrases, etc.

     In this Addendum, (i) the words “including”, “includes” and “include” mean “including (or
includes or include) without limitation”, and (ii) the words “the aggregate of”, “the total of”,
“the sum of”, or a phrase of similar meaning means “the aggregate (or total or sum), without
duplication, of”. The expressions “Article”, “Section” and other subdivision followed by a number
mean and refer to the specified Article, Section or other subdivision of the Addendum. In the
computation of periods of time from a specified date to a later specified date, unless otherwise
expressly stated, the word “from” means “from and including” and the words “to” and “until” each
mean “to but excluding”.

Section 1.6 Accounting Terms.

     All accounting terms not specifically defined in this Addendum are to be interpreted in
accordance with GAAP.

Section 1.7 Statutory References.

     Except as otherwise provided in this Addendum, any reference in this Addendum to a statute
refers to such statute and all rules and regulations made under it as they may have been or may
from time to time be amended, re enacted or superseded.

Section 1.8 Reference to and Effect on the Shareholders Agreement.

	(1)	 	Upon the effectiveness of this Addendum, each reference in the Shareholders Agreement to
“this Agreement”, “hereunder”, “hereof”, “herein” or words of like import shall mean and be a
reference to the Shareholders Agreement as supplemented and amended hereby, and each reference
to the Shareholders Agreement in any other document, instrument or agreement executed and/or
delivered in connection with the Shareholders Agreement shall mean and be a reference to the
Shareholders Agreement as supplemented and amended hereby.

 

-7-

	(2)	 	The Shareholders Agreement, as supplemented and amended by this Addendum shall remain in full
force and effect and the provisions thereof are hereby ratified and confirmed.

Section 1.9 Schedules.

     The schedules attached to this Addendum form an integral part of it for all purposes of it.

Section 1.10 Fully Diluted Basis.

     Whenever ownership or holding of a number of Shares is determined under this Addendum, unless
otherwise provided, such determination will be made on a fully diluted basis taking into account
the issued and outstanding Shares and assuming conversion to or exercise for Shares of all
preferred shares, debentures, options, warrants, convertible securities or other rights exercisable
or convertible for Shares.

ARTICLE 2

IMPLEMENTATION OF AGREEMENT AND TERM

Section 2.1 Actions in Accordance with Addendum.

     Each Shareholder will vote its Shares to give effect to this Addendum whether at a meeting of
the Shareholders or by written resolution of the Shareholders. Each Principal will vote and
otherwise deal with its securities in the Shareholder of which it is a Principal to (i) give effect
to this Addendum, (ii) cause the Shareholder to perform its obligations under this Addendum and
(iii) cause the Shareholder to otherwise act in accordance with this Addendum.

Section 2.2 Conflicts.

     In the event of any conflict between the provisions of this Addendum and the provisions of the
Shareholders Agreement, Articles or By-laws, the provisions of this Addendum shall prevail to the
extent permitted by Law. Each of the Shareholders will take such steps and proceedings as may be
required to amend the Shareholders Agreement, Articles and By-laws to resolve any conflicts in
favour of this Addendum.

Section 2.3 Corporation Consent.

     The Corporation consents to this Addendum and is governed by its terms.

Section 2.4 Share Certificates.

     In addition to any legends required by applicable securities Laws, all certificates
representing Shares must bear the following legend:

“The shares represented by this certificate are subject to a
[unanimous shareholders agreement dated l between the
Corporation and its shareholders,] as amended and supplemented by
an addendum dated l, as may be amended from time to time,
and such shares may not be pledged, sold or otherwise transferred
except in accordance

 

-8-

with the terms of that agreement. Any transfer made in
contravention of such restrictions is null and void. A copy of the
agreement and the addendum are on file at the registered office of
the Corporation and available for inspection on request and without
charge.”

Section 2.5 Term of Addendum.

	(1)	 	Subject to Section 2.5(2), this Addendum terminates on the earliest of:

	 	(a)	 	The date on which one Person acquires all of the issued and outstanding
Shares;
	 
	 	(b)	 	The date on which this Addendum is terminated by written agreement of the
Parties; and
	 
	 	(c)	 	The date that the Post Option Shareholders Agreement comes into effect.

	(2)	 	Even if this Addendum is terminated, each Party is responsible for paying all amounts owing
by it under this Addendum prior to the date of termination, including any amounts owing for
Shares purchased under this Addendum.

Section 2.6 Agreement to be Bound.

     Each Person who becomes a Shareholder or Principal must concurrently with becoming a
Shareholder or Principal execute and deliver to the Corporation a counterpart copy of this Addendum
or a written agreement in form and substance satisfactory to the Parties, agreeing to be bound by
this Addendum. 

Section 2.7 Deemed Consent under Articles.

     Each of the Parties (i) consents to the issuance of Shares by the Corporation made in
accordance with this Addendum, and (ii) agrees that this consent satisfies any restriction on the
transfer or issuance of the Shares contained in the Articles or By-laws and that no further consent
is required under the Articles or By-laws for any such issuance. 

ARTICLE 3

DIRECTOR OR OBSERVER

Section 3.1 General.

	(1)	 	During the Option Exercise Period, the Corporation and the Shareholders shall:

	 	(a)	 	maintain capacity on the board of Directors for the Board Nominees and the
Shareholder nominees referred to below;
	 
	 	(b)	 	cause the board of Directors to consist of no greater than five (5)
Directors, subject to increase with the prior written consent of MPA;
	 
	 	(c)	 	upon the written request of:

 

-9-

	 	(i)	 	MPA, propose up to two (2) Board Nominees;
	 
	 	(ii)	 	FEI, propose two (2) nominees; and
	 
	 	(iii)	 	JS, propose one (1) nominee,

for nomination for election to the board of Directors and to each committee thereof
at the earliest of: (i) any meeting of shareholders electing directors; and (ii)
the next scheduled board of Directors Meeting; provided that if no such meeting is
scheduled to occur within five (5) days of such request, the board of Directors will
meet and appoint such Board Nominees and Shareholder nominees to the board of
Directors prior to the expiration of such five (5) days;

	 	(d)	 	within five (5) days of a Director leaving the board of Directors, proceed to
fill the vacancy thus created with the appointment of the replacement Board Nominee
designated by MPA or Shareholder nominee designated by FEI or JS pursuant to their
respective rights in accordance with Section 3.1(1) to the board of Directors and each
committee thereof in accordance with Section 3.1(1); and
	 
	 	(e)	 	pay the Directors all consideration that is normally paid to a member of the
board of Directors or any committee thereof, for the period that such Director is a
director or member of any such committee.

	(2)	 	If MPA elects not to have a Board Nominee elected to the board of Directors under Section
3.1(1), until the expiry of the Option Exercise Period, MPA shall be entitled to appoint, from
time to time, an observer (the “Observer”) who shall be entitled to attend and participate in
the discussions at all meetings of the board of Directors or any committees thereof. Such
observer shall be entitled to all materials provided in connection with meetings of the board
of Directors or any committees thereof and shall be entitled to reimbursement of expenses as
if the observer were a Director.

Section 3.2 Indemnification.

     The Corporation will indemnify the Board Nominee and Observer to the fullest extent permitted
by the Act. Nothing in this Addendum limits the right of any Board Nominee and Observer to claim
indemnity apart from the provisions of this Addendum, if the Board Nominee and Observer is entitled
to such indemnity.

Section 3.3 Insurance.

     The Corporation will purchase and maintain insurance for the benefit of the Directors and
officers of the Corporation against such liabilities, in such amounts and on such terms as the
Directors determine and as are permitted by Law, which insurance shall cover the Board Nominee and
Observer.

 

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ARTICLE 4

BUSINESS AND MANAGEMENT OF THE CORPORATION

Section 4.1 Business of the Corporation.

     The business of the Corporation and its Subsidiaries is the manufacturing and remanufacturing
and distribution of aftermarket auto parts (the “Business”).

Section 4.2 Management of the Corporation.

     The Directors will manage, or supervise the management of, the business and affairs of the
Corporation in accordance with this Addendum, the Shareholders Agreement, the Act and the By-laws.

Section 4.3 Approvals.

	(1)	 	Until the expiry of the Option Exercise Period, but other than in respect of decisions and
actions required to be undertaken by the Corporation to fulfill its obligations arising under
the survivorship provisions set forth in the Shareholders Agreement in consequence of a death
which gives rise to the application of those survivorship provisions, the Corporation may not
make a decision about, take action on or implement any of the following (for itself and any of
its Subsidiaries) without the prior written consent of MPA, in addition to any other approval
required by Law:

	 	(a)	 	the acquisition or commencement of any business other than the Business or
any material change in the Business or the taking of any action which may reasonably
lead to or result in such material change;
	 
	 	(b)	 	any sale, lease, exchange, transfer or other disposal of all or a substantial
part of the assets and undertaking of the Corporation or any of its Subsidiaries;
	 
	 	(c)	 	any amendment or other variation to the Articles or By-laws; any dissolution,
liquidation or winding-up of the Corporation or any of its Subsidiaries or other
distribution of the assets of the Corporation or any of its Subsidiaries for the
purpose of winding-up its affairs, whether voluntary or involuntary;
	 
	 	(d)	 	issuing any Shares, security or selling, transferring or otherwise disposing
of any securities or other ownership, equity or proprietary interest in any other
Person, including securities held by the Corporation in any of its Subsidiaries,
except as contemplated by an Annual Business Plan;
	 
	 	(e)	 	purchasing, leasing or otherwise acquiring any property or assets, which
individually or in the aggregate exceed $100,000, or making any commitment to do so,
except as contemplated by an Annual Business Plan;
	 
	 	(f)	 	purchasing or otherwise acquiring any securities or other ownership, equity
or proprietary interests in any other Person, or incorporating or creating any
Subsidiary, except as contemplated by an Annual Business Plan;

 

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	 	(g)	 	making any loan or advance to any person in excess of $25,000, except as
contemplated by an Annual Business Plan;
	 
	 	(h)	 	amalgamating, merging or entering into an arrangement or other corporate
reorganization involving the Corporation or the continuance of the Corporation into
any other jurisdiction;
	 
	 	(i)	 	any transaction between the Corporation and any Person not dealing at Arm’s
Length with the Corporation, or any transactions by the Corporation for the benefit of
any Person not dealing at Arm’s Length with the Corporation; provided, however, that
the Corporation may enter into management and/or services agreements with its managers
and/or service providers in the ordinary course of business;
	 
	 	(j)	 	any change in the Auditors of the Corporation;
	 
	 	(k)	 	any change in the number of Directors on the board;
	 
	 	(l)	 	declaring or paying any dividend or other distribution on or in respect of
any Shares or other securities of the Corporation;
	 
	 	(m)	 	purchasing, redeeming or acquiring any Shares or other securities of the
Corporation, except as expressly permitted;
	 
	 	(n)	 	paying or distributing amounts out of any stated capital account, reducing
any stated capital account, distributing any surplus or earnings, or returning any
capital;
	 
	 	(o)	 	any Lien by the Corporation of any of the assets of the Corporation, except
for purchase money security interests incurred in the ordinary course of business or
otherwise provided for in an approved Annual Business Plan;
	 
	 	(p)	 	save for the replacement of the Royal Bank of Canada as lead banker to
Corporation, any borrowing of funds, any incurring of indebtedness, obligation or
liability by the Corporation in excess of or any expenditure by the Corporation of any
amount in excess of an amount stipulated in an approved Annual Business Plan;
	 
	 	(q)	 	any transfer, purchase, redemption, split, conversion or exchange of Shares,
other securities or the granting of any option or right (including convertible
securities, warrants, or convertible obligations of any nature) for the purchase or
issuance of any Shares or other securities of the Corporation or any agreement in the
foregoing regards;
	 
	 	(r)	 	any guarantee howsoever by the Corporation of the indebtedness or obligations
of any Person;

 

-12-

	 	(s)	 	the payment of any management or administration fees in excess of an amount
stipulated in an approved Annual Business Plan;
	 
	 	(t)	 	the establishment of any executive committee or any other delegation of any
power, right or duty of the Directors;
	 
	 	(u)	 	the incorporation or acquisition of any Person;
	 
	 	(v)	 	making or filing any material tax election;
	 
	 	(w)	 	entering into any Material Agreement; and
	 
	 	(x)	 	replacing the current CFO or any successor thereto.

Section 4.4 Annual Business Plan.

	(1)	 	The Corporation will prepare a draft annual business plan before the start of each Financial
Year (and shall prepare one for the remainder of the current Financial Year, as of August 1,
2010 (the “Stub Business Plan”)). The draft annual business plan must contain a detailed
monthly financial budget prepared in accordance with GAAP. The budget must (i) have a pro
forma balance sheet, income statement and statement of changes in financial position of the
Corporation for such Financial Year, (ii) include comparison statements from the previous
Financial Year, (iii) be accompanied by a statement of the nature and amount of all capital
expenditures to be incurred during such Financial Year, and (iv) be supported by the
explanations, notes and information upon which the projections underlying the annual business
plan have been based.

	(2)	 	The Corporation must deliver the draft annual business plan to MPA at least 60 days prior to
the start of the applicable Financial Year or by September 1, 2010 in the case of the Stub
Business Plan. MPA will review the draft annual business plan and make such amendments and
modifications it determines appropriate, acting reasonably. Upon approval by MPA, the draft
annual business plan becomes the “Annual Business Plan” for the applicable Financial Year. In
the event that MPA, acting reasonably, does not approve any annual business plan in whole or
in part prior to the start of a Financial Year, the financial budget contained in the Annual
Business Plan for the preceding Financial Year will continue to apply to the extent of such
disagreement until a complete annual business plan is approved.

Section 4.5 Financial Information.

     The Corporation shall maintain proper, complete and accurate books and accounts in accordance
with GAAP. The Corporation shall provide on a timely basis the following to MPA:

	 	(a)	 	one copy of its audited consolidated financial statements within 65 days
following the end of each Financial Year. The annual financial statements will be
audited by the Auditors and will include the balance sheet and

 

-13-

	 	 	 	statements of income, retained earnings and changes in financial position, together
with all supporting schedules, and the Auditors’ report;
	 
	 	(b)	 	a monthly financial report within 30 days after the end of each month. The
report will consist of the monthly and year-to-date financial statements on a
consolidated basis in a form consistent with the Annual Business Plan and as normally
prepared by management for its own use. The report will also contain a comparison of
budget to actual and to the prior year for the same period;
	 
	 	(c)	 	such other information and documents respecting the Corporation’s business
and affairs MPA may reasonably request including a copy of any minutes of board
meetings or other materials provided to directors at the same time as are circulated
to the directors; and
	 
	 	(d)	 	copies of all written reports and information provided to the Corporation’s
lenders.

Section 4.6 Adjusted Net Income

     For the purposed of this agreement, “Adjusted Net Income” means the net income of the
Corporation on a consolidated basis, calculated in accordance with Canadian GAAP and derived from
the Corporation’s audited financial statements for the fiscal year ended March 31, 2011, adjusted
to exclude: foreign exchange gains and losses, any impact of fluctuations in the Canadian
Dollar/United States Dollar exchange rate above or below par, any extraordinary gains, any gains or
losses from the disposition of assets outside of the ordinary course of business, and bona fide
expenses incurred in connection with the Corporation’s restructuring process, including expenses
relating to the refinancing of the indebtedness to RBC, the obtaining of new or replacement bank
financing, the transactions contemplated hereby and the prior proposed transactions (to a maximum
of $275,000) relating to the Corporation’s restructuring.

     The Corporation shall prepare a draft calculation of and adjustments to net income described
above (“Draft ANI”) within two business days of the finalization of the audited financial
statements in respect of the Corporation’s fiscal year ended March 31, 2011 and deliver the Draft
ANI to MPA. If the Corporation and MPA agree on the calculation of the Draft ANI, then it shall be
the Adjusted Net Income for the purposes of this Agreement. If the Corporation and MPA do not agree
on the calculation of the Draft ANI within 10 days of its delivery to MPA, the parties shall
mutually appoint a third party to calculate Adjusted Net Income (on the basis set forth above). If
the parties cannot agree on a third party to so calculate Adjusted Net Income, then
PricewaterhouseCoopers LLP shall be appointed to calculate Adjusted Net Income, at the expense of
the Corporation. The determination of Adjusted Net Income by the third party, if appointed, or
PricewaterhouseCoopers LLP, as the case may be, shall be final.

 

-14-

Section 4.7 Books and Records.

     The Corporation will maintain accurate and complete Books and Records. MPA or its nominee or
other authorized agent or representative is entitled to examine such Books and Records during
normal business hours on reasonable notice and at its own expense.

ARTICLE 5

COVENANTS

Section 5.1 Transfer by Shareholders.

     In addition to any restrictions imposed by the Shareholders Agreement, and except as otherwise
contemplated hereby, no Shareholder or Principal may Transfer any Shares until the transferee
complies with Section 2.6.

Section 5.2 Encumbering of Shares.

     No Shareholder may grant a Lien on any of its Shares without the prior written consent of MPA,
which consent may be unreasonably or arbitrarily withheld.

Section 5.3 Financing.

     In the event that MPA lends an additional $3 million (the “Excess Loan”) over and above the
loan made under the Debenture, all of the Shareholders, as a group, shall match, dollar for dollar,
any loans made over and above the Excess Loan that are made to renew the Corporation’s current, or
enter into any lead banker replacement, credit facility, to a maximum aggregate amount of $5
million, being $2.5 million by MPA and $1.875 million by FEI and $625,000 by JS.

ARTICLE 6

OPTION

Section 6.1 Option.

     At any time during the Option Exercise Period, MPA has the right to purchase (the “MPA
Option”) at its option, either (i) from the Corporation that number of Shares necessary for MPA to
hold, in the aggregate, 51%(subject to adjustment, as set forth in Section 6 below) of the Shares
in the Corporation on a fully diluted basis, after taking into account the conversion referred to
in Section 7.1(2), or (ii) from Opco and Introcan that number of shares necessary for MPA to hold,
in the aggregate, 51% (subject to adjustment, as set forth in Section 6.2 below) of the shares of
each of Opco and Introcan (in each case, the “Optioned Shares”). The option may be exercised by
delivering a notice to the Corporation in the form attached as Schedule Error! Reference source not
found. (the “Subscription Notice”) at any time during the Option Exercise Period. The Corporation
or Opco and Introcan, as the case may be, will issue to MPA and MPA will purchase from the
Corporation or Opco and Introcan, as the case may be, the Optioned Shares on and subject to the
terms of this Article 6 and Article 7.

 

-15-

Section 6.2 Adjustment to Optioned Shares.

     The number of Optioned Shares (as a percentage of the Shares in the Corporation on a fully
diluted basis) shall increase by .00427% for every CDN$1,000 reduction in Adjusted Net Income below
CDN$10,000,000 to a maximum of 80% (i.e., an additional 29%) of the Shares in the Corporation of a
fully diluted basis. If the MPA Option is exercised prior to the determination of Adjusted Net
Income, then if applicable, such additional number of Optioned Shares (in excess of 51%) shall be
issued to take into account the foregoing adjustment at the time Adjusted Net Income is determined.

Section 6.3 Purchase Price.

     The aggregate purchase price of the Optioned Shares (the “Option Purchase Price”) shall be CDN
TEN MILLION DOLLARS (CDN$10,000,000). At the option of MPA, a portion of the purchase may be
satisfied by MPA assigning to the Corporation the Debenture, in which case MPA will be credited for
all amounts due thereunder, which amounts will be set off against the Option Purchase Price of the
Optioned Shares. The balance of the Option Purchase Price shall be paid in the manner contemplated
in Section 7.1(3)(b).

Section 6.4 Closing.

     The completion of the transaction of purchase and sale contemplated by this Article 6 (the
“Option Transaction”) will take place on the Closing Date in accordance with and subject to Article
7. “Closing Date” means (i) 10 days after the delivery of the Subscription Notice or, (ii) unless
all filings, notices and Authorizations necessary to complete the Option Transaction have not been
made, given or obtained by that date in which case the closing date will be extended for up to 45
days in order to make, give or obtain the filings, notices and Authorizations, or (iii) such
earlier or later date as the parties to the Option Transaction agree in writing.

Section 6.5 Assignment of Rights.

     MPA is entitled to assign its rights under Section 6.1 to any of its Affiliates, subject to
such Affiliate complying with Section 2.6.

	 	(a)	 	such Affiliate complying with Section 2.6; and
	 
	 	(b)	 	MPA remaining a party to this Agreement and becoming a guarantor of its
Assignee’s obligations under the Post Option Shareholders Agreement.

ARTICLE 7

PROCEDURE FOR ISSUANCE OF SHARES

Section 7.1 Closing Procedures.

	(1)	 	The completion of the Option Transaction will take place at the offices of Stikeman Elliott
LLP, Suite 5300, Commerce Court West, Toronto, Ontario, at the Time of Closing on the Closing
Date or at such other place, on such other date and at such other time as the parties to the
Option Transaction may agree to in writing.

 

-16-

	(2)	 	Prior to the closing of the Option Transaction, any indebtedness owing by the Corporation and
its Affiliates to any of the Shareholders, the Principals or their respective Affiliates,
prior to July 6, 2010, shall be capitalized and converted to Shares. On or prior to such
conversion each of GF, PF and JF (the “Insured Principals”) shall have the right to obtain
from Holdings an assignment to him of the whole life policy of insurance on his life owned by
the Corporation, particulars of which are set forth on Schedule Error! Reference source not
found. of this Agreement. Such assignment shall be made upon a written request therefore and
in consideration of the reduction of the indebtedness owing at that time by the Corporation to
the Insured Principal making such request or any corporation in respect of which he is a
Principal by way of the set-off of the Cash Surrender Value of such policy as at the date of
such assignment against such indebtedness, provided that in the event that such Cash Surrender
Value is then more than the amount of such indebtedness, the amount of the shortfall shall be
paid in full. Until the said policies are assigned to GF, PF and JF, respectively, the
premiums shall be paid by the Corporation.

	(3)	 	Subject to satisfaction or waiver by MPA of any conditions of closing, at the closing of the
Option Transaction:

	 	(a)	 	The Corporation will issue and deliver to MPA (i) actual possession of the
share certificates representing the Optioned Shares and (ii) a certified copy of the
resolution of the directors of the Corporation approving the issuance of the Optioned
Shares to MPA; and
	 
	 	(b)	 	Subject to Section 6.2, MPA will pay or satisfy the Purchase Price for the
Optioned Shares by delivering to the Corporation a certified cheque, bank draft or
wire transfer of immediately available funds and, if applicable, the original executed
version of the Debenture; and
	 
	 	(c)	 	The Corporation, the Shareholders and MPA will deliver an executed copy of
the Post Option Shareholders Agreement.

Section 7.2 Non-Completion by the Corporation or Shareholders.

	(1)	 	In addition to and without limiting any remedy that may be available at Law to MPA, if at the
Time of Closing, the Corporation fails to complete the Option Transaction, MPA has the right,
if not in default under this Addendum, to make payment of the Purchase Price for the Optioned
Shares to the Corporation by depositing such amount to the credit of the Corporation in the
main branch of the Corporation’s bankers in the City of Toronto. Such deposit constitutes
valid and effective payment of the Purchase Price of the Optioned Shares to the Corporation.
If the Purchase Price of the Optioned Shares has been so paid, then from the date of deposit,
the Option Transaction is deemed to have been completed and all right, title, benefit and
interest, both at law and in equity in and to the Optioned Shares is deemed to have been
issued to and become vested in MPA.

 

-17-

	(2)	 	The Corporation is entitled to receive the amount deposited with the Corporation’s bankers
under Section 7.2(1) on delivery to MPA of the documents referred to in Section 7.1(3) and in
compliance with all other provisions of this Addendum.

Section 7.3 Irrevocable Power of Attorney.

	(1)	 	The Corporation and each Shareholder irrevocably constitutes and appoints MPA as the true and
lawful attorney of the Corporation and Shareholder. As the attorney of the Corporation and
Shareholder, MPA has the power to act for and in the name of the Corporation and Shareholder,
with full power of substitution, to execute and deliver such documents, instruments or
agreements, (including all transfers, share certificates, resignations and releases) and do
all acts and things necessary to:

	 	(a)	 	complete any Option Transaction; and
	 
	 	(b)	 	execute and deliver the Post Option Shareholders Agreement.

	(2)	 	This power of attorney is irrevocable, is coupled with an interest, has been given for
valuable consideration (the receipt and adequacy of which is acknowledged) and survives, and
does not terminate upon, the legal or mental incapacity, death, bankruptcy, dissolution,
winding-up or insolvency of the Corporation and Shareholder. This power of attorney extends to
and is binding upon the Corporation and Shareholder’s successors and permitted assigns. This
power of attorney supersedes any prior delegation of authority that conflicts with it.

ARTICLE 8

CALL OPTION

Section 8.1 Call of MPA

     At any time following the the exercise of the MPA Option but prior to the third anniversary of
the date hereof, MPA has the right (the “Call Option”) to require all other Shareholders and any
Permitted Transferee thereof holding Shares (collectively, the “Call Seller”) to sell all but not
less than all of the Shares owned by the Call Seller (the “Called Shares”). The call right may be
exercised by delivering a notice to the Corporation in the form attached as Schedule Error!
Reference source not found. (the “Call Notice”) at any time. The Call Seller will sell to MPA and
MPA will purchase from the Call Seller the Called Shares on and subject to the terms of this
Article 8.

Section 8.2 Calculation of Purchase Price.

     The purchase price for the Called Shares (the “Call Purchase Price”) shall be, in aggregate,
equal to the Adjusted Net Income, subject to a minimum of CDN$3.6 million and a maximum of CDN$15
million.

Section 8.3 Closing.

     The completion of any transaction of purchase and sale contemplated by this Article 8 (a “Sale
Transaction”) will take place on the Closing Date. “Closing Date” means (i) 45 days after the
delivery of the Call Notice or, if applicable, 45 days after the Purchase

 

-18-

Price for the Called Shares is finally determined in accordance with Section 8.2, (ii) unless all
filings, notices and Authorizations necessary to complete the Sale Transaction have not been made,
given or obtained by that date in which case the closing date will be extended for up to but not
later than 45 days in order to make, give or obtain the filings, notices and Authorizations, or
(iii) such earlier or later date as the parties to the Sale Transaction agree in writing.

Section 8.4 Payment.

     At the Call Buyer’s option, payment of the Call Purchase Price may be made in cash or in MPA
common stock or combination thereof. Notwithstanding the foregoing, at the Call Seller’s option, up
to 20% of the Call Purchase Price shall be paid in cash. For the purposes of the payment of the
Call Purchase Price, the number of any MPA common stock issued shall be based on a price equal to
the volume weighted average trading price of the MPA common stock on the primary stock exchange on
which it may then be listed for the five trading days immediately following the later of the
determination of Adjusted Net Income and the release of MPA’s financial statements for the fiscal
year ended March 31, 2011.

ARTICLE 9

SHAREHOLDERS PUT OPTION

Section 9.1 Put by Shareholders.

     Provided that the MPA Option has been exercised and the Call Option has expired unexercised,
at any time within 30 days following the third anniversary of the date hereof (the “Put Exercise
Period”), the Shareholders, collectively, have the right (the “Put Option”) to require MPA to
acquire all but not less than all of the Shares owned by the Shareholders (the “Put Shares”). The
put right may be exercised by delivering a notice to MPA (the “Put Notice”) at any time during the
Put Exercise Period. The purchase price for the Put Shares (the “Put Purchase Price”) shall be
equal to and be calculated on the same basis as the Call Purchase Price. The Shareholders (other
than MPA) will sell to MPA and MPA will purchase from the Shareholders (other than MPA) the Put
Shares on and subject to the terms of this Article 9.

Section 9.2 Closing.

     The completion of any transaction of purchase and sale contemplated by this Article 9 (a “Put
Transaction”) will take place on the Put Closing Date. The Put Closing Date means (i) 90 days after
the delivery of the Put Notice, (ii) unless all filings, notices and Authorizations necessary to
complete the Put Transaction have not been made, given or obtained by that date in which case the
closing date will be extended for up to 45 days in order to make, give or obtain the filings,
notices and Authorizations, or (iii) such earlier or later date as the parties to the Put
Transaction agree in writing.

Section 9.3 Payment.

     At MPA’s option, payment of the Put Purchase Price for the Put Shares may be made in cash or
in MPA common stock or combination thereof. Notwithstanding the foregoing, at the Shareholder’s
option, up to 20% of the Put Purchase Price shall be paid in cash. For the

 

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purposes of the payment of the Put Purchase Price, the number of any MPA common stock issued
shall be based on a price equal to the volume weighted average trading price of the MPA common
stock on the primary stock exchange on which it may then be listed for the five trading days
immediately following the later of the determination of Adjusted Net Income and the release of
MPA’s financial statements for the fiscal year ended March 31, 2011.

ARTICLE 10

REPRESENTATIONS AND WARRANTIES

Section 10.1 Representations and Warranties of the Shareholders and Principals.

     Each Shareholder and its Principals, if any, represent and warrant as follows and acknowledge
and confirm that MPA is relying on such representations and warranties in entering into this
Addendum:

	 	(a)	 	Qualification. If the Shareholder or Principal is an individual, he or she is
of legal age and is legally competent to enter into and perform his or her obligations
under this Addendum. If the Shareholder or Principal is a corporation, it is a
corporation incorporated and existing under the laws of its jurisdiction of
incorporation and has the corporate power to enter into and perform its obligations
under this Addendum.
	 
	 	(b)	 	Authorization. If the Shareholder or Principal is not an individual, the
execution and delivery of and performance by it of this Addendum and the consummation
of the transactions contemplated by this Addendum have been duly authorized by all
necessary corporate or other action on the part of the Shareholder or Principal.
	 
	 	(c)	 	Validity of Addendum. The execution and delivery of and performance by the
Shareholder and Principal of this Addendum:

	 	(i)	 	if it is not an individual, will not (or would not with the
giving of notice, the lapse of time or the happening of any other event or
condition) result in a breach or violation of or a conflict with, or allow any
other Person to exercise any rights under, any of the terms or provisions of
its constating documents or by-laws;
	 
	 	(ii)	 	will not (or would not with the giving of notice, the lapse
of time or the happening of any other event or condition) result in a breach
or violation of or a conflict with, or allow any other Person to exercise any
rights under any Contracts or instruments to which the Shareholder or
Principal is a party or pursuant to which any of the Shareholder’s or
Principal’s assets may be affected;
	 
	 	(iii)	 	will not result in a breach of, or cause the termination or
revocation of, any Authorization held by the Shareholder or Principal or
necessary to the ownership of Shares by the Shareholder; and

 

-20-

	 	(iv)	 	will not result in the violation of any Law;

provided that the Non-Active Principals are not making the warranties and
representations set forth in sub-clauses (ii), (iii) and (iv) above in respect of
the Corporation or FEI.

	 	(d)	 	Authorizations and Consents. There is no requirement on the part of the
Shareholder or Principal to make any filing with or give any notice to any
Governmental Entity, or obtain any Authorization, in connection with the completion of
the transactions contemplated by this Addendum, except for filings and notifications
required by applicable securities Laws. There is no requirement on the part of the
Shareholder or Principal to obtain any consent, approval or waiver of any Person under
any Contracts or instruments to which the Shareholder or Principal is a party or
pursuant to which any of the Shareholder’s or Principal’s assets may be affected in
connection with the completion of the transactions contemplated by this Addendum.
	 
	 	(e)	 	Execution and Binding Obligation. This Addendum has been duly executed and
delivered by the Shareholder and Principal and constitutes a legal, valid and binding
agreement of each of the Shareholder and Principal enforceable against it in
accordance with its terms subject only to any limitation under applicable Laws
relating to (i) bankruptcy, winding-up, insolvency, arrangement and other Laws of
general application affecting the enforcement of creditors’ rights, and (ii) the
discretion that a court may exercise in the granting of equitable remedies such as
specific performance and injunction.
	 
	 	(f)	 	Title to Shares. The Shares set out opposite the Shareholder’s name in
Schedule Error! Reference source not found. are owned by the Shareholder as the
registered and beneficial owner with good title, free and clear of all Liens (except
in the case of MPA), other than those restrictions on transfer, if any, contained in
the articles of the Corporation.
	 
	 	(g)	 	Authorized Capital. If the Shareholder is a corporation, (i) the Principals
of the Shareholder are the Persons identified as such in Schedule Error! Reference
source not found.; (ii) its authorized capital is described in Schedule Error!
Reference source not found. of which at this date, the securities identified in
Schedule Error! Reference source not found. (and no more) have been duly issued and
are outstanding as fully paid and non assessable, (iii) all of the issued and
outstanding securities of the Shareholder are owned beneficially and of record by
those Persons identified in Schedule Error! Reference source not found., (iv) the only
asset of the Shareholder are the Shares set out opposite its name in Schedule Error!
Reference source not found., and (v) no Person has any written or oral agreement,
option or warrant or any right or privilege (whether by Law, pre-emptive or
contractual) capable of becoming such for (A) the purchase or acquisition from the
Principal of any of the issued and outstanding securities of the Shareholder, or (B)
the purchase, subscription, allotment or issuance of any of the unissued securities of
the Shareholder.

 

-21-

Section 10.2 Representations and Warranties of the Corporation.

     The Corporation represents and warrants as follows and acknowledges and confirms that MPA is
relying on such representations and warranties in entering into this Addendum:

	 	(a)	 	Qualification. It is a corporation incorporated and existing under the laws
of its jurisdiction of incorporation and has the corporate power to enter into and
perform its obligations under this Addendum.
	 
	 	(b)	 	Authorization. The execution and delivery of and performance by it of this
Addendum and the consummation of the transactions contemplated by this Addendum have
been duly authorized by all necessary corporate or other action on the part of the
Corporation.
	 
	 	(c)	 	Validity of Addendum. The execution and delivery of and performance by the
Corporation of this Addendum:

	 	(i)	 	will not (or would not with the giving of notice, the lapse
of time or the happening of any other event or condition) result in a breach
or violation of or a conflict with, or allow any other Person to exercise any
rights under, any of the terms or provisions of its constating documents or
by-laws;
	 
	 	(ii)	 	will not (or would not with the giving of notice, the lapse
of time or the happening of any other event or condition) result in a breach
or violation of or a conflict with, or allow any other Person to exercise any
rights under any Contracts or instruments to which the Corporation is a party
or pursuant to which any of the Corporation’s assets may be affected;
	 
	 	(iii)	 	will not result in a breach of, or cause the termination or
revocation of, any Authorization held by the Corporation; and
	 
	 	(iv)	 	will not result in the violation of any Law.

	 	(d)	 	Authorizations and Consents. There is no requirement on the part of the
Corporation to make any filing with or give any notice to any Governmental Entity, or
obtain any Authorization, in connection with the completion of the transactions
contemplated by this Addendum, except for filings and notifications required by
applicable securities Laws. There is no requirement on the part of the Corporation to
obtain any consent, approval or waiver of any Person under any Contracts or
instruments to which the Corporation is a party or pursuant to which any of the
Corporation’s assets may be affected in connection with the completion of the
transactions contemplated by this Addendum.
	 
	 	(e)	 	Execution and Binding Obligation. This Addendum has been duly executed and
delivered by the Corporation and constitutes a legal, valid and binding

 

-22-

	 	 	 	agreement of the Corporation enforceable against it in accordance with its terms
subject only to any limitation under applicable Laws relating to (i) bankruptcy,
winding-up, insolvency, arrangement and other Laws of general application affecting
the enforcement of creditors’ rights, and (ii) the discretion that a court may
exercise in the granting of equitable remedies such as specific performance and
injunction.

	 	(f)	 	Authorized Capital. The Corporation’s authorized capital is described in
Schedule Error! Reference source not found. of which at this date, the securities
identified in Schedule Error! Reference source not found. (and no more) have been duly
issued and are outstanding as fully paid and non assessable, and (ii) no Person has
any written or oral agreement, option or warrant or any right or privilege (whether by
Law, pre-emptive or contractual) capable of becoming such for (A) the purchase,
subscription, allotment or issuance of any of the unissued securities of the
Corporation.
	 
	 	(g)	 	Optioned Shares. Upon completion of the Option Transaction, MPA will have
good and valid title to the Optioned Shares, free and clear of all Liens other than
(i) those restrictions on transfer, if any, contained in the articles of the
Corporation and the Post Option Shareholders Agreement, and (ii) Liens granted by MPA.

Section 10.3 Representations and Warranties of MPA.

     MPA represents and warrants as follows and acknowledges and confirms that the Shareholders,
Principals and the Corporation are relying on such representations and warranties in entering into
this Addendum:

	 	(a)	 	Qualification. It is a corporation, it is a corporation incorporated and
existing under the laws of its jurisdiction of incorporation and has the corporate
power to enter into and perform its obligations under this Addendum.
	 
	 	(b)	 	Authorization. The execution and delivery of and performance by it of this
Addendum and the consummation of the transactions contemplated by this Addendum have
been duly authorized by all necessary corporate or other action on the part of MPA.
	 
	 	(c)	 	Validity of Addendum. The execution and delivery of and performance by MPA of
this Addendum:

	 	(i)	 	will not (or would not with the giving of notice, the lapse
of time or the happening of any other event or condition) result in a breach
or violation of or a conflict with, or allow any other Person to exercise any
rights under, any of the terms or provisions of its constating documents or
by-laws;
	 
	 	(ii)	 	will not (or would not with the giving of notice, the lapse
of time or the happening of any other event or condition) result in a breach
or violation of or a conflict with, or allow any other Person to exercise

 

-23-

	 	 	 	any rights under any Contracts or instruments to which MPA is a party or
pursuant to which any of MPA’s assets may be affected; and
	 
	 	(iii)	 	will not result in the violation of any Law.

	 	(d)	 	Execution and Binding Obligation. This Addendum has been duly executed and
delivered by MPA and constitutes a legal, valid and binding agreement of MPA
enforceable against it in accordance with its terms subject only to any limitation
under applicable Laws relating to (i) bankruptcy, winding-up, insolvency, arrangement
and other Laws of general application affecting the enforcement of creditors’ rights,
and (ii) the discretion that a court may exercise in the granting of equitable
remedies such as specific performance and injunction.

Section 10.4 Survival.

     The representations, warranties and covenants of the Parties contained in this Article survive
the execution and delivery of this Addendum and continue in full force and effect with respect to
each Party until it ceases to be bound by the provisions of this Addendum.

ARTICLE 11

MISCELLANEOUS

Section 11.1 Notices.

     Any notice, direction or other communication given pursuant to this Addendum (each a “Notice”)
must be in writing, sent by personal delivery, courier or facsimile (but not by email) and
addressed:

	 	(a)	 	to Motorcar Parts of America, Inc. at:
	 
	 		 	2929 California Street

Torrance CA 90503

United States of America

	 	 	 

	Attention:

	 	Michael M. Umansky
	Telephone:

	 	(310) 972-4015
	Facsimile:

	 	(310) 943-1630

with a copy (that does not constitute notice) to:

Stikeman Elliott LLP

Barristers & Solicitors

5300 Commerce Court West,

199 Bay Street,

Toronto, ON

M5L 1B9

Canada

 

-24-

	 	 	 

	Attention:

	 	David Weinberger
	Telephone:

	 	(416) 869-5515
	Facsimile:

	 	(416) 947-0866

	 	(b)	 	to FEI at:

1100 Caledonia Road

Toronto, ON

M6A 2W5

	 	 	 

	Attention:

	 	Gordon Fenwick
	Telephone:

	 	(416) 787-1723
	Facsimile:

	 	(416) 787-7621

	 	(c)	 	to Gordon Fenwick or Escal Holdings Inc. at:
	 
	 		 	475 Spadina Road

Toronto, ON

M5P 2W6
	 
	 	(d)	 	to Paul Fenwick or Fencity Holdings Inc. at:
	 
	 		 	125 Bedford Road

Toronto, ON

M5R 2K6
	 
	 	(e)	 	to Joel Fenwick or Jofen Holdings Inc. at:
	 
	 		 	28 Ridge Hill Drive

Toronto, ON

M6G 3A3
	 
	 	(f)	 	to the Corporation or Opco or Introcan at:
	 
	 		 	1100 Caledonia Road

Toronto, ON

M6A 2W5

	 	 	 

	Attention:

	 	Jack Shuster, President
	Telephone:

	 	(416) 787-1723
	Facsimile:

	 	(416) 784-1197

with a copy (that does not constitute notice) to:

Wisebrod/Zeliger Associates

Barristers & Solicitors, Notaries

245 Fairview Mall Drive

Suite 510

 

-25-

Toronto, ON

M2J 4T1

	 	 	 

	Attention:

	 	Avi Wisebrod
	Telephone:

	 	(416) 496-2600 x 201
	Facsimile:

	 	(416) 496-1708

	 	(g)	 	to Stanley Fenwick at:
	 
	 		 	52 Berkindale Drive

Toronto, ON

M2L 1Z8

	 
	 	(h)	 	to Karen Fenwick at:
	 
	 		 	65 Markwood Lane

Thornhill, ON

L4J 7A6
	 
	 	(i)	 	to Jack Shuster at:
	 
	 		 	48 King Cross Avenue

Richmond Hill, ON

L4B 2S9

A Notice is deemed to be given and received (i) if sent by personal delivery or same day courier,
on the date of delivery if it is a Business Day and the delivery was made prior to 4:00 p.m. (local
time in place of receipt) and otherwise on the next Business Day, (ii) if sent by overnight
courier, on the next Business Day, or (iii) if sent by facsimile, on the Business Day following the
date of confirmation of transmission by the originating facsimile. A Party may change its address
for service from time to time by providing a Notice in accordance with the foregoing. Any
subsequent Notice must be sent to the Party at its changed address. Any element of a Party’s
address that is not specifically changed in a Notice will be assumed not to be changed.

Section 11.2 Time of the Essence.

     Time is of the essence in this Addendum.

Section 11.3 Announcements.

     No press release, public statement or announcement or other public disclosure with respect to
this Addendum or the transactions contemplated in this Addendum may be made except with the prior
written consent and joint approval of the Parties, or if required by Law or a Governmental Entity.
Where such disclosure is required by Law or a Governmental Entity, the Party required to make the
disclosure will use its commercially reasonable efforts to obtain the approval of the other Parties
as to the form, nature and extent of the disclosure.

 

-26-

Section 11.4 Third Party Beneficiaries.

     The Parties intend that this Addendum will not benefit or create any right or cause of action
in favour of any Person, other than the Parties. No Person, other than the Parties, is entitled to
rely on the provisions of this Addendum in any action, suit, proceeding, hearing or other forum.
The Parties reserve their right to vary or rescind the rights at any time and in any way
whatsoever, if any, granted by or under this Addendum to any Person who is not a Party, without
notice to or consent of that Person.

Section 11.5 Joint and Several Liability.

     Each Principal, other than each Non-Active Principal, is jointly and severally liable with the
Shareholder of which it is the Principal as a principal and not as a surety, with respect to all of
the representations, warranties, covenants, indemnities and agreements of such Shareholder under
this Addendum.

Section 11.6 No Agency or Partnership.

     Nothing contained in this Addendum makes or constitutes any Party, or any of its directors,
officers or employees, the trustee, fiduciary, representative, agent, principal, partner, joint
venturer, employer, employee of any other Party. It is understood that no Party has the capacity to
make commitments of any kind or incur obligations or liabilities binding upon any other Party.

Section 11.7 Expenses.

     Other than MPA, each Party will pay for its own costs and expenses incurred in connection with
this the Debenture, this Addendum and the transactions contemplated by it. The Corporation shall be
responsible for the payment of MPA’s reasonable costs and expenses incurred in connection with the
Debenture, this Addendum and the transactions contemplated by them. The fees and expenses
referred to in this Section are those which are incurred in connection with the negotiation,
preparation, execution and performance of this Addendum and the Debenture, and the transactions
contemplated by this Addendum and the Debenture, including the fees and expenses of legal counsel,
investment advisers and accountants.

     Immediately following execution of this Agreement by the parties, the Corporation shall
advance $500,000 in immediately available funds to or to order of MPA to satisfy the portion of the
expense reimbursement obligations incurred to date, as contemplated in this Section 11.7. Any
further expense reimbursement obligations shall be paid by the Corporation to or to the order of
MPA forthwith, and in any event within two business days following receipt of written notice from
MPA setting out the amount due as well as supporting documentation in form satisfactory to the
Corporation, acting reasonably.

Section 11.8 Amendments.

     This Addendum may be amended, supplemented or otherwise modified by written agreement signed
by (i) Shareholders then holding 90% or more of the Shares; and (ii) MPA.

 

-27-

Section 11.9 Waiver.

     No waiver of any of the provisions of this Addendum will constitute a waiver of any other
provision (whether or not similar). No waiver will be binding unless executed in writing by the
Party to be bound by the waiver. A Party’s failure or delay in exercising any right under this
Addendum will not operate as a waiver of that right. A single or partial exercise of any right will
not preclude a Party from any other or further exercise of that right or the exercise of any other
right.

Section 11.10 Entire Agreement.

     This Addendum and the Shareholders Agreement constitutes the entire agreement between the
Parties with respect to the matters contemplated therein and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the Parties related to
such matters.

Section 11.11 Successors and Assigns.

	(1)	 	This Addendum becomes effective only when executed by all of the Parties. After that time, it
is binding on and endures to the benefit of the Parties and their respective heirs,
administrators, executors, legal personal representatives, successors and permitted assigns.

	(2)	 	Except as otherwise provided in this Addendum, neither this Addendum nor any of the rights or
obligations under this Addendum are assignable or transferable by any Party without the prior
written consent of the other Parties, which may be unreasonably withheld.

Section 11.12 Severability.

     If any provision of this Addendum is determined to be illegal, invalid or unenforceable, by an
arbitrator or any court of competent jurisdiction from which no appeal exists or is taken, that
provision will be severed from this Addendum and the remaining provisions will remain in full force
and effect.

Section 11.13 Governing Law.

     This Addendum is governed by, and is to be interpreted and enforced in accordance with, the
laws of the Province of Ontario and the federal laws of Canada applicable therein.

Section 11.14 Counterparts.

     This Addendum may be executed in any number of counterparts (including counterparts by
facsimile) and all such counterparts taken together will be deemed to constitute one and the same
instrument. The Party sending the facsimile transmission will also deliver the original signed
counterpart to the other Party, however, failure to deliver the original signed counterpart shall
not invalidate this Addendum.

Section 11.15 Corporate Opportunities

     The Corporation and the Shareholders acknowledge that MPA will likely have, from time to time,
information acquired independently from its relationship with the Corporation and the Shareholders
and that may be of interest to the Corporation (the “Information”)

 

-28-

regarding a wide variety of matters including, by way of example, (a) MPA’s investments, plans
and services, and plans and strategies relating thereto, (b) current and future investments MPA has
made, may make, may consider or may become aware of with respect to other companies and other
investments, products and services, including, without limitation, products and services that may
be competitive with the Corporation’s and (c) developments with respect to the auto parts industry,
products and services, and plans and strategies relating thereto, of other companies, including,
without limitation, companies that may be competitive with the Corporation. The Corporation and
the Shareholders recognize that a portion of such Information may be of interest to the
Corporation. Such Information may or may not be known by MPA. The Corporation and the
Shareholders, as a material part of the consideration for this Agreement, agree that MPA shall have
no duty to disclose any Information to the Corporation or permit the Corporation to participate in
any projects or investments based on any Information, or to otherwise take advantage of any
opportunity that may be of interest to the Corporation if it were aware of such Information, and
hereby waives, to the extent permitted by law, any claim based on the corporate opportunity
doctrine or otherwise that could limit MPA’s ability to pursue opportunities based on such
Information or that would require any such party to disclose any such Information to the
Corporation or offer any opportunity relating thereto to the Corporation.

Section 11.16 Royal Bank of Canada.

     MPA agrees that (i) it shall have no recourse against Royal Bank of Canada in respect of the
obligations set out herein, and (ii) any recourse which MPA may have against the Corporation or the
Subsidiaries in respect of the obligations set out herein shall be fully subordinated to the
Indebtedness in accordance with the terms of a subordination agreement to be entered into between
MPA and Royal Bank of Canada.

Section 11.17 Non-Competition.

     During the term of this agreement and for a period of two years following, the later of the
date upon which the employment of a Shareholder or Principal by the Corporation is terminated for
any reason or such Shareholder or Principal ceases to be a director of the Corporation, such
Shareholder or Principal shall not, on his own behalf or on behalf of or in connection with any
Person, directly or indirectly, in any capacity whatsoever, carry on, be engaged in, have any
financial or other interest in or be otherwise commercially involved in any endeavour, activity or
business in all or any part of the Territory which is substantially the same as or is in
competition, in whole or in part, with the Business.

Section 11.18 Non-Solicitation of Customers.

     During the term of this agreement and for a period of two years following the later of the
date upon which the employment of a Shareholder or Principal by the Corporation is terminated for
any reason or such Shareholder or Principal ceases to be a director of the Corporation, such
Shareholder or Principal shall not, on his own behalf or on behalf of or in connection with any
other Person, directly or indirectly, in any capacity whatsoever:

	 	(i)	 	canvass or solicit the business of (or procure or assist the
canvassing or soliciting of the business of) any customer or prospective
customer of the Corporation or its Affiliates;

 

-29-

	 	(ii)	 	accept (or procure or assist the acceptance of) any business
from any customer or prospective customer of the Corporation or its
Affiliates; or
	 
	 	(iii)	 	supply (or procure or assist the supply of) any goods or
services to any customer or prospective customer of the Corporation or its
Affiliates;

provided that the “canvassing”, “soliciting”, “accepting business” and “supplying” prohibited above
is limited in each case to undertaking such activity in relation to services or products which are
substantially the same as or in competition, in whole or in part, services or products
manufactured, remanufactured or distributed in connection with the Business in the relevant period.

Section 11.19 Non-Solicitation of Employees.

     During the term of this agreement and for a period of two years following the later of the
date upon which the employment of a Shareholder or Principal by the Corporation is terminated for
any reason or such Shareholder or Principal ceases to be a director of the Corporation, such
Principal shall not, on their own behalf or on behalf of or in connection with any other Person,
directly or indirectly, in any capacity whatsoever:

	 	(i)	 	employ, offer employment to or solicit the employment or
engagement of or otherwise entice away from the employment of the Corporation
or its Affiliates any individual who is employed by the Corporation or its
Affiliates, whether or not such individual would commit any breach of his
contract or terms of employment by leaving the employ of the Corporation or
its Affiliates; or
	 
	 	(ii)	 	procure or assist any Person to employ, offer employment or
solicit the employment or engagement of or otherwise entice away from the
employment of the Corporation or its Affiliates any such individual who is
employed by the Corporation or its Affiliates, whether or not such individual
would commit any breach of his contract or terms of employment by leaving the
employ of the Corporation or its Affiliates.

Section 11.20 English Language.

     The Parties have agreed that this Addendum as well as any document or instrument relating to
it be drawn up in English only but without prejudice to any such document or instrument which may
from time to time be drawn up in French only or in both French and English. Les parties aux
présentes ont convenu que la présente Convention ainsi que tous autres actes ou documents s’y
rattachant soient rédigés en anglais seulement mais sans préjudice à tous tels actes ou documents
qui pourraient à l’occasion être rédigés en français seulement ou à la fois en anglais et en
français.

     IN WITNESS WHEREOF the Parties have executed this Addendum.

 

-30-

	 	 	 	 	 
	 	FENWICK ENTERPRISES INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Gordon Fenwick 	 
	 	 	Title:  	President 	 
	 
	 	MOTORCAR PARTS OF
AMERICA, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 

	 

	 	 
	Witness

	 	Gordon Fenwick
	 
	 	 
	 
	 	 
	 

	 	 
	Witness

	 	Paul Fenwick
	 
	 	 
	 
	 	 
	 

	 	 
	Witness

	 	Joel Fenwick
	 
	 	 
	 
	 	 
	 

	 	 
	Witness

	 	Stanley Fenwick
	 
	 	 
	 
	 	 
	 

	 	 
	Witness

	 	Karen Fenwick
	 
	 	 
	 
	 	 
	 

	 	 
	Witness

	 	Jack Shuster

 

-31-

	 	 	 	 	 
	 	FAPL HOLDINGS INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Gordon Fenwick 	 
	 	 	Title:  	 	 
	 
	 	FENWICK AUTOMOTIVE PRODUCTS LIMITED

 	 
	 	By:  	 	 
	 	 	Name:  	Jack Shuster 	 
	 	 	Title:  	President 	 
	 
	 	INTROCAN INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Jack Shuster 	 
	 	 	Title:  	President 	 
	 
	 	ESCAL HOLDINGS INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Gordon Fenwick 	 
	 	 	Title:  	President 	 
	 
	 	FENCITY HOLDINGS INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Paul Fenwick 	 
	 	 	Title:  	President 	 

 

-32-

	 	 	 	 	 

	 	 	 	 	 
	 	JOFEN HOLDINGS INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Joel Fenwick 	 
	 	 	Title:  	President<PAGE>

                     FIRST SUNAMERICA LIFE INSURANCE COMPANY
                 OPTIONAL GUARANTEED LIVING BENEFIT ENDORSEMENT

Notwithstanding any provision in the Contract or Certificate ("Contract") to the
contrary, this Endorsement becomes a part of the Contract to which it is
attached. Should any provision in this Endorsement conflict with the Contract,
the provisions of this Endorsement will prevail.

Subject to the terms and conditions set forth herein this optional Guaranteed
Living Benefit Endorsement provides for guaranteed income over the lifetime of
the Covered Person(s). You may take Withdrawals under the Guaranteed Living
Benefit as prescribed by this Endorsement while this Endorsement is in effect.

                              ENDORSEMENT DATA PAGE

<TABLE>
<S>                                <C>
COVERED PERSON(S):                 [John Doe
                                   Jane Doe]

ENDORSEMENT EFFECTIVE DATE:        [November 1, 2009]

ELIGIBLE PURCHASE PAYMENTS:        1.   [100%] of Purchase Payments received in the 1st Contract Year; and

                                   2.   Purchase Payments received in each of Contract Years 2-5, capped each year at
                                        an amount equal to 200% of the Purchase Payments received in Contract Year 1.

GROSS PURCHASE PAYMENT LIMIT:      The sum of Purchase Payments cannot exceed [$1,500,000] without prior Company approval

SECURE VALUE ACCOUNT ALLOCATION:   10% of every Purchase Payment(s), Spousal Beneficiary Contribution, and Payment
                                   Enhancements if applicable
</TABLE>

ENDORSEMENT FEE:

The Endorsement Fee is assessed against the Income Base and deducted from the
Contract Value allocated to the Variable Portfolio(s) or Subaccount(s) at the
end of each Benefit Quarter. The Initial Annual Fee Rate is guaranteed not to
change for the first Benefit Year. After the first Benefit Year, on each Benefit
Quarter Anniversary, we will (1) deduct the fee in effect for the previous
Benefit Quarter; and (2) determine the fee rate applicable to the next Benefit
Quarter. The fee rate can increase or decrease each Benefit Quarter, subject to
the minimums and maximums in the table below:

<TABLE>
<CAPTION>
 NUMBER OF COVERED                                                         MAXIMUM ANNUALIZED
    PERSONS ON                                                            FEE RATE INCREASE OR
    ENDORSEMENT       INITIAL ANNUAL   MAXIMUM ANNUAL   MINIMUM ANNUAL   DECREASE EACH BENEFIT
  EFFECTIVE DATE         FEE RATE         FEE RATE         FEE RATE             QUARTER*
-------------------   --------------   --------------   --------------   ---------------------
<S>                   <C>              <C>              <C>              <C>
One Covered Person        [1.10%]          [2.20%]          [0.60%]           [+/- 0.25%]
Two Covered Persons       [1.35%]          [2.70%]          [0.60%]           [+/- 0.25%]
</TABLE>

*    The fee rate can increase or decrease no more than [0.0625%] each quarter
     [(0.25%/4)].

<TABLE>
<S>                                <C>
INCOME CREDIT PERCENTAGE:          8%

INCOME CREDIT PERIOD:              Beginning on the Endorsement Effective Date and ending 12 years later
</TABLE>

MAXIMUM ANNUAL WITHDRAWAL AND PROTECTED INCOME PAYMENT PERCENTAGES:

<TABLE>
<CAPTION>
                    MAXIMUM ANNUAL WITHDRAWAL
                            PERCENTAGE                     PROTECTED INCOME PAYMENT PERCENTAGE
                   ---------------------------   ------------------------------------------------------
                                                                     IF INCOME BASE IS INCREASED TO THE
                                                                       HIGHEST ANNIVERSARY VALUE ON OR
AGE AT FIRST       (ONE COVERED   (TWO COVERED      (ONE OR TWO                 AFTER AGE 65
WITHDRAWAL            PERSON)       PERSONS)     COVERED PERSON(S)     (ONE OR TWO COVERED PERSON(S))
----------------   ------------   ------------   -----------------   ----------------------------------
<S>                <C>            <C>            <C>                 <C>
Less than Age 65       5.5%           5.0%              3.0%                        4.0%
Age 65 and older       5.5%           5.0%              4.0%                        4.0%
</TABLE>

<TABLE>
<S>                                <C>
MINIMUM INCOME BASE:               200% of Eligible Purchase Payments received in the 1st Benefit Year effective on the 12th Benefit
                                   Year Anniversary provided no Withdrawals are taken before the 12th Benefit Year Anniversary.
</TABLE>

                                        1

<PAGE>

                                   DEFINITIONS

For purposes of this Endorsement, the following definitions apply. Terms not
defined in this Endorsement shall have the same meaning as defined in the
Contract.

AGE

The attained age as of the Covered Person's last birthday. If there are two
Covered Persons on the Endorsement Data Page, the Age of the younger Covered
Person or in the event of the death of one Covered Person, the surviving Covered
Person as of their last birthday.

BENEFIT ANNIVERSARY VALUE

The Contract Value including any applicable Payment Enhancement(s) or Spousal
Beneficiary Continuation contribution minus cumulative Ineligible Purchase
Payments, as measured on each Benefit Year Anniversary.

BENEFIT QUARTER

Each consecutive 3 month period starting on the Endorsement Effective Date.

BENEFIT QUARTER ANNIVERSARY

The date following each consecutive 3 month period starting on the Endorsement
Effective Date. If the next Benefit Quarter Anniversary is on any non-business
day of the month for which there is no corresponding date the Benefit Quarter
Anniversary will be deemed to be the following business day.

BENEFIT YEAR

Each consecutive one year period starting on the Endorsement Effective Date.

BENEFIT YEAR ANNIVERSARY

The date on which each Benefit Year begins.

CONTRACT YEAR

Each consecutive one year period starting on the Contract Date.

COVERED PERSON(S)

The person(s) named on the Endorsement Data Page whose lives are used to
determine the amount and duration of Withdrawals.

ELIGIBLE PURCHASE PAYMENTS

Purchase Payments or portions thereof made on or after the Endorsement Effective
Date as shown on the Endorsement Data Page that are included in the calculation
of the Income Base. If this Endorsement is added after the Contract Date, for
purposes of determining the Income Base, Income Credit Base, if applicable, and
Minimum Income Base, if applicable, the Contract Value on the Endorsement
Effective Date is considered the initial Eligible Purchase Payment and Purchase
Payments added prior to the Endorsement Effective Date are not considered
Eligible Purchase Payments. The calculation of Eligible Purchase Payments does
not include Payment Enhancements, Income Credits, or Spousal Beneficiary
Continuation contribution, if any.

ENDORSEMENT EFFECTIVE DATE

The date when this Endorsement becomes effective as shown on the Endorsement
Data Page.

EXCESS WITHDRAWAL

Any Withdrawal in a Benefit Year taken after the Maximum Annual Withdrawal
Amount has been withdrawn, or any portion of a Withdrawal that causes the total
Withdrawals in a Benefit Year to exceed the Maximum Annual Withdrawal Amount.

HIGHEST ANNIVERSARY VALUE

The Benefit Anniversary Value that is the greater of (1) all Benefit Anniversary
Values; and (2) Eligible Purchase Payments, while this Endorsement is effective
and the Contract Value is greater than zero.

INCOME BASE

The Income Base is used to determine the Endorsement Fee, the Maximum Annual
Withdrawal Amount and the Protected Income Payment.

                                        2

<PAGE>

INCOME CREDIT

An amount that may be added to the Income Base during the Income Credit Period
that is equal to the Income Credit Percentage multiplied by the Income Credit
Base.

INCOME CREDIT BASE

A factor which is used to determine the amount of any Income Credit during the
Income Credit Period.

INCOME CREDIT PERIOD

The period of time over which We calculate an Income Credit that may be added to
the Income Base.

INELIGIBLE PURCHASE PAYMENTS

Purchase Payments or portions thereof that are not included in the calculations
of the Income Base, Minimum Income Base, and the Income Credit Base.

MAXIMUM ANNUAL WITHDRAWAL AMOUNT

The maximum amount that may be withdrawn each Benefit Year while the Contract
Value is greater than zero without reducing the Income Base and the Income
Credit Base, if applicable.

MAXIMUM ANNUAL WITHDRAWAL PERCENTAGE

The percentage, as referenced on the Endorsement Data Page used to determine the
Maximum Annual Withdrawal Amount available for Withdrawal each Benefit Year
while the Contract Value is greater than zero and the Covered Person(s) is
living.

MINIMUM INCOME BASE

The guaranteed minimum amount to which the Income Base and the Income Credit
Base, if applicable, could be increased on a specified Benefit Year Anniversary
provided no Withdrawals are taken before the 12th Benefit Year Anniversary.

PROTECTED INCOME PAYMENT

The amount to be paid each year over the remaining lifetime of the Covered
Person(s) after the Contract Value is reduced to zero but the Income Base is
still greater than zero.

PROTECTED INCOME PAYMENT PERCENTAGE

The percentage, as referenced on the Endorsement Data Page, used to determine
the Protected Income Payment.

YOU, YOUR

The Covered Person(s) under this Endorsement.

                      GUARANTEED LIVING BENEFIT PROVISIONS

The Guaranteed Living Benefit described in this Endorsement provides for
guaranteed Withdrawals over the lifetime of the Covered Person(s), subject to
the following provisions:

CALCULATION OF THE FACTORS OF THE GUARANTEED LIVING BENEFIT

To determine the Guaranteed Living Benefit, We use the following factors: Income
Base, Income Credit Base, Income Credit, Income Credit Percentage, Income Credit
Period, Minimum Income Base, and Maximum Annual Withdrawal Amount. These factors
are not used in the calculation of the Contract Value or any other benefits
under the Contract.

CALCULATION OF THE INCOME BASE

     CALCULATION OF THE INCOME BASE IF THE ENDORSEMENT IS ELECTED ON THE
     CONTRACT DATE

     If this Living Benefit is elected on the Contract Date, the initial Income
     Base is equal to the initial Eligible Purchase Payment.

     CALCULATION OF THE INCOME BASE IF THE ENDORSEMENT IS ELECTED AFTER THE
     CONTRACT DATE

     If this Living Benefit is elected after the Contract Date, the initial
     Income Base is the Contract Value on the Endorsement Effective Date, which
     is considered the initial Eligible Purchase Payment and is subject to the
     Eligible Purchase Payment limits shown on the Endorsement Data Page.

THEREAFTER, ON EACH BENEFIT YEAR ANNIVERSARY, THE INCOME BASE IS AUTOMATICALLY
INCREASED TO THE GREATER OF (A), OR (B) WHERE:

     (a)  is the Highest Anniversary Value; and

     (b)  is the current Income Base, plus the Income Credit, if any.

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<PAGE>

The Income Base will continue to be calculated on each Benefit Year Anniversary
while this Endorsement is in effect and both the Contract Value and Income Base
are greater than zero.

CALCULATION OF THE INCOME CREDIT BASE

     CALCULATION OF THE INCOME CREDIT BASE IF THE ENDORSEMENT IS ELECTED ON THE
     CONTRACT DATE

     The Income Credit Base is used to calculate the amount of the Income Credit
     during the Income Credit Period. If this Living Benefit is elected on the
     Contract Date, the initial Income Credit Base is equal to the initial
     Eligible Purchase Payment.

     CALCULATION OF THE INCOME CREDIT BASE IF THE ENDORSEMENT IS ELECTED AFTER
     THE CONTRACT DATE

     If this Living Benefit is elected after the Contract Date, the initial
     Income Credit Base is the Contract Value on the Endorsement Effective Date,
     which is considered the initial Eligible Purchase Payment and is subject to
     the Eligible Purchase Payment limits shown on the Endorsement Data Page.

THEREAFTER, THE INCOME CREDIT BASE IS INCREASED AND DECREASED AS FOLLOWS:

INCREASES IN THE INCOME CREDIT BASE

The Income Credit Base increases each time Eligible Purchase Payments are made.
The Income Credit Base also increases to the Highest Anniversary Value when the
Income Base is increased to the Highest Anniversary Value.

DECREASES IN THE INCOME CREDIT BASE

The Income Credit Base decreases each time an Excess Withdrawal is taken, in the
same proportion by which the Contract Value is reduced by the amount in excess
of the Maximum Annual Withdrawal Amount.

CALCULATION OF THE INCOME CREDIT

On each Benefit Year Anniversary during the Income Credit Period, if Withdrawals
were not taken during the previous Benefit Year, the Income Credit is determined
by multiplying the Income Credit Percentage by the Income Credit Base. If any
Withdrawals were taken in the previous Benefit Year, then the Income Credit is
reduced to zero for that Benefit Year.

CALCULATION OF THE MINIMUM INCOME BASE

     CALCULATION OF THE MINIMUM INCOME BASE IF THE ENDORSEMENT IS ELECTED ON THE
     CONTRACT DATE

     If this Living Benefit is elected on the Contract Date, the Minimum Income
     Base is as shown on the Endorsement Data Page.

     CALCULATION OF THE MINIMUM INCOME BASE IF THE ENDORSEMENT IS ELECTED AFTER
     THE CONTRACT DATE

     If this Living Benefit is elected after the Contract Date, the Minimum
     Income Base is 200% of the Contract Value on the Endorsement Effective
     Date, which is considered the initial Eligible Purchase Payment and is
     subject to the Eligible Purchase Payment limits shown on the Endorsement
     Data Page.

The Income Base and Income Credit Base, if applicable, will be increased to at
least the Minimum Income Base on the 12th Benefit Year Anniversary, provided no
Withdrawals are taken prior to that anniversary. If You are eligible for the
Minimum Income Base, the Income Base on the 12th Benefit Year Anniversary is the
greater of (a) or (b), where:

     (a)  is the current Income Base; and

     (b)  is the Minimum Income Base.

CALCULATION OF THE MAXIMUM ANNUAL WITHDRAWAL AMOUNT

The Maximum Annual Withdrawal Amount is calculated by multiplying the Income
Base by the Maximum Annual Withdrawal Percentage as shown on the Endorsement
Data Page, which is determined by Your Age at the time You first take a
Withdrawal from Your Contract.

Withdrawals during a Benefit Year that in total are less than or equal to the
Maximum Annual Withdrawal Amount will not reduce the Maximum Annual Withdrawal
Amount and the Income Base, and the Income Credit Base if applicable. If you
take an Excess Withdrawal in a Benefit Year, the Income Credit is reduced to
zero for that Benefit Year. If You choose to take less than the Maximum Annual
Withdrawal Amount in any Benefit Year, You may not carry over the unused amount
for withdrawal in subsequent Benefit Years. Your Maximum Annual Withdrawal
Amount in any year will not be recalculated solely as a result of taking less
than the entire Maximum Annual Withdrawal Amount in the prior year.

Withdrawals taken under this Living Benefit are treated like any other
Withdrawal under the Contract for purposes of calculating Contract Value,
including any fees and charges applicable to such Withdrawals and any other
benefits under the Contract. In any Benefit Year, Withdrawals up to Maximum
Annual Withdrawal Amount are free of Withdrawal Charges.

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CALCULATION OF THE PROTECTED INCOME PAYMENT

If the Contract Value is reduced to zero due to unfavorable investment
performance, Withdrawal up to the Maximum Annual Withdrawal Amount, if you live
longer than expected, or any combination of these factors, but the Income Base
is still greater than zero, the Protected Income Payment is calculated by
multiplying the Income Base by the applicable Protected Income Payment
Percentage, which is determined by Your Age at the time You first take a
Withdrawal from Your Contract, as shown on the Endorsement Data Page. You will
receive the Protected Income Payment each year for the remaining lifetime of the
Covered Person(s).

INCREASES AND DECREASES IN THE INCOME BASE AND THE IMPACT TO YOUR MAXIMUM ANNUAL
WITHDRAWAL AMOUNT

INCREASES IN THE INCOME BASE

The Income Base is increased anytime an Eligible Purchase Payment is allocated
to Your Contract. The Income Base is also increased by any available Income
Credit on any Benefit Year Anniversary during the Income Credit Period, or as a
result of a Highest Anniversary Value being achieved resulting in the Income
Base being stepped up on a Benefit Year Anniversary. In addition, the Income
Base can also be increased to the Minimum Income Base on the 12th Benefit Year
Anniversary, provided no Withdrawals are taken before the 12th Benefit Year
Anniversary. In any Benefit Year during which Eligible Purchase Payments are
allocated to Your Contract, any remaining Withdrawals of the Maximum Annual
Withdrawal Amount will be based on the increased Maximum Annual Withdrawal
Amount reduced by Withdrawals previously taken in that Benefit Year. If the
Income Base is increased on a Benefit Year Anniversary, the Maximum Annual
Withdrawal Amount will be recalculated on that Benefit Year Anniversary,
applicable to the coming Benefit Year, by multiplying the increased Income Base
by the applicable Maximum Annual Withdrawal Percentage. The Endorsement Fee will
be assessed on the increased Income Base.

DECREASES IN THE INCOME BASE

Excess Withdrawals reduce Your Income Base on the date the Excess Withdrawal
occurs. Any Excess Withdrawal in a Benefit Year reduces the Income Base in the
same proportion by which the Contract Value is reduced by the Excess Withdrawal.
As a result of a reduction of the Income Base, the Maximum Annual Withdrawal
Amount will also be reduced. The new Maximum Annual Withdrawal Amount will be
equal to the reduced Income Base multiplied by the applicable Maximum Annual
Withdrawal Percentage. The last recalculated Maximum Annual Withdrawal Amount in
a given Benefit Year is available for Withdrawal at the beginning of the next
Benefit Year and may be lower than the previous Benefit Year's Maximum Annual
Withdrawal Amount. When the Contract Value is less than the Income Base, Excess
Withdrawals will reduce the Income Base by an amount which is greater than the
amount of the Excess Withdrawal. In addition, no Income Credit will be added to
the Income Base in that Benefit Year.

REQUIRED MINIMUM DISTRIBUTIONS

This provision applies ONLY to the Contract to which this Endorsement is
attached. If you are taking Required Minimum Distributions and the Required
Minimum Distribution amount, based only on this Contract, is greater than the
Maximum Annual Withdrawal Amount in any given Benefit Year, no portion of the
Required Minimum Distribution will be treated as an Excess Withdrawal provided
you enroll in the Company's systematic withdrawal program for Required Minimum
Distributions. However, any portion of a Withdrawal in a Benefit Year that is
more than the greater of both the Maximum Annual Withdrawal Amount and the
Required Minimum Distribution amount will be considered an Excess Withdrawal for
the purpose of the recalculation of the Income Credit Base, Income Base and
Maximum Annual Withdrawal Amount.

IF YOUR CONTRACT VALUE IS REDUCED TO ZERO

If Your Contract Value is reduced to zero because of an Excess Withdrawal, no
further benefits will be payable under this Endorsement or the Contract, and
Your Contract along with the Endorsement will terminate. However, if Your
Contract Value is reduced to zero due to unfavorable investment performance
and/or fees, Withdrawal up to the Maximum Annual Withdrawal Amount, if you live
longer than expected, or any combination of these factors, and the Income Base
is greater than zero, We will pay the remaining Maximum Annual Withdrawal Amount
for that Benefit Year in the same frequency withdrawals had been taken, i.e.
monthly or quarterly. Thereafter, we will pay the Protected Income Payment over
the remaining lifetime of the Covered Person(s) which will be calculated by
multiplying the Income Base by the Protected Income Payment Percentage, as shown
on the Endorsement Data Page.

Because the Contract Value has been reduced to zero, the Income Base will no
longer be increased to the Highest Anniversary Value nor will Income Credits be
applied, if applicable. In addition, all other benefits under the Contract, will
be terminated and You may no longer make subsequent Purchase Payments or
transfers, and no Death Benefit is payable.

When the Contract Value equals zero and the Income Base is greater than zero, to
receive any remaining Living Benefit, you must select one of the following
options:

     1.   The current Protected Income Payment, divided equally and paid on a
          monthly, quarterly, semi-annual or annual

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<PAGE>

          frequency as selected by You until the date of Your death(s); or

     2.   Any payment option mutually agreeable between You and Us.

Once You elect a payment option, it cannot be changed. If You do not select a
payment option above, the remaining benefit will be paid as an amount based on
the Protected Income Payment Percentage. This amount will be divided equally and
paid on a quarterly basis until the date of death of the Covered Person(s).

LATEST ANNUITY DATE

If the Contract Value and the Income Base are greater than zero on the Latest
Annuity Date, You must select one of the following options:

     1.   Annuitize the Contract Value under the Annuity Provisions of the
          Contract; or

     2.   Elect to receive the current Protected Income Payment, as of the
          Latest Annuity Date, divided equally and paid on a monthly, quarterly,
          semi-annual or annual frequency as selected by You until the date of
          death of the Covered Person(s); or

     3.   Any payment option mutually agreeable between You and Us.

If You do not select an option listed above, on the Latest Annuity Date, We may
annuitize the Contract Value in accordance with Annuity Provisions of the
Contract, Options 3 and 3V with 120 Monthly Payments Guaranteed or payments that
do not exceed Your life expectancy as required by the IRS.

INVESTMENT REQUIREMENTS

In addition to the Secure Value Account Allocation, we require that you allocate
your Purchase Payment(s), Spousal Continuation Contribution, and Payment
Enhancements, if applicable, and Contract Value in accordance with established
requirements stated in the Prospectus. We require enrollment in a quarterly
automatic asset rebalancing program that complies with the investment
requirements. In addition to quarterly asset rebalancing, We will initiate
rebalancing in accordance with your most current and compliant automatic asset
rebalancing instructions on file after any Withdrawal or transfer You initiate.

SECURE VALUE ACCOUNT ALLOCATION

The Secure Value Account Allocation as shown on the Endorsement Data Page, is
required only while the Endorsement is effective. Amounts allocated to the
Secure Value Account are not subject to the Separate Account Charge. Amounts
allocated to the Secure Value Account may not to be transferred to any other
investment option as long as the Endorsement is effective and We will not
rebalance amounts allocated to the Secure Value Account in accordance with the
automatic asset rebalancing program. You may not transfer into or out of the
Secure Value Account. You may not request the entire amount of any withdrawal to
be deducted solely from the Secure Value Account. Rather, any Withdrawal reduces
the amount invested in the Secure Value Account in the same proportion that the
Withdrawal reduces the Contract Value.

TERMINATION OF WITHDRAWALS OVER TWO LIVES

If there are two Covered Persons on the Endorsement Effective Date, Withdrawals
guaranteed for the life of one of the Covered Persons will terminate if:

     1.   One of the two Covered Persons is removed from the Endorsement due to
          any reason other than death; or

     2.   The Covered Persons are no longer married at the time of death of the
          first Covered Person.

Termination of Withdrawals guaranteed for the life of one Covered Person does
not impact any other terms and conditions of this Endorsement, including the
applicable Endorsement Fee, which is based on the number of Covered Persons on
this Endorsement Effective Date.

CANCELLATION OF THE GUARANTEED LIVING BENEFIT

You cannot cancel this Endorsement in the first 5 Benefit Years unless You
surrender Your Contract. You may cancel this Endorsement as detailed below. The
Guaranteed Living Benefit may not be re-elected or reinstated after a
cancellation.

CANCELLATION EFFECTIVE DATE

If Your cancellation request is received:

     1.   In the first 5 Benefit Years, the cancellation is effective on the 5th
          Benefit Year Anniversary;

     2.   In any Benefit Year after the 5th Benefit Year Anniversary, the
          cancellation is effective on the Benefit Quarter Anniversary following
          Our receipt of the cancellation request.

THIS ENDORSEMENT AND THE ENDORSEMENT FEE WILL CANCEL AUTOMATICALLY UPON THE
OCCURRENCE OF ONE OF THE FOLLOWING:

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     1.   Death of the Covered Person, or if there were two Covered Persons,
          upon the death of the surviving Covered Person; or

     2.   A Death Benefit is paid resulting in the Contract being terminated; or

     3.   The Contract is annuitized; or

     4.   An Excess Withdrawal that reduces the Contract Value and Income Base
          to zero; or

     5.   Any change occurs that removes all Covered Persons from the Contract;
          or

     6.   The Contract is cancelled or surrendered for any reason.

On the Cancellation Effective Date, amounts allocated to the Secure Value
Account will be automatically transferred to a 1-Year Fixed Account option, if
available, or the Cash Management Variable Portfolio. You may no longer allocate
Purchase Payments to the Secure Value Account after cancellation. From the day
following the automated transfer, you may transfer this amount to another
available investment option under the Contract for a period of 90 days during
which the transfer will not count against the annual number of free transfers or
incur a transfer fee.

If You cancel the Endorsement or surrender Your Contract while Your Contract
Value is greater than zero, We will assess a pro-rata charge for the Endorsement
Fee applicable to the Benefit Quarter in which the cancellation or surrender
occurs if the Contract was cancelled or surrendered before the end of a Benefit
Quarter. The pro-rated charge is calculated by multiplying the fee by the number
of days between the date when the prior fee was last assessed and the date of
cancellation or surrender, divided by the number of days between the prior and
the next Benefit Quarter Anniversaries. Thereafter, You will no longer be
charged a fee.

DEATH OF COVERED PERSON(S)

If there is one Covered Person and that person dies, this Endorsement and the
Endorsement Fee will be terminated.

If there are two Covered Persons, upon the first death, if the surviving Covered
Person elects to continue the Contract, this Endorsement is also continued. Upon
the election of continuation, the Endorsement Effective Date and applicable
Endorsement Fee based on two Covered Persons will not change.

Signed for the Company to be effective on the Endorsement Effective Date.

FIRST SUNAMERICA LIFE INSURANCE COMPANY

/s/ Jay S. Wintrob
-------------------------------------
Jay S. Wintrob
President

                                        7

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