<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 26, 1999.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to ______
COMMISSION FILE NUMBER 333-21819
---------------
LDM TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Character)
MICHIGAN 38-2690171
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2500 EXECUTIVE HILLS DRIVE, AUBURN HILLS, MICHIGAN 48326
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (248) 858-2800
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
None None
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes [X] No [ ]
As of December 17, 1999, 600 shares of Common Stock of the Registrant were
outstanding. There is no public trading market for the Common Stock.
<PAGE> 2
PART I
Item 1. Business
GENERAL
LDM Technologies, Inc. (the "Company" or "LDM") is a leading Tier 1 designer
and manufacturer of highly engineered plastic instrument panel and interior trim
components, exterior trim components and under the hood components supplied
primarily to North American automotive original equipment manufacturers (OEMs).
Suppliers that sell directly to OEMs are referred to herein as "Tier 1"
suppliers. The Company is a full service supplier with advanced computer design
and engineering capabilities that have enabled it to penetrate OEM new product
programs during the concept stage of the product life cycle and promote
long-term customer relationships. The Company operates a Design Center in Auburn
Hills, Michigan to enhance its conceptual design and development capabilities.
The Company, a privately held Michigan corporation, was incorporated in 1985
to pursue acquisitions in the automotive industry. In 1986, the Company began to
focus on the market for highly engineered plastic components when it acquired
Arrow Molded Plastics, Inc. In 1993, the Company strengthened its presence in
this market with the acquisition of Knapp Plastics Ltd., a manufacturer of
exterior trim components and in 1994, purchased selected assets of Windsor
Plastic Products Ltd., a manufacturer of instrument panel components.
In fiscal year 1997 the Company completed its acquisition of substantially
all the assets of Molmec, Inc., a manufacturer of under the hood products (the
"Molmec" Acquisition). The Company also completed its acquisition of Aeroquip's
Kendallville, Indiana facility in fiscal year 1997 (the "Kendallville"
Acquisition).
On September 30, 1997, the Company purchased the entire voting stock of
Kenco Plastics, Inc., a manufacturer of blowmolded under the hood products (the
"Kenco" Acquisition). On November 25, 1997, the Company acquired the business
and certain net assets of Aeroquip-Vickers International GmbH (the "Beienheim"
Acquisition). The business is located in Beienheim, Germany and manufactures
interior and under the hood products, primarily for European OEM's. On February
6, 1998, the Company acquired the stock of Huron Plastics Group, Inc. and
substantially all of the assets of Tadim, Inc. (collectively the "HPG"
Acquisition). HPG is a manufacturer of under the hood and functional products
for sale to OEM's and Tier I automotive suppliers.
Effective as of December 31, 1998, the Company entered into a joint venture
(the DBM joint venture) that is 49% owned by the Company, and 51% owned by an
independent third party. The Company sold the Kenco business and most of its net
current assets to the joint venture and leased all machinery and equipment of
the Kenco business to the joint venture. Subsequent to September 26, 1999, the
Company sold the machinery and equipment of the Kenco business to the joint
venture.
On April 15, 1999, the Company sold a majority of its ownership stake in
Como Products to an independent third party. Como is a producer of injection
molded plastic consumer products. The sale was made to allow management to
narrow its focus on the Company's core automotive business.
Through a combination of the acquisitions and divestitures described above
and internal growth, the Company's net sales and EBITDA have increased from
approximately $221.0 million and $21.3 million, in fiscal year 1995 to
approximately $507.1 million and $42.6 million, respectively, on a proforma
basis in fiscal year 1999, which represents compound annual growth rates of 23%
and 19%, respectively.
<PAGE> 3
INDUSTRY OVERVIEW
The North American automotive industry is currently experiencing a number of
trends which are significant to the Company's business.
Increasing Utilization of Plastic. In recent years, OEMs have focused
their efforts on developing and employing lower cost and lighter materials,
such as plastic, in the design of components. Plastic provides OEMs with a
number of design advantages over metal including increased design
flexibility and aesthetic appeal, resistance to corrosion and improved
fuel-efficiency performance due to lighter weight materials. Substituting
plastic for metal can also reduce manufacturing costs by eliminating
machining costs, reducing painting costs, facilitating assembly, minimizing
tooling costs and consolidating the number of parts used in a vehicle. The
Company believes that while the majority of the opportunities for converting
metal into plastic have already occurred in exterior and interior trim
applications, there are significant growth opportunities in the use of
plastic in under-the-hood components. Suppliers of under-the-hood
components, such as the Company, are increasingly being asked to develop
complex under-the-hood systems, including plastic transmission covers that
consolidate engine mounts and drive shaft seals and battery trays that
integrate fluid reservoirs.
Expansion of OEM Supplier Responsibilities. Since the 1980s, OEMs such as
Ford, General Motors and Chrysler have been actively reducing their supplier
base to include only those suppliers which accept significant responsibility
for product management and meet increasingly strict standards for product
quality, on time delivery and manufacturing costs. These suppliers are
expected to control many aspects of the production of system components,
including design, development, component sourcing, manufacturing, quality
assurance, testing and delivery to the customer's assembly plant.
Globalization of the OEM Supplier Base. Several OEMs have announced
certain models designed for the world automobile market ("World Car"). This
departure from the historical practice of designing separate models for each
regional market will generally require suppliers to establish international
design and manufacturing capabilities through internal development, joint
ventures or acquisitions. As a result, certain domestic and European OEMs
have encouraged their existing suppliers to establish foreign production
support for World Car programs.
Market-based Pricing. In an effort to reduce costs and to ensure the
affordability and competitiveness of their products, OEMs are sourcing
automotive components using a market-based pricing approach. In using such a
market-based approach, OEMs establish a target price, or the price the
market is willing to pay for a vehicle, and systematically divide this price
into system and component target prices. In addition, under market-based
pricing, the OEMs often require annual price reductions for the vehicle's
systems and components. As a result, the market-based approach to pricing
has generally required automotive suppliers to focus on continually reducing
product costs while improving quality standards.
AUTOMOTIVE PRODUCTS
The Company designs and manufactures highly-engineered plastic instrument
panel and interior trim components, exterior trim components and
under-the-hood components. In recent years, the Company has significantly
expanded its design and engineering capabilities which provide the Company
with a competitive advantage in obtaining new business. The Company's three
automotive lines of business are as follows:
Instrument Panel Components and Interior Trim Components. The Company
focuses on the production of complex products such as instrument panel
subassemblies which require the integration of multiple components.
Instrument panel components manufactured by the Company include cluster
finish panels, center trim panels, air vents, coin and cup holders,
ashtrays, gloveboxes, telephone holders and consoles. Certain products in
this line of business demand functional aesthetics appeal and typically
require the Company to provide innovative and design intensive solutions for
application requirements stipulated by OEMS. Historically, the Company's
largest customer for its instrument panel components has been Ford.
<PAGE> 4
Exterior Trim Components. Exterior trim systems manufactured by the
Company include front and rear bumper fascias, end caps, body side claddings
and moldings, rocker panels and grills. The Company's broad range of
exterior trim class A painting capabilities provides it with a competitive
advantage in supplying exterior trim to domestic and foreign OEMs. The
Company is able to provide both high-bake high solids painting, which is
traditionally preferred by domestic OEMs, and low-bake, two component
painting, which is preferred by foreign OEMs. Historically, LDM's largest
customer for its exterior trim components has been General Motors.
Under-the-Hood/Functional Components. The Company is a designer and
manufacturer of fluid and air management components for under-the-hood
applications such as cowl vent assemblies, fluid reservoirs including degas
bottles, battery trays and covers, air deflectors and sight shields. The
Company believes that it supplies the majority of Ford's cowl vent
assemblies for North American car and truck platforms. OEMs are increasingly
substituting plastic for metal in under-the-hood components and systems in
an effort to reduce cost, noise and weight, to enhance design flexibility,
to improve airflow and to increase aesthetic appeal. Historically, the
largest customer for its under-the-hood components has been Ford.
CONSUMER PRODUCTS
G.L. Industries of Indiana, Inc. (d/b/a Como Products ("Como")), a
manufacturer of consumer and office products, was acquired by the Company in
1993. Como is a manufacturer of plastic injection molded products for the
electronics, computer, television, office furniture, appliance, transportation
and business machine markets. Como's extensive finishing capabilities include
painting, EMI/RFI shielding, hot stamping, induction bonding, pad printing and
machining of molded parts. With injection molding machines ranging from 230 tons
to 3,000 tons, Como has the ability to produce a broad range of molded parts,
including injection molded, structural foam and counter pressure structural foam
parts. Como sales represented approximately 4.2% of the Company's fiscal year
1998 net product sales.
On April 15, 1999, the Company sold a majority of its ownership stake in
Como Products to an independent third party. The sale was made to allow
management to concentrate its focus on the Company's core automotive business.
CUSTOMERS
The Company's principal customers are Ford, General Motors and
DaimlerChrysler for which it supplies components and subassemblies for a variety
of light duty trucks, minivans and passenger cars. While the Company's products
are generally used on a diverse group of over 60 models, the Company's sales and
marketing efforts have been directed toward those sectors of the automotive
market which have experienced strong consumer demand and growth in sales. The
Company supplies components and subassemblies for a variety of light duty
trucks, sport utility vehicles, minivans and passenger cars.
The approximate percentage of net production sales to the principal
customers of the Company for the twelve-month period ended September 26, 1999
are shown below:
<TABLE>
<CAPTION>
Year Ended
September 26, 1999
------------------
<S> <C>
Ford .................................................................... 35.5%
General Motors .......................................................... 32.6%
DaimlerChrysler.......................................................... 4.9%
Other Automotive......................................................... 25.1%
Other Non-Automotive..................................................... 1.9%
------
Total.......................................................... 100.0%
======
</TABLE>
The Company's customers typically award purchase orders on a limited source
basis that normally cover components to be supplied for a particular car model.
Such purchase orders generally provide for supplying the customer's requirements
for a model year, although, in practice, such purchase orders are typically
renewed until the component is redesigned or eliminated in a model change.
<PAGE> 5
Products under development are assigned a selling price which is reevaluated
from time to time during the product development cycle. Prior to production, the
Company and the customer generally agree on a final price, which, in some
instances, may be subject to negotiated price reductions or increases over the
term of the project. Consequently, the Company's ability to improve operating
performance is generally dependent primarily on its ability to reduce costs and
operate more efficiently.
The Company has been chosen as a supplier for a variety of light trucks
(including pick-up trucks, minivans, full size vans and sport utility vehicles)
and passenger car models. The following table presents an overview of the major
models, for which the Company currently produces components for its OEM
customers:
<TABLE>
<CAPTION>
Customer Model
- ----------------------------------------------------------------------------
<S> <C>
General Motors-truck.......................................... Astro/Safari
Blazer/Bravada/Jimmy
Sonoma Pick-up/S10 Pick-up
GMC Sierra/Silverado
Venture/Silhouette/Trans Sport
Yukon
Suburban
Tahoe
Escalade
Denali
General Motors-car............................................ Grand Am
Alero
Aurora/Riviera
Cavalier/Sunbird/Sunfire
Corvette
Firebird/Camaro
Grand Prix/Cutlass
Impact
Intrigue
Lumina
Malibu
Monte Carlo
Park Avenue
Saturn/Z
Seville
Astra (Opel)
Vectra (Opel)
Park Avenue
Bonneville
Regal
Impala
Envoy
Zaphira (Opel minivan)
Ford-truck.................................................... Econoline
Expedition
Explorer
F-Series Truck (PN96/PN102/PN131)
Ranger
Villager/Quest
Windstar
Navigator
Excursion
Ford-car...................................................... Continental
Contour/Mystique/Mondeo
Crown Victoria/Grand Marquis
Escort (US and Europe)
Mark VIII
Mustang
Cougar /Lincoln LS
Taurus/Sable
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
Town Car
Focus/Entry
Jaguar X200
Daimler/Chrysler-truck........................................ Caravan/Voyager/Town & Country
Dakota
Grand Cherokee
Ram Pick-up/Van
Durango
Wrangler
Daimler/Chrysler-car.......................................... Avenger/Sebring
Breeze/Cirrus/Stratus
Concord/Intrepid
LHS 1300
Neon
Viper
Mercedes ML55/270/320
Volkswagen.................................................... A3 (Audi)
A4 (Audi)
A6 (Audi)
</TABLE>
DESIGN AND PRODUCT ENGINEERING
The Company is a full service Tier I supplier with advanced engineering
capabilities which enable it to design innovative, high-quality products that
provide value to its customers. The Company has a Design Center in Auburn Hills,
Michigan to provide an environment for trend-setting conceptual design and
product development. The Company has made other significant investments in
conceptual design capabilities that allow it to participate in the earliest
stages of programs. For instance, the Company has embraced computer-aided
simulation directly linked to customer computer networks as a means to reduce
the cost and time required to develop new products. The industrial design
activity has augmented the Company's traditional modeling methods with
computer-aided technology which reduces staff requirements as well as
simplifying the integration of design and engineering functions. The Company has
transitioned from computer-aided design shell to solid modeling which provides a
direct link to rapid prototyping. The Company's design staff employs
state-of-the-art ALIAS and CATIA computer software and hardware to provide
three-dimensional virtual modeling and product animation. Analytical tools
employed include finite element analysis for structural analysis, kinematics for
mechanisms, computational fluid dynamics for airflow studies and moldfilling
analysis for injection molding optimization and warp prediction.
MANUFACTURING
The Company's OEM customers are focusing on suppliers capable of delivering
quality products, controlling manufacturing costs and integrating, through
design capabilities, multiple components into larger systems. The Company has
responded to this challenge by implementing a lean manufacturing program and
adopting advanced processing technology.
The Company's lean manufacturing program has focused on "kanban" production
scheduling and materials management techniques and labor productivity
improvements. Kanban management techniques are characterized by flexible
production scheduling as well as vendor scheduling, reduced work queues, more
frequent vendor deliveries and reduced inventory levels. Through kanban, the
Company has experienced increased inventory turnover and generally reduced
inventory levels.
The Company continually seeks to achieve labor productivity improvement and
has established a work environment which encourages employee involvement in
identifying and eliminating waste. A key factor in the Company's operations is
maintaining the flexibility to respond to the demands of different product runs
and changing product delivery requirements while continuously increasing
production efficiency.
The Company believes its broad base of class A paint application
capabilities positions it well for supplying the domestic and foreign exterior
trim market. The Company is able to provide both high-bake high solids painting,
<PAGE> 7
which is traditionally preferred by domestic OEMS, and low-bake, two component
painting, which is preferred by foreign OEMS. The Company has also recently
developed paint application technology utilizing innovative robotic applications
which has enabled the Company to reduce costs by improving paint transfer
efficiency.
The Company has been recognized as a quality supplier by its OEM customers
and has received Ford's Q1 Award and has been nominated for DaimlerChrysler's
Pentastar Award. The majority of the Company's facilities are QS 9000 certified
and the remaining facilities are in the process of being certified.
MARKETING
Sales of the Company's products to OEMs are made directly by the Company's
sales and engineering force, headquartered in Michigan. Through the sales and
engineering office, the Company services its OEM customers and manages its
continuing programs of product design improvement and development. The Company's
sales and engineering force currently consists of approximately 100 individuals,
including several who are located periodically at various OEMs' offices in order
to facilitate the development of new programs.
COMPETITION
The automotive supplier industry in which the Company competes is highly
competitive. A large number of actual or potential competitors exist including
the internal component supply operations of the OEMs as well as independent
suppliers, many of which are larger than the Company. The Company believes its
principal competitors in its three lines of business include: Progressive
Dynamics Inc., Summit Polymers Inc. and Manchester Plastics, a business unit of
Collins & Aikman Corporation, in instrument panel components; Magna
International Inc., and Venture Holdings Corporation, in exterior trim
components; and Key Plastics Inc. and Lacks Industries in under-the-hood
components.
The Company principally competes for new business both at the initial
development of new models and upon the redesign of existing models by its major
customers. New model development generally begins two to four years prior to the
marketing of such models to the public. Because of the large investment by OEMs
and Tier I suppliers in tooling and the long lead time required to commence
production, OEMs and Tier I suppliers generally do not change a supplier during
a model production run.
RAW MATERIALS
The principal raw materials used by the Company are engineered plastic
resins such as nylon, polypropylene, polycarbonate and
acrylonitrile-butadiene-styrene, paint, and steel for production molds, all of
which are available from many sources. The resins used in the Company's business
historically have been subject to price fluctuations. In the past, the Company
has been unable to pass price increases in resins through to its customers.
There can be no assurance that a material increase in the price of resin will
not adversely affect the Company's results of operations. The Company has not
experienced significant raw material shortages and does not anticipate
significant raw material shortages in the foreseeable future.
EMPLOYEES
As of September 26, 1999, the Company's workforce included 3,567 employees,
of which 626 were salaried workers, and 2,941 were hourly workers including
temporary and part-time employees. The Company has 375 hourly employees
represented by the Canadian Automobile Workers union at its Leamington, Canada
facility. The Company's three-year contract with the bargaining unit for the
Leamington facility expires January 15, 2001. None of the Company's other
employees are subject to collective bargaining agreements. The Company has not
experienced any work stoppages and considers relations with its employees to be
good.
<PAGE> 8
ENVIRONMENTAL MATTERS
The Company's operations and properties are subject to a wide variety of
international, federal, state and local laws and regulations, including those
governing the use, storage, handling, generation, treatment, emission, release,
discharge and disposal of certain materials, substances and wastes, the
remediation of contaminated soil and groundwater, and the health and safety of
employees (collectively, "Environmental Laws"). As such, the nature of the
Company's operations exposes it to the risk of claims with respect to such
matters and there can be no assurance that material costs or liabilities will
not be incurred in connection with such claims.
The Company has taken steps, including the installation of an Environmental,
Health and Safety group to reduce the environmental risks associated with its
operations and believes that it is currently in substantial compliance with
applicable Environmental Laws. See Item 7 - "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Environmental."
Item 2. Properties
The Company conducts molding, painting and assembly operations in
approximately 1.9 million square feet of space in a total of 25 manufacturing
locations. The utilization and capacity of the Company's facilities fluctuates
based upon the mix of components the Company produces and the vehicle models for
which they are being produced. Detail of each manufacturing location is
scheduled below:
<TABLE>
<CAPTION>
LOCATION OWNED/LEASED SQUARE FOOTAGE
- --------- ------------ --------------
<S> <C> <C>
Circleville, OH Owned 71,300
Napoleon, OH Leased 150,000
Franklin, TN Owned 122,000
Kendallville, IN Owned 60,000
Byesville, OH Owned 160,000
Leamington, Ontario, Canada Owned 200,000
New Hudson, MI Owned 57,900
Hartland, MI Owned 44,600
Fowlerville, MI Owned 65,000
Clarkston, MI Owned 21,600
Croswell, MI Leased 80,900
St. Clair, MI Leased 35,000
St. Clair, MI Leased 29,100
Harlingen, TX Leased 42,900
Port Huron, MI Leased 71,000
Port Huron, MI Leased 71,000
Beienheim, Germany Leased 140,000
</TABLE>
The Company's principal executive offices and design and engineering staff
are located in a building owned by the Company in Auburn Hills, Michigan. The
Company believes that its facilities and equipment are in good condition and are
adequate for the Company's present and anticipated future operations.
Item 3. Legal Proceedings
There are no material legal proceedings pending against the Company or its
subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
<PAGE> 9
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters
There is no public trading market for the Company's Common Stock. As of
September 27, 1998, there were two holders of record of the Registrant's Common
Stock.
Item 6. Selected Financial Data
Summary Financial Data
(dollars in thousands)
The following table sets forth summary historical financial data of LDM
Technologies, Inc. for the fiscal years ended September 24, 1995, September 29,
1996, September 28, 1997, September 27, 1998, and September 26, 1999. The
following table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the historical
consolidated financial statements of LDM presented elsewhere in this document.
<TABLE>
<CAPTION>
SEPT. 24 SEPT. 29 SEPT. 28 SEPT. 27 SEPT. 26
1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Statement of operations
data
Net sales $ 220,991 $ 217,759 $ 293,020 $ 483,224 $ 530,498
Cost of sales 182,408 182,896 240,929 404,001 441,514
Gross margin 38,583 34,863 52,091 79,223 88,984
Selling, general and
administrative
expenses 23,515 26,418 35,562 56,607 63,401
Interest expense 3,178 3,280 11,076 19,814 21,067
Impairment of
long-lived 10,523
assets
Income (loss) from
continuing
operations,
before extraordinary
item 6,248 1,173 3,063 (7,067) (761)
Other financial data
Cash flows from operating
activities $ 14,788 $ 12,912 $ 9,336 $ 19,547 $ 26,611
EBITDA (a) 21,261 16,473 28,182 42,598 45,136
Depreciation and
amortization 6,778 8,006 11,955 19,866 22,025
Capital expenditures 15,150 20,286 12,776 14,143 22,003
Ratio of earnings to
fixed charges(b) 3.9 1.9 1.4 .6 1.1
Ratio of EBITDA to
interest expense 6.7 5.0 2.5 2.2 2.1
Ratio of debt to EBITDA 2.1 3.1 4.5 5.3 4.7
Balance sheet data
Cash $ 1,138 $ 2,122 $ 4,632 $ 3,317 $ 4,317
Total assets 107,655 119,125 212,187 327,651 312,143
Total debt 44,936 51,786 126,770 224,444 213,102
Stockholder's equity 23,635 17,323 20,386 13,358 12,920
</TABLE>
<PAGE> 10
(a) EBITDA is defined as income (loss) from continuing operations
before the effect of extraordinary items plus the following: interest,
income taxes, depreciation and amortization. EBITDA is presented because
it is a widely accepted financial indicator of a company's ability to
incur and service debt. EBITDA is not, and should not be used as, an
indicator or alternative to operating income, net income (loss) or cash
flow as reflected in the Consolidated Financial Statements, is not
intended to represent funds available for debt service, dividends,
reinvestment or other discretionary uses, is not a measure of financial
performance under generally accepted accounting principles, should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles and
may not be comparable to other similarly-titled measures of other
companies. A reconciliation of net income to EBITDA is as follows:
<TABLE>
<CAPTION>
AUDITED
---------------------------------------------------------------------
SEPT. 24 SEPT. 29 SEPT. 28 SEPT 27 SEPT. 26
1995 1996 1997 1998 1999
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Income (loss) $ 6,334 $ 1,869 $ 3,063 $(7,067) $ (761)
Add (deduct) the following:
Extraordinary Item - (754) - -
Discontinued operations (87) 58 - -
Adjustment for
impairment of - - - 10,523
long-lived assets
Provision (credit) for
income taxes 5,058 4,014 2,088 (538) 2,805
Interest expense 3,178 3,280 11,076 19,814 21,067
Depreciation and
amortization 6,778 8,006 11,955 19,866 22,025
------- ------- ------- ------- -------
EBITDA $21,261 $16,473 $28,182 $42,598 $45,136
======= ======= ======= ======= =======
</TABLE>
(b) For purposes of the ratio of earnings to fixed charges, (i) earnings include
income from continuing operations before the following: income taxes,
extraordinary items, minority interests, and fixed charges and (ii) fixed
charges include interest on all indebtedness, amortization of deferred
financing costs and the portion of rental expense that the Company believes
to be representative of interest. For the year ended September 27, 1998,
earnings were inadequate to cover fixed charges by $7,966.
<PAGE> 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. When used in this report, the words
"anticipate," "believe," "estimate," and "expect" and similar expressions are
generally intended to identify forward-looking statements. Readers are cautioned
that any forward-looking statements, including statements regarding the intent,
belief or current expectations of the Company or its management, are not
guarantees of future performance and involve risks and uncertainties, and that
the actual results may differ materially from those in the forward-looking
statements as a result of various factors including, but not limited to: (i)
general economic conditions in the markets in which the Company operates; (ii)
fluctuations in worldwide or regional automobile and light and heavy truck
production, (iii) labor disputes involving the Company or its significant
customers; (iv) changes in practices and/or policies of the Company's
significant customers toward outsourcing automotive components and systems; (v)
foreign currency and exchange fluctuations; (vi) factors affecting the ability
of the Company or its key suppliers to resolve Year 2000 issues in a timely
manner; and (vii) other risks detailed from time to time in the Company's
filings with the Securities and Exchange Commission. The Company does not intend
to update these forward-looking statements.
GENERAL
LDM is a leading Tier I designer and manufacturer of highly engineered
plastic instrument panel and interior trim components, exterior trim components
and under-the-hood components supplied primarily to North American automotive
OEMs. LDM supplies components and subassemblies for a variety of light duty
trucks, sport utility vehicles, minivans and passenger cars. Automotive products
under development are assigned a selling price which is reevaluated from time to
time during the product development cycle. Prior to production, the Company and
the customer generally agree on a final price, which, in some instances, may be
subject to negotiated price reductions or increases over the term of the
project. Consequently, the Company's ability to improve operating performance is
generally dependent primarily on its ability to reduce costs and operate more
efficiently. Molds used in LDM's operations are requisitioned by LDM's customers
and are purchased from mold builders who design and construct the molds under
LDM supervision. Upon acceptance of the molds, title is passed to customers and
revenue is recognized. In addition to automotive products, LDM's net sales
include some consumer product sales and mold sales.
RESULTS OF CONTINUING OPERATIONS
YEAR ENDED SEPTEMBER 26, 1999 COMPARED TO YEAR ENDED SEPTEMBER 27, 1998
NET SALES: Net sales for fiscal year 1999 were $530.5 million, an increase of
$47.3 million, or 9.8%, from $483.2 million in fiscal year 1998. For fiscal year
1999, net sales were comprised of $460.1 million of automotive product sales,
$7.8 million of consumer and other product sales, and $62.6 million of mold
sales.
Automotive product sales in fiscal year 1999 were $460.1 million, an increase of
$39.2 million, or 9.3%, from $420.9 million in fiscal year 1998. This is the
result of recognizing a full year of HPG sales offset by the loss of nine months
of blowmolding sales due to the DBM joint venture. Consumer and other product
sales were $7.8 million in fiscal year 1999, compared to $18.1 million in fiscal
year 1998. This decrease of $10.3 million, or 56.9%, is the result of LDM's sale
of Como Products on April 15, 1999. Mold sales in fiscal year 1999 were $62.6
million, an increase of $18.3 million, or 41.3% from $44.3 million in fiscal
year 1998. The increase is due to certain programs that have launched during the
Company's fiscal fourth quarter. 1999 mold sales were comprised of $61.7 million
of automotive mold sales and $0.9 million of consumer and other mold sales.
GROSS MARGIN: Gross margin was $89.0 million, or 16.8% of net sales, for fiscal
year 1999 compared to $79.2 million, or 16.4% of net sales, for fiscal year
1998.
Gross margin related to automotive product sales was $86.9 million, or 18.9% of
net automotive product sales in fiscal year 1999 compared to $75.8 million or
18.0% of net automotive product sales in fiscal year 1998.
Gross margin related to consumer and other sales was $0.2 million, or 0.3% of
net consumer and other sales in fiscal year 1999 compared to $0.2 million or
0.2% of net consumer and other sales in fiscal year 1998.
<PAGE> 12
Gross margin related to mold sales was $1.9 million or 3.0% of mold sales in
fiscal year 1999 compared to $3.2 million or 7.2% of mold sales in fiscal year
1998.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for fiscal
1999 were $63.4 million, or 12.0% of net sales, compared to $56.6 million, or
11.7% of net sales, for fiscal year 1998.
INTEREST EXPENSE: Interest expense was $21.1 million for fiscal year 1999,
compared to $19.8 million for fiscal year 1998.
INCOME TAXES: The provision for income taxes for fiscal year 1999 was $2.8
million with an effective tax rate of 137.2%, as compared to a tax benefit of
$0.5 million with an effective tax benefit rate of 6.8% for fiscal year 1998.
The low effective benefit rate and high effective tax rate is the result of
certain non-deductible expenses and foreign tax in excess of foreign tax
credits.
DBM TECHNOLOGIES JOINT VENTURE: On December 31, 1998, the Company entered into a
joint venture (DBM joint venture) that is 49% owned by the Company, and 51%
owned by an independent third party. The Company sold the Kenco business and
most of its net current assets to the joint venture at an amount equal to the
net book value of the net current assets. The sales price of the net current
assets approximated $8.8 million.
The Company leased all machinery and equipment of the Kenco business to the
joint venture, and is subleasing to the joint venture all real properties in the
Kenco operations.
Under terms of the agreement, the Company provided a subordinated $1.8 million
loan to the joint venture and guaranteed $1.0 million of the joint venture line
of credit borrowings. As a result of these terms, and the relatively small
amount of equity contributed to the joint venture by the independent third
party, the Company retained substantially all of the risks of ownership. The
investment is treated as an equity investment for accounting purposes, but the
Company has recorded 100% of the joint venture losses as equity losses.
Subsequent to September 26, 1999, the Company sold to the joint venture the
machinery and equipment previously leased to the joint venture. Proceeds from
the sale approximated $10.3 million, the equipment's net book value. Proceeds
included $8.3 million in cash and an additional $2.0 million subordinated note
payable to the Company from the joint venture. As part of this transaction, the
joint venture's line of credit borrowings were refinanced which released the
Company from the $1.0 million guarantee discussed above.
SALE OF COMO PRODUCTS: On April 15, 1999, all of the assets and liabilities of
GL Industries of Indiana, Inc. (d/b/a Como Products), a 75% owned subsidiary of
the Company, were sold to New GLI, Inc., an Indiana corporation, which is now
doing business as "Como Products." A new independent partner joined the business
(New GLI) and purchased all but 36.75% of the Company's stake in New GLI for a
minimal amount. Under terms of the purchase agreement, the Company accepted a
subordinated note from New GLI for approximately $0.5 million, which represents
previous loans, accrued interest, and working capital advances from the Company
to Como. The note has been fully reserved on the Company's books.
The Company's ownership percentage in New GLI has become less than 50%. As a
result, New GLI's results are reported as equity earnings. As part of this
transaction, the Company was released from all guarantees on Como's line of
credit borrowings.
<PAGE> 13
YEAR ENDED SEPTEMBER 27, 1998 COMPARED TO YEAR ENDED SEPTEMBER 28, 1997
NET SALES: Net sales for fiscal year 1998 were $483.2 million, an increase of
$190.2 million, or 64.9% from $293.0 million in fiscal year 1997. For fiscal
year 1998, net sales, before intercompany elimination of $.1 million, were
comprised of $420.9 million of automotive product sales, $18.1 million of
consumer and other product sales, and $44.3 million of mold sales. A strike at
the General Motors Corporation during fiscal year 1998 resulted in estimated
lost automotive product sales of approximately $13.0 million.
Automotive product sales in fiscal year 1998 were $420.9 million, an increase of
$177.6 million, or 73.0%, from $243.3 million in fiscal year 1997. The strong
growth of automotive product sales was mainly attributable to increased
automotive product sales related to the Company's fiscal year 1998 acquisitions
(Kenco, $56.5 million; Beienheim, $20.6 million; and HPG, $66.6 million), a full
year of sales related to the 1997 acquisitions of Molmec and Kendallville and
the continued strength of the Company's other production parts programs.
Consumer and other product sales were $18.1 million in fiscal year 1998,
compared to $19.2 million in fiscal year 1997. This decrease of $1.1 million,
or 5.7%, is primarily the result of lower sales of television cabinets due to
the manufacturer's resourcing of these products to local suppliers.
Mold sales in fiscal year 1998 were $44.3 million, an increase of $12.4 million,
or 38.9% from $31.9 million in fiscal year 1997. 1998 mold sales were comprised
of $42.2 million automotive mold sales and $2.1 million of consumer and other
mold sales.
GROSS MARGIN: Gross margin was $79.2 million or 16.4% of net sales, for fiscal
year 1998 compared to $52.1 million or 17.8% of net sales, for fiscal year 1997.
Gross margin related to automotive product sales was $75.8 million, or 18.0% of
net automotive product sales in fiscal year 1998 compared to $50.2 million or
20.6% of net automotive product sales in fiscal year 1997. A strike at General
Motors Corporation during fiscal year 1998 resulted in estimated lost gross
margin of approximately $3.5 million. If the strike at General Motors had not
occurred, gross margin related to product sales would have approximated $79.3
million or 18.8% of net automotive product sales. The remaining decrease in
gross margin as a percentage of net product sales relates to gross margins at
Kenco and Beienheim being lower than achieved historically at the Company.
Gross margin related to consumer and other sales was $0.2 million or 0.2% of net
consumer and other sales in fiscal year 1998 compared to $.4 million or 2.0% of
net consumer and other sales in fiscal year 1997.
Gross margin related to mold sales was $3.2 million or 7.2% of mold sales in
fiscal year 1998 compared to $1.5 million or 4.7% of mold sales in fiscal year
1997.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for fiscal
1998 were $56.6 million, or 11.7% of net sales, compared to $35.6 million, or
12.1% of net sales, for fiscal year 1997.
INTEREST EXPENSE: Interest expense was $19.8 million during fiscal year 1998,
compared to $11.1 million for fiscal year 1997. The increased interest expense
is the result of a full year's effect of the issuance of $110.0 million Senior
Subordinated Notes in January 1997, and additional indebtedness assumed in
fiscal year 1998 related to acquisitions. The Kenco Acquisition ($27.1 million)
and the Beienheim Acquisition ($9.7 million) were financed with the Company's
existing Senior Revolving Credit Facility. The HPG Acquisition ($69.0) million
was financed with the proceeds of a new $66.0 million Senior Term Credit
Facility and the existing Senior Revolving Credit Facility.
INCOME TAXES: The benefit for income taxes for fiscal year 1998 was $0.5 million
with an effective tax benefit rate of 6.8%, as compared to a provision of $2.1
million with an effective tax rate of 41.7% for fiscal year 1997. The lower
effective benefit rate is the result of certain non-deductible expenses, foreign
tax in excess of foreign tax credits, and establishment of valuation allowances
against deferred tax assets at Como and LDM Technologies GmbH. These are
partially offset by the settlement of a prior year income tax audit.
<PAGE> 14
ACQUISITION OF KENCO: On September 30, 1997 the Company acquired the entire
outstanding voting stock of Kenco Plastics, Inc. of Michigan, Kenco Plastics,
Inc. of Kentucky and the business and net tangible assets of Narens Design and
Engineering, Inc. (collectively referred to herein as "Kenco") for approximately
$27.1 million in cash. The acquisition was financed with additional borrowings
under the Company's Senior Credit Facility. Kenco designs and manufactures a
full range of blow molded plastic parts including HVAC components, air induction
components, functional components and fluid reservoirs at six manufacturing
locations located in Michigan, Kentucky and Tennessee.
ACQUISITION OF BEIENHEIM: On November 25, 1997 the Company acquired
substantially all of the operating assets of Aeroquip-Vickers International
GmbH., including the manufacturing operation located in Beienheim Germany, for
approximately $9.7 million in cash, and the assumption of approximately $2.5
million of liabilities, subject to certain adjustments. The acquisition was made
through the Company's newly formed German subsidiary and was financed with
additional borrowings under the Company's Senior Credit Facility. The Beienheim
facility manufactures various interior trim components, exterior trim components
and under the hood components supplied primarily to European automotive OEMs.
Beienheim's customers include Ford, Opel and Audi.
ACQUISITION OF HURON PLASTICS: On February 6, 1998, the Company acquired the
stock of Huron Plastics Group, Inc. and substantially all of the assets of
Tadim, Inc. (collectively "HPG") for $69.0 million in cash and the assumption of
certain liabilities. The acquisition was financed with proceeds from a new $66
million Senior Term Credit Facility and additional borrowings under the
Company's existing Senior Revolving Credit Facility. HPG designs and
manufactures under the hood and functional injection molded plastic parts at six
manufacturing facilities located in Michigan and Texas.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's principal capital requirements are to fund working capital needs,
to meet required debt obligations, and to fund capital expenditures for facility
maintenance and expansion. The Company believes its future cash flow from
operations, combined with its revolving credit availability will be sufficient
to meet its planned debt service, capital requirements and internal growth
opportunities. Potential growth from acquisitions will be funded from a variety
of sources including cash flow from operations and permitted additional
indebtedness. As of September 26, 1999 the Company had $179.8 million of
long-term debt outstanding and $18.3 million of borrowing availability under its
revolving credit facility.
Cash provided by operating activities in fiscal year 1999 was $26.6 million
compared to $19.5 million of cash provided by operating activities in the same
period in 1998. The increase in cash provided by operating activities was
primarily the result of increased gross margins.
Capital expenditures for fiscal year 1999 were $22.0 million compared to $14.1
million for fiscal year 1998. Fiscal 1999 capital expenditures include several
injection molding machines and secondary equipment, as well as new hardware and
software related to a common mainframe computer system implemented throughout
the entire organization.
The Company believes its capital expenditures (exclusive of any potential
acquisitions) will be approximately $20.0 million in each of the fiscal years
ended September 2000, 2001, and 2002. However, the Company's capital
expenditures may be greater than currently anticipated as the result of new
business opportunities.
The Company's liquidity is affected by both the cyclical nature of its business
and levels of net sales to its major customers. The Company's ability to meet
its working capital and capital expenditure requirements and debt obligations
will depend on its future operating performance, which will be affected by
prevailing economic conditions and financial, business and other factors,
certain of which are beyond its control. However, the Company believes that its
existing borrowing ability and cash flow from operations will be sufficient to
meet its liquidity requirements in the foreseeable future.
<PAGE> 15
ENVIRONMENTAL:
The Company was named as a Defendant in a lawsuit in connection with a failed
landfill in Byesville, Ohio. The lawsuit sought contribution from the Company as
a potentially responsible party for allegedly generating waste that was disposed
of at the landfill. During fiscal year 1999, the Company settled this matter for
a nominal amount. The Company also received a letter from a group of
corporations which have entered into an agreement with the USEPA to prepare a
remedial design for curing a failed landfill site in Circleville, Ohio. The
Company was identified as a potentially responsible party for alleged waste
disposal at the Circleville landfill. The Company believes that, based on the
available information, the ultimate liability with respect to these issues will
not materially exceed the $50,000 it has recorded.
YEAR 2000 COMPLIANCE:
GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND THE NATURE AND EFFECTS OF THE
YEAR 2000 ON INFORMATION TECHNOLOGY (IT) AND NON-IT SYSTEMS
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
The Company determined that it was required to modify or replace significant
portions of its software and certain hardware so that those systems will
properly utilize dates beyond December 31, 1999. The Company believes that
modifications or replacements of existing software and certain hardware have
mitigated, the Year 2000 issue. However other matters related to the Year 2000
Issue could have a material impact on the operations of the Company.
The Company's plan to resolve the Year 2000 Issue involves the following four
phases: assessment, remediation, testing, and implementation. To date, the
Company has fully completed its assessment of all systems that could be
significantly affected by the Year 2000. The completed assessment indicated that
most of the Company's significant information technology systems could be
affected, particularly the general ledger, billing, and inventory systems. That
assessment also indicated that software and hardware (embedded chips) used in
production and manufacturing systems (hereafter also referred to as operating
equipment) were at risk. Affected systems include automated assembly lines and
related robotic technologies used in various aspects of the manufacturing
process. In addition, the Company has gathered information about the Year 2000
compliance status of its significant suppliers and subcontractors and continues
to monitor their compliance.
STATUS OF PROGRESS IN BECOMING YEAR 2000 COMPLIANT, INCLUDING TIMETABLE FOR
COMPLETION OF EACH REMAINING PHASE
For its information technology exposures, the Company has completed all phases
and has fully implemented Year 2000 compliant hardware and software. The Company
has also completed all phases and has upgraded all operating equipment to be
Year 2000 compliant.
NATURE AND LEVEL OF IMPORTANCE OF THIRD PARTIES AND THEIR EXPOSURE TO THE YEAR
2000
The Company's accounts receivable system interfaces directly with significant
customers. The Company has worked with these customers to ensure that the
Company's systems that interface directly with third parties are Year 2000
compliant. We understand that these key customers are in the process of making
their accounts payable systems Year 2000 compliant. Each customer queried
believed that its payable system would be Year 2000 compliant by the end of
1999.
<PAGE> 16
The Company has queried its significant suppliers and subcontractors that do not
share information systems with the Company (external agents). To date, the
Company is not aware of any external agent with a Year 2000 issue that would
materially impact the Company's results of operations, liquidity, or capital
resources. However, the Company has no means of ensuring that external agents
will be Year 2000 ready. The inability of external agents to complete their Year
2000 resolution process in a timely fashion could materially impact the Company.
The effect of non-compliance by external agents is not determinable.
COST
The Company has utilized both internal and external resources to reprogram, or
replace, test, and implement the software and operating equipment for Year 2000
modifications. The total cost of the Year 2000 project approximated $7
million, and was funded through operating cash flows. The total expenditures
were comprised of $4 million of new hardware, software, and operating equipment
which was capitalized and the remaining $3 million relates to repairs and
implementation costs which were expensed as incurred.
RISKS
Management of the Company believes it has an effective program in place to
resolve the Year 2000 Issue in a timely manner. As noted above, the Company has
completed all necessary phases of the Year 2000 program. Disruptions in the
economy generally resulting from Year 2000 issues could also materially
adversely affect the Company. The amount of potential liability and lost revenue
cannot be reasonably estimated at this time.
CONTINGENCY PLAN
The Company has contingency plans for critical applications. These contingency
plans involve, among other actions, manual workarounds, increasing inventories,
and adjusting staffing strategies.
YEAR 2000 DISCLOSURE CHART
<TABLE>
<CAPTION>
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
ASSESSMENT REMEDIATION TESTING IMPLEMENTATION
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
Information Technology 100% complete 100% complete 100% complete 100% complete
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Operating Equipment with 100% complete 100% complete 100% complete 100% complete
Embedded Chips or Software
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Products 100% complete 100% complete 100% complete 100% complete
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Third Party 100% complete 100% complete 100% complete 100% complete
Implement
contingency plans or
other alternatives
as necessary,
December 1999
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
</TABLE>
MARKET RISK
FOREIGN CURRENCY RISK
QUANTITATIVE AND QUALITATIVE ANALYSIS
A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. The Company manufactures its products in
the United States, Canada, and Germany and sells the products in those markets
as well. As a result, the Company's financial results could be significantly
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in the foreign markets in which the Company distributes its
products. The Company's operating results are exposed to changes in exchange
rates between the U.S. dollar and the Canadian dollar, and the U.S. dollar and
the German mark.
In Canada, the Company operates in both the U.S. and the Canadian dollar, and is
funded by a U.S. dollar loan from the parent Company. The functional currency is
the U.S. dollar. The Company is exposed to exchange gains or losses on current
assets and liabilities denominated in the Canadian dollar.
<PAGE> 17
In Germany, the functional currency is the German mark, in which all operating
cash-flows are denominated. The German operation is also funded by a U.S. dollar
loan from the parent Company. The Company is exposed to exchange gains or losses
on current assets and liabilities denominated in the German mark.
As of September 26, 1999, the Company's net assets subject to foreign currency
translation risk is $4,801. The potential loss from a hypothetical 10% adverse
change in quoted foreign currency exchange rates would be approximately $480.
The model assumes a parallel shift in foreign currency exchange rates. Exchange
rates rarely move in the same direction. This assumption may overstate the
impact of changing exchange rates on individual assets and liabilities
denominated in a foreign currency.
INTEREST RATE RISK
QUALITATIVE AND QUANTITATIVE ANALYSIS
The Company's variable interest expense is sensitive to changes in the general
level of U.S. interest rates. Some of the Company's interest expense is fixed
through long-term borrowings to mitigate the impact of such potential exposure.
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter Total FMV
---- ---- ---- ---- ---- ---------- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate (maturity) - - - - - $110,000 $110,000 $103,400
Fixed rate % (average) 10.75% 10.75%
Variable rate (maturity) $44,840 $11,543 $38,129 $ 520 $ 540 $ 7,530 $103,102 $103,102
Variable rate % (future 7.62% 7.62% 7.62% 7.62% 7.62% 7.62% 7.62%
rates)
</TABLE>
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted as a separate section of this
Form 10-K. See Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable
PART III
Item 10. Directors and Executive Officers of the Registrant
The names and ages of all executive officers and directors of the Company
are as follows:
<TABLE>
<CAPTION>
HAS SERVED
IN POSITION
NAME AGE POSITION SINCE
------------------------- --- -------- -----
<S> <C> <C> <C>
Joe Balous............... 74 Chairman of the Board, Secretary and Director 1985
Richard J. Nash.......... 55 Chief Executive Officer and Director 1985
Robert C. Vamos.......... 53 President 1997
Gary E. Borushko......... 54 Chief Financial Officer 1987
Gordon F. Steil.......... 50 Vice President of Engineering 1991
William Kessler.......... 53 Vice President of Development 1993
Vincent P. Buscemi....... 51 Group Vice President - Sales 1991
Michael T. Heneka........ 52 Group Vice President - Sales 1991
</TABLE>
Directors of the Company are elected each year at the Annual Meeting of
Stockholders to serve for the ensuing year or until their successors are elected
and qualified. The officers of the Company are elected each year at the Annual
Meeting of the Board of Directors to serve for the ensuing year or until their
successors are elected and qualified.
Each of the directors of the Company has had the same principal occupation
during the past five years.
<PAGE> 18
All of the executive officers of the Company named above have held various
executive positions with the Company for more than five years except: Mr. Vamos
joined Molmec in 1992 as Vice President of Manufacturing and was named President
of Molmec in 1993. Prior to 1992, he held various manufacturing management
positions with the Budd Company. Upon LDM's acquisition of Molmec in January
1997 he was named Executive Vice President of Manufacturing of the Company and
on September 2, 1997 he was named to his current position. Mr. Kessler joined
the Company in 1993. Prior thereto he was Vice President of Sales at Velcro
Industries for 22 years.
Item 11. Executive Compensation
The following table sets forth the compensation paid to each of the
Company's five highest paid executive officers and significant employees for
fiscal year 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE 1(1)
OTHER ANNUAL ALL OTHER
NAME YEAR SALARY BONUS COMPENSATION COMPENSATION
--------------------------------- ---- --------- ----------- --------------------- -----------------
<S> <C> <C> <C> <C> <C>
Richard J. Nash 1999 $ 850,000 $ 1,000,000 -- $ 5,000(2)
Chief Executive Officer and Director 1998 550,000 1,000,000 -- 3,750(2)
1997 550,000 1,050,000 -- 3,562(2)
Joe Balous 1999 -- -- $1,595,000(3) --
Chairman of the Board and Secretary 1998 -- -- 1,340,000(3) --
1997 -- -- 1,420,000(3) --
--
Gary E. Borushko 1999 263,344 185,000
Chief Financial Officer 1998 230,015 361,700 -- --
1997 202,923 450,000 -- --
Robert C. Vamos 1999 298,077 135,000 5,000(2)
President 1998 289,075 100,000 -- $1,000(2)
1997 185,353 100,000 -- --
Vincent P. Buscemi 1999 190,550 35,640 96,000(4) --
Group Vice President - Sales 1998 190,531 45,000 96,000(4) --
1997 45,000 9,000 376,692(4) --
</TABLE>
(1) This table does not include any value that might be attributable to certain
job related benefits, the amount of which for any executive officer does
not exceed the lesser of $50,000 or 5% of combined salary and bonus for
such executive officer.
(2) Represents contributions to the Company's 401 (k) plan.
(3) Consulting fees paid to a management company owned by Joe Balous.
(4) Represents sales commission paid to a company owned by such individual.
The Company does not pay director fees to its two directors. The Company
does not have a Compensation Committee and Messrs. Nash and Balous
participate in all deliberations concerning executive officer compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management
All of the outstanding capital stock of the Company is owned beneficially
and equally by Messrs. Richard J. Nash and Joe Balous.
Item 13. Certain Relationships and Related Transactions.
The Company and its two stockholders entered into a stock redemption agreement
which provides that upon the death of either stockholder, the Company is
required to purchase, and their respective estates are required to sell, all of
the capital stock of the Company owned by such stockholder, as the case may be,
at a price equal to $50.0 million, which amount would be payable upon receipt of
the proceeds of life insurance policies owned by the Company on each of the
lives of the stockholders. Pursuant to the terms of the stock redemption
agreement, the Company is required to maintain life insurance policies of $50.0
million on the lives of Mr. Nash and Mr. Balous. The annual premiums for such
policies of insurance are approximately $2,200,000.
<PAGE> 19
During 1998, Como transferred equipment with a net book value of
approximately $609,000 to LDM. In exchange for the equipment, LDM relieved Como
of its liability for accrued corporate charges and other accounts payable of
approximately $604,000, which had been included in Como's accrued liabilities in
prior years.
During fiscal year 1999, the Company paid consulting fees of $1,595,000 to a
management company owned by Joe Balous. The nature of the services performed by
Mr. Balous are development of corporate policy and strategic planning,
integration of recent acquisitions, and overseeing facilities construction and
leasehold improvements.
In September 1996, the Company entered into a five-year lease for its Troy
offices with Messrs. Nash and Balous and a relative of one of them. Monthly rent
expense pursuant to this lease was $15,000 per month. In July of 1997 the
Company terminated the lease for the Troy offices and purchased Mr. Nash's
interest in the office for $714,000. In November 1998, Joe Balous acquired LDM's
50% interest in the Troy office for $625,000.
The terms of these leases are not the result of arms-length bargaining;
however, the Company believes that such leases and other transactions described
above are on terms no less favorable to the Company than could be obtained if
such leases, transactions or arrangements were arms-length transactions with
non-affiliated persons.
It is the Company's policy to continue future transactions with its
affiliates as long as the terms of such transactions are fair and reasonable and
no less favorable to the Company than could have been obtained through
arms-length negotiations with an independent third party.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
1. Financial Statements
The following consolidated financial statements of LDM Technologies,
Inc. and subsidiaries filed herewith.
Consolidated Balance Sheets at September 26, 1999 and September 27,
1998.
Consolidated Statements of Income for each of the years in the
three-year period ended September 26, 1999.
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended September 26, 1999.
Notes to Consolidated Financial Statements.
All Schedules have been omitted because they are not applicable or
are not required or the information to be set forth therein is
included in the Consolidated Financial Statements or Notes thereto.
<PAGE> 20
EXHIBITS
The Exhibits marked with one asterisk below were filed as
Exhibits to the Registration Statement of the Company on Form S-4
(No. 333-21819). The Exhibit marked with two asterisks below was
filed as an Exhibit to the Form 8-K of the Company dated
September 30, 1997. The Exhibit marked with three asterisks below
was filed as an Exhibit to the Form 10-K of the Company dated
December 28, 1998. These are incorporated herein by reference,
the Exhibit numbers in brackets being those in such Registration
Statement, Form 10-K or Form 8-K Report.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
3.1 Articles of Incorporation of LDM Technologies, Inc. (the
"Company"), as amended [3.1]*
3.2 By-laws of the Company [3.5]*
4.1 Indenture dated as of January 15, 1997 by and among the
Company, LDM Holdings, LDM Partnership, LDM Canada and IBJ
Schroder Bank & Trust Company, as Trustee [4.1]*
4.2 Form of 10 3/4% Senior Subordinated Note Due 2007, Series B
[4.2]* 4.3 Form of Guarantee [4.3]*
10.1(a) Loan and Security Agreement dated as of January 22, 1997
("Loan Agreement") by and between the Company, as Borrower,
and BankAmerica Business Credit, Inc. ("BankAmerica"), as
Agent for the Lenders [10.2]*
10.1(b) First Amendment to Loan Agreement dated May 1, 1997.
[10.1(b)]***
10.1(c) Amendment No. 2 and Affirmation of Guaranties to Loan
Agreement dated as of July 14, 1997. [10.1(c)]***
10.1(d) Amendment No. 3 and Affirmation of Guaranties to Loan
Agreement dated as of September 30, 1997. [10.1(d)]***
10.1(e) Amendment No. 4 and Affirmation of Guaranties to Loan
Agreement dated as of November 25, 1997. [10.1(e)]***
10.2 Intellectual Property Security Agreement dated as of January
22, 1997 made by the Company in favor of BankAmerica, as Agent
for Lenders [10.4]*
10.3 Stock Purchase Agreement among the Company and the various
stockholders of Kenco Plastics, Inc., a Michigan corporation,
and Kenco Plastics, Inc., a Kentucky corporation, and Narens
Design & Engineering Co., a Michigan corporation, dated
September 30, 1997 [1].**
10.4 Asset Purchase Agreement between LDM Technologies, Inc. (a
Michigan corporation) and DBM Technologies, LLC (a Michigan
limited liability company) dated December 31, 1998.
10.5 Asset Purchase Agreement between GL Industries, Inc. (an
Indiana corporation) and New GLI, Inc. (an Indiana
corporation) dated April 15, 1999.
11 Statement of Ratio of Earnings to Fixed Charges
21 Subsidiaries and Affiliates of the Company
27 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed by
the Registrant for the quarter ended September 29, 1997.
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the twenty-seventh
day of December, 1999.
LDM TECHNOLOGIES, INC.
By: /s/ Richard J. Nash
--------------------------
Richard J. Nash
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Gary E. Borushko
--------------------------
Gary E. Borushko
(Chief Financial Officer)
By: /s/ Brad N. Frederick
--------------------------
Brad N. Frederick
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on December 10, 1997.
Signature Title
- --------- -----
/s/ Joe Balous Director
- -----------------------------
Joe Balous
/s/ Richard J. Nash Director
- -----------------------------
Richard J. Nash
<PAGE> 22
Report of Independent Auditors
Board of Directors of LDM Technologies, Inc.
We have audited the accompanying consolidated balance sheets of LDM
Technologies, Inc. as of September 26, 1999 and September 27, 1998, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended September 26, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of LDM Technologies,
Inc. at September 26, 1999 and September 27, 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended September 26, 1999 in conformity with generally accepted accounting
principles.
Detroit, Michigan ERNST & YOUNG LLP
December 17, 1999
F-1
<PAGE> 23
LDM Technologies, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
SEPTEMBER 26, SEPTEMBER 27, 1998
1999
------------------ -------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 4,317 $ 3,317
Accounts receivable 79,434 81,781
Inventories 20,783 24,069
Mold costs 12,706 22,510
Prepaid expenses 1,960 2,030
Refundable income tax 1,385 1,251
Deferred income taxes 1,947 2,403
----------------- ------------------
Total current assets 122,532 137,361
Net property, plant and equipment 121,116 118,201
Equity investments in affiliates 2,091 1,098
Note receivable from affiliate 895
Goodwill, net of accumulated amortization of
$10,358 in 1999 and $5,620 in 1998 59,688 64,047
Debt issue costs, net of accumulated
amortization of
$2,969 in 1999 and $1,521 in 1998 5,126 6,303
Other 695 641
------------------
=================
Total assets $ 312,143 $ 327,651
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loan $ 33,276 $ 39,139
Accounts payable 55,120 54,451
Accrued liabilities 21,575 22,476
Accrued compensation 7,988 10,097
Advance mold payments from customers 1,036
Income taxes payable 850
Current maturities of long-term debt 11,564 13,631
----------------- ------------------
Total current liabilities 129,523 141,680
Long-term debt due after one year 168,262 171,674
Deferred income taxes 1,438 939
Stockholders' equity:
Common stock ($.10 par value; 100,000 shares
authorized, 600 shares issued and outstanding) - -
Additional paid in capital 94 94
Retained earnings 12,525 13,286
Accumulated other comprehensive income (loss) 301 (22)
----------------- ------------------
Total stockholders' equity 12,920 13,358
================= ==================
Total liabilities and stockholders' equity $ 312,143 $ 327,651
================= ==================
</TABLE>
See accompanying notes.
F-2
<PAGE> 24
LDM Technologies, Inc.
Consolidated Statements of Operations
(in thousands)
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 26, SEPTEMBER 27, SEPTEMBER 28,
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net sales:
Product sales $ 467,912 $ 438,960 $ 261,103
Mold sales 62,586 44,264 31,917
------------ ------------ ------------
530,498 483,224 293,020
Cost of sales:
Product cost of sales 380,856 362,983 210,532
Mold cost of sales 60,658 41,018 30,397
------------ ------------ ------------
441,514 404,001 240,929
------------ ------------ ------------
Gross margin 88,984 79,223 52,091
Selling, general and administrative
expenses 63,401 56,607 35,562
Interest 21,067 19,814 11,076
Equity in losses of affiliates, net 1,480 285 -
Adjustment for impairment of 10,523 -
goodwill
Other, net 992 (122) 445
------------ ------------ ------------
86,940 87,107 47,083
------------ ------------ ------------
Income (loss) before income taxes
and minority interest 2,044 (7,884) 5,008
Provision (credit) for income taxes 2,805 (538) 2,088
------------ ------------ ------------
Income (loss) before minority (761) (7,346) 2,920
interest
Minority interest 279 143
------------ ------------ ------------
Net income (loss) $ (761) $ (7,067) $ 3,063
============ ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 25
LDM Technologies, Inc.
Consolidated Statements of Stockholders' Equity
(in thousands except common shares and common stock)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE
ADDITIONAL INCOME (LOSS)
COMMON COMMON PAID-IN RETAINED - CURRENCY
SHARES STOCK CAPITAL EARNINGS TRANSLATION TOTAL
------ ----- ------- -------- ------------- -----
(IN DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Balance at September 29, 1996 600 $ 60 $ 94 $ 17,290 $ (61) $ 17,323
Net income (comprehensive
income) for 1997 3,063 3,063
--- ------ ----- -------- -------- ----------
Balance at September 28, 1997 600 60 94 20,353 (61) 20,386
Comprehensive Income:
Net loss for 1998 (7,067) (7,067)
Currency translation 39 39
adjustment ----------
Comprehensive loss (7,028)
--- ------ ----- -------- -------- ----------
Balance at September 27, 1998 600 60 94 13,286 (22) 13,358
Comprehensive Income:
Net loss for 1999 (761) (761)
Currency translation 323 323
adjustment -------- ----------
Comprehensive loss (438)
--- ------ ----- -------- -------- ----------
Balance at September 26, 1999 600 $ 60 $ 94 $ 12,525 $ 301 $ 12,920
=== ====== ===== ======== ======== ==========
</TABLE>
F-4
<PAGE> 26
LDM Technologies, Inc.
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------------------
SEPTEMBER 26, SEPTEMBER 27, SEPTEMBER 28,
1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (761) $ (7,067) $ 3,063
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 22,025 19,866 11,955
Adjustment for impairment of long-lived assets 10,523
Equity in losses of affiliates, net 1,480 285 -
(Gain) loss on sale of property and equipment (156) 97 (156)
Deferred income taxes 955 (2,033) (1,127)
Reserve for trade and notes receivable 2,767 - 453
Changes in assets and liabilities, net of the effect
of 1997 and 1998
acquisitions and 1999 divestitures:
Accounts and notes receivable (10,739) (4,960) (5,458)
Inventory and mold costs 8,052 (2,153) (4,954)
Prepaid expenses (508) 979 (1,494)
Other assets - 415
Accounts payable and accrued liabilities 4,494 5,790 7,357
Income taxes payable (998) (1,780) (718)
------------ ------------ ------------
Net cash provided by operating activities 26,611 19,547 9,336
INVESTING ACTIVITIES
Additions to property, plant and equipment (22,003) (14,143) (12,776)
Sale of Kenco business net of $98 equity contribution 6,935
Proceeds from disposal of property and equipment 1,010 814 1,777
Net advances to unconsolidated affiliate (1,465)
Business acquisitions, net of cash acquired (103,484) (60,357)
Other - 174
------------ ------------ ------------
Net cash used for investing activities (15,523) (116,813) (71,182)
FINANCING ACTIVITIES
Payments on notes payable and long-term debt (12,979) (4,809) (22,199)
Proceeds from issuance of long-term debt, (net of debt
issuance costs of $272 in 1999, $1,540 in 1998 and
$6,039 in 1997) 7,228 63,992 103,962
Net (repayments) proceeds from borrowings on line of credit (4,337) 36,767 (17,406)
------------ ------------ ------------
Net cash provided by financing activities (10,088) 95,950 64,357
------------ ------------ ------------
Net increase (decrease) in cash 1,000 (1,316) 2,511
Cash at beginning of year 3,317 4,633 2,122
------------ ------------ ------------
Cash at end of year $ 4,317 $ 3,317 $ 4,633
============ ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE> 27
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of LDM Technologies,
Inc. (the "Company") and its subsidiaries, LDM Holdings Canada, Inc., LDM
Technologies Company ("LDM Canada"), LDM Technologies, GmbH, ("LDM Germany"),
LDM Holdings Mexico, Inc., LDM Technologies, S.de R.L. ("LDM Mexico") and G.L.
Industries of Indiana, Inc. (d/b/a Como Products "Como"). All subsidiaries are
wholly owned with the exception of Como (75% owned in 1997 and 1998, 36.75%
owned effective April 15, 1999), and LDM Mexico (99% owned). As of September 26,
1999, the Company, LDM Mexico, LDM Canada and LDM Germany are the only
subsidiaries which are still consolidated. Como, Sunningdale Plastics Ltd, a
Singapore based injection molder of which the Company owns 30%, and DBM
Technologies, LLC, a minority blowmolding concern formed December 31, 1998, of
which the Company owns 49%, are accounted for under the equity method. All
intercompany accounts and transactions have been eliminated in consolidation.
DESCRIPTION OF BUSINESS
The Company's domestic automotive operations are conducted through divisions
and, in Canada and Germany, through LDM Canada and LDM Germany. Such operations
principally consist of manufacturing of molded and blow-molded plastic interior
and exterior trim, under the hood, and powertrain components for sale
principally to several North American automobile manufacturers and their
suppliers. Como is a manufacturer of molded plastic products for end-use
application primarily in the consumer appliance, office products, and commercial
furniture markets.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
The Company operates with a 52/53 week fiscal year ending on the last Sunday in
September. The fiscal years ended September 26, 1999, September 27, 1998, and
September 28, 1997, all included 52 weeks.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
In January, 1997, LDM Canada was re-financed with inter company loans and
additional equity, which were funded with part of the proceeds of the Senior
Subordinated Notes, and existing loans were repaid. In prior years, the Canadian
dollar was considered to be the functional currency for the Canadian operations.
During the 1997 fiscal year, as a result of the U.S. dollar based re-financing
and the volume of U.S. dollar denominated sales and operating costs, the Company
determined that the functional currency of LDM Canada should be the U.S. dollar.
Accordingly long lived assets and inter company debt has been translated at the
historical rate and exchange differences arising on translation have been
included in 1999, 1998, and 1997 operations.
The functional currency for LDM Germany is the Deutsche Mark. Exchange losses
recognized for LDM germany related to U.S. Dollar denominated intercompany debt
amounted to $1,152 in 1999.
F-6
<PAGE> 28
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following is a roll-forward of the Company's allowance for doubtful
accounts for 1999:
<TABLE>
<S> <C>
Allowance for doubtful accounts at September 27, 1998 $ 772
Provision for bad debts 2,268
Uncollectible accounts written off (42)
------
Allowance for doubtful accounts at September 26, 1999 $2,998
======
</TABLE>
Substantially all of the provision for bad debts was recorded in the fourth
quarter of 1999.
INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out method. Inventories at September 26, 1999 and September 27, 1998
consist of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Raw materials and supplies $ 12,827 $ 14,791
Work-in-process 1,872 2,715
Finished goods 6,084 6,563
----------- -----------
Total $ 20,783 $ 24,069
=========== ===========
</TABLE>
MOLDS
Molds used in Company operations are requisitioned by the Company's customers
and are purchased from mold builders who design and construct the molds under
Company supervision. Upon acceptance of the molds, title is passed to customers
and revenue is recognized.
DEPRECIATION AND AMORTIZATION
Depreciation of property, plant and equipment is determined principally using
the straight-line method based upon the following estimated useful lives:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
LIFE (YEARS)
---------------------------------------------------
<S> <C>
Buildings and improvements 10 - 20
Machinery and equipment 3 - 12
Transportation equipment 3 - 10
Furniture and fixtures 3 - 12
</TABLE>
Leasehold improvements are amortized using the straight-line method over the
useful life of the improvement or the term of the lease, whichever is less.
Goodwill is amortized over its estimated useful economic life of 15 years.
Debt issue costs are amortized over the term of the associated debt.
IMPAIRMENT OF LONG-LIVED ASSETS, INCLUDING GOODWILL
Impairment losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the asset's carrying amount.
Impairment losses are determined based on the estimated shortfall of discounted
cash flows.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance sheet
for cash and cash equivalents approximates its fair value.
F-7
<PAGE> 29
Short and long-term debt: The carrying amounts of the Company's borrowings
under its short-term revolving credit agreements approximate their fair
value. The Company's Senior Subordinated Notes carry fixed interest rates.
Smith Barney currently makes a market for the Notes. As of September 26,
1999, the average of the bid and asking price was 94.0 giving a fair market
value of $6.6 million below stated value ($110 million). The remainder of
the Company's long-term debt carries variable interest rates and,
accordingly, the carrying amount approximates fair value.
IMPACT OF ACCOUNTING STANDARDS TO BE ADOPTED SUBSEQUENT TO THE FISCAL YEAR
ENDING IN SEPTEMBER, 1999
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is required to be adopted in fiscal
years beginning after June 15, 2000, with earlier adoption encouraged. At this
time the Company has not adopted Statement 133 but has not entered into any
derivative or hedging activity and accordingly does not anticipate the
provisions of Statement 133 will affect future results of operations or
financial position.
PRODUCT SALES
Revenue is recognized on product sales when the goods are shipped.
2. ACQUISITIONS, JOINT VENTURE AND DIVESTITURE
On November 4, 1996, the Company signed a definitive agreement to acquire the
business and certain net assets of Molmec, Inc. for $55.9 million in cash. The
acquisition was consummated on January 17, 1997. The fair value of the net
tangible assets acquired was $19.1 million.
On May 1, 1997, the Company acquired the business and certain net assets
comprising the 'Kendallville' plant of Aeroquip Corporation for a purchase price
of $7.2 million in cash. The fair value of the net tangible assets acquired
was $5.5 million.
On September 30, 1997, the Company purchased the entire voting stock of Kenco
Plastics, Inc. (a Michigan Corporation) and Kenco Plastics, Inc. (a Kentucky
corporation) and the business and net tangible assets of Narens Design &
Engineering Company (collectively known as "Kenco Plastics") for a consideration
of $27.1 million in cash. The fair value of the net tangible assets acquired
amounted to $17.7 million.
On November 25, 1997, the Company acquired the business and certain net assets
of Aeroquip-Vickers International GmbH, through a newly created entity, LDM
Technologies, GmbH, for consideration of $9.7 million in cash and the assumption
of certain liabilities. The fair value of the net tangible assets acquired
amounted to $9.7 million. The new entity is referred to herein as LDM Germany.
On February 6, 1998, the Company acquired the stock of Huron Plastics Group,
Inc. and substantially all of the assets of Tadim, Inc. (collectively known as
"HPG") for $69.0 million in cash and the assumption of certain liabilities. The
fair value of the net tangible assets acquired was $37.7 million.
A summary of the allocation of purchase price of each of the acquisitions during
the year ended September 27, 1998 is given below:
<TABLE>
<CAPTION>
KENCO LDM
PLASTICS GERMANY HPG
-------- ------- ---
<S> <C> <C> <C>
Current assets $ 12,576 $ 6,143 $ 30,047
Net property, plant and equipment 11,638 6,132 21,703
Other assets 1,354
Other liabilities (6,510) (2,540) (15,356)
-------- -------- ---------
Net tangible assets 17,704 9,735 37,748
Goodwill 9,438 - 31,227
-------- -------- ---------
Cost $ 27,142 $ 9,735 $ 68,975
======== ======== =========
</TABLE>
F-8
<PAGE> 30
All of the above acquisitions have been accounted for using the purchase method.
Accordingly, the assets acquired and the liabilities assumed have been recorded
at fair values and the excess of the purchase price over the net tangible assets
acquired recorded as goodwill to be amortized over 15 years. The results of
operations of the above acquisitions have been included in the consolidated
financial statements from the date of acquisition.
Effective as of December 31, 1998, the Company entered into a joint venture (DBM
joint venture) that is 49% owned by the Company, and 51% owned by an independent
third party. The Company sold the Kenco business and most of its net current
assets to the joint venture at an amount equal to the net book value of the net
current assets. The sales price of the net current assets approximated $8.8
million.
The Company leased all machinery and equipment of the Kenco business to the
joint venture, and is subleasing to the joint venture all real properties in the
Kenco operations.
Under the terms of the agreement, the Company provided a subordinated $1.8
million loan to the joint venture and guaranteed $1.0 million of the joint
venture line of credit borrowings. As a result of those terms, and the
relatively small amount of equity contributed to the joint venture by the
independent third party, the Company retained substantially all of the risks of
ownership. The investment is treated as an equity investment for accounting
purposes, but the Company has recorded 100% of the joint venture losses as
equity losses.
On December 8, 1999, the Company sold all of the machinery and equipment of the
Kenco business to the joint venture for $10.3 million, the approximate net book
value of the machinery and equipment. Proceeds from the sale were comprised of
$8.3 million in cash and an additional $2.0 million subordinated note payable to
the Company from the joint venture.
As part of the transaction, the joint venture refinanced its line of credit
which released the Company from the $1 million guarantee discussed above.
The joint venture's new senior lender required the Company to subordinate all
amounts due from the joint venture at the time of refinancing. As a result, the
previous subordinated note payable to the Company was canceled and replaced with
a new subordinated note payable approximating $5.6 million. This amount is
comprised of the $2.0 million related to the machinery and equipment purchase,
$1.9 million related to the original subordinated note payable plus accrued
interest, and $1.7 million related to unpaid machinery and equipment rentals and
miscellaneous other unpaid trade amounts. The new subordinated note payable
bears interest at 9.5% and is payable in equal quarterly installments beginning
June 1, 2000 and shall be fully paid on or before December 8, 2004.
On April 15, 1999, all of the assets and liabilities of GL Industries of
Indiana, Inc. (d/b/a Como Products), a 75% owned subsidiary of the Company, were
sold to New GLI, Inc. an Indiana corporation, which is now doing business as
"Como Products." A new independent partner joined the new business (New GLI) and
purchased all but 36.75% of the Company's stake in New GLI for a minimal amount.
Under terms of the purchase agreement, the Company accepted a subordinated note
from New GLI for approximately $0.5 million, which represents previous loans,
accrued interest and working capital advances from the Company to Como. The note
has been fully reserved on the Company's books.
The Company's ownership percentage in New GLI has become less than 50%. As a
result, New GLI's results are reported as equity earnings. Como's net sales and
net loss for the year ended September 27, 1998 were $18.1 million and $1.5
million, respectively. Como's net sales and net income for the six month period
ended March 28, 1999 were $8.6 million and $0.1 million, respectively. The
Company wrote its equity investment down to zero during fiscal year 1998, due to
Como's operating losses and capital deficiency.
As part of this transaction, the Company was released from a $1.0 million
guarantee on Como's line of credit borrowings.
F-9
<PAGE> 31
3. SEGMENT AND GEOGRAPHICAL DATA
The Company currently operates in two industries; automotive components and
consumer products. The Company's automotive components operations include the
design and manufacture of plastic injection molded and blow molded products for
certain original equipment manufacturers of cars, minivans and sport utility
vehicles. The Company's automotive products include exterior and interior trim,
under the hood components, and powertrain components. The Company has one
consumer products plant which manufactures plastic molded products for the
consumer appliance, office products and commercial furniture markets. The
Company sold all but 36.75% of its stake in its consumer products plant
effective April 15, 1999. The Company also contributed substantially all of the
business and net current assets of its blow molded operations to a joint
venture, which is still 49% owned by the Company, effective December 31, 1998.
For the purpose of FAS 131, "Disclosures about Segments of an Enterprise and
Related Information," the Company is presented as one segment, being automotive
plastics components. The consumer products operations are considered
insignificant with sales of $20,201, and $19,207 and losses of $(1,484) and
$(723) during the years ended 1998 and 1997, respectively.
The following provides a summary of selected financial information by geographic
area:
<TABLE>
<CAPTION>
SEPTEMBER 26, 1999
---------------------------------------------
Revenues (a) Long-Lived Net Income
Assets (loss)
---------------------------------------------
<S> <C> <C> <C>
United States $ 432,857 $ 102,017 $ 3,489
LDM Canada 64,090 14,650 1,166
LDM Germany 33,551 4,449 (5,416)
---------------------------------------------
Consolidated total $ 530,498 $ 121,116 $ (761)
=============================================
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 27, 1998
---------------------------------------------
Revenues (a) Long-Lived Net Income
Assets (loss)
---------------------------------------------
<S> <C> <C> <C>
United States $ 394,882 $ 98,045 $ (7,638)
LDM Canada 65,399 14,498 3,293
LDM Germany 22,943 5,658 (2,722)
---------------------------------------------
Consolidated total $ 483,224 $ 118,201 $ (7,067)
=============================================
</TABLE>
F-10
<PAGE> 32
<TABLE>
<CAPTION>
SEPTEMBER 28, 1997
---------------------------------------------
Revenues(a) Long-Lived Net Income
Assets
---------------------------------------------
<S> <C> <C> <C>
United States $ 247,558 $ 66,020 $ 2,255
LDM Canada 45,462 16,239 808
LDM Germany - - -
---------------------------------------------
Consolidated total $ 293,020 $ 82,259 $ 3,063
=============================================
</TABLE>
(a) Revenues are attributed to countries based on point of manufacturing.
During the years ended September 1999, 1998,and 1997, approximately 98%, 98%,
and 93% of consolidated sales were to customers in the automotive industry.
Following is a summary of customers that accounted for more than 10% of
consolidated net product sales as of each fiscal year end:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------------------
<S> <C> <C> <C>
Ford Motor Company $ 161,429 $ 169,293 $ 114,446
General Motors Corporation 133,987 151,880 88,818
Volkswagen A.G 883 15,822 15,856
</TABLE>
4. IMPAIRMENT OF LONG-LIVED ASSETS
Since its' acquisition on September 30, 1997, the Kenco business has performed
significantly below original expectations, causing management to undertake a
strategic review of the future viability of the business.
During the fourth quarter of 1998, the Company established a formal business
plan to enter into a joint venture.
See discussion in Footnote 2 regarding consummation of the joint venture on
December 31,1998.
See also discussion in Footnote 2, regarding the Company's sale of the property,
plant and equipment to the joint venture, and the Company release of the
$1,000,000 guarantee on the joint venture's line of credit.
The Company evaluated the on-going value of the long-lived assets (goodwill and
tangible fixed assets) associated with the Kenco business, as they were
held-for-use by LDM. Based upon this evaluation, the Company determined that
assets with carrying amounts of $19,528 were impaired and wrote them down by
$10,523 to their fair value. Fair value was based on projected future cash flows
to be generated by the Kenco business, under its new ownership, discounted at a
market rate of interest. In determining future cash flows the Company developed
its best estimate of operating cash flows over the life of the goodwill and
tangible fixed assets, which was fifteen years.
F-11
<PAGE> 33
5. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
INTEREST PAID, INCOME TAXES PAID AND INTEREST CAPITALIZED
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Interest paid $ 20,744 $ 17,643 $ 7,919
Income taxes paid $ 2,945 $ 2,176 $ 3,996
Interest capitalized $ 706 $ 185 $ 312
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
At September 26, 1999 and September 27, 1998, property, plant and equipment
consists of the following:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Land, buildings and improvements $ 43,252 $ 43,827
Machinery and equipment 118,964 116,047
Transportation equipment 2,366 2,490
Furniture and fixtures 7,186 7,390
Construction in process 3,774 7,290
------------ ----------
Total, at cost 175,542 177,044
Less accumulated depreciation (63,318) (58,843)
------------ ----------
Net property, plant, and equipment
used in operations 112,224 118,201
Net property, plant, and equipment
leased to DBM Technologies 8,892
------------ -----------
Net property, plant and equipment $ 121,116 $ 118,201
============= ===========
</TABLE>
F-12
<PAGE> 34
7. LINES OF CREDIT AND REVOLVING DEBT
On January 22, 1997, the Company entered into a five-year Senior Credit
Facility. At September 26, 1999, the Senior Credit Facility is secured by
substantially all of the assets of the Company and its guarantors (LDM Holdings,
L.L.C., LDM Canada Limited Partnership and LDM Technologies Company). The Senior
Credit Facility provides for advances up to (i) 85% of eligible accounts
receivable, and (ii) the lesser of $12,000 or 60% of eligible inventory, up to a
maximum availability of $63,000. The Senior Credit Facility provides for the
issuance of commercial and stand-by letters of credit up to a portion of the
$63,000 Senior Credit Facility. The Senior Credit Facility bears interest at
rates based upon a prime or LIBOR rate, in each case plus an applicable basis
point spread; and provides that the Company will pay an issuance fee with
respect to letters of credit based on a percentage of the full amount of such
letters of credit, and an unused line fee equal to a percentage of the unused
portion of the Senior Credit Facility. The Senior Credit Facility contains
customary covenants, including financial covenants relating to, among other
things, fixed charge coverage ratios, capital expenditure limitations and
profitability.
The Company had borrowings outstanding under the Senior Credit Facility at
September 26, 1999 and September 27, 1998 of $33,276 and $36,699, respectively.
Borrowings available under the Senior Credit Facility were $18,300 and $19,000
at September 26, 1999 and September 27, 1998, respectively.
Summary of lines of credit and revolving debt outstanding:
<TABLE>
<CAPTION>
SEPTEMBER 26, SEPTEMBER 27,
1999 1998
<S> <C> <C>
Borrowings under lines of credit:
LDM Technologies Inc. $ 33,276 $ 36,699
Como - 2,440
-------------- -------------
$ 33,276 $ 39,139
============== =============
</TABLE>
The weighted average interest rate on all short-term borrowings as of September
26, 1999 and September 27, 1998 was 8.13% and 8.77%, respectively.
8. LONG-TERM DEBT
On January 22, 1997, the Company issued, in a private placement, 10 3/4% Senior
Subordinated Notes due 2007, Series A, with an aggregate principal amount of
$110,000. The net proceeds of the Offering, which amounted to $104,000 were used
to repay debt in default amounting to $27,300, to repay a $2,700 note payable to
a former shareholder, to fund the $55,900 acquisition of Molmec, to re-finance
LDM Canada and for general corporate purposes.
The Indenture under which the Notes were issued contains certain covenants,
including limitations on the following matters: (i) the incurrence of additional
indebtedness, (ii) the issuance of preferred stock by subsidiaries, (iii) the
creation of liens, (iv) restricted payments, (v) the sales of assets and
subsidiary stock, (vi) mergers and consolidations, (vii) payment restrictions
affecting subsidiaries and (viii) transactions with affiliates.
Interest on the Notes is payable semi-annually at 10 3/4%. The Notes are subject
to redemption on or after January 15, 2002, at the option of the Company, in
whole or in part, at redemption prices ranging from 105.375% to 100% of the
principal amount. Up to 25% of the Notes may be redeemed on or before January
15, 2000, at 110.75% of the principal amount in the event of a Public Equity
Offering. At September 26, 1999, the Notes are guaranteed by certain
subsidiaries of the Company namely LDM Holdings, L.L.C., LDM Canada Limited
Partnership and LDM Canada but not by Como, LDM Mexico, or LDM Germany.
Supplemental financial information for the guarantor and non-guarantor
subsidiaries is disclosed in Note 14.
The notes are subordinate in right of payment to all existing and future Senior
Debt.
The Company has a letter of credit that secures its $8,800 Multi-Option
Adjustable Rate Notes and on acquisition of Molmec assumed Molmec's Variable
Rate Demand Limited Obligation Revenue Bonds with an aggregate principal amount
of $4,400.
F-13
<PAGE> 35
On February 6, 1998, the Company entered into an additional term and capital
expenditure line of credit. The term line of credit is not to exceed the lesser
of (i) $66,000 or (ii) the sum of (A) one hundred percent (100%) of the
appraised orderly liquidation value of Equipment of the Company's operations in
the United States and Canada; plus (B) eighty percent (80%) of the fair market
value of all owned Real Estate of the Company's operations in the United States
and Canada. The capital expenditure line of credit is not to exceed the lesser
of (i) $10,000 or (ii) eighty percent (80%) of actual invoiced cost of the
equipment. These obligations, totaling a maximum availability of $76,000 at
September 26, 1999, are subject to interest at a Base or LIBOR Rate plus a
variable margin as set forth in the loan agreement. These loans are also subject
to interest for any unused line of credit equal to .375% per annum on the
average daily unused facility for the immediate preceding month. The loans are
repayable in monthly installments of $887 in addition to an annual payment due
the first day of the fourth month after the end of each fiscal year of 50% of
any excess cash flow (as defined in the loan agreement) for such fiscal year.
The lines of credit contain customary covenants, including financial covenants
relating to, among other things, fixed charge coverage ratios, capital
expenditure limitations and profitability. The Company may terminate these
obligations upon written notice and full payment of principal and accrued
interest.
The Company had borrowings outstanding under the term and capital expenditure
line of credit at September 26, 1999 of $58,464. Borrowings available under the
term and capital expenditure line of credit were $1,500 and $9,000 at September
26, 1999, and September 27, 1998, respectively.
Long-term debt at September 26, 1999 and September 27, 1998 consists of the
following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Senior Subordinated Notes due 2007. $ 110,000 $ 110,000
Term and capital expenditure line of credit,
principal payable in monthly installments of
$786, at Base or LIBOR plus margin
(7.82% at September 26, 1999). Balance 58,464 63,048
repayable February 2002.
Multi-Option Adjustable Rate Notes, principal
payable in various annual installments ranging
from $240 to $780 through April 1, 2015, plus
interest payable monthly at the higher of the
30 day commercial paper rate or 90 day
commercial paper rate (5.72% at September 26,
1999). Borrowings are collateralized by the
corporate headquarters facility which has a
carrying value of approximately $16,085 at
September 26, 1999 8,080 8,340
Variable Rate Demand Limited Obligation
Revenue Bonds, principal payable in various
annual installments through December 1, 2009,
ranging from $630 to $160, plus
variable interest (subject to a maximum of
12%), payable semi-annually (4.0% at
September 26, 1999), collateralized by a letter
of credit. 3,235 3,825
Other 47 92
------------ -------------
Total $ 179,826 $ 185,305
Current maturities of long-term debt (11,564) (13,631)
------------ -------------
Long-term debt due after one year $ 168,262 $ 171,674
============ =============
</TABLE>
LDM Technologies, Inc. has the option to convert the interest rate on the
Multi-Option Adjustable Rate Notes to the Six Month, One Year, Three Year, Five
Year, Seven Year, or the Fixed Interest Rates Modes.
F-14
<PAGE> 36
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
<S> <C>
2000 $ 11,564
2001 11,543
2002 38,129
2003 520
2004 540
Thereafter 117,530
-------------
Total $ 179,826
=============
</TABLE>
9. RELATED PARTY TRANSACTIONS
Como leases its general office and plant facilities, in addition to certain
computer and manufacturing equipment, from corporations whose directors and
stockholders include Como's minority stockholder. Lease rental payments made to
these corporations for 1998 and 1997 were $467 and $502, respectively. Como also
pays management fees to its minority stockholder based on a percentage of sales.
Selling, general and administrative expenses include $63 in 1997 for management
fees to the minority stockholder. The minority shareholder did not charge Como a
management fee during fiscal year 1998.
During 1998, Como transferred equipment with a net book value of approximately
$609 to LDM. In exchange for the equipment, LDM relieved Como of its liability
for accrued corporate charges and other accounts payable of approximately $604,
which had been included in accrued liabilities as of September 28, 1997.
Through July 15, 1997, the Company leased certain corporate administrative
facilities from its shareholders. Lease rental payments were $110 for the year
ended September 28, 1997. The Company also paid the repairs and maintenance,
insurance and property taxes on these facilities. During July, 1997, the Company
purchased a 50% interest in the administrative facilities it previously leased
from its shareholders. The purchase price totaled $714. In November 1998, the
Company sold its interest in this property to one of its shareholders at book
value.
10. INCOME TAXES
The Company's provision (credit) for income taxes for continuing operations for
the years ended September 26, 1999, September 27, 1998, and September 28, 1997
is comprised of the following:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------
<S> <C> <C> <C>
Domestic:
Federal:
Current $ 1,594 $ 121 $ 2,789
Deferred 325 (2,692) (262)
----------- ----------- -----------
1,919 (2,571) 2,527
State and local:
Current 213 (253) 405
Deferred 100 (29)
----------- ----------- -----------
313 (253) 376
Foreign:
Current 43 850 20
Deferred 530 1,436 (835)
----------- ----------- -----------
573 2,286 (815)
----------- ----------- -----------
Total income tax provision (credit) $ 2,805 $ (538) $ 2,088
=========== =========== ===========
</TABLE>
F-15
<PAGE> 37
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and tax basis of the Company's assets and liabilities.
At September 26, 1999 and September 27, 1998 deferred tax assets and liabilities
are comprised of the following:
<TABLE>
<CAPTION>
1999 1998
------------------------
<S> <C> <C>
Deferred tax assets:
Goodwill $ 3,228 $ 3,904
Inventory 1,687 834
Accounts receivable 1,198 391
Employee benefits 1,158 930
Net operating loss carryovers 723 1,523
Investment in affiliates 238
Capital loss carryovers 198 194
Other accrued liabilities 88 820
---------- ---------
Total deferred tax assets 8,518 8,596
Less valuation allowances for loss carryovers (407) (686)
---------- ---------
Total net deferred tax asset 8,111 7,910
Deferred tax liabilities:
Property, plant and equipment 7,190 6,446
Other accrued liabilities 412
---------- ---------
Total deferred tax liability 7,602 6,446
---------- ---------
Net deferred tax asset (liability) $ 509 $ 1,464
========== =========
</TABLE>
A reconciliation of the Company's income tax expense at the federal statutory
tax rate to the actual income tax expense follows:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------
SEPTEMBER 26, SEPTEMBER 27, SEPTEMBER 28,
1999 1998 1997
---------------- ---------------- -----------------
<S> <C> <C> <C>
Tax at federal statutory rate of $ 695 $ $ 1,703
34% (2,681)
State and local taxes, net of
federal tax effect 207 (299) 248
Settlement of prior years' income
tax liabilities (1,056)
Nondeductible expenses 1,242 838 742
Reversal of valuation allowance
for Canadian loss carryovers (728)
Foreign tax in excess of
foreign tax credits 821 1,781
Deferred tax valuation allowance 71 685
Other, net (231) 343 123
---------- ---------- ----------
Provision for income taxes $ 2,805 $ (538) $ 2,088
========== ========== ==========
</TABLE>
For Canadian income tax purposes, approximately $2,010 of net operating losses
are available at September 26, 1999 for carryover against taxable income in
future years. These carryovers expire $690 in 2003 and $1,320 in 2004. The net
operating loss carry forwards include timing differences, principally tax
depreciation in excess of financial statement depreciation, of approximately
$4,809, for which a $1,731 deferred tax liability has been recorded.
11. RETIREMENT AND PROFIT SHARING PLANS
The Company provides defined contribution retirement plans to substantially all
employees of LDM Technologies, Inc. During 1998, the Company obtained two
additional defined contribution plans through the acquisitions disclosed in Note
2. In July 1998, two of the defined contribution plans were merged into one
plan. Contributions by the Company, which are different for each individual
plan, are based on matching 50% of employees contributions, up to a maximum
range of 3-4 % of earnings or five hundred to one thousand dollars. Costs under
the plans amounted to $912, $378, and $296 in 1999, 1998 and 1997, respectively.
F-16
<PAGE> 38
12. COMMITMENTS AND CONTINGENCIES
LEASES AND PURCHASE COMMITMENTS
The Company leases certain of its facilities, furniture and fixtures, and
equipment. Rental expense, including short-term cancelable leases, approximated
$8,310, $6,367 and $2,227 for the years ended September 26, 1999, September 27,
1998 and September 28, 1997, respectively. Future commitments under
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
--------------
<S> <C>
2000 $ 5,105
2001 3,375
2002 2,345
2003 1,837
2004 1,149
Thereafter 823
-------
Total $14,634
=======
</TABLE>
STOCK REDEMPTION AGREEMENT
The Company and its two shareholders are party to a binding stock redemption
agreement providing the following:
Upon the death of either shareholder, the Company is required to purchase and
the shareholder's estate is required to sell all of the shareholder's stock at a
price equal to $50,000. This amount is payable upon receipt of the proceeds of
the life insurance policies owned by the Company on the shareholder's life. Any
shortfall between the insurance proceeds and the amount payable to the
shareholder's estate will require funding by the Company, subject to
restrictions in the Company's loan agreements.
The Company is required to purchase and maintain life insurance policies of
$50,000 on the lives of each of the shareholders for as long as the Stock
Redemption Agreement is in effect. The aggregate premium for these policies
presently approximates $2.2 million per year. Further, the Company is prohibited
from assigning, pledging or borrowing against these life insurance policies
without the consent of the insured shareholder.
The Agreement may be terminated by mutual agreement of all parties or by any
shareholder with respect to that shareholder's stock only.
CONTINGENCIES
Environmental Matters
The Company previously received letters from a corporation and a group of
corporations, which have entered into agreements with the United States
Environmental Protection Agency ("USEPA") to prepare remedial designs for curing
two separate failed landfill sites. In each letter, the Company was identified
as a potentially responsible party for its alleged waste disposal at such
landfills. In the first case, a lawsuit was brought against the Company for
which the USEPA subsequently agreed to provide contribution protection in
exchange for payment of a nominal fee. In the second case, the Company has no
reason to believe that any liability associated with the particular landfill
will materially exceed the recorded liability of $50; however the ultimate
outcome of such matters cannot be predicted with certainty.
F-17
<PAGE> 39
LITIGATION
The Company accrues contingent liabilities when it is probable that future costs
will be incurred and such costs can be reasonably estimated. Such accruals are
based on developments to date, the Company's estimates of the outcomes of these
matters and its experience in contesting, litigating and settling other matters.
As the scope of the liabilities becomes better defined, there will be changes in
the estimates of future costs; however the Company does not believe any such
changes will have a material effect on the Company's future results of
operations and financial condition or liquidity.
13. UNCONSOLIDATED SUBSIDIARIES
The Company has a less than fifty percent equity interest in two subsidiaries,
DBM Technologies LLC, of which the Company owns 49%, and Sunningdale Plastic
Industries Pte. Ltd., of which the Company owns 30%. These investments are
accounted for under the equity method. Equity earnings are reported as equity
losses of affiliates, net on the income statement, and as equity investments
in affiliates on the balance sheet. Summarized financial information for these
unconsolidated subsidiaries is presented below.
<TABLE>
<CAPTION>
Sunningdale Plastic
Industries Pte. Ltd. DBM Technologies, LLC
----------------------------------------------
<S> <C> <C>
Current assets $ 14,940 $ 13,649
Noncurrent assets 11,610 403
Current liabilities 16,630 14,508
Noncurrent liabilities 2,502 $ 1,757
Minority interest $ 343
Net sales $ 27,002 $ 41,669
Operating profit (loss) 5,135 (1,961)
Net income (loss) $ 3,308 $ (2,413)
</TABLE>
14. SUPPLEMENTAL GUARANTOR INFORMATION
The $110 million 10 3/4% Senior Subordinated Notes due 2007, the Senior Credit
Facility, the standby letters of credit with respect to the $8.8 million
Multi-Option Adjustable Rate Notes, the $4.4 million Variable Rate Demand
Limited Obligation Revenue Bonds and the Senior Term and Capital Expenditures
Line of Credit are obligations of LDM Technologies, Inc. The obligations are
guaranteed fully, unconditionally and jointly and severally by LDM Canada and
certain holding companies as described above. The non-guarantor subsidiaries are
Como and LDM Germany. Upon the divestiture of Como as discussed in Note 2,
effective April 15,1999, the only non-guarantor subsidiary remaining in the
consolidated financial statements is LDM Germany.
Supplemental consolidating financial information of LDM Technologies, Inc., LDM
Canada (including the related holding company guarantors) and combined Como and
LDM Germany (the "non-guarantor subsidiaries") is presented below. Investments
in subsidiaries are presented on the equity method of accounting. Separate
financial statements of the guarantors are not provided because management has
concluded that the summarized financial information below provides sufficient
information to allow investors to separately determine the nature of the assets
held by and the operations of LDM Technologies, Inc., and the guarantor and
non-guarantor subsidiaries.
F-18
<PAGE> 40
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING BALANCE SHEET AT SEPTEMBER 26, 1999
<TABLE>
<CAPTION>
LDM Non-Guarantor Consolidating
Technologies, LDM Canada Subsidiaries Entries Consolidated
Inc.
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 2,184 $ - $ 2,133 $ $ 4,317
Accounts receivable 60,613 13,748 5,073 79,434
Inventories 15,769 2,873 2,141 20,783
Mold costs 10,193 2,379 134 12,706
Prepaid expenses 1,817 143 1,960
Refundable income taxes 1,312 73 1,385
Deferred income taxes 1,947 1,947
--------------- -------------- --------------- --------------- -----------
Total current assets 93,835 19,216 9,481 122,532
Net property, plant and equipment, at 102,017 14,650 4,449 121,116
cost
Investment in subsidiaries and affiliates 10,269 (8,178) 2,091
Note receivable affiliates 17,175 (16,280) 895
Goodwill 59,688 59,688
Debt issue costs 5,126 5,126
Other 695 695
--------------- -------------- --------------- --------------- -----------
$ 288,805 $ 33,866 $ 13,930 $ (24,458) $ 312,143
=============== ============== =============== =============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loan $ 33,276 $ 33,276
Accounts payable 39,231 $ 11,300 $ 4,635 $ (46) 55,120
Accrued liabilities 17,603 2,420 1,552 21,575
Accrued compensation 5,988 282 1,718 7,988
Current maturities of long-term debt 11,564 11,564
--------------- -------------- --------------- --------------- -----------
Total current liabilities 107,662 14,002 7,905 (46) 129,523
Long-term debt due after one year 168,262 10,532 10,897 (21,429) 168,262
Deferred income taxes 284 1,154 1,438
Stockholders' equity:
Common stock 5,850 2,943 (8,793)
Additional paid-in capital 94 94
Retained earnings 12,525 2,328 (8,138) 5,810 12,525
Accumulated other comprehensive income
(loss) (22) 323 301
--------------- -------------- --------------- --------------- -----------
Total stockholders' equity 12,597 8,178 (4,872) (2,983) 12,920
--------------- -------------- --------------- --------------- -----------
Total liabilities and stockholders'
equity $ 288,805 $ 33,866 $ 13,930 $ (24,458) $ 312,143
=============== ============== =============== =============== ===========
</TABLE>
F-19
<PAGE> 41
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING BALANCE SHEET AT SEPTEMBER 27, 1998
<TABLE>
<CAPTION>
UNCONSOLIDATED
---------------------------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 673 $ 1,317 $ 1,327 $ 3,317
Accounts receivable 63,856 10,849 7,076 81,781
Note receivable affiliates 21,487 - - $ (21,487) -
Inventories 18,964 1,567 3,538 24,069
Mold costs 17,967 - 4,543 22,510
Prepaid expenses 1,785 136 109 2,030
Refundable income taxes 1,204 - 47 1,251
Deferred income taxes 2,403 - - 2,403
------------ ------------ ------------ ------------ ------------
Total current assets 128,339 13,869 16,640 (21,487) 137,361
Net property, plant and equipment, at
cost 96,662 14,498 7,041 118,201
Investment in subsidiaries and affiliates 8,334 - - (7,236) 1,098
Goodwill 64,047 - - - 64,047
Debt issue costs 6,303 - - 6,303
Other 632 - 9 641
------------ ------------ ------------ ------------ ------------
$ 304,317 $ 28,367 $ 23,690 $ (28,723) $ 327,651
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loan $ 36,699 - $ 2,440 $ 39,139
Accounts payable 39,923 $ 7,737 7,032 $ (329) 54,363
Demand note payable to shareholders - - 88 88
Accrued liabilities 20,392 745 1,339 22,476
Accrued compensation 7,629 247 2,221 10,097
Advance mold payments - 443 593 1,036
Income taxes payable - 850 850
Note payable to affiliates - - -
Current maturities of long-term debt 13,631 - 13,631
------------ ------------ ------------ ------------ ------------
Total current liabilities 118,274 10,022 13,713 (329) 141,680
Long-term debt due after one year 171,674 10,709 10,449 (21,158) 171,674
Deferred income taxes 285 624 30 939
Stockholders' equity:
Common stock - 5,850 2,945 (8,795) -
Additional paid-in capital 94 - 126 (126) 94
Retained earnings 14,012 1,162 (3,575) 1,687 13,286
Currency translation adjustments (22) - 2 (2) (22)
------------ ------------ ------------ ------------ ------------
Total stockholders' equity 14,084 7,012 (502) (7,236) 13,358
------------ ------------ ------------ ------------ ------------
Total liabilities and stockholders' equity $ 304,317 $ 28,367 $ 23,690 $ (28,723) $ 327,651
============ ============ ============ ============ ============
</TABLE>
F-20
<PAGE> 42
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 26, 1999
<TABLE>
<CAPTION>
UNCONSOLIDATED
-----------------------------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
------------------ ---------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Net sales:
Product sales $ 367,301 $ 59,677 40,934 $ $ 467,912
Mold sales 56,842 4,413 1,331 62,586
-------------- --------- ------------ ------------- ---------------
424,143 64,090 42,265 530,498
Cost of sales:
Product cost of sales 281,868 55,745 43,243 380,856
Mold cost of sales 55,461 4,331 866 60,658
-------------- --------- ------------ ------------- ---------------
337,329 60,076 44,109 441,514
-------------- --------- ------------ ------------- ---------------
Gross margin 86,814 4,014 (1,844) 88,984
Selling, general and
administrative expenses 60,862 1,042 1,497 63,401
Interest 20,952 1,225 853 (1,963) 21,067
Equity in losses of 4,946 (3,466) 1,480
Subsidiaries and affiliates, net
Other, net (1,379) 8 400 1,963 992
-------------- --------- ------------ ------------- ---------------
85,381 2,275 2,750 (3,466) 86,940
-------------- --------- ------------ ------------- ---------------
Income (loss)
before income taxes 1,433 1,739 (4,594) 3,466 2,044
Provision (credit) for
income taxes 2,194 573 38 2,805
-------------- --------- ------------ ------------- ---------------
Net income (loss) $ (761) $ 1,166 $ (4,632) $ 3,466 $ (761)
============== ========= ============ ============= ===============
</TABLE>
F-21
<PAGE> 43
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 27, 1998
<TABLE>
<CAPTION>
UNCONSOLIDATED
-------------------------------------------------------
LDM TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales:
Product sales $ 349,218 $ 51,228 $ 38,641 $ (127) $ 438,960
Mold sales 25,589 14,172 4,503 44,264
------------- ---------------- ------------------- ------------------ --------------
374,807 65,400 43,144 (127) 483,224
Cost of sales:
Product cost of sales 278,818 44,443 39,849 (127) 362,983
Mold cost of sales 24,643 12,154 4,221 41,018
------------- ---------------- ------------------- ------------------ --------------
303,461 56,597 44,070 (127) 404,001
------------- ---------------- ------------------- ------------------ --------------
Gross margin 71,346 8,803 (926) 79,223
Selling, general and
administrative expenses 52,664 1,195 2,748 56,607
Equity in net income of 187 - - (187) -
subsidiaries
Interest 19,703 1,633 860 (2,382) 19,814
Equity in loss of 285 - - - 285
affiliate
Adjustment for
impairment of
long-lived assets 10,523 - - - 10,523
Other, net (2,627) 396 (273) 2,382 (122)
------------- ---------------- ------------------- ------------------ --------------
80,735 3,224 3,335 (187) 87,107
------------- ---------------- ------------------- ------------------ --------------
Income (loss)
before income taxes
and minority interest (9,389) 5,579 (4,261) 187 (7,884)
Provision (credit) for
income taxes (2,769) 2,286 (55) (538)
------------- ---------------- ------------------- ------------------ --------------
Income (loss)
before minority (6,620) 3,293 (4,206) 187 (7,346)
interest
Minority interest loss 279 - - 279
------------- ---------------- ------------------- ------------------ --------------
Net income (loss) $ (6,341) $ 3,293 $ (4,206) $ 187 $ (7,067)
============= ================ =================== ================== ==============
</TABLE>
F-22
<PAGE> 44
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 28, 1997
<TABLE>
<CAPTION>
UNCONSOLIDATED
-------------------------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales:
Product sales $ 204,902 $ 38,427 $ 19,207 $ (1,433) $ 261,103
Mold sales 20,843 7,035 4,039 31,917
------------ ----------- ----------- ----------- ------------
225,745 45,462 23,246 (1,433) 293,020
Cost of sales:
Product cost of sales 156,477 36,651 18,837 (1,433) 210,532
Mold cost of sales 20,425 6,485 3,487 30,397
------------ ----------- ----------- ----------- ------------
176,902 43,136 22,324 (1,433) 240,929
------------ ----------- ----------- ----------- ------------
Gross margin 48,843 2,326 922 52,091
Selling, general and administrative 32,396 1,573 1,781 (188) 35,562
expenses
Equity in net loss of subsidiaries 722 (722) -
Interest 10,499 1,567 250 (1,240) 11,076
Other, net (914) (32) (38) 1,428 445
------------ ----------- ----------- ----------- ------------
42,703 3,108 1,993 (722) 47,083
------------ ----------- ----------- ----------- ------------
Income (loss) from continuing
operations
before income taxes and minority 6,140 (783) (1,071) 722 5,008
interest
Provision for income taxes 4,027 (1,591) (348) 2,088
------------ ----------- ----------- ----------- ------------
Income (loss) from continuing
operations
before minority interest 2,113 808 (723) 722 2,920
Minority interest loss 143 143
------------ ----------- ----------- ----------- ------------
Net income (loss) $ 2,256 $ 808 $ (723) $ 722 $ 3,063
============ =========== =========== =========== ============
</TABLE>
F-23
<PAGE> 45
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 26, 1999
<TABLE>
<CAPTION>
UNCONSOLIDATED
--------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (761) $ 1,166 $ (4,632) $ 3,466 $ (761)
Adjustments to reconcile net income
(loss) to net cash provided by
operating
activities:
Equity in subsidiaries losses 3,466 (3,466)
Equity in losses of affiliates, net 1,480 1,480
Reserve for trade and notes
receivable 2,767 2,767
Depreciation and amortization 18,702 1,977 1,346 22,025
(Gain) loss on sale of
property and equipment 380 190 (726) (156)
Deferred income taxes 455 530 (30) 955
Changes in assets and
liabilities, net of
the effect of the 1999 joint
venture and divestiture
Accounts and notes
receivable (7,957) (2,899) 117 (10,739)
Inventory and mold costs 7,460 (3,685) 4,277 8,052
Prepaid expenses (502) (7) 1 (508)
Accounts payable and
accrued liabilities (1,063) 4,830 669 58 4,494
Income taxes payable (108) (923) 33 (998)
------------------------------------------------------------------------------------------
Net cash provided by operating
activities 24,319 1,179 1,055 58 26,611
INVESTING ACTIVITIES
Additions to property, plant and
equipment (19,639) (2,319) (45) (22,003)
Proceeds from sale of Kenco business
and net current assets to DBM
joint venture (net of $98 equity
contribution) 6,935 6,935
Proceeds from disposal of property,
and
equipment 1,010 1,010
Disbursements to affiliates (3,989) 1,748 (2,241)
Payments from affiliates 2,049 (1,273) 776
------------------------------------------------------------------------------------------
Net cash (used for) provided by
investing
activities (13,634) (2,319) (45) 475 (15,523)
FINANCING ACTIVITIES
Proceeds from issuance of long term 7,228 749 (749) 7,228
debt
Payments on long-term debt (12,979) (177) (39) 216 (12,979)
Net proceeds from Line of
Credit/Revolver (3,423) (914) (4,337)
------------------------------------------------------------------------------------------
Net cash provided (used) by
financing
activities (9,174) (177) (204) (533) (10,088)
------------------------------------------------------------------------------------------
Net increase (decrease) in cash 1,511 (1,317) 806 1,000
Cash at beginning of year 673 1,317 1,327 3,317
==========================================================================================
Cash at end of year $ 2,184 - $ 2,133 $ $ 4,317
==========================================================================================
</TABLE>
F-24
<PAGE> 46
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 27,1998
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------------
LDM TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (6,341) $ 3,293 $ (4,206) $ 187 $ (7,067)
Adjustments to reconcile net income
(loss) to net cash provided by
operating
activities:
Equity in subsidiaries losses 187 - (187) -
Equity in loss of affiliate 285 - - - 285
Depreciation and amortization 16,260 1,974 1,632 19,866
Adjustment for impairment of
long-lived assets 10,523 - - - 10,523
(Gain) loss on sale of
property and equipment 36 61 97
Deferred income taxes (3,370) 1,421 (84) (2,033)
Changes in assets and
liabilities, net of
the effect of the 1998
acquisitions
Accounts and notes
receivable (775) (4,905) (791) 1,511 (4,960)
Inventory and mold costs (6,584) 6,129 (1,698) (2,153)
Prepaid expenses 1,025 (32) (13) 979
Accounts payable and
accrued liabilities 9,947 (7,320) 3,163 5,790
Income taxes payable (2,982) 846 356 (1,780)
------------ ---------- ----------- ------------ ------------
Net cash provided by operating
activities 18,211 1,406 (1,580) 1,511 19,547
INVESTING ACTIVITIES
Purchase of Kenco (net of $500 cash
received in acquisition) (26,641) (26,641)
Additions to property, plant and
equipment (12,083) (370) (1,690) (14,143)
Purchase of Huron Plastics (net of
$1,835
cash received in acquisition) (67,140) (67,140)
Proceeds from disposal of property,
and equipment 622 192 814
Purchase of LDM Technologies, GmbH (9,703) (9,703)
Disbursements to affiliates (7,837) 7,837 -
Payments from affiliates 10,073 (10,073) -
------------ ---------- ------------ ------------ ------------
Net cash (used for) provided by
investing activities (112,709) (370) (1,498) (2,236) (116,813)
FINANCING ACTIVITIES
Proceeds from issuance of long term 63,992 3,869 (3,869) 63,992
debt
Payments on long-term debt (4,809) (4,317) (278) 4,595 (4,809)
Net proceeds from Line of 35,976 791 36,767
------------ ---------- ------------ ------------ ------------
Credit/Revolver
Net cash provided (used) by
financing
activities 95,159 (4,317) 4,382 726 95,950
------------ ---------- ------------ ------------ ------------
Net increase (decrease) in cash 661 (3,281) 1,304 - (1,316)
Cash at beginning of year 12 4,598 23 4,633
------------ ---------- ------------ ------------ ------------
Cash at end of year $ 673 $ 1,317 $ 1,327 $ - $ 3,317
============ ========== ============ ============ ============
</TABLE>
F-25
<PAGE> 47
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 28,1997
<TABLE>
<CAPTION>
UNCONSOLIDATED
-----------------------------------------------
LDM TECHNOLOGIES, NON-GUARANTOR CONSOLIDATING
INC. LDM CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 2,256 $ 808 $ (723) $ 722 $ 3,063
Adjustments to reconcile net income
(loss) to net cash provided by
operating
activities:
Equity in subsidiaries losses 722 (722)
Depreciation and amortization 9,054 2,141 760 11,955
(Gain) loss on sale of property and
equipment (151) (5) (156)
Deferred income taxes 480 (1,611) 4 (1,127)
Other 203 250 453
Changes in assets and liabilities,
net of the effect of the 1997
acquisitions
Accounts and notes receivable (8,222) 2,632 132 (5,458)
Inventory and mold costs 2,165 (7,028) (91) (4,954)
Prepaid expenses (1,573) 90 (11) (1,494)
Other assets 65 350 415
Accounts payable and accrued
liabilities 2,320 4,489 82 466 7,357
Income taxes payable (693) (25) (718)
------------ ---------- --------- ----------- ------------
Net cash provided by operating
activities 6,626 2,121 123 466 9,336
INVESTING ACTIVITIES
Purchase of Molmec (net of $2,704,958
cash
received in acquisition) (53,198) (53,198)
Additions to property, plant and (10,521) (2,174) (81) (12,776)
equipment
Purchase of Kendallville (7,159) (7,159)
Proceeds from disposal of property, and
equipment 1,769 8 1,777
Cash and cash equivalents restricted for
construction of new corporate facility 658 658
Disbursements to affiliates (12,587) 12,587
Payments from affiliates 1,553 (1,553)
Equity investment in affiliate (4,500) 4,500
Other (484) (484)
------------ ---------- --------- ----------- ------------
Net cash (used for) provided by investing
activities (84,469) 2,326 (73) 11,034 (71,182)
FINANCING ACTIVITIES
Proceeds from issuance of long term debt 103,962 11,500 (11,500) 103,962
Payments on long-term debt (12,316) (9,647) (236) (22,199)
Net proceeds from Line of Credit/Revolver (13,800) (3,634) 28 (17,406)
------------ ---------- --------- ----------- ------------
Net cash provided (used) by financing
activities 77,846 (1,781) (208) (11,500) 64,357
------------ ---------- --------- ----------- ------------
Net increase (decrease) in cash 3 2,666 (158) 2,511
Cash at beginning of year 9 1,933 180 2,122
------------ ---------- --------- ----------- ------------
Cash at end of year $ 12 $ 4,599 $ 22 $ 4,633
============ ========== ========= =========== ============
</TABLE>
F-26
<PAGE> 48
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
3.1 Articles of Incorporation of LDM Technologies, Inc. (the "Company"), as amended [3.1]*
3.2 By-laws of the Company [3.5]*
4.1 Indenture dated as of January 15, 1997 by and among the Company, LDM Holdings, LDM
Partnership, LDM Canada and IBJ Schroder Bank & Trust Company, as Trustee [4.1]*
4.2 Form of 10 3/4% Senior Subordinated Note Due 2007, Series B [4.2]* 4.3 Form of Guarantee
[4.3]*
10.1(a) Loan and Security Agreement dated as of January 22, 1997 ("Loan Agreement") by and between
the Company, as Borrower, and BankAmerica Business Credit, Inc. ("BankAmerica"), as Agent
for the Lenders [10.2]*
10.1(b) First Amendment to Loan Agreement dated May 1, 1997. [10.1(b)]***
10.1(c) Amendment No. 2 and Affirmation of Guaranties to Loan Agreement dated as of July 14, 1997.
[10.1(c)]***
10.1(d) Amendment No. 3 and Affirmation of Guaranties to Loan Agreement dated as of September 30,
1997. [10.1(d)]***
10.1(e) Amendment No. 4 and Affirmation of Guaranties to Loan Agreement dated as of November 25,
1997. [10.1(e)]***
10.2 Intellectual Property Security Agreement dated as of January 22, 1997 made by the Company in
favor of BankAmerica, as Agent for Lenders [10.4]*
10.3 Stock Purchase Agreement among the Company and the various stockholders of Kenco Plastics,
Inc., a Michigan corporation, and Kenco Plastics, Inc., a Kentucky corporation, and Narens Design
& Engineering Co., a Michigan corporation, dated September 30, 1997 [1].**
10.4 Asset Purchase Agreement between LDM Technologies, Inc. (a Michigan corporation) and DBM
Technologies, LLC (a Michigan limited liability company) dated December 31, 1998.
10.5 Asset Purchase Agreement between GL Industries, Inc. (an Indiana corporation) and New GLI,
Inc. (an Indiana corporation) dated April 15, 1999.
11 Statement of Ratio of Earnings to Fixed Charges
21 Subsidiaries and Affiliates of the Company
27 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Registrant for the quarter
ended September 29, 1997.
</TABLE>
<PAGE> 1
EXHIBIT 10.4
ASSET PURCHASE AGREEMENT
BETWEEN
LDM TECHNOLOGIES, INC.,
a Michigan corporation
AND
DBM TECHNOLOGIES, LLC,
a Michigan limited liability company
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. SALE AND TRANSFER OF ASSETS.......................................... 1
1.1 Transfer of Assets ........................................... 1
1.2 Retained Assets .............................................. 3
1.3 Business ..................................................... 3
1.4 Retained Contracts ........................................... 3
2. CONSIDERATION ....................................................... 3
2.1 Purchase Price ............................................... 3
2.2 Cash Price ................................................... 3
2.3 Current Assets ............................................... 3
2.4 Current Liabilities .......................................... 4
2.5 Assumed Liabilities .......................................... 4
2.6 Inventory .................................................... 4
2.7 Accounts Receivable .......................................... 4
2.8 Retained Liabilities ......................................... 4
2.9 Time for Determination ....................................... 5
2.10 Payment of the Purchase Price ................................ 5
2.11 Determination of the Cash Price .............................. 5
2.12 Assignment ................................................... 6
3. CLOSING PAYMENT AND OTHER MATTERS ................................... 6
3.1 Closing ...................................................... 6
3.2 Closing Deliveries ........................................... 6
3.3 Allocation ................................................... 6
3.4 (Reserved) ................................................... 7
3.5 Seller to Assume Risk Prior to Closing ....................... 7
4. CERTAIN COVENANTS OF SELLER AND BUYER................................ 7
4.1 Negative Covenants ........................................... 7
4.2 Affirmative Covenants ........................................ 7
4.3 Seller's Employees ........................................... 7
5. REPRESENTATIONS AND WARRANTIES OF SELLER ............................ 8
5.1 Organization and Good Standing ............................... 8
5.2 Authority .................................................... 9
5.3 Due Authorization: Enforceability ............................ 9
5.4 No Conflicts ................................................. 9
5.5 Permits ...................................................... 9
5.6 Title to Property ............................................ 10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5.7 Litigation ................................................... 10
5.8 Delivery of Schedules ........................................ 10
6. REPRESENTATIONS AND WARRANTIES OF BUYER ............................. 10
6.1 Organization and Good Standing ............................... 10
6.2 Authority .................................................... 10
6.3 Due Authorization; Enforceability ............................ 10
6.4 No Conflicts ................................................. 11
7. CONDITIONS TO BUYER'S PERFORMANCE.................................... 11
7.1 Representations and Warranties ............................... 11
7.2 Approval ..................................................... 11
7.3 Organizational Documents ..................................... 12
7.4 No Litigation ................................................ 12
7.5 Licenses and Permits ......................................... 12
7.6 Consents...................................................... 12
7.7 Performance .................................................. 12
7.8 Real Property Leases with Seller ............................. 12
8. CONDITIONS TO SELLER'S PERFORMANCE .................................. 12
8.1 Representations and Warranties ............................... 12
8.2 Approval ..................................................... 13
8.3 Organizational Documents ..................................... 13
8.4 No Litigation ................................................ 13
8.5 Real Property Leases with Buyer .............................. 13
8.6 Performance .................................................. 13
9. OTHER COVENANTS AND AGREEMENTS ...................................... 13
9.1 Assignment ................................................... 13
9.2 Bulk Sales Law ............................................... 13
9.3 Further Assurances ........................................... 13
9.4 Broker's Fees ................................................ 14
9.5 Communications ............................................... 14
9.6 Misdirected Property ......................................... 14
9.7 Business Records ............................................. 14
9.8 Confidentiality .............................................. 14
9.9 Joint Obligations of the Parties.............................. 15
9.10 Employee Benefit Plans.......... ............................. 16
10. INDEMNIFICATION ..................................................... 17
10.1 Survival ..................................................... 17
10.2 Indemnification by Seller or Buyer ........................... 18
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
10.3 Indemnity Payments ........................................... 19
11. GENERAL PROVISIONS .. ............................................... 19
11.1 Successors and Assigns ....................................... 19
11.2 Section Headings ............................................. 19
11.3 Cooperation .................................................. 20
11.4 Expenses ..................................................... 20
11.5 Schedules .................................................... 20
11.6 Counterparts ................................................. 20
11.7 Notice ....................................................... 20
11.8 Severability ................................................. 21
11.9 Governing Law ................................................ 21
11.10 Waiver ....................................................... 21
11.11 Public Statements ............................................ 22
11.12 Entire Agreement ............................................. 22
11.13 Termination .................................................. 22
11.14 Affiliate; Knowledge ......................................... 22
LIST OF SCHEDULES ........................................................ 24
SCHEDULE 1.2 ............................................................. 25
SCHEDULE 1.4 ............................................................. 26
SCHEDULE 3.3 ............................................................. 27
SCHEDULE 5.4 ............................................................. 28
SCHEDULE 5.6 ............................................................. 29
SCHEDULE 5.7 ............................................................. 30
</TABLE>
<PAGE> 5
THIS AGREEMENT dated as of December 31, 1998, between DBM Technologies,
LLC, a Michigan limited liability company ("Buyer") and LDM Technologies, Inc.,
a Michigan corporation ("Seller"),
WITNESSETH:
WHEREAS, Buyer desires to purchase from Seller, and Seller desire to sell
to Buyer, substantially all of the assets owned or used by Seller in the
Business (as defined in Section 1.3),
AGREEMENTS:
NOW, THEREFORE, in consideration of the above premises and of the mutual
representations, warranties and covenants contained in this Agreement, Seller
and Buyer agree as follows:
1. SALE AND TRANSFER OF ASSETS.
1.1 Transfer of Assets. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell, and Buyer hereby agrees to purchase, on
the Closing Date (as defined in Section 3.1) all of Seller's right, title, and
interest in and to all of the assets owned or used by Seller in the Business,
other than the Retained Assets (as defined in Section 1.2), including, without
limitation, inventory, accessories, intellectual property, specified contracts,
permits, licenses, and selected other personal property (collectively referred
to as the "Assets"). Without limiting the foregoing, the Assets include the
Accessories, Intellectual Property, Permits, Business Records, Rights Under
Assumed Contracts, Inventory, Receivables, Cash and Data as follows:
A. All motor vehicles, furniture (other than the Retained Assets) and
removable fixtures or other appurtenances ("Accessories") used by Seller or any
of its affiliates in connection with the Business, but excluding (i) the
Retained Assets, and (ii) items solely used by Seller or its affiliates to
provide centralized administrative services to the Business;
B. All of Seller's ownership, use, license or similar rights and
interests in the Business's trade names, trademarks and service marks, licenses,
copyrights, technical information, know-how, proprietary information, computer
software, all letters patent (utility and design) and pending applications for
patents as well as any rights in all other intellectual property (excluding
Retained Assets) used in the Business (collectively "Intellectual Property"),
together with the goodwill associated with trademarks and service marks of the
Business and other goodwill of the Business (collectively the "Goodwill");
<PAGE> 6
C. All governmental permits, consents, authorizations, approvals, and
licenses (collectively, "Permits") now held by Seller in connection with the
Business to the extent that Seller's rights under such Permits are transferable;
D. All engineering drawings, material specifications, process and
routing sheets, bills of materials, employee records, test data, catalogs,
brochures, advertising materials, and business records of Seller relating to the
Business (excluding tax records and corporate minute books of Seller) ("Business
Records");
E. All of Seller's rights relating to the Business under (i) all
licenses (the "Licenses"); (ii) contracts to sell Inventory and/or provide
services to Seller's customers; (iii) contracts to purchase raw materials and
supplies from suppliers; (iv) customer purchase orders; and (v) other contracts
entered into in the Business, whether or not in the ordinary course of Business,
and whether or not executory, performed, terminated or otherwise involving
on-going rights or obligations, other than Retained Contracts as hereinafter
defined (collectively items (i), (ii), (iii), (iv) and (v) being the "Assumed
Contracts") (collectively "Rights Under Assumed Contracts");
F. All of Seller's "Inventory" (as defined in Section 2.7) relating to
the Business on the Closing Date.
G. All rights to payment of any kind (and any security therefor) owing
to Seller, with respect to the Business (exclusive of Retained Assets),
including, without limitation, rights to payment by reason of: (i) accounts
receivable and any other accounts, whether such right to payment is classified
by law as an instrument, chattel paper, contract right, account, general
intangible or otherwise; (ii) rights to refunds or rebates arising from
operation of the Business; and (iii) general intangibles, including rights,
claims or causes of action against third parties (collectively, "Receivables");
H. All cash and cash equivalents of the Business on hand and in
accounts and all security deposits of any kind whatsoever ("Cash"); and
I. All computerized data bases containing information relating to the
Business, including, but not limited to, customer lists, third party
contractors, suppliers, and accounting records and any and all other information
related to the Business to be provided to Purchaser in the form currently used
by Seller in the ordinary course of operating the Business ("Data").
Seller agrees to deliver to Buyer at the Closing good, clear,
marketable title to the Assets, free and clear of all claims, liabilities,
obligations, restrictions, security interests, leases, liens, charges and
encumbrances (other than Assumed Liabilities as hereinafter defined and other
than set forth in Schedule 5.6)
<PAGE> 7
1.2 Retained Assets. The term "Retained Assets" shall mean the machinery
and equipment of the Business and owned by Seller, Seller's minute books, and
any tax attributes relating to the Business prior to the Closing Date, including
tax refunds, credits and net operating loss carry-overs of Seller for periods up
to the Closing Date, rights of Seller in its six (6) real estate leases of the
facilities identified on Schedule 1.2, and Seller's rights in Retained
Contracts, and any assets of Seller not located at the Schedule 1.2 locations
(including those used to provide administrative services to those locations).
1.3 Business. The term "Business" as used in this Agreement shall mean the
operations of manufacture and sale of various automotive components and services
related thereto (including, without limitation, tooling and engineering)
conducted at the six (6) facilities identified on Schedule 1.2.
1.4 Retained Contracts. "Retained Contracts" shall mean Seller's six (6)
real estate leases of the facilities identified on Schedule 1.2 under which
Seller is the lessee, all contracts in which Seller is a party that do not
relate to the Business, or which solely relate to providing administrative
services to the Business by Seller or its affiliates, and any other contracts
identified on Schedule 1.4.
2. CONSIDERATION.
2.1 Purchase Price. In consideration for the sale and transfer of the
Assets of the Business effective as of the Closing Date, Buyer hereby agrees to
and will pay, perform and discharge, as of the Closing Date or as otherwise
provided, all of the following, which will collectively be described as the
"Purchase Price":
A. The "Cash Price" as hereinafter defined; plus
B. The amount of the "Assumed Liabilities", as hereinafter defined.
2.2 Cash Price. The "Cash Price" shall be the:
A. "Current Assets" (as defined herein) for the Business,
less the:
B. "Current Liabilities" (as defined herein) for the Business.
2.3 Current Assets. The "Current Assets" shall mean the amount at which
Current assets are carried on the "Closing Balance Sheet" (as defined herein) of
the Business. As to "Inventory" (as defined herein), this will be the lower of
cost or market, and as to "Accounts
<PAGE> 8
Receivable" (as defined herein), it will be the book amount of such receivables
subject to any reserve or credit for uncollectible accounts or adjustments owed
to customers not already taken into account in the definition of Accounts
Receivable.
2.4 Current Liabilities. The "Current Liabilities" shall be the amount of
current liabilities carried on the balance sheet of the Business as of the
Closing Date.
2.5 Assumed Liabilities. The "Assumed Liabilities" means the obligations
and liabilities contained within or resulting from the following items, whether
now existing or arising in the future:
A. All obligations and liabilities under Assumed Contracts;
B. all obligations and liabilities which are Current Liabilities;
C. all other obligations and liabilities arising out of the ownership
or operation of the Business, whether or not incurred in the ordinary course of
business, and whether incurred or arising before or after the Closing Date,
apart from federal, state or local income tax or Single Business Tax liabilities
of Seller arising out of ownership or operation of the Business for periods
prior to the Closing Date;
excluding only Retained Liabilities.
2.6 Inventory. The "Inventory" shall mean the inventory of items for
sale to customers as part of the Business, which includes, but is not
necessarily limited to, the raw materials, spare parts, work-in-process and
finished goods as of a given point in time.
2.7 Accounts Receivable. The "Accounts Receivable" shall mean the book
amount of accounts receivable carried on the balance sheet of the Business at a
given point in time, prior to any reduction for reserves for uncollectible
accounts or credits or adjustments owed customers not reflected in such book
amount.
2.8 Retained Liabilities. Seller shall specifically retain, and Buyer shall
not assume or pay, any obligations, liabilities and commitments of Seller under
the items described below in this Section, which items shall collectively
constitute the "Retained Liabilities":
A. All obligations and liabilities for taxes (including penalties,
interest and additions to tax) of Seller, including all obligations and
liabilities for taxes relating to consolidated or combined tax returns which
include the Business activities up to the Closing Date;
B. any obligations of Seller under Retained Contracts; and
<PAGE> 9
C. any other liability or obligation of Seller not expressly assumed by
Buyer hereunder.
2.9 Time for Determination. For purposes of computing, determining and
identifying the components of the Purchase Price, or identifying the Assets,
each definition used in this regard is computed, determined and its components
identified as of the date of the Closing Balance Sheet, with the exception of
Assumed Liabilities, which may arise or become quantified both before and after
the Closing Date.
2.10 Payment of the Purchase Price. Buyer shall pay and perform the
following in order to provide the Purchase Price to Seller:
A. At Closing. At the Closing, on the Closing Date (as such terms are
defined herein), Buyer will:
1. Deliver cash or immediately available funds, in U.S. currency, to
Seller in the amount of eighty percent (80%) of the Cash Price,
with each component of that Cash Price determined as of the date
of the Closing Balance Sheet.
2. Deliver its subordinated promissory note ("Buyer Note") in the
form of Exhibit 2.10.A.2 attached hereto in the amount of twenty
percent (20%) of the Cash Price.
3. Assume or pay all Assumed Liabilities.
B. After Closing. After the Closing, Buyer will:
1. Pay or otherwise discharge and perform all Assumed Liabilities
whether under Assumed Contracts or otherwise, as they come due,
without incurring penalty or interest or permitting default in
any of such obligations.
2.11 Determination of the Cash Price. The Cash Price will be determined as
follows:
A. Seller shall prepare and deliver to Buyer at the Closing a balance
sheet for the Business dated December 31, 1998 (the "Closing Balance Sheet")
along with a computation of the Cash Price as of the Closing Date, each of
which shall be prepared in accordance with generally accepted accounting,
principles ("GAAP") and, even if differing from GAAP, the provisions of this
Agreement and Seller's past practices. The Closing Balance Sheet will be used to
compute the Cash Price. All monetary amounts referred to in this Agreement are
in U.S. funds.
5
<PAGE> 10
B. If Buyer agrees with the Closing Balance Sheet, it shall so notify
Seller at the Closing in writing. The date such notification is received by
Seller is the date the Cash Price has been determined by agreement.
2.12 Assignment. Contracts assumed by Buyer hereunder (Assumed Contracts)
shall be deemed to have been assigned by Seller to Buyer effective with the
Closing; provided, however, that to the extent that the assignment of any such
Assumed Contracts requires the consent of the other parties thereto, this
Agreement and any closing documents ancillary hereto shall not constitute a
breach thereof. In cases in which the consent of a third party to assignment of
a contract is legally required, Seller will exercise reasonable efforts to
obtain such consent, unless directed otherwise by Buyer or its representatives.
In the event that any third party shall refuse to grant consent, or as to any
contracts on which Buyer directs Seller not to seek consent, Seller shall retain
such contract in its name and attempt, to the extent reasonably possible, to
provide Buyer with the benefits of such contracts. To the extent Buyer is able
to enjoy the benefits of each contract, the costs and performance of such
contract shall be the responsibility of Buyer, and the lack of such consent
shall not then be a breach of any representation or obligation of Seller
hereunder.
3. CLOSING PAYMENT AND OTHER MATTERS.
3.1 Closing. The closing of the transactions contemplated hereby
("Closing") shall be held at the offices of Dean & Fulkerson, P.C., 801 West Big
Beaver Road, Suite 500, Troy, Michigan, at 9:00 a.m (local time) on February 1,
1999, or such other date as the parties agree upon in writing (the "Closing
Date"), and shall be effective as of 12:01 a.m. on the date following the
Closing Date. Unless the parties otherwise agree in writing, if the Closing has
not occurred by the Closing Date, then this Agreement will be deemed to have
been terminated and abandoned, in which event all obligations of the parties
herewith shall terminate except for the parties' obligations in Sections 9.4,
9.8, 11.4 and 11.11, subject to the legal rights and remedies of either party
arising out of the other party's breach of any provision of this Agreement.
3.2 Closing Deliveries. On the Closing Date, Seller shall grant and deliver
to Buyer exclusive possession of the Assets in the manner required by this
Agreement. In addition to delivering all other documents required under the
terms of this Agreement to be delivered by Seller at the Closing, Seller will
deliver to Buyer: (a) a Bill of Sale for the Assets; (b) recordable assignments
of all rights in or evidencing the use of all Intellectual Property which is or
could be of public record; (c) assignments of all Assumed Contracts (in the form
of an Assignment and Assumption Agreements); and (d) all documents and
agreements referenced in this Agreement and the schedules hereto (the
"Schedules") or otherwise reasonably required to implement the provisions of
this Agreement.
3.3 Allocation. The parties agree that all Assumed Liabilities and all
other capitalized costs shall be allocated for all purposes (including,
financial, accounting and tax purposes) in
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accordance with Schedule 3.3, which Schedule shall be agreed upon by Buyer and
Seller prior to the Closing Date.
3.4 (Reserved).
3.5 Seller to Assume Risk Prior to Closing. Possession of the Assets will
be given to Buyer at the Closing. Buyer will not acquire any title to the
Assets until Closing occurs and possession has been given to it in accordance
with this Section 3.5, and, accordingly, all risk of loss with respect to the
Assets will be borne by Seller until possession has been given to Buyer. For
purposes of this Section 3.5, possession will be deemed to have been given to
Buyer when Seller delivers or causes to be delivered to Buyer good and
sufficient instruments of transfer and conveyance as provided in this Agreement.
4. CERTAIN COVENANTS OF SELLER AND BUYER.
Seller, and as set forth below, Buyer, covenant and agree that:
4.1 Negative Covenants. Except as Buyer may otherwise consent in writing,
and between the date of this Agreement and the Closing Date Seller shall not:
A. sell or otherwise dispose of any part of the Business or Assets,
except Inventory sold in the ordinary course of business; or
B. create or suffer to exist any new encumbrances (other than any Lien
for taxes not yet due and payable on any of the Assets.
4.2 Affirmative Covenants. Except as Buyer may otherwise consent in
writing, between the date of this Agreement and the Closing Date Seller shall:
A. operate the Business only in the ordinary course and in accordance
with past practices; and
B. give to Buyer and to its counsel, accountants, and other
representatives reasonable access to the premises of the Business and all of the
Assets and the personnel of Seller related thereto during normal business hours
upon reasonable notice; furnish to Buyer and Buyer's representatives such
additional documents, financial information, and information with respect to
any of the Assets or the Business as Buyer may from time to time reasonably
request; and cause Seller's independent accountant to permit Buyer and its
independent accountant to examine the records and working papers pertaining to
financial information.
4.3 Seller's Employees.
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A. Except as otherwise specifically provided herein, on or before 11:59
p.m. on the Closing Date, Seller shall terminate the employment of all employees
of the Business and cause the employees of the Business to cease active
participation in all Benefit Plans of Seller, including, without limitation, all
health insurance, welfare and health benefit plans, all pension, profit sharing,
and savings and stock ownership plans, all workers' compensation insurance and
all payments into any unemployment compensation funds
B. Buyer shall offer employment to substantially all of Seller's
employees identified by Buyer in its sole discretion, but in all events Buyer
will employ no less than the number of then-terminated employees of Seller that
will prevent a plant closing or mass layoff under, or imposition of any
liability on Seller for violation of, the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN"), due to such terminations, failure to give
notice, or transactions pursuant to this Agreement. Buyer shall be solely liable
for, and will pay any amount owing for, failure of Seller or Buyer to provide
any notice required under the Worker Adjustment and Retraining Notification Act
of 1988 in connection with the transaction contemplated by this Agreement. Buyer
will be solely responsible for any obligations to pay severance or WARN
benefits, if any, due to Seller's former employees who do not become employed by
Buyer immediately after the Closing Date.
C. Seller hereby consents to the negotiation by Buyer, if Buyer elects
to do so, before or after Closing, with the appropriate collective bargaining
units of new collective bargaining agreements with respect to the terms and
conditions of employment of certain hourly employees represented by such union
as to certain plant facilities in the Business. Seller shall take all steps
reasonably necessary to assist Buyer in negotiations of such collective
bargaining agreements, which shall be in form and substance satisfactory to
Buyer, in its sole discretion. In the event Buyer elects to enter into such
negotiations (rather than assume the existing collective bargaining agreement),
Buyer, will then not assume the existing collective bargaining agreement as
amended ("Union Contract") with the union, identified on Schedule 4.3.C., and
Buyer shall make its election to Seller in writing on or before the Closing
Date. In the event Buyer elects the negotiation alternative, any penalty or new
cost imposed on Seller under the Union Contract due to or arising out of this
Agreement or its transactions will be assumed and paid by Buyer as an additional
Assumed Liability. The Union Contract will then be treated as a Retained
Contract rather than an Assumed Contract.
5. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce Buyer to enter into this Agreement and to consummate the
transactions provided for herein, Seller represents and warrants to Buyer that:
5.1 Organization and Good Standing. Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Michigan
with full power and authority
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to own and operate its properties and to carry on its business as it is now
being conducted. Seller is authorized to transact business in the State of
Michigan and any other State in which the nature of its business and the
ownership of its properties makes such qualification necessary.
5.2 Authority. Seller has full power, authority, and legal capacity to
enter into this Agreement and to perform its obligations hereunder.
5.3 Due Authorization; Enforceability. The execution and delivery of this
Agreement by Seller and the performance of the obligations of Seller under this
Agreement have been duly authorized by the Board of Directors of Seller and to
the extent necessary, by its Shareholders, and all other corporate action has
been taken which is necessary to authorize the execution and delivery of this
Agreement by Seller and the performance of the obligations of Seller hereunder.
This Agreement has been duly and validly executed and delivered by Seller and
assuming valid execution thereof by Buyer, it will constitute a legal, valid,
and binding obligation of Seller and be enforceable against Seller in accordance
with its terms, subject to the effects of bankruptcy, insolvency and similar
laws affecting the enforcement of creditors' rights generally and except as
enforceability is subject to general equity principles.
5.4 No Conflicts. The execution, delivery, and performance of this
Agreement: (a) will not conflict with or result in a breach of any provision
contained in the charter or bylaws or other organizational documents of Seller;
(b) will not result in any conflict with, breach of, or default under or require
any notice, consent or approval which has not been obtained with respect to any
of the terms, conditions or provisions of any contract, agreement, lease,
license, franchise, permit, indenture, agreement or mortgage for borrowed money
or other arrangement to which Seller is a party or is bound or to which any of
its respective assets is subject or bound; and (c) will not violate any order,
law, rule or regulation applicable to Seller or to the Assets. To the best of
Seller's officers' knowledge, no action, consent or approval by, or filing by
Seller with, any federal, state, municipal, foreign or other court or
governmental body or agency, or any other regulatory body, is required in
connection with the execution, delivery or performance by Seller of this
Agreement or the consummation of the sale of the Assets and the other
transactions contemplated hereby. Other than as described on Schedule 5.4, to
the knowledge of Seller's officers, Seller is not in default under any contract,
transaction, agreement, lease, or instrument to which it is a party or by which
it is bound which default is likely to have a material adverse effect upon the
Assets or any portion thereof or the Business. Except as set forth on Schedule
5.6, neither the execution of this Agreement nor the consummation of the
transactions herein contemplated will result in the creation of any Lien on any
of the Assets; and neither Seller nor, to its officers' knowledge, any third
party is in default (or would be in default upon the giving or receipt of
notice or the passage of time or both) under any of the Assumed Contracts or
other contracts to which Seller is a party relating to the Business.
5.5 Permits. The "Permits" referenced in Section 1.1.C. are, to Seller's
officers' knowledge, the only permits consents, approvals, licenses and
authorizations required to enable the
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Business, as currently operated, to comply with applicable laws and regulations.
Seller is in compliance in all material respects with the terms of all of said
Permits.
5.6 Title to Property. Except as set forth in Schedule 5.6. Seller owns and
possesses all right, title and interest in and to the Assets free and clear of
all Liens or other restrictions on transfer.
5.7 Litigation. Except as set forth in Schedule 5.7, (a) there is no claim,
action, suit, charge, proceeding, arbitration, investigation, hearing, or notice
of hearing (each and all of the foregoing items being herein referred to as
"Litigation"), pending or, to the knowledge of Seller's officers, threatened by
or before any court or governmental or administrative authority or private
arbitration tribunal against Seller which relates to or affects the Assets or
Business or the transactions contemplated hereby, (b) Seller has not been
permanently or temporarily enjoined or barred by order, judgment, or decree of
any court or other tribunal or any agency or self-regulatory body from engaging
in or continuing any conduct or practice in connection with the Business, and
(c) there is not in existence any order, judgment, or decree of any court or
other tribunal or any agency or self-regulatory body requiring Seller to take
any action of any kind which is not required generally of other entities in
businesses similar to the Business with respect to the Business or Assets or to
which Seller or its properties or Assets are subject or by which Seller is bound
with respect to the Business or Assets.
5.8 Delivery of Schedules. Seller will be entitled to update all Schedules
to the date of Closing.
6. REPRESENTATIONS AND WARRANTIES OF BUYER.
To induce Seller to enter into this Agreement and to consummate the
transactions provided for herein, Buyer represents and warrants to Seller that:
6.1 Organization and Good Standing. Buyer is a limited liability company
duly organized, validly existing, and in good standing under the laws of the
State of Michigan with full power and authority to own and operate its
properties and to carry on its business as it is now being conducted.
6.2 Authority. Buyer has full power, authority, and legal capacity to enter
into this Agreement and to perform its obligations hereunder.
6.3 Due Authorization: Enforceability. The execution and delivery of this
Agreement by Buyer and the performance of the obligations of Buyer under this
Agreement have been duly authorized by the Members of Buyers, and to the extent
necessary by its Managers, Officers or Directors, if any, and all other limited
liability company action has been taken which is necessary
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to authorize the execution and delivery of this Agreement by Buyer and the
performance of the obligations of Buyer hereunder. This Agreement has been duly
and validly executed and delivered by Buyer and, assuming valid execution
thereof by Seller, it will constitute a legal, valid and binding obligation of
Buyer and be enforceable against Buyer in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors rights generally and except as
enforceability is subject to general equity principles.
6.4 No Conflicts. The execution, delivery, and performance of this
Agreement: (a) will not conflict with or result in a breach of any provision
contained in the Articles of Organization; Operating Agreement or other
organizational documents of Buyer, (b) result in any conflict with, breach of,
or default under or require any notice, consent or approval which has not been
obtained with respect to any of the terms, conditions or provisions of any
contract, agreement, lease, license, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, or other arrangement to
which Buyer is a party or by which it is bound or to which any of its assets is
subject or bound; and (c) will not violate any order, law, rule or regulation
applicable to Buyer. No action, consent or approval by, or filing by Buyer with,
any United States, federal, state, municipal, foreign or other court or
governmental body or agency, or any other regulatory body, is required in
connection with the execution, delivery or performance by Buyer of this
Agreement or the consummation of the sale of the Assets and the other
transactions contemplated hereby.
7. CONDITIONS TO BUYER'S PERFORMANCE
The obligations of Buyer under this Agreement, including that of
consummating the transactions contemplated herein, shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:
7.1 Representations and Warranties. All representations and warranties of
Seller contained in this Agreement, or any of the certificates, schedules,
exhibits, or other documents attached to this Agreement or delivered to Buyer
pursuant to this Agreement shall be true, correct, and complete on and as of the
date when made and on and as of the Closing Date, and Seller's authorized
Officer shall have executed and delivered to Buyer a certificate dated as of the
Closing Date to the foregoing effect.
7.2 Approval. The execution, delivery, and performance of this Agreement
and of the other documents provided for herein shall have been approved by the
Board of Directors of Seller, and Buyer shall have received copies of
resolutions to that effect duly adopted by the Board of Directors of Seller and
certified by the Secretary or an Assistant Secretary of Seller.
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7.3 Organizational Documents. Seller shall have delivered to Buyer
certified copies of the charter and bylaws and other organizational documents of
Seller, as amended to the Closing Date, and a Certificate of Good Standing of
such Seller issued by the appropriate authority in Michigan.
7.4 No Litigation. No action or proceeding shall have been instituted or
threatened before any court or governmental agency to restrain or prohibit
performance of this Agreement or the transactions contemplated herein.
7.5 Licenses and Permits. Seller shall have transferred to Buyer, or Buyer
shall have otherwise obtained, all licenses and permits with respect to the
Business, the absence of which would be likely to have a material adverse effect
on the ability of Buyer to conduct the Business after the Closing Date in the
manner in which it has been conducted by Seller.
7.6 Consents. Seller shall have obtained and delivered to Buyer all of the
consents of third parties required for the assignment to Buyer of all Assumed
Contracts, subject to the provisions of Section 2.13.
7.7 Performance. The performance by Buyer of its covenants under this
Agreement and the Closing of the transactions contemplated hereby shall be
subject to the full performance by Seller of each and every covenant and
condition imposed upon it hereunder; provided, however, that Buyer may at its
option waive in writing the performance of any of such covenants or conditions
imposed hereunder. Such waiver, however, shall not constitute a waiver of any
other covenant or condition.
7.8 Real Property Leases with Seller. Buyer and Seller shall have entered
into one or more subleases to sublease the real properties described in Schedule
1.2 upon terms mutually satisfactory to Buyer and Seller, and Seller shall have
delivered evidence of any required landlord consents to sublease.
8. CONDITIONS TO SELLER'S PERFORMANCE.
The obligations of Seller under this Agreement, including that of
consummating the transactions contemplated herein, shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:
8.1 Representations and Warranties. All representations and warranties of
Buyer contained in this Agreement or any of the certificates, schedules,
exhibits, or other documents attached to this Agreement or delivered to
Seller pursuant to this Agreement shall be true, correct, and complete on and as
of the date when made and on and as of the Closing Date, and a Member of Buyer
shall have executed and delivered to Seller a certificate dated as of the
Closing Date to the foregoing effect.
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8.2 Approval. The execution, delivery, and performance of this Agreement
and of the other documents provided for herein shall have been approved by the
Members of Buyer, and Seller shall have received copies of resolutions to that
effect duly adopted by the Members of Buyer and certified by a Member of Buyer.
8.3 Organizational Documents. Buyer shall have delivered to Seller
certified copies of the organizational documents of Buyer, as amended to the
Closing Date, and a certificate of the good standing of Buyer issued by the
appropriate authority in the jurisdiction of its creation.
8.4 No Litigation. No action or proceeding shall have been instituted or
threatened before any court or governmental agency to restrain or prohibit
performance of this Agreement
8.5 Real Property Leases with Buyer. Buyer and Seller shall have entered
into one or more subleases to sublease the real properties described in Schedule
1.2 upon terms mutually satisfactory to Buyer and Seller.
8.6 Performance. The performance by Seller of its covenants under this
Agreement and the Closing of the transactions contemplated hereby shall be
subject to the full performance by Buyer of each and every covenant and
condition imposed upon it hereunder; provided, however, that Seller may at its
option waive in writing the performance of any of such covenants or conditions
imposed hereunder. Such waiver, however, shall not constitute a waiver of any
other covenant or condition.
9. OTHER COVENANTS AND AGREEMENTS.
9.1 Assignment. As of the Closing Date, Seller shall be deemed to have
assigned to Buyer all right, title, and interest of Seller in and to such
warranties (express and implied) that continue in effect with respect to the
Assets or any portion of the Assets and to have nominated Buyer as the true and
lawful attorney of Seller to enforce such warranties. From time to time after
the Closing Date, Seller shall execute and deliver to Buyer such specific
assignments of such warranty rights held by Seller as Buyer may reasonably
request to enable Buyer to enforce such warranties.
9.2 Bulk Sales Law. Buyer and Seller agree to waive compliance under this
Agreement with the Michigan bulk sales law. Seller hereby agrees to indemnify,
defend, and hold Buyer harmless from and against any and all claims based on
non-compliance with the Michigan bulk sales law in this transaction, other than
for claims pertaining to Assumed Liabilities.
9.3 Further Assurances. At or after the Closing, at the request of Buyer,
Seller shall promptly execute and deliver or cause to be executed and delivered
to Buyer all such assignments, bills of sale, endorsements, powers of attorney,
and other documents, in addition to those otherwise required by this Agreement,
in form and substance reasonably required to (a) vest in Buyer title to
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and possession of the Assets, and (b) perfect and record, if necessary, the
sale, transfer, assignment, conveyance, and delivery to Buyer of the Assets.
9.4 Broker's Fees. Seller represents and warrants to Buyer that Seller has
not incurred any obligation or liability, contingent or otherwise, for brokerage
fees, finder's fees, agent's commissions or similar payments in connection with
this Agreement or the transactions contemplated hereby. Buyer represents and
warrants to Seller that Buyer has not incurred any obligation or liability,
contingent or otherwise, for brokerage fees, finder's fees, agent's commissions
or similar payments in connection with this Agreement or the transactions
contemplated hereby. Buyer and Seller each agree to indemnify and hold the other
party harmless against claims arising out of a breach of the representation and
warranty of such party contained in this Section.
9.5 Communications. Seller hereby authorizes Buyer from and after the
Closing Date to receive and open all mail and other communications received by
the Business, and, except as otherwise provided herein, to act with respect to
such communications in such manner as Buyer may elect if such communications
relate to the Business or the Assets, or, if such communications do not so
relate, to forward the same promptly to Seller. Seller shall promptly deliver to
Buyer the original of any mail or other communication received by it after the
Closing pertaining to any of the Assets or the Business or the obligations of
liabilities assumed by Buyer hereunder, and any monies, checks, or other
instruments of payment for amounts to which Buyer is entitled.
9.6 Misdirected Property. After the Closing, (i) Buyer shall deliver to
Seller any property which is owned by Seller and which comes into the possession
of Buyer but is not included in the Assets transferred hereunder, and (ii)
Seller shall deliver to Buyer any property which is owned by Buyer and comes
into the possession of Seller.
9.7 Business Records. Upon consummation of the Closing, Buyer shall
maintain for at least five (5) years the Business Records pertaining to the
pre-Closing Business operations. Buyer agrees to provide Seller reasonable
access to and copies of such Business Records as Seller reasonably requires to
conduct its business after Closing, including reporting any tax, claiming any
tax refund or disputing any tax matter, upon reasonable advance notice to Buyer
(which, absent actual emergency, will not be less than forty-eight (48) hours).
9.8 Confidentiality.
A. Except as required to assert or defend its rights in a judicial or
administrative proceeding, (x) neither Seller nor Buyer will, at any time prior
to the Closing Date disclose to any third parties the existence or the terms of
this Agreement, and (y) Seller will not, at any time after the Closing Date
disclose to any third parties any of Seller's trade secrets or proprietary
information assigned to Buyer under this Agreement or which is licensed to
Seller under any agreement being assigned to Buyer under this Agreement;
provided, that Seller or its affiliates may use or disclose
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any such information once it (i) becomes generally publicly known through no
fault of Seller or its affiliates, (ii) is generally or readily obtainable
within the industry relating to the Business, or (iii) to the extent that Seller
or its affiliates may become legally compelled to disclose any of such
information. Buyer will be given a reasonable opportunity to obtain a protective
order prior to disclosure under (iii).
B. Except as required to assert or defend its right in a judicial or
administrative proceeding, prior to the Closing, Buyer will not disclose or use
or enable anyone else to disclose or use any "Confidential Information", which
term shall mean all information relating to the Assets or the Business, except
information which (i) is generally publicly known or becomes generally publicly
known through no fault of Buyer, (ii) is generally or readily obtainable within
the industry relating to the Business, (iii) was available or becomes available
to Buyer on a non-confidential basis, or (iv) Buyer is legally required to
disclose. Seller will be given a reasonable opportunity to obtain a protective
order prior to disclosure under (iv). Notwithstanding the above, in connection
with the transactions contemplated hereunder, Buyer may disclose Confidential
Information to its accountants, lawyers and other representatives advising or
assisting Buyer in connection herewith and to third parties for the purpose of
obtaining debt or equity financing for the purchase of the Assets, provided that
all such parties are informed of this confidentiality arrangement and the
confidential nature of such information. In the event of termination of this
Agreement, upon the written request of Seller, Buyer shall use all reasonable
efforts to (x) cause to be delivered to Seller and retain no copies of any
documents, work papers, and other materials obtained by Buyer or on its behalf
from Seller, whether so obtained before or after the execution hereof, and (y)
destroy any documents, memoranda, notes, or other writings prepared by Buyer
based on information contained in such materials. Buyer's obligations under this
Section 9.8. B. shall terminate on the Closing Date assuming the Closing is
consummated.
C. Any non-public information that Seller obtains in connection herewith
with respect to Buyer shall be deemed confidential, and Seller will not disclose
such information to any third party or use such information to the detriment of
Buyer; provided, that (i) Seller or its affiliates may use and disclose any such
information once it has been publicly disclosed (other than by Seller in breach
of its obligations under this Section 9.8. C. or which has rightfully come into
the possession of Seller or its affiliates (other than from Buyer), and (ii) to
the extent that Seller or its affiliates may become legally compelled to
disclose any of such information, Seller or its affiliates may disclose such
information if reasonable efforts have been used by Seller (and Buyer has been
afforded the opportunity) to obtain an appropriate protective order or other
satisfactory assurance of confidential treatment for the information required
to be disclosed.
9.9 Joint Obligations of the Parties.
A. The parties agree to treat, and to cause all of their respective
affiliates to treat, the Seller and the Buyer as Predecessor and Successor
Corporations, respectively, pursuant to 26
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CFR Section 31.3121(a)(1)-(1)(b)and 26 CFR Section 31.3306(b)(1)-l(b) for
purposes of computing the annual wage limitations prescribed by 26 USC Section
3121(a)(1) and 26 USC Section 3306(b)(1) and the regulations thereunder. Such
treatment shall apply to all persons employed by the Seller and employed by the
Buyer after the Closing. The parties further agree to handle all reporting
requirements mandated by 26 USC Section 6011(a) and 26 USC Section 6051(a)
and the regulations thereunder under the procedures set forth in Section 5
("Alternate Procedures") of Rev. Proc. 83-66, 1983-36 I.R.S. 15, as amended by
Rev. Proc. 84-77, and particularly Section 5 (Alternate Procedure) thereof. The
parties shall cooperate in the exchange of information required by this Section.
The Buyer shall reimburse the Seller for any and all penalties assessed on the
Seller due to the Buyer's failure to comply with 26 USC Section 6051(a) and
regulations thereunder.
B. Pursuant to Section 5 of IRS Rev. Proc. 84-77, Buyer will assume
Seller's obligation to furnish Forms W-2 to employees of the Business subject to
U.S. income tax for the year in which the Closing occurs. Seller will provide
Buyer the information not available to Buyer relating to periods ending on or
before the Closing necessary for Buyer to prepare and distribute Forms W-2 to
employees of the Business for the year in which the Closing occurs, which forms
will reflect all remuneration earned by employees from both Seller and Buyer
during such year. Buyer will prepare and distribute such forms.
9.10 Employee Benefit Plans.
A. On the Closing Date, Buyer will:
1. Become plan sponsor, plan administrator, and assume all "Employee
Benefit Plans" as defined herein, which are separately maintained
by Seller for the Business (or simply assume any Employee Benefit
Plans maintained by or for any union representing employees of
the Business) as of the Closing Date, and all contributions
therefor will be prorated as of the Closing Date; and
2. Not become plan sponsor, plan administrator or assume any other
Employee Benefit Plans which are not described in Section 9.10.
A.1. above to cover employees of the Business. Buyer will
establish comparable Employee Benefit Plans to those not assumed
hereunder to cover employees of the Business it hires on or after
the Closing Date.
B. Seller shall have the obligation to continue to offer and provide
such continuation of coverage as required by Section 4980B of the Code and in
Regulation ss. 1. 162-26 and Sections 601 and 608 of ERISA and compliance with
the Health Insurance Portability and Accountability Act of 1996 to all of its
employees, former employees and qualified beneficiaries
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(including employees and qualified beneficiaries who incur a qualifying event as
the result of the sale of assets contemplated by this Agreement). Buyer shall
also fulfill the requirements of the Family and Medical Leave Act (FMLA) with
respect to employees of the Business who have taken or requested an
FMLA-qualifying leave on or before the time of the Closing. Buyer shall have no
obligation to provide continuation of coverage except with respect to those
employees (and their qualifying beneficiaries) who are employed by Buyer and who
after enrollment in Buyer's group health plan incur a subsequent qualifying
event which causes a loss of coverage under Buyer's group health plan.
C. "Employee Benefit Plan(s)" means all benefit plans within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended (29 USC 100 et seq.) ("ERISA"), which have been or are currently
contributed to or maintained by the Seller or any predecessor employer as such
term is utilized in Section 414(a) of the Internal Revenue Code of 1986, as
amended, (the "Code") or any employer who was or is within the same controlled
group of corporation as with the Seller (as defined in Code Section 414(b)), or
any employer who was or is in a partnership under common control with the Seller
(as defined in Code Section 414(c)), or any employer who was or is a member of
an affiliated service group with the Seller (as defined in Code Section 414(m)),
including but not limited to any agreement, policy or practice providing
benefits including any payroll practice, severance pay plan, arrangement or
practice, percentage compensation plan, executive compensation plan, bonus plan,
profit sharing, incentive compensation plan or arrangement, union plan, employee
stock ownership or stock purchase plan, deferred compensation or supplemental
agreement or arrangement, and any fringes such as holiday pay, employee gifts
and employee discount purchases.
10. INDEMNIFICATION.
10.1 Survival. All representations, warranties, covenants and agreements
set forth in this Agreement or in any writing delivered in connection with this
Agreement will survive the Closing Date and the consummation of the transactions
contemplated hereby. Representations, warranties and covenants made hereunder,
other than those contained in Section 10.2.A.(iv), shall survive the execution
and delivery of this Agreement and the Closing Date for a period of one (1) year
after the Closing Date. Representations, warranties and covenants contained in
Section 10.2.A.(iv) shall survive the execution and delivery of this Agreement
and the Closing Date for a period of six (6) years after the Closing Date.
Seller's liabilities with respect to the Retained Liabilities are unlimited as
to dollar amount and survival period and nothing herein shall be deemed to limit
in any way whatsoever Seller's liability respecting the Retained Liabilities.
17
<PAGE> 22
10.2 Indemnification by Seller or Buyer.
A. Subject to the limitations set forth in Section 10.2B. below, the
Seller agrees to indemnify Buyer, its officers, managers, and members (the
"Buyer Parties") and hold them harmless against any loss, liability, deficiency,
damage or expense including, but not limited to, legal expenses and costs,
("Losses") which Buyer Parties may suffer, sustain or become subject to, as a
result of (i) the breach of any representation or warranty contained in Article
5 of this Agreement; (ii) the breach of any representation, warranty (other than
representations or warranties set forth in Article 5), covenant or agreement
made by the Seller contained in this Agreement; (iii) any Retained Liabilities
or Retained Contracts; or (iv) any liability or obligation known by Seller's
officers to exist or to be likely to be incurred but not disclosed to Buyer's
president prior to the date of this Agreement; and any other liability or
obligation arising out of Seller's conduct of the Business or state of facts in
existence prior to the Closing Date to the extent such liabilities or
obligations give rise to any personal or vicarious liability to any of Buyer's
members or their affiliates.
B. The indemnification provided for in Section 10.2A.(i) or (ii) is
subject to the following limitations:
1. The Seller will be liable to Buyer Parties for a Loss only if the
Buyer gives the Seller a written "Claim Notice" (as defined in
Section 10.2. D.) therefor within one (1) year after the Closing
Date;
2. The Seller will not be liable to Buyer Parties for any such
Losses unless and until the aggregate amount of all such Losses
relating to all such breaches exceeds Fifty Thousand and no/100
Dollars ($50,000.00), and then only for the amount in excess of
that level; and
3. The Seller will not be liable to Buyer Parties for any such
Losses to the extent that such Losses exceed One Million Fifty
Thousand Dollars ($1,050,000.00) in the aggregate.
C. The Buyer agrees to indemnify the Seller, its officers, directors
and shareholders (the "Seller Parties") and hold them harmless against any
Losses the Seller Parties may suffer, sustain or become subject to, as a result
of (i) a breach (or alleged breach) of any representation, warranty, covenant,
or agreement by Buyer contained in this Agreement, or (ii) any Assumed
Liability, including any Assumed Contract or Current Liability.
D. If a party hereto seeks indemnification under this Section 10.2,
such party (the "Indemnified Party") shall give written notice to the other
party (the "Indemnifying Party") specifying in reasonable detail the basis for
the claim. In that regard, upon any suit, action, or claim
18
<PAGE> 23
of liability or obligation being brought or asserted by any third party which,
if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to this Section 10.2, the Indemnified Party shall promptly notify the
Indemnifying Party of the same in writing, specifying in detail the basis of
such claim and the facts pertaining thereto (a "Claim Notice"). Then
Indemnifying Party shall, at its own expense, be entitled to participate in and,
to the extent that it shall desire, assume the defense of any such claim or
proceeding. If the Indemnifying Party elects to assume control of such defense
or settlement, the Indemnifying Party shall within thirty (30) days (or sooner,
if the nature of the matter so requires) notify the Indemnified Party of its
intent to do so, and the indemnified party shall cooperate with all reasonable
requests, in the compromise of, or defense against, such claim or proceeding and
shall make available to the Indemnifying Party any books, records, other
documents or personnel within its control that are necessary or appropriate for
such defense. If the Indemnifying Party elects to assume control of such defense
or settlement, it shall conduct such defense or settlement in a manner
reasonably satisfactory and effective to protect the Indemnified Party; no
compromise or settlement shall be agreed or made without the Indemnified Party's
written consent. In any case, the Indemnified Party shall have the right to
employ its own counsel and such counsel may participate in such action, but the
fees and expenses of such counsel shall be at the expense of the Indemnified
Party. If the Indemnifying Party does not elect to assume the defense or
settlement in a manner reasonably satisfactory to protect the Indemnified Party
fully, the Indemnified Party may engage independent counsel to assume the
defense and may contest, pay, settle or compromise any such claim on such terms
and conditions as the Indemnified Party may determine. The reasonable fees and
disbursements of such counsel (as well as amounts paid in settlement and any
amount paid under a judgment against any Seller Parties) shall constitute
amounts for which indemnification shall be made hereunder. Indemnification
obligations shall survive until paid, once a timely Claim Notice has been given.
10.3 Indemnity Payments. The parties agree that any amounts owed by the
Indemnifying Party to the Indemnified Party pursuant to this Section 10 may be
offset by the Indemnifying Party against any other amounts owing from the
Indemnified Party to the Indemnifying Party.
11. GENERAL PROVISIONS.
11.1 Successors and Assigns. The rights under this Agreement are not
assignable, nor are the duties delegable by a party, without the written
consent of the other party first having been obtained, and any attempted
assignment or delegation without such consent will be null and void.
11.2 Section Headings. The Section headings contained in this Agreement are
for convenience of reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
19
<PAGE> 24
11.3 Cooperation. Each of the parties hereto agrees to use reasonable
commercial efforts to cause all conditions precedent to its obligations under
this Agreement to be satisfied.
11.4 Expenses. Whether or not the obligations of the parties hereto are
performed and except as otherwise expressly provided herein, each party shall
pay its own expenses incident to the preparation of this Agreement and for the
consummation of the transactions contemplated hereby.
11.5 Schedules. The Schedules to this Agreement shall be delivered by the
parties hereto contemporaneously with the execution and delivery of this
Agreement, except as otherwise expressly provided herein. All the Schedules,
Exhibits and other attachments to this Agreement are hereby incorporated herein
by reference and constitute a part of this Agreement as if fully set forth
herein. This Agreement together with the Schedules, Exhibits and other
attachments hereto constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof and may not be changed, modified or
amended except by an instrument in writing signed by the parties; provided,
however, that Seller is permitted to unilaterally update any Schedule or Exhibit
to the date of Closing as it deems necessary, and Seller will not have breached
any representation or warranty due to the differing content or time of making
such Schedule disclosures.
11.6 Counterparts. This Agreement maybe executed in any number of
counterparts, each of which when executed and delivered shall be an original,
and all such counterparts shall constitute but one and the same instrument. This
Agreement, once executed, may be delivered to either party through the use of
facsimile transmission. In this regard, any and all signatures of the parties
appearing on any facsimile copies of the signature page of this Agreement shall
be deemed, unless otherwise proved, the lawful and valid signature of the
executing party.
11.7 Notice. All notices, requests, demands and other communications under
this Agreement must be in writing and will be deemed duly given, unless
otherwise expressly indicated to the contrary in this Agreement: (i) when
personally delivered; (ii) upon receipt of a telephonic facsimile transmission
with a confirmed telephonic transmission answer back; (iii) three (3) days after
having been deposited in the United States mail, certified or registered, return
receipt requested, postage prepaid; or (iv) one (1) business day after having
been dispatched by a nationally recognized overnight courier service, addressed
to the intended recipient or its permitted assigns at the following addresses
(or at such other address or number as is given in writing by either party to
the other) as follows:
20
<PAGE> 25
If to Seller or Seller Parties:
LDM Technologies, Inc. Facsimile: (248) 858-2812
2500 Executive Hills Drive
Auburn Hills, Michigan 48326
Attn: Gary E. Borushko
With a copy to:
Michael B. Lewis, Esq. Facsimile: (248) 362-1358
Dean & Fulkerson, P.C.
801 W. Big Beaver Road, Suite 500
Troy, Michigan 48084
If to Buyer or Buyer Parties:
DBM Technologies, Inc. Facsimile: (313) 465-7513
2500 Executive Hills Drive
Auburn Hills, Michigan 48326
Attn: Larry Crawford
With a copy to:
Alex L. Parrish, Esq. Facsimile: (313) 465-7513
Honigman Miller Schwartz & Cohn
2290 First National Building
Detroit, Michigan 48226
11.8 Severability. In the event that any provision of this Agreement shall
be declared by a court of competent jurisdiction to be invalid, illegal, or
otherwise unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
11.9 Governing Law. This Agreement shall be governed by the laws of the
State of Michigan.
11.10 Wavier. No delay or omission to exercise any right, power, or remedy
accruing to any party hereto upon any breach or default by another party shall
impair any such right, power, or remedy except as expressly set forth herein.
Any waiver, permit, consent, or approval of any kind or character of any breach
or default under this Agreement or any waiver of any provisions or conditions of
this Agreement must be in writing and shall be effective only to the extent
specifically
21
<PAGE> 26
set forth in such writing. The rights and remedies granted the parties under
this Agreement are cumulative and the waiver of any single remedy will not
constitute a waiver of such party's right to assert all other legal remedies
available to it under the circumstances.
11.11 Public Statements. After the date of this Agreement, neither Seller
nor Buyer will issue any press release or make any other public statement with
respect to this Agreement and the transactions contemplated hereby without the
prior consent of the other party (which consent shall not be unreasonably
withheld), except as may be required by applicable law; provided that the
foregoing limitation shall terminate with respect to each party upon Closing,
subject to the restrictions of Section 9.8.
11.12 Entire Agreement. This Agreement constitutes an agreement solely
between the parties hereto, and is not intended to and shall not confer any
rights, remedies, obligations, or liabilities, legal or equitable, including any
right of employment, on any person (including, without limitation, any employees
or former employees of the Business) other than the parties hereto and their
respective legal representatives, successors, or permitted assigns, or otherwise
constitute any person a third party beneficiary under or by reason of this
Agreement. Nothing in this Agreement, expressed or implied, is intended to or
shall constitute the parties hereto partners or participants in a joint venture.
11.13 Termination. This Agreement may be terminated by mutual written
consent of all of the parties hereto.
11.14 Affiliate; Knowledge. The term "Affiliate" or "affiliate" shall mean
any person or entity, directly or indirectly controlling, controlled by, or
under common control with the other person or entity. "Knowledge" of a person as
used in this Agreement with respect to facts or circumstances shall mean actual
knowledge of the person. Actual knowledge of any officer, but only an officer
(or if there are no officers, of a manager) of such party will be imputed and
deemed to be actual knowledge of such party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date set forth above.
SELLER:
WITNESSES: LDM TECHNOLOGIES, INC.
By:
- ----------------------------- -----------------------------------------
Its:
- ----------------------------- -----------------------------------
22
<PAGE> 27
BUYER:
DBM TECHNOLOGIES, LLC
By:
- ------------------ ---------------------------
Its: CEO
- ------------------ ---------------------------
23
<PAGE> 28
LIST OF SCHEDULES
-----------------
1.2 Facility Locations
1.4 Retained Contracts
3.3 Allocation
5.4 Conflicts
5.6 Encumbered Assets
5.7 Litigation
24
<PAGE> 29
SCHEDULE 1.2
FACILITY LOCATIONS
------------------
1. 1470 McMillan ("Owosso West")
Owosso, Michigan 48867
2. 1650 E. South Street ("Owosso East")
Owosso, Michigan 48867
3. 503 S. Shiawassee
Corunna, Michigan 48817
4. 539 N. Belvedere
Gallatin, Tennessee 37066
5. 838 Industrial ("Owensboro North")
Owensboro, Kentucky 42301
6. 518 Industrial ("Owensboro South")
Owensboro, Kentucky 42301
25
<PAGE> 30
SCHEDULE 1.4
RETAINED CONTRACTS
------------------
NONE.
26
<PAGE> 31
SCHEDULE 3.3
ALLOCATION
-----------
Cash $ 4,352
Other Current Assets $ 8,785,733
27
<PAGE> 32
SCHEDULE 5.4
CONFLICTS
---------
NONE.
28
<PAGE> 33
SCHEDULE 5.6
ENCUMBERED ASSETS
-----------------
- - BankAmerica Business Credit, Inc. ("BABC") has a security interest in
all of the Assets of Seller. Such security interest will be released
by BABC at the Closing, and Seller shall own and possess all right,
title and interest in and to the Assets free and clear of all Liens or
other restrictions on transfer.
29
<PAGE> 34
SCHEDULE 5.7
LITIGATION
----------
See attached.
30
<PAGE> 35
January 29, 1999
OUTSTANDING LIABILITY CLAIMS - DBM
KENCO NORTH
Rebecca Mendez Employment Claim.
Settled in the amount of $2,000.00. Check issued on 1/21/99.
Waiting for signed settlement & release.
Larry Jackson Labor Arbitration
10/9/98 had a triple by-pass and was returned to work
without restriction. Claimed he could not pick-up part
weighing 20 pounds (part actually weighed less than ig).
He was terminated and wants to return to work with back
pay. We won the unemployment case and so far all of the
arbitration appeals. Anita does not believe he will get
his job back.
Paulette Parson Department of Labor - Denied family leave.
Dismissed or dropped. Employee falsified the doctors note.
No other correspondence received after 9/30/97 (See
attached)
KENCO SOUTH
No outstanding liability cases.
KENCO CORUNNA
Charel Stevens The Bullard-Plawecki Act
Settlement in the amount of $9,000.00 was awarded to
Ms. Stevens. Approval for settlement and payment given on
January 20, 1999. Waiting for signed settlement & release.
(See attached)
Donald Weekly Employee was terminated for attendance on December 3,
1998. Missed the day after the funeral of his grandparent.
Received letter from an attorney inquiring into the
termination. Our attorney responded to the letter. No
petitions or legal papers have been filed.
Amy Kingsler Sexual Harassment Case
Karrie Lane No correspondence since late 1998.
Lisa Reed (See R. Lapak to view file.)
<PAGE> 36
Page Two
January 29, 1999
OUTSTANDING LIABILITY CLAIMS-DBM
Linda McIntire Terminated from employment on August 5, 1997.
Letter received from an attorney August 20, 1997. No
correspondence to date.
<PAGE> 37
JANUARY 29, 1999
WORKER'S COMP RESOLVED/UNRESOLVED POSSIBLE LEGAL CASES AT DBM TECHNOLOGIES
MICHIGAN
EMPLOYEE NAME DATE OF INCIDENT CURRENT STATUS
Ariss, Charles 4/17/97 Discussion of offer occurred.
Redemption offer made ($70,000) file to be closed in approximately 60 days.
Permanently restricted, unable to work here.
Brewer, Bradley 6/18/98 Applied for Mediation or Hearing,
disputes compensation paid by Travelers. RESOLVED, compromised and petition
removed. Quit employment.
Harvey, Marcus 4/19/98 Made application for Hearing, disputes
Travelers denial of claim. Trial date set for 2/2/99. Released from employment.
Horn, Christopher 10/9/97 Made application for Hearing disputes
Travelers response to claim. RESOLVED, compromised and petition removed.
Currently working.
Kingsley, Amy 9/18/97 Made application for Hearing, disputes
Travelers response to claim. Nuisance settlement offer made ($3,500) to date not
response. Permanently laid off of work.
McCormic, Cheryl 4/2/97 Made application for Hearing, disputes
Travelers response to claim. Redemption to occur 2/10/99 for $10,000.
Theil, Colleen 8/2/97 Made application for Hearing, disputes
Travelers response to claim. Settlement negotiations currently on-going (max
offer $10,000). Released from employment.
Ulrich, Debbie 12/13/96 Discussion of offer has occurred.
Fireman's Fund has not responded to my question of whether Kenco was premium
paid or self-insured. Currently off of work due to restrictions. If under
insured plan, approved S44,000.00.
<PAGE> 38
LIST OF EXHIBITS
----------------
2.10.A.2 Buyer Note
<PAGE> 39
EXHIBIT 2.10.A.2
BUYER NOTE
----------
See attached.
32
<PAGE> 40
SUBORDINATED
PROMISSORY NOTE
$ 1,758,015.00 DECEMBER 31, 1999
AUBURN HILLS, MICHIGAN
FOR VALUE RECEIVED, the undersigned, DBM Technologies, LLC ("DBM") a
Michigan limited liability company ("Maker") promises to pay to the order of LDM
TECHNOLOGIES, INC. ("Holder") the principal sum of One Million Seven Hundred
Fifty-Eight Thousand and Fifteen ($ 1,758,015.00) Dollars in lawful money of the
United States of America, or such greater or lesser amount as may be set forth
in the grid attached hereto, together with interest on the unpaid principal
balance at the rate of nine and one-half percent (9.50%), compounded quarterly
until fully paid, and if any principal or interest is not paid when due, then
interest upon the unpaid balance shall be at the rate of eleven percent (11%)
per annum during the period of any default in payment. Said principal and
interest shall be paid by Maker during the term hereof in lawful money of the
United States in quarterly principal payments of ___________________________
($________________) Dollars, together with accrued interest, with the first
payment due on April 1, 1999, provided, however, that this Subordinated
Promissory Note shall be paid in full on or before February 2, 2003.
All payments shall be applied first against accrued interest, if any, and
the remainder against the principal amount then outstanding.
Payments hereunder shall be made to: LDM Technologies, Inc.
2500 Executive Hills Dr.
Auburn Hills, Michigan 48326
Attention: Gary E. Borushko
or such other place as Holder shall designate from time to time.
This Subordinated Promissory Note is subordinated to the interest of
BankAmerica Business Credit, Inc. ("BABC") pursuant to that certain
Subordination Agreement dated as of December 31, 1998 by and between Holder and
BABC and its Agents. In addition, Maker is a party to a Loan and Security
Agreement (the "Loan and Security Agreement") with BABC which provides that
Maker may not make any payments hereunder during the term of the Loan and
Security Agreement. In the event that Maker is prevented from paying principal
and interest hereunder by the terms of the Loan and Security Agreement, the
failure to make such payments shall not constitute a default hereunder and
principal due hereunder shall continue to accrue interest at the rate of nine
and one-half (9.5%) percent until such restriction is no longer applicable.
If any payment of principal of, or interest on, this Subordinated
Promissory Note shall become due on a Saturday, Sunday or public holiday under
applicable laws, or any other day on which banking institutions are authorized,
or obligated by law, to close, such payment shall be made
<PAGE> 41
on the next succeeding business day and the extension of time shall in such case
be included in computing interest in connection with such payment.
Maker shall have the right at any time, and from time to time, to prepay,
in whole or in part, the unpaid principal and/or interest accrued thereon,
without penalty, such payments being applied first to the payment of accrued
interest and the balance to the payment of principal.
In the case of (a) a default in the payment of principal of and/or interest
on this Subordinated Promissory Note when due, (b) an assignment for the benefit
of the creditors of maker, (c) the filing of a petition in bankruptcy or under
any debtor's law by or against Maker (which is not stayed or vacated within
thirty days thereafter) for the relief or reorganization of Maker, or for the
composition, extension, arrangement or readjustment of any of the obligations of
Maker, (d) the appointment of any trustee, receiver or liquidator or similar
official having jurisdiction over any substantial part of the property of Maker,
or (e) a default in any other obligation of maker under this Subordinated
Promissory Note, then in any such event, the principal of this Subordinated
Promissory Note and all accrued interest thereon may, at the option of Holder,
be declared due and payable, whereupon the same shall forthwith immediately
become due and payable.
If suit is brought to enforce the terms of this Subordinated Promissory
Note, Holder shall be entitled to collect all reasonable costs and expenses of
such suit, including, but not limited to, actual reasonable attorney's fees.
Each party to this Subordinated Promissory Note, whether as Maker,
endorser, guarantor, surety or assignor, waives presentment for payment, demand,
protest, notice of protest and notice of dishonor and nonpayment of this
Subordinated Promissory Note, and all defenses on the grounds of delay or of any
extension of time at or after maturity for the payment of this Subordinated
Promissory Note, which may hereafter be given by the Holder or holders to them,
any of them or to anyone who has assumed the payment of this Subordinated
Promissory Note, and each of them agrees to all of the terms of this
Subordinated Promissory Note and agrees that this is the joint and several
obligation of the parties to this Subordinated Promissory Note.
No failure or delay on the part of Holder in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof, or the exercise of any other right or power. The rights and remedies of
Holder hereunder are cumulative and not exclusive of any rights or remedies
which otherwise would be available. Neither any modification or waiver of any
provision of this Subordinated Promissory Note, nor any consent to any departure
by Maker therefrom, shall in any event be effective unless the same shall be in
writing, signed by the person against whom enforcement of such modification,
waiver or consent is sought, and then such modification, waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
<PAGE> 42
The provisions of this Subordinated Promissory Note shall be liberally
construed in favor of the subordination of Holder's debt to its Lenders (as
defined in the Loan and Security Agreement) and shall be cumulative to the
rights its Lenders may have or acquire pursuant to the Loan Agreement, whether
by operation of law, by contract or otherwise.
The obligations of Maker under this Subordinated Promissory Note shall
inure to the benefit of Holder and its successors, assigns and legal
representatives, as the case may be. This Subordinated Promissory Note is made
in and shall be governed by the laws of the State of Michigan.
DBM Technologies, LLC
"Maker"
By: ______________________
Its: _____________________
3
<PAGE> 1
EXHIBIT 10.5
ASSET PURCHASE AGREEMENT
BETWEEN
GL INDUSTRIES OF INDIANA, INC.,
an Indiana corporation
("Seller")
AND
NEW GLI, INC.,
an Indiana corporation
("Purchaser")
<PAGE> 2
TABLE OF CONTENTS
1.0 Purchase and Sale....................................................1
1.1 Furniture, Fixtures and Equipment .............................1
1.2 Inventory .....................................................1
1.3 Contracts .....................................................2
1.4 Intangibles ...................................................2
1.5 Books and Records .............................................2
1.6 Sales and Advertising Materials................................2
1.7 Permits, Etc...................................................2
2.0 Excluded Assets......................................................3
3.0 Assumption of Liabilities............................................3
4.0 Purchase Price.......................................................3
4.1 Payment of Purchase Price......................................3
4.2 Determination of Purchase Price................................4
4.3 Allocation of Purchase Price ..................................4
5.0 The Closing..........................................................4
5.1 .................................................................4
5.2 .................................................................5
6.0 Representations and Warranties of Seller ............................5
6.1 Organization, Existence and Power..............................5
6.2 No Breach; Authorization.......................................5
6.3 Subsidiaries...................................................6
6.4 Title to Properties............................................6
6.5 Condition of Equipment.........................................6
6.6 Inventory......................................................6
6.7 Litigation.....................................................7
6.8 Advance Payments...............................................7
6.9 Contracts......................................................7
6.10 Compliance With Laws...........................................7
6.11 Broker, Finder.................................................8
6.12 Financial Statements...........................................8
6.13 Undisclosed Liabilities........................................8
6.14 Absence of Certain Conditions..................................9
6.15 Environmental Matters..........................................9
6.16 Customers......................................................9
i
<PAGE> 3
6.17 Suppliers .....................................................9
6.18 Employee Benefit Plans.........................................9
6.19 Disclosure ...................................................10
7.0 Representations and Warranties of Purchaser.........................10
7.1 Corporate Organization.........................................10
7.2 Authorization..................................................10
7.3 No Conflict or Breach..........................................11
7.4 Broker, Finder.................................................11
8.0 Covenants of the Seller.............................................11
8.1 Conduct of Business ...........................................11
8.2 No Encumbrances................................................11
8.3 Books and Records..............................................12
8.4 Investigation by and Notice to the Purchaser...................12
8.5 Consents.......................................................12
8.6 Additional Agreements..........................................12
8.7 Inconsistent Activities........................................13
8.8 Remittance of Purchaser's Monies...............................13
8.9 Release of Guarantor...........................................13
9.0 Termination.........................................................13
10.0 Conditions to Purchaser's Obligation................................14
10.1 Performance...................................................14
10.2 Representations and Warranties True...........................14
10.3 Officer's Certificate.........................................14
10.4 Corporate Action..............................................14
10.5 Lease of Facility.............................................15
11.0 Conditions to Seller's Obligation...................................15
11.1 Performance...................................................15
11.2 Representations and Warranties True...........................15
11.3 Officer's Certificate.........................................15
11.4 Corporate Action..............................................16
11.5 [RESERVED]....................................................16
12.0 Survival of Representation and Warranties...........................16
13.0 Indemnifications....................................................16
13.1 General Indemnification by Seller.............................16
13.2 General Indemnification by Purchaser..........................17
13.3 Conditions of General Indemnifications........................17
ii
<PAGE> 4
14.0 General..............................................................18
14.1 Notices.......................................................18
14.2 Expenses......................................................19
14.3 Confidentiality...............................................19
14.4 Waiver, Discharge, Etc........................................20
14.5 Bulk Transfer Laws............................................20
14.6 Assignment....................................................20
14.7 Cooperation...................................................21
14.8 Severability..................................................21
14.9 Schedules............................................................21
14.10 Captions......................................................21
14.11 Complete Agreement............................................21
14.12 Conterparts...................................................22
14.13 Passage of Title and Risk of Loss.............................22
14.14 Governing Law.................................................22
EXHIBIT 4.2(a)(i)...........................................................25
LDM Subordinated Note ................................................25
EXHIBIT 4.2(a)(ii) .........................................................26
Luke Subordinated Note................................................26
EXHIBIT 10.5(a).............................................................27
Assignment and Assumption.............................................27
EXHIBIT 10.5(b).............................................................28
Second Amendment......................................................28
SCHEDULE 1.1................................................................29
Furniture, Fixtures and Equipment.....................................29
SCHEDULE 1.2................................................................30
Inventory.............................................................30
SCHEDULE 1.3................................................................31
Contracts.............................................................31
SCHEDULE 4.3 ...............................................................32
Purchase Price Allocation.............................................32
1
<PAGE> 5
THIS ASSET PURCHASE AGREEMENT, dated as of April _, 1999 (the "Agreement"),
by and between G L Industries of Indiana, Inc., an Indiana corporation
("Seller"), and New GLI Inc., an Indiana corporation ("Purchaser"),
WITNESSETH:
WHEREAS, Seller is engaged in the business of manufacturing and selling
plastic products (the "Business"); and
WHEREAS, Seller desires to sell or otherwise transfer the benefits of, and
Purchaser desires to acquire from Seller all of Seller's right, title and
interest in and to substantially all of the assets of the Seller used in the
Business, including, without limitation, substantially all of the assets at
Seller's facility at 2860 N. National Road, Columbus, Indiana (the "Facility")
in exchange for the consideration hereinafter specified;
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto do hereby agree as follows:
1.0 PURCHASE AND SALE.
Subject to the terms and conditions of this Agreement, and in reliance
on the representations and warranties contained herein, on the Closing Date (as
hereinafter defined) the Seller shall sell, convey, assign, transfer and deliver
to the Purchaser, and the Purchaser shall purchase and acquire all of the
assets, including, but not limited to the cash and cash equivalents,
inventories, notes and accounts receivable, prepaid expenses, properties,
rights, contracts, operations and businesses of every kind and description,
wherever located, whether tangible or intangible, utilized by Seller in the
Business (except those assets specifically described in Section 2.0 below)
including, without limitation, the following (the "Assets"):
1.1 FURNITURE, FIXTURES AND EQUIPMENT.
All fixed and tangible assets utilized in the Business, including all
machinery, equipment, fixtures, warehouse and office equipment, test equipment,
delivery trucks, furniture and all other such tangible personal property,
including, but not limited to, the items identified on Schedule 1.1 attached
hereto and all documents and records related thereto (the "Equipment").
1.2 INVENTORY.
All supplies and spare parts and all inventories of goods of the
Seller utilized in the Business including, but not limited to, the items listed
on Schedule 1.2, attached (the "Inventory").
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1.3 CONTRACTS.
All of Seller's right, title and interest, if any, in and to contracts
with suppliers and unfilled customer orders, including, but not limited to,
those listed on Schedule 1.3, attached (the "Contracts").
1.4 INTANGIBLES.
All of Seller's right, title and interest, if any, in and to any
copyrights, licensing agreements, trademarks, service marks, trade names
(including the names "G L Industries of Indiana, Inc.", "Como Plastics", "Como
Products", and "Como Products Corporation") and logos and any registrations and
applications therefor, trade secrets, know-how, and any other proprietary
confidential information utilized in the Business.
1.5 BOOKS AND RECORDS.
All books, payment records, accounts, correspondence, sales records,
correspondence, business plans, employment records and other useful business
records utilized by Seller, including electronic media, of every description
relating to the Business and reasonably required for Purchaser to operate the
Business (excluding corporate books and permanent financial and tax records of
the Seller).
1.6 SALES AND ADVERTISING MATERIALS.
All customer lists, sales aids, sales literature, price lists,
advertising materials, mats and all other sales and marketing data and material
of every description relating to the Business of Seller.
1.7 PERMITS, ETC.
All permits, licenses, product registrations, filings, authorizations,
approvals or indicia of authority (and any pending applications for any thereof)
(a) to conduct the Business and operations of the Business and to own,
construct, operate and maintain any fixture, facility, equipment, vehicle,
machinery or installation of the Business, and (b) to store, transport, treat,
discharge, dispose of, market or sell any goods or any substance (including,
without limitation, materials classified as "hazardous materials" or "hazardous
substances" or "hazardous waste") used, handled, produced, stored, transported,
treated, discharged, disposed of, marketed or sold in the Business or operations
of the Business, as issued by any government agency, authority or other
instrumentality of the United States or any state or political subdivision
thereof.
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2.0 EXCLUDED ASSETS.
The parties agree that the following are excluded from the purchase
and sale hereunder and are not included in the Assets (the "Excluded Assets"):
(a) Seller's rights under or pursuant to this Agreement.
3.0 ASSUMPTION OF LIABILITIES.
Upon the sale and purchase of the Assets, Purchaser shall assume and
be responsible for any and all liabilities and obligations of Seller (the
"Assumed Liabilities"), including, without limitation, all known, unknown,
liquidated and contingent liabilities or obligations with respect to (a) any
income, gross receipts, sales, use, transfer, personal property, real property,
or other similar taxes of Seller due or to become due in respect of matters
arising prior to the Closing; (b) current and former employees of Seller or
employee benefit plans of Seller; (c) any lawsuit, action, proceeding or
investigation pending or threatened against Seller; (d) workers compensation
claims filed in respect of conditions or occurrences prior to the Closing; (e)
any claims or remedial expenses arising under environmental laws (common and
statutory) attributable to acts or omissions of any party prior to Closing; (f)
product liability and warranty claims involving products sold prior to Closing;
(g) contractual obligations of Seller including, without limitation, purchase
orders and other agreements for the acquisition of products or services, leases
(including but not limited to the First Amended and Restated Lease dated as of
April 28,1993, as amended, by and between CPC Associates, Inc., as landlord, and
Seller, as tenant [the "Lease"]) and consignment agreements except to the extent
that such contractual obligations arise from executory contracts assigned to
Purchaser; and (h) any accounts payable or other obligations of Seller to pay
money to any person, including but not limited to legal fees and other
professional fees.
4.0 PURCHASE PRICE.
The price to be paid by Purchaser to Seller for the Assets shall be
approximately Five Million Six Hundred Twenty Thousand Dollars ($5,600,000.00)
and shall be determined, paid and allocated as follows:
4.1 PAYMENT OF PURCHASE PRICE.
Purchaser shall pay and perform the following in order to provide the
Purchase Price to Seller:
(a) At the Closing, on the Closing Date (as such terms are defined
herein), Buyer will (i) cancel the promissory notes representing the LDM
Technologies, Inc. debt and the Laurence M. Luke debt currently on the books of
Seller; (ii) deliver a Subordinated Promissory Note in the form of Exhibit
4.2(a)(i) attached hereto in the amount of $479,649.97
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to LDM Technologies, Inc. (the "LDM Subordinated Note"); (iii) deliver a
Subordinated Promissory Note in the form of Exhibit 4.2(a)(ii) attached hereto
in the amount of $119,783.30 to Laurence M. Luke (the "Luke Subordinated Note");
and (iv) assume and pay all Assumed Liabilities (including, without limitation,
the payment of all legal fees incurred by Seller through the Closing Date, which
will be assumed and paid by Purchaser at the Closing);
(b) After the Closing, Buyer will (i) pay or otherwise discharge and
perform all Assumed Liabilities, whether under assumed contracts or otherwise,
as they come due, without incurring penalty or interest or permitting default in
any of such obligations.
4.2 DETERMINATION OF PURCHASE PRICE.
The parties agree that the final Purchase Price shall equal the total
of the amounts of (a) the LDM Subordinated Note, (b) the Luke Subordinated Note,
and (c) the Assumed Liabilities.
4.3 ALLOCATION OF PURCHASE PRICE.
The parties agree that, for all purposes, the Purchase Price will be
allocated among the Assets in the manner specified in Schedule 4.3. The parties
agree that any returns or reports filed by either of them under any applicable
provision of the Internal Revenue Code of 1986, as amended, or with respect to
taxes generally shall reflect such allocation and shall treat the sale of the
Assets to Purchaser pursuant to this Agreement as a fully taxable transaction.
5.0 THE CLOSING.
The Closing of the purchase and sale of the Assets hereunder (the
"Closing") shall take place at such place and time as is agreed upon by the
parties (the "Closing Date").
5.1 At the Closing, unless waived or deferred in writing by the
Purchaser prior or at the Closing, the Seller shall deliver to the Purchaser, in
form and substance satisfactory to the Purchaser and counsel for Purchaser,
those documents necessary to transfer ownership of the Assets to Purchaser,
including, but not limited to, the following:
(a) A duly executed Bill of Sale conveying to Purchaser all of the
personal property (except titled motor vehicles) included in the Assets;
(b) Duly executed assignments of all of Seller's rights and
obligations under all contracts, leases, permits, licenses and similar
instruments to which Seller is a party relating to the Assets or Business,
other than Excluded Assets;
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(c) Duly executed documents required to assign and transfer to
Purchaser all trademarks, trade names and applications for any of the foregoing;
(d) Titles for the motor vehicles identified in Schedule 1. 1 properly
executed by Seller to transfer ownership to Purchaser,
(e) All documents and agreements referenced in this Agreement and the
schedules thereto (the "Schedules") or otherwise reasonably required to
implement the provisions of this Agreement; and
(f) Such other duly executed assignments, bills of sale, deeds,
endorsements, and instruments of conveyance and transfer as are necessary or
appropriate in order to sell, assign and transfer the Assets to Purchaser, and
such other documents and instruments of conveyance as Purchaser may reasonably
request in order to effectuate the transactions contemplated hereby.
5.2 At the Closing, the Purchaser shall deliver to the Seller:
(a) Payment for the Assets in accordance with Section 4.1; and
(b) Such other documents as Seller may reasonably request in order to
effectuate the transactions contemplated hereby.
6.0 REPRESENTATIONS AND WARRANTIES OF SELLER.
The Seller represents and warrants to the Purchaser that the following
statements are true and correct as of the date hereof and will be true and
correct as of the Closing Date:
6.1 ORGANIZATION, EXISTENCE AND POWER.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Indiana with full corporate power and
authority to execute, deliver and perform this Agreement. Seller is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the failure to so qualify would materially and adversely
affect its ownership of the Assets or the operation of Seller's Business and
each such jurisdiction is listed in Schedule 6.1 hereto.
6.2 NO BREACH; AUTHORIZATION.
The execution, delivery and performance of this Agreement by the
Seller has been duly authorized and approved by the directors and the
shareholders of Seller prior to Closing, and neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will (a) violate or result in the breach of the terms, conditions
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or provisions of, or constitute a default under, any provision of the Seller's
Articles of Incorporation or Bylaws, or any provision of, or result in the
acceleration of any obligation under, any mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree to which the Seller is
a party or by which the Seller is bound; (b) require the approval, consent,
authorization or other order or action of, or filing with, any court,
governmental authority or regulatory body; (c) require the consent, approval,
order or authorization of any other person (except consents to the assignment of
distribution agreements, unfilled customer orders and the Lease); (d) violate
any provision of law or any rule or regulation of any governmental or other
regulatory authority or any order or decree of any court or governmental
authority; or (e) require any declaration, filing or registration with any
governmental or regulatory authority by Seller.
The Seller has taken, or will take, all action required by law, its
Articles of Incorporation or Bylaws or otherwise to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement and each other agreement and
instrument required to be delivered hereunder by Seller, when duly executed and
delivered by Seller, constitute valid and binding obligations of Seller
enforceable in accordance with their respective terms.
6.3 SUBSIDIARIES.
Seller does not own any stock, partnership interest, joint venture
interest, or any other security issued by any other corporation, organization or
entity. No part of the business or operations of Seller is conducted by or
through any of its shareholders or any affiliate of a shareholder.
6.4 TITLES TO PROPERTIES.
Seller has or at the Closing will have good and marketable title to
all of the Assets, and, upon the consummation of the transactions contemplated
hereby, Buyer will own all of the Assets free and clear of all liens,
encumbrances, covenants and conditions, other than liens in favor of The CIT
Group/Credit Finance, Inc., LDM Technologies, Inc., Laurence M. Luke, Toyota
Motor Credit Corporation and Ingersoll Rand.
6.5 CONDITION OF EQUIPMENT.
The Equipment is in good operating condition, ordinary wear and tear
excepted, and in a state of good maintenance and repair, is adequate and
suitable for the purposes for which it is presently being used, is useful in the
Business and conforms in all material respects to all applicable laws,
ordinances and regulations.
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6.6 INVENTORY.
The Inventory identified in Schedule 1.2 consists solely of products
of the kind and quality regularly sold in the Business.
6.7 LITIGATION
There are no actions, suits, claims, proceedings, investigations or
orders pending or, to the best of Seller's knowledge, threatened against or
affecting Seller relating to the operation of the Business, at law or in equity,
in any court, or before or by any federal, state, provincial, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind, which if adversely
determined could reasonably be expected to have a material adverse effect on the
ongoing business, operations, properties, assets, financial condition or
prospects of the Business or upon the Assets. Seller is not in default, and no
condition exists that with notice or the lapse of time or both would constitute
a default, with respect to any order, writ, injunction or decree of any court or
before any federal, state, provincial, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting or relating to the Business.
6.8 ADVANCE PAYMENTS.
Seller has not received progress or other advance payments from
customers with respect to unfilled customer orders to be assigned to Purchaser
hereunder, and has not rendered billings to customers except with respect to
shipments of products made.
6.9 CONTRACTS.
Schedule 1.3 sets forth a complete and accurate list of all of the
distribution agreements and unfilled customer orders to which the Seller is a
party.
6.10 COMPLIANCE WITH LAWS.
To the best of its knowledge, Seller is in compliance in all material
respects, and there exists no alleged noncompliance, with applicable statutes,
orders, rules and regulations promulgated by governmental authorities relating
in any material respect to the Assets or the operation or conduct of the
Business, or the use of the properties of the Business, including, without
limitation, any applicable statute, order, rule or regulation relating to (i)
wages, hours, hiring, non-discrimination, promotion, retirement, benefits,
pensions and working conditions; (ii) air, water, toxic substances, noise, odor,
or solid, gaseous or liquid waste generation, handling, storage, disposal or
transportation; (iii) health and safety; (iv) zoning and building codes; (v) the
production, storage, processing, advertising, sale, transportation,
distribution, disposal, use and warranty of products of the business or (iv)
trade and anti-trust regulations,
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and Seller has not received any notice of alleged violation of any such statute,
order, rule or regulation which remains uncured.
6.11 BROKER, FINDER.
Neither Seller nor its officers, directors or employees has employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated
herein.
6.12 FINANCIAL STATEMENTS.
Seller has delivered to Purchaser copies of the following financial
statements (hereinafter collectively called the "Financial Statements"), and the
Financial Statements are substantially complete and correct, have been prepared
from the books and records of Seller in accordance with generally accepted
accounting principles consistently applied and maintained throughout the periods
indicated and fairly present the financial condition of Seller as at their
respective dates and the results of its operations for the periods covered
thereby:
(a) unaudited balance sheets of Seller for the years 1997 and 1998,
and unaudited statements of earnings for the years then ended; and
(b) unaudited interim balance sheets of Seller for the month ending on
March 28, 1999 and Seller's unaudited statements of earnings for the periods
then ended.
Such statements of earnings do not contain any items of special or
nonrecurring income or any other income not earned in the ordinary course of
business, except as expressly specified therein, and all adjustments necessary
for fair presentation except for items which in the aggregate do not have a
materially adverse affect on the fairness or accuracy of such statements.
6.13 UNDISCLOSED LIABILITIES.
Seller does not have any material known liability or obligation
whatsoever, either accrued, absolute, contingent or otherwise, and there is no
basis for any claim against Seller for any liability or obligation except (a) to
the extent reserved for on the March 31, 1999 balance sheet (the "Latest Balance
Sheet"), (b) liabilities or obligations incurred in the normal and ordinary
course of business of Seller since February 28, 1999, all of which are reserved
for fully on the current books of Seller as reflected in the Financial
Statements, or (c) March 20, 1999 unpaid rent.
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6.14 ABSENCE OF CERTAIN CONDITIONS.
There are no conditions known to Seller existing with respect to the
markets, proposed marketing plans, products, facilities, personnel or raw
material supplies of the Business which might reasonably be expected to have a
material adverse effect on the Business or its prospects.
6.15 ENVIRONMENTAL MATTERS
(a) To the best of Seller's knowledge, no toxic or hazardous
substances have been generated, treated, stored or disposed of in or at the
Facility by Seller, nor has any activity been undertaken at the Facility by
Seller which would cause (i) the Facility to become a hazardous waste treatment,
storage or disposal facility within the meaning of federal laws and regulations
or any state law or local ordinance; (ii) a release or threatened release of
hazardous waste, or (iii) the discharge of pollutants or effluent into any water
source or system, or the discharge into the air of any emissions, which would
require a permit under any federal law or regulation or any state law or local
ordinance.
(b) To the best of Seller's knowledge, there are (i) no substances or
conditions in or at the Facility which could support a claim or cause of action
under or any federal, state or local environmental statutes, regulations,
ordinances or other environmental regulatory requirements, and (ii) no
underground storage tanks or underground deposits located on the premises.
6.16 CUSTOMERS.
Seller does not have any knowledge or information or reason to believe
that any customer of Seller has ceased, or will or may cease, to purchase
products sold by Seller, or has substantially reduced since the end of the most
recent fiscal year, or will or may substantially reduce, the purchase of
products to be sold by Purchaser, at any time after the Closing Date.
6.17 SUPPLIERS.
Seller does not have any knowledge or information that any supplier of
Seller will not sell goods, raw materials, auxiliary materials, component parts,
equipment or services to Purchaser at any time after the Closing Date on terms
and conditions similar to those imposed on prior sales to Seller.
6.18 EMPLOYEE BENEFIT PLANS.
Seller has furnished or will make available to Purchaser on written
request true and complete copies of: (i) all non-qualified, deferred or
incentive compensation or retirement plans or arrangements, (ii) all other
employee, compensation, severance or termination pay or
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welfare benefit plans, programs or arrangements, and (iii) all related trusts,
insurance contracts or other funding arrangements maintained, established or
contributed to by Seller or to which Seller is a party or otherwise bound.
Seller is not a party to and is under no obligation to contribute to any other
pension, profit sharing or other plan or arrangement, qualified or unqualified.
Seller does not maintain or contribute to any funded or unfunded medical, health
or life insurance plan or arrangement for future retirees or future terminated
employees. Seller has no obligation to make any payments or contributions to a
multi-employer plan, as that term is defined in the Employee Retirement Income
Security Act of 1974, as amended (ERISA), and Seller has no actual or potential
liability under the Multi-Employer Pension Plan Amendments Act of 1980 (Section
4201 of ERISA) for any complete or partial withdrawal from a multi-employer plan
either directly or because Seller is deemed to be under common control with an
employer having such liability.
6.19 DISCLOSURE.
None of the representations and warranties contained in this Section
and elsewhere in this Agreement made by Seller, and none of the Schedules to
this Agreement required to be delivered by Seller hereunder, contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they are made, not misleading, and all of the information contained herein
and therein is true and correct in all material respects on the date of this
Agreement and will be true and correct on the Closing Date, except to the extent
that Seller has advised Purchaser specifically in writing prior to the Closing.
Originals or true and complete copies of all documents or other written
Schedules, and all underlying items listed in such Schedules, have heretofore
been made available for examination by Purchaser, including, without limitation,
deeds, leases, mortgages, deeds of trust, security interests, instruments,
permits, trademarks, patents and other intellectual property rights, litigation
files, contracts, employee agreements and licenses, and such documents have not
been modified and will not be modified in any material respect prior to the
Closing Date without Purchaser's prior written consent.
7.0 REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to Seller that:
7.1 CORPORATE ORGANIZATION.
The Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Indiana, has corporate power to
execute, deliver and perform this Agreement and is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the failure to
so qualify would materially and adversely affect its ownership of the Assets.
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7.2 AUTHORIZATION.
The execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, by Purchaser has been duly
and effectively authorized by all necessary corporate action. This Agreement has
been duly executed and delivered and constitutes legal, valid and binding
obligations of Purchaser.
7.3 NO CONFLICT OR BREACH.
Neither the execution and delivery of this Agreement, the consummation
of the transactions contemplated hereby, nor the fulfillment of the terms hereof
will constitute, with or without the giving of notice, the passage of time, or
both, a breach or default or result in a loss of rights under or the creation of
any lien, charge or encumbrance under any agreement or instrument to which
Purchaser is a party or by which it is bound, nor will it conflict with the
Articles of Incorporation or the Bylaws of Purchaser, or with any judgment,
decree, order or award of any court, governmental body by which Purchaser is
bound, or with any law, rule or regulation applicable to Purchaser.
7.4 BROKER, FINDER.
Neither Purchaser nor its officers, directors or employees has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transaction contemplated
herein.
8.0 COVENANTS OF THE SELLER.
The Seller covenants and agrees with the Purchaser as set forth below:
8.1 CONDUCT OF BUSINESS.
From the date hereof to the Closing Date, except with the prior
written consent of Purchaser, Seller shall conduct the business in all material
respects in the ordinary course consistent with past practice and shall use its
best efforts to maintain, in accordance with sound business judgment, the
Business, to continue to meet the contractual obligations incurred in the
ordinary course of business and to pay all of its obligations as they mature in
the ordinary course of business, to keep available the services of the present
employees of the Business, and to preserve the good relations of the suppliers,
customers, distributors and others with whom the Seller has business relations.
8.2 NO ENCUMBRANCES.
Prior to the Closing Date, the Seller will not create or suffer to
exist any encumbrances on any of the Assets, or enter into any transaction or
make any commitment
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relating to any of the Assets otherwise than in the ordinary course of business,
except (a) as may be permitted hereby, (b) with the written consent of the
Purchaser, or (c) which are curable at or before Closing.
8.3 BOOKS AND RECORDS.
At all reasonable times after the Closing Date, the Seller shall make
available any of the Seller's books and records relating to the Business which
are not to be transferred to the Purchaser pursuant to this Agreement. The
Seller shall not dispose of any books and records relating to the Business
without first giving notice to the Purchaser and permitting the Purchaser to
retain such books and records as it may select.
8.4 INVESTIGATION BY AND NOTICE TO THE PURCHASER.
Prior to the Closing Date, the Seller shall give the Purchaser and its
agents full access at all reasonable times to the Facility and to all the books
and records of the Business and furnish to the Purchaser such financial and
operating data and other information with respect to the Business and properties
of Seller as the Purchaser shall from time to time reasonably request. No
investigation by the Purchaser shall affect the Seller's representations and
warranties herein or in any certificate or other writing delivered pursuant
hereto or in connection herewith.
8.5 CONSENTS.
The Seller will use its reasonable best efforts to obtain or assist
Purchaser in obtaining all consents from third parties necessary for the conduct
of the Business.
8.6 ADDITIONAL AGREEMENTS.
(a) To the extent that any of the unfilled customer orders for which
assignment to Purchaser is provided herein are not assignable without the
consent of another party, this Agreement shall not constitute an assignment or
an attempted assignment thereof if such assignment or attempted assignment would
constitute a breach thereof. If such a required consent is not obtained by the
Closing Date. The Purchaser and Seller agree to cooperate in any reasonable
arrangement designed to provide Purchaser the benefits under any such customer
order. The Seller hereby authorizes Purchaser, at the Purchaser's expense, and
the Purchaser hereby undertakes the responsibility to perform, all of the
Seller's obligations arising after the Closing Date pursuant to any unfilled
customer order and the Seller agrees to remit promptly to the Purchaser all
collections received by the Seller in respect thereof.
(b) The Seller hereby authorizes the Purchaser from and after the
Closing Date to receive and open all mail and other communications to the Seller
received by the Purchaser, and to act with respect to such communications in
such manner as Purchaser may
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elect if such communications relate to the Assets or the Business or, if such
communications do not so relate, to forward the same promptly to the Seller.
(c) After the Closing Date, the Seller shall promptly deliver to the
Purchaser the original of any mail or other communication received by it
pertaining to the Assets or the Business, and any monies, checks or other
instruments of payment to which the Purchaser is entitled.
8.7 INCONSISTENT ACTIVITIES.
Unless and until this Agreement has been terminated by its terms, the
Seller will not, other than in the ordinary course of the Seller's business:
(a) solicit, directly or indirectly, or cause any other person to
solicit any offer to acquire any of the Assets;
(b) afford any third party which may be considering the acquisition of
Seller or any part thereof access to its properties, books or records; or
(c) enter into any negotiations for, or enter into, any agreement
which provides for the acquisition of Seller or any part thereof to a person
other than in connection with the transaction contemplated herein.
8.8 REMITTANCE OF PURCHASER'S MONIES.
The Seller agrees to remit promptly to the Purchaser all monies
received by the Seller after the Closing Date to which the Purchaser is
entitled.
8.9 RELEASE OF GUARANTOR.
The Seller shall cause KeyBank National Association to release LDM
Technologies, Inc. as a guarantor of its debt with said bank on or before the
Closing Date.
9.0 TERMINATION.
This Agreement may, by notice given in the manner hereinafter
provided, be terminated and abandoned at any time prior to the Closing:
(a) by the mutual written consent of the Boards of Directors of Seller
and Purchaser;
(b) by either Seller or Purchaser if (i) a material default or breach
shall be made by the other with respect to the due and timely performance of any
of its covenants and
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agreements contained herein, or with respect to due compliance with any of its
representations and warranties contained herein and such default cannot be
cured, or shall have not been cured within ten days after receipt of notice
specifying particularly such default, or (ii) the transaction is not closed on
or within thirty (30) days of April 1, 1999; or
(c) by Purchaser if all of the conditions to its obligations are not
satisfied (or are incapable of being satisfied) on or before the Closing Date,
or waived by it on or before such date; or by Seller, if all of the conditions
to its obligations are not satisfied (or are incapable of being satisfied) by
the Closing Date or waived by it on or before such date.
Each party's right of termination hereunder is in addition to any other
rights it may have hereunder or otherwise.
10.0 CONDITIONS TO PURCHASER'S OBLIGATION.
Unless waived in writing by the Purchaser, the obligations of the
Purchaser to consummate the transaction contemplated by this Agreement are
subject to the satisfaction at or prior to the Closing of the following
conditions:
10.1 PERFORMANCE.
Each of the covenants, conditions and agreements of the Seller to be
performed or complied with at or before the Closing pursuant hereto shall have
been duly performed or complied with in all material respects.
10.2 REPRESENTATIONS AND WARRANTIES TRUE.
The representations and warranties of the Seller contained herein and
in any certificate or other writing delivered by the Seller pursuant hereto or
in connection herewith shall have been true and correct in all material respects
when made and will be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of such date.
10.3 OFFICER'S CERTIFICATE.
On the Closing Date, Seller shall have delivered to Purchaser an
officer's certificate duly executed by the Chairman, President or a Vice-
President of Seller, dated the Closing Date stating that the preconditions
specified in Sections 10.1 and 10.2 have been satisfied.
10.4 CORPORATE ACTION.
The Seller shall have furnished to the Purchaser:
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(a) a copy of the Seller's Articles of Incorporation, certified as of
a recent date by the State of Indiana;
(b) a Certificate of Good Standing certified as of a recent date by
the Secretary of State of Indiana;
(c) certified copies of the resolution or resolutions duly adopted by
the Shareholders and Board of Directors of the Seller authorizing the execution,
delivery and performance of this Agreement by the Seller; and
(d) a certificate of the Secretary or an Assistant Secretary of the
Seller as to the incumbency and signatures of officers.
10.5 LEASE OF FACILITY.
Purchaser shall have assumed Seller's obligations under the Lease with
respect to the Facility, and Purchaser shall have executed a Second Amendment to
the Lease. The form of Assignment and Assumption document is attached hereto as
Exhibit 10.5(a), and the form of Second Amendment is attached hereto as Exhibit
10.5(b).
11.0 CONDITIONS TO SELLER'S OBLIGATION.
Unless waived in writing by the Seller, the obligations of the Seller
to consummate the transaction contemplated by this Agreement are subject to the
satisfaction at or prior to the Closing of the following conditions.
11.1 PERFORMANCE.
Each of the covenants, conditions and agreements of the Purchaser to
be performed or complied with at or before the Closing Date pursuant hereto
shall have been duly performed or complied with in all material respects.
11.2 REPRESENTATIONS AND WARRANTIES TRUE.
The representations and warranties of the Purchaser contained in this
Agreement and in any certificate or other writing delivered pursuant hereto or
in connection with the transaction contemplated hereby shall be true in all
material respects on and as of the Closing Date with the same effect as though
made on and as of such date.
11.3 OFFICER'S CERTIFICATE.
On the Closing Date, Purchaser shall have delivered to Seller an
officer's certificate duly executed by the Chairman, President or a Vice-
President of Purchaser, dated the
15
<PAGE> 20
Closing Date, stating that the preconditions specified in Sections 11.1 and
11.2 have been satisfied.
11.4 CORPORATE ACTION.
The Purchaser shall have furnished to the Seller:
(a) a copy of the Purchaser's Articles of Incorporation, certified as
of a recent date by the State of Indiana;
(b) A Certificate of Good Standing certified as of a recent date by
the State of Indiana;
(c) certified copies of the resolution or resolutions duly adopted by
the Board of Directors of the Purchaser authorizing the execution, delivery and
performance of this Agreement by the Purchaser; and
(d) a certificate of the Secretary or an Assistant Secretary of the
Purchaser as to the incumbency and signatures of officers.
11.5 [RESERVED]
12.0 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Notwithstanding any other term or provision of this Agreement, in all
events and under all circumstances, all of Seller's and Purchaser's
representations and warranties contained in this Agreement shall survive the
Closing Date for a period equal to the applicable statutes of limitation.
13.0 INDEMNIFICATIONS.
13.1 GENERAL INDEMNIFICATION BY SELLER.
(a) Seller hereby agrees to indemnify, defend and hold Purchaser
harmless, and allow Purchaser a right of set-off against any amounts owed
Seller, from and against any demand, claim, action or cause of action,
liability, damage and loss, including, without limitation, interest, penalty and
attorney's fee and expense, asserted against, relating to, imposed upon or
incurred by Purchaser by reason of or resulting from (i) liabilities, whether
accrued, absolute, contingent or otherwise, arising from the operation of the
Assets or the Business prior to the Closing Date, except as otherwise
specifically set forth herein; (ii) the failure of Seller to pay, discharge or
perform any liability or obligation of Seller not specifically assumed by
Purchaser pursuant to the terms of this Agreement; (iii) any untrue
representation or breach of
16
<PAGE> 21
warranty contained herein or in any certificate, document or instrument
delivered to Purchaser pursuant hereto or in connection herewith; (iv) the
nonfulfillment of any other agreement or covenant on the part of Seller
contained herein or in any certificate, document or instrument delivered to
Purchaser pursuant hereto or in connection herewith; and (v) non-compliance with
any laws relating to bulk transfers.
(b) Seller shall promptly reimburse Purchaser for all amounts owed
under this section from time to time, at its request, as such amounts are
incurred.
13.2 GENERAL INDEMNIFICATION BY PURCHASER.
(a) Purchaser agrees to indemnify, defend and hold Seller harmless
from and against any demand, claim, action or cause of action, liability, damage
and loss, including, without limitation interest, penalty and attorney's fees
and expense, asserted against, relating to, imposed upon or incurred by Seller
by reason of or resulting from: (i) the failure of Purchaser to pay, discharge
or perform any liability or obligation assumed by Purchaser under unfilled
customer orders; (ii) any untrue representation or breach of warranty contained
herein or in any certificate, document or instrument delivered to Seller
pursuant hereto or in connection herewith; and (iii) the nonfulfillment of any
other agreement or covenant on the part of Purchaser contained herein or in any
certificate, document or instrument delivered to Seller pursuant hereto or in
connection herewith.
(b) Purchaser shall promptly reimburse Seller for all amounts owed
under Section 13.2(a) from time to time, at its request, as such amounts are
incurred.
13.3 CONDITIONS OF GENERAL INDEMNIFICATIONS.
The liabilities and obligations of the parties hereunder with respect
to the general indemnifications shall be subject to the following:
(a) Prompt Notice of Claims. The party hereto seeking indemnification
(the "Indemnitee") will give the other party hereto (the "Indemnitor") notice of
any claim by a third party which could give rise to a request for
indemnification hereunder with reasonable promptness (and in any case within
thirty (30) days) after the Indemnitee receives notice of such claim, in which
event the Indemnitor will undertake the defense thereof by representatives of
its own choosing.
(b) Right to Undertake Defense. In the event the Indemnitor, within
thirty (30) days after notice of any such claim, fails to defend the claim, the
Indemnitee will (upon further notice to the Indemnitor) have the right to
undertake the defense, compromise or settlement of such claim on behalf of and
for the account and risk of the Indemnitor, subject to the right of the
Indemnitor to assume the defense of such claim at any time prior to settlement,
compromise or final determination thereof.
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<PAGE> 22
(c) Indemnitor's Right to Defend Certain Claims. In the event the
Indemnitee is defending a claim because it has not given notice or because the
Indemnitor has not undertaken the defense of the claim and there is a reasonable
probability that any such claim may materially and adversely affect the
Indemnitor other than as a result of money damages or other money payments, the
Indemnitor will have the right, at its own cost and expense, to defend,
compromise or settle such claim but the Indemnitor shall not, without the
Indemnitee's written consent, settle or compromise any such claim or consent to
entry of any judgment which does not include as an unconditional term thereof
claimant's release of the Indemnitee from all liability with respect to such
claim.
(d) Indemnitee's Right to Defend Certain Claims. In the event the
Indemnitor is defending a claim because it has undertaken the defense of the
claim and there is a reasonable probability that any such claim may materially
and adversely affect the Indemnitee other than as a result of money damages or
other money payments, the Indemnitee will have the right, at its own cost and
expense, to defend, compromise or settle such claim but the Indemnitee shall
not, without the Indemnitor's written consent, settle or compromise any such
claim or consent to entry of any judgment which does not include as an
unconditional term thereof claimant's release of the Indemnitor from all
liability with respect to such claim.
14.0 GENERAL.
14.1 NOTICES.
All notices, demands or other communications required or permitted
hereunder shall be sufficiently given if delivered by hand or sent by telecopy
or by registered or certified airmail, postage prepaid, addressed as follows:
To the Purchaser: New GLI, Inc.
2860 N. National Road
Columbus, IN 47201
Attention: Mr. John Prepolec
Copy to: Michael B. Lewis, Esq.
Dean & Fulkerson, P.C.
801 W. Big Beaver Rd., Suite 500
Troy MI 48084
To the Seller: GL Industries of Indiana, Inc.
c/o LDM Technologies, Inc.
2500 Executive Hills Drive
Auburn Hills, MI 48326
Attention: Gary E. Borushko
18
<PAGE> 23
Copy to: Michael B. Lewis, Esq.
Dean & Fulkerson, P.C.
801 W. Big Beaver Rd., Suite 500
Troy, MI 48084
or such other addresses as shall be furnished by like notice by such party. Any
such notice or communication given by mail or telecopy shall be deemed to have
been given when received.
14.2 EXPENSES.
(a) Whether the transactions contemplated by this Agreement are
consummated or fail to be consummated for any reason whatsoever, except as
otherwise expressly provided herein, each party hereto will pay all of its own
expenses, including the fees and disbursements of its counsel, accountants, and
other experts, in connection with the negotiation of this Agreement, the
performance of its obligations hereunder, and the consummation of the
transactions contemplated by this Agreement. Notwithstanding the previous
sentence, Purchaser will assume and pay at Closing all legal fees incurred by
Seller through the Closing Date.
(b) All state and local property taxes respecting the Assets
attributable to the period prior to the Closing Date shall be the responsibility
of Seller and any such amount paid by Seller prior to the Closing Date relating
to periods before and after the Closing Date shall be prorated between Seller
and Purchaser as of the Closing Date with due credit given to Seller.
14.3 CONFIDENTIALITY.
(a) Except as otherwise required by applicable law and except in the
ordinary course of business consistent with current practices, Seller will not,
and will not permit any of its affiliates or its or their directors, officers,
employees and agents to, disclose to any other party any data or information
concerning the Business or Buyer, except any data or information which: (i) was
or is in the public domain; or (ii) thereafter, through an act or failure to act
on the part of Purchaser, becomes information generally available to the public.
(b) Except as otherwise required by applicable law, Purchaser will
not, and will not permit any of its affiliates or its or their directors,
officers, employees and agents to, disclose to any other party (other than
financing institutions for purposes of financing the transactions contemplated
by this Agreement) any confidential data or information except that which: (i)
was or is in the public domain;(ii) was known to Purchaser prior to its
disclosure by Seller; (iii) is disclosed to Purchaser by a third party that is
not an agent of Seller; or (iv) thereafter, through an act of failure to act
on the part of Seller, becomes information generally available to the public.
19
<PAGE> 24
(c) In the event of the termination of this Agreement for any reason,
Purchaser shall return to Seller all originals and copies of all documents, work
papers and other material respecting Seller obtained by Purchaser from Seller or
from its directors, officers, agents, employees, independent accountants or
legal counsel in connection with the negotiations or consummation of this
Agreement, whether so obtained before or after the execution hereof, and will
not itself use, directly or indirectly, any information so obtained or otherwise
obtained from Seller hereunder or in connection herewith.
(d) Purchaser and Seller agree that the covenants contained in this
Section shall survive indefinitely the termination of this Agreement.
14.4 WAIVER, DISCHARGE, ETC.
(a) This Agreement may not be released, discharged, abandoned, changed
or modified in any manner, except by an instrument in writing signed on behalf
of each of the parties hereto by their duly authorized representatives. The
failure of any party hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of art such provision, nor
in any way to affect the validity of this Agreement or any part thereof or the
right of any party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held to be a waiver of any other
or subsequent breach.
(b) No course of dealing between or among any persons having any
interest in this Agreement will be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
14.5 BULK TRANSFER LAWS.
Purchaser hereby waives compliance by Seller with the provisions of
any laws relating to bulk transfers of any Jurisdiction in connection with the
sale of the Assets to Purchaser. Seller agrees to indemnify and hold harmless
Purchaser against all liability, cost, damage or expense which Purchaser may
suffer due to the failure to so comply.
14.6 ASSIGNMENT.
This Agreement and all of the provisions hereof will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, provided that neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by Seller without the
prior written consent of Purchaser, and this Agreement and the rights,
interests and obligations may only be assigned (without Seller's consent) to an
affiliate of Purchaser (as long as Purchaser shall remain liable hereunder).
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<PAGE> 25
14.7 COOPERATION.
Each of the parties hereto agree to use reasonable commercial best
efforts to cause all conditions precedent to its obligations under this
Agreement to be satisfied.
14.8 SEVERABILITY.
Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
14.9 SCHEDULES.
The Schedules to this Agreement shall be construed with and as an
integral part of this Agreement to the same extent as if the same had been set
forth herein; however, any inconsistency or ambiguity existing between the
Schedules and this Agreement shall be resolved in favor of this Agreement.
Seller may amend the Schedules hereto or add schedules as necessary by reason of
events or circumstances arising on or after the date hereof to keep the
information set forth in this Agreement and in the Schedules true and complete
in all material respects and not misleading. In the event of a change to any
Schedule which alone or together with other changes to the Schedules hereto
reflects any materially adverse information relating to Seller, the Business, or
the Assets, this Agreement, at Purchaser's option, by written notice to Seller
within five (5) days after Purchaser's receipt of the changed or new Schedule
hereto, may be terminated on or prior to the Closing Date.
14.10 CAPTIONS.
The captions used in this Agreement are for convenience of reference
only and do not constitute a part of this Agreement and will not be deemed to
limit, characterize or in any way affect any provision of this Agreement, and
all provisions of this Agreement will be enforced and construed as if no caption
had been used in this Agreement.
14.11 COMPLETE Agreement.
This document and the documents referred to herein contain the
complete agreement between the parties and supersede any prior understandings,
agreements or representations by or between the parties written or oral, which
may have related to the subject matter hereof in any way.
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<PAGE> 26
14.12 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, any one of
which need not contain the signatures of more than one party, but all such
counterparts taken together will constitute one and the same instrument, and
shall become a binding agreement when one or more counterparts have been signed
by each of the parties and delivered to the other party.
14.13 PASSAGE OF TITLE AND RISK OF LOSS.
Legal title, equitable title and risk of loss with respect to the
property and rights to be transferred hereunder shall not pass to Purchaser
until the property or right is transferred at the Closing hereunder.
14.14 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the law of the State of Indiana.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
SELLER: GL INDUSTRIES OF INDIANA, INC.
By: /s/ John Prepolec
-----------------
John Prepolec
Title: President
PURCHASER: NEW GLI, INC.
By: /s/ John Prepolec
-----------------
John Prepolec
Title: President
22
<PAGE> 27
EXHIBITS
--------
EXHIBIT 4.2(a)(i) LDM Subordinated Note
EXHIBIT 4.2(a)(ii) Luke Subordinated Note
EXHIBIT 10.5(a) Assignment and Assumption
EXHIBIT 10.5(b) Second Amendment to First Amended and Restated Lease
23
<PAGE> 28
SCHEDULES
---------
SCHEDULE 1.1 Furniture, Fixtures and Equipment
SCHEDULE 1.2 Inventory
SCHEDULE 1.3 Contracts
SCHEDULE 4.3 Purchase Price Allocation
24
<PAGE> 29
EXHIBIT 4.2(a)(i)
LDM SUBORDINATED NOTE
(SEE ATTACHED)
25
<PAGE> 30
SUBORDINATED
PROMISSORY NOTE (THE "NOTE")
$479,649.97 APRIL 15, 1999
AUBURN HILLS, MICHIGAN
FOR VALUE RECEIVED, the undersigned, New GLI, Inc., an Indiana corporation
("Maker"), promises to pay to the order of LDM TECHNOLOGIES, INC. ("Holder"),
the principal sum of Four Hundred Seventy Nine Thousand Six Hundred Forty-Nine
and 97/100 ($479,649.97) Dollars lawful money of the United States of America,
together with interest on the unpaid principal balance at the rate of seven and
75/100 percent (7.75%), compounded quarterly until fully paid, and if any
principal or interest is not paid when due, then interest upon the unpaid
balance shall be at the rate of eighteen percent (18%) per annum during the
period of any default in payment. Said principal and interest shall be paid by
Maker in lawful money of the United States. Interest shall be paid by Maker in
(a) quarterly interest payments on the unpaid balance through the term hereof
beginning with the first payment due on July 1, 1999, and (b) on any date on
which principal payments are permitted and required to be made in accordance
with the terms of this Note, provided however, such interest payments shall be
made only if no Event of Default exists under the Loan and Security Agreement
dated as of April 16, 1999 between the Maker and The CIT Group/Credit Finance,
Inc. ("Lender").
Principal payments shall only be made by Maker if said payments are
permitted under the terms of a Subordination Agreement dated as of April 16,
1999 among Maker, Holder and Lender (the "Subordination Agreement").
Principal payments are permitted under the Subordination Agreement during any
calendar month commencing after Lender receives Maker's audited financial
statements for Maker's fiscal year ending on March 31, 2000 in which all of the
following conditions are met: (1) no Event of Default (as defined in the Loan
and Security Agreement dated as of April 16, 1999 by and between Lender and
Maker [the "Loan Agreement"]) exists or is continuing or if the making of a
payment under this Note would cause such Event of Default; (2) the audited
financial statements for Maker's most recent fiscal year show a pre-tax net
income of at least $250,000 prior to extraordinary items; (3) Maker has a
positive cash flow (as defined in the Subordination Agreement) of at least
$250,000.00 for its most recent fiscal year; (4) Maker has Net Availability (as
defined in the Loan Agreement) after any such payment under this Note of at
least $500,000.00; (5) none of Maker's accounts payable is over sixty (60) days
past terms; and (6) all of Maker's tax obligations are paid current.
The amount of such monthly payments shall be the maximum amount that Maker
can pay and Holder can receive in that particular month without breaching the
provisions of the Subordination Agreement set forth in the preceding paragraph.
Notwithstanding anything in this Note to the contrary, all principal and
interest on the Note shall be paid in full on or before March 31, 2002, provided
such payment terms do not violate the provisions of the Loan Agreement, or the
Subordination Agreement if such documents are still in effect.
This Note is secured by a Security Agreement of even date herewith covering
all of the assets of the Maker, including those set forth on Annex A to the
Security Agreement. As additional security, Maker agrees that Holder shall have
(and hereby grants) a lien on and security interest in all of its other property
or assets. Maker and Holder agree that such lien and security interest shall be
subordinated only to Lender pursuant to the Subordination Agreement.
Notwithstanding any other provision of this Note to the contrary, at no time
may any payment of interest (or in the nature of interest) hereunder exceed the
maximum rate of interest allowed by applicable law.
<PAGE> 31
Payment shall be made to: LDM Technologies, Inc.
2500 Executive Hills Dr.
Auburn Hills, Michigan 48326
Attention: Gary E. Borushko
or such other place as Holder shall designate from time to time.
THE PAYMENT OF THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO
THE PAYMENT OF THE "SENIOR DEBT" DEFINED AND DESCRIBED IN THE SUBORDINATION
AGREEMENT AND REFERENCE IS MADE TO SUCH SUBORDINATION AGREEMENT FOR A FULL
STATEMENT OF THE TERMS AND CONDITIONS OF SUCH SUBORDINATION.
If any payment of principal of, or interest on, this Note shall become due
on a Saturday, Sunday or public holiday under applicable laws, or any other day
on which banking institutions are authorized, or obligated by law, to close,
such payment shall be made on the next succeeding business day and the extension
of time shall in such case be included in computing interest in connection with
such payment.
Subject to the terms of the Subordination Agreement, Maker shall have the
right at any time, and from time to time, to prepay, in whole or in part, the
unpaid principal and/or interest accrued thereon, without penalty, such payments
being first applied to the payment of accrued interest and the balance to the
payment of principal.
Upon the occurrence of any of the following events of default, the Holder,
at its option, may declare the principal of this Note and all accrued interest
thereon, to be immediately due and payable, all without demand, presentment or
other notice of any kind, all of which are hereby expressly waived:
1. Failure by the Maker to pay principal and/or interest on this Note when
due.
2. An event of default under the Security Agreement shall have occurred.
3. Any event shall arise which permits the holder of any indebtedness of
the Maker under any note, agreement or undertaking to accelerate the
maturity of such indebtedness.
4. If any of the following events shall occur: Dissolution, termination of
existence, insolvency, business failure, appointment of a receiver for
any part of the property of, assignment for the benefit of creditors by
or the commencement of any proceeding under any bankruptcy laws against
Maker (which is not dismissed within 30 days), entry of any court order
which enjoins, restrains or in any way prevents Maker from conducting
all or any material part of its business affairs in the ordinary
course, failure to be in good standing under the laws of the state of
Maker's organization or qualification, filing of any financing
statement by others against the Collateral (excluding CIT), or the
failure of Maker and each of Maker's guarantors and sureties of the
Indebtedness to give prompt written notice to the Secured Party of any
occurrence of any of the foregoing.
5. Belief by the Holder, in good faith, that the prospect of payment by
the Maker of this Note, or the performance by the Maker of any of its
obligations under this Note or the Security Agreement is impaired.
If suit is brought to collect on this Note, Holder shall be entitled to
collect all reasonable costs and expenses of such suit, including, but not
limited to, actual attorney's fees.
The Maker waives presentment for payment, demand, protest, notice of protest
and notice of dishonor and nonpayment of this Note, and all defenses on the
grounds of delay or of any extension of time at or after maturity for the
payment of this Note, which may hereafter be given by the Holder or holders to
the Maker or to anyone who has assumed the payment of this Note.
<PAGE> 32
No failure or delay on the part of Holder in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof, or the exercise of any other right or power. The rights and remedies of
Holder hereunder are cumulative and not exclusive of any rights or remedies
which otherwise would be available. Neither any modification or waiver of any
provision of this Note, nor any consent to any departure by Maker therefrom
shall in any event be effective unless the same shall be in writing, signed by
the person against whom enforcement of such modification, waiver or consent is
sought, and then such modification, waiver or consent shall be effective only in
the specific instance and for the purpose for which given.
The obligations of Maker under this Note shall inure to the benefit of
Holder's successors, assigns, heirs and/or legal representatives, as the case
may be. This Note is made in and shall be governed by the laws of the State of
Michigan.
New GLI, Inc.
"Maker"
By:
---------------------------------
Its:
----------------------------
<PAGE> 33
EXHIBIT 4.2(a)(ii)
LUKE SUBORDINATED NOTE
(SEE ATTACHED)
26
<PAGE> 34
SUBORDINATED
PROMISSORY NOTE (THE "NOTE")
$119,783.30 APRIL 15, 1999
AUBURN HILLS, MICHIGAN
FOR VALUE RECEIVED, the undersigned, New GLI, Inc., an Indiana
corporation ("Maker"), promises to pay to the order of LAURENCE M. LUKE
("Holder), the principal sum of One Hundred Nineteen Thousand Seven Hundred
Eighty-Three and 30/100 ($119,783.30) Dollars lawful money of the United States
of America, together with interest on the unpaid principal balance at the rate
of seven and 75/100 percent (7.75%), compounded quarterly until fully paid, and
if any principal or interest is not paid when due, then interest upon the unpaid
balance shall be at the rate of eighteen percent (18%) per annum during the
period of any default in payment. Interest shall be paid by Maker in lawful
money of the United States. Said principal and interest shall be paid by Maker
in (a) quarterly interest payments on the unpaid balance through the term hereof
beginning with the first payment due on July 1, 1999, and (b) on any date on
which principal payments are permitted and required to be made in accordance
with the terms of this Note, provided however, such interest payments shall be
made only if no Event of Default exists under the Loan and Security Agreement
dated as of April 16, 1999 between the Maker and the CIT Group/Credit Finance,
Inc. ("Lender").
Principal payments shall only be made by Maker if said payments are
permitted under the terms of a Subordination Agreement dated as of April 16,
1999 among Maker, Holder and Lender (the "Subordination Agreement"). Principal
payments are permitted under the Subordination Agreement during any calendar
month commencing after Lender receives Maker's audited financial statements for
Maker's fiscal year ending on or about March 31, 2000 in which all of the
following conditions are met: (1) no Event of Default (as defined in the Loan
and Security Agreement dated as of April 16, 1999 by and between Lender and
Maker [the "Loan Agreement"]) exists or is continuing or if the making of a
payment under this Note would cause such Event of Default; (2) the audited
financial statements for Maker's most recent fiscal year show a pre-tax net
income of at least $250,000 prior to extraordinary items; (3) Maker has a
positive cash flow (as defined in the Subordination Agreement) of at least
$250,000.00 for its most recent fiscal year; (4) Maker has Net Availability (as
defined in the Loan Agreement) after any such payment under this Note of at
least $500,000.00; (5) none of Maker's accounts payable is over sixty (60) days
past terms; and (6) all of Maker's tax obligations are paid current.
The amount of such monthly payments shall be the maximum amount that
Maker can pay and Holder can receive in that particular month without breaching
the provisions of the Subordination Agreement set forth in the preceding
paragraph.
Notwithstanding anything in this Note to the contrary, all principal
and interest on the Note shall be paid in full on or before March 31, 2002,
provided such payment terms do not violate the provisions of the Loan Agreement
or the Subordination Agreement if such documents are still in effect.
This Note is secured by a Security Agreement of even date herewith
covering all of the assets of the Maker, including those set forth on Annex A to
the Security Agreement. As additional security, Maker agrees that Holder shall
have (and hereby grants) a lien on and security interest in all of its other
property or assets. Maker and Holder agree that such lien and security interest
shall be subordinated only to the Lender pursuant to the Subordination
Agreement.
Notwithstanding any other provision of this Note to the contrary, at no
time may any payment of interest (or in the nature of interest) hereunder exceed
the maximum rate of interest allowed by applicable law.
<PAGE> 35
Payment shall be made to: Laurence M. Luke
3430 N. Mountain Ridge, #33
Mesa, AZ 85207
or such other place as Holder shall designate from time to time.
THE PAYMENT OF THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED
TO THE PAYMENT OF THE "SENIOR DEBT" DEFINED AND DESCRIBED IN THE SUBORDINATION
AGREEMENT AND REFERENCE IS MADE TO SUCH SUBORDINATION AGREEMENT FOR A FULL
STATEMENT OF THE TERMS AND CONDITIONS OF SUCH SUBORDINATION.
If any payment of principal of, or interest on, this Note shall become
due on a Saturday, Sunday or public holiday under applicable laws, or any other
day on which banking institutions are authorized, or obligated by law, to close,
such payment shall be made on the next succeeding business day and the extension
of time shall in such case be included in computing interest in connection with
such payment.
Subject to the terms of the Subordination Agreement, Maker shall have
the right at any time, and from time to time, to prepay, in whole or in part,
the unpaid principal and/or interest accrued thereon, without penalty, such
payments being first applied to the payment of accrued interest and the balance
to the payment of principal.
Upon the occurrence of any of the following events of default, the
Holder, at its option, may declare the principal of this Note and all accrued
interest thereon, to be immediately due and payable, all without demand,
presentment or other notice of any kind, all of which are hereby expressly
waived:
1. Failure by the Maker to pay principal and/or interest on this Note
when due.
2. An event of default under the Security Agreement shall have
occurred.
3. Any event shall arise which permits the holder of any indebtedness
of the Maker under any note, agreement or undertaking to
accelerate the maturity of such indebtedness.
4. If any of the following events shall occur: Dissolution,
termination of existence, insolvency, business failure,
appointment of a receiver for any part of the property of,
assignment for the benefit of creditors by or the commencement of
any proceeding under any bankruptcy laws against Maker (which is
not dismissed within 30 days), entry of any court order which
enjoins, restrains or in any way prevents Maker from conducting
all or any material part of its business affairs in the ordinary
course, failure to be in good standing under the laws of the state
of Maker's organization or qualification, filing of any financing
statement by others against the Collateral (excluding CIT), or the
failure of Maker and each of Maker's guarantors and sureties of
the Indebtedness to give prompt written notice to the Secured
Party of any occurrence of any of the foregoing.
5. Belief by the Holder, in good faith, that the prospect of payment
by the Maker of this Note, or the performance by the Maker of any
of its obligations under this Note or the Security Agreement is
impaired.
If suit is brought to collect on this Note, Holder shall be entitled to
collect all reasonable costs and expenses of such suit, including, but not
limited to, actual attorney's fees.
The Maker waives presentment for payment, demand, protest, notice of
protest and notice of dishonor and nonpayment of this Note, and all defenses on
the grounds of delay or of any extension of time at or after maturity for the
payment of this Note, which may hereafter be given by the Holder or holders to
the Maker or to anyone who has assumed the payment of this Note.
<PAGE> 36
No failure or delay on the part of Holder in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof, or the exercise of any other right or power. The
rights and remedies of Holder hereunder are cumulative and not exclusive of any
rights or remedies which otherwise would be available. Neither any modification
or waiver of any provision of this Note, nor any consent to any departure by
Maker therefrom shall in any event be effective unless the same shall be in
writing, signed by the person against whom enforcement of such modification,
waiver or consent is sought, and then such modification, waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
The obligations of Maker under this Note shall inure to the benefit of
Holder's successors, assigns, heirs and/or legal representatives, as the case
may be. This Note is made in and shall be governed by the laws of the State of
Michigan.
New GLI, Inc.
"Maker"
By:
------------------------------------------
Its:
--------------------------------------
<PAGE> 37
EXHIBIT 10.5(a)
ASSIGNMENT AND ASSUMPTION
(SEE ATTACHED)
27
<PAGE> 38
ASSIGNMENT AND ASSUMPTION OF LEASE
This Assignment and Assumption of Lease (the "Assignment") is dated as of
April , 1999 and is an agreement between GL Industries of Indiana, Inc., an
Indiana corporation ("Assignor") and New GLI, Inc., an Indiana corporation
("Assignee").
WHEREAS, as of April 28, 1993, CPC Associates, Inc., an Indiana corporation
("CPC"), as Landlord, and Assignor, as Tenant, entered into a First Amended and
Restated Lease (the "Lease") for certain property located at 2860 N. National
Road, Columbus, Indiana (the "Leased Premises"); and
WHEREAS, as of January 19, 1999, CPC and Assignor entered into a First
Amendment to the Lease; and
WHEREAS, Assignor desires to assign all of its right, title and interest as
Tenant under the Lease to Assignee and Assignee desires to accept such
assignment and to assume all of Assignor's obligations as Tenant under the
Lease;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Assignor and Assignee
agree as follows:
1. As of the date of this Assignment, Assignor transfers and assigns to
Assignee all of Assignor's right, title and interest as Tenant under the Lease.
2. As of the date of this Assignment, Assignee accepts the assignment by
Assignor of all of Assignor's right, title and interest as Tenant under the
Lease and assumes all of the Assignor's obligations under the Lease, including
but not limited to those, if any, arising from and after April 28, 1993.
3. Assignee agrees to indemnify and hold harmless Assignor and Assignor's
shareholders, officers, directors, employees and agents from any and all claims,
losses, damages, liabilities and expenses (including court costs and reasonable
attorney fees) arising out of acts or omissions of either Assignor or Assignee
as Tenant under the Lease and/or with respect to the Leased Premises occurring
from and after April 28, 1993.
4. Assignor makes no warranties and representations in this Assignment with
respect to the Lease or the Leased Premises except for the following:
(a) The Lease (as amended by the First Amendment) is in full force and
effect with a term expiring on April 19, 2003.
(b) Assignor is in default in the payment of rent under the Lease in the
amount of $47,500.00 for the period from March 20, 1999 through April
19, 1999.
<PAGE> 39
5. This Assignment shall be binding upon the Assignor and the Assignee and
their respective successors and assigns.
6. This Assignment shall be governed by and construed in accordance with
the laws of the State of Indiana.
"ASSIGNOR"
GL INDUSTRIES OF INDIANA, INC.
By:
--------------------------
"ASSIGNEE"
NEW GLI, INC.
By:
-------------------------
2
<PAGE> 40
EXHIBIT 10.5(b)
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED LEASE
(SEE ATTACHED)
28
<PAGE> 41
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED LEASE
This Second Amendment ("Second Amendment") is dated as of April __, 1999
and is the Second Amendment to the First Amended and Restated Lease dated as
of April 28, 1993 (as amended by a First Amendment dated as of January 19, 1999)
(the "Lease") by and between CPC ASSOCIATES, INC. (the "Landlord")
and GL INDUSTRIES OF INDIANA, INC. ("Old GL"), the tenant's right, title and
interest in which were assigned to and obligations under were assumed by New
GLI, Inc., as Tenant ("Tenant") pursuant to an Assignment and Assumption of
Lease dated as of April __, 1999 (the "Assignment").
RECITALS:
The facts on which this Second Amendment to the Lease is based are as
follows:
A. On April 28, 1993, Landlord and Old GL entered into the Lease for the
Leased Premises (as defined in Article I of the Lease).
B. As of January 19, 1999, Landlord and Old GLI entered into a First
Amendment to the Lease.
C. On April __, 1999, Old GL assigned its right, title and interest as
tenant under the Lease to Tenant and Tenant assumed Old GL's obligations under
the Lease pursuant to the terms of the Assignment.
D. Landlord and Tenant desire to amend the Lease as set forth below.
NOW, THEREFORE, in consideration of the foregoing recitals and the material
covenants contained herein, Landlord and Tenant agree as follows:
1. Article 25 of the Lease shall be deleted in its entirety and replaced by
the following new Article 25:
"ARTICLE 25
SECURITY DEPOSIT
On or before the earlier of (a) the occurrence of an Event of Default
under the Lease or (b) December 31, 1999, the Tenant shall deposit the sum
of Eighty Thousand Dollars ($80,000.00) with Landlord as a security deposit
under this Lease, which Landlord is to retain as security for the faithful
performance of all of the covenants, conditions, and agreements of this
Lease, but in no event shall be Landlord be obliged to apply the security
deposit to rents or other charges in
<PAGE> 42
arrears or upon damages for the Tenant's failure to perform the
covenants, conditions, and agreements. The Landlord may so apply the
security deposit at its option and the Landlord's right to the possession
of the Leased Premises for nonpayment of rent or for any other reason shall
not in any event be affected by reason of the fact that the Landlord holds
this security deposit. The security deposit, if not applied toward the
payment of rent in arrears or toward the payments of this Lease, is to be
returned to the Tenant when this Lease is terminated, according to these
terms, and in no event is the security deposit to be returned until the
Tenant has vacated the Leased Premises and delivered possession to the
Landlord.
In the event that the Landlord repossesses itself of the Leased
Premises because of the Tenant's default or because of the Tenant's failure
to carry out the covenants, conditions, and agreements of this Lease, the
Landlord may apply the security deposit upon all damages suffered to the
date of the possession and may retain the security deposit to apply upon
such damages as may be suffered or shall accrue thereafter by reason of the
Tenant's default or breach. The Landlord shall not be obliged to keep the
security deposit as a separate fund, but may mix the security deposit with
its own funds.
Until such time as Tenant deposits the Eighty Thousand Dollar
($80,000.00) security deposit with Landlord, LDM Technologies, Inc., a
Michigan corporation, shall guarantee Tenant's obligations under Article 25
of this Lease under the terms of the Guaranty attached as Exhibit B
hereto."
2. The Tenant notice information under Article 32 of the Lease shall be
deleted in its entirety and replaced by the following new Tenant notice
information:
"If to Tenant:
New GLI, Inc.
2860 N. National Road
Columbus, Indiana 47202-0387
With a copy to:
Michael B. Lewis, Esq.
Dean & Fulkerson, P.C.
801 W. Big Beaver
Fifth Floor
Troy, Michigan 48084"
2
<PAGE> 43
3. In all other respects, the Lease shall remain in full force and effect
and unamended.
LANDLORD:
CPC ASSOCIATES, INC.
By:
---------------------------
Laurence M. Luke, President
TENANT:
NEW GLI, INC.
By:
---------------------------
John Prepolec, President
3
<PAGE> 44
SCHEDULE 1.1
FURNITURE, FIXTURES AND EQUIPMENT
All machinery, equipment, fixtures, warehouse and office equipment, test
equipment, delivery trucks, vehicles, furniture, computer equipment and all
other tangible personal property of GL Industries of Indiana, Inc.
29
<PAGE> 45
SCHEDULE 1.2
INVENTORY
All supplies, spare parts, raw materials, finished goods and all inventories of
goods of Seller located at all of Seller's facilities.
30
<PAGE> 46
SCHEDULE 1.3
CONTRACTS
All of Seller's right, title and interest in and to all contracts with
suppliers, customers and third parties.
31
<PAGE> 47
SCHEDULE 4.3
PURCHASE PRICE ALLOCATION
[To be determined]
32
<PAGE> 1
EXHIBIT 11
LDM Technologies, Inc.
Computation of Ratio of Earnings to Fixed Charges
(thousands of dollars, except ratios)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings available for fixed charges:
Income from continuing operations before income
taxes, minority interest and extraordinary item $ 11,537 $5,109 $ 5,008 $ (7,884) $ 2,044
Interest, including amortization of debt issuance cost 3,340 4,060 11,388 19,999 21,067
Less, interest capitalized during the year (162) (780) (312) (185) (706)
Amortization of capitalized interest 16 84 103 174
Portion of operating lease rentals deemed to be interest 650 600 701 2,122 2,770
-------- ------ -------- -------- --------
Total earnings available for fixed charges: $ 15,365 $9,005 $ 16,869 $ 14,155 $ 25,349
======== ====== ======== ======== ========
Fixed charges:
Interest, including amortization of debt issuance cost $ 3,340 $4,060 $ 11,388 $ 19,999 $ 21,067
Portion of operating lease rentals deemed to be interest 650 600 701 2,122 2,770
-------- ------ -------- -------- --------
Total fixed charges $ 3,990 $4,660 $ 12,089 $ 22,121 $ 23,837
======== ====== ======== ======== ========
Ratio of earnings to fixed charges 3.9 1.9 1.4 .6 1.1
======== ====== ======== ======== ========
</TABLE>
F-27
<PAGE> 1
EXHIBIT 21
Subsidiaries and Affiliates of the Company
LDM Holding Canada, Inc.
LDM Technologies Company, LLC
LDM Technologies GmbH
GL Industries of Indiana, Inc.
LDM Holding Mexico, Inc.
LDM Technologies S de RL
DBM Technologies, LLC
Sunningdale Plastic Industries Pte. Ltd.
F-28
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-26-1999
<PERIOD-START> SEP-28-1999
<PERIOD-END> SEP-26-1999
<CASH> 4,317
<SECURITIES> 0
<RECEIVABLES> 79,434
<ALLOWANCES> 2,998
<INVENTORY> 20,783
<CURRENT-ASSETS> 122,532
<PP&E> 184,434
<DEPRECIATION> 63,318
<TOTAL-ASSETS> 312,143
<CURRENT-LIABILITIES> 129,523
<BONDS> 168,262
0
0
<COMMON> 0
<OTHER-SE> 12,920
<TOTAL-LIABILITY-AND-EQUITY> 312,143
<SALES> 530,498
<TOTAL-REVENUES> 530,498
<CGS> 441,514
<TOTAL-COSTS> 441,514
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,067
<INCOME-PRETAX> 2,044
<INCOME-TAX> 2,805
<INCOME-CONTINUING> (761)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (761)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
