SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended June 30, 1996
( ) 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 0-627
Douglas & Lomason Company
(exact name of registrant as specified in its charter)
Michigan 38-0495110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
24600 Hallwood Court, Farmington Hills, Michigan 48335-1671
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (810) 478-7800
Former name, former address and former fiscal year, if changed since last
year: Same
Indicate by checkmark 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 and (2) has been subject to such filing
requirements for the past 90 days.
YES_X_ NO___
CLASS OUTSTANDING AT AUGUST 15, 1996
Common stock, $2 par value 4,245,127 shares
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<TABLE>
<CAPTION>
DOUGLAS & LOMASON COMPANY
Consolidated Condensed Balance Sheets
(in thousands)
June 30 December 31
1996 1995
------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 4,342 $ 4,587
Accounts receivable 96,556 93,486
Inventories
Raw materials 10,165 10,562
Work in process and finished goods 13,060 15,520
-------- --------
23,225 26,082
Prepaid expenses and other
current assets 4,199 7,618
-------- --------
128,322 131,773
Property, plant and equipment, net 74,113 76,164
Intangibles 36,656 38,179
Other non-current assets 28,454 22,773
-------- --------
Total assets $267,545 $268,889
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 4,963 $ 4,775
Accounts payable and accrued expenses 62,929 80,944
--------- --------
Total current liabilities 67,892 85,719
Long-term debt, less current maturities 78,849 69,113
Postretirement benefits other than
pensions 9,059 8,598
Other liabilities and deferred credits 18,993 19,112
Shareholders' equity
Preferred stock
No par value, authorized 500,000
shares, issued - none
Common stock
Par value $2 per share authorized
10,000,000 shares; issued and
outstanding 4,243,021 shares in
1996 and 1995 8,486 8,486
Other capital 28,088 28,088
Retained earnings 61,050 54,543
Foreign currency translation adjustment (4,872) (4,770)
--------- --------
Total shareholders' equity 92,752 86,347
--------- --------
Total liabilities and
shareholders' equity $ 267,545 $268,889
========= ========
</TABLE>
2
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<TABLE>
<CAPTION>
DOUGLAS & LOMASON COMPANY
Consolidated Condensed Statements of Income
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 156,155 $ 130,602 $ 298,986 $ 285,660
Cost of sales 140,928 125,131 272,514 268,890
----------- ----------- ----------- -----------
Gross profit 15,227 5,471 26,472 16,770
Selling, general and
administrative expense 8,153 5,959 15,258 12,022
----------- ----------- ----------- -----------
Operating income (loss) 7,074 (488) 11,214 4,748
Other income (expenses):
Interest expense, net (1,594) (1,054) (3,157) (1,750)
Interest income
and other 529 46 1,594 262
----------- ----------- ----------- -----------
(1,065) (1,008) (1,563) (1,488)
Earnings (loss) before
provision for
income taxes 6,009 (1,496) 9,651 3,260
Income tax expense
(benefit) 1,680 (1,040) 2,295 335
----------- ----------- ----------- -----------
Net earnings (loss) $ 4,329 $ (456) $ 7,356 $ 2,925
=========== =========== =========== ===========
Net earnings (loss)
per share $ 1.02 $ (.11) $ 1.73 $ .69
=========== =========== =========== ===========
Weighted average number
of shares $ 4,243,021 4,243,580 4,243,021 4,239,365
=========== =========== =========== ===========
</TABLE>
3
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<TABLE>
<CAPTION>
DOUGLAS & LOMASON COMPANY
Consolidated Condensed Statements of Cash Flows
(in thousands)
Six Months Ended
June 30
----------------
1996 1995
-------- ------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,356 $ 2,925
Depreciation and amortization 6,686 6,437
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable (3,158) 8,940
Decrease in inventories 2,857 2,847
Increase in prepaid expenses
and other assets (739) (7,188)
Decrease in accounts payable,
and accrued expenses (18,575) (8,176)
Increase in other liabilities 1,031 485
-------- -------
Net cash (used) provided by operating
activities (4,542) 6,270
Cash flows from investing activities:
Proceeds from the sale of property,
plant and equipment --- 84
Acquisition of property, plant and
equipment (4,653) (9,356)
Cost of acquisition, net of cash --- (43,488)
------- -------
Net cash used by investing activities (4,653) (52,760)
------- -------
Cash flows from financing activities:
Proceeds from long-term debt 12,000 47,000
Repayment of long-term debt (2,076) (3,221)
Proceeds from exercised stock
options, net --- 129
Dividends paid (849) (849)
-------- -------
Net cash provided by financing
activities 9,075 43,059
------- -------
Effect of translation on cash (125) (719)
Net decrease in cash (245) (4,150)
Cash at beginning of year 4,587 6,532
-------- -------
Cash at end of quarter $ 4,342 $ 2,382
======== =======
</TABLE>
4
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DOUGLAS & LOMASON COMPANY
Notes to Consolidated Condensed Financial Statements
1. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial position as
of June 30, 1996 and 1995, and the results of operations for the six
months then ended, and changes in financial position for the six months
then ended, subject to year end audit adjustments.
2. On June 8, 1995, Douglas & Lomason Company (the "Company") acquired the
stock of Bestop, Inc. ("Bestop"). Bestop is the leading designer and
manufacturer in North America of soft tops and accessories for small
sport utility vehicles. Bestop sells its product domestically and
internationally to original equipment manufacturer (OEM) companies and in
the aftermarket. The purchase agreement required a purchase price of
approximately $43,952,000. The acquisition will be accounted for in
accordance with the purchase method of accounting.
Had the acquisition of Bestop, Inc. occurred as of January 1, 1995,
revenues, net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
(in 000's except for per share data)
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $156,155 $143,108 $298,986 $314,025
Net Income $ 4,329 $ (928) $ 7,356 $ 2,310
Earnings Per Share $ 1.02 $ (.22) $ 1.73 $ .54
</TABLE>
5
<PAGE>
Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Liquidity and Capital Resources
At June 30, 1996, the Company had working capital of $60.4 million and
available borrowings of $15.0 million on a $60.0 million revolver credit
agreement with two banks.
Funds from borrowings, $12.0 million, less repayment of long-term debt of $2.1
million provided cash available for capital expenditures of $4.7 million and
cash necessary for operating activities of $4.5 million.
Capital expenditures in 1996 are anticipated to be approximately $15.0
million.
Results of Operations
Net Sales
Net sales for the three months ended June 30, 1996, were $156.2 million, an
increase of 19.6% over sales of $130.6 million in the second quarter of 1995.
Sales for the six month period of 1996 were $299.0 million versus $285.7
million for the same period of 1995, an increase of 4.7%. The acquisition of
Bestop in June 1995 accounted for the majority of the sales increase, but the
Company also benefited from increased production of the Ford Aerostar minivan
and the Ford Contour/Mercury Mystique for which the Company is the lead
supplier of complete seating systems.
Cost of Sales
The cost of sales as a percentage of sales decreased to 90.2% for the three
month period ended June 30, 1996, compared to 95.8% in the same period of
1995. For the six month period ended June 30, 1996, the cost of sales as a
percentage of sales was 91.1% compared to 94.1% in 1995. Several factors
contributed to the improvement in 1996, including cost reductions achieved
through Value Analysis/Value Engineering efforts, increased production volume
at a number of plants, the full quarter impact of Bestop in 1996 and a
dramatic improvement in medical insurance claims.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three month period ended
June 30, 1996, increased $2.2 million over the same period of 1995 as a result
of the consolidation of the selling, general and administrative expenses of
Bestop, Inc. acquired in June of 1995.
Interest Expense
Interest expense in the second quarter of 1996 of $1.6 million increased $.5
million or 51.2% from the $1.1 million reported for the same period of 1995
principally as a result of the higher debt level in 1996. In June 1995, the
Company borrowed $44.0 million to acquire Bestop, Inc.
Net Earnings (Loss)
Net earnings of $4.3 million or $1.02 per share in the second quarter of 1996
compared with a net loss of $456.0 thousand or $.11 per share in the second
quarter of 1995 improved principally as a result of the lower cost mentioned
previously in the cost of sales. For the six months ended June 30, 1996, the
Company recorded net earnings of $7.4 million or $1.73 per share compared with
net earnings of $2.9 million or $.69 per share in the first six months of
1995.
6
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Financial Condition
The balance sheet remains strong at June 30, 1996. The current ratio was 1.9
to 1 and the ratio of debt to total capitalization was .45 to 1 at June 30,
1996.
On August 7, 1996, in response to increased trading volume and per share
price, the Company announced that it was engaged in discussions regarding a
possible business combination. No assurance can be given that the discussions
will result in the consumation of any transaction. The Company will not issue
any further press releases or comments concerning the discussions until they
are finalized or terminated.
7
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote for Security Holders
The following information is furnished with respect to the Annual
Meeting of security holders of the Registrant held during April 1996:
(a) A meeting was held on April 26, 1996, and was an Annual
Meeting.
(b) Not applicable.
(c) At such meeting the nominee for election as a director, Verne C.
Hampton II, was elected for the term of office to expire at the
1999 Annual Meeting of Shareholders. The votes cast with respect
to such nominee for director are as follows:
Votes to
Withhold
Authority
to Vote
Votes for for the
Nominee Nominee Nominee
------- ------- -------
Verne C. Hampton II 3,977,353 28,007
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
20.1. Agreement dated as of May 17, 1996 between Registrant and
Harry A. Lomason II.
20.2. Form of Agreement dated as of May 17, 1996 between
Registrant and the following executive officers of
Registrant: James J. Hoey, Roger H. Morelli, Dan D. Smith
and certain other officers.
(b) Reports on Form 8-K
The Registrant filed no reports on Form 8-K duirng the quarter
for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOUGLAS & LOMASON COMPANY
-------------------------
(Registrant)
Date: August 15, 1996 /s/ James J. Hoey
-------------------------
James J. Hoey
Senior Vice President &
Chief Financial Officer
(Duly Authorized Officer
and Principal Financial
Officer)
8
EXHIBIT 20.1
AGREEMENT
This Agreement (the "Agreement") is made as of the 17th day of May,
1996, between Douglas & Lomason Company, a Michigan corporation (hereinafter
called the "Company") and Harry A. Lomason II (hereinafter called "Employee").
WHEREAS, should the Company receive any proposal for a Change in
Control, as defined in Section 1 hereof, the Board of Directors of the Company
(the "Board") believes it imperative that the Company and the Board be able to
rely upon Employee to continue in his or her position, and that they be able
to receive and rely upon Employee's advice, if they request it, as to the best
interests of the Company and its shareholders, without concern that Employee
might be distracted or his or her advice affected by the personal
uncertainties and risks created by such a proposal;
NOW, THEREFORE, to induce Employee to remain in the employ of the
Company, and for other good and valuable consideration, the Company and
Employee agree as follows:
1. Definitions.
(i) "Change in Control" shall mean the occurrence of any of the
following events:
(a) a third "person," including a "group," becomes the
"beneficial owner" (as these terms are defined in or for the purposes
of Section 13(d) of the Securities Exchange Act of 1934, as in effect
on the date hereof) of shares of the
<PAGE>
Company having more than 50% of the total number of votes that may be
cast for the election of Directors of the Company;
(b) the merger or consolidation of the Company with or
into any other corporation or entity or the merger or consolidation of
any other corporation or entity into or with the Company, in which
merger or consolidation those persons who are shareholders of the
Company immediately prior to such merger or consolidation do not
receive, as a result of such merger or consolidation, more than 50% in
voting power of the outstanding capital stock of the surviving
corporation;
(c) any sale or transfer in a single transaction or
series of related transactions (other than a public offering of
securities) of more than 50% of fair market value of the Company's
assets; or
(d) the Board determines in its sole and absolute
discretion that there has been a change in control of the Company.
(ii) "Controlling portion of the Company's stock" shall mean
shares of the Company having more than 50% of the total number of votes that
may be cast for the election of Directors of the Company.
(iii) "Company" shall mean Douglas & Lomason Company and any
successor (whether such succession is direct or indirect, by purchase, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
business and/or assets of the Company.
(iv) "Good Reason," when used with reference to a voluntary
termination by Employee of Employee's employment with the Company, shall mean:
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(a) the assignment to Employee of any duties
substantially inconsistent with, or the reduction of powers or
functions associated with, Employee's positions, duties,
responsibilities and status with the Company as they existed
immediately prior to a Change in Control;
(b) a reduction by Company in Employee's base salary as
in effect on the date hereof or as the same may be increased from time
to time;
(c) a change in Employee's principal work location
outside of the Farmington Hills, Michigan metropolitan area, except
for required travel on the Company's business to an extent
substantially consistent with Employee's business travel obligations
immediately prior to a Change in Control;
(d) the failure by the Company to obtain an agreement to
expressly assume this Agreement from any successor (whether such
succession is direct or indirect by purchase, merger, consolidation,
liquidation or otherwise) to substantially all of the business and/or
assets of the Company or from a person or group (as these terms are
defined in or for the purposes of Section 13(d) of the Securities
Exchange Act of 1934, as in effect on the date hereof) acquiring a
controlling portion of the Company's stock; or
(e) any purported termination of Employee's employment
by the Company during the Contract Period which is not effected
pursuant to the requirements of this Agreement.
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<PAGE>
(v) "Contract Period" shall mean the period commencing on the
day a Change in Control takes place and continuing for three (3) years. A
Contract Period shall only exist for the first Change in Control which takes
place after the date hereof.
(vi) "Disability" shall mean a physical or mental incapacity of
Employee which entitles Employee to benefits under the long term disability
plan applicable to Employee and maintained by the Company as in effect
immediately prior to the Change in Control. However, if the Company has no
such plan at that time, "Disability" shall mean any physical or mental
condition that renders Employee unable to substantially perform Employee's
duties with the Company for a period exceeding six (6) consecutive months or
for a period exceeding four (4) months if a physician selected by the Company,
and reasonably satisfactory to Employee, specializing in the area of the
disability in question determines in good faith that Employee will be
permanently unable to substantially perform Employee's duties with the
Company.
(vii) "Cause," when used in connection with the termination of
Employee's employment by the Company, shall mean (a) the willful and continued
failure by Employee substantially to perform Employee's duties and obligations
to the Company (other than any such failure resulting from Employee's
Disability), (b) the willful engaging by Employee in misconduct which is
materially injurious to the Company, monetarily or otherwise, or (c) a
conviction for or plea of nolo contendere to a felony under the laws of any
state within the United States or of the United States. For purposes of this
definition, no act, or failure to act, on Employee's part shall be considered
"willful" unless done, or omitted to be done, by Employee in bad faith and
without reasonable belief that Employee's action or omission was in the best
interests of the Company.
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<PAGE>
(viii) "Without Cause," when used in connection with the
termination of Employee's employment by the Company, shall mean any
termination of employment of Employee by the Company which is not a
termination of employment for Cause or for Disability.
(ix) "Termination Date" shall mean the effective date as
provided hereunder of the termination of Employee's employment.
2. Application of this Agreement: Term of Agreement. This Agreement
shall apply with respect to any termination of employment of Employee which
occurs during the Contract Period. It shall not apply to any termination of
employment of Employee which occurs other than during the Contract Period. As
provided in the definition of Contract Period, a Contract Period shall only
exist for the first Change in Control after the date hereof. This Agreement
shall terminate automatically upon termination of employment of Employee by
reason of Employee's death. Continuation of employment with a successor to the
Company, as described in Section 1 (iii), shall not alone constitute
termination of Employee's employment. This Agreement shall also terminate upon
the expiration of five (5) years from the date hereof unless the Contract
Period has commenced on or prior to the expiration of such five (5) years, in
which case this Agreement will terminate upon the expiration of the Contract
Period. Any such termination shall not affect obligations incurred prior to
the date of termination, including any obligation to provide benefits under
Section 5.
3. Termination of Employment of Employee By the Company During the
Contract Period.
(i) During the Contract Period, the Company shall have the
right to terminate
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<PAGE>
Employee's employment hereunder for Cause, for Disability or Without Cause
upon compliance with the procedures hereinafter specified.
(ii) Termination of Employee's employment for Disability shall
become effective no sooner than thirty (30) days after a notice of intent to
terminate Employee's employment, specifying Disability as the basis for such
termination, is given to Employee by the Board or by a Committee of the Board.
(iii) Termination of Employee's employment for Cause shall not
be deemed effective unless and until there shall have been delivered to
Employee a copy of a notice of termination from the Chief Executive Officer of
the Company, after reasonable notice to Employee and an opportunity for
Employee, together with Employee's counsel, to be heard before the Chief
Executive Officer, finding that in the good faith opinion of the Chief
Executive Officer Cause existed and specifying the particulars thereof in
detail.
(iv) The Company shall have the absolute right to terminate
Employee's employment Without Cause at any time by vote of a majority of the
whole Board. Termination of Employee's employment Without Cause shall be
effective five (5) business days after the date of the Company's giving to
Employee a notice of termination, specifying that such termination is Without
Cause.
(v) Upon a termination of Employee's employment for Cause or
for Disability, Employee shall have no right to receive any compensation or
benefits hereunder. Upon a termination of Employee's employment Without Cause,
Employee shall be entitled to receive the benefits provided in Section 5
hereof.
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<PAGE>
4. Termination of Employment By Employee During Contract Period.
During the Contract Period, Employee shall be entitled to terminate employment
with the Company for any reason and, if such termination is for Good Reason,
to receive the benefits provided in Section 5 hereof. Employee shall give the
Company notice of voluntary termination of employment, which notice need
specify only Employee's desire to terminate employment and, if such
termination is for Good Reason, also set forth in reasonable detail the facts
and circumstances claimed by Employee to constitute Good Reason. Any notice by
Employee pursuant to this Section shall be effective five (5) business days
after the date it is given by Employee.
5. Benefits Upon Termination in Certain Circumstances. Upon the
termination of the employment of Employee by the Company pursuant to Section
3(iv) or by Employee for Good Reason pursuant to Section 4 hereof, Employee
shall be entitled to receive the following benefits:
(i) The Company shall pay to Employee, not later than the
Termination Date, a lump sum cash amount equal to the sum of (a) the full base
salary earned by Employee through the Termination Date and unpaid at the
Termination Date, (b) the amount of any base salary attributable to vacation
earned by Employee but not taken before the Termination Date, and (c) all
other amounts earned by Employee and unpaid at the Termination Date.
(ii) The Company shall pay to Employee a cash amount equal to
thirty-six (36) times the Employee's base monthly salary at the rate in effect
immediately prior to the Termination Date. Such sum shall be paid at the
option of Employee either (i) in a lump sum, (ii) in monthly installments over
a period of 36 months, or (iii) in monthly installments with a lump sum
payable upon request from Employee.
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(iii) The Company shall further pay to Employee a pro-rata
amount of any bonus award earned by the Employee during the year of the
Termination Date under the Company's Annual Incentive Plan.
(iv) The Company shall also pay to Employee all legal fees and
expenses incurred by Employee as a result of successfully enforcing any right
or benefit provided to Employee by this Agreement.
(v) The Company shall pay, when due, for outplacement services
as requested by Employee to assist in locating new employment, up to a maximum
amount of $30,000.
(vi) The Company will continue to provide Employee with an
automobile for a period of six months after the Termination Date.
(vii) The Company shall maintain in full force and effect for
Employee's continued benefit until the earlier of (a) the end of the Contract
Period or (b) Employee's commencement of employment with a new employer, any
medical insurance plans or medical insurance arrangements in which Employee
was entitled to participate upon the Termination Date, provided that
Employee's continued participation is possible under the general terms and
provisions of such plans or arrangements. In the event that Employee's
participation in any such plans or arrangements is barred, the Company shall
arrange to provide Employee with benefits substantially similar to those which
Employee is entitled to receive under such plans or arrangements. Should the
medical insurance plans or arrangements provided by Employee's new employer
not entitle Employee or Employee's dependents (a) to any coverage during an
initial qualification period or (b) to coverage for any condition which is
considered a pre-existing condition under the new employer's plan and which
was covered under the Company's medical
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<PAGE>
insurance plans or arrangements at the Termination Date, then notwithstanding
Employee's employment, the Company shall continue to provide medical benefits
as stated above in this Section 5(v) during such qualification period (if
clause (a) of this sentence is applicable) and at least for such pre-existing
condition (if clause (b) of this sentence is applicable)
.
(viii) The Company shall assign to Employee without any cost to
Employee the Company's interest in any insurance policies issued on the life
of Employee.
6. Excess Parachute Payment. In the event that it is determined that
the payments and benefits to Employee provided for in Section 5 hereof shall
constitute an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Internal Revenue Code of 1986, as amended and any successors
thereto (the "Code"), and would be subject to an excise tax pursuant to
Section 4999 of the Code, Employee shall be entitled to receive additional
payments from the Company in an amount equal to that gross amount which when
all additional income or excise taxes payable by Employee by reason of the
imposition of such excise tax pursuant to Section 4999 of the Code are
deducted therefrom is equal to the net amount which Employee was intended to
receive pursuant to Section 5 of this Agreement.
7. Other Employment. Employee shall not be required to mitigate the
amount of any payment or benefit provided for in Section 5 by seeking other
employment or otherwise. The amount of any such payment or benefit shall not
be reduced by any compensation earned or benefit received by Employee as the
result of other employment.
8. Life Insurance. During the Contract Period the Company will
continue to maintain in effect and pay the premiums on any insurance policies
on the life of Employee which are in effect on the effective date of a Change
in Control.
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<PAGE>
9. Split Dollar Life Insurance. The Company will pay all premiums on
the split dollar life insurance policy with Transamerica Occidental Life
Insurance Company insuring Employee and his spouse until the first to occur of
the following: (i) the last day of the tenth year of the policy's existence,
or (ii) the death of Employee and his spouse. If the policy continues in
effect until the last day of the tenth year of its existence, the policy shall
continue to remain in effect thereafter with the Company maintaining an
interest in the policy equal to the amount of premiums paid until the first to
occur of the following: (i) reimbursement to the Company of the premiums paid
through withdrawal of cash value or (ii) the death of Employee and his spouse.
During the foregoing period the premiums each year shall be paid from the cash
surrender value of the policy and interest earned thereon.
If the policy continues in effect, no later than the 20th year of its
existence, there shall be paid to the Company from the cash surrender value of
the policy the amounts accrued on the books of the Company by reason of
advancing funds for premium payment in full satisfaction of all interest of
the Company in the policy and the Company shall assign to the owner of the
policy all interest of the Company in the policy.
If the policy terminates by reason of the death of Employee and his
spouse prior to the repayment to the Company of premiums through cash value,
there shall be paid to the Company in full satisfaction of all its interest in
the policy from the death proceeds payable the amounts accrued on the books of
the Company by reason of advancing funds for premium payment and the balance
of the death proceeds shall be paid to the beneficiaries designated under the
policy by Employee and his spouse.
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10. Successors: Binding Agreement.
(i) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, liquidation or otherwise) to all
or substantially all of the business and/or assets of the Company, or any
person or group (as these terms are defined in or for the purposes of Section
13(d) of the Securities Exchange Act of 1934, as in effect on the date hereof
acquiring a controlling portion of the Company's stock, to agree to expressly
assume the obligation of the Company to perform this Agreement upon or prior
to such succession taking place. A copy of such assumption and agreement shall
be delivered to Employee promptly after its execution by the successor or such
person or group. Failure of the Company to obtain such agreement upon or prior
to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Employee to benefits as set forth above in
Sections 4 and 5. Further, if the Company fails to obtain such agreement upon
or prior to the effectiveness of any such succession, the Company shall place
in trust or escrow, with an independent third party as trustee or escrow
agent, for the benefit of Employee cash in an amount equal to the total of the
following: the maximum amounts which are or may become payable to Employee by
reason of Section 5(i), (ii), (iv) and (v). This amount shall not be
discounted to any present value. All or any portion of such amount held in
trust or escrow shall be paid to Employee at the times required by Section 5
hereof, and any remaining balance shall be returned to the Company only after
there are no obligations of the Company under Section 5 that may be required
to be performed in the future.
(ii) This Agreement is personal to Employee and Employee may
not assign or transfer any part of Employee's rights or duties hereunder, or
any compensation due to Employee
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hereunder, to any other person, except that this Agreement shall inure to the
benefit of and be enforceable by Employee's personal or legal representatives,
executors, administrators, heirs, distributees, devisees, legatees or
beneficiaries.
11. Modification: Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in a writing signed by Employee and by the Company. Waiver by any
party of any breach of or failure to comply with any provision of this
Agreement by the other party shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this Agreement.
12. Arbitration of Disputes.
(i) Any disagreement, dispute, controversy or claim arising out
of or relating to this Agreement or the interpretation or validity hereof
shall be settled exclusively and finally by arbitration. It is specifically
understood and agreed that any disagreement, dispute or controversy which
cannot be resolved between the parties, including without limitation any
matter relating to the interpretation of this Agreement, may be submitted to
arbitration irrespective of the magnitude thereof, the amount in controversy
or whether such disagreement, dispute or controversy would otherwise be
considered justiciable or ripe for resolution by a court or arbitral tribunal.
(ii) The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA").
(iii) The arbitral tribunal shall consist of one arbitrator.
The parties to the arbitration jointly shall directly appoint such arbitrator
within 30 days of initiation of the
-12-
<PAGE>
arbitration. If the parties shall fail to appoint such arbitrator as provided
above, such arbitrator shall be appointed by the AAA as provided in the
Arbitration Rules and shall be a person who has had substantial experience in
mergers and acquisitions. The Company shall pay all of the fees, if any, and
expenses of such arbitrator.
(iv) The arbitration shall be conducted in the metropolitan
Detroit, Michigan area or in such other city in the United States of America
as the parties to the dispute may designate by mutual written consent.
(v) At any oral hearing of evidence in connection with the
arbitration, each party thereto or its legal counsel shall have the right to
examine its witnesses and to cross- examine the witnesses of any opposing
party. No evidence of any witness shall be presented in form unless the
opposing party or parties shall have the opportunity to cross-examine such
witness, except as the parties to the dispute otherwise agree in writing or
except under extraordinary circumstances where the interests of justice
require a different procedure.
(vi) Any decision or award of the arbitral tribunal shall be
final and binding upon the parties to the arbitration proceeding. The parties
hereto agree that the arbitral award may be enforced against the parties to
the arbitration proceeding or their assets wherever they may be found and that
a judgment upon the arbitral award may be entered in any court having
jurisdiction.
(vii) Nothing herein contained shall be deemed to give the
arbitral tribunal any authority, power, or right to alter, change, amend,
modify, add to, or subtract from any of the provisions of this Agreement.
-13-
<PAGE>
13. Notice. All notices, requests, demands and other communications
required or permitted to be given by either party to the other party by this
Agreement (including, without limitation, any notice of termination of
employment and any notice under the Arbitration Rules of an intention to
arbitrate) shall be in writing and shall be deemed to have been duly given
when delivered personally or received by certified or registered mail, return
receipt requested, postage prepaid, at the address of the other party, as
follows:
If to the Company, to:
Douglas & Lomason Company
24600 Hallwood Court
Farmington Hills, MI 48335-1671
Attention: Chairman of the Board of Directors
If to Employee, to:
Harry A. Lomason II
2900 Pine Lake Road
Orchard Lake, MI 48324
Either party hereto may change its address for purposes of this Section 10 by
giving fifteen (15) days' prior notice to the other party hereto.
14. Severability. If any term or provision of this Agreement or the
application hereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Agreement or the application
of such term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be affected thereby, and
each term and provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law.
-14-
<PAGE>
15. Headings. The headings in this Agreement are inserted for
convenience of reference only and shall not be a part of or control or affect
the meaning of this Agreement.
16. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original.
17. Governing Law. This Agreement shall in all respects be governed
by, and construed and enforced in accordance with, the laws of the State of
Michigan, without regard to the conflicts of laws principles of such state.
18. Payroll and Withholding Taxes. All payments to be made or benefits
to be provided hereunder by the Company shall be subject to reduction for any
applicable payroll- related or withholding taxes.
19. Entire Agreement. This Agreement supersedes any and all other oral
or written agreements heretofore made relating to the subject matter hereof
and constitutes the entire agreement of the parties relating to the subject
matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Douglas & Lomason Company
________________________________ By:_______________________________
(Employee Signature) Secretary
________________________________
Harry A. Lomason II
(Employee)
-15-
EXHIBIT 20.2
AGREEMENT
This Agreement (the "Agreement") is made as of the 17th day of May,
1996, between Douglas & Lomason Company, a Michigan corporation (hereinafter
called the "Company") and ___________________________ (hereinafter called
"Employee").
WHEREAS, should the Company receive any proposal for a Change in
Control, as defined in Section 1 hereof, the Board of Directors of the Company
(the "Board") believes it imperative that the Company and the Board be able to
rely upon Employee to continue in his or her position, and that they be able
to receive and rely upon Employee's advice, if they request it, as to the best
interests of the Company and its shareholders, without concern that Employee
might be distracted or his or her advice affected by the personal
uncertainties and risks created by such a proposal;
NOW, THEREFORE, to induce Employee to remain in the employ of the
Company, and for other good and valuable consideration, the Company and
Employee agree as follows:
1. Definitions.
(i) "Change in Control" shall mean the occurrence of any of the
following events:
(a) a third "person," including a "group," becomes the
"beneficial owner" (as these terms are defined in or for the purposes
of Section 13(d) of the Securities Exchange Act of 1934, as in effect
on the date hereof) of shares of the
<PAGE>
Company having more than 50% of the total number of votes that may be
cast for the election of Directors of the Company;
(b) the merger or consolidation of the Company with or
into any other corporation or entity or the merger or consolidation of
any other corporation or entity into or with the Company, in which
merger or consolidation those persons who are shareholders of the
Company immediately prior to such merger or consolidation do not
receive, as a result of such merger or consolidation, more than 50% in
voting power of the outstanding capital stock of the surviving
corporation;
(c) any sale or transfer in a single transaction or
series of related transactions (other than a public offering of
securities) of more than 50% of fair market value of the Company's
assets; or
(d) the Board determines in its sole and absolute
discretion that there has been a change in control of the Company.
(ii) "Controlling portion of the Company's stock" shall mean
shares of the Company having more than 50% of the total number of votes that
may be cast for the election of Directors of the Company.
(iii) "Company" shall mean Douglas & Lomason Company and any
successor (whether such succession is direct or indirect, by purchase, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
business and/or assets of the Company.
(iv) "Good Reason," when used with reference to a voluntary
termination by Employee of Employee's employment with the Company, shall mean:
-2-
<PAGE>
(a) the assignment to Employee of any duties
substantially inconsistent with, or the reduction of powers or
functions associated with, Employee's positions, duties,
responsibilities and status with the Company as they existed
immediately prior to a Change in Control;
(b) a reduction by Company in Employee's base salary as
in effect on the date hereof or as the same may be increased from time
to time;
(c) a change in Employee's principal work location
outside of the Farmington Hills, Michigan metropolitan area, except
for required travel on the Company's business to an extent
substantially consistent with Employee's business travel obligations
immediately prior to a Change in Control;
(d) the failure by the Company to obtain an agreement to
expressly assume this Agreement from any successor (whether such
succession is direct or indirect by purchase, merger, consolidation,
liquidation or otherwise) to substantially all of the business and/or
assets of the Company or from a person or group (as these terms are
defined in or for the purposes of Section 13(d) of the Securities
Exchange Act of 1934, as in effect on the date hereof) acquiring a
controlling portion of the Company's stock; or
(e) any purported termination of Employee's employment
by the Company during the Contract Period which is not effected
pursuant to the requirements of this Agreement.
-3-
<PAGE>
(v) "Contract Period" shall mean the period commencing on the
day a Change in Control takes place and continuing for three (3) years. A
Contract Period shall only exist for the first Change in Control which takes
place after the date hereof.
(vi) "Disability" shall mean a physical or mental incapacity of
Employee which entitles Employee to benefits under the long term disability
plan applicable to Employee and maintained by the Company as in effect
immediately prior to the Change in Control. However, if the Company has no
such plan at that time, "Disability" shall mean any physical or mental
condition that renders Employee unable to substantially perform Employee's
duties with the Company for a period exceeding six (6) consecutive months or
for a period exceeding four (4) months if a physician selected by the Company,
and reasonably satisfactory to Employee, specializing in the area of the
disability in question determines in good faith that Employee will be
permanently unable to substantially perform Employee's duties with the
Company.
(vii) "Cause," when used in connection with the termination of
Employee's employment by the Company, shall mean (a) the willful and continued
failure by Employee substantially to perform Employee's duties and obligations
to the Company (other than any such failure resulting from Employee's
Disability), (b) the willful engaging by Employee in misconduct which is
materially injurious to the Company, monetarily or otherwise, or (c) a
conviction for or plea of nolo contendere to a felony under the laws of any
state within the United States or of the United States. For purposes of this
definition, no act, or failure to act, on Employee's part shall be considered
"willful" unless done, or omitted to be done, by Employee in bad faith and
without reasonable belief that Employee's action or omission was in the best
interests of the Company.
-4-
<PAGE>
(viii) "Without Cause," when used in connection with the
termination of Employee's employment by the Company, shall mean any
termination of employment of Employee by the Company which is not a
termination of employment for Cause or for Disability.
(ix) "Termination Date" shall mean the effective date as
provided hereunder of the termination of Employee's employment.
2. Application of this Agreement: Term of Agreement. This Agreement
shall apply with respect to any termination of employment of Employee which
occurs during the Contract Period. It shall not apply to any termination of
employment of Employee which occurs other than during the Contract Period. As
provided in the definition of Contract Period, a Contract Period shall only
exist for the first Change in Control after the date hereof. This Agreement
shall terminate automatically upon termination of employment of Employee by
reason of Employee's death. Continuation of employment with a successor to the
Company, as described in Section 1 (iii), shall not alone constitute
termination of Employee's employment. This Agreement shall also terminate upon
the expiration of five (5) years from the date hereof unless the Contract
Period has commenced on or prior to the expiration of such five (5) years, in
which case this Agreement will terminate upon the expiration of the Contract
Period. Any such termination shall not affect obligations incurred prior to
the date of termination, including any obligation to provide benefits under
Section 5.
3. Termination of Employment of Employee By the Company During the
Contract Period.
(i) During the Contract Period, the Company shall have the right
to terminate
-5-
<PAGE>
Employee's employment hereunder for Cause, for Disability or Without Cause
upon compliance with the procedures hereinafter specified.
(ii) Termination of Employee's employment for Disability shall
become effective no sooner than thirty (30) days after a notice of intent to
terminate Employee's employment, specifying Disability as the basis for such
termination, is given to Employee by the Board or by a Committee of the Board.
(iii) Termination of Employee's employment for Cause shall not
be deemed effective unless and until there shall have been delivered to
Employee a copy of a notice of termination from the Chief Executive Officer of
the Company, after reasonable notice to Employee and an opportunity for
Employee, together with Employee's counsel, to be heard before the Chief
Executive Officer, finding that in the good faith opinion of the Chief
Executive Officer Cause existed and specifying the particulars thereof in
detail.
(iv) The Company shall have the absolute right to terminate
Employee's employment Without Cause at any time by vote of a majority of the
whole Board. Termination of Employee's employment Without Cause shall be
effective five (5) business days after the date of the Company's giving to
Employee a notice of termination, specifying that such termination is Without
Cause.
(v) Upon a termination of Employee's employment for Cause or
for Disability, Employee shall have no right to receive any compensation or
benefits hereunder. Upon a termination of Employee's employment Without Cause,
Employee shall be entitled to receive the benefits provided in Section 5
hereof.
-6-
<PAGE>
4. Termination of Employment By Employee During Contract Period.
During the Contract Period, Employee shall be entitled to terminate employment
with the Company for any reason and, if such termination is for Good Reason,
to receive the benefits provided in Section 5 hereof. Employee shall give the
Company notice of voluntary termination of employment, which notice need
specify only Employee's desire to terminate employment and, if such
termination is for Good Reason, also set forth in reasonable detail the facts
and circumstances claimed by Employee to constitute Good Reason. Any notice by
Employee pursuant to this Section shall be effective five (5) business days
after the date it is given by Employee.
5. Benefits Upon Termination in Certain Circumstances. Upon the
termination of the employment of Employee by the Company pursuant to Section
3(iv) or by Employee for Good Reason pursuant to Section 4 hereof, Employee
shall be entitled to receive the following benefits:
(i) The Company shall pay to Employee, not later than the
Termination Date, a lump sum cash amount equal to the sum of (a) the full base
salary earned by Employee through the Termination Date and unpaid at the
Termination Date, (b) the amount of any base salary attributable to vacation
earned by Employee but not taken before the Termination Date, and (c) all
other amounts earned by Employee and unpaid at the Termination Date.
(ii) The Company shall pay to Employee a cash amount equal to
thirty-six (36) times the Employee's base monthly salary at the rate in effect
immediately prior to the Termination Date. Such sum shall be paid at the
option of Employee either (i) in a lump sum, (ii) in monthly installments over
a period of 36 months, or (iii) in monthly installments with a lump sum
payable upon request from Employee.
-7-
<PAGE>
(iii) The Company shall further pay to Employee a pro-rata
amount of any bonus award earned by the Employee during the year of the
Termination Date under the Company's Annual Incentive Plan.
(iv) The Company shall also pay to Employee all legal fees and
expenses incurred by Employee as a result of successfully enforcing any right
or benefit provided to Employee by this Agreement.
(v) The Company shall pay, when due, for outplacement services
as requested by Employee to assist in locating new employment, up to a maximum
amount of $30,000.
(vi) The Company will continue to provide Employee with an
automobile for a period of six months after the Termination Date.
(vii) The Company shall maintain in full force and effect for
Employee's continued benefit until the earlier of (a) the end of the Contract
Period or (b) Employee's commencement of employment with a new employer, any
medical insurance plans or medical insurance arrangements in which Employee
was entitled to participate upon the Termination Date, provided that
Employee's continued participation is possible under the general terms and
provisions of such plans or arrangements. In the event that Employee's
participation in any such plans or arrangements is barred, the Company shall
arrange to provide Employee with benefits substantially similar to those which
Employee is entitled to receive under such plans or arrangements. Should the
medical insurance plans or arrangements provided by Employee's new employer
not entitle Employee or Employee's dependents (a) to any coverage during an
initial qualification period or (b) to coverage for any condition which is
considered a pre-existing condition under the new employer's plan and which
was covered under the Company's medical
-8-
<PAGE>
insurance plans or arrangements at the Termination Date, then notwithstanding
Employee's employment, the Company shall continue to provide medical benefits
as stated above in this Section 5(v) during such qualification period (if
clause (a) of this sentence is applicable) and at least for such pre-existing
condition (if clause (b) of this sentence is applicable).
(viii) The Company shall assign to Employee without any cost to
Employee the Company's interest in any insurance policies issued on the life
of Employee.
6. Excess Parachute Payment. In the event that it is determined that
the payments and benefits to Employee provided for in Section 5 hereof shall
constitute an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Internal Revenue Code of 1986, as amended and any successors
thereto (the "Code"), and would be subject to an excise tax pursuant to
Section 4999 of the Code, Employee shall be entitled to receive additional
payments from the Company in an amount equal to that gross amount which when
all additional income or excise taxes payable by Employee by reason of the
imposition of such excise tax pursuant to Section 4999 of the Code are
deducted therefrom is equal to the net amount which Employee was intended to
receive pursuant to Section 5 of this Agreement.
7. Other Employment. Employee shall not be required to mitigate the
amount of any payment or benefit provided for in Section 5 by seeking other
employment or otherwise. The amount of any such payment or benefit shall not
be reduced by any compensation earned or benefit received by Employee as the
result of other employment.
8. Life Insurance. During the Contract Period the Company will
continue to maintain in effect and pay the premiums on any insurance policies
on the life of Employee which are in effect on the effective date of a Change
in Control.
-9-
<PAGE>
9. Successors: Binding Agreement.
(i) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, liquidation or otherwise) to all
or substantially all of the business and/or assets of the Company, or any
person or group (as these terms are defined in or for the purposes of Section
13(d) of the Securities Exchange Act of 1934, as in effect on the date hereof
acquiring a controlling portion of the Company's stock, to agree to expressly
assume the obligation of the Company to perform this Agreement upon or prior
to such succession taking place. A copy of such assumption and agreement shall
be delivered to Employee promptly after its execution by the successor or such
person or group. Failure of the Company to obtain such agreement upon or prior
to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Employee to benefits as set forth above in
Sections 4 and 5. Further, if the Company fails to obtain such agreement upon
or prior to the effectiveness of any such succession, the Company shall place
in trust or escrow, with an independent third party as trustee or escrow
agent, for the benefit of Employee cash in an amount equal to the total of the
following: the maximum amounts which are or may become payable to Employee by
reason of Section 5(i), (ii), (iv) and (v). This amount shall not be
discounted to any present value. All or any portion of such amount held in
trust or escrow shall be paid to Employee at the times required by Section 5
hereof, and any remaining balance shall be returned to the Company only after
there are no obligations of the Company under Section 5 that may be required
to be performed in the future.
(ii) This Agreement is personal to Employee and Employee may
not assign or transfer any part of Employee's rights or duties hereunder, or
any compensation due to Employee
-10-
<PAGE>
hereunder, to any other person, except that this Agreement shall inure to the
benefit of and be enforceable by Employee's personal or legal representatives,
executors, administrators, heirs, distributees, devisees, legatees or
beneficiaries.
10. Modification: Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in a writing signed by Employee and by the Company. Waiver by any
party of any breach of or failure to comply with any provision of this
Agreement by the other party shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this Agreement.
11. Arbitration of Disputes.
(i) Any disagreement, dispute, controversy or claim arising out
of or relating to this Agreement or the interpretation or validity hereof
shall be settled exclusively and finally by arbitration. It is specifically
understood and agreed that any disagreement, dispute or controversy which
cannot be resolved between the parties, including without limitation any
matter relating to the interpretation of this Agreement, may be submitted to
arbitration irrespective of the magnitude thereof, the amount in controversy
or whether such disagreement, dispute or controversy would otherwise be
considered justiciable or ripe for resolution by a court or arbitral tribunal.
(ii) The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA").
(iii) The arbitral tribunal shall consist of one arbitrator.
The parties to the arbitration jointly shall directly appoint such arbitrator
within 30 days of initiation of the
-11-
<PAGE>
arbitration. If the parties shall fail to appoint such arbitrator as provided
above, such arbitrator shall be appointed by the AAA as provided in the
Arbitration Rules and shall be a person who has had substantial experience in
mergers and acquisitions. The Company shall pay all of the fees, if any, and
expenses of such arbitrator.
(iv) The arbitration shall be conducted in the metropolitan
Detroit, Michigan area or in such other city in the United States of America
as the parties to the dispute may designate by mutual written consent.
(v) At any oral hearing of evidence in connection with the
arbitration, each party thereto or its legal counsel shall have the right to
examine its witnesses and to cross-examine the witnesses of any opposing
party. No evidence of any witness shall be presented in form unless the
opposing party or parties shall have the opportunity to cross-examine such
witness, except as the parties to the dispute otherwise agree in writing or
except under extraordinary circumstances where the interests of justice
require a different procedure.
(vi) Any decision or award of the arbitral tribunal shall be
final and binding upon the parties to the arbitration proceeding. The parties
hereto agree that the arbitral award may be enforced against the parties to
the arbitration proceeding or their assets wherever they may be found and that
a judgment upon the arbitral award may be entered in any court having
jurisdiction.
(vii) Nothing herein contained shall be deemed to give the
arbitral tribunal any authority, power, or right to alter, change, amend,
modify, add to, or subtract from any of the provisions of this Agreement.
-12-
<PAGE>
12. Notice. All notices, requests, demands and other communications
required or permitted to be given by either party to the other party by this
Agreement (including, without limitation, any notice of termination of
employment and any notice under the Arbitration Rules of an intention to
arbitrate) shall be in writing and shall be deemed to have been duly given
when delivered personally or received by certified or registered mail, return
receipt requested, postage prepaid, at the address of the other party, as
follows:
If to the Company, to:
Douglas & Lomason Company
24600 Hallwood Court
Farmington Hills, MI 48335-1671
Attention: Chairman of the Board of Directors
If to Employee, to:
Either party hereto may change its address for purposes of this Section 10 by
giving fifteen (15) days' prior notice to the other party hereto.
13. Severability. If any term or provision of this Agreement or the
application hereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Agreement or the application
of such term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be affected thereby, and
each term and provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law.
-13-
<PAGE>
14. Headings. The headings in this Agreement are inserted for
convenience of reference only and shall not be a part of or control or affect
the meaning of this Agreement.
15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original.
16. Governing Law. This Agreement shall in all respects be governed
by, and construed and enforced in accordance with, the laws of the State of
Michigan, without regard to the conflicts of laws principles of such state.
17. Payroll and Withholding Taxes. All payments to be made or benefits
to be provided hereunder by the Company shall be subject to reduction for any
applicable payroll- related or withholding taxes.
18. Entire Agreement. This Agreement supersedes any and all other oral
or written agreements heretofore made relating to the subject matter hereof
and constitutes the entire agreement of the parties relating to the subject
matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Douglas & Lomason Company
________________________________ By:______________________________
(Employee Signature) Chairman of the Board
and President
________________________________
(Employee)
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> $ 4,342
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<CURRENT-ASSETS> 128,322
<PP&E> 180,771
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0
0
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