SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT TO CURRENT REPORT
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year ended June 29, 1996.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from
_____________ to _____________
Commission File Number: 1-9716
DONNELLY CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-0493110
(State of other jurisdiction of
incorporation or organization) (IRS Employer Identification No.)
414 East Fortieth Street, Holland, Michigan 49423
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (616) 786-7000
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
Class A Common Stock American Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None
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 the Form 10-K or any amendment to this
Form 10-K. __X__
The aggregate market value of voting stock held by non-affiliates of the
registrant was $102,811,298 as of August 30, 1996.
Number of shares outstanding of each of the registrant's classes of common
stock, as of August 30, 1996.
4,261,178 shares of Class A Common Stock par value, $.10 per share
3,575,959 shares of Class B Common Stock par value, $.10 per share
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
General
Donnelly Corporation's (Company) net sales and net income are subject to
significant quarterly fluctuations attributable primarily to production
schedules of the Company's major automotive customers. These same factors cause
quarterly results to fluctuate from year to year. The comparability of the
Company's results on a period to period basis may also be affected by the
Company's implementation of new joint ventures, alliances and acquisitions.
Comparison of 1996 to 1995
The Company's net sales increased 14.7% to $439.6 million in 1996, from $383.3
million in 1995. Net sales for the Company's domestic operations increased by
approximately 11% despite a 3% decrease in North American car and light truck
production, the loss of Saturn modular window business (which represented
approximately 5% of the Company's net sales in 1995) and price pressures from
the Company's major automotive customers. Price decreases, however, did not have
a material impact on the Company's increase in net sales for 1996. The increase
in net sales remained strong due to higher sales of modular window systems
(particularly for the new Chrysler Caravan/Voyager minivans), lighting and trim
products, complete exterior mirror products and door handles. Net sales for the
Company's foreign operations increased by approximately 54% from the previous
year due to the introduction of modular window programs in Langres, France for
the Chrysler Caravan/Voyager minivan and Jeep Cherokee and stronger sale for the
Company's electrochromic mirror product line. The Company's Irish operations
experienced significant pricing pressures during the year from competition in
Eastern Europe and Asia slightly offsetting the higher sales volumes.
Consolidated net sales remained relatively strong throughout the year, but were
exceptionally strong during the fourth quarter with an increase of 24% over the
fourth quarter of 1995.
Gross profit margin decreased to 18.6% of net sales in 1996, from 21.5% of net
sales in 1995. The gross profit margins were adversely impacted in the first
half of the year by the start-up of various modular window programs,
particularly for the Chrysler Caravan/Voyager minivan, and the implementation of
a new paint line in the Company's Newaygo facility. Domestic gross profit margin
performance was also significantly impacted by supplier technical difficulties
on a new business program that resulted in significant additional engineering,
production and other costs that negatively impacted gross margins by $2.2
million. Although this problem was largely due to factors not directly under the
Company's control, the issue was resolved in a timely and cooperative way that
provided an uninterrupted source of supply to the customer. Finally, the
Company's foreign operations experienced lower gross profit margins in 1996
compared to 1995 due to pricing pressures and operating expenses at the
Company's Irish operations.
Selling, general and administrative expenses were 8.7% of net sales in 1996,
down from 11.8% of net sales in 1995. These costs were significantly reduced
primarily as a result of the restructuring plan implemented in 1995 and
continued commitment to achieve higher sales levels without a proportionate
increase in these expenses. In addition, a patent settlement recognized in 1996
resulted in a reduction of these expenses by 1.3% of net sales.
Research and development expenses for 1996 were 6.3% of net sales, compared to
5.9% of net sales in 1995. The increase in research and development costs was
due to the technical difficulties on a new business program and costs for the
design and development of new window, mirror, door handle and interior trim
programs.
<PAGE>
A restructuring charge of $2.4 million was recorded in the fourth quarter of
1996 related to the write-down of certain assets and the closure of the
Company's manufacturing facility in Mt. Pleasant, Tennessee. The decision to
close the Tennessee facility was based on a number of factors that included a
major loss of business during 1995 and the inability to attract significant new
business for the plant. These costs included accruals for severance and related
employee support programs and write-down of certain assets removed from service.
The majority of these liabilities were paid or settled during the first six
months of 1997.
The Company's operating income decreased from 4.4% of net sales in 1995 to 3.1%
of net sales in 1996. The Company's domestic operating income decreased from
5.7% of net sales in 1995 to 4.1% of net sales in 1996. Domestic operating
income was adversely effected by the start-up of various modular window
programs, the implementation of a new paint line, supplier technical
difficulties on a new business program, higher research and development costs
and a restructuring charge relating to the closure of the Company's
manufacturing facility in Mt. Pleasant, Tennessee. Partially offsetting these
variances was the recognition of a $2.3 million patent settlement in the fourth
quarter of 1996. Foreign operating losses improved from 7.8% of net sales in
1995 to 3.8% of net sales in 1996. The improvement resulted primarily from the
Company's subsidiary in Mexico operating at normal production levels in 1996. In
1995, this subsidiary experienced start-up losses. The Company's Irish operation
experienced lower operating margins due to pricing pressures and higher
operating expenses to support new business programs.
Interest expense increased to $8.1 million in 1996, from $5.0 million in 1995.
The increase over 1995 resulted from higher borrowing levels to support the
Company's investment in and advances to Donnelly Hohe, which was then an equity
affiliate of the Company, and to support the Company's capital expenditures and
higher working capital. The Company has advanced $28 million to Donnelly Hohe
under a subordinated loan agreement, $14.3 million in 1995 and $13.7 million in
1996. Amounts advanced to Donnelly Hohe under the subordinated loan agreement
provide for 10% interest per annum with no principal payments due until its
maturity on April 1, 1998. The advances were financed through the Company's
existing borrowing agreements. The increase in interest income realized by the
Company was a result of the interest charged on the advances to Donnelly Hohe,
which is presented net of amounts eliminated from equity earnings in accordance
with generally accepted accounting principles.
Royalty income was $5.2 million in 1996 compared to $3.8 million in 1995. This
increase resulted from royalty income associated with the sale of the Appliance
Business in 1995. Royalty payments associated with the sale of the Appliance
Business in 1995 concluded in the fourth quarter of 1996.
Equity in earnings of affiliated companies was $0.1 million in 1996 compared to
$0.4 million in 1995. Equity earnings from Donnelly Hohe, after the elimination
of intercompany interest, were offset by losses at Applied Films Corporation
("AFC"), the Company's joint venture in Boulder Colorado, and Vision Group. The
combined impact on net income from the Company's non-automotive joint ventures
was a loss of $1.5 million in 1996, compared to income of $0.1 million in 1995.
AFC's results were adversely affected by a downturn in the market for coated
glass used in the production of liquid crystal displays. The Company is
currently exploring opportunities to exit this business. Vision Group continued
to experience start-up losses during 1996.
The Company reported net income of $8.5 million in 1996 compared to $11.0
million for 1995. Net income in 1996 included $1.1 million of net income
associated with the patent and license settlement and a $1.4 million net loss
for restructuring costs, while 1995 included $2.0 million of net income
associated with the gain on the sale and restructuring of certain non-automotive
businesses. Positively impacting the Company's domestic operations were higher
sales volumes, higher royalty income, lower selling, general and administrative
costs as a percentage of net sales and a patent and license settlement with a
competitor. These improvements were offset by higher than expected start-up
costs during the first half of the year, technical difficulties during the third
<PAGE>
quarter on a new business program which resulted in a reduction of net earnings
by $1.2 million, higher research and development costs as a percent of net sales
and restructuring charges taken in the fourth quarter. The Company's foreign
operations experienced lower net income at the Company's subsidiaries in Ireland
in addition to start-up losses at Langres, France. The Company's net income was
also lower in 1996 due to the recognition of a $1.5 million loss for
non-automotive affiliated companies.
Comparison of 1995 to 1994
Donnelly's net sales were $383.3 million in 1995, an increase of 14% over the
$337.3 million of net sales in 1994. The Company's domestic net sales increased
by approximately 9% while automotive production increased 5% in 1995 over 1994
production levels. New business in exterior mirrors, door handles, interior
systems and modular systems, along with the strong automotive production levels,
all contributed to the stronger sales level. The Company continues to experience
pricing pressures from its automotive customers. Price decreases, however, did
not have a material impact on the Company's increase in net sales for 1995. The
Company's foreign net sales were higher due to twelve months of net sales
included in 1995 for Donnelly Vision Systems Europe ("DVSE"), compared to two
months in 1994. The Company acquired DVSE in April 1994.
Gross profit margin was 21.5% in 1995 compared to 21.8% in 1994. Continuous
improvement programs being run throughout the Company, along with higher sales
volumes, helped the Company offset price pressures from customers and
significant increases in raw material costs.
Selling, general and administrative expenses were 11.8% of net sales in 1995, an
increase from 11.3% of net sales in 1994. The increase was primarily due to
patent litigation costs that were significantly higher in 1995 as the Company
pursued actions to protect its intellectual property.
Research and development expenses were 5.9% of net sales in 1995 compared to
6.3% of net sales in 1994.
In the second quarter of 1995, the Company implemented a restructuring plan to
focus on its automotive businesses. The restructuring plan included the sale of
the Company's appliance business, the sale of the heavy truck mirror business
and the liquidation of the Company's investment in OSD Envizion, a joint venture
engaged in the manufacture of welding helmet shields. The Company received total
proceeds of $14.2 million associated with the restructuring of these businesses,
which had a combined net book value of $6.5 million. In addition, restructuring
costs of $3.0 million were also recognized consisting of a severance program and
other expenses associated with the plan. The severance program included
twenty-five personnel, primarily middle and senior managers of the Company. The
spending for these costs was essentially completed by the end of 1995. The
restructuring of the non-automotive businesses resulted in a pretax gain of $4.7
million. These non-automotive businesses represented an insignificant portion of
the Company's operations for each period reported.
The Company also restructured certain automotive operations resulting in a
charge of $2.4 million in the second quarter, primarily for the write-down of
operating assets due to the loss of Saturn's business at D&A Technology, Inc.
("D&A"), the Company's joint venture with Asahi Glass Company. As a result,
minority interest in net income of subsidiaries was $0.4 million in 1995
compared to $0.8 million in 1994. D&A represented 5% and 8%, respectively, of
the Company's net sales and net income in 1995.
The Company's operating income increased from 3.9% of net sales in 1994 to 4.4%
of net sales in 1995. The Company's domestic operating income increased from
5.1% of net sales in 1994 to 5.7% of net sales in 1995. Domestic operating
margins were higher due to higher sales, lower research and development expenses
as a percent of net sales and the recognition of a gain on the restructuring of
certain businesses. Foreign operating
<PAGE>
loss improved from 17.7% of net sales in 1994 to 7.8% of net sales in 1995. The
improvement resulted primarily from the restructuring of the Company's Irish
subsidiary in 1994. In the fourth quarter of 1994, the Company recognized
restructuring costs of $1.2 million to cover a severance program and other
expenses at Donnelly Mirrors Limited. Foreign operating income also improved
despite start-up expenses incurred at the Company's subsidiaries in Mexico and
France. These expenses were approximately 5.0% to foreign segment net sales in
1995.
Interest expense increased to $5.0 million in 1995, from $3.5 million in 1994,
due to higher interest rates and to increased borrowing to support increased
capital spending.
Royalty income was $3.8 million in 1995 compared to $1.4 million in 1994. The
increase resulted primarily from royalty income associated with the sale of the
Appliance Business in 1995. Included in other income was a $0.5 million gain on
the sale of a warehouse facility in the fourth quarter of 1995.
Equity in earnings of affiliated companies increased to $0.4 million in 1995,
from a loss of $0.1 million in 1994. Improved earnings at AFC and a slight
profit from Donnelly Hohe for the two month period ending May 31, 1995, more
than offset start-up costs at Vision Group.
The Company had net income of $11.0 million in 1995, compared to $7.3 million in
1994. The increase in net income was the result of a restructuring of
non-automotive businesses, higher sales volumes, lower research and development
costs as a percentage of net sales, higher royalty income and improved equity
earnings in affiliated companies. Results from foreign operations improved
slightly, as improvements in Ireland exceeded start-up losses in Mexico and
France.
ACQUISITIONS AND INVESTMENT IN AFFILIATES
In the fourth quarter of 1996, the Company formed a 50-50 joint venture with
Shanghai Fu Hua Glass Company, Ltd. to produce framed glass products for the
Asian automotive industry. Shanghai Fu Hua Glass Company is itself a joint
venture between Ford Motor Company and Shanghai Yao Hua Glass Works. The joint
venture will have its equipment and processes in place by September 1996 and
will begin manufacturing encapsulated and framed glass products by the end of
1997. Also in the fourth quarter, the Compan formed Donnelly Eurotrim Ltd., a
100% owned subsidiary organized under the laws of Ireland, to offer our interior
lighting and overhead trim products for the European market.
During 1996 and 1995, VVL's parent, VISION Group, PLC (VISION), sold common
shares in a private placement and through public offerings reducing the
Company's ownership interest from 40% to 30.4%. The Company's equity in the net
proceeds of these sales is reflected as an increase in additional paid-in
capital in the accompanying financial statements. The aggregate market value of
the Company's investment in VISION, based on the quoted market price for
VISION's common shares, which are listed on the Londo Stock Exchange, was
approximately $44 million at June 29, 1996. The Company's investment in the net
assets of VISION was $4.0 million at June 29, 1996.
In April 1995, the Company acquired an interest in Hohe GmbH & Co. KG, since
renamed Donnelly Hohe GmbH & Co. KG (Donnelly Hohe), a German limited
partnership with operations in Germany and Spain. Donnelly Hohe, based in
Collenberg, Germany, serves many of the main auto producers in Europe in
exterior automotive mirrors, interior mirrors, door handles, automotive tooling,
and electronic components related to mirror systems.
The Company acquired 48% of the controlling general partnership interest and 66
2/3% of the limited
<PAGE>
partnership interest for $3.6 million. Additionally, the Company has advanced
$28 million to Donnelly Hohe under a subordinated loan agreement, $14.3 million
in 1995 and $13.7 million in 1996. Amounts advanced to Donnelly Hohe under the
subordinated loan agreement provide for 10% interest per annum with no principal
payments due until its maturity on April 1, 1998. In connection with the
Company's acquisition of the Donnelly Hohe interest, refinancing and additional
loans of approximately $70 million were provided to Donnelly Hohe by several
banks.
The terms of the transaction allow Donnelly to purchase the remaining ownership
interest in Donnelly Hohe through various options ranging from $3 million to $10
million. The remaining owners have an option to require the Company to buy their
interests at any time based upon a formula that results in a price of up to $10
million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current ratio was 2.0 and 1.7 at June 29, 1996 and July 1, 1995,
respectively. Working capital was $63.5 million at June 29, 1996, compared to
$40.5 million at July 1, 1995. This increase included an increase in accounts
receivables to support higher sales and higher customer tooling and increased
inventories to support new business programs reaching full production in the
first quarter of 1997. Accounts receivable were also higher due to the year
ending on June 29 and the timing of customer payments. The Company's accounts
receivable balance as a percent to sales increased from 13.3% at July 1, 1995 to
16.8% at June 29, 1996. The Company's North American customers pay the Company
on pre-established payment dates ranging from the 25th to the 30th of each
month. Therefore, a number of customer payments were not received by the June
29, 1996 balance sheet date, accounting for the increase in accounts receivable
compared to July 1, 1995.
Capital expenditures for 1996 were $20.6 million compared to $29.2 million for
1995 and $35.3 million for 1994. Capital expenditures were lower in 1996 due to
the completion of the building additions required the last two years in Langres,
France and Newaygo, Michigan to support new business programs, the transfer of
the outside mirror glass product line to Mexico and the consolidation of two
older interior mirror operations into a new facility in Holland, Michigan.
Capital expenditures in 1996 included costs for equipment to support new
business for complete exterior mirrors, door handles and modular window
encapsulation, bonding and hardware programs. The Company does not have any
material commitments for capital expenditures other than those arising out of
the normal course of business, which were approximately $9.0 million at June 29,
1996.
In the second quarter of 1996, the Company amended its revolving credit loan
agreement by increasing the amount to $80 million and extending the maturity
date to November 2002. The revolving credit agreement had borrowings against it
of $35.4 million at June 29, 1996. In November 1995, the Company issued a senior
note of $20.0 million with an insurance company. Principal payments commence in
2001 until maturity in 2006. The Company anticipates completing a $50 million
asset securitization transaction by the end of the first quarter of 1997. This
will be utilized by the Company and Donnelly Hohe to provide additional
financing availability and reduce interest and other costs.
The Company utilizes interest rate swaps and foreign exchange contracts to
manage exposure to fluctuations in interest and foreign currency exchange rates.
The risk of loss to the Company in the event of nonperformance by any party
under these agreements is not material.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets
<PAGE>
to be Disposed Of." The Company is required to adopt this statement by its
fiscal year ending in 1997. The new statement requires the Company to review
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable through
future net cash flows generated by the assets. The Company does not expect the
adoption of this statement to have a material impact on its financial position
or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 allows companies to continue to account for their
stock-based compensation plans in accordance with APB Opinion No. 25, but
encourages the adoption of a new accounting method to record compensation
expense based on the estimated fair value of employee stock-based compensation.
Companies electing not to follow the new fair value based method are required to
provide expanded footnote disclosures, including pro forma net income and
earnings per share, determined as if the company had adopted the new method. The
Statement is required to be adopted by the Company's fiscal year ending in 1997.
Management intends to continue to account for its stock-based compensation plans
in accordance with APB Opinion No. 25 and provide the supplemental disclosures
as required by SFAS No. 123, beginning in 1997.
No other recently issued accounting standards are expected to have a material
impact on the Company.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DONNELLY CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------
COMBINED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
June 29, July 1, July 2,
In thousands, except share data Year ended 1996 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales ............................................ $ 439,571 $ 383,340 $ 337,262
Cost of sales ........................................ 357,830 300,772 263,630
Gross profit...... 81,741 82,568 73,632
Operating expenses:
Selling .............................................. 8,239 6,538 6,194
Administrative and general ........................... 29,884 38,529 31,771
Research and development ............................. 27,728 22,733 21,362
Restructuring charges (gain) ......................... 2,399 (2,265) 1,184
Total operating expenses ............................. 68,250 65,535 60,511
Operating income..... 13,491 17,033 13,121
Non-operating (income) expenses:
Interest expense ..................................... 8,102 5,010 3,528
Royalty income ....................................... (5,239) (3,774) (1,370)
Interest income ...................................... (1,017) (514) (153)
Other (income) expenses, net ......................... (704) (512) 108
Non-operating expenses ............................... 1,142 210 2,113
Income before taxes on ............................... 12,349 16,823 11,008
income
Taxes on income ...................................... 4,191 5,795 3,334
Income before minority
interest and
equity earnings .................................... 8,158 11,028 7,674
Minority interest in net (income) loss of ............ 186 (371) (825)
subsidiaries
Equity in earnings (losses) of affiliated ............ 110 352 (104)
companies
Income before cumulative effect of change in
accounting principle ............................... 8,454 11,009 6,745
Cumulative effect of adopting SFAS No. 109 ........... -- -- 513
Net income ........................................... $ 8,454 $ 11,009 $ 7,258
Per share of common stock:
Income before cumulative effect of change in
accounting principle ............................ $ 1.08 $ 1.42 $ 0.87
Cumulative effect of adopting SFAS No. 109 ........... -- -- 0.07
Income per share of common stock ..................... $ 1.08 $ 1.42 $ 0.94
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
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COMBINED CONSOLIDATED BALANCE SHEETS
<TABLE>
June 29, July 1,
In thousands, except share data 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................................... $ 1,303 $ 5,224
Accounts receivable, less allowance of $571 and $575 .................................... 73,658 50,866
Inventories ............................................................................. 24,228 22,042
Customer tooling to be billed ........................................................... 19,955 17,357
Prepaid expenses ........................................................................ 5,639 2,120
Deferred income taxes ................................................................... 1,912 2,197
--------- ---------
Total current assets ........................ 126,695 99,806
--------- ---------
Property, plant and equipment:
Land .................................................................................... 3,327 3,329
Buildings ............................................................................... 33,000 32,556
Machinery and equipment ................................................................. 112,761 98,149
Construction in progress ................................................................ 8,073 16,544
--------- ---------
157,161 150,578
Less accumulated depreciation ........................................................... 57,397 56,642
--------- ---------
Net property, plant and equipment ........... 99,764 93,936
Investments in and advances to affiliates ............................................... 37,932 25,246
Other assets ............................................................................ 7,101 4,800
--------- ---------
Total assets ................................ $ 271,492 $ 223,788
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................................ $ 44,349 $ 42,248
Current maturities of long-term debt .................................................... 159 428
Accruals:
Compensation ............................................................................ 7,264 6,671
Taxes ................................................................................... 4,705 1,974
Other ................................................................................... 6,736 7,983
--------- ---------
Total current liabilities ................... 63,213 59,304
--------- ---------
Long-term debt, less current maturities ................................................. 101,757 66,374
Postretirement plans .................................................................... 12,026 7,645
Deferred income taxes and other ......................................................... 5,644 5,281
--------- ---------
Total liabilities ........................... 182,640 138,604
--------- ---------
Minority interest ....................................................................... -- 2,284
Shareholders' equity:
Preferred stock, 7 1/2% cumulative, $10 par: shares
authorized 250,000, issued 53,112 ................................. 531 531
Common stocks:
Class A, $.10 par; shares authorized
30,000,000, issued 4,248,814 and 4,183,287 ........... 425 418
Class B, $.10 par; shares authorized
15,000,000, issued 3,582,198 and 3,582,915 ........... 358 358
Donnelly Export Corporation, $.01 par; shares
authorized 600,000, issued 409,397 and ............... 4 4
Additional paid-in capital .............................................................. 25,158 23,522
Cumulative foreign currency translation adjustment ...................................... (771) 154
Retained earnings ....................................................................... 63,147 57,913
--------- ---------
Total shareholders' equity .................. 88,852 82,900
--------- ---------
Total liabilities and shareholders' equity .. $ 271,492 $ 223,788
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
DONNELLY CORPORATION AND
SUBSIDIARIES
- ----------------------------------------------------------------------------
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
June 29, July 1, July 2,
In thousands Year ended 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $8,454 $11,009 $7,258
Adjustments to reconcile net income to net
cash from
(for) operating activities:
Depreciation and amortization 12,984 11,184 9,771
Deferred pension cost and postretirement 4,934 2,742 3,941
benefits
Deferred income taxes (2,386) (2,108) (1,432)
Minority interest income (loss) (186) 371 825
Equity in (earnings) losses of affiliated 1,160 (453) 28
companies
Cumulative effect of change in accounting -- -- (513)
principle
Restructuring charges (gain) 2,399 (2,265) 1,184
Changes in operating assets and liabilities,
net of
effects of sale of businesses:
Accounts receivable (22,792) (3,736) (9,228)
Inventories (2,186) (2,841) (6,074)
Prepaid expenses and other current assets (6,117) (3,304) (3,352)
Accounts payable and other current liabilities 3,134 6,320 13,629
Other 189 131 375
---------------------------------------------
Net cash from (for) (413) 17,050 16,412
operating activities
=============================================
INVESTING ACTIVITIESCapital expenditures (20,585) (29,154) (35,329)
Investments in and advances to equity affiliates (13,966) (18,824) --
Purchase of minority interest (2,100) -- --
Proceeds from sale of businesses -- 14,200 --
Proceeds from sale-lease back -- 10,513 --
Change in unexpended bond proceeds 316 (1,015) 1,093
Other (854) (601) 847
---------------------------------------------
Net cash for investing (37,189) (24,881) (33,389)
activities
=============================================
FINANCING ACTIVITIES
Proceeds from long-term debt 36,195 15,000 21,362
Repayments on long-term debt -- (1,764) (2,018)
Resources provided by minority interest -- 491 --
Common stock issuance 706 478 304
Dividends paid (3,220) (2,524) (2,511)
---------------------------------------------
Net cash from financing 33,681 11,681 17,137
activities
=============================================
Increase (decrease) in cash and cash equivalents (3,921) 3,850 160
Cash and cash equivalents, beginning of year 5,224 1,374 1,214
---------------------------------------------
Cash and cash equivalents, end of year $1,303 $5,224 $1,374
=============================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
COMBINED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
Common stock Cumulative
_______________________________ foreign
Donnelly Additional currency
Preferred Export paid-in translation Retained
stock Class A Class B Corporation capital adjustment earnings
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 4, 1993 .......................... $ 531 $ 413 $ 358 $ 4 $20,428 ($ 869) $44,681
Net income ...................................... 7,258
Foreign currency translation
adjustment ................................. 229
Cash dividends declared:
Preferred stock-$.75 per share .................. (40)
Common stock:
Class A-$.32 per share ..................... (1,323)
Class B-$.32 per share ..................... (1,148)
Common stock issued under
employee benefit plans ..................... 2 302
Balance, July 2, 1994 ...........................$ 531 $ 415 $ 358 $ 4 $ 20,730 ($ 640) $49,428
Net income ...................................... 11,009
Foreign currency translation
adjustment ................................. 794
Cash dividends declared:
Preferred stock-$.75 per share ................ (40)
Common stock:
Class A-$.32 per share ..................... (1,337)
Class B-$.32 per share ..................... (1,147)
Common stock issued under
employee benefit plans ..................... 3 475
Change in investment in Vision
Group PLC .................................. 2,317
------
Balance, July 1, 1995 ........................... 531 418 358 4 23,522 154 57,913
Net income ...................................... 8,454
Foreign currency translation
adjustment ................................. (925)
Cash dividends declared:
Preferred stock-$.75 per share.............. (40)
Common stock:
Class A-$.40 per share ..................... (1,690)
Class B-$.40 per share ..................... (1,490)
Common stock issued under
employee benefit plans ..................... 7 699
Change in investment in Vision
Group PLC .................................. 937
------
Balance, June 29, 1996 .......................... 531 425 358 4 25,158 (771) 63,147
======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOTES TO THE COMBINED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION AND CONSOLIDATION
The combined consolidated financial statements include the accounts of Donnelly
Corporation, Donnelly Export Corporation and all majority owned, controlled
subsidiaries (the Company) after all significant intercompany balances,
transactions and shareholdings have been eliminated. Investments in 20% to 50%
owned companies are accounted for using the equity method of accounting.
Investments in affiliates representing less than 20% ownership are accounted for
under the cost method. Cost in excess of net assets of acquired companies is
being amortized on a straight-line basis over a 15 year period.
Voting control of Donnelly Corporation and Donnelly Export Corporation is vested
in the same shareholders and the corporations are under common management.
Because of these relationships, the accounts of the two corporations are
included in the financial statements as if they were a single entity.
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 and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
Except for the Company's subsidiary in Mexico, whose functional currency is the
United States dollar, financial statements of international companies are
translated into United States dollar equivalents at exchange rates as follows:
(1) balance sheet accounts at year-end rates; and (2) income statement accounts
at weighted average monthly exchange rates prevailing during the year.
Translation gains and losses are reported as a separate component of
shareholders' equity. For the Company's subsidiary in Mexico, transaction and
translation gains or losses are reflected in net income for all accounts other
than intercompany balances of a long-term investment nature for which the
translation gains or losses are reported as a separate component of
shareholders' equity. Foreign currency transaction gains and losses included in
other income are not material.
REVENUE RECOGNITION
The Company's primary source of revenue is generated from the sale of its
products. The Company recognizes revenue when its products are shipped.
CASH AND CASH EQUIVALENTS
Cash equivalents include all highly liquid investments with a maturity of three
months or less when purchased.
<PAGE>
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by the
last-in, first-out (LIFO) method, except for inventories of the consolidated
subsidiaries which are valued using the first-in, first-out (FIFO) method.
CUSTOMER TOOLING TO BE BILLED
Customer tooling to be billed represents costs incurred on behalf of the
Company's customers. These costs are recoverable at the time of tool completion
and approval, or are recovered in the program's piece price over the program's
life, not to exceed a period of three years.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided
primarily by the straight-line method. Depreciation is computed over the
estimated useful lives of the assets as follows:
Years
Buildings........................ 10 to 40
Machinery and equipment.......... 3 to 12
For tax purposes, useful lives and accelerated methods are used as permitted by
the taxing authorities.
INCOME TAXES
Deferred taxes reflect the tax effects of temporary differences between the
financial statement and tax basis of assets and liabilities, and operating loss
carryforwards. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred income taxes are not
provided on cumulative undistributed earnings of the foreign subsidiaries and
affiliates because they are intended to be permanently reinvested.
INCOME PER SHARE OF COMMON STOCK
Income per share is computed by dividing net income, adjusted for preferred
stock dividends, by the weighted average number of shares of Donnelly
Corporation common stock outstanding, as adjusted for the stock split effective
January 30, 1997 (7,802,846 in 1996, 7,744,042 in 1995 and 7,716,923 in 1994).
The potential dilutive effect from the exercise of stock options is not
material.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates the fair value of all financial instruments where the
carrying value differs from the fair value, primarily long-term fixed rate debt,
interest rate swaps and foreign exchange currency contracts, based
<PAGE>
upon quoted amounts or the current rates available for similar financial
instruments. The carrying value of the Company's variable rate debt and all
other financial instruments approximates their fair value.
FISCAL YEAR
The Company's fiscal year is the 52 or 53 week period ending the Saturday
nearest June 30. Fiscal years 1996, 1995 and 1994 ended on June 29, July 1 and
July 2, respectively, each included 52 weeks.
IMPAIRMENT OF ASSETS
In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," was issued. SFAS No. 121 requires long-lived assets, including
the excess of cost over the fair value of assets of businesses acquired, to be
reviewed for impairment losses whenever events or changes in circumstances
indicate the carrying amount may not be recoverable through future net cash
flows generated by the assets. The Company consistent with existing generally
accepted accounting principles, currently states the majority of its fixed
assets at the lower of cost or net realizable value. The Company will adopt SFAS
No. 121 in 1997 and believes the effect of adoption will not be material.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year data to conform to the
current year presentation and had no effect on net income reported for any
period.
2. NATURE OF OPERATIONS
The Company is an international supplier of high quality automotive parts and
component systems from manufacturing operations in North America and Europe. The
Company supplies automotive customers around the world with rearview mirror
systems, modular window systems and interior lighting and trim systems. The
Company also provides products to several non-automotive markets.
Export revenues are foreign revenues produced by identifiable assets located in
the United States. Foreign revenues are generated by identifiable assets at the
Company's subsidiaries located in Ireland, France and Mexico. A summary of the
Company's operations by geographic area follows:
<TABLE>
Year ended
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Revenues:
United States ............. $ 331,469 $ 317,710 $ 296,226
Foreign ................... 55,998 36,832 18,367
Export:
Americas .................. 49,655 25,016 21,557
Asia ...................... 532 981 310
Europe .................... 1,917 2,786 785
Other ..................... -- 15 17
$ 439,571 $ 383,340 $ 337,262
Operating Income (Loss):
United States ............. $ 15,641 $ 19,857 $ 16,397
Foreign ................... (2,150) (2,824) (3,276)
--------- --------- ---------
$ 13,491 $ 17,033 $ 13,121
Identifiable Assets:
United States ............. $ 226,861 $ 186,743 $ 165,172
Foreign ................... 44,631 37,045 18,629
$ 271,492 $ 223,788 $ 183,801
</TABLE>
<PAGE>
Sales to major automobile manufacturers as a percent of the Company's net sales
follows:
<TABLE>
Year ended
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Chrysler............... 33% 18% 18%
Ford................... 22 22 24
Honda.................. 16 14 12
General Motors......... 10 17 21
---- ---- ----
81% 71% 75%
==== ==== ====
</TABLE>
3. INVENTORIES
Inventories consist of:
<TABLE>
1996 1995
------ -----
(in thousands)
<S> <C> <C>
LIFO cost:
Finished products and work in process ......... $ 6,998 $ 6,743
Raw materials ................................. 6,981 6,622
13,979 13,365
FIFO cost:
Finished products and work in process ......... 3,202 3,397
Raw materials ................................. 7,047 5,280
10,249 8,677
$24,228 $22,042
</TABLE>
If only the first-in, first-out method of inventory valuation had been used,
inventories would have been $0.4 million and $0.5 million higher than reported
at June 29, 1996 and July 1, 1995, respectively, and would have approximated
replacement cost.
<PAGE>
4. INVESTMENTS IN AND ADVANCES TO EQUITY AFFILIATES
The Company's equity affiliates include the following: Donnelly Hohe, a
German limited partnership that produces exterior mirrors, interior mirrors,
door handles, automotive tooling and electronic components related to mirror
systems; Vision Group plc ("Vision Group"), the sole shareholder of VLSI Vision
Limited that produces an advanced video microchip; newly formed Shanghai
Donnelly Fu Hua Window Systems Company Ltd. (Shanghai Donnelly Fu Hua) that will
manufacture encapsulated and framed glass products for the Asian automotive
industry; and Applied Films Corporation, a 50% owned joint venture that
manufactures thin-film glass coatings used in the production of liquid crystal
displays.
In the fourth quarter of 1996, the Company formed Shanghai Donnelly Fu Hua,
a 50-50 joint venture with Shanghai Fu Hua Glass Company, Ltd. Shanghai Fu Hua
Glass Company is itself a joint venture between Ford Motor Company and Shanghai
Yao Hua Glass Works. The joint venture will have its equipment and processes in
place by September 1996, and the venture will begin manufacturing encapsulated
and framed glass products by the end of the year.
During 1996 and 1995, Vision Group sold common shares in a private
placement and through public offerings reducing the Company's ownership interest
from 40% to 30.4%. The Company's equity in the net proceeds of these sales is
reflected as an increase in additional paid-in capital in the accompanying
financial statements. The aggregate market value of the Company's investment in
Vision Group, based on the quoted market price for Vision Group's common shares,
which are listed on the London Stock Exchange, was approximately $44 million at
June 29, 1996. The Company's investment in the net assets of Vision Group was
approximately $4 million at June 29, 1996.
Effective April 1, 1995, the Company acquired an interest in Hohe GmbH &
Co. KG, since renamed Donnelly Hohe GmbH & Co. KG (Donnelly Hohe), a German
limited partnership with operations in Germany and Spain. Donnelly Hohe, based
in Collenberg, Germany, supplies many of the main automakers in Europe.
The Company acquired 48% of the general partnership interest and 662/3% of
the limited partnership interest for $3.6 million. Additionally, the Company has
advanced $28 million to Donnelly Hohe under a subordinated loan agreement, $14.3
million in 1995 and $13.7 million in 1996. Amounts advanced to Donnelly Hohe
under the subordinated loan agreement provide for 10% interest per annum with no
principal payments due until its maturity on April 1, 1998. In connection with
the Company's acquisition of the Donnelly Hohe interest, refinancing and
additional loans of approximately $70 million were provided to Donnelly Hohe by
several banks. The terms of the transaction allow Donnelly to purchase the
remaining ownership interest in Donnelly Hohe through various options ranging
from $3 million to $10 million. The remaining owners have an option to require
the Company to buy their interests at any time based upon a formula which
results in a price range of up to $10 million.
Summarized balance sheet and income statement information for the Company's
non-consolidated affiliates
<PAGE>
accounted for using the equity method are as follows. Income statement
information includes Donnelly Hohe's twelve months ended May 31, 1996, and two
months ended May 31, 1995. All significant others presented include twelve
months ending in the month of June for each year presented.
<TABLE>
1996 1995
(in thousands)
Summarized Balance Sheet Information
<S> <C> <C>
Current assets ............................. $ 90,927 $ 80,443
Non-current assets ......................... 82,052 80,986
Current liabilities ........................ 69,931 57,857
Non-current liabilities .................... 87,905 89,860
Net equity ................................. $ 15,143 $ 13,712
Summarized Income Statement Information
Net sales .................................. $ 250,904 $ 77,756
Costs and expenses ......................... 254,403 77,547
Net income (loss) .......................... $ (3,500) $ 209
========= =========
</TABLE>
5. DEBT AND OTHER FINANCING ARRANGEMENTS
Debt consists of:
<TABLE>
1996 1995
(in thousands)
<S> <C> <C>
Borrowings under revolving credit agreements at 4.15% and 7.50% $ 35,418 $ 15,000
Senior Notes, due 2004, principal payable in installments
beginning in 1999, interest at 6.67% ........................... 15,000 15,000
Senior Notes, due 2005, principal payable in installments
beginning in 2000, interest at 7.22% ........................... 15,000 15,000
Senior Notes, due 2006, principal payable in installments
beginning in 2001, interest at 6.70% ........................... 20,000 --
Industrial revenue bonds:
$9,500 at adjustable rates (3.80% at June 29, 1996), due in 2008-
2010; $5,000 at a fixed rate of 8.13%, due in 2012 ............. 14,500 14,500
Other ............................................................. 1,998 6,602
Total ............................................................. 101,916 66,802
Less current maturities ........................................... 159 428
$101,757 $66,374
</TABLE>
<PAGE>
The Company has an unsecured $80 million Revolving Credit Loan Agreement
which expires November 20, 2002. Interest is at prime unless one of three
alternative elections are made by the Company.
The $9.5 million industrial revenue bonds are secured by letters of credit
which must be renewed annually. All industrial revenue bonds are collateralized
by the purchased land, building and equipment. The senior notes are unsecured.
The various borrowings subject the Company to certain restrictions relating
to, among other things, minimum net worth, payment of dividends and maintenance
of certain financial ratios. At June 29, 1996, the Company was in compliance
with all related covenants. Retained earnings available for dividends at June
29, 1996, are $19.6 million.
Annual principal maturities consist of:
<TABLE>
Year ending Amount
(in thousands)
<S> <C>
1997................... $ 159
1998................... 117
1999................... 3,525
2000................... 7,000
2001................... 20,357
2002 and thereafter.... 70,758
---------
$101,916
</TABLE>
The Company provides guarantees for $7.3 million in municipal funding for
the construction of a manufacturing facility and up to $5.0 million of Applied
Films Corporation borrowings.
Interest payments of $7.8 million, $5.0 million and $3.7 million were made
in 1996, 1995 and 1994, respectively.
6. FINANCIAL INSTRUMENTS
The Company utilizes interest rate swaps and foreign exchange contracts to
manage exposure to fluctuations in interest and foreign currency exchange rates.
The risk of loss to the Company in the event of nonperformance by any party
under these agreements is not material. At June 29, 1996 and July 1, 1995, the
Company had interest rate swaps with an aggregate notional amount of $60
million, $30 million and $40 million of which were offsetting at June 29, 1996
and July 1, 1995, respectively. These effectively converted $30 million and $20
million of the Company's variable interest rate debt to fixed rates at June 29,
1996 and July 1, 1995, respectively. The Company is currently paying a weighted
average fixed rate of 7.17%, calculated on the notional amounts. These swap
agreements have varied expirations through 2003. The notional amounts of
interest rate swaps do not represent amounts exchanged by the parties, and thus
are not a measure of the exposure to the Company through its use of these
instruments. Net receipts or payments under the agreements are recognized as an
adjustment to interest expense.
<PAGE>
The Company's Irish subsidiaries enter into foreign exchange contracts to
hedge against changes in foreign currency exchange rates. The Company had
foreign exchange contracts outstanding of $7.8 million and $13.3 million at June
29, 1996 and July 1, 1995, respectively. The foreign exchange contracts require
the Company to exchange foreign currencies for Irish pounds and generally mature
within 12 months.
In accordance with the requirements of SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments" (see Note 1), the Company has provided the
following fair value estimates for instruments in which the fair value differs
from carrying value at June 29, 1996:
<TABLE>
Carrying Value Fair Value
(in thousands)
Liabilities
<S> <C> <C>
Long-term fixed rate debt......... $ 55,000 $ 53,630
Derivatives
Interest rate swaps............... -- (423)
Foreign exchange contracts........ -- 274
</TABLE>
7. BENEFIT PLANS
A. Pension Benefits
The Company sponsors defined benefit pension plans covering substantially
all employees. Pension costs for the plans are funded in amounts which equal or
exceed regulatory requirements. Benefits under these plans are based primarily
on years of service and compensation.
Assumptions and net periodic pension cost are as follows:
<TABLE>
Year ended
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Discount rate......................... 8.00% 8.25% 8.25%
Compensation increase................. 5.00% 5.00% 5.00%
Expected return on plan assets........ 9.50% 9.50% 9.50%
Service cost.......................... $3,545 $3,544 $3,178
Interest cost......................... 5,060 4,560 3,912
Actual gain on plan assets............ (8,528) (6,389) (854)
Net amortization and deferral......... 4,550 2,563 (2,292)
------- ------- ------
Net periodic pension cost............. $4,627 $4,278 $3,944
</TABLE>
<PAGE>
The funded status of the defined benefit pension plans is summarized below:
<TABLE>
1996 1995
(in thousands)
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of $43,101 and $38,997....... $(43,945) $(40,328)
Effect of projected compensation increases............................................. (23,826) (23,462)
--------- ---------
Projected benefit obligation for service rendered to date.............................. (67,771) (63,790)
Plan assets at fair value, primarily corporate equity and debt securities.............. 55,784 47,180
---------- ---------
Projected benefit obligation in excess of plan assets.................................. (11,987) (16,610)
Unrecognized net transition obligation................................................. 408 492
Unrecognized prior service cost........................................................ 530 120
Unrecognized net loss.................................................................. 1,926 10,165
--------- ---------
Net pension liability.................................................................. $ (9,123) $ (5,833)
========= =========
</TABLE>
B. Postretirement Health Care Benefits
The Company provides certain health care and life insurance benefits for
eligible active and retired employees. The plan contains cost saving features
such as deductibles, coinsurance and a lifetime maximum and is unfunded.
Effective July 4, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." This Statement
requires the accrual, during the employee's years of service, of the expected
cost of providing those benefits to an employee and the employee's beneficiaries
and covered dependents. The net transition obligation represents the difference
between the accrued postretirement benefit costs prior to the adoption of SFAS
No. 106 and the Plan's unfunded accumulated postretirement benefit obligation as
of July 4, 1993. The net transition obligation of $7.9 million at July 4, 1993
is being amortized over 22 years.
The components of the net periodic postretirement benefit cost are as
follows:
<TABLE>
Year ended
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Service cost........................................................ $ 450 $ 402 $ 388
Interest cost....................................................... 830 779 661
Amortization of net transition obligation over 22 years............. 360 360 360
Unrecognized net loss............................................... 20 13 --
Net periodic postretirement benefit cost............................ $1,660 $1,554 $1,409
</TABLE>
<PAGE>
The postretirement health care liability recognized in the balance sheet is
as follows:
<TABLE>
1996 1995
(in thousands)
<S> <C> <C>
Retirees................................................... $(5,946) $(5,973)
Fully eligible active participants......................... (66) (14)
Other active participants.................................. (5,467) (4,961)
-------- --------
Accumulated postretirement benefit obligation.............. (11,479) (10,948)
Unrecognized transition obligation......................... 6,841 7,201
Unrecognized net loss...................................... 1,486 1,519
Postretirement health care liability....................... $(3,152) $(2,228)
======= =======
</TABLE>
The assumed health care inflation rate used in measuring the postretirement
health care liability is 9.0% for 1997, declining uniformly to 6% in 2000 and
remaining level thereafter. The health care cost trend rate has an effect on the
amounts reported. Increasing the assumed health care inflation rate by 1% would
increase the postretirement health care liability by $0.6 million, and the net
periodic postretirement benefit cost for the year by $40,000. The weighted
average discount rate used in determining the accumulated postretirement benefit
obligation was 8.0% and 7.75% in 1996 and 1995, respectively.
8. TAXES ON INCOME
Effective July 4, 1993, the Company adopted SFAS No. 109, "Accounting for Income
Taxes." The cumulative effect of this accounting change of $0.5 million is
reported separately in the 1994 combined consolidated statement of income.
Deferred income taxes under SFAS No. 109 reflect the tax effects of temporary
differences between the amounts of assets and liabilities for financial
reporting purposes and those amounts as measured by income tax laws. The Company
has grouped the noncurrent deferred tax assets with other assets and the net
noncurrent deferred tax liability with certain other liabilities on the balance
sheet. The tax effects of temporary differences which give rise to a significant
portion of deferred tax assets (liabilities) are as follows:
<TABLE>
1996 1995
(in thousands)
<S> <C> <C>
Fixed assets................................... $(5,581) $(4,237)
Retirement plans............................... 3,106 1,641
Postretirement benefits........................ 1,103 780
Loss carryforwards............................. 2,095 636
Accrued expenses and other..................... (280) (271)
--------- ---------
Net deferred tax asset (liability)............. $ 443 $(1,451)
Per Balance Sheet:
1996 1995
(in thousands)
<S> <C> <C>
Current income tax asset........... $1,912 $2,197
Noncurrent income tax asset........ 2,095 ----
Noncurrent income tax liability.... (3,564) (3,648)
--------- ---------
Net deferred tax asset (liability). $ 443 $(1,451)
</TABLE>
<PAGE>
At June 29, 1996, the Company has $2.1 million of net operating loss
carryforwards, the majority of which expire in 2010 or are indefinite.
<TABLE>
Year ended
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Income before taxes on income consists of:
Domestic......................................... $15,647 $18,692 $14,453
Foreign.......................................... (3,298) (1,869) (3,445)
--------- ------- ---------
$12,349 $16,823 $11,008
Tax expense (benefit) consists of:
Current:
Domestic.................................... $ 6,909 $ 7,920 $ 4,782
Foreign..................................... 8 (17) (16)
----------- ----------
6,917 7,903 4,766
Deferred:
Domestic.................................... (2,156) (1,761) (1,101)
Foreign..................................... (570) (347) (331)
--------- --------- ---------
(2,726) (2,108) (1,432)
--------- --------- ---------
$ 4,191 $ 5,795 $ 3,334
</TABLE>
The difference from the amount that would be computed by applying the
federal statutory income tax rate to income before taxes on income is reconciled
as follows:
<TABLE>
Year ended
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Income taxes at federal statutory rate 35% 35% 34%
Impact of:
Available tax credits.................. -- (2) (11)
Foreign subsidiary earnings............ 5 2 7
DISC earnings.......................... (6) (2) (3)
Other.................................. -- 1 3
----- ------ -----
Effective tax rate.......................... 34% 34% 30%
----- ------ -----
Income taxes paid........................... $3,731 $10,332 $3,149
====== ======= ======
</TABLE>
<PAGE>
9. PREFERRED STOCK AND COMMON STOCK
Each share of 71/2% cumulative preferred stock is entitled to one vote for
the election of the members of the Board of Directors not elected by the holders
of Class A Common Stock, and all other matters at all shareholders' meetings
whenever dividend payments are in arrears for four cumulative quarters. No
arrearage existed at June 29, 1996. The preferred stock is redeemable in whole
or in part, if called by the Company, at $10.50 per share. Additionally, there
are 1,000,000 authorized shares of series preferred stock, no par value. At June
29, 1996 and July 1, 1995, no series preferred stock was outstanding.
Each share of Class A Common Stock and Class B Common Stock is entitled to
one vote and ten votes, respectively, at all shareholders' meetings. The holders
of Class A Common Stock are entitled to elect one-quarter of the members of the
Board of Directors. The remaining directors are elected by the holders of Class
B Common Stock and any preferred stock entitled to vote.
10. STOCK PURCHASE AND OPTION PLANS
The Company's Employees' Stock Purchase Plan permits the purchase in an
aggregate amount of up to 437,800 shares of Class A Common Stock. Eligible
employees may purchase stock at market value, or 90% of market value if the
price is $8.00 per share or higher, up to a maximum of $5,000 per employee in
any calendar year. The Company issued 17,460 shares in 1996 and 22,771 shares in
1995 under this plan.
The Company's Stock Option Plans permit the granting of either nonqualified
or incentive stock options to certain key employees and directors to purchase an
aggregate amount of up to 862,500 shares of the Company's Class A Common Stock.
The options, which become exercisable twelve months after date of grant, expire
ten years after date of grant. Although the plan administrator may establish the
nonqualified option price at below market value at date of grant, incentive
stock options may be granted only at prices not less than the market value.
Options have been granted to purchase common stock at prices ranging from
$9.20 to $20.125 per share. Options were exercised during 1995 and 1996 at
prices ranging from $9.20 to $10.60 per share. A summary of option transactions
follows:
<TABLE>
Year ended
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Options outstanding, beginning of year.......... 412 361 283
Options granted................................. 80 76 79
Options exercised............................... (47) (13) (1)
Options expired................................. (36) (12) --
Options outstanding, end of year................. 409 412 361
Exercisable, end of year......................... 337 343 282
</TABLE>
<PAGE>
The Company has reserved 364,975 shares for future grants at June 29, 1996.
In 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 allows companies to continue to account for their
stock-based compensation plans in accordance with APB Opinion No. 25, but
encourages the adoption of a new accounting method to record compensation
expense based on the estimated fair value of employee stock-based compensation.
Companies electing not to follow the new fair value based method are required to
provide expanded footnote disclosures, including pro forma net income and
earnings per share, determined as if the company had adopted the new method. The
Statement is required to be adopted by the Company's fiscal year ending in 1997.
Management intends to continue to account for its stock-based compensation plans
in accordance with APB Opinion No. 25 and provide the supplemental disclosures
as required by SFAS No. 123, beginning in 1997.
11. COMMITMENTS AND CONTINGENCIES
A. Patent Litigation
Certain electrochromic mirror technology of the Company has been the
subject of patent litigation between the Company and Gentex Corporation
("Gentex"). Following the settlement of prior litigation, Gentex filed a lawsuit
against the Company on June 7, 1993, alleging that the Company's solid polymer
film electrochromic mirror infringed a patent owned by Gentex. On March 21,
1994, the Company's motion for summary judgment of non-infringement was granted
and the lawsuit was dismissed. Gentex filed an appeal of this ruling. On
November 3, 1995, the Court of Appeals for the Federal Circuit affirmed the
summary judgment decision and dismissed Gentex's appeal. On December 18, 1995,
the Court of Appeals for the Federal Circuit denied Gentex's request for a
rehearing.
The Company was also a party to three subsequent lawsuits involving 10
patents owned by the Company. In one of these suits, the Court granted Gentex's
motion for summary judgment that two of the Company's patents relating to
lighted mirrors are invalid. The Company believes that its lighted mirror
patents are not invalid and has filed on appeal on this issue. The appeal is
currently pending.
On April 1, 1996, the Company entered into a settlement agreement with
Gentex which resolved all aspects of these three lawsuits except for the pending
appeal referred to above. Under the agreement, Gentex paid the Company $6.0
million in settlement fees and will pay an additional $0.2 million if the
Company prevails in its appeal. In addition, the settlement includes
cross-licensing of certain patents which each party may practice within its own
core technology area, and an agreement that the partie will not pursue
litigation against each other on certain other patents for a period of four
years. This settlement was recognized in selling, general and administrative,
net of related patent litigation costs previously capitalized. Patent litigation
costs included in selling, general and administrative expenses were $3.7
million, $3.1 million and $0.8 million in 1996, 1995, and 1994, respectively.
B. Other Litigation
The Company and its subsidiaries are involved in certain other legal
actions and claims, including environmental claims, arising in the ordinary
course of business. Management believes (based on advice of legal counsel) that
such litigation and claims will be resolved without material effect on the
Company's financial position, results of operation and liquidity, individually
and in the aggregate.
<PAGE>
C. Other
As of June 29, 1996, the Company had capital expenditure purchase
commitments outstanding of approximately $9 million.
12. LEASES
The Company leases various facilities and equipment. Rental expense charged to
operations amounted to approximately $3.8 million for 1996, $2.5 million for
1995 and $2.5 million for 1994. In 1995 the Company entered an agreement for the
sale and leaseback of newly installed modular window production equipment. The
equipment was sold at cost and no gain or loss was recognized on the
transaction. The lease which has six one year renewal terms, an effective 6.9%
fixed interest rate and a 40% balloon for the Company option to purchase after
the full seven year term is classified as an operating lease.
Future minimum lease payments, excluding renewal options, consist of:
<TABLE>
Year ending Amount
(in thousands)
<S> <C>
1997........................ $ 3,688
1998........................ 1,196
1999........................ 514
2000........................ 578
2001........................ 221
2002 and thereafter......... 485
-------------
$ 6,682
</TABLE>
13. RESTRUCTURING OF OPERATIONS
In the fourth quarter of 1996, the Company recorded a restructuring charge
of $2.4 million related to the write-down of certain assets and the closure of
the Company's manufacturing facility in Mt. Pleasant, Tennessee. The decision to
close the Tennessee facility was based on a number of factors that included a
major loss of business one year ago and the inability to attract significant new
business for the plant. These costs include accruals for severance and related
employee support programs and write-off of certain assets removed from service.
The majority of these liabilities will be paid or settled during the first six
months of 1997.
In the second quarter of 1995, the Company implemented a restructuring
plan to focus on its automotive businesses. The restructuring plan included the
sale of the Company's appliance business, the sale of the heavy truck mirror
business and the liquidation of the Company's investment in OSD Envizion, a
joint venture engaged in the manufacture of welding helmet shields. The Company
received total proceeds of $14.2 million associated with the restructuring of
these businesses, which had a combined net book value of $6.5 million. In
addition, restructuring costs of $3.0 million were also recognized consisting of
a severance program and other expenses associated with the plan. The severance
program included twenty-five personnel, primarily middle and senior managers of
the Company. The spending for these costs was essentially completed by the end
of 1995. The restructuring of the non-automotive businesses resulted in a pretax
gain of $4.7 million. These non-automotive businesses represented an
insignificant portion of the Company's operations for each period reported.
<PAGE>
The Company also restructured certain automotive operations in the second
quarter of 1995, resulting in a charge of $2.4 million primarily for the
write-down of operating assets due to the loss of Saturn's business at D&A
Technology, Inc. (D&A), the Company's former joint venture with Asahi Glass
Company. In the first quarter of 1996, the Company dissolved the joint venture
and acquired Asahi's 40% interest in D&A for approximately $2.1 million. D&A
represented 5% and 8%, respectively, of the Company's combined consolidated net
sales and net income in 1995.
In the fourth quarter of 1994, the Company recognized restructuring costs
of $1.2 million to cover a severance program and other expenses associated with
the restructuring of Donnelly Mirrors Limited.
QUARTERLY FINANCIAL DATA--UNAUDITED
The Company's common stock is traded on the American Stock Exchange under
the Symbol "DON." Market quotations regarding the range of high and low sales
prices of the Company's common stock were as follows:
<TABLE>
Fiscal 1996 1995
Quarter High Low High Low
<S> <C> <C> <C> <C>
First $ 16 3/4 $ 141/2 $ 17 1/2 $ 15 1/8
Second 15 5/8 13 3/4 17 5/8 13 1/4
Third 14 7/8 13 18 15 1/8
Fourth 16 1/8 13 3/4 17 5/8 14 7/8
</TABLE>
<TABLE>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
1996
Net sales................................................ $90,523 $106,823 $116,445 $125,780 $439,571
Gross profit............................................. 13,685 20,030 22,153 25,873 81,741
Operating income (loss).................................. (2,087) 3,899 3,920 7,759 13,491
Net Income (loss):
Income (loss)....................................... (1,789) 2,629 2,503 5,111 8,454
Per common share.................................... (.23) .34 .32 .65 1.08
Dividends declared per share of common stock............. .10 .10 .10 .10 .40
1995
Net sales................................................ $86,741 $ 98,460 $ 96,708 $101,431 $383,340
Gross profit............................................. 18,101 22,312 21,019 21,136 82,568
Operating income......................................... 811 7,274 4,828 4,120 17,033
Net Income (loss):
Income (loss)....................................... (85) 4,699 3,076 3,319 11,009
Per common share.................................... (.01) .61 .40 .42 1.42
Dividends declared per share of common stock............. .08 .08 .08 .08 .32
</TABLE>
<PAGE>
The impact of certain transactions on the 1996 and 1995 quarterly results
of operations is discussed in Notes 11 and 13. See Management's Discussion and
Analysis of Results of Operations and Financial Condition for discussion of the
Company's results of operations, in Item 7 of this report on pages 2-5.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 (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.
DONNELLY CORPORATION
/s/ William R. Jellison
William R. Jellison
Vice President, Corporate
Controller and Treasurer
Date: September 23, 1997
<PAGE>
Annual Report - Form 10-K
Exhibit Index
3. Articles of Incorporation and Bylaws are incorporated by reference to
Exhibit 3.1 and 3.2 of Registrant's Registration Statement on Form
S-1, as amended, dated March 9, 1988, (Registration No. 33-17167)
("S-1 Registration Statement").
4. A specimen stock certificate of the Class A Common Stock was filed as
part of a Registration Statement on Form S-1 (Registration No.
33-17167) as Exhibit 4.1, and the same is hereby incorporated herein
by reference.
10.1 Amended and Restated First Chicago Revolving Credit Loan Agreement
10.2 Nationwide Life Insurance Company Debt Agreement was filed as part of
Form 10-K for the fiscal year ending July 1, 1995 as Exhibit 10.1 and
is hereby incorporated herein by reference.
10.3 An English language summary of an Acquisition Agreement and related
documents written in German between the Registrant, Donnelly GmbH,
Hohe GmbH & Co. KG ("Hohe") and other related parties, dated May 25,
1995, consolidated financial statements of Hohe as of March 31, 1995
and 1994 (audited) and pro forma financial information of the
Registrant were filed as part of Form 8-K on June 9, 1995, which has
been subsequently amended and are hereby incorporated herein by
reference.
10.4 Nationwide Life Insurance Company Debt Agreement was filed as part of
Form 10-K for the fiscal year ending July 2, 1994 as Exhibit 10.1 and
is hereby incorporated herein by reference.
10.5 The Principal Mutual Debt Agreement was filed as part of Form 10-K for
the fiscal year ending July 3, 1993 as Exhibit 10.2 and is hereby
incorporated herein by reference.
10.6 A Merger Agreement for the Merger of Donnelly Coated Corporation
("DCC") into Applied Coated Corporation, among Registrant, DCC,
Applied Films Lab, Inc. and Cecil Vanalsburg, John Chapin, and Richard
Condon, dated February 24, 1992, was filed as part of a Registration
Statement on Form S-2 (Registration No. 33-47036) and Exhibit 10.7,
and the same is hereby incorporated herein by reference.
10.7 The form of Indemnity Agreement between Registrant and each of its
directors was filed as a part of a Registration Statement on Form S-1
(Registration No. 33-17167) as Exhibit 10.8, and the same is hereby
incorporated herein by reference.
10.8 The Donnelly Corporation Stock Option Plan was filed as part of a
Registration Statement on Form S-1 (Registration No. 33-17167) as
Exhibit 10.9, and the same is hereby incorporated herein by reference.
10.9 The Donnelly Corporation 1987 Employees' Stock Purchase Plan,
including amendments was filed as part of a Registration Statement on
Form S-8 (Registration No. 33-34746) as Exhibit 28.1, and the same is
hereby incorporated herein by reference.
10.10 The Donnelly Corporation Non Employee Director's Stock Option Plan was
filed as part of a Registration Statement on Form S-8 (Registration
No. 33-55499) as Exhibit 99, and the same is hereby incorporated
herein by reference.
10.11 The Donnelly Corporation Executive Compensation Plan
10.12 The Donnelly Corporation Unfunded Deferred Director Fee Plan
10.13 The Donnelly Corporation Pension Plan for Outside Directors
10.14 The Donnelly Corporation Supplemental Retirement Plan
10.15 The Donnelly Corporation Deferred Compensation Plan
10.17 Letter from Donnelly Corporation to Mr. Donn Viola dated July 12,
1996, as modified on July 22, 1996.
10.18 Letter from Donnelly Corporation to Mr. Russ Scaffede dated September
15, 1995
10.19 An English language summary of the Security Pool Agreement written in
German between the Registrant and Donnelly Hohe GmbH & Co. KG dated
September 15, 1995
10.20* Receivables Purchase Agreement among Donnelly Receivables Corporation,
Falcon Asset Securitization Corporation and the First National Bank of
Chicago dated as of November 14, 1996
22 Schedule of Affiliates.
24 Consent of BDO Seidman, LLP, independent public accountants for
Form-10K/A for the fiscal year ending June 29, 1996.
27 Financial Data Schedules.
__________________________
*Certain confidential information has been omitted pursuant to a request for
confidential treatment.
<PAGE>
10.11
Executive Compensation Plan August 29, 1994
TABLE OF CONTENTS
PAGE
ARTICLE I CONCEPT AND OBJECTIVES....................................... 1
ARTICLE 11 DEFINITIONS.................................................. 3
ARTICLE III ELIGIBILITY.................................................. 5
ARTICLE IV INDIVIDUAL ANNUAL INCENTIVE AWARD OPPORTUNITIES.............. 6
ARTICLE V ANNUAL INCENTIVE AWARD PAYMENTS..............................12
ARTICLE VI MEASUREMENT OF PERFORMANCE UNITS.............................13
ARTICLE VII PERFORMANCE UNIT GRANTS......................................14
ARTICLE VIII PERFORMANCE UNIT AWARD PAYOUTS...............................16
ARTICLE IX ADMINISTRATION OF THE PLAN...................................17
<PAGE>
DONNELLY CORPORATION EXECUTIVE COMPENSATION PLAN
ARTICLE I CONCEPT AND OBJECTIVES
SECTION 1:01 This incentive compensation Plan is intended (in combination
with the organization's Stock Option Plan) to reward key executives and other
designated members of management for increasing the value of the Company long
ten-n and for the profitable growth of the Company on an annual basis. There are
two parts of this cash-based Plan:
(a) ANNUAL INCENTIVE AWARDS. Provide annual cash payments in recognition
of the profitable growth of Donnelly and reward successful
controllable performance on an annual basis. Participating executives
will be rewarded for performance based on financial results, measured
by Earnings per Share, Business Unit BGI, and Business Unit BGI-ROA
and strategy implementation.
Cash awards will be paid following year-end based on actual results measured
against performance standards established prior to the beginning of each Plan
Year.
Participation in the annual incentive part of the Plan is intended to include
members of senior management and may be expanded in scope over time.
(b) LONG-TERM INCENTIVE AWARDS.. Reward executive for sustainable Company
performance improvements, serve to link executive and shareholder
interests, focus attention on long-term profitability and planning,
and provide the primary retention mechanism among all compensation
elements.
Participating executives will be granted a specific number of Performance Units
which will be converted to a cash payment at the end of a five-year Performance
Period. The value of the Performance Units at the time of grant IS zero.
Monetary value is accrued over the five year Performance Period based on 5 year
cumulative average appreciation in share value. The ultimate size of an
executive's long-term award payment depends on the number of Performance Units
granted and the appreciation in share value over the Performance Period.
Units will be granted annually and without cost to participating executives.
Following the first five-year Performance Period, award payments will be made
annually.
Participation in the long-term part of the overall executive incentive program
is limited to the most senior management team members.
<PAGE>
SECTION 1:02 This Executive Compensation Plan is designed and adopted to
achieve the following objectives:
(a) ALIGN STRATEGY WITH PAY. To encourage executives to exercise the type
of judgment that supports Donnelley's strategy while actin in the
spirit of Donnelley's culture and values.
(b) ENCOURAGE PROFITABLE GROWTH. To provide financial recognition to
Participants for their contribution to the profitable growth of the
Company.
(c) BUILD COMMITMENT. To promote commitment to Donnelley long-term by
providing equitable and competitive compensation, and the potential
for substantial cash awards.
(d) LINK PAY AND PERFORMANCE. To reinforce and motivate actions that will
ensure Donnelley's best interests are served by linking pay to
long-term value creation and performance improvement.
<PAGE>
ARTICLE II
DEFINITIONS
SECTION 2:01 As used in this document, the following words and phrases will
have the meanings specified below:
(a) BASE SALARY means the annual rate of base pay in effect for the Plan
Year.
(b) CAUSE means failure to satisfactorily perform assigned
responsibilities, or other conduct, leading to termination of
employment.
(c) COMMITTEE means the Committee (Compensation Committee of the Board of
Directors) formed to oversee the administration of the Plan.
(d) COMPANY means Donnelley Corporation including all wholly owned
subsidiaries of Donnelley Corporation.
(e) DISABILITY OR DISABLED means a Participant is disabled within the
meaning of the Company's long-term disability plan.
(f) EARNINGS PER SHARE means the dollars of earnings generated in the Plan
Year divided by the average number of shares of outstanding stock for
the same period.
(g) GRANT YEAR means the first year of a 5 year Performance Period in
which the number of performance units per Participant are determined
for that Performance Period.
(h) PARTICIPANT means a full-time employee of the Company fulfilling the
eligibility requirements defined in Article M.
(i) PERFORMANCE PERIOD means a period of 5 consecutive fiscal years,
beginning on the first day of the first fiscal year and ending on the
last day of the fifth fiscal year, over which performance units are
measured.
(j) PERFORMANCE UNIT OR UNITS means the form in which long-term cash
awards are granted to Participants. Each Performance Unit has monetary
value as determined by this Plan. Performance Units do not represent
any actual ownership interest in the Company.
<PAGE>
(k) PLAN means the Executive Compensation Plan described in this document
and any amendments to the Plan.
(1) PLAN YEAR means the Company's fiscal year.
(m) PRETAX measures the income of the business group before adjustments for
income taxes and minority interests.
(n) PRETAX-ROA measures return on assets for the business group based on
the Pretax calculation divided by average assets deployed for the
business group.
(o) RETIREMENT OR RETIRE means a Participant is receiving retirement
benefits under the United States Social Security Act or any similar
program or act, or Donnelley pension, and is not in active employment.
SECTION 2:02 Tables contained in this Plan documentation are conceptual
illustrations and not intended to specify actual or specific opportunities.
Specific opportunities will be communicated on an annual basis.
<PAGE>
ARTICLE III ELIGIBILITY
SECTION 3:01 Those eligible to be selected for participation will consist
of executives who are full-time employees of the Company who are selected by the
Committee on the basis of Plan objectives described in Article 1.
(a) Executives who are selected to be Participants in this Plan will be
notified by the Committee at the beginning of each Plan
Year/Performance Period.
(b) The Committee may, from time to time, select additional executives to
become Participants during a Plan Year/Performance
Period from the eligible group of employees.
(c) The Committee may select executives to participate in the annual
incentive portion of this Plan only or in combination with the
long-term incentive portion of this Plan.
SECTION 3:02 Any employees of the Company who becomes eligible for
participation and is selected as a Participant after the beginning of the Plan
Year/Performance Period will participate on a pro rata basis.
SECTION 3:03 A Participant will cease to be eligible for participation in
the Plan due to voluntary or involuntary termination of full-time employment,
death, Disability or Retirement.
SECTION 3:04 If a Participant dies, retires, becomes disabled, or is
granted a leave of absence during the Plan Year/Performance Period, the
Committee, at its discretion, may award partial incentive on a pro-rata basis.
SECTION 3:05 In no case, will any award be paid under the Plan to any
Participant who is terminated at any time for Cause including cases in which
termination occurs after the end of the Plan Year/Performance Period, but before
incentive awards are paid.
<PAGE>
ARTICLE IV
INDIVIDUAL ANNUAL INCENTIVE AWARD OPPORTUNITIES
SECTION 4:01 Annual incentive award opportunities will be determined by the
Committee in consideration of the following:
(a) The degree to which a Participant may impact Company performance.
(b) The magnitude of award opportunity that will affordably allow Donnelley
to reward Participants competitively when expected results are
achieved.
SECTION 4:02 A range of annual incentive opportunity will be provided to:
(a) Reward controllable achievements above expected levels.
(b) Encourage and recognize efforts that are above minimum acceptable
levels of performance.
TABLE I
RANGE OF ANNUAL INCENTIVE OPPORTUNITY
Table I shows the correlation between award size and performance results. An
example of threshold for Corporate performance achievement might be in the
neighborhood of 80% of planned results and an appropriate Maximum limit for
Corporate performance achievement might be in the 140% range.
(TABLES CONTAINED IN THIS REPORT ARE CONCEPTUAL ILLUSTRATIONS ONLY AND NOT
INTENDED TO SPECIFY ACTUAL OR SPECIFIC OPPORTUNITIES.)
(Table 1)
<PAGE>
SECTION 4:03 Payment of annual incentive awards to Participants will be
contingent on performance measured in two broad categories. Financial
performance will be measured by Earnings Per Share for the organization and by
Pretax and Pretax-ROA for business units. Strategic/Operational performance will
be measured on accomplishment against pre-established goals.
TABLE 2
FINANCIAL MEASURES CALCULATION
Table 2 illustrates the method to be used for Earnings per Share calculation,
Pretax income calculation for each business unit, and Pretax-ROA calculation for
each business unit.
(TABLES CONTAINED IN THIS REPORT ARE CONCEPTUAL ILLUSTRATIONS ONLY AND NOT
INTENDED TO SPECIFY ACTUAL OR SPECIFIC OPPORTUNITIES.)
(Table 2)
<PAGE>
TABLE 3
ILLUSTRATION OF STRATEGIC/OPERATIONAL GOALS
Table 3 illustrate an example of what a strategic/operational imperative may be
for a business unit head and how accomplishment of that imperative may be
measured.
(TABLES CONTAINED IN THIS REPORT ARE CONCEPTUAL ILLUSTRATIONS ONLY AND NOT
INTENDED TO SPECIFY ACTUAL OR SPECIFIC OPPORTUNITIES.)
(Table 3)
STRATEGIC/OPERATIONAL Performance will be measured against milestones
established in context of long-term strategy implementation. Strategic
milestones will be determined prior to the beginning of each Plan Year.
SECTION 4:04 The amount of the emphasis placed on achieving results in each
performance category can vary by Participant and will be determined by the
Committee in consideration of the following and as shown for illustrative
purposes only in Table 4:
(a) The Participant's responsibilities.
(b) Areas of performance where results can have the most significant
contribution.
<PAGE>
TABLE 4
ILLUSTRATION OF WEIGHTING OF AWARD OPPORTUNITIES
Table 4 illustrates that I 00% of the CEO's performance weighting will be based
on Corporate Financial performance. It also shows that Business Unit Heads will
typically have three components of performance categories, and that Corporate
Staff will typically have two components of performance categories with a range
possible (e.g.- A-13%) in each.
(TABLES CONTAINED IN THIS REPORT ARE CONCEPTUAL ILLUSTRATIONS ONLY AND NOT
INTENDED TO SPECIFY ACTUAL OR SPECIFIC OPPORTUNITIES.)
(Table 4)
SECTION 4:05 For each financial performance measure, awards will be paid
based on performance results achieved relative to predetermined, expected
levels. Minimum acceptable and maximum controllable achievement will also be
specified by the Committee prior to the beginning of the Plan Year. No awards
will be paid for performance that falls below minimum acceptable levels
(Threshold) and no additional incentive payments will be made for performance
that exceed maximum controllable levels. Awards for performance between
specified levels will be interpolated.
SECTION 4:06 Prior to the beginning of each Plan Year the Committee will
decide and communicate expected levels of financial performance for which Awards
will be Paid, as well as minimum acceptable and maximum controllable financial
performance.
Specified threshold, expected and maximum levels of financial performance
may vary by business group or for the Company at the discretion of the Committee
in consideration of the following:
(a) The sensitivity of financial results to Participant performance.
(b) The level of effort required to attain desired results.
(c) The Company's pay philosophy and compensations principles.
<PAGE>
TABLE 5
ILLUSTRATION OF RANGE OF ANNUAL INCENTIVE OPPORTUNITY
Table 5 provides an illustration of potential award size versus level of
performance achievement. The numbers is this table provide an example of what
might be expected for a business unit head. The potential also exist to
establish awards that are flat dollar amounts instead of awards that represent a
percent of base salary.
(TABLES CONTAINED IN THIS REPORT ARE CONCEPTUAL ILLUSTRATIONS ONLY AND NOT
INTENDED TO SPECIFY ACTUAL OR SPECIFIC OPPORTUNITIES.)
(Table 5)
SECTION 4:07 The award portion based on strategy implementation will be
discretionary based on an evaluation of achievement of one to three
predetermined strategic milestones. The emphasis will be placed on whether or
not all of the milestones were attained during the Plan Year rather than on
degrees of fulfillment.
SECTION 4:08 When position and/or responsibility changes occur within the
year, awards will be paid on a pro rata basis based on the discretion of the
Committee.
<PAGE>
SECTION 4:09 While the Committee has overall accountability for
administering this Plan, the process for setting expectations, evaluating and
communicating results is participatory as designated below:
TABLE 6
PARTICIPATORY PROCESS FOR SETTING EXPECTATIONS AND EVALUATING AND
COMMUNICATING RESULTS
(TABLES CONTAINED IN THIS REPORT ARE CONCEPTUAL ILLUSTRATIONS ONLY AND NOT
INTENDED TO SPECIFY ACTUAL OR SPECIFIC OPPORTUNITIES.)
(Table 6)
<PAGE>
ARTICLE V
ANNUAL INCENTIVE AWARD PAYMENTS
SECTION 5:01 Annual incentive awards will be paid in cash to Participants
as soon as possible following finalization of audited financials for the Plan
Year.
SECTION 5:02 Payments of awards will be reduced by the amount paid out in
other bonuses paid to the Participant for the Plan year.
SECTION 5:03 Payment of awards is contingent upon the company's ability to
pay.
<PAGE>
ARTICLE VI
MEASUREMENT OF PERFORMANCE UNITS
SECTION 6:01 Performance units will be valued based on a 5 year cumulative
average appreciation in share value. Yearly appreciation will be calculated
using the average of the average of the first 3 0 days and the average of the
last 3 0 days of the year stock price.
SECTION 6:02 The Committee will determine the value of a Participant's
Performance Unit as soon as possible after the close of the 5 year Performance
Period.
SECTION 6:03 There is no cap on the maximum value of Performance Units
under this Plan.
<PAGE>
ARTICLE VII
PERFORMANCE UNIT GRANTS
SECTION 7:01 There are an aggregate number of 100,000 Performance Units
available for allocation each year from which grants can be made.
SECTION 7:02 Units will be granted at the beginning of each Plan Year
resulting in overlapping Performance Periods.
TABLE 7
OVERLAPPING FIVE YEAR PERFORMANCE PERIODS
This table illustrates the concept of granting Performance Units at the
beginning of each Plan Year with a five-year Performance Period for those grants
resulting in a potential payout at the end of the five-year Performance Period.
Table 7 also illustrates the concept of overlapping Performance Periods.
(TABLES CONTAINED IN THIS REPORT ARE CONCEPTUAL ILLUSTRATIONS ONLY AND NOT
INTENDED TO SPECIFY ACTUAL OR SPECIFIC OPPORTUNITIES.)
(Table 7)
SECTION 7:03 All Participants will not necessarily receive a grant of Units
each year, and the number of Units granted to the same Participant may vary from
year to year. Not all available units will necessarily be granted in any given
year.
SECTION 7:04 The number of Units granted to a Participant will remain in
effect for the duration of the Performance Period unless the Units are forfeited
as described in Article II or the Participant is transferred as described in
Section 7:07.
<PAGE>
SECTION 7:05 The value of Units at the time of grant is zero. Units will
appreciate in value over the Performance Period based on an amount equal to the
appreciation in share price. The Units do not represent and equity interest in
the Company.
SECTION 7:06 The specific number of Units to be granted to each eligible
Participant will be decided by the Committee. The number of Units granted will
be determined in consideration of the following:
(a) The Participant's current and anticipated ability to contribute to the
long-term success of the organization through actions and decisions.
(b) The number of Units required to provide long-term compensation
opportunities, in conjunction with Stock Options, which support
Donnelley's pay philosophy and that will help retain high-performance
Participants who fulfill strategic plans.
SECTION 7:07 Units granted to Participants who are transferred from one
position to another during a Performance Period will be handled as follows:
(a) Units already granted from the Performance Period will continue to
appreciate in value to the remainder of the Performance Period.
(b) Any adjustments due to position/responsibility changes will be made at
the discretion of the Committee in future Grant Years.
<PAGE>
ARTICLE VIII PERFORMANCE UNIT AWARD PAYOUTS
SECTION 8:01 Cash award payments will be made at the end of the 5 year
Performance Period as soon as possible after the award amount can be calculated
and audited following the close of the Performance Period.
SECTION 8:02 Payment of awards is contingent upon the Company's ability to
pay.
<PAGE>
ARTICLE IX
ADMINISTRATION OF THE PLAN
SECTION 9:01 This Plan is effective July 1, 1994.
SECTION 9:02 The Plan will be administered by the Committee which will have
full responsibility and authority to interpret and administer the Plan. The
Committee will have the following duties and responsibilities in relation to the
administration of the Plan.
(a) To resolve all questions arising in the administration, interpretation
and application of the Plan, including questions of eligibility and the
status and rights of Participants.
(b) To decide any dispute arising in the administration of the Plan.
(c) To correct defects, supply omissions, and reconcile inconsistencies to
the extent necessary to act on the Plan.
(d) To authorize all payments that will be made pursuant to the provisions
of this Plan.
(e) To have all such other powers as may be necessary to discharge its
duties herein.
SECTION 9:03 The Committee may at any time amend, modify, or terminate the
Plan. Written notice of any amendments will be given to each Participant.
SECTION 9:04 All costs and expenses involved in the administration of this
Plan will be borne by the Company.
SECTION 9:05 The Company will deduct from all payments under this Plan any
federal, state and/or local taxes required by law.
SECTION 9:06 Any payments due upon a Participant's death will be paid to
the beneficiary by her/him in writing and filed with the Committee. In the
absence of such a designation, payment will be made to the person(s) entitled by
will or the laws of descent and distribution. Acceptable proof of the
entitlement to payment must be provided by the beneficiary to the Committee.
<PAGE>
SECTION 9:07 Nothing contained in the Plan shall be construed as a contract
of employment between the Company and a Participant, or as a right of a
Participant to continue in the employment of the Company or as a limitation of
the right of the Company to discharge a Participant, with or without Cause.
SECTION 9:08 All determinations by the Committee will be final and binding
upon Participants and are not subject to appeal.
SECTION 9:09 In the event of a change in control in the beneficial interest
of both vote and value of the Company, this Plan will remain in effect
unchanged.
SECTION 9:10 None of the opportunities, payments, or Units under this Plan
will be transferable by the Participant other than by will or the laws of
descent and distribution, or pursuant to a qualified domestic relations order as
defined in Title I of the Employee Retirement Income Security Act of 1974 and
the rules thereunder.
<PAGE>
DONNELLY CORPORATION
UNFUNDED DEFERRED DIRECTOR
--------------------------
FEE PLAN
--------
1. On or before the last day of any quarter, any director may elect to
defer receipt of all or a specified amount of his or her director's fees to be
earned in the succeeding quarter. Any election shall continue from quarter to
quarter until modified by a subsequent election, which subsequent election shall
be effective with respect to the calendar quarters following the election.
2. The Company shall maintain a separate account for each director to which
the fees of such director shall be credited as earned. On the last day of each
of its fiscal quarters, the Company shall also credit to each such account
interest on the average balance in that quarter, at the rate equal to the prime
rate on the last day of that quarter.
3. The plan will be unfunded.
4. Amounts deferred under the Plan, together with accumulated interest,
will be distributed to the director in ten annual installments, the first
installment payable on the first day of the year following such director's
retirement or termination from the Board of Directors. The amount of each
installment shall be the balance of the director's account at that date divided
by the number of unpaid installments. The balance of such director's account
shall continue to be credited with interest as provided above.
5. The Company, by resolution of the Board of Directors, may elect, at the
Company's sole option, to pay any amount standing to the credit of a director in
a lump sum, after such director ceases to be a director of the Company, in the
event the director and thereafter becomes employed by, a director of or
otherwise affiliated with any business that is in competition with the Company.
6. Upon death of a director or a former director prior to the expiration of
the period during which the deferred amounts are payable, the balance of the
director's fees and interest in his or her account shall be payable in full on
the first day of the calendar year following the year in which he or she dies to
the beneficiary designated in writing to the Company by such director or former
director, or if no beneficiary has been designated, to his or her estate.
December 1993 WL07-23.DOC
<PAGE>
FORM OF ELECTION
----------------
TO: Donnelly Corporation
I hereby elect to defer that portion of my director's fees set forth below,
commencing with fees payable to me after the quarter, following the date of this
election, pursuant to the Donnelly Corporation Unfunded Deferred Director Fee
Plan:
Amount of Fees Types of Fees
to be Deferred to be Deferred
---------------------------- --------------
_____ Annual Retainer Fee _____ All
_____ Annual Retainer and Meeting Fees
_____ The first $_________
per year
_____ Percent as earned
In the event of my death, pay the following beneficiary:
--------------------------------------------------------------------------
----------------------- ----------------------------------
Date Signature of Director
December 1996
WL07-23.DOC
<PAGE>
EXHIBIT 10.13
THE DONNELLY CORPORATION PENSION PLAN FOR OUTSIDE DIRECTORS
VARNUM, RIDDERING, SCHMIDT & HOWLETT
Suite 800, 171 Monroe, N.W.
Grand Rapids, Michigan 49503
616/459-4186
9/10/92
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - PURPOSE................................... 1
ARTICLE II - DEFINITIONS.............................. 1
ARTICLE III - PARTICIPATION AND SERVICE............... 2
ARTICLE IV - FUNDING.................................. 2
ARTICLE V - RETIREMENT BENEFITS....................... 2
ARTICLE VI - SPECIAL RETIREMENT BENEFITS.............. 3
ARTICLE VII - SUSPENSION OF BENEFITS.................. 3
ARTICLE VIII - MISCELLANEOUS.......................... 4
<PAGE>
THE DONNELLY CORPORATION
PENSION PLAN FOR OUTSIDE DIRECTORS
This Pension Plan has been adopted by Donnelly Corporation, a Michigan
corporation (the "Company").
ARTICLE I
PURPOSE
The Company is adopting this plan which will be called the Donnelly
Corporation Pension Plan for Outside Directors (the "Plan") effective July 1,
1992 to provide retirement benefits for the members of its board of directors
who are not officers or employees of the Company.
This Plan will not cover any employees of the Company and will not,
therefore, be subject to the requirements of the Employee Retirement Income
Security Act of 1974. This Plan will apply only to persons who served as members
of the Board of Directors of the Company on or after July 1, 1992 and are not
employees or officers of the Company.
ARTICLE II
DEFINITIONS
The masculine gender is used throughout this Plan for purposes of
simplicity only and is intended to refer to persons of both the masculine and
feminine gender. The following words or phrases, when used in this Plan, will
have the following meanings:
2.1 Board: The board of directors of the Company.
2.2 Beneficiary: The person or persons designated by the participant to
receive any death benefit payable under the Plan.
2.3 Committee: The compensation committee established by the board. The
committee may act on behalf of the board on any matter concerning this Plan.
2.4 Company: Donnelly Corporation, a Michigan corporation, or its
successor.
2.5 Outside director: A member of the board who is not an officer or
employee of the Company or any of its subsidiaries.
2.6 Participant: An outside director who is eligible to participate in the
Plan.
2.7 Plan: The Donnelly Corporation Retirement Plan for Outside Directors,
as set forth in this document and any later amendments.
2.8 Service: The period during which a person has served as a member of the
board and computed in accordance with Section 3.2.
-1-
<PAGE>
ARTICLE III
PARTICIPATION AND SERVICE
3.1 Eligibility to participate. Each outside director will become a
participant in the Plan on the first day of the month following the month in
which he completes one (1) year of service as a director of the Company.
3.2 Service. An outside director's eligibility to participate in the Plan
and his benefits under the Plan will be based upon his period of service as a
member of the board. An outside director will be credited with a year of service
for each full year between the date on which he became a member of the board and
the date on which he ceased to be a member of the board. An outside director
will also be credited with one quarter of a year of service for each three
months of service as a member of the Board during the period following his last
full year of service. If an outside director becomes an employee of the Company
and continues to serve as a member of the board, he will not be given credit for
service during the period of his employment by the Company as an employee.
ARTICLE IV
FUNDING
4.1 Funding from General Assets Only. All amounts payable to participants
and beneficiaries under this Plan will be paid in cash from the general assets
of the Company. The Company will not establish any special or separate fund for
purposes of this Plan.
4.2 Status of Participants. Participants and beneficiaries will have a
right to payment of their benefits under this Plan from the general assets of
the Company. They will have the status of unsecured creditors with respect to
their claims for benefits. The establishment of this Plan is not intended to
create a trust or fiduciary relationship between the Company and participants or
beneficiaries.
ARTICLE V
RETIREMENT BENEFITS
5.1 Eligibility. A retirement benefit will be paid to each participant
whose service as a member of the board terminates after he has completed 10 or
more years of service.
5.2 Amount of Benefit. A participant's retirement benefit will be quarterly
payments for a period equal to his years of service on the board or 20 years,
whichever number is smaller, in an amount equal to 25% of the annual retainer
that was in effect for participant on the date of termination of his service on
the board.
5.3 Commencement and Duration of Benefit Payments. Payment of the
retirement benefit will begin on the first working day of the next quarter after
the participant's 70th birthday or the date of termination of his service on the
board, whichever is later, and will
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<PAGE>
continue on the first working day of each quarter thereafter for a period equal
to the participant's years of service on the board or 20 years, whichever period
is shorter.
If a participant's service on the board terminates prior to his 70th
birthday, he may elect to have his retirement benefits commence on the first day
of any quarter after his 55th birthday. If payments commence prior to his 70th
birthday, the quarterly payments will be reduced by the amount required to make
the payments the actuarial equivalent of payments beginning on the first day of
the quarter after his 70th birthday. The actuarial equivalence will be
determined on the basis of the interest assumptions used for determining
actuarially equivalent installment payments under the Donnelly Corporation
Retirement Income Plan.
5.4 Continuation of Benefits After Death. If a participant dies while he is
a member of the board or after he is retired, but before he has received
retirement benefits over the period for which he is eligible, the balance of the
quarterly payments for which the participant was eligible will be continued to
be made to his beneficiary. At the election of the beneficiary, the balance of
the payments may be made in a single lump sum payment equal to the actuarially
equivalent present value of the remaining quarterly payments. The present value
will be determined using the interest assumption specified in Section 5.3.
5.5 Designation of Beneficiary. Each participant may designate a
beneficiary or beneficiaries to whom his plan benefits will be paid if he dies
before receipt of all benefits. Each beneficiary designation must be on the form
prescribed by the committee and will be effective only when filed with the
committee during the participant's lifetime. Each beneficiary designation filed
with the committee will cancel all beneficiary designations that were filed
previously. If a participant fails to designate a beneficiary or if the
beneficiary dies before the participant, the death benefit will be paid to the
participant's spouse, if surviving, and if not, to his estate.
ARTICLE VI
SPECIAL RETIREMENT BENEFITS
6.1 Eligibility. The board may grant a special retirement benefit to a
participant whose service on the board will be terminating before he is eligible
for a retirement benefit. The board may grant special retirement benefits only
if it determines that the payment will be in the best interest of the Company.
6.2 Amount of Benefit. The amount and timing of the special retirement
benefit will be determined by the board on the basis of the circumstances of
each special retirement. The actions of the board with respect to any special
retirement will not serve as a precedent for any situation in the future.
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<PAGE>
ARTICLE VII
SUSPENSION OF BENEFITS
7.1 Resumption of Board Membership. If a retired participant returns to
membership on the board, the benefits payable under the Plan will cease for as
long as he continues on the board. Upon subsequent retirement from the board,
the participant's retirement benefits will be resumed and will be redetermined
on the basis of the annual retainer that is in effect for him on the date of the
second retirement.
7.2 Employment as Employee. If a retired participant becomes an employee of
the Company or any of its subsidiaries, retirement benefits payable to him under
the Plan will cease for as long as he remains an employee. Upon termination of
employment, payment of his retirement benefits will be resumed in the same
amount as before the period of employment.
ARTICLE VIII
MISCELLANEOUS
8.1 Amendments. The board reserves the right to amend the Plan at any time
and from time to time, and the right to terminate the Plan at any time. The
board may not, however, by way of amendment or termination of the Plan,
adversely affect the rights of any participant or beneficiary who is receiving
benefits at the time, or the rights of any participant who has 10 or more years
of service.
8.2 Status of Participants. No participant will have any right or claim to
benefits under the Plan except in accordance with the provisions of the Plan.
The adoption of the Plan will not be construed as giving any participant the
right to be continued as a member of the board, to modify or affect the terms of
membership on the board, or to interfere with the right of shareholders of the
Company to elect members of the board.
8.3 Nonalienation of Benefits. No interest, right, or claim to any benefit
payable under the Plan will be assignable, transferable, or subject to sale,
assignment, garnishment, attachment, execution, or levy of any kind. The Company
will not recognize any attempt to transfer, assign, sell, garnish, attach or
execute on benefits except to the extent required by law.
8.4 Facility of Payment. Whenever in the committee's opinion, a person
entitled to receive any benefit is under a legal disability or is incapacitated
in any way so as to be unable to manage his financial affairs, the committee may
direct the Company to make payments to such person or to his legal
representative or to a relative or friend of such person for his benefit, or the
committee may direct the Company to apply the payment for the benefit of such
person in such manner as the committee considers advisable. If a person entitled
to receive benefits is a minor and the value of the benefit exceeds $5,000, the
Company may either delay payment of the benefit until the minor has attained the
age of majority or pay the benefit to a person who has been named by a court of
competent jurisdiction as conservator of the estate of the minor or to another
similar court-appointed fiduciary. Any payment of a benefit in accordance with
the provisions of this Section will discharge all liability for such benefit
under the provisions of the Plan.
-4-
<PAGE>
8.5 Interpretation. The committee will be responsible for the
administration and interpretation of the Plan and will determine the amount, of
benefits payable in the event of any dispute. Any determination or
interpretation by the committee will be final, binding and conclusive on all
persons.
8.6 Governing Law. This Plan will be interpreted, construed and enforced in
accordance with the laws of the State of Michigan.
8.7 Severability of Provisions. If any provision of this Plan is declared
void and unenforceable, the other provisions will be severable and will not be
affected by the invalidation of the unenforceable provision.
IN WITNESS WHEREOF, the Company has adopted this Plan on the _____ day of
_____, 1992.
DONNELLY CORPORATION
By
Its Chief Executive Officer
(Corporate Seal)
Attest:
By
Its Secretary
::ODMA\PCDOCS\GRR\72898\1
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<PAGE>
EXHIBIT 10.14
THE DONNELLY CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
VARNUM, RIDDERING, SCHMIDT & HOWLETT 171 Monroe, N.W., Suite 800
Grand Rapids, MI 49503
(616) 459-4186
8/21/92
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I -- PURPOSE 1
ARTICLE II -- DEFINITIONS 1
2.1 Accrued Benefits 1
2.2 Actuarial Equivalent 1
2.3 Authorized Leave of Absence 1
2.4 Average Monthly Compensation 2
2.5 Code 2
2.6 Committee 2
2.7 Company 2
2.8 Compensation 2
2.9 Covered Compensation 2
2.10 Controlled Group 2
2.11 Employee 2
2.12 ERISA 3
2.13 Normal Retirement Date 3
2.14 Participant 3
2.15 Plan Year 3
2.16 Service 3
2.17 Social Security Retirement Age 3
ARTICLE III -- PARTICIPATION AND SERVICE 3
3.1 Participation 3
3.2 Service 4
3.3 Transfers of Employment Within the Company or
Controlled Group of Corporations 4
ARTICLE IV -- NORMAL RETIREMENT BENEFIT 4
4.1 Eligibility 4
4.2 Amount of Benefit 4
4.3 Suspension of Benefits 5
4.4 Commencement of Benefits 5
ARTICLE V -- EARLY RETIREMENT BENEFIT 5
5.1 Eligibility 5
5.2 Amount of Benefit 5
5.3 Commencement of Benefits 5
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<PAGE>
Page
----
ARTICLE VI -- DEFERRED VESTED BENEFIT 6
6.1 Eligibility 6
6.2 Amount of Benefit 6
6.3 Commencement and Form of Payment 6
ARTICLE VII -- SURVIVING SPOUSE BENEFIT 6
7.1 Eligibility 6
7.2 Amount of Benefit 6
7.3 Commencement, Duration, and Form of Payment 7
ARTICLE VIII -- PAYMENT OF RETIREMENT BENEFITS 7
8.1 Standard Benefit 7
8.2 Post-Retirement Surviving Spouse Benefit 8
8.3 Optional Forms of Benefit 8
8.4 Reduction of Benefits for Previous Payments 8
ARTICLE IX -- RESPONSIBILITIES AND INDEMNIFICATION 8
9.1 Funding 8
9.2 Indemnification 9
ARTICLE X -- ADMINISTRATION 9
10.1 Plan Administrator 9
10.2 Records and Reports 9
10.3 Appointment of Committee 9
10.4 Claims Procedure 9
10.5 Other Committee Powers and Duties 10
10.6 Committee Procedures 10
10.7 Authorization of Benefit Payments 10
10.8 Application and Forms for Benefits 10
10.9 Facility of Payment 10
ARTICLE XI -- AMENDMENT OF PLAN 10
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<PAGE>
Page
----
11.1 Amendments 10
11.2 Right of Termination 10
ARTICLE XII -- NONALIENATION OF BENEFITS AND DOMESTIC
RELATIONS ORDERS 11
12.1 Nonalienation of Benefits 11
12.2 Procedure for Domestic Relations Orders 11
ARTICLE XIII -- MISCELLANEOUS 11
13.1 Status of Participants 11
13.2 No Interest in Company Affairs 12
13.3 Notices 12
13.4 Governing Law 12
13.5 Severability of Provisions 12
-iii-
<PAGE>
THE DONNELLY CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
This Supplemental Pension Plan has been adopted by Donnelly Corporation, a
Michigan corporation (the "Company").
ARTICLE I PURPOSE
The Company maintains a pension plan for all of its employees. The plan is
known as the Donnelly Corporation Employees' Retirement Plan and is maintained
as a "qualified plan" under the provisions of Section 401(a) of the Internal
Revenue Code.
This Supplemental Pension Plan (the "Plan") is designed to provide benefits
to certain employees that will be in addition to the benefits that will be paid
under the qualified plan. This Plan is intended to be an "excess benefit plan"
that does not satisfy the requirements of Section 401(a) of the Internal Revenue
Code and is exempt from most of the provisions of ERISA. This Plan will apply to
all employees who are covered by the qualified plan and whose benefits under the
qualified plan are limited by the provisions of Section 415 of the Code and the
limitations on compensation in Section 401(a)(17) of the Code.
This Plan will be effective as of July 1, 1992 and will apply to persons
who were employed by the Company on or after that date.
ARTICLE II DEFINITIONS
The masculine gender is used throughout this Plan for purposes of
simplicity, but is intended to refer to either gender. The following words or
phrases will have the following meanings:
2.1 Accrued benefit. The portion of a normal retirement benefit earned as
of the date of the computation. It is a monthly benefit commencing at normal
retirement date and equal to the benefit computed in accordance with the normal
retirement benefit formula in Section 4.2 using the participant's average
monthly compensation, covered compensation and service on the date of
computation.
2.2 Actuarial equivalent. Equivalence in the present value of various forms
of payment. Present values will be determined by the actuaries chosen by the
Company based on the 1971 Group Annuity Mortality Table (male lives) with ages
set back two years for employees and four years for joint annuitants, and
interest at the rate of 8% per annum.
2.3 Authorized leave of absence. Any absence authorized by the Company
under its standard personnel policies. All employees under similar circumstances
will be treated alike in the granting of leaves and must return within the
period authorized. An absence due to service in the armed forces of the United
States will be an authorized leave of
<PAGE>
absence provided the employee qualifies for reemployment rights under federal
law (38 USCA (S)(S)2021 or 2024 or other statute of similar import) and returns
to employment with the Company within the period provided by law.
2.4 Average monthly compensation. The greater of the following:
(a) 1/60th of the compensation of the participant during the last 60
consecutive calendar months prior to termination of employment with the Company;
or
(b) 1/60th of his compensation during the five consecutive calendar years
in which his compensation was the highest during the last 10 calendar years of
his employment with the Company.
2.5 Code. The Internal Revenue Code of 1986, as amended from time to time.
2.6 Committee. The persons appointed to administer the Plan.
2.7 Company. Donnelly Corporation, a Michigan corporation, or its
successor.
2.8 Compensation. The total of salary, wages, and bonuses paid to a
participant by the Company for personal services rendered as an employee, plus
any amounts by which the participant's salary or wages has been reduced pursuant
to any 401(k) or flexible benefit plan salary reduction agreements with the
Company. Amounts shown on the participant's form W-2 for any year as a result of
fringe benefits derived from the Company or benefits paid under this Plan will
not be counted as compensation for purposes of the Plan.
2.9 Covered compensation. One-twelfth (1/12th) of the average for each
participant of the Social Security taxable wage bases in effect for each
calendar year during the 35-year period ending with the last day of the year
preceding the year in which the participant attains or will attain Social
Security retirement age. The taxable wage base for the current year and each
subsequent year will be assumed to be the same as the taxable wage base in
effect as of the beginning of the plan year for which the determination is being
made. If a participant continues working during the plan year in which he
attains Social Security retirement age and thereafter, his covered compensation
will be the amount determined for the year in which he attains Social Security
retirement age. For plan years prior to the 35-year period described in the
first sentence, a participant's covered compensation will be equal to the
taxable wage base for the plan year. Each participant's covered compensation
will be redetermined for each plan year.
2.10 Controlled group. The group consisting of each corporation that is a
member of a controlled group of corporations, as defined in Code Section 414(b),
of which the Company is a member; each trade or business, whether or not
incorporated, under common control, as defined in Code Section 414(c), of or
with the Company; and each member of an affiliated service group, as defined in
Code Section 414(m), of which the Company is a member.
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<PAGE>
2.11 Employee. Any person who is a regular full-time employee of the
Company and receives compensation for personal services rendered to the Company
(or is on lay off status or an authorized leave of absence), but excluding
persons who are classified as temporary contract employees.
2.12 ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
2.13 Normal retirement date. The first day of the month following the later
of the following:
(a) The participant's birthday on which he attains the age that is three
(3) years prior to his Social Security retirement age; or
(b) The fifth anniversary of the date on which he first became a
participant in the Plan.
The relevant birthday for subsection (a) is the 62nd birthday for
participants born before 1938, the 63rd birthday for participants born in the
years 1938 through 1954, and the 64th birthday for participants born after 1954.
2.14 Participant. A person who is employed by the Company and is
participating in the Plan in accordance with the provisions of Article III.
2.15 Plan year. The "fiscal year" of the Plan which will be the 12-month
period ending June 30.
2.16 Service. The period of a participant's employment considered in
determining his eligibility for benefits and the amount of his benefits under
the Plan, as computed in accordance with Section 3.2.
2.17 Social Security retirement age. The age at which a participant becomes
eligible for benefits under the federal Social Security Act that are not reduced
on account of age. This will be age 65 for participants born before 1938, age 66
for participants born during the years 1938 through 1954, and age 67 for
participants born after 1954.
ARTICLE III PARTICIPATION AND SERVICE
3.1 Participation. An employee will become a participant in this Plan on
the first day of the next plan year (July 1) after the plan year in which either
of the following occurs:
(a) The employee's compensation exceeds the limit on compensation that can
be considered under the Donnelly Corporation Employees' Retirement Plan under
the provisions of Section 401(a)(17) of the Code. This limit is $228,860 for
-3
<PAGE>
the plan year beginning July 1, 1992 and will be adjusted for changes in the
cost of living under the provisions of Section 415(d) of the Code; or
-4
<PAGE>
(b) The employee's accrued benefit under the Donnelly Corporation
Employees' Retirement Plan exceeds the maximum benefit under Section 4.4(a) of
that plan.
3.2 Service. A Participant's eligibility for benefits and the amount of his
benefits under the Plan will be determined by his period of service which will
be equal to his years of service as calculated under the provisions of Section
3.2 of the Donnelly Corporation Employees' Retirement Plan.
3.3 Transfers of Employment Within the Company or Controlled Group of
Corporations.
(a) Transfers Resulting in Eligibility to Participate. A person who becomes
an employee as a result of a transfer to employment with the Company from
another corporation that is in a controlled group will be given credit for
purposes of the eligibility requirements of Section 6.1 for prior years of
service with the other corporation while it was a member of the controlled group
of corporations. The transferred employee will earn service credits for purposes
of determining his benefit under the Plan only for his period of employment with
the Company.
Notwithstanding the foregoing, a participant who was previously employed by
Donnelly Mirrors, Ltd., an Irish corporation and wholly owned subsidiary of the
Company, will be given credit in accordance with Section 3.2 for prior service
with Donnelly Mirrors, Ltd. for purposes of benefits and eligibility.
(b) Transfers resulting in ineligibility to participate. A participant who
ceases to be an employee as a result of a transfer to employment with another
corporation that is a member of the controlled group of corporations with the
Company will cease to be an active participant as of the date of transfer. The
transferee will continue to earn service credits for purposes of determining
eligibility for a deferred vested benefit under Section 6.1 for his period of
service with any member of the controlled group, but he will not earn any
additional service credits for purposes of determining benefits after the date
of transfer.
ARTICLE IV
NORMAL RETIREMENT BENEFIT
4.1 Eligibility. A normal retirement benefit will be paid to each
participant whose employment terminates on or after his normal retirement date.
4.2 Amount of Benefit.
The normal retirement benefit will be equal to the sum of the amounts
determined under the following subparagraphs (a) and (b) minus the amount of the
participant's normal retirement benefits that are payable under the Donnelly
Corporation Employees'
-5
<PAGE>
Retirement Plan and the pension plan for Donnelly Mirrors, Ltd., the Company's
Irish subsidiary.
(a) The participant's number of years of service multiplied by 1% of his
average monthly compensation; and
(b) The participant's number of years of service or 35, whichever number is
smaller, multiplied by 0.55% of his average monthly compensation that is in
excess of his covered compensation.
Participants who receive benefits in the form of a joint and survivor
annuity or other optional form of payment will have their benefits adjusted by
an amount necessary to make the optional form of payment the actuarial
equivalent of the benefit provided in this section.
4.3 Suspension of Benefits. Benefits will not be payable with respect to
any month in which an otherwise eligible participant remains in the employ of
the Company or in which a retiree returns to active service with the Company as
an employee and is credited with 40 or more hours of employment.
4.4 Commencement of Benefits. Payment of normal retirement benefits will
commence on the first day of the month after the participant meets all
requirements for eligibility and be payable in accordance with Article VIII.
ARTICLE V
EARLY RETIREMENT BENEFIT
5.1 Eligibility. A participant who has attained age 55, completed five (5)
or more years of service, and thereafter terminates his employment with the
Company will be entitled to receive an early retirement benefit beginning on the
first day of the month following the month of termination.
5.2 Amount of Benefit. The early retirement benefit will be equal to the
participant's accrued benefit. If payment of benefits is to commence prior to
normal retirement date, the benefit will be reduced by six-tenths of one percent
(0.6%) for each month by which the commencement of benefits precedes the
participant's normal retirement date during the period from age 60 to normal
retirement date, and by three-tenths of one percent (0.3%) for each month by
which commencement precedes normal retirement date during the period from age 55
to age 60.
5.3 Commencement of Benefits. Payment of early retirement benefits will com
mence on the first day of the month after the participant meets the requirements
and requests payment, and be payable in accordance with Article VIII.
-6
<PAGE>
ARTICLE VI DEFERRED VESTED BENEFIT
6.1 Eligibility. A participant will be eligible for a deferred vested
benefit if he:
(a) has completed at least five (5) years of service with the Company;
(b) terminates employment for reasons other than death or retirement; and
(c) is not receiving or entitled to receive any other benefit under the
Plan.
6.2 Amount of Benefit. The amount of a participant's deferred vested
benefit will be equal to his accrued benefit.
6.3 Commencement and Form of Payment. Payment of the deferred vested
benefit will commence on the former participant's normal retirement date. If the
former Participant satisfied the service requirement for an early retirement
benefit on his date of termination, then at his option the deferred vested
benefit may be payable commencing on the first day of the month following the
birthday on which he would have been eligible for early retirement, but the
payments will be reduced in accordance with the formula in section 5.2.
Payment will be made in accordance with Article VIII. The former
participant must apply in writing for payment of benefits at such date as he
wishes to have benefits commence and no payment will be made until the
application has been received by the committee. If the actuarially equivalent
present value of a deferred vested benefit is $10,000 or less, the benefit will
be paid to the former participant in a single lump sum payment as soon as
administratively practical after the end of the plan year in which employment
terminates.
ARTICLE VII SURVIVING SPOUSE BENEFIT
7.1 Eligibility. The spouse of a participant will receive a survivor's
benefit if the participant:
(a) dies while employed by the Company and after he is eligible for a
deferred vested benefit, or an early or normal retirement benefit;
(b) is survived by a spouse to whom he has been married for more than one
year at the time of his death; and
(c) has not begun receiving payments in a form other than a joint and 100%
survivor annuity.
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<PAGE>
7.2 Amount of Benefit. The survivor's benefit will be computed as if the
participant had retired in the manner for which he was eligible on the day
before his death and elected payment of his retirement benefit in the form of a
joint and 100% survivor annuity with his spouse.
7.3 Commencement, Duration and Form of Payment. The survivor's benefit will
be payable in the form of a monthly pension for the life of the surviving spouse
commencing on the first day of the month following the participant's death or
the date on which the participant would have been eligible to begin receiving
early retirement benefits, whichever date is later, and continuing every month
thereafter to and including the month in which the surviving spouse dies. If the
actuarially equivalent present value of the surviving spouse benefit is $10,000
or less, the benefit will be paid to the surviving spouse in a single lump sum
payment as soon as administratively practical after the death of the
participant.
ARTICLE VIII
PAYMENT OF RETIREMENT BENEFITS
8.1 Standard Benefit. Benefits will be paid as follows unless an optional
form of benefit is elected:
(a) If the participant is not married at the time benefit payments begin,
the benefit will be payable in monthly installments from the com mencement date
to and including the month in which the participant dies; and
(b) If the participant is married at the time payments begin, benefits will
be paid in the form of a joint and 100% survivor annuity with the spouse.
Payment in this form may be waived by the participant and his spouse.
A joint and 100% survivor annuity will provide monthly payments to the
participant from the commencement date to and including the month in which he
dies and, thereafter, monthly payments to the spouse, if surviving, for the
balance of the spouse's life in an amount equal to 100% of the monthly payments
to the participant. The amount of the monthly payments under the joint and 100%
survivor annuity will be adjusted so that the payments to the participant and
spouse will be the actuarial equivalent of payments for the life of the
participant only.
The Company will furnish each participant, within a reasonable period of
time before his benefit commencement date, with a written explanation of the
terms and conditions of the joint and 100% survivor annuity and the other
optional forms of payment provided under this Article. The explanation will
advise the participant of his right to elect a form of payment other than the
joint and 100% survivor annuity and the requirement that the participant's
spouse consent to the election. The explanation will advise the participant that
any elections concerning benefits can be changed or revoked by the participant
and his spouse at any time prior to the date on which benefit payments commence.
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<PAGE>
An election to have benefits paid in any form other than joint and 100%
survivor annuity can be made by the participant and his spouse only during the
period of ninety (90) days prior to the date on which benefits are to commence.
If the participant is married on the date the benefit payments commence, then
the participant's spouse must consent in writing to the payment of the
retirement benefit in any form other than a joint and 100% survivor annuity with
the spouse. The spouse's consent must acknowledge that the spouse understands
the effect of electing another form of benefit, and must be signed in the
presence of a representative of the Company or witnessed by a notary public.
8.2 Post-Retirement Surviving Spouse Benefit. The surviving spouse of a
former participant will be entitled to a benefit if:
(a) the former participant's employment with the company terminated after
he had satisfied the requirements for normal retirement, early retirement, or
deferred vested benefits under the Plan;
(b) the former participant died before he had begun to receive payment of
benefits under the Plan; and
(c) the former participant had been married to his spouse for a period of
at least one year on the date of his death.
The post-retirement surviving spouse benefit will be computed as if the
former participant had elected payment of his retirement benefit in the form of
a joint and 100% survivor annuity with his spouse. Payment will commence as of
the first day of the month following the participant's death or the date on
which the participant would have been eligible to begin receiving early
retirement benefits, whichever date is later, and will continue every month
thereafter to and including the month in which the surviving spouse dies. If the
actuarially equivalent present value of the surviving spouse benefit is $10,000
or less, the benefit will be paid to the surviving spouse in a single lump sum
payment as soon as administratively practical after the death of the
participant.
8.3 Optional Forms of Benefit. At any time during the election period
described in section 8.1, a participant may, with the consent of his spouse if
applicable, elect payment in one of the optional forms described below by filing
a written election with the committee. Upon receipt of a proper election, the
committee will direct the trustee to distribute benefits in any of the following
methods in accordance with the election:
(a) Monthly payments during a period certain (not to exceed 10 years)
during and after the participant's lifetime; or
(b) Monthly payments during the lifetime of the participant only.
8.4 Reduction of Benefits for Previous Payments. If a participant receives
payment of any benefits under the Plan prior to his normal retirement date and
thereafter is employed by the
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<PAGE>
Company, the benefits payable upon any subsequent retirement will be reduced by
the actuarial equivalent of the earlier payments.
ARTICLE IX RESPONSIBILITIES AND INDEMNIFICATION
9.1 Funding. Benefits payable under this Plan will be paid by the Company
as they become due. Benefits will be paid from the general assets of the
Company.
9.2 Indemnification. The Company will indemnify the members of the
committee and any other employees of the Company and hold them harmless against
any and all liabilities, including legal fees and expenses, arising out of any
act or omission made or suffered in good faith pursuant to the provisions of the
Plan.
ARTICLE X ADMINISTRATION
10.1 Plan Administrator. The Company will be the plan administrator.
10.2 Records and Reports. The Company will exercise such authority and
respon sibility as it deems appropriate in order to maintain records of
participant's service, and to provide notices and reports to participants.
10.3 Appointment of Committee. The Company will appoint a committee
consisting of at least three persons who will assist in the administration of
the Plan and serve at the pleasure of the Company. All usual and reasonable
expenses of the committee will be paid by the Company.
10.4 Claims Procedure. The committee will make all determinations
concerning benefits. Any denial of benefits by the committee will be stated in
writing and delivered or mailed by certified mail, return receipt requested, to
the participant or beneficiary within 60 days after the denial. The notice will
set forth the reasons for the denial in language that may be understood by the
participant and will specify the Plan provisions upon which the denial was
based. If the denial is based on the failure of the participant or beneficiary
to supply certain materials or information, the notice will so state. The notice
will advise that the denial may be appealed to the committee and will include an
explanation of the appeal procedure.
The committee will adopt a procedure for reviewing appeals of denials of
claim benefits. The procedure will include the following:
(a) The claimant or his duly authorized representative may initiate an
appeal by written request for review delivered to the committee not later than
60 days after receipt by the claimant of the notice of denial;
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<PAGE>
(b) The claimant or his duly authorized representative may review documents
pertinent to the appeal and may submit written statements of issues and
arguments relevant to the appeal to the committee;
(c) The committee will return its decision on the appeal not later than 60
days after receipt of the request for review; and
(d) The claimant will be advised in writing of the decision on the appeal
including the reasons for the decision in language that may be understood by the
claimant with references to the Plan provisions upon which the decision is
based.
10.5 Other Committee Powers and Duties. The committee will have such powers
as may be necessary to discharge its duties under the Plan. The committee may
adopt such rules as it deems necessary and appropriate. All rules and decisions
of the committee will be consistently applied to all participants in similar
circumstances. When making a determination or calculation, the committee will be
entitled to rely upon information furnished by a participant or beneficiary, the
Company, or the legal counsel of the Company.
10.6 Committee Procedures. The committee may act at a meeting or by
unanimous written consent without a meeting. The committee may elect one of its
members as chairman and appoint a secretary, who need not be a committee member.
The secretary will keep a record of all meetings and forward all necessary
communications to the Company and the trustee. The committee may adopt such
bylaws and regulations as it deems desirable for the conduct of its affairs. All
decisions of the committee will be made by the vote of the majority.
10.7 Authorization of Benefit Payments. The committee will issue directions
to the Company concerning all benefits which are to be paid pursuant to the
provisions of the Plan.
10.8 Application and Forms for Benefits. The committee may require a
participant to complete and file an application for a benefit and all other
forms approved by the committee, and to furnish all pertinent information
requested by the committee. The committee may rely upon all such information
including the participant's current mailing address.
10.9 Facility of Payment. Whenever, in the committee's opinion, a person
entitled to receive any benefit is under a legal disability or is incapacitated
in any way so as to be unable to manage his financial affairs, the committee may
direct the Company to make payments to such person or to his legal
representative or to a relative or friend of such person for his benefit, or the
committee may direct the Company to apply the payment for the benefit of such
person in such manner as the committee considers advisable. Any payment of a
benefit in accordance with the provisions of this section will discharge all
liability for such benefit under the provisions of the Plan.
ARTICLE XI
AMENDMENT OR TERMINATION OF PLAN
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<PAGE>
11.1 Amendments. The Company reserves the right at any time to amend any of
the provisions of this Plan on a prospective basis, but amendments may not
reduce the accrued benefit that has been earned by any participant prior to the
date of the amend ment.
11.2 Right of Termination. The Plan may be terminated at any time by action
of the board of directors of the Company. Upon termination of the Plan, the
rights of each participant to benefits accrued to the date of termination will
become nonforfeitable.
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<PAGE>
ARTICLE XII NONALIENATION OF BENEFITS AND
DOMESTIC RELATIONS ORDERS
12.1 Nonalienation of Benefits. No interest, right, or claim in or to any
part of the trust or any benefit will be assignable, transferable, or subject to
sale, assignment, hypothecation, anticipation, garnishment, attachment,
execution, or levy of any kind and the Company will not recognize any attempt to
so transfer, assign, sell, hypothecate, or anticipate the same except to the
extent required by law. This provision will not apply to any domestic relations
order entered by a Court of competent jurisdiction.
12.2 Procedure for Domestic Relations Orders. Whenever the Company is
served with a domestic relations order from a court of competent jurisdiction,
the Company will follow the following procedure in determining whether the order
constitutes a domestic relations order that would be exempt from the general
spendthrift protection of this Article:
(a) The Company will notify the participant and any "alternate payees"
named in the order that the order was served on the Company and that objec tions
concerning the order must be submitted in writing within 15 days;
(b) The Company will determine whether the order is a "qualified domestic
relations order" and notify the participant and each alternate payee of its
determination. If the Company determines that the order is a qualified domestic
relations order, the Company will make payment in accordance with the order
except that payment will not be made until the participant's employment has
terminated;
(c) During the period in which the Company is determining the status of the
order, payment of any benefits in dispute will be deferred. If the Company
determines that the order is not a qualified domestic relations order, the
Company will resume payments to the former participant or begin payments in
accordance with the terms if this Plan as the case may be; and
(d) The Company will notify the participant and all other alternate payees
named in the order of its decision concerning the qualified status of the order.
Payments pursuant to the order will be made as soon as practicable after the
status of the order has been determined or as soon as the amounts become payable
pursuant to this Plan.
ARTICLE XIII MISCELLANEOUS
13.1 Status of Participants. No participant will have any right or claim to
any benefits under the Plan except in accordance with the provisions of the
Plan. The adoption of the Plan will not be construed as creating any contract of
employment between the Company and any participant
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<PAGE>
or to otherwise confer upon any participant or other person any right to
continuation of employment, nor as limiting or qualifying the right of the
Company to discharge any participant.
13.2 No Interest in Company Affairs. Nothing contained in this Plan will be
construed as giving any participant, employee or beneficiary an equity or other
interest in the assets, business or affairs of the Company, or the right to
examine any of the books and records of the Company.
13.3 Notices. All notices and other designations to be given hereunder will
be in writing and will be deemed to be given when mailed by United States mail
with postage prepaid addressed to the Company at 414 East Fortieth Street,
Holland, Michigan 49423, and to the committee at 414 East Fortieth Street,
Holland, Michigan 49423, or at such other address as the parties may designate
in writing.
13.4 Governing Law. This Plan will be interpreted, construed and enforced
in accordance with the laws of the State of Michigan.
13.5 Severability of Provisions. If any provisions of the Plan will at any
time be declared void and unenforceable, the other provisions will be severable
and will not be affected thereby.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed this
_______ day of ___________________, 1992.
ATTEST: DONNELLY CORPORATION
By____________________________ By____________________________
Its Secretary Its Chief Executive Officer
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<PAGE>
EXHIBIT 10.15
- ----------------------------------------------------------------------DONNELLY
CORPORATION
DEFERRED COMPENSATION PLAN
PLAN DOCUMENT AND SUMMARY PLAN DESCRIPTION
(Effective January 1, 1997)
- ------------------------------------------------------------------------------
<PAGE>
DONNELLY CORPORATION DEFERRED COMPENSATION PLAN
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I - Introduction 1
ARTICLE II - Definitions 2
ARTICLE III - Participation by Eligible Employees 3
ARTICLE IV - Annual Incentive Award and Annual Base Salary Deferrals 4
ARTICLE V - Distributions 5
ARTICLE VI - Accounts 7
ARTICLE VII - Funding and Participant's Interest 8
ARTICLE VIII - Administration and Interpretation 9
ARTICLE IX - Amendment and Termination 10
ARTICLE X - Miscellaneous Provision 11
<PAGE>
DONNELLY CORPORATION
DEFERRED COMPENSATION PLAN
(Effective January 1, 1997)
ARTICLE I INTRODUCTION
1.1 Name: The name of this plan is the Donnelly Corporation Deferred
Compensation Plan ("Plan").
1.2 Effective Date: The effective date of this Plan is January 1, 1997.
1.3 Employer: Donnelly Corporation ("Donnelly"), when employing one or more
Eligible Employees who have become Participants in accordance with Article III,
shall be the employer under this Plan.
1.4 Purpose: This Plan is established effective January 1, 1997 by Donnelly for
the purposes of providing deferred compensation benefits for a select group of
its management and/or highly compensated employees.
This Plan provides a means whereby Eligible Employees may defer all or a portion
of their annual incentive awards they otherwise would receive under the Donnelly
Corporation Executive Compensation Plan for services performed for Donnelly. It
will also be the means whereby Eligible Employees may defer a portion of their
annual base salary, whether or not they defer all or a portion of their annual
incentive award.
All deferrals under this Plan shall be in the form of unfunded recordkeeping
entries.
<PAGE>
ARTICLE II
DEFINITIONS
Whenever the following initially capitalized words and phases are used in this
Plan, they shall have the meanings specified below unless the context clearly
indicates to the contrary:
2.1 "Administrator" shall mean the Compensation and Benefits Manager of Donnelly
Corporation.
2.2 "Beneficiary" shall mean such person or legal entity as may be designated by
a Participant under Section 5.6 to receive benefits hereunder after such
Participant's death.
2.3 "Board" shall mean the Board of Directors of Donnelly Corporation, as
constituted from time to time.
2.4 "Change in Control" shall mean a change in the control of Donnelly that
shall be deemed to have occurred upon the earliest to occur of the following:
(i) the date Donnelly becomes a party to a merger, consolidation, or sale of
substantially all of its assets or any other corporate reorganization in which
Donnelly will not be the surviving corporation, or in which the holders of
Donnelly stock will receive securities of another corporation, (ii) the purchase
by an individual, or group of individuals acting in concert, of at least 25% of
the voting securities of Donnelly, or (iii) during any 24-month period,
individuals who at the beginning of such period constituted the Board cease for
any reason to constitute a majority thereof.
2.5 "Committee" shall mean the Compensation Committee of the Board.
2.6 "Deferred Compensation" shall mean that portion of the Participant's annual
incentive awards and/or annual base salary which the Participant elects to defer
pursuant to Sections 4.1 or 4.2 of this Plan in accordance with a Deferred
Compensation Agreement.
2.7 "Deferred Compensation Account" shall mean the recordkeeping account
established by the Administrator for each Participant to which the portion of a
Participant's annual incentive award and/or annual base salary that is
voluntarily deferred pursuant to Sections 4.1 or 4.2 is credited and from which
distributions
<PAGE>
to the Participant or to his or her Beneficiary are debited. A Participant shall
at all times be fully vested in the balance of his Deferred Compensation
Account.
2.8 "Deferred Compensation Agreement" shall mean a document (or documents) as
made available from time to time by the Administrator, whereby an Eligible
Employee enrolls as a Participant and elects to defer a portion of his annual
incentive award and/or annual base salary pursuant to Article IV of this Plan.
2.9 "Disability" shall mean a disability qualifying for benefits payable under
Donnelly's long-term disability plan under which the Participant is covered.
2.10 "Eligible Employee" shall mean an individual who is employed by Donnelly,
and who is a member of the Corporate Senior Management Team and holds the job
title of Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, Treasurer, Corporate Secretary, or Senior Vice President.
2.11 "Participant" shall mean an Eligible Employee as designated by the
Committee and who has amounts standing to his credit under a Deferred
Compensation Account.
2.12 "Plan Year" shall be the 12 consecutive month period between July 1 and
June 30th.
ARTICLE III PARTICIPATION BY ELIGIBLE EMPLOYEES
3.1 Participation: Participation in this Plan is limited to Eligible Employees,
who are designated by the Committee as Participants for the following year.
3.2 Failure to Designate: In the event that the Committee fails to designate the
group of Eligible Employees who shall be eligible to participate for any year,
each Eligible Employee who was designated in the prior year shall be deemed to
have been designated for the next succeeding Plan Year, provided that any such
Eligible Employee shall participate for purposes of the next succeeding Plan
Year only if he or she is actively employed by Donnelly on the first day of such
succeeding Plan Year and provided he or she is otherwise an Eligible Employee
for such year.
<PAGE>
3.3 Continuity of Participation: A Participant who separates from service with
Donnelly will cease active participation hereunder.
3.4 Immediate Cash-Out of Ineligible Employee: This Plan is intended to be an
unfunded "top-hat" plan, maintained primarily for the purposes of providing
deferred compensation for a select group of management or highly compensated
employees. Accordingly, if the Committee determines that any Participant does
not qualify as a member of the select group, one hundred percent (100%) of such
Participant's Deferred Compensation Account shall be paid to the Participant
immediately.
ARTICLE IV
ANNUAL INCENTIVE AWARD AND BASE SALARY DEFERRALS
4.1 Annual Incentive Award Deferral Election: No later than March 15 of the Plan
Year in which the annual incentive award under the Donnelly Corporation
Executive Compensation Plan is earned, each Eligible Employee may irrevocably
elect, by completing and executing a Deferred Compensation Agreement and filing
it with the Administrator, to defer any portion up to one hundred percent (100%)
of his annual incentive award to be earned for that year.
4.2 Deferral of Annual Base Salary: An Eligible Employee may elect to defer up
to twenty-five percent (25%) of his future annual base salary by completing and
executing a Deferred Compensation Agreement which specifies the amount of annual
base salary to be deferred and filing it with the Administrator. Such election
may be modified or revoked once each quarter by executing and filing with the
Administrator a new Deferred Compensation Agreement at least 15 days before the
end of the quarter. Any election, modification or revocation shall be effective
as of the first payroll of the next quarter after being received by the
Administrator. No election, modification or revocation is permissible with
respect to annual base salary paid prior to the execution of a Deferred
Compensation Agreement.
4.3 Period for Which Deferral Election is Effective: A Participant's deferral
election under Section 4.1 with respect to annual incentive award shall be
effective only for the Plan Year specified in the Deferred Compensation
Agreement. A Participant must file a separate Deferred Compensation Agreement by
March 15 of each subsequent Plan Year in order to make annual incentive award
deferrals for that Plan Year. A Participant's election to defer
<PAGE>
annual base salary shall remain in effect until modified or revoked as provided
in Section 4.2.
ARTICLE V DISTRIBUTIONS
5.1 Election of Distribution Date: At the time a Participant makes an election
to defer a portion of his annual incentive award and/or annual base salary under
Article IV, such Participant shall also specify in writing in the Deferred
Compensation Agreement the date or event on which the cash payment of the
Participant's Deferred Compensation Account shall be made. Such date may be any
of the following:
(i) The fifth December 31st immediately following the year in which a
portion of the annual base salary and annual incentive award were
initially deferred. However, a Participant's termination of employment
for any reason shall accelerate the payment of any deferral under this
Section 5.1(i); or
(ii) The earlier of the Participant's death, disability, or termination of
employment for any reason.
5.2 Distribution May Be Extended: If the Participant has made an election to
defer a portion of his annual incentive award and/or annual base salary for any
Plan Year for the five-year period provided under Section 5.1(i) above, the
period of deferral with respect to such compensation may be mutually extended
for another five-year period or until the Participant's death, disability or
termination of employment for any reason. An extended deferral under this
section shall be effective only by mutual agreement reached at least 90 (ninety)
days before the original deferral is to be distributed between the Participant
and Donnelly. This agreement shall be in the written format specified by
Donnelly.
5.3 Method of Payment:
(i) Distributions resulting from retirement or disability of the Participant
shall be paid in cash in the form of either a single lump sum or, annual
installments for a period not to exceed five years as elected by the
Participant and approved by Donnelly.
<PAGE>
(ii) Distributions resulting from termination of employment for any reason
other than retirement or disability of the Participant shall be paid in
cash in the form of a single lump sum.
5.4 Special Election for Early Distribution: A Participant may apply to the
Administrator for early distribution of all or any part of his Deferred
Compensation Account. Such early distribution shall be made in a single lump sum
and in cash, provided that 10% of the amount withdrawn in such early
distribution shall be forfeited from the payment of the early distribution
amount to the Participant. In the event a Participant's early distribution is
submitted within one year after a Change in Control the forfeiture penalty shall
be reduced to 5%.
5.5 Financial Hardship. The Committee shall have the authority to determine, in
its sole discretion, that payments should be made in any manner the Committee
deems appropriate, in whole or in part, on any other date or dates in order to
alleviate a financial hardship of a Participant. "Financial hardship" shall mean
a severe financial hardship resulting from a sudden and unexpected illness or
accident of the Participant, or of a dependent (as defined in Section 152(a) of
the Internal Revenue Code) of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and unforeseeable
emergencies arising as a result of events beyond the control of the Participant.
The circumstances that will constitute a financial hardship will depend on the
facts of each case, but, in any case, payment may not be made to the extent that
such hardship is or may be relieved (i) through reimbursement or compensation by
insurance or otherwise, (ii) by liquidation of the Participant's assets, to the
extent such liquidation would not itself cause severe financial hardship, and
(iii) by cessation of deferrals under the Plan. Any financial hardship
distribution approved by the Committee shall be limited to the amount necessary
to meet the financial hardship and shall be made solely from the Participant's
Deferred Compensation Account.
5.6 Distribution on Death. In the event of a Participant's death before his
Deferred Compensation Account has been distributed, distribution(s) shall be
made to the Beneficiary selected by the Participant, in a single lump sum cash
payment within 60 days after the date of death (of, if later, after the proper
Beneficiary has been identified). A Participant may from time to time change his
designated Beneficiary without the consent of such Beneficiary by filing a new
designation in writing with the Administrator. If no Beneficiary designation is
in effect at the time of the Participant's death, or if the designated
Beneficiary is missing or has predeceased the Participant, distribution shall be
made to the Participant's surviving spouse, or if none, to his surviving
children per stirpes, and if none, to his estate.
<PAGE>
5.7 Valuation of Distributions. All distributions under this Plan shall be
annual based upon the amount credited to a Participant's Deferred Compensation
Account as of the last quarterly valuation immediately preceding the date of the
distribution. The amount of installment payable to a Participant electing such
method of payment shall be determined by dividing the amount credited to the
Participant's Deferred Compensation Account by the remaining number of
installments, including the current installment, to be paid. It is understood
that administrative requirements may lead to a delay between such valuation date
and the date of distribution, not to exceed twenty business days.
ARTICLE VI ACCOUNTS
6.1 Deferred Compensation Account: The Administrator shall establish and
maintain, or cause to be established and maintained, a separate Deferred
Compensation Account for each Participant hereunder who executes an election
pursuant to Section 4.1 or Section 4.2. Each such Participant's annual incentive
awards and/or annual base salary deferred pursuant to a Deferred Compensation
Agreement under Section 4.1 or Section 4.2 shall be separately accounted for and
credited with earnings, for recordkeeping purposes only, to his Deferred
Compensation Account. A Participant's Deferred Compensation Account shall be
solely for the purpose of measuring the amounts to be paid under the Plan.
Donnelly shall not be required to fund or secure the Deferred Compensation
Account, in any way, Donnelly's obligation to Participants hereunder being
purely contractual. All assets of the Plan will at all times remain the property
of Donnelly and will be subject to Donnelly's creditors.
6.2 Crediting of Earnings and Statement of Account: The Participant's Deferred
Compensation Account shall be credited with interest quarterly. The amount of
interest to be credited each quarter shall be equal to the prime rate of
interest in effect as of the last day of the preceding each quarter. Interest
will be credited for whole quarters only. As soon as practicable after the end
of each quarter (and at such additional times as the Administrator may
determine), the Administrator shall furnish each Participant with a statement of
the balance credited to the Participant's Deferred Compensation Account.
6.3 Investment to Facilitate Payment of Benefits: Although Donnelly is not
obligated to invest in any specific asset or fund, or purchase any insurance
<PAGE>
contract in order to provide the means for the payment of any liabilities under
this Plan, the Committee may elect to do so.
ARTICLE VII
FUNDING AND PARTICIPANT'S INTEREST
7.1 Deferred Compensation Plan Unfunded: This Plan shall be unfunded and no
trust shall be created by the Plan. The crediting to each Participant's Deferred
Compensation Account, as the case may be, shall be made through recordkeeping
entries. No actual funds shall be set aside; provided, however, that nothing
herein shall prevent Donnelly from establishing one or more grantor trusts from
which benefits due under this Plan may be paid in certain instances. All
distributions shall be paid by Donnelly from its general assets and a
Participant or his or her Beneficiary shall have the rights of a general,
unsecured creditor against Donnelly for any distributions due hereunder. The
Plan constitutes a mere promise by Donnelly to make benefit payments in the
future.
7.2 Participant's Interest in Plan: A Participant has an interest only in the
cash value of the amount credited to his Deferred Compensation Account. A
Participant has no rights or interests in any specific funds, stock or
securities.
ARTICLE VIII ADMINISTRATION AND INTERPRETATION
8.1 Administration: Except where certain duties are delegated to the
Administrator, the Committee shall be in charge of the operation and
demonstration of this Plan. The Committee has, to the extent appropriate and in
addition to the powers described elsewhere in this Plan, full discretionary
authority to construe and interpret the terms and provision of the Plan; to
adopt, alter and repeal administrative rules, guidelines and practices governing
the Plan; to perform all acts, including the delegation of its administrative
responsibilities to advisors or other persons who may or may not be employees of
Donnelly; and to rely upon the information or opinions of legal counsel or
experts selected to render advice with respect to the Plan, as it shall deem
advisable, with respect to the administration of the Plan.
<PAGE>
8.2 Interpretation: The Committee may take any action, correct any defect,
supply any omission or reconcile any inconsistency in the Plan, or in any
election hereunder, in the manner and to the extent it shall deem necessary to
carry the Plan into effect or to carry out the Board's purposes in adopting the
Plan. Any decision, interpretation or other action made or taken in good faith
by or at the direction of Donnelly, the Board, the Committee, or the
Administrator arising out of or in connection with the Plan, shall be within the
absolute discretion of all and each of them, as the case may be, and shall be
final, binding and conclusive on Donnelly, and all Participants and
Beneficiaries and their respective heirs, executors, administrators, successors
and assigns. The Committee's determinations hereunder need not be uniform, and
may be made selectively among Eligible Employees, whether or not they are
similarly situated. Any actions to be taken by the Committee will require the
consent of a majority of the Committee members. If a member of the Committee is
a Participant in this Plan, such member may not decide or determine any matter
or question concerning his benefits under this Plan that such member would not
have the right to decide or determine if he were not a member.
8.3 Records and Reports: The Administrator shall keep a record of proceedings
and actions and shall maintain or cause to be maintained all such books of
account, records, and other data as shall be necessary for the proper
administration of the Plan. Such records shall contain all relevant data
pertaining to individual Participants and their rights under the Plan. The
Administrator shall have the duty to carry into effect all rights or benefits
provided hereunder to the extent assets of Donnelly are properly available.
8.4 Payment of Expenses: Donnelly shall bear all expenses incurred by it and by
the Committee in administering this Plan.
8.5 Indemnification for Liability: Donnelly shall indemnify the Administrator,
the members of the Committee, and the employees of Donnelly to whom the
Administrator delegates duties under this Plan against any and all claims,
losses, damages, expenses and liabilities arising from their responsibilities in
connection with the Plan, unless the same is determined to be due to gross
negligence or willful misconduct.
8.6 Claims Procedure: If a claim for benefits or for participation under this
Plan is denied in whole or in part, a Participant will receive written
notification. The notification will include specific reasons for the denial,
specific reference to pertinent provisions of this Plan, a description of any
additional material or information necessary to process the claim and why such
material or information is
<PAGE>
necessary, and an explanation of the claims review procedure. If the Committee
fails to respond within 90 days, the claim is treated as denied.
8.7 Review Procedure. Within 60 days after the claim is denied or, if the claim
is deemed denied, within 150 days after the claim is filed, a Participant (or
his duly authorized representative) may file a written request with the
Committee for a review of his denied claim. The Participant may review pertinent
documents that were used in processing his claim, submit pertinent documents,
and address issues and comments in writing to the Committee. The Committee will
notify the Participant of its final decision in writing. In its response, the
Committee will explain the reason for the decision, with specific references to
pertinent Plan provision on which the decision was annual based. If the
Committee fails to respond to the request for review within 60 days, the claim
is treated as denied.
ARTICLE IX AMENDMENT AND TERMINATION
9.1 Amendment and Termination: The Company may at any time amend or terminate
any or all of the provisions of the Plan, subject to the following limitations:
(a) The amendment will not be effective unless the Plan will continue
to operate for the exclusive benefit of employees.
(b) The amendment or termination will not adversely affect the right
of any Participant or Beneficiary to a payment under the Plan on
the basis of compensation allocated to the Participant's Deferred
Compensation Account.
If the Plan is discontinued with respect to future deferrals, Participants'
Deferred Compensation Accounts shall be distributed on the distribution dates
elected in accordance with Section 5.1, unless the Committee designates that
distributions shall be made on an earlier date. If the Committee designates such
earlier date, each Participant shall receive distribution of his entire Deferred
Compensation Account, as specified by the Committee. If the Plan is completely
terminated, each participant shall receive distribution of his entire Deferred
Compensation
<PAGE>
Account in a single lump sum cash payment as of the date of the Plan termination
designated by the Board.
ARTICLE X MISCELLANEOUS PROVISION
10.1 Right of Donnelly to Take Employment Actions: The adoption and maintenance
of this Plan shall not be deemed to constitute a contract between Donnelly and
any Eligible Employee, or to be a consideration for, or an inducement or
condition of, the employment of any person. Nothing herein contained, or any
action taken hereunder, shall be deemed to give an Eligible Employee the right
to be retained in the employ of Donnelly or to interfere with the right of
Donnelly to discharge an Eligible Employee at any time, nor shall it be deemed
to give to Donnelly the right to require the Eligible Employee to remain in its
employ, nor shall it interfere with the Eligible Employee's right to terminate
his or her employment at any time. Nothing in this Plan shall prevent Donnelly
from amending, modifying, or terminating any other benefit plan, including the
Donnelly Corporation Executive Compensation Plan.
10.2 Alienation of Assignment of Benefits: A Participant's rights and interest
under the Plan shall not be assigned or transferred except as otherwise provided
herein, and the Participant's rights to benefit payments under the Plan shall
not be subject to alienation, pledge or garnishment by or on behalf of creditors
(including heirs, beneficiaries, or dependents) of the Participant or of a
Beneficiary.
10.3 Right to Withhold: To the extent required by law in effect at the time a
distribution is made from the Plan, Donnelly or its agents shall have the right
to withhold or deduct from any distributions or payments any taxes required to
be withheld by federal, state or local governments.
10.4 Construction: All legal questions pertaining to the Plan shall be
determined in accordance with the laws of the State of Michigan, to the extent
such laws are not superseded by the Employee Retirement Income Security Act of
1974, as amended, or any other federal law.
10.5 Headings: The headings of the Articles and Sections of this Plan are for
reference only. In the event of a conflict between a heading and the contents of
an Article or Section, the contents of the Article or Section shall control.
<PAGE>
10.6 Number and Gender: Whenever any words used herein are in the singular form,
they shall be construed as though they were also used in the plural form in all
cases where they would so apply, and references to the male gender shall be
construed as applicable to the female gender where applicable, and vice versa.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed this
23rd day of August , 1996.
-------------------- --------------------
DONNELLY CORPORATION
By: /s/ William R. Jellison
----------------------------
William R. Jellison Chief Financial Officer
CORPORATE SEAL
Attest:
By: /s/ Maryam Komejan ------------------Maryam Komejan Corporate Secretary
<PAGE>
EXHIBIT 10.17
July 22, 1996
Mr. Donn Viola
7405 Parkwood Drive Fenton, MI 48430
Dear Donn:
This letter will amend your original offer letter dated July 12, 1996, based on
our conversation of July 19, 1996. Our discussions centered on three major areas
of concern:
1. Regarding Performance Shares, you questioned whether or not those would be
carried forward on a rolling basis after your retirement. In other words,
would you receive the value of the performance shares that were awarded to
you before retirement after retiring from the company.
This is the first year that we have used Performance Shares at Donnelly and that
issue is not addressed in our plan. However, I believe it is the intent of the
plan to provide the value of performance shares that were granted prior to
retirement after retirement. I will clarify this issue with the Board at the
upcoming meeting in July.
2. On the issue of retirement income, we both understand that the assumptions
being used to project the benefits could vary considerably based on the
performance of the company and how that performance affects stock value.
However, you expressed a strong need to have your compensation package be
structured so as to provide a somewhat stronger income opportunity for
retirement than is currently assumed to be the case.
In order to provide additional support in this area, the company will increase
the amount to be deposited in your deferred compensation plan to $75,000 rather
than the $50,000 originally offered. A new worksheet from Towers Perrin is
attached to illustrate the effect of that change. As stated in your original
letter, this amount will be deposited in such an account on your behalf within
one year of employment. This amendment affects item 4.a. in your offer letter of
July 12, 1996.
3. The third area of concern dealt with your relocation package. Since you
have concerns about selling your house in the near-term, due to its
uniqueness, you inquired whether Donnelly could provide you with cash flow
assistance in the purchase of a home in West Michigan.
<PAGE>
Donn Viola
July 22, 1996
Page 2
Donnelly has already agreed to pay for the real estate fees and closing costs on
the sale of your existing home in Pennsylvania. To assist you in purchasing a
home in West Michigan, we will pay you $30,000 in lieu of those closing costs in
Pennsylvania upon having made an offer and having it accepted on the home of
your choice in West Michigan. This payment will be grossed up for taxes. In
addition, Donnelly will cover closing costs on a new home in West Michigan and
those costs will be grossed up for taxes. This modification will replace section
7.a. in your original offer letter of July 12, 1996.
We are very pleased with the prospect of having you join our organization and
look forward to working with you. This offer, as amended here, remains open
until the close of business on Tuesday, July 23, 1996 and is subject the
contingencies #11 and 12 in your original offer letter. I will assume, based on
our earlier conversations, that you remain highly interested in joining Donnelly
and will attend the Board meeting on July 30, 1996 in Chicago to finalize these
agreements. Please notify me today, by telephone your intention to proceed with
our plans for a meeting in Chicago.
As always, feel free to contact me with questions if I can be of service.
Sincerely,
DONNELLY CORPORATION
Maryann Komejan
Senior Vice President
/jvb
<PAGE>
July 12, 1996
Mr. Donn Viola
7405 Parkwood Drive Fenton, MI 48430
Dear Donn:
I am very pleased to extend to you Donnelly's offer of employment to fill the
new position of Chief Operating Officer for Donnelly North American Operations.
We believe you bring outstanding skills to our company and that you will find
Donnelly an excellent environment in which to invest your career. We are looking
forward to working with you.
You will report to the CEO of Donnelly and will work from our home office
located in Holland, Michigan. The details of your offer include:
1. A base salary of $27,083 per month. This equates to an annual salary
of $325,000. This base compensation falls in the neighborhood of the
75th percentile based on national executive compensation survey data
for an operation the size of our North American Operations, and as
such represents a strong expression of interest for you to join
Donnelly. Our policy is to review salaries for all officers annually
after the close of our fiscal year. You will be eligible for review in
August/September, 1997 and the Board takes action regarding officer
salaries in October of each year.
2. An annual bonus incentive will be provided which is linked to the
achievement of specific business and individual goals. Achieving plan
performance would result in a bonus of approximately 50% of base
salary. Exceptional performance over plan goals can earn a bonus of up
to 100% of base salary. Shortly after you begin work at Donnelly, I
will meet with you to establish specific goals for the upcoming year.
Bonus awards are typically paid in September, after the close of our
fiscal year. This program will begin for you in fiscal 1997 (June '96
June '97). Two-thirds of the first year's plan annual incentive for
achieving plan (or $108,000) will be guaranteed since you were not
part of the planning process for this year and will not have the full
year to influence performance. This annual incentive will be paid in
the August - October period of 1997.
3. It is customary for Donnelly to consider stock options for executives
annually, based on competitive market comparisons and on individual
contributions made to the business. Long-term incentive compensation
for your position would typically consist of annual stock option
grants and performance unit grants. The initial stock option grants
and performance unit grants will be priced at the date of your
acceptance of the employment offer made to you. Subsequent grants will
be
<PAGE>
Donn Viola
July 12, 1996
Page 2
priced as of the date granted. Stock options are exercisable after one
year of receiving them and no later than ten years of receiving them.
Performance unit grants are paid out in cash five years after they are
granted.
4. A special one-time consideration is being offered to recognize the
adjustments that will be required in making a transition to Donnelly.
This one-time consideration will include two components:
a. A $50,000 deposit into a deferred compensation program. While Donnelly
does not have a deferred compensation plan in place for executives
now, we will commit to having such a plan in place within one year of
your employment and we will deposit $50,000 into this account on your
behalf at the time the plan is adopted.
b. Donnelly is offering you a stock option for 10,000 shares and 10,000
performance unit shares upon your employment with Donnelly. These
grants are subject to approval by the Donnelly Stock Option Committee
and will be governed by the terms of Donnelly plans for these
programs.
5. You will receive a company car valued at between $40,000 - $50,000.
Car expenses will be covered for insurance, maintenance, and business
fuel expense.
6. Donnelly offers a very comprehensive package of group health
insurance, group life insurance, 401K, employee stock purchase, and
retirement plans. Vacation is six weeks. You will be provided with
descriptions of all plans and I believe you will find our flexible
benefit options very strong in protecting you and your family.
7. Our relocation package will include:
a. Closing costs on a new home in West Michigan and real estate fees and
closing costs on the sale of your existing home. These costs will be
"grossed up" for taxes.
b. Moving expenses for you, your family, and personal belongings (per
company policy). We will select a mover for you or reimburse a mover
of your choice upon receiving two estimates.
c. Temporary living expenses to cover an appropriate apartment, or
equivalent temporary condo/house as available, for six months in West
Michigan if required. Of course, we assume that you will be interested
in locating more permanent living arrangements as soon as possible
after
<PAGE>
Donn Viola
July 12, 1996
Page 3
accepting a position with Donnelly. If you haven't made permanent
arrangements at the end of six months, we can discuss an extension.
The objective is to achieve a transition as soon as possible.
d. If you are unable to sell your home within nine (9) months of
beginning work at Donnelly, we will purchase your home at fair market
value (based on the average value established by two independent
appraisals). If the amount that you paid for your home exceeds the
appraised value, Donnelly will pay the difference, but the total price
paid by Donnelly will not exceed 100% of the average appraised value.
8. In the event that you are separated from Donnelly for any reason other
than cause, we will provide a severance plan that provides 18 months
of base salary and benefits, subject to a noncompete agreement in our
specific area of business and closure on a separation agreement.
9. In the event that you choose to leave Donnelly, you will receive all
benefits for which you are vested per plan descriptions.
10. In the event that there is a change in control regarding ownership of
the company, all stock options and performance units will be vested
consistent with the applicable plan descriptions.
11. This offer is contingent on appropriate references being completed and
that those references are positive. We have already begun this process
and do not anticipate problems in this area.
12. You have expressed an interest to meet with some of our Directors, and
as a courtesy to our Directors, I feel this is also important to do
before everything is totally final. I do not anticipate any issues,
and expect that both you and they will feel positive about moving
forward. Therefore, while I hope that you and I can reach agreement
regarding this offer as soon as possible, we will wait until July 30th
to totally finalize everything. I will schedule an opportunity for you
to meet with our Human Resource Committee of the Board at a meeting
previously scheduled in Chicago on the 30th to deal with a number of
other issues.
I plan to be in Europe and Asia for the next two weeks, which makes this the
earliest time we can do this.
We will also invite all Directors to attend, but due to their schedules, we
cannot predict how many will be able to make it.
<PAGE>
Donn Viola
July 12, 1996
Page 4
We are pleased to extend this to offer you. In an effort to be helpful, we have
enclosed a comparative summary of Donnelly's offer to your previous annual
compensation package, as we understand it. This comparative summary was prepared
after discussions between you and Jeff Bacher from Towers Perrin. In both the
current year and over the course of your career with Donnelly, we feel this
package offers substantial advantages for you and your family. Based on the
Towers Perrin comparison, your total direct compensation is estimated to be
equivalent to that at Mack, and the potential for the long-term (or non-direct)
compensation is more favorable for you in joining Donnelly.
As the company continues to grow and develop, part of our corporate mission is
to double shareholder value every five years, and our current five-year outlook
is consistent with achieving this level of performance. Donnelly has grown at a
compounded annual rate in excess of 15% during the past 15 years, and we believe
the company is positioned for strong growth in the future. With your proven
skills to shape strong operations and improve earnings, the prospects for the
growth of your estate through the stock options and performance share plans
should be strong. Our program for deferred compensation should also prove to be
an attractive tool for enhancing your long-term financial position.
All matters not specified here will be handled in accordance with company
policy. We will provide you with all appropriate policies and plan descriptions
forthrightly. I believe that you will find all of them very competitive and
supportive.
Of course, we understand that you will need time to assess the financial
implications of this opportunity. This offer will remain open until the close of
business on Friday, July 18, 1996, although the offer and your acceptance are
subject to the contingencies discussed in paragraphs 11 and 12.
On behalf of myself, the Board of Directors, and the senior management team at
Donnelly, we are looking forward to having you and Barbara join our company. I
am convinced that you will help us make this an even stronger company and I am
personally looking forward to working with you.
Sincerely,
DONNELLY CORPORATION
Dwane Baumgardner Chairman of the Board
<PAGE>
Exhibit 10.18
September 15, 1995
Mr. Russ Scaffede
102 Clubhouse Drive Nicholasville, KY 40356
Dear Russ:
I am very pleased to extend to you Donnelly's offer of at will employment for
the position of Vice President, Manufacturing. We believe you bring outstanding
skills to our company and that you will find Donnelly an excellent environment
in which to invest your career. We are all looking forward to working with you.
You will report to the C.O.O. of Donnelly North America and be located here in
Holland. Until that position is filled, you will report directly to me. Your
annual base salary will be $180,000 paid in 52 equal installments of $3,461.64
paid each week. Our policy is to review salaries at the end of each fiscal year.
We offer a management bonus based on attainment of mutually agreed upon
objectives targeted at 25% of base salary for reaching those objectives, and
with a potential to reach a total of 35% for exceeding them. This is paid yearly
at the closing of the accounting records. You will be eligible to participate in
the plan, on a prorated basis, for the balance of fiscal year 1996.
Our long term incentive plan, also based on attainment of mutually agreed upon
personal objectives and company performance, is targeted at 35% of annual base
salary. This is awarded in stock options and/or performance units. This bonus is
also awarded at the time of closing of accounting records for the previous year.
You will be eligible for participation in this plan, on a prorated basis, for
the balance of fiscal 1996.
We will provide you with a company car with an approximate value of $30,000 and
car expenses to include insurance, maintenance and business use fuel expense.
I have included, for your information, information on our various health, life,
stock purchase and pension plans. Vacation is six weeks. Rick will be happy to
provide any further information you may require on these plans. I think you will
agree that our flexible benefit approach allows you to select a very generous
array of protection for you and your family.
Our relocation policy includes the following:
All closing costs including real estate fees.
Moving expenses for you, your family and your property.
<PAGE>
Mr. Russ Scaffede September 15, 1995 page 2
Two trips for Barb to visit the area and look at housing.
One time relocation expense of $7,500.
Away from home expenses for yourself for a period of 90 days and five trips back
to Nicholasville.
In the event that we elect your separation from the company for any reason other
than cause, we will provide severance in the form of base salary and benefit
coverage for a period of 12 months or until you find other employment of any
kind whichever occurs first. This consideration will be subject to a noncompete
agreement in our specific area of business.
Our Board of Directors has been strongly supportive of bringing someone of your
caliber to our company. While I anticipate no reservations on their part about
your selection for this key position, this offer is subject to their
confirmation.
Russ, we are looking forward to having you and Barb join our family here at
Donnelly. I am convinced you can help us make this a great company and am
personally looking forward to working with you with great anticipation.
Sincerely,
DONNELLY CORPORATION
Dwane Baumgardner Chairman of the Board
<PAGE>
Exhibit 10.19
English Language Summary of Security Pool Agreement
-----------------------
This document is a translation and a summary, and the terms of the complete
original document are controlling.
Between the following credit institutions of the one part:
1. Berliner Bank Aktiengesellschaft, Berlin
-Hereinafter also referred to as the "pool principal"
2. Deutsche Genossenschaftsbank Bayam, Nuremberg branch
3. National Bank Detroit, Frankfurt branch
4. The First National Bank of Chicago, Chicago
5. Sparkasse Miltenberg-Obernburg, Miltenberg
-hereinafter referred to jointly as "the Banks" and referred to individually
as "the Bank",
and
Donnelly Hohe GmbH & Co KG, Collenberg (at present still called Hohe GmbH & Co
KG) of the other part
-hereinafter referred to as "the Firm"
the following agreement has been reached:
Clause 1 Loans and credit facilities
The following banks have made/shall make the following loans and credit lines
available to the firm:
Berliner Bank AG: Loan for DM
5,000,000.00
Working credit for DM 15,000,000.00
Bridging loan for DM 5,000,000.00
Deutsche Genossenschaftsbank: Loan for DM
5,000,000.00
Working credit for DM
15,000,000.00
Bridging loan for DM 5,000,000.00
National Bank Detroit: Working credit for DM
15,000,000.00
The First National Bank of Chicago: Working credit for DM
10,000,000.00
Sparkasse Miltenberg: Working credit for DM
5,00
0,0
00.
00
----
---
---
---
Total DM 80,000,000.00
<PAGE>
Money-market transactions, Euro-financing business, bill purchases or foreign
exchange transactions, for example, can also be performed and bank guarantees
can be accepted in appropriation to the respective business loans.
The two bridging loans of Berliner Bank AG and Deutsche Genossenschaftsbank are
limited to 31/st/ December, 1995 at the latest, and will be paid back when an
additional bank is admitted into this securities pooling agreement.
The business loans granted by the NBD Bank, Frankfurt/Main branch and The First
National Bank of Chicago shall be administered as a unit by the NBD Bank until
revocation by one of the two banks; credit shall be granted individually and
independent of the respective other bank up to the level of participation of the
respective bank. The First National Bank of Chicago hereby revocably authorizes
the NBD to represent it in all respects in connection with this pooling
agreement, to safeguard its rights in connection with this securities pooling
agreement vis-a-vis the other contractual parties to the said agreement, and to
issue such statements on behalf of the First National Bank of Chicago as the NBD
Bank deems necessary or desirable in connection with the loans granted and with
respect to this securities pooling agreement.
Clause 2 Securities
1. The Firm has provided/shall provide the following securities to the pool
principal:
a) Registered land charge for DM 5,000,000.00, jointly registered as follows:
in the Land Register of Fechenbach, leaf 1508, leaf 1810 and leaf 2152; in
the Land Register of Dorfprozelten, leaf 3738; in the Land Register of
Stadtprozelten, leaf 1733; and in the Land Register of Tappenbeck, leaf
299.
b) Registered land charge for DM 32,500,000.00, jointly registered as
follows: in the Land Register of Fechanbach, leaf 1808, leaf 1810, leaf
1817 and leaf 2152; in the Land Register of Dorprozelten, leaf 3738; and
in the Land Register of Stadtprozelten, leaf 1733.
c) Owner's certified land charge for DM 5,000,000.00, jointly registered as
follows: in the Land Register of Fechenbach, leaf 1608, leaf 1810, leaf
1817 and leaf 2152; in the Land Register of Dorfprozelten, leaf 3738; and
in the Land Register of Stadtprozelten, leaf 1733, assigned to the pool
principal.
d) Owner's certified land charge for DM 7,500,000.00, jointly registered as
follows: Land Register of Fechenbach, leaf 1608, leaf 1810, leaf 1817 and
leaf 2152; in the Land Register of Dorfprozelten, leaf 3738; and in the
Land Register of Stadtprozelten, leaf 1733, assigned to the pool
principal.
e) Registered land charge for DM 7,000,000.00, jointly registered as follows:
in the Land Register of Fechenbach, leaf 1608 and leaf 1817. This
registered land charge is currently still entered in the Land Register in
the name of Bankhaus Karl Schmidt, and shall be assigned to the pool
principal.
f) Registered land charge for DM 4,000,000.00, jointly registered as follows:
in the Land Register of Fechenbach, leaf 1608 and leaf 1817. This
registered land charge is currently still entered in the Land Register in
the name of Deutsche Genossenschaftsbank, and shall be assigned to the
pool principal.
<PAGE>
g) Registered land charges (in some cases for joint and several liability)
for a total of DM 14,450,000.00, which is currently still entered in the
Land Register in the name of Industriekreditbank AG, Deutsche
Industriebank in Dusseldorf and Berlin (IKB) and is to be assigned to the
pool principal, if and as soon as the IKB is obliged to release these land
charges. These registered charges are place on different items of real
estate in Fachenbach, Dorprozelten and Tappenbeck.
h) Chattels mortgage on machines and fittings according to a new chattels
mortgage agreement to be concluded.
2. For the safeguarding purpose outlined in S3, the Company hereby grants the
individual banks a right of lien existing among one another - equal in
status to the individual rights of lien existing among one another - to
the credit balance that is held with one of the banks either now or in the
future. The rights of lien only apply to credit balances that stem from
business relations in connection with this pooling agreement. Rights of
lien that are based on the General Terms and Conditions of Business of the
banks have priority over the rights of lien named herein.
The situation shall not be affected by any consideration of whether or not the
Banks have acquired the de facto or de jure power of disposal for the said
credit balances.
Notification of the placement of these rights under lien is made to the Banks
herewith.
Up until the time of any revocation on recourse on security by any one of the
Banks, each bank shall be entitled to authorize operations on the credit
balances at its establishment which are under lien to the other Banks, in the
course of normal proper business operations. A General Business Conditions lien
held by any of the Banks may be invoked prior to the lien of any other bank only
for its own credit lines according to this security pool agreement; the same
shall apply to the offsetting of any claims receivable it has in its own
capacity against credit balances of the Firm.
Realization of the liens established under this agreement shall be by agreement
with the banks; it shall be done in accordance with the provisions of this pool
agreement.
3. All other securities previously provided to the Banks participating in
this security pool agreement are hereby cancelled and transferred back to
the firm herewith. To the extent that any further procedures are required
for this purpose, the Banks undertake to perform these.
<PAGE>
Clause 3 Purpose of security
The purpose of the securities listed under clause 2 is
as first priority
and with equal priority for each, to provide Berliner Bank AG and Deutsche
Genossenschaftsbank with security for their Loans listed under clause 1 for DM
5,000,000.00 in each case, and
thereafter in terms of priority
and with equal priority with respect to each other, to provide the Banks
listed under clause 1 with security for their credit facilities as indicated
in clause 1.
In the event of Euroloans having been granted by third-party credit
institutions against the credit lines listed under clause 1 through the agency
of the Banks, the securities listed in clause 2 shall also function as
security for all present and future claims arising from the granting of these
credit facilities.
and last ranking
and of equal rank with respect to one another for the purpose of safeguarding
the claims of the banks arising from overdrawing of the loans/credits in
accordance with S1.
Clause 4 Security trustee
1. The pool principal shall administer the securities incorporated in the
pool agreement with proper business care, also acting as a trustee for
each of the other Banks. The pool principal shall be entitled to this end
to exercise all supervisory, administration and drawing rights arising
from the agreement in its own name. The complete or partial release of
securities shall required the consent of each of the other Banks.
2. Each bank may at any time request information from the pool principal on
the administration of the securities. Independently from that entitlement,
the pool principal shall also keep the Banks informed in this regard in
accordance with its conscientious judgment.
3. The pool principal shall be entitled, after prior notification of the
other Banks, to transfer the administration of the securities to another
trustee deemed by it to be suitable for this purpose.
4. In each case, the trustee shall be exempt from the restrictions pursuant
to s. 181 of the German Civil Code.
<PAGE>
S 5 Utilization, Power of Utilization and Distribution of Profits
1. The utilization of the securities referred to in S2 shall be carried out
by the pool manager in its own name, yet for the account of the banks.
2. If the Company is in default with due payments on secured claims despite
the granting of an appropriate period of grace (safeguarding case), the
banks shall decide on the question as to whether and when utilization
measures are to be instituted or put through. Decisions must be taken by a
majority of 50.1% based on the shares of the loans and credits referred to
in S1. The banks may only institute other enforcement measures against the
Company once a majority resolution has been passed in accordance with the
previous sentence.
The utilization measures shall be announced by the pool manager of the Company
and the prerequisites for the utilization are to be observed in accordance with
the individual agreements concerning safeguarding.
3. The proceeds from the utilization of the pool securities are to be used in
the following order of priority:
a) to settle costs, pay any taxes due or meet any other costs arising from
the utilization of the securities;
b) to redeem the claims of the banks arising from the granting of
loans/credits, in respect of which the safeguarding took place, that is
. having higher priority to, and with respect to one another equal priority,
the redemption of the loan referred to in S1 of currently DM 5,000,000.00
in each case, which was made available by the Berliner Bank AG and the
Deutsche Genossenschaftsbank, however at most, up to the amount of the loan
availed of in each case
. of equal rank in the rank below that in relation to the other credits
availed of during the period in which the decision concerning utilization
was taken, whereby the calculation of the distribution key is only to be
based on those claims that do not exceed the credit lines referred to in
S1.
If a distribution of profits takes place, each of the banks is entitled, and on
request of the other banks acting irrevocably on behalf of the Company, obliged
to bring their credit claims, which do not exceed the credit lines in accordance
with S1, to such a level that credit is available to the banks in proportion to
the said credit lines; this credit claims level is to be achieved by means of
appropriate transfers.
If for legal reasons it is not possible validly to implement and equalization of
balances vis-a-vis the Firm, the Banks, acting by arrangement between
themselves, shall be required to implement an equivalent equalization of
balances. The respective Banks shall first offset their credit claims receivable
on the basis of movements in the credit line as specified in clause 1 against
the balances of any accounts not bound to a specific purpose. If any such
offsetting procedures are implemented after the equalization of balances,
further balance equalization procedures must take place.
If the Banks have arranged Euroloans as per clause 3 against the credit lines as
per clause 1 of this agreement, and where the said Euroloans are to be redeemed
by the Bank in question which has arranged the transaction to the third-party
credit institution, the equalization payment shall be imputed to the cash
balance of the credit institution arranging the transaction, provided that this
does not lead to the credit line as per clause 1 of this agreement being
exceeded:
<PAGE>
c) to meeting the claims of Banks whose credit lines have been exceeded, with
equal priority and in proportion to the amounts by which the credit is
exceeded in each case;
d) to meeting the claims of the Banks from other credit facilities granted,
with equal priority and in proportion to the amounts of additional credit
facilities taken up, unless these derive from the proceeds of the
realization of securities provided separately for them;
e) any further proceeds not required for any of the above shall be paid to
the Firm.
4. Guaranteed credits only then count as having been availed of when recourse
has been made to the bank/banks.
5. The amounts taken up shall be imputed to any subsequently arising
increases in balances resulting from reversed debt items and/or returned
cheques. This shall not apply if this would result on the loans/credit
facilities listed in clause 1 being exceeded.
6. If the amount of claims to be considered has not yet been established at
the time of the distribution of proceeds, these shall initially not be
taken into account in the determination of the shares in which the
realization proceeds are to be distributed. Only when the amounts in
question have been definitively established shall a final calculation of
the distribution shares be made. Any resulting changes in the proceeds
payable to each of the Banks shall be adjusted between the Banks, even if
payments have already been made.
7. The Banks shall be entitled to change the above-mentioned distribution
formula at any time by mutual agreement.
S6 Costs
1. All costs incurred by the pool manager in connection with this securities
pooling agreement, and especially in respect of the administration of the
securities, shall only be borne by the firm during the first year of the
term of this agreement. Said costs shall be borne in the form of a
flat-rate payment of DM 50,000.00
2. The Berliner Bank shall only take over the management of the pool
following the first year of the term of the agreement, subject to the
proviso that the said flat-rate costs of DM 50,000.00 shall continue to be
paid to it. The bank is in no way obliged to continue to manage the pool.
3. The costs of any measures that are taken to utilize the securities shall
be borne by the Company.
<PAGE>
S7 Obligation to disclose
Each bank is entitled and, at the request of the other banks, obliged to provide
the other banks with information concerning its claims against the Company and
the securities, insofar as this affects this agreement and its completion. Each
bank shall inform the other banks of disturbances in the credit relationship
(e.g. default, etc.) without delay. Each bank is entitled to inspect the
accounts and receive information relating to same on request.
The Company expressly releases the banks from their obligation to observe
banking secrecy vis-a-vis one another. The Company shall put together a report
on loans/credits availed of in accordance with S1 on a twice monthly basis to
the end of the month and shall pass this on to the banks.
S8 Change to the loans/credits and securities, allocation of securities
to third parties
1. The banks shall maintain the loans/credit lines and shall only make
increases, reductions or cancellations with the mutual agreement of the
parties. This shall not apply, however to loans and credits granted
outside the pool.
2. The right of a bank to terminate loans/credits with just cause and the
right of the NBD Bank and The First National Bank of Chicago to terminate
credits granted in the case of an "event of default", or for any other
reason, shall remain thereby unaffected. This shall also apply to the
reclaiming of credits in accordance with the agreement between the NBD
Bank, The First National Bank of Chicago and the Company. In the case of
such termination by one of the banks, the other banks are to be informed
thereof in advance, unless this is not possible due to the particular
urgency of the termination. The pooling agreement shall remain unaffected
by the termination of a credit line or loan.
3. If a bank receives further securities in the future for one of the loans
or credits listed in S1, the parties are already agreed that said
securities shall be incorporated into the pool agreement.
4. The Company undertakes not to furnish third parties with securities until
it has received the unanimous consent of the banks.
5. The Company is entitled to ascribe or terminate the loan/credits in
accordance with S1, either in full or in part, and is empowered to admit
an other bank/other banks into the pool agreement. The admission can only
be refused by the banks with just cause.
<PAGE>
S9 Term and termination
1a. Each bank is entitled to terminate the agreement observing a period of
notice of three months to the end of the quarter. The earliest date for
termination, however is 31/st/ December, 2005. The notice of termination
is to be served to the pool manager. The date on which the pool manager
receives the letter providing notice of termination shall be decisive for
deciding whether or not the deadline was adhered to. If this agreement is
terminated by the pool manager, notice of termination must be served to
all the other banks.
b. A balance equalization in accordance with S5, No. 3.b is to be carried out
upon withdrawal of the bank terminating the agreement, even if only one of
the banks is in favor of the same.
In the case of termination, the terminating bank withdraws from the pool
agreement without any claim to a transfer of securities from the pool. This
pool agreement between the remaining banks remains unchanged.
2. Notwithstanding the above, this pool agreement can be annulled for all
contractual parties if a majority of at least 50.1% with respect to the
shares of the loans/credits referred to in S1 are in favor of this. The
remaining contractual parties are to be informed of this decision without
delay.
3. If the Company pays back its loans/credits referred to in S1 to one or
several banks, the bank/banks shall be entitled and, at the request of the
Company, obliged to terminate this pool agreement without notice. In this
case, all of the other banks shall be obliged to transfer part of the
securities to the Company. Said part of the securities shall correspond to
the share of the loans/credits in accordance with S1 belonging to the
withdrawing bank.
S10 Release and appraisal of securities
Once all claims secured by this pool agreement have been satisfied (including
the discharge of any obligations in connection with bank guarantees), the
banks shall be obliged to return the securities made available to them to the
respective guarantor. In addition, they shall be obliged to surrender any
surplus proceeds from their utilization. This shall not apply if the party
providing the securities is also the borrower, and the bank in question is
obliged to transfer the security to a third party (a guarantor that has repaid
the bank, for example).
The Banks shall be obliged, even before full satisfaction of their claims
secured by the pool securities, on request, to release the pool securities
provided to them and any other securities provided to them, at their
discretion, to the party providing the said securities, in full or in part,
provided that the realizable value or all securities does not exceed, except
for a short time only, 120% of the claims of the Banks secured by this pool.
The realizable value of the securities shall be as shown in the relevant
security agreement.
The stipulations formulated in the respective security agreements on cover
limits and release obligations shall be supplemented/replaced for the term of
this pool agreements by the conditions agreed upon hereinabove.
<PAGE>
Clause 11 Guarantee
The pool principal and the Bank acting as Trustee do not make any guarantee
that the securities in existence at any time are sufficient to secure the
claims of the Banks, and are not liable for any deficiencies arising from any
breaches of the obligations assumed by the Firm and/or a security provider
pursuant to the security agreements.
The parties are agreed that the pool manager and the bank acting as trustee
shall not be liable for the legal validity of the safeguarding agreements or
their potential to be enforced. Neither shall they be liable for the validity,
preservation, intrinsic value and soundness of the securities, nor for
ensuring that said securities are free from third-party rights, nor for all
circumstances that could detract from the intrinsic value, soundness and
utilization of said securities. Within the framework of the management and
examination of the securities, the liability of the pool manager is to be
limited to the due care to be expected of it when managing its own affairs.
The pool manager and the bank acting as trustee shall therefore submit copies
of the safeguarding agreements referred to in S2 to the other banks, if
requested to do so by them, for the purpose of examination by them at their
own liability.
Clause 12 General Business Conditions
For this agreement, the dealings of the Banks with each other and with the
Firm shall be subject to the General Business Conditions of the pool
principal, which are available for inspection at the offices of that Bank and
can be sent out on request.
Clause 13 Saving clause
If any provision of this agreement proves not to be legally valid or is found
to be unenforceable, the validity of the remaining content shall not be
affected. The contracting parties shall replace the invalid or unenforceable
provision by a condition matching the commercial intent and approaching as
closely as possible the content of the provision replaced.
Clause 14 Venue
The venue shall be Munich. For this pool agreement German law will be valid.
<PAGE>
Clause 15 Legal validity
This agreement becomes effective on being signed by the pool members and the
Firm.
Munich, 9, Aug. 1995
BERLINER BANK Aktiengesellschaft Munich Branch
Frankfurt, 7, Sept. 1995
National Bank Detroit Frankfurt Branch
Miltenberg, 30, Aug. 1995
Sparkasse Miltenberg-Obernburg
Nuremberg, 25, Aug. 1995
Deutsche Genossenschaftsbank Nuremberg Branch
Chicago, 8, Sept. 1995
The First National Bank of Chicago, Chicago
Collenberg, 15, Sept. 1995
Donnelly Hohe GmbH & Co. KG
(currently still called Hohe GmbH & Co. KG)
<PAGE>
EXHIBIT 10.20 FALCON
AGREEMENT
Note: Certain information has been omitted pursuant to a request for
confidential treatment, and such confidential information has been filed
separately with the United States Securities and Exchange Commission.
DONNELLY RECEIVABLES CORPORATION RECEIVABLES PURCHASE AGREEMENT
This Receivables Purchase Agreement dated as of November 14, 1996 is among
Donnelly Receivables Corporation, a Michigan corporation (the "Seller"), the
Investors, Falcon Asset Securitization Corporation ("Falcon") and The First
National Bank of Chicago, as Administrative Agent. Unless defined elsewhere
herein, capitalized terms used in this Agreement shall have the meanings
assigned to such terms in Exhibit I hereto.
PRELIMINARY STATEMENTS
The Seller desires to transfer and assign Receivable Interests to the
Purchasers from time to time.
Falcon may, in its absolute and sole discretion, purchase Receivable
Interests from the Seller from time to time.
The Investors shall, at the request of the Seller, purchase Receivable
Interests from time to time. In addition, the Investors have agreed to provide a
liquidity facility to Falcon.
The First National Bank of Chicago has been requested and is willing to act
as Administrative Agent on behalf of Falcon and the Investors in accordance with
the terms hereof.
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility. (a) Upon the terms and subject to the
conditions hereof, the Seller may, at its option, sell and assign Receivable
Interests to the Administrative Agent for the benefit of the Purchasers. Falcon
may, at its option, instruct the Administrative Agent to purchase on behalf of
Falcon, or if Falcon shall decline to purchase, the Administrative Agent shall
purchase on behalf of the Investors, Receivable Interests from time to time
during the period from the date hereof to but not including the Facility
Termination Date. The Seller hereby assigns, transfers and conveys to the
Administrative Agent for the benefit of the relevant Purchaser or Purchasers,
and the Administrative Agent hereby acquires all of the Seller's right, title
and interest in and to the Receivable Interests.
(b) The Seller may, upon at least five days' notice to the
Administrative Agent, terminate in whole or reduce in part ratably among
the Investors the unused portion of the
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Purchase Limit; provided that each partial reduction of the Purchase Limit
shall be in an amount equal to $5,000,000 or an integral multiple thereof.
Section 1.2. Making Purchases. (a) The Seller shall provide the
Administrative Agent with a purchase notice, in substantially the form of
Exhibit IX hereto (each a "Purchase Notice"), at least three Business Days prior
to the date (the "Purchase Date") of each Incremental Purchase. A Purchase Date
may occur, in the case of a Dollar Purchase, on any Business Day prior to the
Facility Termination Date and, in the case of any DM Purchase, on the tenth
Business Day of any month prior to the Facility Termination Date. Each Purchase
Notice shall, except as set forth below, be irrevocable and shall specify the
requested (i) Purchase Price (which shall not be less than $2,000,000, or the
Dollar Equivalent thereof in the case of any DM Purchase), (ii) currency of such
Purchase Price, whether Dollars or Deutsche Marks, (iii) Purchase Date and (iv)
in the case of a Dollar Purchase, the duration of the initial Tranche Period and
the initial Discount Rate related thereto. Following receipt of a Purchase
Notice, the Administrative Agent will determine whether Falcon agrees to make
the purchase. If Falcon declines to make a proposed purchase, the Seller may
cancel the Purchase Notice or the Incremental Purchase of the Receivable
Interests will be made by the Investors.
(b) On the date of each Incremental Purchase, upon satisfaction of the
applicable conditions precedent set forth in Article IV, Falcon or each
Investor, as applicable, shall deposit to the Facility Account, in
immediately available funds and in the applicable currency, no later than
12:00 noon (Chicago time), an amount equal to (i) in the case of Falcon,
the aggregate Purchase Price of each Receivable Interests Falcon is then
purchasing or (ii) in the case of an Investor, such Investor's Pro Rata
Share of the aggregate Purchase Price of each of the Receivable Interests
the Investors are purchasing.
Section 1.3. Selection of Tranche Periods and Discount Rates. (a) Each
Receivable Interest shall at all times have an associated currency (whether
Dollars or Deutsche Marks), amount of Capital (in the applicable currency),
Discount Rate and Tranche Period applicable to it. Not less than $2,000,000 (or
the Dollar Equivalent thereof in the case of a Receivable Interest arising from
a DM Purchase) of Capital may be allocated to any single Receivable Interest.
(b) In the case of each Receivable Interest that shall have arisen by
reason of a Dollar Purchase, the Seller shall request Discount Rates and
Tranche Periods for such Receivable Interest in the manner described in
this subsection (b). The Seller may select the CP Rate, with the
concurrence of the Administrative Agent, or the Base Rate for the
Receivable Interests of Falcon and the LIBO Rate or the Base Rate for the
Receivable Interests of the Investors. With respect to each expiring
Tranche Period, the Seller shall give the Administrative Agent irrevocable
notice of the new Tranche Period and Discount Rate for the Receivable
Interest associated with such expiring Tranche Period, by 9:00 a.m.
(Chicago time), (i) at least three Business Days prior to the expiration of
any then existing Tranche Period with respect to which the LIBO Rate is
being requested as a new Discount Rate, (ii) at least two Business Days
prior to the expiration of any then existing Tranche Period with respect to
which the CP Rate
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is being requested as a new Discount Rate and (iii) at least one Business
Day prior to the expiration of any Tranche Period with respect to which the
Base Rate is being requested as a new Discount Rate. The Administrative
Agent shall advise the Seller in any instance if the Tranche Period
selected by the Seller at any time is not acceptable to Falcon or the
Investors, as applicable. If the Seller fails to request timely a Discount
Rate and/or a Tranche Period for any Receivable Interest pursuant to the
terms of this Section 1.3(b), or the Seller and the Administrative Agent
fail to agree on an acceptable duration for any Tranche Period, the
Discount Rate shall be the CP Rate (if Falcon is the applicable Purchaser)
or the Base Rate, in the Administrative Agent's sole discretion, and the
applicable Tranche Period shall be a period of one day commencing on the
day requested in the Purchase Notice or the last day of the then expiring
Tranche Period for such Receivable Interest, as applicable. Until the
Seller gives notice to the Administrative Agent of another Discount Rate,
the initial Discount Rate for any Receivable Interest transferred to the
Investors pursuant to Section 2.1 shall be the Base Rate.
(c) In the case of each Receivable Interest that shall have arisen by
reason of a DM Purchase, the applicable Tranche Periods and Discount Rates
shall be determined in accordance with this subsection (c). Each Tranche
Period for each such Receivable Interest shall be coextensive with a Fixed
Exchange Period unless the Administrative Agent shall otherwise agree. The
Discount Rate in respect of each Tranche Period shall be a rate per annum
determined by the Administrative Agent on or prior to the first day of such
Tranche Period on the basis of (i) the cost of Dollar funds procured by the
Purchaser(s) to fund and maintain such Receivable Interest and (ii) the
currency hedging and exchange arrangements procured by such Purchaser(s) in
order to maintain such Receivable Interest in Deutsche Marks.
(d) If any Investor notifies the Administrative Agent that it has
determined that (i) funding its Pro Rata Share of the Receivable Interests
of the Investors at a LIBO Rate or maintaining an appropriate currency
hedge or exchange arrangement for the purpose of maintaining any Receivable
Interest that shall have arisen by reason of a DM Purchase would violate
any applicable law, rule, regulation, or directive, whether or not having
the force of law, (ii) deposits of a type and maturity appropriate to match
fund its Receivable Interests at such LIBO Rate are not available or (iii)
such LIBO Rate does not accurately reflect the cost of acquiring or
maintaining a Receivable Interest at such LIBO Rate, then the
Administrative Agent shall suspend the availability of such LIBO Rate and
require the Seller to select a new Discount Rate for any Receivable
Interest accruing Discount at such LIBO Rate.
(e) If any Purchaser notifies the Administrative Agent that it shall
not be able to make or participate in the making of any DM Purchase then
being requested hereunder, or to maintain an appropriate currency hedge or
exchange arrangement for the purpose of maintaining any Receivable Interest
that shall have arisen from a DM Purchase or for the purpose of converting
any Collections denominated in Deutsche Marks into Dollars, in any such
case whether because (i) the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful, or any central
bank or other governmental authority asserts that it is unlawful, for such
Purchaser to do so or to convert Dollar funds into Deutsche Marks in order
to do so, (ii) any material disruption shall have occurred in the credit,
currency or foreign exchange markets
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in the United States or Germany (whether by reason of act of God, war,
governmental intervention, strike, power or communications system failure
or natural disaster) or (iii) any other event or condition beyond the
reasonable control of the Purchaser, then the Administrative Agent shall
suspend the availability of DM Purchases and in any such event the
Purchasers shall thereafter not have any obligation to make or fund any DM
Purchase. Upon its receipt of any such notice, the Administrative Agent
shall declare the Liquidation Day in respect of all Receivable Interests
that shall have arisen by reason of a DM Purchase.
Section 1.4. Percentage Evidenced by Receivable Interests. Each Receivable
Interest and its corresponding Currency Allocation Percentage shall be initially
computed on its date of purchase. Thereafter, until its Liquidation Day, each
Receivable Interest and Currency Allocation Percentage shall be automatically
recomputed (or deemed to be recomputed) on each day prior to its Liquidation
Day. The variable percentage represented by any Receivable Interest and its
corresponding Currency Allocation Percentage, in each case as computed (or
deemed recomputed) as of the close of business on the day immediately preceding
its Liquidation Day, shall remain constant at all times after such Liquidation
Day.
Section 1.5. Dividing or Combining Receivable Interests. The Seller or the
Administrative Agent may, upon notice to and consent by the other received at
least three Business Days prior to the end of a Tranche Period for any
Receivable Interest, take any of the following actions with respect to such
Receivable Interest: (i) divide the Receivable Interest into two or more
Receivable Interests having aggregate Capital equal to the Capital of such
divided Receivable Interest, (ii) combine the Receivable Interest with another
Receivable Interest with a Tranche Period ending on the same day, creating a new
Receivable Interest having Capital equal to the Capital of the two Receivable
Interests combined or (iii) combine the Receivable Interest with a Receivable
Interest to be purchased on such day by such Purchaser, creating a new
Receivable Interest having Capital equal to the Capital of the two Receivable
Interests combined, provided that, a Receivable Interest of Falcon may not be
combined with a Receivable Interest of the Investors and a Receivable Interest
that shall have arisen from a Dollar Purchase shall not be combined with a
Receivable Interest that shall have arisen from a DM Purchase.
Section 1.6. Reinvestment Purchases. At any time that any Collection or
Collections are received by the Servicer after the initial purchase of a
Receivable Interest hereunder and on or prior to the Liquidation Day of such
Receivable Interest, the Seller hereby requests and, upon the terms and subject
to the conditions hereof, the Purchasers hereby agree to make, simultaneously
with such receipt, a reinvestment (each a "Reinvestment") with that portion of
each and every Collection received by the Servicer that is part of such
Receivable Interest, such reinvestment being in Receivables that shall have been
acquired by the Seller pursuant to the Donnelly Transfer Agreement since the
date of the last purchase or Reinvestment hereunder. Until the Administrative
Agent shall otherwise direct, Collections denominated in Dollars shall be
applied to a Reinvestment in respect of a Receivable Interest the Capital of
which is denominated in Dollars and Collections denominated in Deutsche Marks
shall be applied to a Reinvestment in respect of a Receivable Interest
denominated in Deutsche Marks. The making of a Reinvestment shall not, of
itself, cause any increase or decrease in, or otherwise affect, the
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Capital associated with any Receivable Interest. If, and to the extent, on any
day the Seller shall have insufficient Receivables for the purpose of
accommodating the Reinvestment of all Collections received on such day in the
applicable currency, the Servicer shall set aside and hold in trust for the
holder of each Receivable Interest such Collections until the earlier of (i) the
next date on which the Seller shall acquire Receivables in such currency and
shall be capable of accommodating a Reinvestment of such Collections and (ii)
the next following date that is the last day of any Tranche Period for a
Receivable Interest in such currency.
Section 1.7. Liquidation Settlement Procedures. (a) On the Liquidation Day
of a Receivable Interest and on each day thereafter, the Servicer shall set
aside and hold in trust for the holder of such Receivable Interest all
Collections received on such day that shall be denominated in the currency in
which the Capital of such Receivable Interest is denominated; provided that if
there shall be more than one Receivable Interest at such time the Capital of
which is denominated in such currency, then the Servicer shall set aside and
hold in trust for the holder or holders of the Receivable Interest that are then
liquidating their respective Currency Allocation Percentage of such Collections
received on such day. On the last day of each Tranche Period of a Receivable
Interest after the occurrence of its Liquidation Day, the Servicer shall remit
to the Administrative Agent's account the amounts set aside pursuant to the
preceding sentence, together with any remaining amounts set aside pursuant to
Section 1.8 prior to such day, in each case (unless the Administrative Agent
shall otherwise agree) in the currency in which such Collections shall have been
received or deemed received; provided that the aggregate amount remitted on any
day in respect of any Receivable Interest shall not exceed the sum of (i) the
accrued Discount for such Receivable Interest, (ii) the Capital of such
Receivable Interest, and (iii) the aggregate of all other amounts then owed
hereunder by Seller to the Purchasers.
(b) If there shall be insufficient funds on deposit for the Servicer
to distribute funds in payment in full of the aforementioned amounts, the
Servicer shall distribute funds first, to reimbursement of the
Administrative Agent's costs of collection and enforcement of this
Agreement, second, in payment of all accrued Discount for the Receivable
Interests, third, in reduction of the Capital of the Receivable Interests,
and fourth, in payment of all other amounts payable to the Purchasers.
Notwithstanding any rule pertaining to the application of Collections set
forth in this Section 1.7, the Administrative Agent may, at any time and in
its discretion, allocate Collections in one currency to a Receivable
Interest denominated in another currency. Collections allocated to the
Receivable Interests of the Investors shall be shared ratably by the
Investors in accordance with their Pro Rata Shares. Collections applied to
the payment of fees, expenses, Discount and all other amounts payable by
the Seller to the Administrative Agent and the Purchasers hereunder shall
be allocated ratably among the Administrative Agent and the Purchasers in
accordance with such amounts owing to each of them. Following the date on
which the Aggregate Unpaids are reduced to zero, the Servicer shall pay to
Seller any remaining Collections set aside and held by the Servicer
pursuant to this Section 1.7.
Section 1.8. Deemed Collections. If on any day the Outstanding Balance of a
Receivable is either (x) reduced as a result of any defective or rejected goods
or services, any cash discount or any adjustment by the Seller, any Designated
Servicer or either Originator, or (y) reduced
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or cancelled as a result of a setoff in respect of any claim by any Person
(whether such claim arises out of the same or a related transaction or an
unrelated transaction), the Seller shall be deemed to have received on such day
a Collection of such Receivable in the amount of such reduction or cancellation
and in the currency of such Receivable. If on any day any of the representations
or warranties in Article III are no longer true with respect to a Receivable,
the Seller shall be deemed to have received on such day a Collection of such
Receivable in full in the applicable currency. If the Seller receives any
Collections or is deemed to receive Collections pursuant to this Section 1.8 or
otherwise, the Seller shall immediately pay such Collections or deemed
Collections to the Servicer and, at all times prior to such payment, such
Collections shall be held in trust by the Seller for the exclusive benefit of
the Purchasers and the Administrative Agent.
Section 1.9. Discount; Payments and Computations, Etc. (a) Discount shall
accrue for each Receivable Interest for each day occurring during the Tranche
Period for such Receivable Interest. On the last day of each Tranche Period the
Seller shall pay to the Administrative Agent an amount equal to the accrued and
unpaid Discount for such Tranche Period.
(b) Notwithstanding any limitation on recourse contained in this
Agreement, the Seller shall pay to the Administrative Agent, for the
account of the relevant Purchasers, such fees as set forth in the Fee
Letter (which fees shall be sufficient to pay the Investor Fees), all
amounts payable as Discount, all amounts payable pursuant to Article VIII,
if any, all Servicer costs, if any, payable pursuant to Section 6.2 and on
demand therefor, any Early Collection Fee. If any Person fails to pay any
amount when due hereunder, such Person agrees to pay, on demand, the
Default Fee.
(c) All amounts to be paid or deposited by any Person hereunder shall
be paid or deposited in accordance with the terms hereof no later than
12:00 noon (Chicago time) on the day when due in immediately available
funds; if such amounts are payable to a Purchaser they shall be paid to the
Administrative Agent, for the account of such Purchaser, at (i) in the case
of any Dollardenominated amount, One First National Plaza, Chicago,
Illinois 60670 and (ii) in the case of any Deutsche Mark-denominated
amount, Niederlassung, Frankfurt, Germany, BLZ 503 304 00, in each case
until otherwise notified by the Administrative Agent. Upon notice to the
Seller, the Administrative Agent may debit the Facility Account for all
amounts due and payable hereunder. Except as otherwise provided herein, all
computations of Discount and per annum fees hereunder and under the Fee
Letter shall be made on the basis of a year of 360 days for the actual
number of days elapsed (including the first but excluding the last day).
All per annum fees shall be payable monthly in arrears. If any amount
hereunder shall be payable on a day which is not a Business Day, such
amount shall be payable on the next succeeding Business Day.
(d) Where appropriate, the Administrative Agent may designate whether
any of the foregoing fees or other amounts shall be payable in Dollars or
Deutsche Marks. In the event, for any reason, (i) payment on any obligation
shall be remitted to the Administrative Agent or any Purchaser in a
currency other than the currency designated by the Administrative Agent or
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(ii) Collections in one currency are allocated to a Receivable Interest
denominated in another currency pursuant to Section 1.7(b), then the
Administrative Agent shall convert such payment or such Collections into
such other currency using such hedging arrangements and markets as shall
then be available to the Administrative Agent and as shall have been
selected by the Administrative Agent in its sole discretion and the payment
of such obligation or the application of such Collections to such
Receivable Interest shall be deemed to have occurred only to the extent of
the amount of such other currency received by the Administrative Agent or
the applicable Purchaser after giving effect to such conversion.
Section 1.10. Capital Limit. The Seller shall ensure that the Aggregate
Capital at no time exceeds the Capital Limit. If on the Liquidation Day of a
Receivable Interest or on any day on which the Coverage Exchange Rate is to be
determined in accordance with the definition thereof, the Aggregate Capital
exceeds the Capital Limit, the Seller shall immediately pay to the
Administrative Agent an amount in Dollars or Deutsche Marks (as the
Administrative Agent may direct) to be applied to reduce the Capital of the
Receivable Interests, such that after giving effect to such payment the
Aggregate Capital does not exceed the Capital Limit. Such amount shall be
applied to the reduction of the Capital of the Receivable Interests in the
applicable currency. Any amounts received by the Investors pursuant to the
preceding sentence shall be applied ratably in accordance with their Pro Rata
Shares.
Section 1.11. Seller's Extinguishment. The Seller shall have the right, on
three (3) Business Days' written notice to the Administrative Agent, at any time
following the Facility Termination Date and the reduction of the Aggregate
Capital to a level that is less than ten percent (10%) of the Purchase Limit in
effect on the date hereof, to repurchase from the Purchasers all, and not part,
of the then outstanding Receivable Interests. The purchase price in respect
thereof shall be an amount equal to the Aggregate Unpaids (which amount shall
include, without limitation, any Early Collection Fee that shall arise in
connection with such repurchase) through the date of such repurchase, payable in
immediately available funds. Such repurchase shall be without representation,
warranty or recourse of any kind by, on the part of or against any Purchaser or
the Administrative Agent.
Section 1.12. Extensions of the Liquidity Termination Date. The Seller may,
by written notice (an "Extension Request") given to the Administrative Agent not
later than sixty days prior to the Liquidity Termination Date then in effect,
request that such Liquidity Termination Date be extended. Each such Extension
Request shall contemplate an extension of the Liquidity Termination Date then in
effect to a date that is a Business Day not more than 364 days after such
Liquidity Termination Date. The Administrative Agent shall promptly advise each
Purchaser of its receipt of any Extension Request. Each Purchaser may, in its
sole discretion, consent to a requested extension by giving written notice
thereof to the Administrative Agent by not later than the date that is 30 days
prior to the Liquidity Termination Date then in effect. Failure on the part of
any Purchaser to respond to an Extension Request by such date shall be deemed to
be a denial of such request by such Purchaser. If all of the Purchasers shall
consent in writing to a requested extension, such request shall be granted and
the requested
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extension shall become effective on the Liquidity Termination Date then
otherwise in effect. No extension granted under this Section 1.12 shall exceed a
period of 364 days.
ARTICLE II LIQUIDITY FACILITY
Section 2.1. Transfer to Investors. Each Investor hereby agrees, subject to
Section 2.4, that immediately upon written notice from Falcon delivered on or
prior to the Liquidity Termination Date, it shall acquire by assignment from
Falcon, without recourse or warranty, its Pro Rata Share of one or more of the
Receivable Interests of Falcon as specified by Falcon. Each Investor shall
promptly pay to the Administrative Agent at an account designated by the
Administrative Agent, for the benefit of Falcon, its Acquisition Amount in
Dollars. Unless an Investor has notified the Administrative Agent that it does
not intend to pay its Acquisition Amount, the Administrative Agent may assume
that such payment has been made and may, but shall not be obligated to, make the
amount of such payment available to Falcon in reliance upon such assumption.
Falcon hereby sells and assigns to the Administrative Agent for the ratable
benefit of the Investors, and the Administrative Agent hereby purchases and
assumes from Falcon, effective upon the receipt by Falcon of the Falcon Transfer
Price, the Receivable Interests of Falcon which are the subject of any transfer
pursuant to this Article II.
Section 2.2. Transfer Price Reduction Discount. If the Adjusted Liquidity
Price is included in the calculation of the Falcon Transfer Price for any
Receivable Interest, each Investor agrees that the Administrative Agent shall
pay to Falcon the Reduction Percentage of any Discount received by the
Administrative Agent with respect to such Receivable Interest.
Section 2.3. Payments to Falcon. In consideration for the reduction of the
Falcon Transfer Prices by the Falcon Transfer Price Reductions, effective only
at such time as the aggregate amount of the Capital of the Receivable Interests
of the Investors equals the Falcon Residual, each Investor hereby agrees that
the Administrative Agent shall not distribute to the Investors and shall
immediately remit to Falcon any Discount, Collections or other payments received
by it to be applied pursuant to the terms hereof or otherwise to reduce the
Capital of the Receivable Interests of the Investors.
Section 2.4. Limitation on Commitment to Purchase from Falcon.
Notwithstanding anything to the contrary in this Agreement, no Investor shall
have any obligation to purchase any Receivable Interest from Falcon, pursuant to
Section 2.1 or otherwise, if:
(i) Falcon shall have voluntarily commenced any proceeding or filed
any petition under any bankruptcy, insolvency or similar law seeking the
dissolution, liquidation or reorganization of Falcon or taken any corporate
action for the purpose of effectuating any of the foregoing; or
(ii) involuntary proceedings or an involuntary petition shall have
been commenced or filed against Falcon by any Person under any bankruptcy,
insolvency or similar law
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seeking the dissolution, liquidation or reorganization of Falcon and such
proceeding or petition shall have not been dismissed.
Section 2.5. Defaulting Investors. If one or more Investors defaults in its
obligation to pay its Acquisition Amount pursuant to Section 2.1 (each such
Investor shall be called a "Defaulting Investor" and the aggregate amount of
such defaulted obligations being herein called the "Falcon Transfer Price
Deficit"), then upon notice from the Administrative Agent, each Investor other
than the Defaulting Investors (a "Non-Defaulting Investor") shall promptly pay
to the Administrative Agent, in immediately available Dollar funds, an amount
equal to the lesser of (x) such Non-Defaulting Investor's proportionate share
(based upon the relative Commitments of the Non-Defaulting Investors) of the
Falcon Transfer Price Deficit and (y) the unused portion of such Non-Defaulting
Investor's Commitment. A Defaulting Investor shall forthwith upon demand pay to
the Administrative Agent for the account of the Non-Defaulting Investors all
amounts paid by each Non-Defaulting Investor on behalf of such Defaulting
Investor, together with interest thereon, for each day from the date a payment
was made by a Non-Defaulting Investor until the date such Non-Defaulting
Investor has been paid such amounts in full, at a rate per annum equal to the
Federal Funds Effective Rate plus 2%. In addition, without prejudice to any
other rights that Falcon may have under applicable law, each Defaulting Investor
shall pay to Falcon forthwith upon demand, the difference between such
Defaulting Investor's unpaid Acquisition Amount and the amount paid with respect
thereto by the non-Defaulting Investors, together with interest thereon, for
each day from the date of the Administrative Agent's request for such Defaulting
Investor's Acquisition Amount pursuant to Section 2.1 until the date the
requisite amount is paid to Falcon in full, at a rate per annum equal to the
Federal Funds Effective Rate plus 2%.
Section 2.6. Hedging Arrangements. The Administrative Agent and Falcon
shall take such actions as are reasonably necessary to cause Falcon's rights and
interest in each hedging or exchange arrangement entered into in connection with
a Receivable Interest to be transferred to the Investors upon the transfer by
Falcon of such Receivable Interest to the Investors. Following the purchase by
the Investors of any Receivable Interest hereunder, whether under Section 1.2 or
2.1, the Administrative Agent shall facilitate the procurement by the Investors
of hedging and exchange arrangements in connection with the funding and
maintenance of Receivable Interests by the Investors.
ARTICLE III REPRESENTATIONS AND WARRANTIES
Section 3.1. Seller Representations and Warranties. The Seller hereby
represents and warrants to the Purchasers that:
(a) Corporate Existence and Power. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of its
state of incorporation, and has all corporate
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power and all governmental licenses, authorizations, consents and approvals
required to carry on its business in each jurisdiction in which its
business is conducted.
(b) No Conflict. The execution, delivery and performance by the Seller
of this Agreement and each other Transaction Document to which it is a
party, and the Seller's use of the proceeds of purchases made hereunder,
are within its corporate powers, have been duly authorized by all necessary
corporate action, do not contravene or violate (i) its certificate or
articles of incorporation or by-laws, (ii) any law, rule or regulation
applicable to it, (iii) any restrictions under any agreement, contract or
instrument to which it is a party or by which it or any of its property is
bound, or (iv) any order, writ, judgment, award, injunction or decree
binding on or affecting it or its property, and do not result in the
creation or imposition of any Adverse Claim on assets of the Seller (except
created hereunder); and no transaction contemplated hereby requires
compliance with any bulk sales act or similar law. This Agreement and each
other Transaction Document has been duly authorized, executed and delivered
by the Seller.
(c) Governmental Authorization. Other than the filing of the financing
statements required hereunder, no authorization or approval or other action
by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance
by the Seller of the Transaction Documents.
(d) Binding Effect. The Transaction Documents to which the Seller is a
party constitute the legal, valid and binding obligations of the Seller
enforceable against the Seller in accordance with their respective terms,
except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or limiting
creditors' rights generally.
(e) Accuracy of Information. All information heretofore furnished by
the Seller or any of its Affiliates to the Administrative Agent or the
Purchasers for purposes of or in connection with this Agreement, any of the
other Transaction Documents, or any transaction contemplated hereby or
thereby is, and all such information hereafter furnished by the Seller to
the Purchasers will be, true and accurate in every material respect, on the
date such information is stated or certified and does not and will not
contain any material misstatement of fact or omit to state a material fact
or any fact necessary to make the statements contained therein not
misleading.
(f) Use of Proceeds. No proceeds of any purchase hereunder will be
used (i) for a purpose which violates, or would be inconsistent with,
Regulation G, T, U or X promulgated by the Board of Governors of the
Federal Reserve System from time to time or (ii) to acquire any security in
any transaction which is subject to Section 13 or 14 of the Securities
Exchange Act of 1934, as amended.
(g) Title to Receivables Purchased from Originators. Each Receivable
transferred (i) by Hohe to Donnelly has been purchased by Donnelly from
Hohe in accordance with the terms of the Hohe Transfer Agreement, and
Donnelly has thereby irrevocably obtained all legal and
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equitable title to, and has the legal right to sell, such Receivable and
the Related Security to the Seller, and (ii) by Donnelly to the Seller has
been purchased by the Seller from Donnelly in accordance with the terms of
the Donnelly Transfer Agreement, and the Seller has thereby irrevocably
obtained all legal and equitable title to, and has the legal right to sell,
such Receivable, the Related Security and the Hohe Discount. Each such
Receivable has been transferred to Donnelly and to the Seller, as
applicable, free and clear of any Adverse Claim. Without limiting the
foregoing, there has been duly filed all financing statements or other
similar instruments or documents, and there has been duly taken all other
actions, necessary under the UCC (and any comparable law in the United
States, Germany, Canada, Belgium, Spain, Sweden or any other country in
which an Obligor of an Eligible Receivable may be located) of all
applicable jurisdictions to perfect Donnelly's and the Seller's, as
applicable, ownership interest in such Receivable, the Related Security and
the Hohe Discount.
(h) Good Title; Perfection. Immediately prior to each purchase
hereunder, the Seller shall be the legal and beneficial owner of the
Receivables, Related Security with respect thereto and the Hohe Discount,
free and clear of any Adverse Claim, except as created by the Transaction
Documents. This Agreement is effective to, and shall, upon each purchase
hereunder, transfer to the relevant Purchaser or Purchasers (and such
Purchaser or Purchasers shall acquire from the Seller) a valid and
perfected first priority undivided percentage ownership interest in each
Receivable existing or hereafter arising and in the Related Security, the
Hohe Discount and Collections with respect thereto, free and clear of any
Adverse Claim, except as created by the Transactions Documents.
(i) Places of Business. The principal places of business and chief
executive office of the Seller and the offices where the Seller keeps all
its Records are located at the address(es) listed on Exhibit II or such
other locations notified to the Administrative Agent in accordance with
Section 5.2(a) in jurisdictions where all action required by Section 5.2(a)
has been taken and completed. The Seller's Federal Employer Identification
Number is correctly set forth on Exhibit II.
(j) Collection Banks; etc. Except as otherwise notified to the
Administrative Agent in accordance with Section 5.2(b), (i) the Seller has
instructed, or has caused the Originators to instruct, all Obligors to pay
all Collections directly to a lock-box listed on Exhibit III or, in the
case of wire-transfers on Deutsche Mark-denominated Receivables, to the
concentration account therefor specified on Exhibit III, (ii) proceeds from
any such lock- boxes are deposited directly by a Collection Bank into a
concentration account or a depository account listed on Exhibit III, (iii)
the names and addresses of all Collection Banks, together with the account
numbers of the Collection Accounts of the Seller at each Collection Bank,
are listed on Exhibit III, and (iv) each lock-box and Collection Account to
which Collections are remitted is subject to a Collection Account Agreement
that is in full force and effect. In the case of lock-boxes and Collection
Accounts identified on Exhibit III which were established by an Originator
or by any Person other than the Seller, exclusive dominion and control
thereof has been transferred to the Seller. The Seller has not granted any
Person, other than the Administrative Agent as contemplated by this
Agreement, dominion and control of any lock-box or Collection Account, or
the right to
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take dominion and control of any lock-box or Collection Account at a future
time or upon the occurrence of a future event.
(k) Material Adverse Effect. Since June 29, 1996, no event has
occurred which would have a Material Adverse Effect.
(l) Names. In the past five years, the Seller has not used any
corporate names, trade names or assumed names other than those listed on
Exhibit II.
(m) Actions, Suits. There are no actions, suits or proceedings
pending, or to the knowledge of the Seller threatened, against or affecting
the Seller or either Originator, or any of the respective properties of the
Seller or either Originator, in or before any court, arbitrator or other
body, which are reasonably likely to (i) adversely affect the
collectibility of a material portion of the Receivables, (ii) materially
adversely affect the financial condition of the Seller or such Originator
or (iii) materially adversely affect the ability of the Seller or such
Originator to perform its obligations under the Transaction Documents.
Neither the Seller nor either Originator is in default with respect to any
order of any court, arbitrator or governmental body.
(n) Coverage. The Aggregate Capital does not exceed the Capital Limit.
(o) Credit and Collection Policies. With respect to each Receivable,
each of the applicable Originator, the Seller and the Designated Servicer
has complied in all material respects with the Credit and Collection
Policy. Except as otherwise permitted under this Agreement, the Credit and
Collection Policy has not been amended or modified in any material respect
since the date of this Agreement.
(p) Payments to Originator. With respect to (i) each Receivable
transferred to Donnelly under the Hohe Transfer Agreement, and (ii) each
Receivable transferred to the Seller under the Donnelly Transfer Agreement,
Donnelly or the Seller, as applicable, has given reasonably equivalent
value to the applicable Originator in consideration for such transfer of
such Receivable and the Related Security with respect thereto and the Hohe
Discount under the applicable Transfer Agreement and such transfer was not
made for or on account of an antecedent debt. No transfer by either
Originator of any Receivable is or may be voidable under any Section of the
Bankruptcy Reform Act of 1978 (11 U.S.C. (S)(S) 101 et seq.), as amended or
under any law, rule or regulation in effect in Germany or any other country
in which any Obligor on any Receivable may be located, or any political
subdivision thereof or jurisdiction therein, whether relating to
bankruptcy, insolvency, reorganization, creditors' rights or otherwise.
(q) Ownership of the Seller. Donnelly owns, directly or indirectly,
one hundred percent (100%) of the issued and outstanding capital stock of
the Seller. Such capital stock is validly issued, fully paid and
nonassessable and there are no options, warrants or other rights to acquire
securities of the Seller.
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(r) Subsidiaries. The Seller has no Subsidiaries.
(s) Not an Investment Company. The Seller is not an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended from time to time, or any successor statute.
Section 3.2. Investor Representations and Warranties. Each Investor hereby
represents and warrants to the Administrative Agent and Falcon that:
(a) Existence and Power. Such Investor is a corporation or a banking
association duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, and has all
corporate power to perform its obligations hereunder.
(b) No Conflict. The execution, delivery and performance by such
Investor of this Agreement are within its corporate powers, have been duly
authorized by all necessary corporate action, do not contravene or violate
(i) its certificate or articles of incorporation or association or by-laws,
(ii) any law, rule or regulation applicable to it, (iii) any restrictions
under any agreement, contract or instrument to which it is a party or any
of its property is bound, or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting it or its property, and do not
result in the creation or imposition of any Adverse Claim on its assets.
This Agreement has been duly authorized, executed and delivered by such
Investor.
(c) Governmental Authorization. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance
by such Investor of this Agreement.
(d) Binding Effect. This Agreement constitutes the legal, valid and
binding obligation of such Investor enforceable against such Investor in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
relating to or limiting creditors' rights generally.
ARTICLE IV CONDITIONS OF PURCHASES
Section 4.1. Conditions Precedent to Initial Purchase. The initial purchase
of a Receivable Interest under this Agreement is subject to the conditions
precedent that the Administrative Agent shall have received on or before the
date of such purchase those documents listed on Schedule A hereto.
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Section 4.2. Conditions Precedent to All Purchases and Reinvestments. Each
purchase of a Receivable Interest (other than pursuant to Section 2.1) and each
Reinvestment shall be subject to the further conditions precedent that (a) in
the case of each such purchase, the Servicer shall have delivered to the
Administrative Agent on or prior to the date of such purchase, in form and
substance satisfactory to the Administrative Agent, all Settlement Reports as
and when due under Section 6.5; (b) on the date of each such purchase or
Reinvestment, the following statements shall be true both before and after
giving effect to such Reinvestment (and acceptance of the proceeds of such
purchase or Reinvestment shall be deemed a representation and warranty by the
Seller that such statements are then true):
(i) the representations and warranties set forth in Article III are
correct on and as of the date of such purchase or Reinvestment as
though made on and as of such date;
(ii) no event has occurred, or would result from such purchase or
Reinvestment, that will constitute a Servicer Default, and no event
has occurred and is continuing, or would result from such purchase or
Reinvestment, that would constitute a Potential Servicer Default;
(iii) the Liquidity Termination Date shall not have occurred, the Aggregate
Capital shall not exceed the Purchase Limit, and the Aggregate Capital
shall not exceed the Capital Limit; and
(iv) in the case of any DM Purchase or any Reinvestment for a Receivable
Interest that shall have arisen from a DM Purchase, the applicable
Purchaser(s) shall have obtained hedging and currency arrangements in
connection therewith reasonably satisfactory to such Purchaser(s).
and (c) the Administrative Agent shall have received such other approvals,
opinions or documents as it may reasonably request.
ARTICLE V COVENANTS
Section 5.1. Affirmative Covenants of Seller. Until the date on which the
Aggregate Unpaids have been indefeasibly paid in full, the Seller hereby
covenants, individually and in its capacity as Servicer, that:
(a) Financial Reporting. The Seller will maintain a system of
accounting established and administered in accordance with generally
accepted accounting principles, and furnish to the Administrative Agent:
(i) Annual Reporting. Within 90 days after the close of each of its
fiscal years, financial statements for such fiscal year certified in a
manner acceptable to the Administrative Agent by the chief financial
officer of the Seller.
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(ii) Quarterly Reporting. If so requested by the Administrative Agent,
within 45 days after the close of the first three quarterly periods of each
of its fiscal years, balance sheets as at the close of each such period and
statements of income and retained earnings and a statement of cash flows
for the period from the beginning of such fiscal year to the end of such
quarter, all certified by its chief financial officer.
(iii) Compliance Certificate. Together with the financial statements
required hereunder, a compliance certificate in substantially the form of
Exhibit IV signed by the Seller's corporate comptroller or chief financial
officer and dated the date of such annual financial statement or such
quarterly financial statement, as the case may be.
(iv) Shareholders Statements and Reports. Promptly upon the furnishing
thereof to the shareholders of the Seller, copies of all financial
statements, reports and proxy statements so furnished.
(v) Change in Credit and Collection Policy. At least 30 days prior to
the effectiveness of any material change in or amendment to the Credit and
Collection Policy, a copy of the Credit and Collection Policy then in
effect and a notice indicating such change or amendment.
(vi) Notices under Transaction Documents. Forthwith upon its receipt
of any notice, request for consent, financial statements, certification,
report or other communication under or in connection with any Transaction
Document from any Person other than the Administrative Agent or any
Purchaser, copies of the same.
(vii) Other Information. Such other information (including
nonfinancial information) as the Administrative Agent or any Purchaser may
from time to time reasonably request.
(b) Notices. The Seller will notify the Administrative Agent in
writing of any of the following immediately upon learning of the occurrence
thereof, describing the same and, if applicable, the steps being taken with
respect thereto:
(i) Servicer Defaults or Potential Servicer Defaults. The occurrence
of each Servicer Default or each Potential Servicer Default, by a statement
of the corporate comptroller or senior financial officer of the Seller.
(ii) Judgment. The entry of any judgment or decree against the Seller.
(iii) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding against the Seller or to which the
Seller becomes party.
(iv) Donnelly Credit Rating. The introduction of, or any change in,
any publicly announced or privately issued indicative credit rating by
Standard & Poor's Ratings
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Services, a division of the McGraw-Hill Companies, Inc., Moody's Investors
Service, Inc., the National Association of Insurance Commissioners or any
other nationally recognized rating agency or similar organization with
respect to any indebtedness or obligations of Donnelly at any time that
Donnelly is performing any servicing responsibilities in respect of the
Receivables.
(c) Compliance with Laws. The Seller will comply in all material
respects with all applicable laws, rules, regulations, orders writs,
judgments, injunctions, decrees or awards to which it may be subject.
(d) Audits. The Seller will furnish to the Administrative Agent from
time to time such information with respect to it and the Receivables as the
Administrative Agent may reasonably request. The Seller shall, from time to
time during regular business hours as requested by the Administrative Agent
upon reasonable notice, permit the Administrative Agent, or its agents or
representatives (and shall cause each Originator to permit the
Administrative Agent or its agents or representatives), (i) to examine and
make copies of and abstracts from all Records in the possession or under
the control of the Seller or such Originator relating to Receivables and
the Related Security, including, without limitation, the related Contracts,
and (ii) to visit the offices and properties of the Seller or such
Originator for the purpose of examining such materials described in clause
(i) above, and to discuss matters relating to the Seller's or such
Originator's financial condition or the Receivables and the Related
Security or the Seller's performance hereunder, or such Originator's
performance under any of the other Transaction Documents, or the Seller's
or such Originator's performance under the Contracts with any of the
officers or employees of the Seller or such Originator having knowledge of
such matters.
(e) Keeping and Marking of Records and Books; Notation in Financial
Statements.
(i) The Seller will, and will cause each Originator to, maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Receivables in the
event of the destruction of the originals thereof), and keep and maintain
all documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without
limitation, records adequate to permit the immediate identification of each
new Receivable and all Collections of and adjustments to each existing
Receivable). The Seller will, and will cause each Originator to, give the
Administrative Agent notice of any material change in the administrative
and operating procedures referred to in the previous sentence.
(ii) The Seller will, and will cause each Originator to, (a) on or
prior to the date hereof, mark its master data processing records and other
books and records relating to the Receivable Interests with a legend,
acceptable to the Administrative Agent, describing the Receivable Interests
or, in the case of Hohe, the ownership interest of Donnelly and the Seller
in the "Purchased Receivables" under and as defined in the Hohe Transfer
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Agreement and (b) upon the request of the Administrative Agent at any time
following the replacement of the Seller as the Servicer hereunder, deliver
to the Administrative Agent all Contracts (including, without limitation,
all multiple originals of any such Contract) relating to the Receivables.
(iii) The Seller will note in its financial statements that Receivable
Interests have been sold to the Purchasers hereunder, and will cause (a)
Donnelly to note in its financial statements that its Receivables have been
sold to the Seller and (b) Hohe to note in its financial statements that
the "Purchased Receivables" under and as defined in the Hohe Transfer
Agreement have been sold to Donnelly.
(f) Compliance with Contracts and Credit and Collection Policy. The
Seller will, and will cause each Originator to, timely and fully (i)
perform and comply in all material respects with all provisions, covenants
and other promises required to be observed by it under the Contracts
related to the Receivables, and (ii) comply in all material respects with
the Credit and Collection Policy in regard to each Receivable and the
related Contract. The Seller will, and will cause each Originator to, pay
when due any taxes payable in connection with the Receivables.
(g) Purchase of Receivables from Originators. With respect to each
Receivable purchased under a Transfer Agreement, the Seller shall take (or
shall cause the applicable Originator to take) all actions necessary to
vest legal and equitable title to such Receivable, the Related Security and
the Hohe Discount irrevocably in the Seller, including, without limitation,
the filing of all financing statements or other similar instruments or
documents necessary under the UCC (and any comparable law in the United
States, Germany, Canada, Belgium, Spain, Sweden or any other country in
which an Obligor of an Eligible Receivable may be located) of all
applicable jurisdictions to perfect the Seller's interest in such
Receivable and such other action to perfect, protect or more fully evidence
the interest of the Seller as the Administrative Agent may reasonably
request.
(h) Ownership Interest. The Seller shall take all necessary action to
establish and maintain a valid and perfected first priority undivided
percentage ownership interest in the Receivables, the Related Security, the
Hohe Discount and Collections with respect to any of the foregoing, to the
full extent contemplated herein, in favor of the Administrative Agent and
the Purchasers, including, without limitation, taking such action to
perfect, protect or more fully evidence the interest of the Administrative
Agent and the Purchasers hereunder as the Administrative Agent may
reasonably request.
(i) Payment to the Originators. With respect to any Receivable
purchased by the Seller from Donnelly, such sale shall be effected under,
and in strict compliance with the terms of, the Donnelly Transfer
Agreement, including, without limitation, the terms relating to the amount
and timing of payments to be made to Donnelly in respect of the purchase
price for such Receivable. With respect to any Receivable purchased by
Donnelly from Hohe, the Seller shall cause Donnelly to effect such sale
under, and in strict compliance with the terms of, the Hohe
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Transfer Agreement, including, without limitation, the terms relating to
the amount and timing of payments to be made to Hohe in respect of the
purchase price for such Receivable.
(j) Performance and Enforcement of Transfer Agreements. The Seller
shall timely perform the obligations required to be performed by the
Seller, and shall vigorously enforce the rights and remedies accorded to
the Seller, under each Transfer Agreement. The Seller shall take all
actions to perfect and enforce its rights and interests (and the rights and
interests of the Purchasers and the Administrative Agent, as assignees of
the Seller) under each Transfer Agreement as the Administrative Agent may
from time to time reasonably request, including, without limitation, making
claims to which it may be entitled under any indemnity, reimbursement or
similar provision contained in either Transfer Agreement.
(k) Purchasers' Reliance. The Seller acknowledges that the Purchasers
are entering into the transactions contemplated by this Agreement in
reliance upon the Seller's identity as a legal entity that is separate from
Donnelly, Hohe and other Affiliates of the Seller. Therefore, from and
after the date of execution and delivery of this Agreement, the Seller
shall take all reasonable steps including, without limitation, all steps
that the Administrative Agent or any Purchaser may from time to time
reasonably request to maintain the Seller's identity as a separate legal
entity and to make it manifest to third parties that the Seller is an
entity with assets and liabilities distinct from those of its Affiliates
and not just a division of any such Affiliate. Without limiting the
generality of the foregoing and in addition to the other covenants set
forth herein, the Seller shall:
(i) conduct its own business in its own name and require that all
full-time employees of the Seller identify themselves as such and not as
employees of any of its Affiliates (including, without limitation, by means
of providing appropriate employees with business or identification cards
identifying such employees as the Seller's employees);
(ii) compensate all employees, consultants and agents directly, from
the Seller's bank accounts, for services provided to the Seller by such
employees, consultants and agents and, to the extent any employee,
consultant or agent of the Seller is also an employee, consultant or agent
of an Affiliate of the Seller, allocate the compensation of such employee,
consultant or agent between the Seller and such Affiliate on a basis which
reflects the services rendered to the Seller and such Affiliate; provided,
however, that the Seller may enter into written agreements with any
Affiliate which allow such Affiliate to pay any employee, consultant or
agent on behalf of the Seller provided the Seller agrees to reimburse such
Affiliate for its allocable share of such payment;
(iii) (A) maintain office space separate and apart from that of any of
its Affiliates (even if such office space is subleased from or is on or
near premises occupied by any of its Affiliates), (B) clearly identify its
offices (by signage or otherwise) as its offices, (C) own or lease pursuant
to written leases all office furniture and equipment necessary
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to operate its business and (D) have a separate telephone number, which
will be answered only in its name and separate stationery, invoices and
checks in its own name;
(iv) conduct all transactions with each of its Affiliates (including,
without limitation, any delegation of its obligations hereunder as
Servicer) strictly on an arm's-length basis, and allocate all overhead
expenses (including, without limitation, telephone and other utility
charges) for items shared between the Seller and such Affiliate on the
basis of actual use to the extent practicable and, to the extent such
allocation is not practicable, on a basis reasonably related to actual use;
(v) at all times have at least one member of its Board of Directors
and one officer who (A) meets the qualifications set forth in the Michigan
Compiled Laws Annotated (S) 450.1107(3), as in effect on the date hereof,
(B) is not a customer or supplier of the Seller or any of its Affiliates
and (C) is not a shareholder (whether direct, indirect or beneficial)
holding more than 1% of the oustanding stock of any Affiliate;
(vi) observe all corporate formalities as a distinct entity, ensure
that all corporate actions are duly authorized by unanimous vote of its
Board of Directors, and maintain the Seller's books and records separate
from those of each of its Affiliates and otherwise readily identifiable as
its own assets rather than assets of any of its Affiliates;
(vii) prepare its financial statements separately from those of its
Affiliates and ensure that any consolidated financial statements of either
Originator or any Affiliate thereof that include the Seller have detailed
notes clearly stating that the Seller is a separate corporate entity and
that its assets will be available first and foremost to satisfy the claims
of the creditors of the Seller;
(viii) except as herein specifically otherwise provided, not commingle
funds or other assets of the Seller with those of any of its Affiliates and
not maintain bank accounts or other depository accounts to which any of its
Affiliates is an account party, into which any of its Affiliates makes
deposits or from which any of its Affiliates has the power to make
withdrawals;
(ix) not permit any of its Affiliates to pay any of its operating
expenses (except pursuant to allocation arrangements that comply with the
requirements of this Section 5.1(k));
(x) refrain from paying dividends or making distributions, loans or
other advances to any of its Affiliates (except that, commencing after
October 15, 1997, dividends which are duly authorized by its Board of
Directors and are in compliance with applicable law may be payable no more
than once each calendar year so long as (i) such dividend is payable after
October 15 of such year and (ii) no event has occurred and is continuing,
or would result from such dividend, which constitutes a Servicer Default or
Potential Servicer Default);
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(xi) refrain from filing or otherwise initiating or supporting the
filing of a motion in any bankruptcy or other insolvency proceedings
involving the Seller, Donnelly, Hohe, or any other Affiliate of Seller, to
substantively consolidate the Seller with any such Affiliate;
(xii) refrain from (A) guaranteeing any obligation of any of its
Affiliates (B) having its obligations guaranteed by any of its Affiliates,
(C) holding itself out as responsible for debts of any of its Affiliates or
for the decisions or actions with respect to the affairs of any of its
Affiliates, and (D) being directly or indirectly named as a direct or
contingent beneficiary or loss payee on any insurance policy covering the
property of any Affiliate; and
(xiii) maintain in place all policies and procedures, and take and
continue to take all action, described in the facts and assumptions set
forth in the opinion letter issued by Varnum Riddering Schmidt and Howlett
LLP of even date herewith relating to true sale and substantive
consolidation issues, and in any certificates accompanying such opinion
letter.
(l) Collections. The Seller shall instruct (or cause the applicable
Originators to instruct) all Obligors to pay all Collections directly to a
lockbox listed on Exhibit III or, in the case of wire-transfers on Deutsche
Markdenominated Receivables, to the concentration account therefor
specified on Exhibit III. In the case of payments remitted to any such
lock-box, the Seller shall cause all proceeds from such lock-box to be
deposited directly by a Collection Bank into a concentration account or a
depositary account listed on Exhibit III. The Seller shall maintain
exclusive dominion and control (subject to the terms of this Agreement) to
each such lock-box, concentration account and depositary account. In the
case of any Collections received by the Seller or an Originator, the Seller
shall remit (or shall cause such Originator to remit) such Collections to a
Collection Account not later than the Business Day immediately following
the date of receipt of such Collections, and, at all times prior to such
remittance, the Seller shall itself hold (or, if applicable, shall cause
such Originator to hold) such Collections in trust, for the exclusive
benefit of the Purchasers and the Administrative Agent.
(m) Minimum Net Worth. The Seller shall at all times maintain a net
worth of not less than $2,850,000.
(n) German Credit and Collection Policy. By no later than the date
which is 90 days from the date hereof, the Seller shall deliver to the
Administrative Agent a written credit and collection policy, in form and
substance satisfactory to the Administrative Agent, summarizing its credit
and collection policies and practices relating to Deutsche Mark-denominated
Receivables and Contracts related thereto.
Section 5.2. Negative Covenants of Seller. Until the date on which the
Aggregate Unpaids have been indefeasibly paid in full, the Seller hereby
covenants, individually and in its capacity as Servicer, that:
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(a) Name Change, Offices, Records and Books of Accounts. The Seller
will not change its name, identity or corporate structure (within the
meaning of Section 9-402(7) of any applicable enactment of the UCC) or
relocate its chief executive office or any office where Records are kept
unless it shall have: (i) given the Administrative Agent at least 45 days
prior notice thereof and (ii) delivered to the Administrative Agent all
financing statements, instruments and other documents reasonably requested
by the Administrative Agent in connection with such change or relocation.
(b) Change in Payment Instructions to Obligors. The Seller will not
add or terminate any bank as a Collection Bank from those listed in Exhibit
III, or make any change in its instructions to Obligors regarding payments
to be made to the Seller or payments to be made to any lock-box, Collection
Account or Collection Bank, unless the Administrative Agent shall have
received, at least 10 days before the proposed effective date therefor, (i)
written notice of such addition, termination or change and (ii) with
respect to the addition of a lockbox, Collection Account or Collection
Bank, an executed account agreement and an executed Collection Account
Agreement from such Collection Bank relating thereto; provided, however,
that the Seller may make changes in instructions to Obligors regarding
payments if such new instructions require such Obligor to make payments to
another existing lock-box or Collection Account that is subject to a
Collection Account Agreement then in effect.
(c) Modifications to Contracts and Credit and Collection Policy. The
Seller will not make any change to the Credit and Collection Policy which
would be reasonably likely to adversely affect the collectibility of any
material portion of the Receivables or decrease the credit quality of any
newly created Receivables. Except as provided in Section 6.2(c), the
Seller, acting as Servicer or otherwise, will not extend, amend or
otherwise modify the terms of any Receivable or any Contract related
thereto other than in accordance with the Credit and Collection Policy.
(d) Sales, Liens, Etc. The Seller shall not sell, assign (by operation
of law or otherwise) or otherwise dispose of, or grant any option with
respect to, or create or suffer to exist any Adverse Claim upon (including,
without limitation, the filing of any financing statement) or with respect
to, any Receivable, Related Security, Hohe Discount or Collections in
respect thereof, or upon or with respect to any Contract under which any
Receivable arises, or any lock-box or Collection Account or assign any
right to receive income in respect thereof (other than, in each case, the
creation of the interests therein in favor of the Administrative Agent and
the Purchasers provided for herein), and the Seller shall defend the right,
title and interest of the Administrative Agent and the Purchasers in, to
and under any of the foregoing property, against all claims of third
parties claiming through or under the Seller or either Originator.
(e) Nature of Business; Other Agreements; Other Indebtedness. The
Seller shall not engage in any business or activity of any kind or enter
into any transaction or indenture, mortgage, instrument, agreement,
contract, lease or other undertaking other than the transactions
contemplated and authorized by this Agreement and the Transfer Agreements.
Without limiting the generality of the foregoing, the Seller shall not
create, incur, guarantee, assume or suffer
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to exist any indebtedness or other liabilities, whether direct or
contingent, other than (i) as a result of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business, (ii) the incurrence of obligations under this
Agreement or as expressly contemplated in the Donnelly Transfer Agreement
to make payment to Donnelly for the purchase of Receivables thereunder and
(iii) the incurrence of operating expenses in the ordinary course of
business of the type otherwise contemplated in Section 5.1(k) of this
Agreement.
(f) Amendments to Transfer Agreements. The Seller shall not, without
the prior written consent of the Administrative Agent, (i) cancel or
terminate either Transfer Agreement, (ii) give any consent, waiver,
directive or approval under either Transfer Agreement, (iii) waive any
default, action, omission or breach under either Transfer Agreement, or
otherwise grant any indulgence thereunder, or (iv) amend, supplement or
otherwise modify any of the terms of either Transfer Agreement.
(g) Amendments to Corporate Documents. The Seller shall not amend its
Certificate of Incorporation or By-Laws in any respect that would impair
its ability to comply with the terms or provisions of any of the
Transaction Documents, including, without limitation, Section 5.1(k) of
this Agreement.
(h) Merger. The Seller shall not merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction
or in a series of transactions, and except as otherwise contemplated
herein) all or substantially all of its assets (whether now owned or
hereafter acquired) to, or acquire all or substantially all of the assets
of, any Person.
(i) Subsidiaries. The Seller shall not establish, create, acquire or
permit to exist any Subsidiary.
(j) Deposits. The Seller shall not deposit or otherwise credit, and
shall not permit an Originator or any other Person to deposit or otherwise
credit, to any lock-box or Collection Account any cash or payment item
other than Collections. Notwithstanding the foregoing, Hohe may, from time
to time until the Administrative Agent shall otherwise direct in a written
notice to the Seller, instruct its Obligors to remit payments on
receivables, including receivables that do not constitute "Receivables"
under this Agreement, to one or more of the lock-boxes or concentration
accounts identified on Exhibit III; provided that (i) each such lock-box
and concentration account shall be in the name of, and under the exclusive
dominion and control of, the Seller, and (ii) at all such times a written
agreement among the Seller and the Originators, satisfactory in form and
substance to the Administrative Agent, shall be in effect setting forth the
procedures implemented for the identification and allocation of collections
on such receivables as among the Seller and the Originators.
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ARTICLE VI ADMINISTRATION AND COLLECTION
Section 6.1. Designation of Servicer. (a) The servicing, administration and
collection of the Receivables shall be conducted by such Person (the "Servicer")
so designated from time to time in accordance with this Section 6.1. The Seller
is hereby designated as, and hereby agrees to perform the duties and obligations
of, the Servicer pursuant to the terms of this Agreement. The Administrative
Agent may, and at the direction of the Required Investors shall, at any time
following the occurrence of a Servicer Default, designate as Servicer any Person
to succeed the Seller or any successor Servicer.
(b) The Seller is permitted to delegate, and the Seller hereby advises
the Purchasers and the Administrative Agent that it has delegated, to each
Originator, as a subservicer of the Servicer, certain of its duties and
responsibilities as Servicer hereunder in respect of the Receivables
transferred by such Originator to Donnelly or the Seller, as applicable.
Notwithstanding the foregoing, (i) the Seller shall be and remain primarily
liable to the Administrative Agent and the Purchasers for the full and
prompt performance of all duties and responsibilities of the Servicer
hereunder and (ii) the Administrative Agent and the Purchasers shall be
entitled to deal exclusively with the Seller in matters relating to the
discharge by the Servicer of its duties and responsibilities hereunder, and
the Administrative Agent and the Purchasers shall not be required to give
notice, demand or other communication to any Person other than the Seller
in order for communication to the Servicer and its respective delegates and
subservicers in respect thereof to be accomplished. The Seller, at all
times that it is the Servicer, shall be responsible for providing its
delegates and subservicers with any notice given under this Agreement.
(c) Without the prior written consent of the Required Investors, (i)
the Seller shall not be permitted to delegate any of its duties or
responsibilities as Servicer to any Person other than an Originator, and
then such delegation shall be limited to the activities of Servicer
hereunder as the same may relate to the Receivables originated by such
Originator, and (ii) no Originator shall be permitted to further delegate
to any other Person any of the duties or responsibilities of the Servicer
delegated to it by the Seller. If at any time the Administrative Agent
shall designate as Servicer any Person other than the Seller, all duties
and responsibilities theretofore delegated by the Seller to either
Originator may, at the discretion of the Administrative Agent, be
terminated forthwith on notice given by the Administrative Agent to the
Seller.
Section 6.2. Duties of Servicer. (a) The Servicer shall take or cause to be
taken all such actions as may be necessary or advisable to collect each
Receivable from time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy.
(b) The Servicer shall administer the Collections in accordance with
the procedures described herein and in Article I. The Servicer shall set
aside and hold in trust for the account of the Seller and the Purchasers
their respective shares of the Collections of Receivables in
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accordance with Section 1.7. The Servicer shall upon the request of the
Administrative Agent after the occurrence of a Liquidation Day, segregate,
in a manner acceptable to the Administrative Agent, all cash, checks and
other instruments received by it from time to time constituting Collections
from the general funds of the Servicer or the Seller prior to the
remittance thereof in accordance with Section 1.7. If the Servicer shall be
required to segregate Collections pursuant to the preceding sentence, the
Servicer shall segregate and deposit with a bank designated by the
Administrative Agent such allocable share of Collections of Receivables set
aside for the Purchasers on the first Business Day following receipt by the
Servicer of such Collections, duly endorsed or with duly executed
instruments of transfer.
(c) The Servicer, may, in accordance with the Credit and Collection
Policy, extend the maturity of any Receivable or adjust the Outstanding
Balance of any Receivable as the Servicer may determine to be appropriate
to maximize Collections thereof; provided, however, that such extension or
adjustment shall not alter the status of such Receivable as a Delinquent
Receivable or Defaulted Receivable or limit the rights of the
Administrative Agent or the Purchasers under this Agreement.
Notwithstanding anything to the contrary contained herein, the
Administrative Agent shall have the absolute and unlimited right to direct
the Servicer to commence or settle any legal action with respect to any
Receivable or to foreclose upon or repossess any Related Security.
(d) The Servicer shall hold in trust for the Seller and the
Purchasers, in accordance with their respective Receivable Interests, all
Records that evidence or relate to the Receivables, the related Contracts
and Related Security or that are otherwise necessary or desirable to
collect the Receivables and shall, as soon as practicable upon demand of
the Administrative Agent, deliver or make available to the Administrative
Agent all such Records, at a place selected by the Administrative Agent.
The Servicer shall, as soon as practicable following receipt thereof, turn
over to the Seller (i) that portion of Collections of Receivables
representing the Seller's undivided fractional ownership interest therein,
less, in the event the Seller is not the Servicer, all reasonable
outof-pocket costs and expenses of the Servicer of servicing, administering
and collecting the Receivables, and (ii) any cash collections or other cash
proceeds received with respect to Indebtedness not constituting
Receivables. The Servicer shall, from time to time at the request of any
Purchaser, furnish to the Purchasers (promptly after any such request) a
calculation of the amounts set aside for the Purchasers pursuant to Section
1.7.
(e) Any payment by an Obligor in respect of any indebtedness owed by
it to the Seller shall, except as otherwise specified by such Obligor or
otherwise required by contract or law and unless otherwise instructed by
the Administrative Agent, be applied as a Collection of any Receivable of
such Obligor (starting with the oldest such Receivable) to the extent of
any amounts then due and payable thereunder before being applied to any
other receivable or other obligation of such Obligor.
Section 6.3. Collection Notices. The Administrative Agent is authorized at
any time to date and to deliver (and, at the direction of the Required
Investors, the Administrative Agent shall date and deliver) to the Collection
Banks, a Collection Notice under any Collection
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Account Agreement. The Seller hereby transfers to the Administrative Agent for
the benefit of the Purchasers, effective when the Administrative Agent delivers
such notice, the exclusive ownership and control of the Collection Accounts. In
case any authorized signatory of the Seller whose signature appears on a
Collection Account Agreement shall cease to have such authority before the
delivery of such Collection Notice, such Collection Notice shall nevertheless be
valid as if such authority had remained in force. The Seller hereby authorizes
the Administrative Agent, and agrees that the Administrative Agent shall be
entitled to (i) endorse the Seller's (or, under authority granted to the Seller
under either Transfer Agreement, an Originator's) name on checks and other
instruments representing Collections, (ii) enforce the Receivables, the related
Contracts and the Related Security and (iii) take such action as shall be
necessary or desirable to cause all cash, checks and other instruments
constituting Collections of Receivables to come into the possession of the
Administrative Agent rather than the Seller or an Originator.
Section 6.4. Responsibilities of the Seller. Anything herein to the
contrary notwithstanding, the exercise by the Administrative Agent and the
Purchasers of their rights hereunder shall not release the Servicer or the
Seller from any of their duties or obligations with respect to any Receivables
or under the related Contracts. The Purchasers shall have no obligation or
liability with respect to any Receivables or related Contracts, nor shall any of
them be obligated to perform the obligations of the Seller.
Section 6.5. Reports. On or before the seventh Business Day of each month
and at such other times as the Administrative Agent shall reasonably request,
the Servicer shall prepare and forward to the Administrative Agent (i) a
Settlement Report as of the end of the immediately preceding fiscal month of
Donnelly and (ii) if requested by the Administrative Agent, a listing by Obligor
of all Receivables together with an aging of such Receivables.
ARTICLE VII SERVICER DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Servicer Default:
(a) Any Designated Servicer or the Seller shall fail (i) to make any
payment or deposit required hereunder when due and such failure shall
remain unremedied for one Business Day, (ii) to perform or observe in any
material respect any term, covenant or agreement hereunder relating to the
Receivables, the Related Security, the Hohe Discount or the Collections or
(iii) to perform or observe in any material respect any term, covenant or
agreement hereunder (other than as referred to in clause (i) or (ii) of
this paragraph (a)) and such failure shall remain unremedied for five
Business Days.
(b) Any representation, warranty, certification or statement made by
the Seller, any Designated Servicer or either Originator in this Agreement,
any other Transaction Document or
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in any other document delivered pursuant hereto shall prove to have been
incorrect in any material respect when made or deemed made.
(c)(i) The Seller, any Designated Servicer or either Originator shall
generally not pay its debts as such debts become due or shall admit in
writing its inability to pay its debts generally or shall make a general
assignment for the benefit of creditors; or (ii) any proceeding shall be
instituted by or against the Seller, any Designated Servicer (other than
Donnelly) or Hohe seeking to adjudicate it bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for it or any substantial part of its
property; or (iii) any proceeding shall be instituted by or against
Donnelly seeking to adjudicate it bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for it or any substantial part of its
property unless (A) such proceeding is instituted against Donnelly and is
being contested by Donnelly in good faith and by appropriate proceedings,
(B) within two Michigan business days of the institution of such proceeding
Donnelly shall have obtained a court order (which may include an interim
order) satisfactory to the Administrative Agent and the Required Investors
authorizing the continued transfer of "Receivables", "Related Assets" and
"Collections" under the Donnelly Transfer Agreement and Receivable
Interests hereunder in the manner (and with the effect) contemplated herein
following commencement of such proceeding and granting protection to the
Seller and the Purchasers against subsequent avoidance or subordination of
such transfers by the trustee or any other Person in connection with such
proceeding and (C) such proceeding shall be dismissed within 30 days of the
institution thereof; or (iv) the Seller, any Designated Servicer or either
Originator shall take any corporate action to authorize any of the actions
set forth in clause (i) or (iii) above in this subsection (c);
(d) As at the end of any calendar month, the Delinquency Ratio shall
have exceeded 10% for two consecutive months.
(e) As at the end of any calendar month, the Loss-to-Liquidation Ratio
shall exceed 1%.
(f) Either Originator (i) shall fail to perform or observe in any
material respect any term, covenant or agreement contained in any other
Transaction Document, after giving effect to any grace period therefor, or
(ii) shall for any reason cease to transfer, or cease to have the legal
capacity or otherwise be incapable of transferring, Receivables to the
applicable transferee under any Transfer Agreement to which it is party,
any "Termination Event" or "Potential Termination Event" shall occur under
the Donnelly Transfer Agreement, or any "German Servicer Default" or
"Potential German Servicer Default" shall occur under the Hohe Transfer
Agreement.
(g) A Change of Control shall occur.
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ARTICLE VIII INDEMNIFICATION
Section 8.1. Indemnities by the Seller. Without limiting any other rights
which the Administrative Agent or any Purchaser may have hereunder or under
applicable law, the Seller hereby agrees to indemnify the Administrative Agent
and each Purchaser and their respective officers, directors, agents and
employees (each an "Indemnified Party") from and against any and all damages,
losses, claims, taxes, liabilities, costs, expenses and for all other amounts
payable, including reasonable attorneys' fees (which attorneys may be employees
of the Administrative Agent or such Purchaser) and reasonable disbursements (all
of the foregoing being collectively referred to as "Indemnified Amounts")
awarded against or incurred by any of them arising out of or as a result of this
Agreement or the acquisition, either directly or indirectly, by a Purchaser of
an interest in the Receivables, excluding, however:
(i) Indemnified Amounts to the extent final judgment of a court of
competent jurisdiction holds such Indemnified Amounts resulted from gross
negligence or willful misconduct on the part of the Indemnified Party
seeking indemnification;
(ii) Indemnified Amounts to the extent the same includes losses in
respect of Eligible Receivables which are uncollectible on account of the
insolvency, bankruptcy or lack of creditworthiness of the related Obligor;
or
(iii) taxes imposed by the jurisdiction in which such Indemnified
Party's principal executive office is located, on or measured by the
overall net income of such Indemnified Party to the extent that the
computation of such taxes is consistent with the Intended Characterization;
provided, however, that nothing contained in this sentence shall limit the
liability of the Seller or the Servicer or limit the recourse of the
Purchasers to the Seller or Servicer for amounts otherwise specifically
provided to be paid by the Seller or the Servicer under the terms of this
Agreement. Without limiting the generality of the foregoing
indemnification, the Seller shall indemnify the Administrative Agent and
the Purchasers for Indemnified Amounts (including, without limitation,
losses in respect of uncollectible receivables, regardless of whether
reimbursement therefor would constitute recourse to the Seller or the
Servicer) relating to or resulting from:
(i) any representation or warranty made by the Seller, either Originator
or the Servicer (or any officers of the Seller, either Originator or
the Servicer) under or in connection with this Agreement, any other
Transaction Document, any Settlement Report or any other information
or report delivered by the Seller, either Originator or the Servicer
pursuant hereto or thereto, which shall have been false or incorrect
when made or deemed made;
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(ii) the failure by the Seller, either Originator or the Servicer to comply
with any applicable law, rule or regulation with respect to any
Receivable or Contract related thereto, or the nonconformity of any
Receivable or Contract included therein with any such applicable law,
rule or regulation or the failure of the Seller, either Originator or
the Servicer to timely and fully comply with any provision, covenant
or other promise required to be observed by it under any Contract;
(iii) any failure of the Seller, either Originator or the Servicer to
perform its duties or obligations in accordance with the provisions of
this Agreement or any other Transaction Document;
(iv) any products liability or similar claim arising out of or in
connection with merchandise, insurance or services which are the
subject of any Contract;
(v) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of any Obligor to the payment of any
Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the sale
of the merchandise or service related to such Receivable or the
furnishing or failure to furnish such merchandise or services;
(vi) the commingling of Collections of Receivables at any time with other
funds;
(vii) any investigation, litigation or proceeding related to or arising from
this Agreement or any other Transaction Document, the transactions
contemplated hereby or thereby, the use of the proceeds of a purchase,
the ownership of the Receivable Interests or any other investigation,
litigation or proceeding relating to the Seller or either Originator
in which any Indemnified Party becomes involved as a result of any of
the transactions contemplated hereby or thereby;
(viii) any inability to litigate any claim against any Obligor in respect of
any Receivable as a result of such Obligor being immune from civil and
commercial law and suit on the grounds of sovereignty or otherwise
from any legal action, suit or proceeding;
(ix) any Servicer Default described in paragraph (c) of Article VII;
(x) the failure to vest and maintain vested in the Administrative Agent
and the Purchasers, or to transfer to the Administrative Agent and the
Purchasers,
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legal and equitable title to, and ownership of, a first priority
perfected undivided percentage ownership (to the extent of the
Receivable Interests contemplated hereunder) in the Receivables, the
Related Security, the Hohe Discount and the Collections, free and
clear of any Adverse Claim; or the failure of the Seller or any
Originator to cause Collections to be transferable to any location
outside of Germany without any set-off, deduction or other charge or
encumbrance; or the failure of the Seller or any Originator to deliver
Collections to the Servicer at any time;and
(xi) any failure of the Seller or Donnelly to give reasonably equivalent
value to an Originator under a Transfer Agreement in consideration of
the transfer by such Originator of any Receivable, or any attempt by
any Person to void any such transfer under statutory provisions or
common law or equitable action, including, without limitation, any
provision of the Bankruptcy Code.
If any claim which may give rise to a claim for indemnity under this
Section 8.1 is asserted against any Indemnified Party, such Indemnified Party
shall give the Seller written notice of that claim. In the event any third party
brings an action or proceeding against any Indemnified Party in respect of which
indemnity may be sought under this Section 8.1, such Indemnified Party promptly
shall give notice of that action or proceeding to the Seller and upon receipt of
any such notice the Seller shall have the right and, if so requested by such
Indemnified Party, the obligation to assume the defense of the action or
proceeding; provided, that (i) failure of a party to give such notice shall not
relieve the Seller from any of its obligations under this Section 8.1 unless
that failure prejudices the defense of the action or proceeding by the Seller
and (ii) the Seller shall not have the right to assume the defense of any such
action or proceeding unless (a) no Servicer Default has occurred and is
continuing and (b) the Seller has acknowledged to such Indemnified Party in
writing its obligation to pay any indemnity claim hereunder arising in
connection with such action or proceeding and has paid any Indemnified Amounts
already incurred by the applicable Indemnified Parties in connection with such
action or proceeding. At its own expense, an Indemnified Party may employ
separate counsel and participate in any defense assumed by the Seller. Each
Indemnified Party shall obtain the Seller's prior written consent to any
settlement or compromise of any action or proceeding in respect of which
indemnity may be sought hereunder.
Section 8.2. Increased Cost and Reduced Return. If after the date hereof,
any Funding Source shall be charged any fee, expense or increased cost on
account of the adoption of any applicable law, rule or regulation (including any
applicable law, rule or regulation regarding capital adequacy) or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency (a "Regulatory Change"): (i) which subjects
any Funding Source to any charge or withholding on or with respect to any
Funding Agreement or a Funding Source's obligations under a Funding
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Agreement, or on or with respect to the Receivables, or changes the basis of
taxation of payments to any Funding Source of any amounts payable under any
Funding Agreement (except for changes in the rate of tax on the overall net
income of a Funding Source) or (ii) which imposes, modifies or deems applicable
any reserve, assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the account of a Funding
Source, or credit extended by a Funding Source pursuant to a Funding Agreement
or (iii) which imposes any other condition the result of which is to increase
the cost to a Funding Source of performing its obligations under a Funding
Agreement, or to reduce the rate of return on a Funding Source's capital as a
consequence of its obligations under a Funding Agreement, or to reduce the
amount of any sum received or receivable by a Funding Source under a Funding
Agreement or to require any payment calculated by reference to the amount of
interests or loans held or interest received by it and such cost described in
clause (i), (ii) or (iii) arises in connection with any of the transactions
contemplated in this Agreement, then, upon demand by the Administrative Agent,
the Seller shall pay to the Administrative Agent, for the benefit of the
relevant Funding Source, a reasonable allocation of the aggregate of such
amounts charged to such Funding Source or compensate such Funding Source for a
reasonable allocation of the aggregate of such reduction. A statement as to such
amount, prepared in good faith and in reasonable detail by the Administrative
Agent and submitted by the Administrative Agent to the Seller, shall be
conclusive and binding for all purposes absent manifest error in computation.
Section 8.3. Other Costs and Expenses. The Seller shall pay to the
Administrative Agent and Falcon on demand all reasonable costs and reasonable
out-of-pocket expenses in connection with the preparation, execution, delivery
and administration of this Agreement, the transactions contemplated hereby and
the other documents to be delivered hereunder, including without limitation, the
reasonable cost of Falcon's auditors auditing the books, records and procedures
of the Seller, reasonable fees and reasonable out-of-pocket expenses of legal
counsel for Falcon and the Administrative Agent (which such counsel may be
employees of Falcon or the Administrative Agent) with respect thereto and with
respect to advising Falcon and the Administrative Agent as to their respective
rights and remedies under this Agreement. The Seller shall pay to the
Administrative Agent on demand any and all reasonable costs and expenses of the
Administrative Agent and the Purchasers, if any, including reasonable counsel
fees and expenses in connection with the enforcement of this Agreement and the
other documents delivered hereunder and in connection with any restructuring or
workout of this Agreement or such documents, or the administration of this
Agreement following a Servicer Default. The Seller shall reimburse Falcon on
demand for all other reasonable costs and expenses incurred by Falcon or any
shareholder of Falcon ("Other Costs"), including, without limitation, the
reasonable cost of auditing Falcon's books by certified public accountants, the
cost of rating the Commercial Paper by independent financial rating agencies,
and the reasonable fees and out-of-pocket expenses of counsel for Falcon or any
counsel for any shareholder of Falcon with respect to advising Falcon or such
shareholder as to matters relating to Falcon's operations.
Section 8.4. Allocations. Falcon shall allocate the liability for Other
Costs among the Seller and other Persons with whom Falcon has entered into
agreements to purchase interests in receivables ("Other Sellers") on the basis
of the relation that the Aggregate Capital hereunder
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bears to the aggregate "Capital" or similar investment under all such
agreements, or on such other reasonable basis as Falcon may use for such purpose
in accordance with its customary practice. If any Other Costs are attributable
to the Seller and not attributable to any Other Seller, the Seller shall be
solely liable for such Other Costs. However, if Other Costs are attributable to
Other Sellers and not attributable to the Seller, such Other Sellers shall be
solely liable for such Other Costs. All allocations to be made pursuant to the
foregoing provisions of this Article VIII shall be made by Falcon in its sole
discretion and shall be binding on the Seller and the Servicer.
ARTICLE IX
THE ADMINISTRATIVE AGENT
Section 9.1. Authorization and Action. Each Purchaser hereby designates and
appoints First Chicago to act as its agent hereunder and under each other
Transaction Document, and authorizes the Administrative Agent to take such
actions as agent on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms of this Agreement and the other
Transaction Documents together with such powers as are reasonably incidental
thereto. The Administrative Agent shall not have any duties or responsibilities,
except those expressly set forth herein or in any other Transaction Document, or
any fiduciary relationship with any Purchaser, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities on the part of
the Administrative Agent shall be read into this Agreement or any other
Transaction Document or otherwise exist for the Administrative Agent. In
performing its functions and duties hereunder and under the other Transaction
Documents, the Administrative Agent shall act solely as agent for the Purchasers
and does not assume nor shall be deemed to have assumed any obligation or
relationship of trust or agency with or for the Seller or any of its successors
or assigns. The Administrative Agent shall not be required to take any action
which exposes the Administrative Agent to personal liability or which is
contrary to this Agreement, any other Transaction Document or applicable law.
The appointment and authority of the Administrative Agent hereunder shall
terminate upon the indefeasible payment in full of all Aggregate Unpaids. Each
Purchaser hereby authorizes the Administrative Agent to execute on behalf of
such Purchaser (the terms of which shall be binding on such Purchaser) each of
the Uniform Commercial Code financing statements, together with such other
instruments or documents determined by the Administrative Agent to be necessary
or desirable in order to perfect, evidence or more fully protect the interest of
the Purchasers contemplated hereunder.
Section 9.2. Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement and each other Transaction Document by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. As between the Administrative
Agent and each Purchaser, the Administrative Agent shall not be responsible for
the negligence or misconduct of any agents or attorneys-in-fact selected by it
with reasonable care.
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Section 9.3. Exculpatory Provisions. Neither the Administrative Agent nor
any of its directors, officers, agents or employees shall be (i) liable for any
action lawfully taken or omitted to be taken by it or them under or in
connection with this Agreement or any other Transaction Document (except for
its, their or such Person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Purchasers for any recitals, statements,
representations or warranties made by the Seller contained in this Agreement,
any other Transaction Document or any certificate, report, statement or other
document referred to or provided for in, or received under or in connection
with, this Agreement, or any other Transaction Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement, or any other Transaction Document or any other document furnished in
connection herewith or therewith, or for any failure of the Seller to perform
its obligations hereunder or thereunder, or for the satisfaction of any
condition specified in Article IV, or for the perfection, priority, condition,
value or sufficiency or any collateral pledged in connection herewith. The
Administrative Agent shall not be under any obligation to any Purchaser to
ascertain or to inquire as to the observance or performance of any of the
agreements or covenants contained in, or conditions of, this Agreement or any
other Transaction Document, or to inspect the properties, books or records of
the Seller. The Administrative Agent shall not be deemed to have knowledge of
any Servicer Default or Potential Servicer Default unless the Administrative
Agent has received notice from the Seller or a Purchaser.
Section 9.4. Reliance by Administrative Agent. The Administrative Agent
shall in all cases be entitled to rely, and shall be fully protected in relying,
upon any document or conversation believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation, counsel
to the Seller), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall in all cases be fully
justified in failing or refusing to take any action under this Agreement or any
other Transaction Document unless it shall first receive such advice or
concurrence of Falcon or the Required Investors or all of the Purchasers, as
applicable, as it deems appropriate and it shall first be indemnified to its
satisfaction by the Purchasers, provided that unless and until the
Administrative Agent shall have received such advice, the Administrative Agent
may take or refrain from taking any action, as the Administrative Agent shall
deem advisable and in the best interests of the Purchasers. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, in accordance with a request of Falcon or the Required Investors or all
of the Purchasers, as applicable, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Purchasers.
Section 9.5. Non-Reliance on Administrative Agent and Other Purchasers.
Each Purchaser expressly acknowledges that neither the Administrative Agent, nor
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
the Administrative Agent hereafter taken, including, without limitation, any
review of the affairs of the Seller, shall be deemed to constitute any
representation or warranty by the Administrative Agent. Each Purchaser
represents and warrants to the Administrative Agent that it has and will,
independently and without reliance upon the
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Administrative Agent or any other Purchaser and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, prospects, financial and
other conditions and creditworthiness of the Seller and made its own decision to
enter into this Agreement, the other Transaction Documents and all other
documents related hereto or thereto.
Section 9.6. Reimbursement and Indemnification. The Investors agree to
reimburse and indemnify the Administrative Agent and its officers, directors,
employees, representatives and agents ratably according to their Pro Rata
Shares, to the extent not paid or reimbursed by the Seller (i) for any amounts
for which the Administrative Agent, acting in its capacity as Administrative
Agent, is entitled to reimbursement by the Seller hereunder and (ii) for any
other expenses incurred by the Administrative Agent, in its capacity as
Administrative Agent and acting on behalf of the Purchasers, in connection with
the administration and enforcement of this Agreement and the other Transaction
Documents, but excluding any such expenses to the extent the final judgment of a
court of competent jurisdiction holds that such expenses resulted from gross
negligence or willful misconduct on the part of the Administrative Agent.
Section 9.7. Administrative Agent in its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Seller or any Affiliate of
the Seller as though the Administrative Agent were not the Administrative Agent
hereunder. With respect to the acquisition of Receivable Interests pursuant to
this Agreement, the Administrative Agent shall have the same rights and powers
under this Agreement as any Purchaser and may exercise the same as though it
were not the Administrative Agent, and the terms "Investor," "Purchaser,"
"Investors" and "Purchasers" shall include the Administrative Agent in its
individual capacity.
Section 9.8. Successor Administrative Agent. The Administrative Agent may,
upon five days' notice to the Seller and the Purchasers, and the Administrative
Agent will, upon the direction of all of the Purchasers resign as Administrative
Agent. If the Administrative Agent shall resign, then the Required Investors
during such five-day period shall either (i) appoint from among the Purchasers a
successor agent or (ii) with the consent of the Seller, appoint a Person other
than a Purchaser as the successor agent. If for any reason no successor
Administrative Agent is appointed by the Required Investors during such five-day
period, then effective upon the termination of such five day period, the
Purchasers shall perform all of the duties of the Administrative Agent hereunder
and under the other Transaction Documents and the Seller shall make all payments
in respect of the Aggregate Unpaids directly to the applicable Purchasers and
for all purposes shall deal directly with the Purchasers. After the
effectiveness of any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the retiring Administrative Agent shall be discharged from
its duties and obligations hereunder and under the other Transaction Documents
and the provisions of this Article IX and Article VIII shall continue in effect
for its benefit with respect to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement and under the other
Transaction Documents.
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ARTICLE X ASSIGNMENTS; PARTICIPATIONS
Section 10.1. Assignments. (a) The Seller and each Investor hereby agree
and consent to the complete or partial assignment by Falcon of all of its rights
under, interest in, title to and obligations under this Agreement to (i) the
Investors pursuant to Section 2.1, (ii) any Person that is a special purpose
corporation in respect of which First Chicago is then serving as administrative
or managing agent or in any similar capacity or (iii) with the prior written
consent of the Seller (which consent shall not be unreasonably withheld), any
other Person. In each case, upon such assignment, Falcon shall be released from
its obligations so assigned. Further, the Seller and each Investor hereby agree
that any assignee of Falcon of this Agreement or all or any of the Receivable
Interests of Falcon shall have all of the rights and benefits under this
Agreement as if the term "Falcon" explicitly referred to such party, and no such
assignment shall in any way impair the rights and benefits of Falcon hereunder.
The Seller shall not have the right to assign its rights or obligations under
this Agreement.
(b) Any Investor may at any time and from time to time assign to one
or more Persons ("Purchasing Investors") all or any part of its rights and
obligations under this Agreement pursuant to an assignment agreement, in a
form and substance satisfactory to the Administrative Agent (the
"Assignment Agreement"), executed by such Purchasing Investor and such
selling Investor. The consent of Falcon, the Administrative Agent and the
Seller (the Seller's consent not to be unreasonably withheld) shall be
required prior to the effectiveness of any such assignment. Each assignee
of an Investor must have a short-term debt rating of A-1 or better by
Standard & Poor's Ratings Group and P-1 by Moody's Investors Service, Inc.
and must agree to deliver to the Administrative Agent, promptly following
any request therefor by the Administrative Agent or Falcon, an
enforceability opinion in form and substance satisfactory to the
Administrative Agent and Falcon. Upon delivery of the executed Assignment
Agreement to the Administrative Agent, such selling Investor shall be
released from its obligations hereunder to the extent of such assignment.
Thereafter the Purchasing Investor shall for all purposes be an Investor
party to this Agreement and shall have all the rights and obligations of an
Investor under this Agreement to the same extent as if it were an original
party hereto and no further consent or action by the Seller, the Purchasers
or the Administrative Agent shall be required.
(c) Each of the Investors agrees that in the event that it shall cease
to have a short-term debt rating of A-1 or better by Standard & Poor's
Corporation and P-1 by Moody's Investors Service, Inc. (an "Affected
Investor"), such Affected Investor shall be obliged, at the request of
Falcon or the Administrative Agent, to assign all of its rights and
obligations hereunder to (x) another Investor or (y) another financial
institution nominated by the Administrative Agent and acceptable to Falcon
and the Seller (the Seller's consent not to be unreasonably withheld), and
willing to participate in this Agreement through the Liquidity Termination
Date in the place of such Affected Investor; provided that the Affected
Investor receives payment in full, pursuant to an Assignment Agreement, of
an amount equal to such Investor's Pro Rata Share of the
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Capital and Discount owing to the Investors and all accruing but unpaid
fees and other costs and expenses payable in respect of its Pro Rata Share
of the Receivable Interests.
Section 10.2. Participations. Any Investor may, in the ordinary course of
its business at any time sell to one or more Persons (each a "Participant")
participating interests in its Pro Rata Share of the Receivable Interests of the
Investors, its obligation to pay Falcon its Acquisition Amounts or any other
interest of such Investor hereunder. Notwithstanding any such sale by an
Investor of a participating interest to a Participant, such Investor's rights
and obligations under this Agreement shall remain unchanged, such Investor shall
remain solely responsible for the performance of its obligations hereunder, and
the Seller, Falcon and the Administrative Agent shall continue to deal solely
and directly with such Investor in connection with such Investor's rights and
obligations under this Agreement. Each Investor agrees that any agreement
between such Investor and any such Participant in respect of such participating
interest shall not restrict such Investor's right to agree to any amendment,
supplement, waiver or modification to this Agreement, except for any amendment,
supplement, waiver or modification described in clause (i) of Section 11.1(b).
ARTICLE XI MISCELLANEOUS
Section 11.1. Waivers and Amendments. (a) No failure or delay on the part
of the Administrative Agent or any Purchaser in exercising any power, right or
remedy under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude any other
further exercise thereof or the exercise of any other power, right or remedy.
The rights and remedies herein provided shall be cumulative and nonexclusive of
any rights or remedies provided by law. Any waiver of this Agreement shall be
effective only in the specific instance and for the specific purpose for which
given.
(b) No provision of this Agreement may be amended, supplemented,
modified or waived except in writing in accordance with the provisions of
this Section 11.1(b). Falcon, the Seller and the Administrative Agent, at
the direction of the Required Investors, may enter into written
modifications or waivers of any provisions of this Agreement, provided,
however, that no such modification or waiver shall:
(i) without the consent of each affected Purchaser, (A) extend the
Liquidity Termination Date or the date of any payment or deposit of
Collections by the Seller or the Servicer, (B) reduce the rate or extend
the time of payment of Discount (or any component thereof), (C) reduce any
fee payable to the Administrative Agent for the benefit of the Purchasers,
(D) except pursuant to Article X hereof, change the amount of the Capital
of any Purchaser, an Investor's Pro Rata Share or an Investor's Commitment,
(E) amend, modify or waive any provision of the definition of Required
Investors or this Section 11.1(b), (F) consent to or permit the assignment
or transfer by the Seller of any of its rights and obligations under this
Agreement, (G) change the definition of "Eligible Receivable" or "Aggregate
Reserve" (H) amend any hedging or
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currency exchange arrangement that shall have been entered into in
connection with any DM Purchase hereunder, or (I) amend or modify any
defined term (or any defined term used directly or indirectly in such
defined term) used in clauses (A) through (H) above in a manner which would
circumvent the intention of the restrictions set forth in such clauses; or
(ii) without the written consent of the then Administrative Agent,
amend, modify or waive any provision of this Agreement if the effect
thereof is to affect the rights or duties of such Administrative Agent.
Notwithstanding the foregoing, (i) without the consent of the Investors, the
Administrative Agent may, with the consent of the Seller, amend this Agreement
solely to add additional Persons as Investors hereunder and (ii) without the
consent of the Seller, the Administrative Agent, each Investor and Falcon may
enter into amendments to modify any of the terms or provisions of Article II,
Article IX, Article X, Section 11.13 or any other provision of this Agreement,
provided that such amendment has no negative impact upon the Seller. Any
modification or waiver made in accordance with this Section 11.1 shall apply to
each of the Purchasers equally and shall be binding upon the Seller, the
Purchasers and the Administrative Agent.
Section 11.2 Notices. (a) Except as provided in subsection (b) below, all
communications and notices provided for hereunder shall be in writing (including
bank wire, telecopy or electronic facsimile transmission or similar writing) and
shall be given to the other parties hereto at their respective addresses or
telecopy numbers set forth on the signature pages hereof. All such
communications and notices shall, when mailed, telecopied, telegraphed, telexed
or cabled, be effective when received through the mails, transmitted by
telecopy, delivered to the telegraph company, confirmed by telex answerback or
delivered to the cable company, respectively, except that communications and
notices to the Administrative Agent or any Purchaser pursuant to Article I or II
shall not be effective until received by the intended recipient.
(b) The Seller hereby authorizes the Administrative Agent to effect
purchases and Tranche Period and Discount Rate selections based on
telephonic notices made by any Person whom the Administrative Agent in good
faith believes to be acting on behalf of the Seller. The Seller agrees to
deliver promptly to the Administrative Agent a written confirmation of each
telephonic notice signed by an authorized officer of the Seller. However,
the absence of such confirmation shall not affect the validity of such
notice. If the written confirmation differs from the action taken by the
Administrative Agent, the records of the Administrative Agent shall govern
absent manifest error.
Section 11.3. Ratable Payments. If any Purchaser, whether by setoff or
otherwise, has payment made to it with respect to any portion of the Aggregate
Unpaids owing to such Purchaser (other than payments received pursuant to
Section 8.2 or 8.3) in a greater proportion than that received by any other
Purchaser entitled to receive a ratable share of such Aggregate Unpaids, such
Purchaser agrees, promptly upon demand, to purchase for cash without recourse
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or warranty a portion of the Aggregate Unpaids held by the other Purchasers so
that after such purchase each Purchaser will hold its ratable proportion of the
Aggregate Unpaids; provided that if all or any portion of such excess amount is
thereafter recovered from such Purchaser, such purchase shall be rescinded and
the purchase price restored to the extent of such recovery, but without
interest.
Section 11.4. Protection of Ownership Interests of the Purchasers. (a) The
Seller agrees that from time to time, at its expense, it will promptly execute
and deliver all instruments and documents, and take all actions, that may be
necessary or desirable, or that the Administrative Agent may request, to
perfect, protect or more fully evidence the Receivable Interests, or to enable
the Administrative Agent or the Purchasers to exercise and enforce their rights
and remedies hereunder. At any time following the occurrence of a Servicer
Default, the Administrative Agent may, or the Administrative Agent may direct
the Seller to (and the Seller thereupon shall), notify the Obligors of
Receivables, at any time and at the Seller's expense, of the ownership interests
of the Purchasers under this Agreement and may also direct that payments of all
amounts due or that become due under any or all Receivables be made directly to
the Administrative Agent or its designee; provided that in the case of any
Receivables denominated in Deutsche Marks, the Administrative Agent may direct
the Seller to (and the Seller thereupon shall) notify the Obligors of such
Receivables, at any time and at the Seller's expense, of the Seller's and the
Purchasers' interest therein to the extent determined by the Administrative
Agent to be necessary or desirable in accordance with Section 5.1(h). The Seller
shall, at any Purchaser's request, withhold the identity of such Purchaser in
any such notification.
(b) If the Seller or the Servicer fails to perform any of its
obligations hereunder, the Administrative Agent or any Purchaser may (but
shall not be required to) perform, or cause performance of, such
obligation; and the Administrative Agent's or such Purchaser's reasonable
costs and expenses incurred in connection therewith shall be payable by the
Seller (if the Servicer that fails to so perform is the Seller or an
Affiliate thereof) as provided in Section 8.3, as applicable. The Seller
and the Servicer each irrevocably authorizes the Administrative Agent at
any time and from time to time in the sole discretion of the Administrative
Agent, and appoints the Administrative Agent as its attorney-in-fact, to
act on behalf of the Seller and the Servicer (i) to execute on behalf of
the Seller as debtor and to file financing statements necessary or
desirable in the Administrative Agent's sole discretion to perfect and to
maintain the perfection and priority of the interest of the Purchasers in
the Receivables and (ii) to file a carbon, photographic or other
reproduction of this Agreement or any financing statement with respect to
the Receivables as a financing statement in such offices as the
Administrative Agent in its sole discretion deems necessary or desirable to
perfect and to maintain the perfection and priority of the interests of the
Purchasers in the Receivables. This appointment is coupled with an interest
and is irrevocable.
Section 11.5. Confidentiality. (a) The Seller and each Investor shall
maintain and shall cause each of their respective employees and officers to
maintain the confidentiality of this Agreement and the other confidential
proprietary information with respect to the Administrative
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Agent and Falcon and their respective businesses obtained by any of them in
connection with the structuring, negotiating and execution of the transactions
contemplated herein, except that the Seller, each Investor and their respective
officers and employees may disclose such information to their respective
external accountants and attorneys and as required by any applicable law or
order of any judicial or administrative proceeding.
(b) Anything herein to the contrary notwithstanding, the Seller hereby
consents to the disclosure of any nonpublic information with respect to it
(i) to the Administrative Agent, the Investors or Falcon by each other,
(ii) by the Administrative Agent or the Purchasers to any prospective or
actual assignee or participant of any of them or (iii) by the
Administrative Agent to any rating agency, Commercial Paper dealer or
provider of a surety, guaranty or credit or liquidity enhancement to Falcon
or any entity organized for the purpose of purchasing, or making loans
secured by, financial assets for which First Chicago acts as the
administrative agent and to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing, provided each such
Person is informed of the confidential nature of such information. In
addition, the Purchasers and the Administrative Agent may disclose any such
nonpublic information pursuant to any law, rule, regulation, direction,
request or order of any judicial, administrative or regulatory authority or
proceedings (whether or not having the force or effect of law).
Section 11.6. Bankruptcy Petition. The Seller, the Administrative Agent and
each Investor hereby covenants and agrees that, prior to the date which is one
year and one day after the payment in full of all outstanding senior
Indebtedness of Falcon, it will not institute against, or join any other Person
in instituting against, Falcon any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the laws
of the United States or any state of the United States.
Section 11.7. Limitation of Liability. Except with respect to any claim
arising out of the willful misconduct or gross negligence of Falcon, the
Administrative Agent or any Investor, no claim may be made by the Seller, the
Servicer or any other Person against Falcon, the Administrative Agent or any
Investor or their respective Affiliates, directors, officers, employees,
attorneys or agents for any special, indirect, consequential or punitive damages
in respect of any claim for breach of contract or any other theory of liability
arising out of or related to the transactions contemplated by this Agreement, or
any act, omission or event occurring in connection therewith; and the Seller
hereby waives, releases, and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
SECTION 11.8. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS.
SECTION 11.9. CONSENT TO JURISDICTION. THE SELLER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
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UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT
EXECUTED BY THE SELLER PURSUANT TO THIS AGREEMENT AND THE SELLER HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY
PURCHASER TO BRING PROCEEDINGS AGAINST THE SELLER IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY THE SELLER AGAINST THE ADMINISTRATIVE
AGENT OR ANY PURCHASER OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR A
PURCHASER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY THE
SELLER PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO,
ILLINOIS.
SECTION 11.10. WAIVER OF JURY TRIAL. THE ADMINISTRATIVE AGENT, THE SELLER
AND EACH PURCHASER HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT, ANY DOCUMENT EXECUTED BY THE SELLER PURSUANT TO THIS AGREEMENT
OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
Section 11.11. Integration; Survival of Terms.
(a) This Agreement, the Collection Account Agreements and the Fee Letter
contain the final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to
the subject matter hereof superseding all prior oral or written
understandings.
(b) The provisions of Article VIII and Section 11.6 shall survive any
termination of this Agreement.
Section 11.12. Counterparts; Severability. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and
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any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
Section 11.13. First Chicago Roles. Each of the Investors acknowledges that
First Chicago acts, or may in the future act, (i) as administrative agent for
Falcon, (ii) as issuing and paying agent for the Commercial Paper, (iii) to
provide credit or liquidity enhancement for the timely payment for the
Commercial Paper and (iv) to provide other services from time to time for Falcon
(collectively, the "First Chicago Roles"). Without limiting the generality of
this Section 11.13, each Investor hereby acknowledges and consents to any and
all First Chicago Roles and agrees that in connection with any First Chicago
Role, First Chicago may take, or refrain from taking, any action which it, in
its discretion, deems appropriate, including, without limitation, in its role as
administrative agent for Falcon, the giving of notice to the Administrative
Agent of a mandatory purchase pursuant to Section 2.1.
Section 11.14. Characterization. (a) It is the intention of the parties
hereto that each purchase hereunder shall constitute an absolute and irrevocable
sale, which purchase shall provide the applicable Purchaser with the full
benefits of ownership of the applicable Receivable Interest. Except as
specifically provided in this Agreement, each sale of a Receivable Interest
hereunder is made without recourse to the Seller; provided, however, that (i)
the Seller shall be liable to each Purchaser and the Administrative Agent for
all representations, warranties and covenants made by the Seller pursuant to the
terms of this Agreement, and (ii) such sale does not constitute and is not
intended to result in an assumption by any Purchaser or the Administrative Agent
or any assignee thereof of any obligation of the Seller or either Originator or
any other person arising in connection with the Receivables, the Related
Security, or the related Contracts, or any other obligations of the Seller or
either Originator.
(b) If the conveyance by the Seller to the Purchasers of interests in
Receivables hereunder shall be characterized as a secured loan and not a
sale, it is the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law, and that the Seller
shall be deemed to have granted to the Administrative Agent for the ratable
benefit of the Purchasers a duly perfected security interest in all of the
Seller's right, title and interest in, to and under the Receivables, the
Collections, each Collection Account, all Related Security, all payments on
or with respect to such Receivables, all Hohe Discount, all other rights
relating to and payments made in respect of the Receivables, and all
proceeds of any thereof prior to all other liens on and security interests
therein. After a Servicer Default, the Administrative Agent and the
Purchasers shall have, in addition to the rights and remedies which they
may have under this Agreement, all other rights and remedies provided to a
secured creditor after default under the UCC and other applicable law,
which rights and remedies shall be cumulative.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.
DONNELLY RECEIVABLES CORPORATION
By:/s/ William R. Jellison
William R. Jellison President
414 E. 40th Street Holland, Michigan 49423
FALCON ASSET SECURITIZATION CORPORATION
By:/s/ Signature
-------------------------------------Authorized Signatory
c/o The First National Bank
of Chicago, as Administrative Agent Suite 0596, 1-21
One First National Plaza
Chicago, Illinois 60670
Fax: (312) 732-4487
THE FIRST NATIONAL BANK OF CHICAGO, as Administrative Agent
By:/s/ Signature
Title: Authorized Agent
The First National Bank of Chicago
Suite 0596, 1-21
One First National Plaza
Chicago, Illinois 60670
Fax: (312) 732-4487
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COMMITMENTS INVESTORS
----------- ---------
$25,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Signature
------------------------------
Title: Authorized Agent
---------------------------
The First National Bank of Chicago Suite 0596, 1-21
One First National Plaza
Chicago, Illinois 60670
Fax: (312) 732-4487
$25,000,000 DRESDNER BANK AG NEW YORK AND GRAND CAYMAN BRANCHES
By: /s/ Signature
-----------------------
Title: Vice President
---------------------------
By: /s/ Signature
-----------------------
Title: Executive Vice President
---------------------------
190 S. LaSalle Street Suite 2700
Chicago, Illinois 60603 Fax: (312) 444-1305
=============
$50,000,000 PURCHASE LIMIT
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<PAGE>
EXHIBITS AND SCHEDULES
EXHIBIT I DEFINITIONS
EXHIBIT II PRINCIPAL PLACE OF BUSINESS OF THE SELLER; LOCATION(S)
OF RECORDS; FEDERAL EMPLOYER IDENTIFICATION NUMBERS; NAMES
EXHIBIT III LOCK-BOXES; CONCENTRATION ACCOUNTS; DEPOSITARY ACCOUNTS
EXHIBIT IV FORM OF COMPLIANCE CERTIFICATE
EXHIBIT V FORM OF COLLECTION ACCOUNT AGREEMENT
EXHIBIT VI CREDIT AND COLLECTION POLICY
EXHIBIT VII FORM OF CONTRACT(S)
EXHIBIT VIII FORM OF SETTLEMENT REPORT
EXHIBIT IX FORM OF PURCHASE NOTICE
EXHIBIT X FORM OF LEGEND
EXHIBIT XI ELIGIBLE DM OBLIGORS
EXHIBIT XII FORM OF OBLIGOR NOTIFICATION
SCHEDULE A LIST OF DOCUMENTS TO BE DELIVERED TO THE ADMINISTRATIVE AGENT
PRIOR TO THE INITIAL PURCHASE
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EXHIBIT I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Acquisition Amount" means, on the date of any purchase from Falcon of
Receivable Interests pursuant to Section 2.1, (i) with respect to each Investor
other than First Chicago, the lesser of (a) such Investor's Pro Rata Share of
the Falcon Transfer Price and (b) such Investor's unused Commitment and (ii)
with respect to First Chicago, the difference between (a) the Falcon Transfer
Price and (b) the aggregate amount payable by all other Investors on such date
pursuant to clause (i) above.
"Adjusted Liquidity Price" means, in determining the Falcon Transfer Price
for any Receivable Interest, an amount equal to
[ NDR ]
(i) DC + (ii) RI [-------------- ]
[1 + (.50 X .25)]
where:
RI = the undivided percentage interest evidenced by such Receivable Interest.
DC = the Deemed Collections.
NDR = the Outstanding Balance of all non-Defaulted Receivables.
Each of the foregoing shall be determined from the most recent Settlement Report
received from the Servicer. For this purpose, "Deemed Collections" shall be an
amount equal to the sum of the aggregate amount of all Dollar-denominated Deemed
Collections and the aggregate Dollar Equivalent of all Deutsche Mark-denominated
Deemed Collections.
"Administrative Agent" means First Chicago in its capacity as
administrative agent for the Purchasers pursuant to Article IX, and not in its
individual capacity as an Investor, and any successor Administrative Agent
appointed pursuant to Article IX.
"Adverse Claim" means a lien, security interest, charge or encumbrance, or
other right or claim in, of or on any Person's assets or properties in favor of
any other Person.
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"Affiliate" means any Person directly or indirectly controlling, controlled
by, or under direct or indirect common control with, another Person or any
Subsidiary of such other Person. A Person shall be deemed to control another
Person if the controlling Person owns 10% or more of any class of voting
securities of the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, by contract or otherwise.
"Aggregate Capital" means, at any time, the sum at such time of (i) the
Dollar amount of all Capital associated with Receivable Interests that shall
have arisen by reason of Dollar Purchases and (ii) the Dollar Equivalent amount
of all Capital associated with Receivable Interests that shall have arisen by
reason of DM Purchases.
"Aggregate Reserve" means, [____________].
"Aggregate Unpaids" means, at any time, an amount equal to the sum of all
accrued and unpaid Discount, Capital and all other amounts owed (whether due or
accrued) hereunder or under the Fee Letter to the Administrative Agent and the
Purchasers at such time.
"Agreement" means this Receivables Purchase Agreement, as it may be amended
or modified and in effect from time to time.
"Average Collection Period" means at any time that period of days equal to
the average maturity of the Receivables calculated by the Servicer in the then
most recent Settlement Report; provided that if the Administrative Agent shall
disagree with any such calculation, the Administrative Agent may recalculate the
Average Collection Period.
"Bankruptcy Code" means Title 11 of the United States Code, as it may be
amended from time to time.
"Base Rate" means, (i) prior to the occurrence of a Servicer Default, a
Dollar rate per annum equal to the corporate base rate, prime rate or base rate
of interest, as applicable, announced by the Reference Bank from time to time,
changing when and as such rate changes, and (ii) at all times after the
occurrence of a Servicer Default, such rate plus [__]% per annum.
"Business Day" means any day on which banks are not authorized or required
to close in New York, New York or Chicago, Illinois and The Depository Trust
Company of New York is open for business, and (i) if the applicable Business Day
relates to any computation or payment to be made with respect to the LIBO Rate,
any day on which dealings in Dollar deposits are carried on in the London
interbank market and (ii) if the applicable Business Day relates to any payment
or deposit to be made in Deutsche Marks, any DM Purchase or a Receivable
Interest arising therefrom, the delivery of any Settlement Report under Section
6.5, or any conversion of Dollars into Deutsche Marks or Deutsche Marks into
Dollars, any day on which dealings in Dollars and Deutsche Marks are carried on
in the London interbank market
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and on which banks are not authorized or required to close in London, England,
Frankfurt, Germany or Munich, Germany.
"Capital" of any Receivable Interest means, at any time, (a)(i) in the case
of any Receivable Interest arising from a Dollar Purchase, the Purchase Price in
Dollars of such Receivable Interest, and (ii) in the case of any Receivable
Interest arising from a DM Purchase, the Purchase Price in Deutsche Marks of
such Receivable Interest, minus (b) the sum of the aggregate amount of
Collections and other payments received by the Administrative Agent which in
each case are applied to reduce such Capital; provided that such Capital shall
be restored in the amount of any Collections or payments so received and applied
if at any time the distribution of such Collections or payments are rescinded or
must otherwise be returned for any reason.
"Capital Limit" means, at any time, the amount of Aggregate Capital at such
time that would cause the following calculation to equal 1.00:
C -------NRB - AR
where:
C = the Aggregate Capital of in respect of all Receivable Interests at such
time.
NRB = the Net Receivables Balance.
AR = the Aggregate Reserve.
"Change of Control" means (i) the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 20% or more of the outstanding shares of voting stock of
Donnelly; (ii) Donnelly shall cease to own, free and clear of all Adverse
Claims, at least 66 2/3% of the outstanding shares of voting stock (or
comparable equity interest) of Hohe on a fully diluted basis; or (iii) Donnelly
shall cease to own, free and clear of all Adverse Claims, all of the outstanding
shares of voting stock of the Seller on a fully diluted basis.
"Charged-Off Receivable" means a Receivable: (i) as to which the Obligor
thereof has taken any action, or suffered any event to occur, of the type
described in paragraph (c) of Article VII (as if references to the Seller
therein refer to such Obligor); (ii) as to which the Obligor thereof, if a
natural person, is deceased, (iii) which, consistent with the Credit and
Collection Policy, would be written off the Seller's books as uncollectible,
(iv) which has been
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identified by the Seller as uncollectible or (v) as to which any payment, or
part thereof, remains unpaid for 365 days or more from the original due date for
such payment.
"Collection Account" means each concentration account, depositary account,
lock-box account or similar account in which any Collections are collected or
deposited.
"Collection Account Agreement" means, in relation to any actual or proposed
Collection Account, an agreement in substantially the form of Exhibit V hereto.
"Collection Bank" means, at any time, any of the banks or other financial
institutions holding one or more Collection Accounts.
"Collection Notice" means a notice, in substantially the form of Collection
Notice contained in Exhibit V hereto, from the Administrative Agent to a
Collection Bank.
"Collections" means, with respect to any Receivable or any Hohe Discount,
all cash collections and other cash proceeds in respect of such Receivable or
such Hohe Discount, including, without limitation, all cash proceeds of Related
Security with respect thereto, and all amounts payable to the Purchasers by the
Seller pursuant to Section 1.8.
"Commercial Paper" means promissory notes of Falcon issued by Falcon in the
commercial paper market.
"Commitment" means, for each Investor, the commitment of such Investor to
purchase its Pro Rata Share of Receivable Interests from (i) the Seller and (ii)
Falcon, such Pro Rata Share not to exceed, in the aggregate, the Dollar amount
set forth opposite such Investor's name on the signature pages of this
Agreement, as such amount may be modified in accordance with the terms hereof.
"Concentration Limit" means, at any time, for any Obligor, an amount equal
to [___]% of the Outstanding Balance of all Eligible Receivables at such time,
or such other amount (a "Special Concentration Limit") for such Obligor
designated by the Administrative Agent with the consent of the Required
Investors; provided that, in the case of an Obligor and any Affiliate of such
Obligor, the Concentration Limit shall be calculated as if such Obligor and such
Affiliate are one Obligor; and provided, further, that Falcon or the Required
Investors may, upon not less than three Business Days' notice to the Seller,
cancel any Special Concentration Limit. As of the date of this Agreement, and
subject to the foregoing, each of the following Obligors (together in each case
with its respective Affiliates) shall have a Special Concentration Limit at all
times equal to the lesser of (i) an amount equal to [__]% of the Outstanding
Balance of all Eligible Receivables at such time and (ii) the respective amount
set forth below:
[TABLE]
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"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a letter of credit.
"Contract" means, with respect to any Receivable, any and all instruments,
agreements, leases, invoices, shipping releases, general terms or conditions or
other writings pursuant to which such Receivable arises or which evidences such
Receivable.
"Coverage Exchange Rate" means, with respect to an amount of Deutsche Marks
during any Fixed Exchange Period, the forward rate of exchange quoted by the
Administrative Agent for the amount in question in the London interbank foreign
exchange market at or about 11:00 a.m. London time two Business Days prior to
the first day of such Fixed Exchange Period for the purchase of Deutsche Marks
with Dollars on the last day of such Fixed Exchange Period.
"CP Rate" means, the rate, requested by the Seller and agreed to by Falcon,
equivalent to the rate (or if more than one rate, the weighted average of the
rates) at which Commercial Paper having a term equal to the relevant Tranche
Period may be sold by any placement agent or commercial paper dealer reasonably
selected by Falcon, as agreed between each such dealer or agent and Falcon plus
any and all applicable issuing and paying agent fees and commissions of
placement agents and commercial paper dealers in respect of such Commercial
Paper; provided, however, that if the rate (or rates) as agreed between any such
agent or dealer and Falcon is a discount rate (or rates), the "CP Rate" for such
Tranche Period shall be the rate (or if more than one rate, the weighted average
of the rates) resulting from Falcon's converting such discount rate (or rates)
to an interest-bearing equivalent rate per annum.
"Credit and Collection Policy" means the Seller's credit and collection
policies and practices relating to Contracts and Receivables existing on the
date hereof, which policies and practices (i) in the case of Dollar-denominated
Receivables, are summarized in Exhibit VI hereto and (ii) in the case of
Deutsche Mark-denominated Receivables, shall be summarized in the written credit
and collection policy delivered to the Administrative Agent by the Seller in
accordance with Section 5.1(n), in each case as such policies and practices may
be modified from time to time in accordance with this Agreement.
"Currency Allocation Percentage" means, at any time, with respect to any
Receivable Interest, a ratio (expressed as a percentage) equal to (i) the
Capital of such Receivable Interest, divided by (ii) the aggregate Capital of
all Receivable Interests (including such Receivable Interest) denominated in the
same currency as such Receivable Interest.
"Deemed Collections" means the aggregate of all amounts owing to Falcon
pursuant to Sections 1.8 and 8.1.
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"Default Fee" means with respect to any amount due and payable by the
Seller hereunder or under the Fee Letter, an amount equal to interest on any
such amount at a rate per annum equal to 2% above the Base Rate, together with
any loss, cost or expense incurred by the Administrative Agent or any Purchaser
in connection with the extension or delay of settlement on any foreign exchange
contract related to such due and payable amount, provided, however, that such
interest rate will not at any time exceed the maximum rate permitted by
applicable law.
"Defaulted Receivable" means a Receivable as to which any payment, or part
thereof, remains unpaid for 90 days or more from the original due date for such
payment.
"Delinquency Ratio" means, at any time, a percentage equal to (i) the
aggregate Outstanding Balance of all Receivables that were Delinquent
Receivables at such time divided by (ii) the aggregate Outstanding Balance of
all Receivables (other than Receivables owed by an Affiliate of the applicable
Originator) at such time.
"Delinquent Receivable" means a Receivable (other than a Receivable owed by
an Affiliate of the applicable Originator) as to which any payment, or part
thereof, remains unpaid for 60 days or more from the original due date for such
payment.
"Designated Obligor" means an Obligor indicated by the Administrative Agent
to the Seller in writing.
"Designated Servicer" means, at any time, each of the following: (i) the
Servicer, if other than the Administrative Agent or a Purchaser at such time,
and (ii) each Originator, if any responsibility of the Servicer hereunder shall
have been delegated to such Originator.
"Deutsche Marks" means the lawful currency of Germany.
"Dilution Ratio" means, as of the last day of any calendar month, a
percentage equal to (i) the aggregate amount (in Dollars or Dollar Equivalents)
of Dilutions which shall have occurred during such month, divided by (ii) the
aggregate amount of new Receivables (in Dollars or Dollar Equivalents) arising
during such month.
"Dilution Factor" means, at any time, a percentage equal to the product of
(a) two, multiplied by (b) the highest average of the Dilution Ratios for any
three month period during the immediately preceding twelve months.
"Dilutions" means, at any time, the aggregate amount of reductions in the
Outstanding Balances of the Receivables as a result of any setoff, discount,
return, pricing or warranty adjustment or otherwise, other than cash Collections
on account of such Receivables.
"Discount" means, for each Receivable Interest for any Tranche Period:
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AD DR x C x --
yr
where:
DR = the Discount Rate for such Receivable Interest for such Tranche Period;
C = the Capital of such Receivable Interest during such Tranche Period;
AD = the actual number of days elapsed during such Tranche Period;
yr = (i) in the case of any Receivable Interest arising from a Dollar Purchase,
360, and (ii) in the case of any Receivable Interest arising from a DM
Purchase, such number of days as shall apply to the applicable Discount
Rate as derived from the hedging or exchange arrangements that the
applicable Purchaser shall have entered into to fund and maintain such
Receivable Interest during such Tranche Period;
provided, that no provision of this Agreement shall require the payment or
permit the collection of Discount in excess of the maximum permitted by
applicable law; and provided, further, that Discount for any Tranche Period
shall not be considered paid by any distribution to the extent that at any time
all or a portion of such distribution is rescinded or must otherwise be returned
for any reason.
"Discount Rate" means for any Tranche Period, (i) in the case of any
Receivable Interest that shall have arisen from a Dollar Purchase, the LIBO
Rate, the CP Rate or the Base Rate, as applicable, and (ii) in the case of any
Receivable Interest that shall have arisen by reason of any DM Purchase, such
rate per annum as shall have been notified to the Seller by the Administrative
Agent on or prior to the first day of such Tranche Period in accordance with
Section 1.3(c); provided in each case that from and after the occurrence of a
Servicer Default, the Discount Rate in respect of each Receivable Interest and
Tranche Period shall be the Base Rate.
"Discount Factor" means [__]%.
"DM Purchase" means a Purchase in respect of which the Purchase Price is
payable in Deutsche Marks.
"Dollars" and the sign "$" each means lawful money of the United States.
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"Dollar Equivalent" means, at any time in relation to an amount denominated
in Deutsche Marks, the amount of Dollars required to purchase such amount
denominated in Deutsche Marks at the Applicable Exchange Rate. "Applicable
Exchange Rate" means, at any time, (i) for purposes of calculating the "Dilution
Ratio", the "Loss-to-Liquidation Ratio", the "Aggregate Capital", or the
"Outstanding Balance" of any Receivable, the Spot Exchange Rate in effect at
such time and (ii) for all other purposes, the Coverage Exchange Rate in effect
at such time.
"Dollar Purchase" means a Purchase in respect of which the Purchase Price
is payable in Dollars.
"Donnelly" means Donnelly Corporation, a Michigan corporation.
"Donnelly Transfer Agreement" means that certain Receivables Purchase
Agreement of even date herewith between the Seller, as purchaser, and Donnelly,
as seller, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
"Early Collection Fee" means, for any Receivable Interest which has its
Capital reduced, or its Tranche Period terminated prior to the date on which it
was originally scheduled to end, the sum of (a) the excess, if any, of (i) the
Discount that would have accrued during the remainder of the Tranche Period
subsequent to the date of such reduction or termination on the Capital of such
Receivable Interest if such reduction or termination had not occurred, over (ii)
the sum of (A) to the extent all or a portion of such Capital is allocated to
another Receivable Interest, the Discount actually accrued during such period on
such Capital for the new Receivable Interest, and (B) to the extent such Capital
is not allocated to another Receivable Interest, the income, if any, actually
received during such period by the holder of such Receivable Interest from
investing the portion of such Capital not so allocated and (b) if applicable,
the cost associated with the early reduction or termination of any foreign
currency of exchange transaction that shall have been entered into by the
Administrative Agent or any Purchaser in connection with the funding or
maintenance of such Receivable Interest.
"Eligible DM Obligor" means each of the Persons listed on Exhibit XI
hereto, and any other Person as the Seller may from time to time request and as
the Administrative Agent, in its sole discretion, may agree in writing.
"Eligible Receivable" means, at any time, a Receivable:
(i) the Obligor of which (a) is a corporation or other business
organization, organized under the laws of the United States or Germany or
any political subdivision thereof and has its chief executive office in the
United States or Germany; provided that (A) in the case of any
Dollardenominated Receivables, such Obligor may be organized under the laws
of, and have its chief executive office in, Canada, and (B) in the case of
any Deutsche Mark-denominated Receivables, such Obligor may be organized
under the laws of, and have its chief executive office in, Belgium, Spain,
Sweden or any other country as may be approved in writing by the
Administrative Agent with the consent of
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the Required Investors, such approval and consent to be given by the
Administrative Agent and the Required Investors, respectively, in their
sole discretion; (b) is not an Affiliate of any of the parties hereto; (c)
is not a Designated Obligor; and (d) is not a government or a governmental
subdivision or agency,
(ii) the Obligor of which is not the Obligor of any Charged-Off
Receivable and, if such Obligor is the Obligor of any Defaulted
Receivables, the aggregate Outstanding Balance of such Defaulted
Receivables does not exceed an amount equal to 30% of the Outstanding
Balance of all Receivables of such Obligor at such time,
(iii) which is not a Defaulted Receivable, a Charged-Off Receivable or
Delinquent Receivable,
(iv) which by its terms is due and payable within 60 days of the
original billing date therefor and has not had its payment terms extended,
(v) which is an account receivable representing all or part of the
sales price of merchandise, insurance and services within the meaning of
Section 3(c)(5) of the Investment Company Act of 1940, as amended,
(vi) a purchase of which with the proceeds of notes would constitute a
"current transaction" within the meaning of Section 3(a)(3) of the
Securities Act of 1933, as amended,
(vii) which is an "account" within the meaning of Section 9-106 of the
UCC of all applicable jurisdictions,
(viii) which is denominated and payable only in Dollars in the United
States or Deutsche Marks in Germany,
(ix) which arises under a Contract in substantially the form of one of
the form contracts or, in the case of a Deutsche Mark-denominated
Receivable, Standard Terms set forth on Exhibit VII hereto or otherwise
approved by the Administrative Agent in writing, which, together with such
Receivable, is in full force and effect and constitutes the legal, valid
and binding obligation of the related Obligor enforceable by the Seller and
its assignees against such Obligor in accordance with its terms and, in the
case of a Deutsche Mark-denominated Receivable, has not been amended,
supplemented or superseded in any material respect, or in any respect
whatsoever which could affect the collectibility, transferability or
ownership of such Receivable by any other agreements or communications
between such Obligor and the Seller other than the relevant Obligor
Notification,
(x) which arises under a Contract which (A) does not require the
Obligor under such Contract to consent to the transfer, sale or assignment
of the rights and duties of
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the applicable Originator or any of its assignees under such Contract or,
if any such consent is required, the Obligor shall have duly executed and
delivered either (x) a consent to such transfer, sale or assignment or (y)
a valid waiver of such requirement, and (B) does not contain a
confidentiality provision that would have the effect of restricting the
ability of the Administrative Agent or any Purchaser to exercise its rights
under this Agreement, including, without limitation, its right to review
the Contract,
(xi) which arises under a Contract that contains an obligation to pay
a specified sum of money, contingent only upon the sale of goods or the
provision of services by an Originator,
(xii) which is not subject to any right of rescission, set-off,
counterclaim, any other defense (including defenses arising out of
violations of usury laws) of the applicable Obligor or the applicable
Originator or any other Adverse Claim, and the Obligor thereon holds no
right as against such Originator to cause such Originator to repurchase the
goods or merchandise the sale of which shall have given rise to such
Receivable,
(xiii) as to which the applicable Originator of such Receivable has
satisfied and fully performed all obligations on its part with respect to
such Receivable required to be fulfilled by it, and no further action is
required to be performed by any Person with respect thereto other than
payment thereon by the applicable Obligor,
(xiv) all right, title and interest to and in which has been validly
transferred by the applicable Originator directly or indirectly to the
Seller under and in accordance with the applicable Transfer Agreement, and
the Seller has good and marketable title thereto free and clear of any
Adverse Claim, including but not limited to, any Adverse Claim arising
pursuant to a retention of title arrangement (verlangerter
Eigentumsvorbehalt) or global security assignment (kreditsicherende
Globalzession),
(xv) which, together with the Contract related thereto, was created in
compliance with each, and does not contravene any, law, rule or regulation
applicable thereto (including, without limitation, any law, rule and
regulation relating to truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and
privacy) and with respect to which no part of the Contract related thereto
is in violation of any such law, rule or regulation,
(xvi) which satisfies all applicable requirements of the Credit and
Collection Policy,
(xvii) which was generated in the ordinary course of the applicable
Originator's business in connection with the purchase of goods or services
by the applicable Obligor from such Originator,
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(xviii) which arises solely from the sale or the provision of services
to the related Obligor by the Originator that shall have transferred such
Receivable directly or indirectly to the Seller, and not by any other
Person (in whole or in part),
(xix) in the case of any Receivable other than a Dollar-denominated
Receivable,
(a) such Receivable shall have arisen pursuant to a commercial
transaction (Handelsgeschaft) between Hohe and the relevant Obligor
and is not included in any current account arrangement
(Kontokorrentabrede) between Donnelly and the related Obligor,
(b) such Obligor is an Eligible DM Obligor,
(c) the shipping release in respect of which, if the related Obligor
is organized under, or has its chief executive office in, any country
other than Germany contains the legend set forth in Exhibit X hereto
in the relevant language of the jurisdiction where such Obligor is
resident (or, if different, into the language (or languages) in which
such Obligor conducts its business with Hohe), an d
(d) in respect of which either (1) Hohe has delivered an Obligor
Notification to the related Obligor and such Obligor Notification has
been duly signed by Hohe, the Seller and a duly authorized signatory
on behalf of such Obligor, and has been returned to Hohe not later
than December 20, 1996, or (2) the related Obligor has confirmed in
writing that it will pay all amounts in respect of such Receivable
directly into the German Collection Account, and (in either case) the
relevant Obligor in respect of which is in compliance with any
obligation to make payments into the German Collection Account with
respect to other Eligible Receivables of such Obligor, and
(xx) as to which the Administrative Agent has not notified the Seller
that the Administrative Agent has determined that such Receivable or class
of Receivables is not acceptable as an Eligible Receivable, including,
without limitation, because such Receivable arises under a Contract that is
not acceptable to the Administrative Agent.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Facility Account" means the Seller's Account No. 549-0286 at First Chicago
or, in the case of any DM Purchase, such other account as the Administrative
Agent may from time to time advise the Seller.
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"Facility Termination Date" means the earliest of (i) the Liquidity
Termination Date, (ii) the date the Seller shall exercise its right to
repurchase the outstanding Receivable Interests pursuant to Section 1.11, (iii)
any date selected by the Seller on not less than 30 days' prior written notice
to the Administrative Agent, (iv) the date of the occurrence of any Servicer
Default involving the Seller and of the type described in paragraph (c) of
Article VII, and (v) any date following the occurrence, and during the
continuance, of any Servicer Default which the Required Investors declare to be
the Facility Termination Date.
"Falcon Residual" means the sum of the Falcon Transfer Price Reductions.
"Falcon Transfer Price" means, with respect to the assignment by Falcon of
one or more Receivable Interests to the Administrative Agent for the benefit of
the Investors pursuant to Section 2.1, the sum of (i) the lesser of (a) the
aggregate Dollar and Dollar Equivalent amount of the Capital of each Receivable
Interest and (b) the Adjusted Liquidity Price of each Receivable Interest and
(ii) the aggregate Dollar and Dollar Equivalent amount of all accrued and unpaid
Discount for such Receivable Interests.
"Falcon Transfer Price Reduction" means in connection with the assignment
of a Receivable Interest by Falcon to the Administrative Agent for the benefit
of the Investors, the positive difference between (i) the Capital of such
Receivable Interest and (ii) the Adjusted Liquidity Price for such Receivable
Interest.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period equal to (a) the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York in the Composite Closing
Quotations for U.S. Governments Securities; or (b) if such rate is not so
published for any day which is a Business Day, the average of the quotations at
approximately 10:30 a.m. (Chicago time) for such day on such transactions
received by the Reference Bank from three federal funds brokers of recognized
standing selected by it.
"Fee Letter" means that certain letter agreement dated as of the date
hereof between the Seller and the Administrative Agent, as it may be amended or
modified and in effect from time to time.
"Finance Charges" means, with respect to a Contract, any finance, interest,
late payment charges or similar charges owing by an Obligor pursuant to such
Contract.
"First Chicago" means The First National Bank of Chicago in its individual
capacity and its successors.
"Fixed Exchange Period" means a period commencing on the date in any
calendar month on which a DM Purchase may be made and ending on the date in the
next following calendar
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month on which a DM Purchase may be made, in each case such date being
determined in accordance with the terms of Section 1.2 (and whether or not a
purchase is in fact being made on such date or the Facility Termination Date has
occurred on or prior to such date); provided that (i) if at any time a Fixed
Exchange Period would otherwise be of a duration that is less than 30 days, the
Administrative Agent may direct that such Fixed Exchange Period have a longer
duration not to exceed 60 days, as the Administrative Agent may elect, and (ii)
the Administrative Agent may at any time, on written notice given to the Seller,
direct that the Fixed Exchange Periods in effect be of a duration shorter than
one calendar month (and may be as short as a period of one day). Fixed Exchange
Periods shall occur sequentially, with each Fixed Exchange Period commencing on
the expiration of the immediately preceding Fixed Exchange Period and ending on
the commencement of the immediately next following Fixed Exchange Period.
"Funding Agreement" means this Agreement and any agreement or instrument
executed by any Funding Source with or for the benefit of Falcon.
"Funding Source" means (i) any Investor or (ii) any insurance company, bank
or other financial institution providing liquidity, credit enhancement or backup
purchase support or facilities to, or currency hedging or exchange arrangement
for the benefit of, Falcon.
"German Collection Account" has the meaning assigned to that term in the
Hohe Transfer Agreement.
"Germany" means the Federal Republic of Germany.
"Hedge Factor" means, at any time, [__________].
"Hohe" means Donnelly Hohe GmbH & Co. KG, a company organized under the
laws of Germany.
"Hohe Discount" means all "Discount" now or at any time hereafter payable
by Hohe under the Hohe Transfer Agreement, together with any "Default Fee"
payable by Hohe in respect thereof.
"Hohe Transfer Agreement" means that certain Receivables Purchase Agreement
of even date herewith between Donnelly, as purchaser, and Hohe, as Seller, as
the same may be amended, restated, supplemented or otherwise modified from time
to time.
"Incremental Purchase" means a purchase of one or more Receivable Interests
which increases the total outstanding Capital hereunder.
"Indebtedness" of a Person means such Person's (i) obligations for borrowed
money, (ii) obligations representing the deferred purchase price of property or
services (other than accounts payable arising in the ordinary course of such
Person's business payable on terms customary in
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the trade), (iii) obligations, whether or not assumed, secured by liens or
payable out of the proceeds or production from property now or hereafter owned
or acquired by such Person, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) capitalized lease obligations, (vi) net
liabilities under interest rate swap, exchange or cap agreements, (vii)
Contingent Obligations and (viii) liabilities in respect of unfunded vested
benefits under plans covered by Title IV of ERISA.
"Intended Characterization" means, for income tax purposes, the
characterization of the acquisition by the Purchasers of Receivable Interests as
a loan or loans by the Purchasers to the Seller secured by the Receivables, the
Related Security, the Hohe Discount and the Collections.
"Investor Fee" means, for each Investor, a fee agreed to in writing by the
Administrative Agent or Falcon and such Investor.
"Investors" means the financial institutions listed on the signature pages
of this Agreement under the heading "Investors" and their respective successors
and assigns.
"LIBO Rate" means the rate per annum equal to the sum of (i) (a) the rate
at which deposits in U.S. Dollars are offered by the Reference Bank to
firstclass banks in the London interbank market at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of the relevant Tranche
Period, such deposits being in the approximate amount of the Capital of the
Receivable Interest to be funded or maintained, divided by (b) one minus the
Reserve Requirement (expressed as a decimal) applicable to such Tranche Period
plus (ii) [_____]% per annum. The LIBO Rate shall be rounded, if necessary, to
the next higher 1/16 of 1%.
"Liquidation Day" means, for any Receivable Interest, the earliest to occur
of (i) any Business Day so designated by the Administrative Agent or the
Required Investors on or at any time following any day on which the conditions
precedent set forth in Section 4.2 are not satisfied, (ii) any Business Day so
designated by the Seller or Falcon after the occurrence of the Termination Date,
(iii) the Business Day immediately prior to the occurrence of a Servicer Default
set forth in paragraph (c) of Article VII and (iv) in the case of any Receivable
Interest that shall have arisen by reason of a DM Purchase, declaration of the
Liquidation Day therefor by the Administrative Agent in accordance with Section
1.3(e).
"Liquidity Termination Date" means November 13, 1997, or such later date as
shall then be in effect in accordance with Section 1.12.
"Loss-to-Liquidation Ratio" means, as at the last day of any calendar
month, a percentage equal to (i) the amount (in Dollars and Dollar Equivalents)
of Charged-Off Receivables which became Charged-Off Receivables during the three
calendar months then most recently ended, divided by (ii) the aggregate amount
(in Dollars and Dollar Equivalents) of Collections in respect of Receivables
during such three month period.
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"Material Adverse Effect" means a material adverse effect on (i) the
financial condition, business or operations of the Seller or either Originator,
(ii) the ability of the Seller or either Originator to perform its obligations
under any Transaction Document, (iii) the legality, validity or enforceability
of this Agreement, any Transaction Document or any Collection Account Agreement
or Collection Notice relating to a Collection Account into which a material
portion of Collections are deposited, (iv) the Seller's or any Purchaser's
interest in the Receivables generally or in any significant portion of the
Receivables, the Related Security, the Hohe Discount or the Collections with
respect thereto, or (v) the collectibility of the Receivables generally or of
any material portion of the Receivables.
"Net Receivables Balance" means, at any time, the Outstanding Balance of
Eligible Receivables at such time reduced by the aggregate amount by which the
Outstanding Balance of all Eligible Receivables of each Obligor and its
Affiliates exceeds the Concentration Limit for such Obligor.
"Obligor" means a Person obligated to make payments pursuant to a Contract.
"Obligor Notification" means a notification in the form of Exhibit XII
attached hereto.
"Originator" means either of Donnelly or Hohe.
"Outstanding Balance" of any Receivable at any time means (i) in the case
of any Receivable denominated in Dollars, the then outstanding principal balance
thereof and (b) in the case of any Receivable denominated in Deutsche Marks, the
Dollar Equivalent of the then outstanding principal balance thereof.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Potential Servicer Default" means an event which, with the passage of time
or the giving of notice, or both, would constitute a Servicer Default.
"Pro Rata Share" means, for each Investor, the Commitment of such Investor
divided by the Purchase Limit, adjusted as necessary to give affect to the
application of the terms of Section 2.5.
"Purchase Date" has the meaning specified in Section 1.2.
"Purchase Limit" means the aggregate of the Commitments of the Investors
hereunder.
"Purchase Price" means, with respect to any Incremental Purchase of a
Receivable Interest, the amount paid to the Seller for such Receivable Interest.
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"Purchaser" means Falcon or an Investor, as applicable.
"Receivable" means the indebtedness and other obligations owed (at the time
it arises) to an Originator and owned, transferred to or otherwise held by the
Seller, whether constituting an account, chattel paper, instrument or general
intangible, arising in connection with the sale of goods or the rendering of
services by such Originator, and includes, without limitation, the obligation to
pay any Finance Charges with respect thereto. Indebtedness and other rights and
obligations arising from any one transaction, including, without limitation,
indebtedness and other rights and obligations represented by an individual
invoice, shall constitute a Receivable separate from a Receivable consisting of
the indebtedness and other rights and obligations arising from any other
transaction.
"Receivable Interest" means, at any time, an undivided percentage ownership
interest associated with a designated amount of Capital, Discount Rate and
Tranche Period selected pursuant to Section 1.3 in (i) all Receivables arising
prior to the time of the most recent computation or recomputation of such
undivided interest pursuant to Section 1.4, (ii) all Related Security with
respect to such Receivables, (iii) all Hohe Discount, and (iv) all Collections
with respect to, and other proceeds of, any of the foregoing. From and after the
date of the initial purchase hereunder, the aggregate Receivable Interests
hereunder shall at all times equal 100%. As among Purchasers, any allocation of
Collections in respect of any Receivable Interests (other than in the
circumstances when the applicable Currency Allocation Percentage is required to
be applied) shall be made ratably such that the percentage allocated to each
such Receivable Interest is equal to (i) the Dollar or Dollar Equivalent amount
of Capital assigned to such Receivable Interest, divided by (ii) the aggregate
Capital (in Dollars and Dollar Equivalents) assigned to all Receivable Interests
at such time.
"Records" means, with respect to any Receivable, all Contracts and other
documents, books, records and other information (including, without limitation,
computer programs, tapes, disks, punch cards, data processing software and
related property and rights) relating to such Receivable, any Related Security
therefor and the related Obligor.
"Reduction Percentage" means, for any Receivable Interest acquired by the
Investors from Falcon for less than the Dollar or Dollar Equivalent amount of
Capital of such Receivable Interest, a percentage equal to a fraction the
numerator of which is the Falcon Transfer Price Reduction for such Receivable
Interest and the denominator of which is the Dollar or Dollar Equivalent amount
of Capital of such Receivable Interest.
"Reference Bank" means First Chicago or such other bank as the
Administrative Agent shall designate with the consent of the Seller.
"Required Investors" means, (i) at any time that a Servicer Default has
occurred and is continuing, Investors with Commitments in excess of 66-2/3% of
the Purchase Limit and (ii) at any other time, the Investor then acting as
Administrative Agent.
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"Related Security" means, with respect to any Receivable:
(i) all of the Seller's present or future interest in the inventory
and goods (including returned or repossessed inventory or goods), if any,
the financing or lease of which gave rise to such Receivable, and all
insurance contracts with respect thereto, including, but not limited to,
all of the Seller's present or future claims for re-delivery and/or return
of such inventory and or goods,
(ii) all other security interests or liens and property subject
thereto from time to time, if any, purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable or
otherwise, together with all financing statements and security agreements
describing any collateral securing such Receivable,
(iii) all guaranties, insurance and other agreements or arrangements
of whatever character from time to time supporting or securing payment of
such Receivable whether pursuant to the Contract related to such Receivable
or otherwise,
(iv) all service contracts and other contracts and agreements
associated with such Receivables,
(v) all Records related to such Receivables,
(vi) all of the Seller's right, title and interest in, to and under
each Transfer Agreement, the Servicing Agreement and each instrument,
document or agreement executed in connection the foregoing in favor of or
otherwise for the benefit of the Seller (or, if different, the applicable
transferee thereunder);
(vii) all of the Seller's retention of title rights relating to such
Receivable; and
(viii) all proceeds of any of the foregoing.
"Reserve Requirement" means the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves) which is
imposed against the Reference Bank in respect of Eurocurrency liabilities, as
defined in Regulation D of the Board of Governors of the Federal Reserve System
as in effect from time to time.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Servicer" means at any time the Person (which may be the Administrative
Agent) then authorized pursuant to Article VI to service, administer and collect
Receivables.
"Servicer Default" has the meaning specified in Article VII.
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"Servicing Agreement" means that certain Servicing Agreement of even date
herewith between the Seller and Donnelly, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"Settlement Report" means a report, in substantially the form of Exhibit
VIII hereto (appropriately completed), furnished by the Servicer to the
Administrative Agent pursuant to Section 6.5.
"Spot Exchange Rate" means, with respect to an amount of Deutsche Marks on
any date, the spot rate of exchange at which Deutsche Marks may be converted
into Dollars on such date, as determined by reference to the selling exchange
rate published in the Wall Street Journal on such date (or, if such date is not
a Business Day, on the next preceding Business Day); provided, that in the event
such rate is not so published, the "Spot Exchange Rate" for such date shall be
the rate of exchange quoted by the Administrative Agent in the London interbank
foreign exchange market at or about 11:00 a.m. London time on such date (or, if
such date is not a Business Day, on the next preceding Business Day) for the
spot purchase of such amount of Deutsche Marks with Dollars.
"Standard Terms" means any standard terms and conditions which govern the
sale of any products or provision of any services by Hohe to an Eligible DM
Obligor.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Seller.
"Termination Date" means, for any Receivable Interest, the Facility
Termination Date, and, solely with respect to a Receivable Interest of Falcon,
that Business Day so designated by the Seller or Falcon by notice to the other.
"Tranche Period" means (a) with respect to any Receivable Interest that
shall have arisen from a Dollar Purchase:
(i) if Discount for such Receivable Interest is calculated with
respect to the CP Rate, a period of days not to exceed 270 days commencing
on a Business Day requested by the Seller and agreed to by Falcon;
(ii) if Discount for such Receivable Interest is calculated on the
basis of the LIBO Rate, a period of one, two or three months, or such other
period as may be mutually agreeable to the Administrative Agent and the
Seller, commencing on a Business Day selected by the Seller or the
Administrative Agent pursuant to this Agreement. Such Tranche Period shall
end on the day in the applicable succeeding calendar month which
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corresponds numerically to the beginning day of such Tranche Period,
provided, however, that if there is no such numerically corresponding day
in such succeeding month, such Tranche Period shall end on the last
Business Day of such succeeding month; and
(iii) if Discount for such Receivable Interest is calculated on the
basis of the Base Rate, a period of 30 days commencing on a Business Day
selected by the Seller;
(b) with respect to any Receivable Interest that shall have arisen
from a DM Purchase:
(i) a Fixed Exchange Period, or
(ii) such other period of time as the Seller may, with the prior consent of the
Administrative Agent, select.
If any Tranche Period would end on a day which is not a Business Day, such
Tranche Period shall end on the next succeeding Business Day, provided, however,
that in the case of Tranche Periods corresponding to the LIBO Rate, if such next
succeeding Business Day falls in a new month, such Tranche Period shall end on
the immediately preceding Business Day. In the case of any Tranche Period for
any Receivable Interest of which commences before the Termination Date and would
otherwise end on a date occurring after the Termination Date, such Tranche
Period shall end on the Termination Date. The duration of each Tranche Period
which commences after the Termination Date shall be of such duration as selected
by the Administrative Agent.
"Transaction Documents" means, collectively, this Agreement, the Transfer
Agreements, the Servicing Agreement, each Collections Account Agreement, and all
other instruments, documents and agreements executed and delivered by the Seller
or either Originator in connection herewith.
"Transfer Agreement" means either the Donnelly Transfer Agreement or the
Hohe Transfer Agreement.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the specified jurisdiction.
All accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles. All terms used in
Article 9 of the UCC in the State of Illinois, and not specifically defined
herein, are used herein as defined in such Article 9.
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EXHIBIT II
PLACES OF BUSINESS OF THE SELLER; LOCATIONS OF RECORDS; FEDERAL EMPLOYER
IDENTIFICATION NUMBER(S); NAME(S)
Principal Place of Business; Chief Executive Office
None, except: 414 East Fortieth Street Holland, Michigan 49423
Location of Records:
None, except: 414 East Fortieth Street Holland, Michigan 49423
Haupstrabe 36, D-97903 Collenberg, Germany
Federal Employer Identification Number:
38-3314469
Corporate Names, Trade Names, Assumed Names:
None, except: Donnelly Receivables Corporation
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EXHIBIT III
LOCK-BOXES;
CONCENTRATION ACCOUNTS; AND DEPOSITARY ACCOUNTS
None, except:
a. NBD Bank
611 Woodward Avenue Detroit, MI 48226 Lock-Box No. 78066 Account No. 964-733
b. Bank One, Columbus, NA
100 E. Broad
Columbus, OH 43271-0391
Lock-Box No. 432710938
Checking Account No. 931296050
c. The First National Bank of Chicago, Frankfurt branch Niederlassung Frankfurt
BLZ 503 304 00
Account No. 100-7173
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EXHIBIT IV
[On Letterhead of Seller]
FORM OF COMPLIANCE CERTIFICATE
To: The First National Bank of Chicago, as Administrative Agent
This Compliance Certificate is furnished pursuant to that certain
Receivables Purchase Agreement dated as of November 14, 1996, among Donnelly
Receivables Corporation (the "Seller"), the Purchasers party thereto and The
First National Bank of Chicago, as Administrative Agent for such Purchasers (the
"Agreement").
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _____________________ of the Seller;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Seller during the accounting period covered by the
attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes a
Servicer Default or Potential Servicer Default, as each such term is defined
under the Agreement, during or at the end of the accounting period covered by
the attached financial statements or as of the date of this Certificate, except
as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing the compliance with certain covenants of the Purchase Agreement, all
of which data and computations are true, complete and correct.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Seller has taken, is taking, or proposes to
take with respect to each such condition or event:
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this ____ day of ______________,
19___.
SCHEDULE I TO COMPLIANCE REPORT
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A. Schedule of Compliance as of __________, 19____ with Section [5.1(m)] of
the Agreement. Unless otherwise defined herein, the terms used in this
Compliance Certificate have the meanings ascribed thereto in the Purchase
Agreement.
This schedule relates to the month ended: _______________
Minimum Net Worth:
1. Total assets: _________.
2. Total liabilities: ________.
3. Net Worth (item 1- item 2): _______________.
4. Net Worth [equals or exceeds] [is less than] $2,850,000.
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EXHIBIT V-A
FORM OF COLLECTION ACCOUNT AGREEMENT FOR COLLECTION ACCOUNTS
LOCATED IN THE UNITED STATES
[On letterhead of Seller]
__________ 19__
[Lock-Box Bank/Concentration Bank/Depositary Bank]
Re: Donnelly Receivables Corporation [and name of applicable Originator]
Ladies and Gentlemen:
You have exclusive control of P.O. Box #_____________ in [city, state, zip
code] (the "Lock-Box") for the purpose of receiving mail and processing payments
therefrom pursuant to that certain [name of lock-box agreement] between you and
_______ [Name of Originator] dated _________ (the "Agreement"). You hereby
confirm your agreement to perform the services described therein. Among the
services you have agreed to perform therein, is to endorse all checks and other
evidences of payment, and credit such payments to our checking account no.
__________ maintained with you in the name of [Originator] (the "Lock-Box
Account").
[Originator] hereby transfers and assigns all of its right, title and
interest in and to, and exclusive ownership and control over, the Lock-Box and
the Lock-Box Account to Donnelly Receivables Corporation (the "Seller"). We
hereby request that the name of the Lock-Box Account be changed to Donnelly
Receivables Corporation, as "Collection Agent" for the benefit of The First
National Bank of Chicago ("FNBC"), as Administrative Agent under that certain
Receivables Purchase Agreement (the "Receivables Purchase Agreement") dated as
of November 14, 1996 among the Seller, Falcon Asset Securitization Corporation,
certain financial institutions parties thereto and FNBC.
The Seller hereby irrevocably instructs you, and you hereby agree, that
upon receiving notice from FNBC in the form attached hereto as Annex A: (i) the
name of the Lock-Box Account will be changed to FNBC for itself and as agent (or
any designee of FNBC) and FNBC will have exclusive ownership of and access to
such Lock-Box Account, and neither we nor any of our affiliates will have any
control of such Lock-Box Account or any access thereto, (ii) you will either
continue to send the funds from the Lock-Box to the Lock-Box Account, or will
redirect the funds as FNBC may otherwise request, (iii) you will transfer monies
on deposit in the Lock-Box Account, at any time, as directed by FNBC, (iv) all
services to be performed by you under the Agreement will be performed on behalf
of FNBC, and (v) copies of all
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correspondence or other mail which you have agreed to send us will also be sent
to FNBC at the following address:
The First National Bank of Chicago
Suite 0596, 21st Floor
One First National Plaza
Chicago, Illinois 60670
Attention: Credit Manager, Asset Backed
Securities Division
Moreover, upon such notice, FNBC for itself and as agent will have all
rights and remedies given to us under the Agreement. We agree, however, to
continue to pay all fees and other assessments due thereunder at any time.
You hereby acknowledge that monies deposited in the Lock-Box Account or any
other account established with you by FNBC for the purpose of receiving funds
from the Lock-Box are subject to the liens of FNBC for itself and as agent under
the Receivables Purchase Agreement, and will not be subject to deduction,
setoff, banker's lien or any other right you or any other party may have against
us, except that you may debit the Lock-Box Account for any items deposited
therein that are returned or otherwise not collected and for all charges, fees,
commissions and expenses incurred by you in providing services hereunder, all in
accordance with your customary practices for the charge back of returned items
and expenses.
This letter agreement and the rights and obligations of the parties
hereunder will be governed by and construed and interpreted in accordance with
the laws of the State of Illinois. This letter agreement may be executed in any
number of counterparts and all of such counterparts taken together will be
deemed to constitute one and the same instrument. All references herein to "we"
or "us" refer to [Originator] and Donnelly Receivables Corporation.
This letter agreement contains the entire agreement between the parties,
and may not be altered, modified, terminated or amended in any respect, nor may
any right, power or privilege of any party hereunder be waived or released or
discharged, except upon execution by all parties hereto of a written instrument
so providing. In the event that any provision in this letter agreement is in
conflict with, or inconsistent with, any provision of the Agreement, this letter
agreement will exclusively govern and control. Each party agrees to take all
actions reasonably requested by any other party to carry out the purposes of
this letter agreement or to preserve and protect the rights of each party
hereunder.
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Please indicate your agreement to the terms of this letter agreement by
signing in the space provided below. This letter agreement' will become
effective immediately upon execution of a counterpart of this letter agreement
by all parties hereto.
Very truly yours,
[ORIGINATOR]
By
---------------------------------------
Title
-------------------------------------
DONNELLY RECEIVABLES CORPORATION
By
----------------------------------------
Title
-------------------------------------
Acknowledged and agreed to
this ____ day of _______, 1996
[COLLECTION BANK]
By:
Title:
Acknowledged and agreed to
this ____ day of _______, 1996
THE FIRST NATIONAL BANK OF
CHICAGO (as Administrative Agent)
By
--------------------------------
Title
-----------------------------
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ANNEX A
FORM OF COLLECTION NOTICE
[On letterhead of FNBC]
_____________________, 19__
[Collection Bank/Depositary Bank/Concentration Bank]
Re: Donnelly Receivables Corporation
Ladies and Gentlemen:
We hereby notify you that we are exercising our rights pursuant to that
certain letter agreement among [Originator], Donnelly Receivables Corporation,
you and us, to have the name of, and to have exclusive ownership and control of,
account number ____________ (the "Lock-Box Account") maintained with you,
transferred to us. [Lock-Box Account will henceforth be a zero-balance account,
and funds deposited in the Lock-Box Account should be sent at the end of each
day to _______________.] You have further agreed to perform all other services
you are performing under that certain agreement dated ____________ between you
and [Originator] on our behalf.
We appreciate your cooperation in this matter.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO (as Administrative Agent)
By:
---------------------------------
Title:
-----------------------------
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<PAGE>
EXHIBIT V-B
FORM OF COLLECTION ACCOUNT AGREEMENT
FOR COLLECTION ACCOUNTS LOCATED IN GERMANY
[LETTERHEAD OF DONNELLY RECEIVABLES CORPORATION]
[Date]
[Name and Address of Bank]
Dear Sirs,
Account No. [____________]
We refer to Account No. 1007173 (the "Account") opened with your bank in the
name of Donnelly Receivables Corporation ("DRC"), on trust for the benefit of
The First National Bank of Chicago (in its capacity as administrative agent of
Falcon Asset Securitization Corporation ("Falcon"), the "Administrative Agent")
acting on behalf of Falcon and certain other persons. We hereby notify you that,
in connection with certain transactions involving certain of the trade account
receivables (the "Receivables") of Donnelly Hohe GmbH & Co. KG ("Hohe"), Hohe
has sold and assigned to its parent company, Donnelly Corporation, the
Receivables, together with all payments of all amounts due with respect to the
Receivables. Donnelly Corporation has resold and reassigned or will resell and
reassign the Receivables, together with all payments of all amounts due with
respect thereto, to its wholly-owned subsidiary, DRC. DRC will in turn sell
interests in the Receivables to Falcon and certain other persons.
The obligors of the Receivables have been notified of the sale of the
Receivables to Donnelly Corporation and to DRC. Nevertheless, the obligors may
make payments in respect of the Receivables in the name of Hohe, although such
payments will be made to the Account.
In connection with the foregoing, we hereby instruct you, as of the date of this
Agreement: (i) to collect the monies, checks, instruments and other items of
payment mailed to or otherwise paid to the Account including, for the avoidance
of doubt, any monies, checks, instruments and other items of payment with Hohe
as the named payee; and (ii) endorse all checks and other evidences of payment,
deposit into or otherwise credit to the Account all such monies, checks,
instruments and other items of payment including, for the avoidance of doubt,
any monies, checks, instruments and other items of payment with Hohe as the
named payee. In respect of any monies, checks, instruments and other items of
payment with Hohe as the named payee, Hohe, by its signature below,
Page 71
<PAGE>
acknowledges and consents to your acting in accordance with the foregoing
instructions in the name of Hohe and on its behalf, and undertakes to ratify and
confirm any actions taken by you in the name of Hohe in accordance with the
foregoing instructions.
In addition, we hereby request that the following terms and conditions shall
apply with respect to the Account:
1. The Administrative Agent shall be granted a revocable power of attorney
(widerrufliche Kontovollmacht), pursuant to which the Administrative Agent
shall be entitled to operate the Account and withdraw any and all monies on
deposit in the Account from time to time pursuant to your normal withdrawal
procedures and the mandate signed by us in relation to the Account. The
Administrative Agent may operate the Account as our agent only on the
signatures of certain duly authorized officers of the Administrative Agent.
As at the date of this letter, those duly authorized officers are: [ ]. The
signature of any one of the aforesaid persons is required to authorize any
transaction related to the Account. The specimen signature of each of the
aforesaid authorized signatories is set out in Annex A to this letter. Any
change in the list of authorized signatories of the Administrative Agent
will not be binding on you until notified to you in writing, signed by an
existing authorized signatory of the Administrative Agent.
2. Hohe, shall, until you have received the Notification (as defined below)
from the Administrative Agent, be granted a revocable power of attorney
(widerrufliche Kontovollmacht) (the "Hohe Power of Attorney"), pursuant to
which Hohe shall be entitled to operate the Account and withdraw any and
all monies on deposit in the Account from time to time pursuant to your
normal withdrawal procedures and the mandate signed by us in relation to
the Account. Hohe may operate the Account as our agent only on the
signatures of certain duly authorized officers of Hohe. As at the date of
this letter, those duly authorized officers are: [ ]. [The signatures of
any [two] of the aforesaid persons are required to authorize any
transaction related to the Account.]/1/ The specimen signature of each of
the aforesaid authorized signatories is set out in Annex A to this letter.
Any change in the list of authorized signatories of Hohe will not be
binding on you until notified to you in writing, signed by an officer of
each of DRC, the Administrative Agent and Hohe.
3. If at any time the Administrative Agent delivers to you a written notice in
the form of Annex B to this letter (which may be in the form of a facsimile
and which shall be signed by an officer or director of the Administrative
Agent) (the "Notification"), then the Hohe Power of Attorney shall
terminate and (i) you shall no longer permit Hohe or any authorized
signatory on the Account who is an officer of Hohe to make any further
withdrawals of monies from the Account or otherwise deal with the Account
or authorize any transactions relating to the Account, (ii) the name of the
Account will be changed to the name of the
------------
/1/ Complete information in square brackets as appropriate
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<PAGE>
Administrative Agent and the Administrative Agent will have exclusive ownership
and access to the Account, including the rights to make withdrawals therefrom,
(iii) you will transfer monies on deposit in the Account, at any time, as
directed by the Administrative Agent and (iv) copies of all correspondence or
other mail which you have agreed to send us will also be sent to the
Administrative Agent at the following address:
The First National Bank of Chicago Suite 0956, 1-21
One First National Plaza
Chicago, Illinois 60670
USA
Fax: 1 312-732-4487
4. We hereby agree that you shall in no event be held liable for any
transactions relating to the Account that were authorized by an authorized
signatory of Hohe prior to your receipt of the Notification.
5. Hohe has no authority to withdraw more monies from the Account than are on
deposit therein at such time, and you are expressly requested to
countermand any withdrawals that would so overdraw the Account.
6. You hereby represent and warrant to us that, as of the date of your
signature below, you are not aware of any liens, security interests,
charges, encumbrances or other rights or claims of any persons or entities
to the Account other than ourselves, the Administrative Agent and the
rights of Hohe created pursuant to this letter. You hereby agree that you
will notify us immediately upon your becoming aware of any such liens,
security interests, charges, encumbrances or other rights or claims of any
third persons or entities arising on or with respect to the Account.
7. You hereby agree that you will not exercise, and you hereby waive, any
right of combination, consolidation, merger, set-off, lien, security
interest, charge or encumbrance whatsoever which you may have in respect of
any monies standing or accruing to the credit of the Account. You further
acknowledge and agree that the terms and conditions of this letter shall
prevail in the event of any conflict between such terms and conditions and
your standard terms and conditions applicable to the opening, operating and
holding of the Account (including any standard account mandate).
Please acknowledge your consent and agreement to the terms and conditions
setforth in this letter by signing where indicated below and returning one of
the signed originals of this letter to DRC at [ ] and to the Administrative
Agent at [ ].
Yours faithfully,
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<PAGE>
DONNELLY RECEIVABLES CORPORATION
By: ______________________
Title: ___________________
ACKNOWLEDGED AND AGREED:
[Relevant Bank]
By:_____________________________
Title:____________________________
Date:____________________________
THE FIRST NATIONAL BANK
OF CHICAGO, as Administrative Agent
By:_____________________________
Title:____________________________
Date:____________________________
DONNELLY HOHE GmbH & CO. KG
By:_____________________________
Title:____________________________
Date:____________________________
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<PAGE>
DONNELLY CORPORATION
By:_____________________________
Title:____________________________
Date:____________________________
FALCON ASSET SECURITIZATION CORPORATION
By:_____________________________
Title:____________________________
Date:____________________________
Page 75
<PAGE>
ANNEX A AUTHORIZED SIGNATORIES
HOHE
Name Specimen Signature
[ ] ------------------------------
[ ] ------------------------------
[ ] ------------------------------
[ ] ------------------------------
ADMINISTRATIVE AGENT
Name Specimen Signature
[ ] ------------------------------
[ ] ------------------------------
[ ] ------------------------------
[ ] ------------------------------
Page 76
<PAGE>
ANNEX B
FORM OF NOTIFICATION
[On letterhead of FNBC]
_____________________, 19__
[Collection Bank]
Re: Donnelly Receivables Corporation
Ladies and Gentlemen:
We hereby notify you that we are exercising our rights pursuant to that
certain letter agreement among Donnelly Receivables Corporation, you and us, to
instruct you that (i) you shall no longer permit Donnelly Hohe GmbH & Co. KG
("Hohe") or any authorized signatory on account number ____________ (the
"Account") who is an officer of Hohe to make any further withdrawals of monies
from the Account or otherwise deal with the Account or authorize any
transactions relating to the Account and (ii) we are exercising our rights to
have the name of, and to have exclusive ownership and control of, the Account
transferred to us. The Account will henceforth be a zero-balance account, and
funds deposited in the Account should be sent at the end of each day to
_______________.
We appreciate your cooperation in this matter.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
(as Administrative Agent)
By:___________________________________
Title:__________________
Page 77
<PAGE>
EXHIBIT VI
CREDIT AND COLLECTION POLICY
(Attached)
Page 78
<PAGE>
EXHIBIT VII
FORM OF CONTRACT(S)
(Attached)
Page 79
<PAGE>
EXHIBIT VIII
FORM OF SETTLEMENT REPORT
(Attached)
Page 80
<PAGE>
EXHIBIT IX
FORM OF PURCHASE NOTICE
[On Letterhead of Seller]
[Date]
The First National Bank of Chicago,
as Administrative Agent for the Purchasers parties
to the Receivables Purchase Agreement
referred to below
Suite 0596, 1-21
One First National Plaza Chicago, Illinois 60670
Attention: Asset-Backed Markets
Gentlemen:
The undersigned, DONNELLY RECEIVABLES CORPORATION, refers to the
Receivables Purchase Agreement, dated as of November 14, 1996 (the "Receivables
Purchase Agreement", the terms defined therein being used herein as therein
defined), among the undersigned, Falcon Asset Securitization Corporation
("Falcon"), certain Investors parties thereto and The First National Bank of
Chicago, as Administrative Agent for Falcon and such Investors, and hereby gives
you notice, irrevocably, pursuant to Section 1.2 of the Receivables Purchase
Agreement that the undersigned hereby requests a Purchase under the Receivables
Purchase Agreement, and in that connection sets forth below the information
relating to such Purchase (the "Proposed Purchase") as required by Section 1.2
of the Receivables Purchase Agreement:
(i) The Business Day of the Proposed Purchase is ___________, 19__.
(ii) The requested Purchase Price in respect of the Proposed Purchase is
[$_____________] [DM___________].
(iii) The requested Purchaser[s] in respect of the Proposed Purchase [is
Falcon] [are the Investors].
(iii) The duration of the initial Tranche Period for the Proposed Purchase
is ____________ [days] [months].
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<PAGE>
(iv) The Discount Rate related to such initial Tranche Period is requested
to be the [CP] [LIBO] [Base] Rate.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the Proposed Purchase (before
and after giving effect to the Proposed Purchase):
(A) the representations and warranties set forth in Article III of the
Receivables Purchase Agreement are correct on and as of such date, as
though made on and as of such date;
(B) no event has occurred, or would result from the Proposed Purchase that
will constitute a Servicer Default, and no event has occurred and is
continuing, or would result from such Proposed Purchase, that would
constitute a Potential Servicer Default; and
(iii) the Liquidity Termination Date shall not have occurred, the Aggregate
Capital shall not exceed the Purchase Limit and the Aggregate Capital
shall not exceed the Capital Limit.
[A Settlement Report is attached hereto and made a part hereof.]/2/
Very truly yours,
DONNELLY RECEIVABLES CORPORATION
By__________________________________ Title:
------------
/2/ If requested by the Administrative Agent.
Page 82
<PAGE>
EXHIBIT X
FORM OF LEGEND
The Receivable evidenced by this Invoice/shipping documentation has been sold
and assigned to Donnelly Corporation and resold and reassigned by Donnelly
Corporation to Donnelly Receivables Corporation and the amount payable in
respect hereof should be paid in accordance with our letter to you dated [date
of relevant Obligor Notification].
Page 83
<PAGE>
EXHIBIT XI
LIST OF ELIGIBLE DM OBLIGORS
Name of
Eligible Obligor Address
Audi AG 85045 Ingolstadt, Germany
Bayerische Motorenwerke AG Postfach 40 02 01
80788 Munchen, Germany
Ford Werke AG Henry-Ford-Strasse 1
50735 Koln, Germany
Karmann Wilhelm GmbH Postfach 2609
49016 Osnabruck, Germany
Evobus GmbH Postfach 2660
89016 Ulm, Germany
Opel Adam AG Postfach 17 10
65423 Russelsheim, Germany
Porsche Dr. Ing. H.C.F. AG Postfach 40 06 40
70406 Stuttgart, Germany
Rowenta Werke GmbH Postfach 10 16 64
63016 Offenbach, Germany
B10-3 Erad
Saab Automobile AB 46180 Trollhaettan, Sweden
Saechsische Automobilbau GmbH Postfach 200
08125 Mosel, Germany
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<PAGE>
Volkswagenwerk AG Postfach
38436 Wolfsburg, Germany
Volkswagenwerk Bruxelles S.A. 201, Boulevard de la Deuxieme Armee
1190 Bruxelles, Belgium
Volvo Car Corporation 40508 Goteborg, Sweden
Volvo Cars Europe Industry Postfach 2 73
9000 Gent, Belgium
Alfi Zitzmann GmbH Postfach 16 16
97866 Wertheim, Germany
Page 85
<PAGE>
EXHIBIT XII
FORM OF OBLIGOR NOTIFICATION
(Attached)
Page 86
<PAGE>
SCHEDULE A
DOCUMENTS TO BE DELIVERED TO THE ADMINISTRATIVE AGENT ON OR PRIOR TO THE INITIAL
PURCHASE
(Attached)
Page 87
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
Dated as of November 14, 1996
Among
DONNELLY RECEIVABLES CORPORATION as Seller
and
FALCON ASSET SECURITIZATION CORPORATION
and
THE FINANCIAL INSTITUTIONS PARTY HERETO, as Investors
and
THE FIRST NATIONAL BANK OF CHICAGO, as Administrative Agent
<PAGE>
TABLE OF CONTENTS
-----------------
CAPTION
PAGE
----
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES................. Page 1 Section 1.1.
Purchase Facility.................................. Page 2 Section 1.2.
Making Purchases................................... Page 2 Section 1.3.
Selection of Tranche Periods and Discount Rates.... Page 2 Section 1.4.
Percentage Evidenced by Receivable Interests....... Page 4 Section 1.5.
Dividing or Combining Receivable Interests......... Page 4 Section 1.6.
Reinvestment Purchases............................. Page 4 Section 1.7.
Liquidation Settlement Procedures.................. Page 5 Section 1.8.
Deemed Collections................................. Page 6 Section 1.9.
Discount; Payments and Computations, Etc........... Page 6 Section 1.10.
Capital Limit...................................... Page 7 Section 1.11.
Seller's Extinguishment............................ Page 7 Section 1.12.
Extensions of the Liquidity Termination Date....... Page 7
ARTICLE II
LIQUIDITY FACILITY................................. Page 8 Section 2.1.
Transfer to Investors.............................. Page 8 Section 2.2.
Transfer Price Reduction Discount.................. Page 8 Section 2.3.
Payments to Falcon................................. Page 8 Section 2.4.
Limitation on Commitment to Purchase from Falcon... Page 8 Section 2.5.
Defaulting Investors............................... Page 9 Section 2.6.
Hedging Arrangements............................... Page 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES..................... Page 9 Section 3.1.
Seller Representations and Warranties.............. Page 9 Section 3.2.
Investor Representations and Warranties............ Page 13
ARTICLE IV
CONDITIONS OF PURCHASES............................. Page 14 Section 4.1.
Conditions Precedent to Initial Purchase............ Page 14 Section 4.2.
Conditions Precedent to All Purchases
and Reinvestments.......................... Page 14
ARTICLE V
COVENANTS........................................... Page 15 Section 5.1.
Affirmative Covenants of Seller..................... Page 15 Section 5.2.
Negative Covenants of Seller........................ Page 21
ARTICLE VI
ADMINISTRATION AND COLLECTION....................... Page 23 Section 6.1.
-i-
<PAGE>
Designation of Servicer............................ Page 23 Section 6.2.
Duties of Servicer................................. Page 24 Section 6.3.
Collection Notices................................. Page 25 Section 6.4.
Responsibilities of the Seller..................... Page 25 Section 6.5.
Reports............................................ Page 25
ARTICLE VII
SERVICER DEFAULTS.................................. Page 26
ARTICLE VIII
INDEMNIFICATION.................................... Page 27 Section 8.1.
Indemnities by the Seller.......................... Page 27 Section 8.2.
Increased Cost and Reduced Return.................. Page 30 Section 8.3.
Other Costs and Expenses........................... Page 30 Section 8.4.
Allocations........................................ Page 31
ARTICLE IX
THE ADMINISTRATIVE AGENT........................... Page 31 Section 9.1.
Authorization and Action........................... Page 31 Section 9.2.
Delegation of Duties............................... Page 32 Section 9.3.
Exculpatory Provisions............................. Page 32 Section 9.4.
Reliance by Administrative Agent................... Page 32 Section 9.5.
Non-Reliance on Administrative Agent and
Other Purchasers......................... Page 33 Section 9.6.
Reimbursement and Indemnification...................... Page 33 Section 9.7.
Administrative Agent in its Individual Capacity........ Page 33 Section 9.8.
Successor Administrative Agent......................... Page 34
ARTICLE X
ASSIGNMENTS; PARTICIPATIONS........................ Page 34 Section 10.1.
Assignments........................................ Page 34 Section 10.2.
Participations..................................... Page 35
ARTICLE XI
MISCELLANEOUS...................................... Page 35 Section 11.1.
Waivers and Amendments............................. Page 35 Section 11.2
Notices............................................ Page 36 Section 11.3.
Ratable Payments................................... Page 37 Section 11.4.
Protection of Ownership Interests of the
Purchasers.............................. Page 37 Section 11.5.
Confidentiality......................................... Page 38 Section 11.6.
Bankruptcy Petition..................................... Page 38 Section 11.7.
Limitation of Liability................................. Page 39 SECTION 11.8.
CHOICE OF LAW........................................... Page 39 SECTION 11.9.
CONSENT TO JURISDICTION................................. Page 39 SECTION 11.10.
WAIVER OF JURY TRIAL.................................... Page 39 Section 11.11.
-ii
<PAGE>
Integration; Survival of Terms........................... Page 40 Section 11.12.
Counterparts; Severability............................... Page 40 Section 11.13.
First Chicago Roles...................................... Page 40 Section 11.14.
Characterization......................................... Page 40
-iii
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBIT I DEFINITIONS
EXHIBIT II PRINCIPAL PLACE OF BUSINESS OF THE SELLER; LOCATION(S) OF
RECORDS; FEDERAL EMPLOYER IDENTIFICATION NUMBERS; NAMES
EXHIBIT III LOCK-BOXES; CONCENTRATION ACCOUNTS; DEPOSITARY ACCOUNTS
EXHIBIT IV FORM OF COMPLIANCE CERTIFICATE
EXHIBIT V FORM OF COLLECTION ACCOUNT AGREEMENT
EXHIBIT VI CREDIT AND COLLECTION POLICY
EXHIBIT VII FORM OF CONTRACT(S)
EXHIBIT VIII FORM OF SETTLEMENT REPORT
EXHIBIT IX FORM OF PURCHASE NOTICE
EXHIBIT X FORM OF LEGEND
EXHIBIT XI ELIGIBLE DM OBLIGORS
EXHIBIT XII FORM OF OBLIGOR NOTIFICATION
SCHEDULE A LIST OF DOCUMENTS TO BE DELIVERED TO THE ADMINISTRATIVE AGENT
PRIOR TO THE INITIAL PURCHASE
-iv-
<PAGE>
EXHIBIT 24
Consent of Independent Certified Public Accountants
Donnelly Corporation
Holland, Michigan
We hereby consent to the incorporation by reference of our reports dated August
2, 1996, relating to the combined consolidated financial statements and schedule
of Donnelly corporation appearing in the corporation's amended annual report on
Form 10-K for the year ended June 29, 1996, in that corporation's previously
filed Form S-8 Registration Statements for that corporation's 1987 Stock Option
Plan (Registration No. 33-26555), 1987 Employees' Stock Purchase Plan
(Registration No. 33-34746) and Non-Employee Directors' Stock Option Plan
(Registration No. 33-55499).
/s/ BDO Seidman, LLP
Grand Rapids, Michigan
September 19, 1997
