SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarter ended December 27, 1997 Commission File Number 1-9716
DONNELLY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Michigan 38-0493110
(State or other jurisdiction of (IRS Employer
incorporation or organization) 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
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 ___
5,591,803 shares of Class A Common Stock and 4,365,783 shares of Class B Common
Stock were outstanding as of January 31, 1998.
<PAGE>
DONNELLY CORPORATION
INDEX
Page
Numbering
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Combined Consolidated Balance Sheets
- December 27, 1997 and June 28, 1997 3
Condensed Combined Consolidated Statements of Income
- Three months and six months ended December 27, 1997 4
and December 28, 1996
Condensed Combined Consolidated Statements of Cash Flows
- Six months ended December 27, 1997 and December 28, 1996 5
Notes to Condensed Combined Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 9-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS
<TABLE>
December 27, June 28,
In thousands 1997 1997
- --------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $5,783 $8,568
Accounts receivable, less allowance of $949 and $1,064 69,647 67,850
Inventories 43,226 42,484
Prepaid expenses and other current assets 32,671 33,738
----------------- -----------------
Total current assets 151,327 152,640
Property, plant and equipment 290,028 286,451
Less accumulated depreciation 124,699 121,327
----------------- -----------------
Net property, plant and equipment 165,329 165,124
Investments in and advances to affiliates 18,834 15,487
Other assets 23,100 25,042
----------------- -----------------
Total assets $358,590 $358,293
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts and notes payable $57,950 $76,392
Other current liabilities 44,091 39,257
----------------- -----------------
Total current liabilities 102,041 115,649
Long-term debt, less current maturities 128,343 122,798
Deferred income taxes and other liabilities 29,872 25,674
----------------- -----------------
Total liabilities 260,256 264,121
----------------- -----------------
Minority interest 726 345
Preferred stock 531 531
Common stock 998 991
Other shareholders' equity 96,079 92,305
----------------- -----------------
Total shareholders' equity 97,608 93,827
----------------- -----------------
Total liabilities and shareholders' equity $358,590 $358,293
================= =================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
Three Months Ended Six Months Ended
December 27, December 28, December 27, December 28,
In thousands except share data 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales ................................. $ 194,800 $ 188,037 $ 359,976 $ 301,437
Cost of sales ............................. 161,713 153,266 299,189 243,518
Gross profit ...................... 33,087 34,771 60,787 57,919
Operating expenses:
Selling, general and administrative ....... 17,412 17,723 32,677 28,810
Research and development .................. 9,297 8,448 18,642 15,567
Operating income .................. 6,378 8,600 9,468 13,542
Non-operating (income) expenses:
Interest expense .......................... 2,290 3,034 4,694 4,991
Royalty income ............................ -170 -672 -272 -1081
Interest income ........................... -166 -342 -277 -414
Gain on sale of equity investment ......... -4,598 0 -4,598 0
Other (income) expense, net ............... -175 -1,292 12 -975
Income before taxes on income ..... 9,197 7,872 9,909 11,021
Taxes on income ........................... 3,733 2,972 3,748 4,143
Income before minority interest and
equity earnings ........... 5,464 4,900 6,161 6,878
Minority interest in net (income) loss of
subsidiaries ...................... -111 -594 234 -594
Equity in losses of affiliated companies .. -184 -389 -240 -645
Net income ................................ $ 5,169 $ 3,917 $ 6,155 $ 5,639
Per share of common stock:
Basic net income per share ........ $ 0.52 $ 0.40 $ 0.62 $ 0.57
Diluted net income per share ...... $ 0.51 $ 0.39 $ 0.61 $ 0.57
Cash dividends declared ........... $ 0.10 $ 0.08 $ 0.20 $ 0.16
Average common shares outstanding . 9,940,564 9,822,503 9,916,545 9,809,136
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Six Months Ended
December 27, December 28,
In thousands 1997 1996
OPERATING ACTIVITIES
<S> <C> <C>
Net income ............................................... $ 6,155 $ 5,639
Adjustments to reconcile net income to net cash from (for)
operating activities:
Depreciation and amortization ............................ 12,034 9,443
(Gain) loss on sale of property and equipment ............ 71 -805
Gain on sale of affiliate stock .......................... -4,598 -872
Deferred pension cost and postretirement benefits ........ 2,709 2,744
Deferred income taxes .................................... -1,015 -1,709
Minority interest income (loss) .......................... -569 1,201
Equity in losses of affiliated companies ................. 240 1,032
Changes in operating assets and liabilities:
Sale of accounts receivable .............................. 498 31,957
Accounts receivable ...................................... -3,669 -19,887
Inventories .............................................. -3,012 -4,440
Prepaid expenses and other current assets ................ -2,362 -1,344
Accounts payable and other current liabilities ........... -11,183 11,538
Other .................................................... -2,555 -889
Net cash from (for) operating activities ......... -7,256 33,608
INVESTING ACTIVITIES
Capital expenditures ..................................... -22,413 -11,497
Proceeds from sale of property and equipment ............. 435 3,132
Investments in and advances to equity affiliates ......... -138 -4,567
Repayments on advances to equity affiliates .............. 248 0
Proceeds from sale of affiliated stock ................... 11,067 974
Change in unexpended bond proceeds ....................... 0 47
Cash increase due to consolidation of subsidiary ......... 0 9,963
Other .................................................... -322 -739
Net cash for investing activities ................ -11,123 -2,687
FINANCING ACTIVITIES
Proceeds from long-term debt ............................. 17,711 0
Repayments on long-term debt ............................. -430 -19,812
Common stock issuance .................................... 800 322
Dividends paid ........................................... -2,006 -1,594
Other .................................................... -218 0
Net cash from (for) financing activities ......... 15,857 -21,084
Effect of foreign exchange rate changes on cash .......... -263 -346
(Decrease) increase in cash and cash equivalents ......... -2,522 9,837
Cash and cash equivalents, beginning of period ........... 8,568 1,303
Cash and cash equivalents, end of period ................. $ 5,783 $10,794
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
DONNELLY CORPORATION
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
December 27, 1997
NOTE A---BASIS OF PRESENTATION
The accompanying unaudited condensed combined consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended December 27, 1997,
should not be considered indicative of the results that may be expected for the
year ended June 27, 1998. The combined consolidated balance sheet at June 28,
1997, has been taken from the audited combined consolidated financial statements
and condensed. The accompanying condensed combined consolidated financial
statements and footnotes thereto should be read in conjunction with the
Company's annual report on Form 10-K for the year ended June 28, 1997.
The Company's fiscal year is the 52 or 53 week period ending the Saturday
closest to June 30. Accordingly, each quarter ends on the Saturday closest to
the calendar quarter end. Both the quarters ended December 27, 1997, and
December 28, 1996, included 13 weeks.
NOTE B---INVENTORIES
<TABLE>
Inventories consist of:
(In thousands) December 27, June 28,
1997 1997
<S> <C> <C>
FIFO and average cost:
Finished products and work in process $ 17,341 $ 16,675
Raw materials 25,885 25,809
$ 43,226 $ 42,484
</TABLE>
Note C---Earnings per Share
Effective December 27, 1997, the Company has adopted the provisions of Statement
of Financial Accounting Standards No. 128, Earnings per Share. Statement No. 128
replaces the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options and
convertible securities. Diluted earnings per share is computed similarly to
fully diluted earnings per share. All earnings per share amounts for all periods
presented have been restated to conform to the requirements of Statement No.
128.
<PAGE>
The following table sets forth the computation of basic and diluted
earnings per share for each period reported:
<TABLE>
Three Months Ended Six Months Ended
---------------------------------------- -------------------------------------
December 27, December 28, December 27, December 28,
1997 1996 1997 1996
------------------------------------------ -------------------------------------
<S> <C> <C> <C> <C>
Net income $5,169,000 $3,917,000 $6,155,000 $5,639,000
Less: Preferred stock dividends (9,959) (9,959) (19,918) (19,918)
------------------- -------------------- ------------------ -----------------
Income available to common
stockholders 5,159,041 3,907,041 6,135,082 5,619,082
Plus: Income effect of dilutive stock
options 39,278 50,027 45,333 35,761
------------------- -------------------- ------------------ -----------------
Income available to common
stockholders plus effect from
assumed exercise of stock options $5,198,319 $3,957,068 $6,180,415 $5,654,843
=================== ==================== ================== =================
Weighted-average shares 9,940,564 9,822,503 9,916,545 9,809,136
Plus: Effect of dilutive stock
options 154,174 197,497 146,588 169,137
------------------- -------------------- ------------------ -----------------
Adjusted weighted-average
shares 10,094,738 10,020,000 10,063,133 9,978,273
=================== ==================== ================== =================
Basic earnings per share $ 0.52 $ 0.40 $ 0.62 $ 0.57
=================== ==================== ================== =================
Diluted earnings per share $ 0.51 $ 0.39 $ 0.61 $ 0.57
=================== ==================== ================== =================
</TABLE>
NOTE D---SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
Six Months Ended
(In thousands) December 27, December 28,
1997 1996
<S> <C> <C>
Cash paid during the period for:
Interest ........................................... $5,244 $5,424
Income taxes ....................................... $ 480 $5,175
Non-Cash investing activities:
Transfer of non-cash net assets to equity-method.... $7,622 $ --
affiliate (See Note E)
</TABLE>
<PAGE>
NOTE E---INVESTMENTS IN AND ADVANCES TO AFFILIATES
On November 3, 1997, the Company formed Lear-Donnelly Overhead Systems, L.L.C.
("Lear-Donnelly"), a 50% owned joint venture with Lear Corporation ("Lear"),
based in Southfield, Michigan, one of the world's largest independent automotive
suppliers. Lear- Donnelly is engaged in the design, development and production
of overhead systems for the global automotive market, including complete
overhead systems, headliners, consoles and lighting components, vehicle
electrification interfaces, electronic components, visors and assist handles
("products"). Lear and Donnelly each contributed certain technologies, assets
and liabilities for the creation of the joint venture. The Company transferred
net assets of $7.6 million associated with its interior trim and lighting
businesses, including $10 million of debt, to the Lear-Donnelly joint venture
for its 50% interest in Lear- Donnelly.
Lear-Donnelly manufactures products for sale to both Donnelly and Lear, who are
responsible for the customer sales efforts to the original equipment
manufacturers. Because existing and certain future contracted sales are to be
retained by the Company, the Company's net sales levels will remain unchanged.
The existence of the joint venture will not significantly impact the
comparability of net income of the Company from period to period. However, due
to the supply agreement between Lear- Donnelly and the parent companies and the
related net earnings of the joint venture being accounted for under the equity
method, the Company's gross profit and operating margins are expected to be
unfavorably impacted.
In the second quarter of 1997, the Company sold its 50% interest in Applied
Films Corporation ("AFC") located in Boulder, Colorado. As a result of this
sale, the Company received $7.9 million in net proceeds, after taxes and related
fees, and recognized a one-time pretax gain of approximately $4.6 million, or
$0.22 per share after tax. AFC is primarily a manufacturer of thin-film glass
coatings and related production equipment used in the production of liquid
crystal displays. The Company sold all of its shares in AFC during an initial
public offering that was completed in November.
NOTE F---GLOBAL REVOLVER
In September 1997, the Company entered into an unsecured $160 million
multi-currency global revolving credit agreement to meet the financing needs of
Donnelly Corporation and its majority owned, controlled subsidiaries. This
multi-currency revolving credit agreement replaces the Company's previous
unsecured $80 million domestic credit agreement and its 75 million Deutsch Mark
revolving Eurocredit loan agreement. Borrowings under this agreement bear
interest, at the election of the Company, at a floating rate equal to (i) the
Federal Funds Funding rate plus .385% to .875% or (ii) the Eurodollar rate plus
.185% to .675% based on specific financial ratios of the Company. The Company's
initial borrowings under the agreement bear interest at a floating rate of
approximately 3.5-4.0% per annum when borrowed in German Marks and 5.7-6.0% per
annum when borrowed in U.S. Dollars. This new revolving credit agreement
terminates in September 2004, with an opportunity for the Company to extend for
one year periods with the consent of all the revolver banks.
<PAGE>
Item 2.
DONNELLY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER REPORT
FOR THE SIX MONTHS ENDED DECEMBER 27, 1997
On November 3, 1997, the Company formed Lear-Donnelly Overhead Systems, L.L.C.
("Lear-Donnelly"), a 50% owned joint venture with Lear Corporation ("Lear"),
based in Southfield, Michigan, one of the world's largest independent automotive
suppliers. Lear- Donnelly is engaged in the design, development and production
of overhead systems for the global automotive market, including complete
overhead systems, headliners, consoles and lighting components, vehicle
electrification interfaces, electronic components, visors and assist handles
("products"). Lear and Donnelly each contributed certain technologies, assets
and liabilities for the creation of the joint venture. The Company transferred
net assets of $7.6 million associated with its interior trim and lighting
businesses, including $10 million of debt, to the Lear-Donnelly joint venture
for its 50% interest in Lear- Donnelly.
Lear-Donnelly manufactures products for sale to both Donnelly and Lear, who are
responsible for the customer sales efforts to the original equipment
manufacturers. Because existing and certain future contracted sales are to be
retained by the Company, the Company's net sales levels will remain unchanged.
The existence of the joint venture will not significantly impact the
comparability of net income of the Company from period to period. However, due
to the supply agreement between Lear- Donnelly and the parent companies and the
related net earnings of the joint venture being accounted for under the equity
method, the Company's gross profit and operating margins are expected to be
unfavorably impacted.
On February 3, 1998, the Company reached a final settlement with Happich
Fahrzeug- Innausstaltung GmbH ("Happich") regarding Happich's withdrawal from
Donnelly Happich Technology, Inc. ("DHT"), a joint venture for the production of
interior trim components. See Part II, Item 1 for a more detailed discussion. As
a result of the settlement, the Company owns 100% of DHT (rather than 60%),
resulting in charges against earnings for all start-up costs of DHT, as opposed
to 60% if the joint venture continued. However, the Company also received
payments from Happich for past and future damages and for costs incurred as a
result of Happich's withdrawal from DHT which offset the additional start-up
costs, resulting in a positive impact on net income in the first and second
quarters.
In the second quarter of 1997, the Company acquired a controlling interest in
the general partner of Donnelly Hohe, and therefore, began consolidating the
financial statements of Donnelly Hohe with those of the Company. Prior to
acquiring control of the general partner, the Company's investment in Donnelly
Hohe was accounted for using the equity method. Because the Company's limited
partnership interest has remained unchanged, the impact on net income has
remained unchanged for each period reported.
The Company's fiscal year ends on the Saturday nearest June 30, and its fiscal
quarters end on the Saturdays nearest September 30, December 31, March 31 and
June 30. Donnelly Hohe's fiscal year ends on May 31, and its fiscal quarters end
on August 31, November 30, February 28 and May 31. Accordingly, the Company's
Combined Consolidated Financial Statements as of or for a period ended on a
particular date include Donnelly Hohe's financial statements as of or for a
period ended approximately one month before that date. Accordingly, the
Company's financial statements for the period ended
<PAGE>
December 27, 1997, consolidate Donnelly Hohe's financial statements for the
period ended November 30, 1997.
The Company's 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 formation of new
joint ventures, alliances, acquisitions, and substantial investment in new
product lines.
RESULTS OF OPERATIONS
Net sales were $194.8 million in the second quarter of 1998 compared to $188.0
million for the second quarter of 1997. For the six month period, net sales were
$360.0 million and $301.4 million for 1998 and 1997, respectively, an increase
of 19.4% which is primarily attributed to the consolidation of Donnelly Hohe.
Excluding the consolidation of Donnelly Hohe, consolidated net sales for the
first half of 1998 increased only moderately compared to 1997.
Net sales for the Company's North American operations increased by approximately
11.3% and 9.5% in the second quarter and first half of 1998 compared to 1997,
respectively. The increase was primarily due to programs launched in 1997
running at full production volumes and new product introductions in the modular
window, door handle and interior trim product lines. North American car and
light truck build increased approximately 6 percent and 3 percent for the second
quarter and six-month period, respectively. Net sales for the Company's European
operations were slightly higher in the second quarter of 1998 compared to 1997
as reported in the local currencies for these operations. However, due to the
increased strength of the dollar to the Deutsche Mark, Irish Punt and French
Franc from the three month period in 1998 to the same period in 1997, the
reported consolidated net sales for the Company's European operations decreased
by over 7%. European net sales increased by approximately 43% in the first half
of 1998 from 1997 due to the consolidation of Donnelly Hohe. In the first half
of 1998, the Company's European operations were at the same level as 1997,
excluding the consolidation of Donnelly Hohe.
Gross profit margin for the second quarter of 1998 was 17.0% compared to 18.5%
for the second quarter of 1997. The Company's North American gross profit
margins for the three and six month periods were lower compared to the same
periods in 1997 primarily due to the formation of the Lear-Donnelly joint
venture, costs associated with the ramp-up of the Donnelly Optics business and
an unfavorable product mix. The favorable arbitration award associated with DHT
offset excess costs on the visor program in the first and second quarters and
improved margins slightly. Some of the excess costs are expected to continue in
the future. The Company's European gross profit in the second quarter and first
six months of 1998 were lower compared to the same period in 1997 due to an
unfavorable product mix, continued pricing pressures and operational variances
at the Company's Irish and German operations.
Selling, general and administrative expenses decreased from 9.4% of net sales in
the second quarter of 1997 to 8.9% of net sales for the same period of 1998
primarily due to the formation of the Lear-Donnelly joint venture. These costs
are lower as a percent to sales due to certain general and administrative
expenses to support the interior trim and lighting business transferring to the
joint venture, which is accounted for under the equity method, and recovery of
legal costs associated with the Happich arbitration award. Selling, general, and
administrative expenses were 9.1% of net sales for the first six months of 1998
compared to 9.6% for the same period last year. Discount fees of $1.1 million
<PAGE>
associated with asset securitization entered into in November 1996 are also
included in selling, general and administrative expenses for the six month
period ending December 27, 1997.
Research and development expenses for the second quarter of 1998 were 4.8% of
net sales compared to 4.5% of net sales for the second quarter of 1997 and were
5.2% of net sales for the first six months of both 1998 and 1997. The Company
expects research and development expenses to be approximately 4.5% to 5.0% of
net sales, which is lower than in the past, primarily due to the transfer of
direct expenses to support the interior trim and lighting business to the
Lear-Donnelly joint venture, which is being accounted for under the equity
method, and due to the consolidation of Donnelly Hohe.
The Company's operating income was $6.4 million in the second quarter of 1998,
down from $8.6 million in 1997 and for the six month period was $9.5 million,
down from $13.5 million in 1997. The Company's North American operating income
was lower as a percent to sales for the three and six month period primarily due
to losses associated with the start-up of Donnelly Optics and an unfavorable
product mix. A favorable arbitration award associated with DHT offset excess
costs on the visor program in the first and second quarters and improved margins
slightly. Some of the excess costs are expected to continue in the future. The
formation of the Lear-Donnelly joint venture did not have a significant impact
on the Company's North American operating income. The Company's European
operating income was unfavorably impacted for the quarter by an unfavorable
product mix, competitive pricing pressures and operational problems at the
Company's Irish and German operations. In Germany, plans for restructuring the
operations have been delayed due to the change in management at Donnelly Hohe. A
modified restructuring plan will be implemented over the second half of 1998.
Interest expense was $2.3 million in the second quarter of 1998 compared to $3.0
million for the second quarter of 1997. Interest expense was lower primarily due
to lower average debt during the quarter compared to the same period last year
and favorable interest rates. In the second quarter of 1997, the Company entered
into an agreement to sell an interest in a defined pool of trade accounts
receivable. As of the Company's Consolidated Balance Sheet dated December 27,
1997, a $43.5 million interest in accounts receivable was sold under this
agreement, with proceeds used to reduce revolving lines of credit. The discount
expense associated with this transaction is included in selling, general and
administrative expenses.
In the second quarter of 1997, the Company recognized a one-time pretax gain of
approximately $4.6 million, or $0.22 per share after tax, from the sale of its
50% interest in Applied Films Corporation ("AFC") located in Boulder, Colorado.
The Company sold all of its shares in AFC during an initial public offering that
was completed in November. As a result of this sale, the Company received $7.9
million in net proceeds, after taxes and related fees.
The Company's effective tax rate was 40.6% and 37.8% for the three and six month
periods ending December 27, 1997, respectively. This compares to 37.8% and 37.6%
for the same respective periods last year. The increase in the effective tax
rate for the second quarter is primarily due to taxes on undistributed earnings
associated with the Company's sale of AFC.
Minority interest in net income (loss) of subsidiaries was $0.1 million in the
second quarter of 1998 compared to $0.6 million in the second quarter of 1997
and ($0.2) million and $0.6 million in the first half of 1998 and 1997,
respectively. Equity in losses of affiliated companies was $0.2 million in the
second quarter of 1998 compared to $0.4 million for the same period in 1997 and
$0.2 million and $0.6 million in the first half of 1998 and 1997, respectively.
In the first quarter of 1997 the Company accounted for its investment in
Donnelly Hohe under the equity method of accounting. The formation
<PAGE>
of the Lear-Donnelly joint venture did not have a significant impact on the
Company's equity earnings for the three or six month period.
Net income was $5.2 million in the second quarter of 1998 compared to $3.9
million the previous year and $6.2 million and $5.6 million for the first six
months of 1998 and 1997, respectively. Net income for the three and six month
periods included a $2.2 million net gain after taxes associated with the sale of
AFC. Net income from operations was lower for the three-month and six-month
period primarily due to lower operating margins as a percent to sales in the
Company's North American operations, operating losses at Donnelly Optics due to
the ramp-up of this business, higher research and development expenses and
continued operating issues and pricing pressures in the Company's European
operations. The Company recognized a net gain of approximately $.7 million in
the second quarter and $1.2 million in the first half of 1998 associated with
the cash settlement following a favorable interim DHT arbitration award granted
to the Company on July 31, 1997. This expected cash settlement was based upon
recovery of past and future losses and the recovery of litigation costs. The
consolidation of Donnelly Hohe did not impact the comparability of net income
from 1997 to 1998 for the second quarter or the six month period.
The Company continues to focus on implementing plans during 1998 to improve
financial performance over 1997 levels. However, the delays in implementing
improvements in Germany, operational difficulties in Ireland and the investments
required for Donnelly Optics are placing considerable pressure on financial
goals for the Company.
LIQUIDITY AND CAPITAL RESOURCES
In September 1997, the Company entered into a new unsecured $160 million multi-
currency global revolving credit agreement to meet the financing needs of
Donnelly Corporation and its majority owned, controlled subsidiaries. This
multi-currency revolving credit agreement replaces the Company's previous
unsecured $80 million domestic credit agreement and its 75 million Deutsch Mark
revolving Eurocredit loan agreement. Borrowings under this agreement bear
interest, at the election of the Company at a floating rate equal to (i) the
Federal Funds Funding rate plus .385% to .875% or (ii) the Eurodollar rate plus
.185% to .675% based on specific financial ratios of the Company. The Company's
initial borrowings under the agreement bear interest at a floating rate of
approximately 3.5-4.0% per annum when borrowed in Deutsch Marks and 5.7-6.0% per
annum when borrowed in U.S. Dollars. This new revolving credit agreement
terminates in September 2004, with an opportunity for the Company to extend for
one year periods with the consent of all the revolver banks.
The Company's $160 million multi-currency global revolving credit agreement had
borrowings against it of $49.1 million in the Company's Combined Consolidated
Balance Sheet at December 27, 1997, compared to no borrowings against the
Company's $80 million bank revolving credit agreement and borrowings of $33.4
million on the Company's 75 million Deutsche Mark (approximately $41 to $45
million) credit agreement in the Company's Combined Consolidated Balance Sheet
at June 28, 1997. These credit agreements were replaced by the $160 million
revolver in September 1997. The Company's long-term borrowing increased by $5.5
million from June 28, 1997, to December 27, 1997, primarily to support capital
expenditures and working capital requirements for the period, offset by proceeds
associated with the sale of the Company's investment in AFC and the transfer of
debt to the Lear-Donnelly joint venture.
The Company's current ratio was 1.5 and 1.3 at December 27, 1997, and June 28,
1997, respectively. Working capital was $49.3 million at December 27, 1997,
compared to $37.0 million at June 28, 1997.
<PAGE>
The increase in working capital at December 27, 1997, was primarily due to a
decrease in accounts payable for the period compared to the period ended June
28, 1997. Accounts payable at June 28, 1997, was higher than normal due to the
timing of payments on account at this date.
Capital expenditures for the first six months of 1998 and 1997 were $22.4 and
$11.5 million, respectively. Capital spending in 1998 is expected to be higher
compared to the previous year due to the consolidation of Donnelly Hohe for the
entire twelve month period and new business in diffractive optics and
electrochromic mirrors and implementation of new manufacturing, distribution and
administrative systems in North America and Europe. 1998 capital spending also
includes expenditures on assets for the interior lighting and trim business
through November 3, 1997.
The Company believes that its long term liquidity and capital resource needs
will continue to be provided principally by funds from operating activities,
supplemented by borrowings under the Company's existing credit facilities. The
Company also considers equity offerings to properly manage the Company's total
capitalization position. The Company considers, from time to time, new joint
ventures, alliances and acquisitions, the implementation of which could impact
the liquidity and capital resource requirements of the Company.
Except for Mexico, the value of the Company's consolidated assets and
liabilities located outside the United States and income and expenses reported
by the Company's foreign operations may be affected by translation values of
various functional currencies. Translation gains and loss adjustments are
reported as a separate component of shareholders' equity. For the Company's
subsidiary in Mexico, whose functional currency is the United States Dollar,
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.
The Company utilizes interest rate swaps and foreign exchange contracts, from
time to time, 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.
"Safe Harbor" Provisions
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Investors are cautioned that
any forward- looking statements, including statements regarding the intent,
belief, or current expectations of the Company or its management, are not
guarantees of future performance and involve risks and uncertainties. Actual
results may differ materially from those in forward-looking statements as a
result of various factors including, but not limited to (i) general economic
conditions in the markets in which the Company operates, (ii) fluctuation in
worldwide or regional automobile and light truck production, (iii) changes in
practices and/or policies of the Company's significant customers and (iv) other
risks and uncertainties. The Company does not intend to update these
forward-looking statements.
Recently Issued Accounting Standards
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income is defined to
<PAGE>
include all changes in equity except those resulting from investments by owners
and distributions to owners.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which supersedes SFAS No. 14, "Financial Reporting for Segments of
a Business Enterprise," establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers.
SFAS Nos. 130 and 131 are effective for financial statements for fiscal years
beginning after December 15, 1997, and require comparative information for
earlier years to be restated. Management has not yet fully evaluated the impact,
if any, they may have on future financial statement disclosures. However,
results of operations and financial position will be unaffected by
implementation of these new standards.
No other recently issued accounting standards are expected to have a material
impact on the Company.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 21, 1997, Midwest Manufacturing Holdings, L.L.C. ("Midwest") filed a
lawsuit against the Company in Cook County, Illinois Circuit Court with respect
to terminated discussions regarding the possibility of Midwest's acquisition of
the Company's Information Products business. The litigation has been removed to
the Federal District Court for the Northern District of Illinois. Midwest
alleges that a verbal agreement to purchase the Information Products business
had been reached, and has filed its lawsuit in an attempt to compel the Company
to proceed with the sale or to pay Midwest damages. On August 28, 1997, the
court granted the Company's motion to dismiss one of three counts and on
February 5, 1998, the court granted the Company's motion for summary judgment on
the remaining two counts. Management believes that the claim by Midwest will be
resolved without a material effect on the Company's financial condition or
results of operations and liquidity.
In June 1994, the Company entered into a joint venture with Happich Fahrzeug-
InnausstaHung GmbH of Germany ("Happich") to manufacture and sell sun visors,
grab handles and other interior parts in North America. In 1995, when the joint
venture was at an early stage of its development, Happich expressed its desire
to terminate the joint venture. The parties had been engaged in arbitration over
the terms of the joint venture termination since July 29, 1996. On July 31,
1997, the Company was granted an interim arbitration award favorable to the
Company. On February 3, 1998, the Company reached a final settlement with
Happich on all outstanding issues. As a result of the settlement, the Company
owns 100% of the former joint venture, received payment for damages and costs
incurred and entered into other agreements with respect to certain technology
and the supply of parts.
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 that such litigation and claims will be resolved
without material effect on the Company's financial position, results of
operations and liquidity, individually and in the aggregate.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
At the Annual Shareholders Meeting held October 17, 1997, the shareholders voted
on various proposals presented in the Company's 1997 definitive proxy statement.
The results of the votes follow:
I. Proposal to elect ten (10) directors, each for a term of one year:
1. Class A Common Stock For Against Withheld
John A. Borden 4,715,241 10,907
R. Eugene Goodson 4,716,783 9,365
Donald R. Uhlmann 4,715,783 10,365
Class B Common Stock
Dwane Baumgardner 38,523,040 0
Arnold F. Brookstone 38,523,040 0
B. Patrick Donnelly, III 38,523,040 0
Joan E. Donnelly 38,523,040 0
Thomas E. Leonard 38,523,040 0
Gerald T. McNeive 38,523,040 0
Rudolph B. Pruden 38,523,040 0
2. A proposal to adopt the Donnelly Corporation 1997 Employee Stock
Option Plan (the "Plan"). The proposal was carried and the Plan was
approved with 41,863,245 shares voting for, 876,249 shares voting
against and 509,694 shares abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 10.1 Lear-Donnelly Overhead Systems, L.L.C. Operating Agreement dated
November 1, 1997.
Exhibit 10.2 The Donnelly Corporation 1997 Employee Stock Option Plan was
filed as part of a Registration Statement on Form S-8 on November
25, 1997, (Registration No. 333-40987) as Exhibit 4, and the same
is hereby incorporated herein by reference.
Exhibit 27 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
DONNELLY CORPORATION
Registrant
Date: February 10, 1997 /s/ J. Dwane Baumgardner
J. Dwane Baumgardner
(Chairman, Chief Executive
Officer, and President)
Date: February 10, 1997 /s/ William R. Jellison
William R. Jellison
(Vice President, Corporate
Controller, and Treasurer)
<PAGE>
OPERATING AGREEMENT
OF
LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C.
THIS OPERATING AGREEMENT is made and entered into as of the lst day of
November, 1997, by and between Lear Corporation, a Delaware corporation
("Lear"), Automotive Industries Manufacturing, Inc., a Delaware corporation and
wholly-owned subsidiary of Lear ("AIM") and Donnelly Corporation, a Michigan
corporation ("Donnelly"). Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in Article XII hereof.
ARTICLE I.
Formation
1.1 Background. Lear and Donnelly have been involved in the designing,
engineering, manufacturing, sales, marketing and servicing of Products and have
particular expertise and technical know-how with respect to the Products. The
Members desire to operate the Company for the purpose of designing, engineering,
manufacturing, marketing, selling and servicing of Products in the United States
and other countries worldwide, as may be agreed upon by the Members (the
"Business").
1.2 Formation. On or before Closing, the Company will be formed pursuant to
the Michigan Limited Liability Company Act (the "Act") in accordance with the
terms and conditions of its Articles of Organization. Upon the request of the
Board of Directors of the Company or as required by law, the Members shall
promptly execute all amendments of the Articles of Organization and all other
documents and take all such other actions as may be necessary or advisable to
enable the Company to accomplish all filing, recording, publishing and other
ministerial acts necessary or appropriate to comply with all requirements for
the formation and continued operation of the Company under the Act.
1.3 Intent. It is the intent of the Members that the Company be operated in
a manner consistent with its treatment as a "partnership" for federal and state
income tax purposes. No Member shall take any action inconsistent with the
express intent of the Members as set forth herein.
1.4 Participating Percentages. The participating percentages
("Participating Percentages") of the Members in the Company are as follows:
Member Participating Percentage
Donnelly 50%
Lear and AIM(jointly owned) 50%
<PAGE>
ARTICLE II.
General Provisions
2.1 Name. The name of the Company shall be "Lear Donnelly Overhead Systems,
L.L.C." or such other name as the Board of Directors may from time to time
select. In addition, either Member shall have the unilateral right at any time
to remove its name from the name of the Company, and the Company and the Members
agree to cooperate and to take any necessary actions to effectuate such name
change.
2.2 Principal Place of Business. The principal place of business of the
Company shall be located at 39650 Orchard Hill Place, Novi, Michigan 48375, or
such other place as the Members may from time to time agree.
2.3 Company Purposes. The Company shall be formed for the purposes of (a)
the designing, engineering, manufacturing, selling, marketing and servicing of
Products; and (b) the engaging in any and all acts, things, businesses and
activities that are related, incidental or conducive, directly or indirectly, to
the attainment of the foregoing purposes with respect to the Products, including
the licensing of technical assistance and the procurement of marketing and sales
services and representation from the Members and their Affiliates. The Company
may engage in other business only upon the unanimous vote of the Members. The
Company shall have the power to do any and all acts necessary, appropriate,
proper, advisable, incidental or convenient to or for the furtherance of the
purposes and business described herein.
2.4 Expansion. Either Member may at any time cause the Company to make
recommendations to the Members with regard to the engaging by the Company in
business involving goods and/or services other than or in addition to the
Products which would require consideration of additional enhancements to the
Company's capital structure by contribution of existing operations of the
Members, acquisition of third-party operations, or other capital improvements as
necessary or desirable. Any expansion of the purposes of the Company beyond
those set forth in Section 2.3 hereof shall require the unanimous consent of the
Members.
2.5 Term. The term of the Company commenced on the filing of the Articles
of Organization and shall continue until the Company is terminated in accordance
with the terms of the Articles of Organization, this Agreement or applicable law
and the filing of the Certificate of Dissolution in accordance with Section 10.5
of this Agreement.
2.6 Registered Agent; Registered Office. The Registered Agent for the
Company shall be Richard Perreault and the Registered Office for the Company
shall be located at 39650 Orchard Hill Place, Novi, Michigan 48375. The Members
shall have the power from time to time to appoint a new Registered Agent and/or
specify a new Registered Office.
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ARTICLE III.
Contributions
3.1 Capital Contributions by the Members. As of the date of this Agreement,
each Member agrees to make its respective initial capital contribution set forth
in subsections (a) and (b) below, each such contribution to be in accordance
with the initial approved capital plan:
(a) Lear and AIM shall contribute good and marketable title to the
assets specified in the Transfer Agreement (as hereinafter defined) (the
"Lear Assets") subject to indebtedness of $10 million to be assumed by the
Company but free and clear of all Liens other than Permitted Encumbrances.
The Members agree that the Lear Assets are valued at $21 million (prior to
considering the $10 million indebtedness) and shall constitute Lear's and
AIM's initial capital contribution and, in addition, shall entitle Lear to
receive from the Company a preferred distribution of $3 million as provided
in Section 4.2(d). The allocation of the total value of the Lear Assets to
the individual assets will be agreed upon by Lear and Donnelly within
thirty (30) days after Closing. The assumption of existing liabilities for
each Member is being done to establish a desirable amount of leverage that
is consistent with the business plan for the Company and is pursuant to a
plan which is intended to qualify under Treasury Reg. ss.1.707-5(a)(4).
(b) Donnelly shall contribute good and marketable title to the assets
described in the Transfer Agreement (the "Donnelly Assets") subject to
indebtedness of $10 million to be assumed by the Company but free and clear
of all Liens other than Permitted Encumbrances. The Members agree that the
Donnelly Assets are valued at $18 million (prior to considering the $10
million indebtedness) and shall constitute Donnelly's initial capital
contribution. The allocation of the total value of the Donnelly Assets to
the individual assets will be agreed upon by Lear and Donnelly within
thirty (30) days after Closing. The assumption of existing liabilities for
each Member is being done to establish a desirable amount of leverage that
is consistent with the business plan for the Company and is pursuant to a
plan which is intended to qualify under Treasury Reg. ss.1.707-5(a)(4).
(c) Lear and Donnelly will enter into a Services Agreement in the form
attached as Exhibit A detailing certain services each will provide the
Company. Lear and Donnelly will enter into a Transfer Agreement with the
Company in the form attached as Exhibit B detailing the method in which the
Lear Assets and Donnelly Assets will be transferred to the Company.
(d) Additional capital contributions shall require the unanimous
action of the Members in accordance with Section 6.3 hereof. Any increase
in the capital of the Company shall be contributed by the Members in
accordance with their Participating Percentages. In the event the Members
are unable to unanimously agree upon the need for additional capital,
either Member may, at its sole option, loan to the Company from time to
time such amounts as may be reasonably necessary for the short term (in no
event for a period greater than six months including any period of renewal
or other extension) continued operation of the existing business of the
Company but not for any capital improvements, expansion, or manufacture of
Products not reasonably necessary to fulfill an existing purchase order.
Any loans from a Member to the Company shall be on commercially reasonable
terms applicable to a senior bank loan.
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<PAGE>
Capital accounts shall be maintained for each Member in the manner required by
Treasury Regulation Sections 1.704-1(b)(2)(ii)(b)(1) and (b)(2)(iv).
(e) Section 8.4 of the Transfer Agreement provides that additional
capital contributions will be required and Section 4.2(d) hereof provides
that Lear's preferential distribution will be reduced, if certain levels of
pre-tax, pre-depreciation and amortization levels are not achieved. If
those levels are not achieved, the parties agree that the initial value of
Lear Assets or Donnelly Assets, as the case may be, are overstated. To
adjust the capital accounts to reflect the actual value of the Lear Assets
or the Donnelly Assets:
(i) Prior to any payment required under Section 8.4 of the
Transfer Agreement, the capital account of either Member shall be
reduced by the amount of any such payment.
(ii) The capital account of Lear shall be reduced by any
reduction of the amount of its special distribution pursuant to
Section 4.2(d).
(f) The Lear-AIM Membership interest shall be jointly owned by Lear
and AIM. Lear and AIM agree that said Membership Interest shall be
allocated between them based upon the value of the properties each
contributes to the Company. In connection with such contributions and in
connection with allocations and distributions, the term "Lear" shall also
include AIM, but not otherwise.
3.2 First Tier Debt. It is the intention of the Members that the
expenditures necessary to develop and operate the Business will be financed with
the initial Capital Contributions, additional capital contributions, Company
revenues, third-party loans and, in the sole discretion of the Members, Member
Loans. The Members agree that in the event Capital Contributions and Company
revenues are insufficient, the Company shall first seek loans from third-party
lenders (the "First Tier Debt").
3.3 Member Loans. Except as otherwise provided herein, if funds are needed
by the Company in addition to the Capital Contributions, Company revenues and
First Tier Debt, the Members may, but shall not be obligated to, loan additional
funds to the Company ("Member Loans"). Except as otherwise unanimously agreed by
the Members, all Member Loans shall be made on a pro-rata basis according to
each Member's respective Participating Percentage in such amount as may be
determined to be necessary by the Board of Directors pursuant to Section 6
hereof. All Member Loans shall bear interest at the Prime Rate (as the same may
change from time to time) plus 1%, shall compound annually, shall be nonrecourse
to the Members, shall be repayable in whole or part at any time without penalty,
and shall be evidenced by a promissory note executed by or on behalf of the
Company which shall contain such other terms and conditions as are commercially
reasonable or as may be agreed to by the Members. Except for the distributions
referenced in Section 4.2 (b) hereof, the amount of principal and interest
payable on Member Loans shall be paid to the Members which have made Member
Loans to the Company pro-rata based upon the principal balance of the Member
Loans outstanding prior to any distribution of available funds to the Members
pursuant to Article IV being made.
4
<PAGE>
3.4 Employee Contribution. The Members agree to each assign to work for the
Company the employees currently working at operations transferred to the
Company. The employees so assigned will be leased to the Company from Lear and
Donnelly under an agreement in substantially the forms attached as Exhibits C-1
and C-2, with the cost to be borne by the Company. Additional support,
supervisory and management employees will be leased to the Company by Lear and
Donnelly as agreed.
3.5 Intellectual Property Contribution. The Members agree to license or
sub-license the intellectual property and know-how to be used by the Company and
included as part of the Lear Assets or the Donnelly Assets (collectively, the
"Intellectual Property") on a royalty-free (except for any pass through of the
actual royalty payments owing by the Member to any unaffiliated third party) and
worldwide basis under a license or sub-license in substantially the forms
attached as Exhibits D-1 and D-2. The Company, upon the unanimous approval of
the Members, shall have the right to license or sub-license its affiliates to
use such Intellectual Property provided any license or sub-license to a foreign
affiliate of the Company shall bear a royalty at a fair market rate.
3.6 Purchase and Supply Agreement. The Company will enter into a Purchase
and Supply Agreement with Lear and Donnelly in the form attached hereto as
Exhibit E, which agreement describes the procedures and responsibilities
concerning the purchase and sale of Products.
ARTICLE IV.
Distributions
4.1 Amount and Time of Distributions.
(a) Cash Flow. "Cash Flow" shall mean the sum of Operating Cash Flow
and Capital Proceeds.
(b) Operating Cash Flow. "Operating Cash Flow" means the gross cash
proceeds from the Company's operations less the portion thereof used to pay
or establish reserves for Company expenses and fees, principal and interest
payments on Company debt (including First Tier Debt and Member Loans or
other loans), capital improvements, replacements and contingencies, all as
determined by the Board of Directors in its reasonable discretion.
Operating Cash Flow shall not be reduced by depreciation, amortization, or
other similar non-cash allowances, and shall be increased by any reductions
in reserves which, when previously established, reduced Operating Cash
Flow.
(c) Capital Proceeds. "Capital Proceeds" of the Company means the net
cash proceeds from all sales, dispositions and refinancings of the
Company's property, less any portion thereof used to make principal and
interest payments on Company debt or established reserves, as determined by
the Board of Directors in its reasonable discretion. Capital Proceeds shall
be increased by any reductions in reserves which, when previously
established, reduced Capital Proceeds. Distributions of Capital Proceeds
shall be made from time to time in the reasonable discretion of the Board
of Directors. The Members may unanimously agree to suspend such
distributions at any time for such duration as the Members may determine,
which agreement shall be binding upon the Company.
5
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4.2 Distributions of Operating Cash Flow.
(a) Distributions, if any, of Cash Flow shall be made from time to
time in the reasonable discretion of the Board of Directors. The Members
may unanimously agree to suspend such distributions at any time for such
duration as the Members may determine, which agreement shall be binding
upon the Company. Distributions, if any, shall be made to the Members
pro-rata based on their Participating Percentages, except as set forth in
Section 4.2(d).
(b) The Company shall within ninety (90) days after the end of each
Fiscal Year, distribute to the Members pro rata based upon their
Participating Percentages an amount equal to thirty-five percent (35%) of
the Company's taxable income for the immediately preceding Fiscal Year in
order for the Members to satisfy their respective tax liability resulting
from the taxable income of the Company for the immediately preceding Fiscal
Year.
(c) Except as provided in Section 4.2(b), the Company shall not make
any distributions of Cash Flow to the Members until all Member Loans are
repaid in full.
(d) Lear shall be entitled to a special preferential distribution of
$3 million on January 1, 2002, provided that the amount of the distribution
shall be reduced by the amount that the EBITDA for 1998 and 1999 generated
by the operations contributed by Lear at the Initial Closing (as defined in
the Transfer Agreement) is less than that defined and shown on Exhibit H.
Such reduction shall be in addition to any payments required from Lear to
the Company for EBITDA shortfall provided in the Transfer Agreement.
4.3 Wrongful Withdrawal. Except as provided in Section 4.4 hereof, no
Member may withdraw or resign from the Company. Upon the attempted withdrawal or
resignation of a Member in breach of this Agreement, such Member shall not be
entitled to receive the value of such Member's Interest. Rather, such Member
shall merely be entitled to continue to receive its share of distributions as
provided in Sections 4.1 and 4.2 hereof (reduced by any damages incurred by the
Company as a result of such attempted withdrawal or resignation) as if such
withdrawing or resigning Member was still a Member of the Company.
4.4 Permitted Withdrawal.
(a) Right to Withdraw. Neither Member shall have the right to withdraw
from the Company until the third (3rd) anniversary of the date of this
Agreement, except pursuant to Subsection 4.5(c) hereof. After the third
(3rd) anniversary of the date of this Agreement, either Member may withdraw
from the Company at any time by providing written notice to the other
Member of its intent to do so at least ninety (90) days prior to the date
of such proposed withdrawal and by complying with the remainder of this
Section 4.4.
(b) Withdrawal After Not Meeting Company Goals. If one Member (the
"Selling Member") sends a notice of withdrawal within sixty (60) days after
receiving the annual certified financial statements for the Company for the
years ended December 31, 2000, or December 31, 2001, and the
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<PAGE>
Company has not met the goals set forth on Schedule 4.5 attached hereto for the
Company's previous fiscal year, then the other Member shall have thirty (30)
days in which to notify the Selling Member that it wishes to purchase all but
not less than all of the Selling Member's Interest for cash at the Fair Market
Value.
(i) If the non-selling Member notifies the Selling Member that it
does desire to purchase the Selling Member's Interest, then the
Members shall obtain the Fair Market Value of such Interest. After the
Fair Market Value has been determined, the non-selling Member may
ratify its decision to purchase the Interest of the Selling Member
(and the Selling Member shall be obligated to sell its Interest at
that price, payable in cash) or specify that the Company will be
liquidated.
(ii) If the non-selling Member does not purchase the Interest of
the Selling Member, the Company will be liquidated and dissolved. The
Members will attempt to agree on how the Company's obligations to its
customers will be completed. Failing agreement by the parties, the
Company shall stay in existence for the sole purpose of completing its
obligations to customers. As soon as existing obligations are
satisfied, the Company will be liquidated and dissolved.
(c) Withdrawal After Material Default. If prior to the receipt of a
written notice of withdrawal, there has been a Material Breach of this
Agreement or any of the Ancillary Agreements, then the non-breaching Member
may, at its option, by written notice to the breaching Member given within
thirty (30) days of the expiration of the applicable cure period(remedies
pursuant to this Section 4.5(c) are available only if the required notice
is given within thirty (30) days of the expiration of the applicable cure
period):
(i) Liquidate the Company, in which case the Company shall be
liquidated as provided in subsection (b)(ii) above;
(ii) State a proposed purchase price at which it is willing to
purchase the breaching Member's Interest, at which time the breaching
Member must either sell its Interest to the other Member at that price
or purchase the other Member's Interest at one hundred thirty-five
percent (135%) of that price, in both cases payable in cash;
(iii) Request that the breaching Member state a proposed price at
which it is willing to purchase the interest of the non-breaching
Member. If the breaching Member provides such a price within thirty
(30) days after such notice, the non-breaching Member may, at its
option, either sell its Interest at that price or purchase the
breaching Member's Interest at a price equal to eighty (80%) percent
of the proposed purchase price (and the breaching Member shall be
obligated to purchase at that price), in each case
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payable in cash. Alternatively, at such price the non-breaching Member
may request a determination of the Fair Market Value of the breaching
Member's Interest and after such determination of the Fair Market
Value has been completed, elect to buy or sell as specified in the
immediately preceding sentence or elect either alternative in
subsection (iv) below; or
(iv) Request a determination of the Fair Market Value of the
breaching Member's Interest in which case the non-breaching Member
may, after the determination of the Fair Market Value has been
completed, purchase the breaching Member's Interest for eighty (80%)
percent of the Fair Market Value payable in cash (and the breaching
Member shall be obligated to sell its Interest at that price) or may
elect to liquidate the Company in the manner provided in subsection
(b)(ii) above.
(d) Withdrawal Without Cause; Change of Control. If a Member wishes to
withdraw and neither of the conditions in subsections (b) or (c) above
pertains, then the withdrawing Member must provide a written notice of its
intent to withdraw to the other Member and specify a price upon which it is
willing to purchase the Interest of the other Member. In the event of a
change of Control of a Member where after such change of Control, Control
is held, directly or indirectly, by an entity described on Schedule 4.5(d)
attached hereto, such Member will be deemed to have given a withdrawal
notice unless the other Member consents in writing, and within thirty days
after the change of Control, such Member shall notify in writing the
non-withdrawing Member of a price at which it would be willing to sell its
Interest. The other Member may then, at its option, exercised by written
notice given to the withdrawing Member within thirty (30) days after
receipt of notice from the withdrawing Member, elect to:
(i) Liquidate the Company in which case the Company shall be
liquidated as provided subsection (b)(ii) above;
(ii) Purchase the Interest of the withdrawing Member at eighty
percent (80%) of the purchase price specified by the withdrawing
Member, payable in cash (and the withdrawing Member is obligated to
sell its Interest at that price);
(iii) Sell its Interest to the withdrawing Member at the purchase
price specified by the withdrawing Member (and the withdrawing Member
is obligated to purchase such Interest at that price, payable in
cash); or
(iv) Request a determination of the Fair Market Value of the
withdrawing Member's Interest in which case the non-withdrawing Member
may, after the determination of the Fair Market Value has been
completed, purchase the withdrawing Member's Interest for eighty
percent (80%) of the Fair Market Value price or the price specified in
subsection (d)(ii) above (and the withdrawing Member is obligated to
sell its Interest at that price)
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or may elect to liquidate the Company in the manner provided in
subparagraph (b)(ii) above.
(e) The closing of all transactions shall occur within sixty (60) days
after the price has been determined and the purchasing Member has been
determined. Each Member shall use its best efforts to promptly conclude the
transfer as provided herein, and any transfer of an Interest pursuant to
this Section 4.4 shall be made upon the express warranty that the Interest
of the selling Member is transferred free and clear of any Liens of
whatsoever nature (except as arise pursuant to this Agreement) and without
prejudice to later enforcement by the Company or the purchasing Member of
any unsatisfied obligation of the selling Member to the Company or the
purchasing Member existing as of the date of transfer or arising subsequent
to such date from facts or circumstances which existed on or before such
date. In connection with the closing of the transfer of a Member's Interest
pursuant to this Section 4.4, the Company and the purchasing Member shall
cause all Member Loans of the selling Member to be repaid in full (and all
mortgages and security interests securing such Member Loans, if any, shall
be released and discharged of record by the selling Member) and cause the
selling Member and its Affiliates to be released from all guarantees,
indemnities and similar obligations, if any, relating to obligations of the
Company. All such releases shall be in form and substance reasonably
satisfactory to the selling Member and the Company.
4.5 Return of Capital. No Member shall be entitled to the return of, or
interest on, that Member's Capital Contributions except as provided herein.
4.6 Restricted Distributions. Notwithstanding any provision to the contrary
contained in this Agreement, the Company shall not make any distribution to any
Member on account of its Interest if such distribution would violate Section 307
of the Act.
ARTICLE V.
Profits and Losses
5.1 Profit and Loss Allocations.
(a) Profit Allocation. Profits and any item thereof for any Fiscal
Year shall be allocated to the Members pro rata based on their
Participating Percentages.
(b) Loss Allocations. Losses and any item thereof for any Fiscal Year
shall be allocated to the Members pro rata based on their Participating
Percentages.
(c) Adjustment to Allocations. It is the intention of the Members that
Profit or Loss for each Fiscal Year will be allocated to the Members by
Sections 5.1(a) and (b) hereof in such a manner that would cause each
Member's Adjusted Capital Account Balance at the end of such Fiscal Year to
equal the amount that would be distributed to such Member in respect of its
Interest upon a hypothetical liquidation of the Company at the end of such
Fiscal Year. In determining the amounts distributable to the Members upon a
hypothetical liquidation, it shall be presumed that (i) all of the
Company's assets would be sold at their Gross Asset Value, (ii) payments to
any holder on any nonrecourse debt would be limited
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to the Gross Asset Value of the assets secured by repayment of such debt,
and (iii) all distributions to the Members would be made solely in
accordance with Sections 4.2 and 4.3 hereof. If, upon the advice of the
accounting firm retained to prepare the income tax returns of the Company,
it is determined that the intentions set forth in this Section 5.1(c) are
not being met by the allocations made pursuant to Sections 5.1(a) and (b)
hereof, the Board of Directors shall make such allocations of Profit or
Loss, or items of income, gain, loss or deduction, comprising such Profit
or Loss as are necessary to achieve the intentions set forth herein.
5.2 Special Allocations.
(a) Minimum Gain Chargeback. Notwithstanding any other provision of
this Agreement, if there is a net decrease in Minimum Gain during any
Fiscal Year, each Member shall be specially allocated items of Company
income and gain for such year (and, if necessary, for subsequent years) in
an amount equal to the portion of that Member's share of the net decrease
in Minimum Gain during such year that is allocable to the disposition of
any Company assets subject to one or more nonrecourse liabilities of the
Company. The items to be so allocated shall be determined in accordance
with Treasury Regulation Section 1.704-2(j)(2)(i). Any Member's share of
any net decrease in Minimum Gain shall be determined in accordance with
Treasury Regulation Section 1.704-2(g). This Section 5.2(a) is intended to
comply with the minimum gain chargeback requirement in the Treasury
Regulations and shall be interpreted consistently therewith.
(b) Nonrecourse Deductions. Nonrecourse deductions for any Fiscal Year
shall be allocated to the Members in accordance with their Participating
Percentages. For purposes of this Section 5.2(b), "nonrecourse deductions"
shall have the meaning set forth in Section 1.704-2(b)(1) of the Treasury
Regulations. The amount of nonrecourse deductions for a Fiscal Year shall
equal the excess, if any, of the net increase, if any, in the amount of
Minimum Gain during that Fiscal Year over the aggregate amount of any
distributions during that Fiscal Year of proceeds of a nonrecourse
liability (as that term is defined in Treasury Regulation Section
1.704-2(b)(3)) that are allocable to an increase in Minimum Gain,
determined according to the provisions of Treasury Regulation Section
1.704-2(d).
(c) Member Minimum Gain Chargeback Notwithstanding any Other Provision
of this Agreement Except Section 5.2(a). If there is a net decrease in
Member Minimum Gain attributable to Member Nonrecourse Debt during any
Fiscal Year, each Member who has a share of the Member Minimum Gain
attributable to such Member Nonrecourse Debt shall be specially allocated
items of Company income and gain for such year (and, if necessary,
subsequent years) in an amount equal to the portion of such Member's share
of the net decrease of Member Minimum Gain attributable to such Member
Nonrecourse Debt that is allocable to the disposition of any Company assets
subject to such Member Nonrecourse Debt. The items to be so allocated shall
be determined in accordance with Treasury Regulation Section
1.704-2(j)(2)(ii). Any Member's share of the net decrease in Member Minimum
Gain shall be determined in accordance with Treasury Regulation Section
1.704-2(i)(5). This Section 5.2(c) is intended to comply with the minimum
gain chargeback requirements in the Treasury Regulations and shall be
interpreted consistently therewith.
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(d) Member Nonrecourse Deductions. Any Member nonrecourse deductions
for any Fiscal Year shall be specially allocated to the Member who bears
economic risk of loss with respect to the Member Nonrecourse Debt to which
such Member nonrecourse deductions are attributable in accordance with
Treasury Regulation Section 1.704-2(i). For purposes of this Section
5.2(d), "Member nonrecourse deductions" has the same meaning as "partner
nonrecourse deduction" in Treasury Regulation Section 1.704-2(i)(1). The
amount of Member nonrecourse deductions with respect to a Member
Nonrecourse Debt for a Fiscal Year equals the excess, if any, of the net
increase, if any, in the amount of Member Minimum Gain attributable to such
Member Nonrecourse Debt during that Fiscal Year over the aggregate amount
of any distributions during that Fiscal Year to the Member that bears the
economic risk of loss for such Member Nonrecourse Debt to the extent such
distributions are from the proceeds of such Member Nonrecourse Debt and are
allocable to an increase in Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulation Section
1.704-2(i)(1).
(e) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustment, allocation or distribution described in paragraphs
(4), (5) or (6) of Treasury Regulation Section 1.704-(b)(2)(ii)(d), a pro
rata portion of each item of Company income and gain shall be specially
allocated to the Member in an amount and manner sufficient to eliminate, to
the extent required by the Treasury Regulations, the Adjusted Capital
Account Deficit of that Member as quickly as possible.
(f) Gross Income Allocation. In the event that any Member has a
deficit Capital Account at the end of any Fiscal Year that is in excess of
the sum of (i) the amount that such Member is obligated to restore and (ii)
the amount that the Member is deemed to be obligated to restore pursuant to
the penultimate sentence of Treasury Regulation Sections 1.704-2(g)(1) and
(i)(5), that Member shall be specially allocated items of Company income
and gain in the amount of such excess as quickly as possible, provided that
an allocation pursuant to this Section 5.2(f) shall be made only if and to
the extent that such Member would have a deficit Capital Account in excess
of such sum after all other allocations provided for in this Article V have
been made as if Sections 5.2(e) and 5.2(f) were not in the Agreement.
(g) Allocation In the Event of Section 754 Election. To the extent an
adjustment to the adjusted tax basis of any Company asset pursuant to Code
Section 734(b) or Code Section 743(b) is required, pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of that adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of
the asset), then that gain or loss shall be specially allocated to the
Members in the manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to that Treasury Regulation.
5.3 Curative Allocations.
(a) Regulatory Allocations. The allocations set forth in Section 5.2
hereof ("Regulatory Allocations") are intended to comply with certain
requirements of Treasury Regulations Section 1.704-1(b) and 1.704-2. The
Regulatory Allocations may not be consistent with the manner in which the
Members intend to divide Partnership distributions. Accordingly, the Board
of Directors is authorized to divide allocations of Profits, Losses and
other items among the Members so as to prevent the Regulatory
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Allocations from distorting the manner in which Company distributions are
required to be divided among the Members pursuant to this Agreement. In
general, the Members anticipate that this will be accomplished by specially
allocating Profits and Losses and items of income, gain, loss and deduction
among the Members so that the net amount of the Regulatory Allocations and
such special allocations to each Member is zero. The Board of Directors
will have complete discretion to accomplish this result in any reasonable
manner.
(b) Recharacterization of Fees or Distributions. In the event that a
guaranteed payment to a Member is ultimately recharacterized as a
distribution for federal income tax purposes (as the result of an audit of
the Company's return or otherwise) and if such Recharacterization has the
effect of disallowing a deduction or reducing the adjusted basis of any
asset of the Company, then an amount of Company gross income equal to such
disallowance or reduction shall be allocated to the recipient of such
payment. In the event that a distribution to a Member is ultimately
recharacterized as a guaranteed payment for federal income tax purposes (as
a result of an audit of the Company's return or otherwise), and if any such
recharacterization gives rise to a deduction, such deduction shall be
allocated to the recipient of the distribution.
5.4 Special Tax Allocations.
(a) Contributed Property. In accordance with Code Section 704(c) and
the Treasury Regulations thereunder, including Treasury Regulation Section
1.704-1(b)(2)(iv)(d)(3), income, gain, loss and deduction with respect to
any property contributed to the Company shall, solely for tax purposes, be
allocated among the Members in any permissible manner so that a
contributing Member, to the maximum extent possible, recognizes the
variation, if any, between the Adjusted Basis and the initial Gross Asset
Value of the property contributed by that Member. The Members shall agree
on which acceptable accounting method is used.
(b) Adjusted Property. In the event the Gross Asset Value of any
Company asset is adjusted pursuant to subsection (b) of the definition of
Gross Asset Value, subsequent allocations of income, gain, loss and
deduction with respect to that asset shall take into account any variation
between the Gross Asset Value of that asset before such adjustment and its
Gross Asset Value after such adjustment in the same manner as the variation
between Adjusted Basis and Gross Asset Value is taken into account under
Section 5.4(a) hereof with respect to contributed property, and such
variation shall be allocated in accordance with the principles of Treasury
Regulation Section 1.704-1(b)(2)(iv)(f).
(c) Recapture of Deductions and Credits. If any "recapture" of
deductions or credits previously claimed by the Company is required under
the Code upon the sale or other taxable disposition of any Company
property, those recaptured deductions or credits shall, to the extent
possible, be allocated to the Members pro rata in the same manner that the
deductions and credits giving rise to the recapture items were originally
allocated using the "first-in, first-out" method of accounting; provided,
however, that this Section 5.4(c) shall only affect the characterization of
income allocated among the Members for tax purposes.
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(d) Effect of Section 5.4 Allocations. Allocations pursuant to this
Section 5.4 are solely for purposes of federal, state and local taxes and
shall not affect or in any way be taken into account in computing any
Member's Capital Account or share of Profits, Losses, other items or
distributions pursuant to any provision of this Agreement. Except as
provided in this Section 5.4, the income, gains, losses and credits of the
Company for each taxable period shall, for federal, state and local income
tax purposes, be allocated among the Members in the same manner and
proportion that such items have been allocated to the Members' Capital
Accounts.
(e) Discretion of the Board of Directors. Any elections or other
decisions relating to the allocations under this Section 5.4 shall be made
by the Board of Directors in any manner that reasonably reflects the
purpose and intention of this Agreement.
5.5 Knowledge of Tax Consequences. The Members are aware of the income tax
consequences of the allocations made by this Article V and the economic impact
of the allocations on the amounts receivable by them under this Agreement. The
Members hereby agree to be bound by the provisions of this Article V in
reporting their share of Company income and loss for income tax purposes.
ARTICLE VI.
Management of the Company
6.1 Board of Directors. The business and affairs of the Company shall be
managed under the direction and control of a Board of Directors (the "Board of
Directors"), which shall consist of six (6) individuals; three (3) of the
Directors shall be nominated and appointed by Lear and three (3) of the
Directors shall be nominated and appointed by Donnelly. The nominees and
appointees of each Member shall be officers or employees of such Members. The
Directors of the Company initially shall be the following persons:
Lear Nominees Donnelly Nominees
Joseph F. McCarthy John Donnelly
Terrence E. O'Rourke Hans Huber
Frank J. Preston Donn Viola
(a) Election. Directors shall be elected at the annual meeting of the
Members and each Director shall be elected to hold office for a term of one
(1) year or until his successor shall be elected and qualified.
(b) Vacancies. Vacancies in the Board of Directors arising from any
cause shall be filled by the Member who nominated and appointed the
Director to the seat that has become vacant.
(c) Resignation and Removal. A Director may resign by written notice
to the Company. The resignation shall be effective upon its receipt by the
Company or at a subsequent time as
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set forth in the notice of resignation. A Director may be removed, with or
without cause, at any time, by the Member which nominated and appointed
him.
(d) Committees. The Board of Directors may, upon unanimous consent of
all of the Directors, establish an Executive Committee and such other
committees as they may determine (collectively, "Committees") and may
authorize such Committees to exercise any and all of the powers of the
Board, to the extent permitted by law, and may designate the members of any
such Committees. Each Committee so established shall have at least one (1)
Director nominated and appointed by Donnelly and one (1) Director nominated
and appointed by Lear.
(e) Meetings. An Organizational Meeting of the Board of Directors
shall be held immediately following the Annual Meeting of Members. The
Annual Members' Meeting shall be held within six months after the end of
each Fiscal Year, as determined by the Chairman of the Board in each Fiscal
Year. The Chairman of the Board shall also convene additional meetings of
the Board of Directors upon the request of any two or more Directors. In
addition to the meetings of the Board of Directors following the Annual
Meeting of Members, the Board of Directors shall meet at least once each
fiscal quarter at a date and time to be determined by the Chairman of the
Board. Due notice of all meetings of the Board of Directors, as provided in
this Agreement and as required by applicable law, shall be given. All
meetings of the Board of Directors shall be presided over by the Chairman
of the Board or any representative nominated by the Chairman of the Board.
Meetings may be held within or outside the State of Michigan. In the event
that any member of the Board of Directors cannot attend a meeting of the
Board of Directors, he may appoint a proxy to represent and vote for him. A
Power of Attorney or an Appointment Letter by which the proxy is appointed
shall be presented at or before the commencement of the meeting.
(f) Notice. Written notice of meetings of the Board of Directors or
Committees shall be provided to each Director or Committee member, as
applicable, sent to the Director's or Committee member's last known
residence or place of business, not less than three (3) business days prior
to the date of the meeting. Notice of the meeting shall specify the time
and place of holding of the meeting and any and all business to be
transacted at such meeting. Notice may be waived by any writing either
before or after such meeting. Attendance of a Director or Committee member
at a meeting constitutes a waiver of notice of the meeting except where a
Director or Committee member attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not
lawfully called or convened.
(g) Quorum and Voting. A quorum for the transaction of business shall
consist of two (2) Directors or Committee members being present in person
or by proxy, provided one (1) of the Directors or Committee members present
has been appointed by Donnelly and one (1) of the Directors or Committee
members present has been appointed by Lear. The vote of the majority of the
Directors or Committee members present at a meeting at which a quorum is
present constitutes the action of the Board of Directors or the Committee
unless the vote of a larger number is required by law or this Agreement;
provided, however, that no decision of the Board of Directors or any
Committee thereof will be effective unless concurred in by at least one
Director appointed by each Member. In the event a quorum is not present,
the
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Chairman of the Board or the Chairman of the Committee shall reschedule the
meeting and provide due notice as provided herein.
(h) Adjournment. If at any meeting of the Board of Directors, the
Directors are unable to reach agreement, any Director present may require
that the matter be adjourned for consideration and a decision at the next
meeting of the Board of Directors in order: (i) to provide an opportunity
for consultation with one or both Members, or (ii) to provide an
opportunity for a more complete attendance when the matter is considered.
(i) Action by Unanimous Written Consent. Action required or permitted
to be taken pursuant to authorization voted at a meeting of the Board of
Directors or a Committee may be taken without a meeting, without prior
notice and without a vote if before or after the action all members of the
Board of Directors or the Committee consent thereto in writing. Such
consent shall be filed with the minutes of the proceedings of the Board of
Directors or the Committee and shall have the same effect as a vote of the
Board of Directors or the Committee for all purposes.
(j) Participation by Communication Equipment. A member of the Board of
Directors or a Committee may participate in a meeting of the Board of
Directors or Committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation constitutes presence in
person at the meeting.
6.2 Rights and Powers of the Board of Directors. The Board of Directors
shall have full, exclusive and complete power to manage and control the business
and affairs of the Company. Decisions of the Board of Directors within the scope
of its authority shall be binding upon the Company and each Member.
Notwithstanding the foregoing, the rights and powers of the Board of Directors
shall be limited as set forth in Section 6.3 hereof.
6.3 Actions Requiring Unanimous Member Approval. Notwithstanding anything
to the contrary contained in this Agreement, neither the Board of Directors nor
the Company shall have the authority, right, power or privilege to do or
undertake any of the following acts without the prior unanimous approval of the
Members:
(a) Amendment of the Company's Articles of Organization or this
Operating Agreement;
(b) Admission of a Person as a new Member; declaration or payment of
any distribution by the Company (whether in cash or by issuance of
membership Interests), or the direct or indirect redemption, retirement,
purchase or other acquisition of any membership Interest in the Company; or
authorization of a call for additional capital contributions;
(c) Sell, transfer, exchange, lease, assign, mortgage, pledge,
hypothecate or otherwise dispose of assets (tangible or intangible) of the
Company outside of the ordinary course of business of the Company.
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(d) Enter into any agreement, contract, transaction or obligation of
the Company that involves consideration exceeding $2.5 million in any one
transaction or a series of related transactions (other than purchases and
sales of inventory items in the ordinary course of business).
(e) Merge or consolidate the Company with or into another Person or,
except as provided in Section 4.5 hereof, dissolve the Company;
(f) Appoint or remove, other than for cause, the President or chief
financial officer of the Company;
(g) Enter into (other than Purchase Orders issued to the Company on
the terms set forth in the Purchase and Supply Agreement), amend or waive
any rights under any contracts or other agreements with a Member, or any
Affiliate of a Member which involve aggregate payments or other
consideration exceeding $50,000 in any one transaction or series of related
transactions;
(h) Approval of the annual budget of the Company and each annual and
any long-range or other business plan of the Company; any material change
to, or deviation from, the most recently approved annual budget and any
expenditures not contemplated by such budget aggregating more than $1
million or which would require additional funding from the Members by way
of capital contributions or Member Loans, and approval of any expenditure
aggregating more than $1 million even if included in the annual budget of
the Company;
(i) Appointment or removal of the independent accountants of the
Company;
(j) Set compensation for members of the Board of Directors of the
Company;
(k) Except as otherwise permitted pursuant to Section 4.5 hereof, take
any action which would cause the dissolution of the Company or make it
impossible for the Company to continue in the ordinary course of business;
or
(l) Take any other action which this Agreement specifically requires
to be unanimously agreed upon by the Members.
6.4 Filing of Documents. The Board of Directors shall file or cause to be
filed all certificates or documents as may be determined by the Board of
Directors to be necessary or appropriate for the formation, continuation,
qualification and operation of a limited liability company in the State of
Michigan and any other state or jurisdiction in which the Company may elect to
do business. To the extent that the Board of Directors determines the action to
be necessary or appropriate, it shall do all things to maintain the Company as a
limited liability company under the laws of the State of Michigan and any other
state or jurisdiction in which the Company may elect to do business.
6.5 Liability of Board of Directors. The Board of Directors shall not be
liable to the Company or the Members for errors in judgment or for acts or
omissions committed in good faith, except for acts
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or omissions which are adjudged by a court of competent jurisdiction to be
grossly negligent, fraudulent, willful and wanton misconduct, or material breach
of the fiduciary duty of loyalty to the Company.
6.6 Indemnification of the Board of Directors and Officers. The Company,
its receiver or trustee shall, to the maximum extent allowed by law, indemnify,
defend and hold harmless the members of the Board of Directors, the Members who
appointed or nominated them and their respective Affiliates, and the officers of
the Company (each, an "Indemnitee"), to the extent of the Company's assets, from
and against any liability, damage, cost, expense, loss, claim or judgment
incurred by the Indemnitee arising out of any claim based upon acts performed or
omitted to be performed by the Indemnitee in connection with the business of the
Company, including without limitation, attorneys' fees and costs incurred by the
Indemnitee in settlement or defense of such claims. Notwithstanding the
foregoing, no Indemnitee shall be so indemnified, defended or held harmless for
claims based upon his or its acts or omissions in breach of this Agreement, or
which constitute fraud, gross negligence, willful misconduct, or a material
breach of the fiduciary duty of loyalty to the Company. Except as otherwise
expressly prohibited by this Agreement, amounts incurred by an Indemnitee in
connection with any action or suit arising out of or in connection with Company
affairs shall be reimbursed by the Company.
6.7 Transactions with Members or Affiliates. Except as otherwise provided
in Section 6.3(g) hereof, the Members and any of their respective Affiliates
shall have the right to contract or otherwise deal with the Company in
connection with the sale of goods or services by the Members or their Affiliates
to the Company in the following circumstances: (a) with the consent of the
Members or (b) if (i) the compensation paid or promised for such goods or
services is reasonable and is paid only for goods and services actually
furnished to the Company, (ii) the goods or services to be furnished shall be
reasonable for and necessary to the Company, and (iii) the terms for the
furnishing of such goods or services shall be at least as favorable to the
Company as would be attainable in an arms-length transaction. Any payment made
to a Member or any Affiliate thereof for such goods or services shall be
disclosed to all Members at the time of payment. The burden of proving
reasonableness with respect to transactions described in Section 6.7(b) above
shall be upon the Member transacting business with the Company.
6.8 Officers.
(a) Offices. The officers of the Company shall consist of a Chairman,
a President and CEO, a Secretary/Treasurer and CFO, a Vice President and
Chief Technical Officer, a Vice President Marketing and Business
Development, and a Vice President European Operations. Officers other than
President, Secretary, and Treasurer may be left vacant in the discretion of
the Board of Directors. The Directors shall have the sole power to remove
any officer with or without cause and shall have the right to fill any
vacancy in such position howsoever created, provided that no office
restricted to a person nominated by one of the Members may be vacated or
filled without the affirmative action of a Director nominated by such
Member.
(b) Chairman. The Chairman shall preside at all meetings of the Board
of Directors and Members. At any time the President is an immediate past
former employee of one Member or its affiliates, the Chairman shall be
designated by the other Member. If the President is not an immediate past
former employee of either Member or its affiliates, the office of the
Chairman shall rotate on an annual
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basis, alternating between a Director nominated by Lear and a Director
nominated by Donnelly. The first Chairman shall be nominated by Donnelly.
(c) President. The President shall be the Chief Executive Officer of
the Company, shall be responsible for the general management of the
business of the Company, shall be responsible for the implementation of all
orders and resolutions of the Board of Directors, and shall have the power
and responsibility for the performance of other duties as the Board of
Directors may from time to time prescribe. Except as required by law or
this Agreement, subject to direction or limitation by the Board of
Directors, the President shall have full responsibility and authority to
act for and on behalf of the Company in all of its matters. In the absence
or disability of the Chairman, the President shall perform and exercise the
powers of the Chairman. The first President shall be nominated by Lear.
(d) Secretary/Treasurer and Chief Financial Officer. The
Secretary/Treasurer and Chief Financial Officer, subject to the control of
the Board of Directors and the Chairman, shall, in general, perform all the
duties of Secretary and Treasurer, including those relating to the minutes
of meetings of the Board of Directors and Members, notice of such meetings,
Member lists, attestation of contracts, documents and instruments to which
the Company is a Member, if attestation is required, the custody of all
funds and securities of the Company, and shall perform all acts incident to
the office with respect to the Company's funds, securities, and financial
instruments and documents, at all times subject to direction or limitation
by the Board of Directors and President.
(e) Vice President and Chief Technical Officer. The Vice President and
Chief Technical Officer shall be responsible for the research, design, and
engineering activities of the Company. Except as required by law or this
Agreement, subject to direction or limitation by the Board of Directors and
the Chairman or President, the Vice President and Chief Technical Officer
shall have full responsibility and authority to act for and on behalf of
the Company in all such matters.
(f) Other Vice Presidents. Other Vice Presidents provided for in
Section 6.8 (a) shall be responsible for those duties decided upon by the
Board of Directors at the time the position is so appointed, subject to
direction or limitation by the Board of Directors and President.
(g) Other Officers. Other officers may be appointed by the Board of
Directors only with the unanimous consent of the Members.
(h) Financial Authority of Officers. The President shall have the
right to make capital expenditures for budgeted and non-budgeted items in
such amounts as are established by resolution of the Board of Directors
from time to time.
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6.9 Compensation of Directors. No Director of the Company who at the time
is also employed or retained by, or is an officer, director, partner, member or
principal of a Member or its Affiliate, shall receive any compensation for his
or her services to the Company in such capacity, in each case without the
unanimous approval of all Members.
ARTICLE VII.
The Members
7.1 Meetings of the Members. The Board of Directors shall decide the time,
place and agenda for all annual meetings of the Members, subject to the
provisions of this Agreement and applicable law; provided that at least 10 days'
prior written notice shall be given to all Members with respect to any meeting
of the Members, including an annual meeting of the Members. An annual meeting of
the Members shall be held every year, no later than six (6) months after the end
of the Fiscal Year, at a place to be designated by the Board of Directors within
the State of Michigan unless otherwise unanimously agreed upon by the Board of
Directors. Special meetings of Members of the Company may be held at any time in
compliance with resolutions of the Board of Directors, this Agreement or
applicable law. The Chairman of the Board of Directors shall call a special
meeting of the Members to be held within thirty (30) days of the request
therefor made by any Member. A waiver of any required notice shall be equivalent
to the giving of such notice if such waiver is in writing and signed by the
Person entitled to such notice, whether before, at or after the time stated
therein. The Members may make use of telephones and other electronic devices to
hold meetings, provided that each Member is able to simultaneously participate
with the other Members with respect to all discussions and votes of the Members.
The Members may act without a meeting if the action taken is reduced to writing
(either prior to or thereafter) and consented to in writing by all of the
Members. Written minutes shall be taken at each meeting of the Members; however,
any action taken or matter agreed upon by the Members at the meeting shall be
deemed final, whether or not written minutes are prepared or finalized.
7.2 Voting of the Members. Unless the specific language herein requires
unanimous consent, all actions, approvals, elections and consents required in
this Agreement to be made by the Members shall be effective if approved by a
majority-in-interest of the Members. All meetings of Members shall be presided
over by the Chairman of the Board of Directors. In the event the Chairman of the
Board is unable to or prevented from attending the meeting, the President shall
preside over the meeting. For determining the voting interest of a Member,
reference shall be made to its Participating Percentage.
7.3 Other Business Interests of the Members. This Agreement shall not be
construed to grant any right, privilege or option to any Member to participate
in any manner in any other business, corporation, partnership or investment in
which the other Member hereto may participate, including those which may be the
same as or similar to the Company's business and in direct competition
therewith. Each of the Members expressly waives the doctrine of corporate
opportunity (or any analogous doctrines), subject to the terms of the
Noncompetition Agreements, and consents subject to the terms of the
Noncompetition Agreements, to the participation by the other Member or its
Affiliates and any officer,
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director, stockholder, associate, member, partner, beneficiary or employee
thereof in any other such business, corporation, partnership or investment.
7.4 Rights and Obligations of Members.
(a) Fiduciary Duty. Subject to Section 7.3, each Member shall have a
fiduciary duty to the other Member to take into account the best interests
of the Company when exercising its membership rights under this Agreement
or when acting through a director; provided, however, that each Member or
any director nominated or appointed by a Member shall be entitled to vote
consistent with the Member's own interests when the Member's own interest
is not, or may not be, consistent with the interest of the Company or the
Members as a whole. To the extent that, at law or in equity, a director, a
Member or its board of directors, or Affiliate thereof, has duties
(including fiduciary duties) and liabilities relating thereto to the
Company or to the Members, such director, Member, its directors or
Affiliates, acting in connection with the Company's business or affairs
shall not be liable to the Company or to any Member for its good-faith
reliance on the provisions of this Agreement. The provisions of this
Agreement, to the extent that they modify the duties and liabilities of a
Member, the Board of Directors or an Affiliate otherwise existing at law or
in equity, are agreed by the Members to replace such other duties and
liabilities of such Persons.
(b) Limitation of Liability. Each Member's and the Board of Directors'
liability for the debts and obligations of the Company shall be limited as
set forth in the Act and other applicable law.
(c) Company Records. For any purpose relating to its Interest, upon
written request, the designated representatives of each Member shall have
the right, during ordinary business hours, to inspect and copy the Company
records required to be maintained by the Board of Directors at the
Company's place of business as set forth in Section 8.1 hereof. The
designated representative of each Member shall have the right at any
reasonable time to inspect and copy records of the Company including, but
not limited to, all checks, bills, invoices, vouchers, statements, cash
receipts, correspondence and other records in connection with the
management of the Company.
7.5 Defaulting Member.
(a) Events of Default. A Member's violation or breach of any of the
terms or provisions of this Agreement or any Ancillary Agreement shall
constitute an event of default hereunder unless the Member so defaulting
(the "Defaulting Member") shall cure the same within 30 days (or, with
respect to the breach of an Ancillary Agreement, within such cure period,
if any, as may be provided therein) after receiving written notice of such
violation or breach from the other Member; provided, further, that if a
default under this Agreement is a nonmonetary default and cannot reasonably
and with due diligence and in good faith be cured within said 30-day
period, and if the Defaulting Member immediately commences and proceeds to
complete the cure of such default with due diligence and in good faith, the
30-day period with respect to such default under this Agreement shall be
extended to include such additional period of time as may be reasonably
necessary to cure such default.
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(b) Remedies on Default. Subject to the terms of this Agreement, upon
the occurrence of a default by a Member, the other Member shall have all
rights and remedies available at law and in equity and may institute
arbitration and/or legal proceedings in accordance with Section 13.17
hereof against the Defaulting Member with respect to any damages or losses
incurred by the non-Defaulting Member. The non-defaulting Member shall also
have rights set forth in Section 4.5 (c) hereof if the default is a
Material Breach.
ARTICLE VIII.
Books, Records, Reports and Accounting
8.1 Records. The Board of Directors shall keep or cause to be kept at the
place of business of the Company the following: (a) true and full information
regarding the status of the business and financial condition of the Company; (b)
promptly after becoming available, a copy of the Company's federal, state and
local income tax returns for each year; (c) a current list of the name and last
known business, residence or mailing address of each Member and member of the
Board of Directors; (d) a copy of this Agreement and the Articles of
Organization and all amendments thereto, together with executed copies of any
written powers of attorney pursuant to which this Agreement and the Articles of
Organization and all amendments thereto have been executed; (e) true and full
information regarding the amount of cash and description and statement of the
agreed value of any other property or services contributed by each Member and
which each Member has agreed to contribute in the future, and the date on which
each has become a Member; and (f) other information regarding the affairs of the
Company as is just and reasonable. Any such records maintained by the Company
may be kept on or be in the form of any information storage device, provided
that the records so kept are convertible into legible written form within a
reasonable period of time.
8.2 Fiscal Year and Accounting. The Fiscal Year of the Company shall be the
calendar year or such other accounting period as shall be required under the
Code. All amounts computed for the purposes of this Agreement and all applicable
questions concerning the economic rights of Members shall be determined using
the accrual method of accounting in accordance with U.S. generally accepted
accounting principles consistently applied ("GAAP") and shall accurately reflect
the financial position and results of operations of the Company. All decisions
as to other accounting matters, except as specifically provided to the contrary
herein, shall be made by the Board of Directors. The books and records of the
Company shall be audited at the end of each Fiscal Year by an independent
certified public accountant designated by Lear and reasonably acceptable to
Donnelly. In addition to any other rights of the Members to access to
information of the Company, the Members shall have the right, at their expense,
to cause their auditors or other representatives at any time during normal
business hours to examine, review and/or audit all of the books and records of
the Company and, in connection therewith, the Member and its representatives
shall have access to the Company's accountants and auditors and their work
papers.
8.3 Annual Reports. As soon as practicable, but in no event later than four
months after the close of each Fiscal Year, the Board of Directors shall cause
to be furnished to the Members as of the last day of that Fiscal Year reports
containing such financial statements of the Company for the Fiscal Year,
presented in accordance with GAAP, including a balance sheet, a statement of
income, a statement of
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Members' equity and a statement of cash flows, which statements shall have been
audited by the independent certified public accountant retained by the Company.
8.4 Interim Reports. As soon as practicable, but in no event later than the
first business day following the 15th day of the month after the close of each
calendar quarter, the Board of Directors shall cause to be furnished to the
Members unaudited financial statements of the Company for that calendar quarter,
including a balance sheet and statement of income. If requested by a Member at
least 90 days prior to any June 30, as soon as practicable but in no event later
than three (3)] weeks after the close of the calendar quarter ending on or about
June 30, the Board of Directors shall cause to be furnished to the Members as of
the last day of the first half of the Fiscal Year of the Company reports
containing such financial statements of the Company for such half Fiscal Year,
presented in accordance with GAAP, including a balance sheet, statement of
income, statement of Members' equity and a statement of cash flows, which
statements shall have been audited by the independent certified public
accountant retained by the Company.
8.5 Preparation of Tax Returns. The Board of Directors shall arrange for
the preparation and timely filing of all returns of the Company for federal,
state and local income tax purposes and shall cause to be furnished to the
Members the tax information reasonably required for federal, state and local
income tax reporting purposes. The classification, realization and recognition
of income, gain, losses and deductions and other items, for federal income tax
purposes, shall be on that method of accounting as the Board of Directors shall
determine, in its reasonable discretion, to be in the best interests of the
Members.
8.6 Tax Elections. Unless otherwise directed by both Members, the Board of
Directors may determine whether to make any available elections pursuant to the
Code in its reasonable discretion.
8.7 Tax Matters Member. Lear is hereby designated as the tax matters
Member. All tax elections shall be approved by both Members. All tax returns
prepared by the tax matters Member shall be provided to the other Member for
review at least ten (10) days prior to the filing date.
8.8 Budget. At the commencement of each Fiscal Year, the Board of Directors
shall submit a budget for approval at the annual meeting of Members for the
coming Fiscal Year projecting profit and loss, cash flow and capital
expenditures.
ARTICLE IX.
Transfers
9.1 Transfers.
(a) Restriction. Except as provided in Section 4.5 hereof, or this
Article IX, a Member shall not make any Transfer of all or any portion of
its Interest including, without limitation, a Transfer of a right to
Profits, Losses or distributions, without the unanimous consent of all
Members which consent may be withheld or granted in each Member's sole
discretion.
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(b) Requirements for Transferee Becoming a Substituted Member. No
Person shall become a substituted Member in the Company until and unless
the following conditions precedent are satisfied: (i) the Transferee shall
have assumed, in a form acceptable to the other Member, any and all of the
obligations under this Agreement with respect to the Interest to which the
Transfer relates; (ii) all reasonable expenses required in connection with
the Transfer shall have been paid by or for the account of the Transferee;
and (iii) all agreements, articles, minutes, written consents and all other
necessary documents and instruments shall have been executed and filed and
all other acts shall have been performed which the Board of Directors deems
necessary to make the Transferee a substitute Member of the Company and to
preserve the status of the company as a limited liability company;
(c) Permitted Transferees. Notwithstanding anything in this Agreement
to the contrary, each Member may at any time, without the consent of the
other Member, Transfer all or any portion of its Interest in the Company to
any Affiliate (a "Permitted Transferee"), subject to the provisions of
Section 9.1(b)(i), (ii) and (iii), and provided (i)such Permitted
Transferee is not otherwise a Competing Enterprise (as defined in the
Noncompetition and Nonsolicitation Agreements described in Section 11.1
hereof) or an Affiliate of a Competing Enterprise, and (ii) such Transfer
would not cause a deemed termination of the Company for tax purposes. In
addition, no Transfer by a Member or any of its Permitted Transferees under
this Section shall release such Member from any obligations or liabilities
under this Agreement. Any Member or Permitted Transferee intending to
Transfer any membership Interest of the Company pursuant to this Section
shall notify the other Members of any intended Transfer not less than
thirty (30) days prior to such Transfer, giving the name and address of the
intended Permitted Transferee and the Permitted Transferee's status as set
forth in this Section and shall provide such additional information as the
other Member may reasonably request.
9.2 Right of First Offer; Right of First Refusal. Any Member may sell all
but not less than all of its Interest, but only on the following terms and
conditions.
(a) By complying with the remaining terms of this Section 9.2, a
Member ("Selling Party") may sell all but not less than all of its Interest
to a Bona Fide Third Party which agrees to be bound by all of the terms of
this Agreement and the Ancillary Agreements, including Noncompetition and
Non- Solicitation Agreement on the same terms as those applicable to the
Selling Party. With regard to the Purchase and Supply Agreement of the
Selling Party:
(i) If the buyer is not the other Member, the Purchase and Supply
Agreement will be assigned to and assumed by the buyer if the buyer is
capable of performing in the reasonable opinion of the other Member,
and otherwise it shall be assigned to the other Member.
(ii) The Selling Party will transfer to the same party specified
in subsection (i) above and the assignee will assume all of the
Selling Party's contracts with OEMs for the purchase of Products under
the Purchase and Supply Agreement. If any OEM will not permit such
transfer, the Selling Party will continue to fulfill its obligations
to the OEM under its contracts
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and to the Company under the Purchase and Supply Agreement with
respect thereto.
(b) If the Selling Party has not received an unsolicited offer from a
Bona Fide Third Party (i) the Selling Party must notify the non-Selling
Party of the desire of the Selling Party to sell its Interest. The notice
shall specify the price and other terms on which the Selling Party is
willing to sell its Interest; (ii) the non-Selling Party shall then have
thirty days in which to offer to purchase from the Selling Party all, but
not less than all, of the Interest offered on the terms and conditions set
forth in the notice. If the non-Selling Party determines not to purchase
the Interest from the Selling Party on the terms and conditions set forth
in the notice, or if the non-Selling Party fails to notify the Selling
Party in writing of its intentions within thirty days of the notice from
the Selling Party, then subject to the other terms and conditions of this
Agreement, the Selling Party may sell all, but not less than all, of its
Interest to any Bona Fide Third Party for a price and on the terms and
conditions no less favorable to the Selling Party than set forth in the
notice during the following , a period which is one hundred eighty (180)
days if no filing is required under the Hart Scott Rodino Antitrust Act
("HSR") or if a filing is required under HSR the shorter of 240 days or 30
days after expiration or early termination of the HSR pre-merger
notification period, provided the Selling Party sends a written notice to
the non-Selling Party stating the name of the purchaser and the price and
terms of the transaction at least thirty (30) days prior to closing and
provided further that the Selling Member and purchaser comply with the
requirements of Section 9.1(b) on or prior to such closing..
(c) If the Selling Party receives an unsolicited offer for the
purchase of all of its Interest from a Bona Fide Third Party and decides to
entertain the offer, then:
(i) the Selling Party must notify the non-Selling Party of the
unsolicited offer received by the Selling Party from the Bona Fide
Third Party for the purchase of the Selling Party's Interest. The
notice shall state the terms and conditions of the transaction and the
identity of the Bona Fide Third Party;
(ii) the non-Selling Party shall have thirty (30) days in which
to offer to purchase from the Selling Party all but not less than all
of its Interest on the terms and conditions proposed by the Bona Fide
Third Party. If the non-Selling Party decides not to purchase the
Selling Party's Interest on the terms and conditions set forth in the
notice, or if the non-Selling Party fails to notify the Selling Party
of its intentions within thirty (30) days of the notice from the
Selling Party, then the Selling Party may sell all, but not less than
all, of its Interest in the Company to the Bona Fide Third Party on
the terms and conditions set forth in the notice within a period which
is one hundred eighty (180) days if no filing is required under the
HSR or if a filing is required under HSR the shorter of 240 days or 30
days after the expiration or early termination of the HSR pre-merger
notification, provided the Selling Party and the Bona Fide Third Party
comply with the requirements of Section 9.1(b) on or prior to the
closing of such sale.
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9.3 Closing. The closing of any purchase by one Member of the other
Member's Interest under Section 9.2 shall occur within sixty (60) days after
written notice to the Selling Party of the other Member's election to purchase
if no filing is required under HSR, or if a filing is required under HSR, the
shorter of 240 days or 30 days after the expiration or early termination of the
HSR pre-merger notification period.
9.4 Transfers Void. If a Member purports to withdraw or Transfer its
Interest in breach of any provision of this Agreement, that purported withdrawal
or Transfer shall be void and of no effect.
9.5 Bankruptcy of a Member. A Member shall continue as a Member of the
Company upon the Bankruptcy of that Member.
ARTICLE X.
Liquidation and Winding Up
10.1 Dissolution. The Company shall dissolve only upon the earlier of:
(a) the unanimous vote of the Members;
(b) the election of either Member to liquidate under Section 4.5 of
this Agreement;
(c) upon the acquisition by one Person of all of the outstanding
Interests;
(d) the occurrence of any event which makes it unlawful for the
business of the Company to be carried on;
(e) the entry of a decree of judicial dissolution under Section 801(e)
of the Act; or
(f) the sale or other disposition of all or substantially all of the
Company's assets and the collection of all assets received in connection
with such sale or other disposition.
10.2 Continuation of the Business of the Company. If the resignation of a
Member leaves only one remaining Member, that remaining Member shall have the
right, exercisable by the Member within 90 days of the occurrence of such
resignation, to admit an additional Member to the Company or to readmit the
resigned Member, and that newly admitted (or re-admitted) Member along with the
remaining Member may elect to continue the business of the Company as set forth
in Section 10.1(d) hereof without dissolution.
10.3 Liquidation. Upon the dissolution of the Company, the Company shall
cease to carry on its business, except insofar as may be necessary for the
winding up of its business, but its separate existence shall continue until the
Certificate of Dissolution has been filed as required by the Act. Upon
dissolution of the Company, the business and affairs of the Company shall be
wound up and the Company liquidated as rapidly as business circumstances permit,
the Board of Directors shall act as the liquidating
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trustee, and the assets of the Company shall be liquidated. Unless the Members
unanimously agree to the contrary, the Board of Directors shall first seek the
assistance of a qualified investment banker to evaluate the Company as a going
business and for a reasonable period of time (not to exceed six (6) months) to
seek a buyer for the Company's business as a whole or in such separate parts as
yield the greatest return to the Members. There shall be no prohibition or
impediment to the purchase of the assets of the business by either Member on the
same basis as a purchase by a third party. The proceeds of any sale shall be
distributed (to the extent permitted by applicable law) in the following order:
(a) first, to creditors, including Members that are creditors, in the
order of priority as required by applicable law (whether by payment or
making of reasonable provision for payment thereof);
(b) second, to the Members in accordance with Section 4.3.
10.4 Reasonable Time for Winding Up. A reasonable time shall be allowed for
the orderly winding up of the business and affairs of the Company and the
liquidation of its assets pursuant to Section 10.3 hereof in order to minimize
any losses otherwise related to that winding up. The liquidating trustee may set
up reasonable reserves for contingent, conditional and non-mature liabilities
and obligations of the Company.
10.5 Deficit Capital Account. Upon liquidation, each Member shall look
solely to the assets of the Company for the return of that Member's Capital
Contribution. Except as provided herein, no Member shall be personally liable
for a deficit Capital Account balance of that Member, it being expressly
understood that the distribution of liquidation proceeds shall be made solely
from existing Company assets in the order and priority set forth in Section 10.3
hereof. It is the intent of this provision and the Qualified Income Offset
provision of Section 5.2(e) that the tax allocations to the Members meet the
alternate test for substantial economic effect under Treasury Regulation Section
1.704-1(b)(2)(ii)(d).
10.6 Certificate of Dissolution. When all debts, liabilities and
obligations have been paid, satisfied, compromised or otherwise discharged, or
adequate provisions have been made therefor, and all of the remaining property
and assets have been distributed to the Members, a Certificate of Dissolution
shall be executed and filed as required by the Act.
ARTICLE XI.
Noncompetition and Nonsolicitation
11.1 Noncompetition and Nonsolicitation. Donnelly agrees to enter into a
separate noncompetition and nonsolicitation agreement with the Company and Lear,
in substantially the form attached hereto as Exhibit F (the "Donnelly
Noncompetition Agreement"), to prevent Donnelly and its respective Affiliates
from competing with the business or soliciting the employees of the Company or
Lear. Lear agrees to enter into a separate noncompetition and nonsolicitation
agreement with the Company and Donnelly, in substantially the form attached
hereto as Exhibit F (the "Lear Noncompetition Agreement"), to prevent Lear and
its respective Affiliates from competing with the business or soliciting the
employees of the Company or Donnelly.
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ARTICLE XII.
Definitions
The following terms used in this Agreement shall have the meanings
described below:
"Act" means the Michigan Limited Liability Company Act, MCLA 450.4101, et
seq., as it may be amended from time to time.
"Adjusted Basis" shall have the meaning given such term in Code Section
1011.
"Adjusted Capital Account Balance" means that amount with respect to
any Member equal to the balance of such Member's Capital Account at the end of
the Fiscal Year after increasing the balance on such Member's Capital Account by
any amount which the Member is deemed to be obligated to restore pursuant to the
penultimate sentence of Treasury Regulation Sections 1.704-2(g)(1) and (i)(5).
"Adjusted Capital Account Deficit" means with respect to any Member, the
deficit balance, if any, in that Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments: (i)
credit to that Capital Account the amount by which that Member is obligated to
restore or is deemed to be obligated to restore pursuant to the penultimate
sentence of Treasury Regulation Sections 1.704-2(g)(1) and (i)(5), and (ii)
debit to that Capital Account the items described in paragraphs (4), (5) and (6)
in Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations. This definition of
Adjusted Capital Account Deficit is intended to comply with the provisions of
Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be
interpreted consistently therewith.
"Affiliate" or "affiliate" means a Person who, with respect to any other
Person directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such other Person.
"Agreement" means this Agreement, as it may be amended, restated or
supplemented from time to time, complete with all Exhibits and Schedules hereto.
Such Agreement shall constitute an "operating agreement" within the meaning of
the Act.
"Ancillary Agreements" means the Noncompetition and Non-Solicitation
Agreements attached as Exhibits F and G, the Purchase and Supply Agreement
attached as Exhibit E, the Leased Worker Agreements attached as Exhibits C-1 and
C-2, the Technology License Agreements attached as Exhibits D-1 and D-2, the
Transfer Agreement attached as Exhibit B, and all other agreements,
certificates, instruments or other documents delivered in connection with the
execution of this Agreement.
"Bankruptcy" means, with respect to a Member or the Company, the happening
of any of the following:
(a) the making of a general assignment for the benefit of creditors;
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(b) the filing of a voluntary petition in bankruptcy or the filing of
a pleading in any court of record admitting in writing an inability to pay
debts as they become due;
(c) the entry of an order, judgment or decree by any court of
competent jurisdiction adjudicating the Company or a Member to be bankrupt
or insolvent;
(d) the filing of a petition or answer seeking any reorganization,
liquidation, dissolution or similar relief under any statute, law or
regulation;
(e) the filing of an answer or other pleading admitting the material
allegations of, or consenting to, or defaulting in answering, a bankruptcy
petition filed against the Company or a Member in any bankruptcy
proceeding;
(f) the filing of an application or other pleading or any action
otherwise seeking, consenting to or acquiescing in the appointment of a
liquidating trustee, receiver or other liquidator of all or any substantial
part of the Company's or a Member's properties;
(g) the commencement of any proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation which has not been quashed or
dismissed within ninety (90) days; or
(h) the appointment without consent of the Company or such Member or
acquiescence of a liquidating trustee, receiver or other liquidator of all
or any substantial part of the Company's or a Member's properties without
such appointment being vacated or stayed within 90 days and, if stayed,
without such appointment being vacated within 90 days after the expiration
of any such stay.
"Capital Account" means the accounting record of each Member's capital
interest in the Company. There shall be credited to each Member's Capital
Account (a) the amount of any contribution of cash by that Member, (b) the Gross
Asset Value of property contributed by that Member, (c) that Member's allocable
share of Profits and any items in the nature of income or gain that are
specially allocated to that Member (not including allocations pursuant to
Section 5.4 hereof) and (d) the amount of any Company liabilities that the
Member assumes or takes subject to under Code Section 752. There shall be
debited against each Member's Capital Account (i) the amount of all
distributions of cash to that Member unless a distribution to the Member is a
loan or is deemed a payment under Code Section 707(c), (ii) the Gross Asset
Value of property distributed to that Member by the Company, (iii) that Member's
allocable share of Losses and any items in the nature of expenses or losses
which are specially allocated to that Member (not including allocations pursuant
to Section 5.4 hereof), and (iv) the amount of any liabilities of that Member
that the Company assumes or takes subject to under Code Section 752. The
transferee of all or a portion of an Interest shall succeed to that portion of
the transferor Member's Capital Account that is allocable to the portion of the
Interest transferred. This definition of Capital Account and the other
provisions herein relating to the maintenance of Capital Accounts are intended
to comply with Treasury Regulation Sections 1.704-1(b) and 1.704-2 and shall be
interpreted and applied in a manner consistent with those Treasury Regulation
Sections. In the event the Board of Directors reasonably determines that it is
prudent to modify the manner in which the Capital Accounts, or any debits or
credits
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thereto (including, without limitation, debits or credits relating to
liabilities that are secured by contributed or distributed property or which are
assumed by the Company or the Members), are computed in order to comply with
that Treasury Regulation, the Board of Directors may make such modification. The
Board of Directors shall also make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Treasury Regulation Sections 1.704-1(b) and 1.704-2.
"Bona Fide Third Party" shall mean an entity less than five percent (5%) of
the stock or other ownership of which is owned directly or indirectly by any
Member or its respective Affiliates, which has equal or better financial
stability as the Company.
"Capital Contribution" means, with respect to any Member, the amount of
money contributed by that Member to the Company and, if property other than
money is contributed, the initial Gross Asset Value of such property, net of
liabilities assumed or taken subject to by the Company.
"Closing" shall mean the closing on the Initial Closing Date, as defined in
the Transfer Agreement.
"Code" means the Internal Revenue Code of 1986 (or successor thereto), as
amended from time to time.
"Company" means the limited liability company formed pursuant to this
Agreement, as such limited liability company may from time to time be
constituted.
"Control" shall mean the right, directly or indirectly, to elect a majority
of the Board of Directors, Operating Committee or similar governing body of an
entity.
"Defaulting Member" means a Member that has committed an event of default
as described in Section 7.5 hereof.
"Depreciation" means, for each Fiscal Year or other period, an amount equal
to the depreciation, amortization or other cost recovery deduction allowable
with respect to an asset for that year or other period, except that if the Gross
Asset Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of the Fiscal Year or other period, Depreciation shall
be an amount which bears the same ratio to that different Gross Asset Value (as
originally computed) as the federal income tax depreciation, amortization, or
other cost recovery deduction for that Fiscal Year or other period bears to the
adjusted tax basis (as originally computed); provided, however, that if the
federal income tax depreciation, amortization or other cost recovery deduction
for the applicable year or period is zero, Depreciation shall be determined with
reference to the Gross Asset Value (as originally computed) using any reasonable
method selected by the Board of Directors.
"Effective Date" means the date of this Agreement.
"Fair Market Value" shall have the meaning set forth in Section 13.18.
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"Fiscal Year" means the year on which the accounting and federal income tax
records of the Company are kept.
"Gross Asset Value" means with respect to any Company asset, the asset's
Adjusted Basis, except as follows:
(a) the initial Gross Asset Value of any asset contributed by a Member
to the Company shall be the gross fair market value of that asset, as
determined by the contributing Member and the non-contributing Member;
(b) the Gross Asset Value of all Company assets shall be adjusted to
equal their respective gross fair market values, as determined by the Board
of Directors, as of the date upon which any of the following occurs: (i)
the acquisition of an additional interest in the Company after the
Effective Date by any new or existing Member, in exchange for more than a
de minimis Capital Contribution or the distribution by the Company to a
Member of more than a de minimis amount of Company property as
consideration for an interest in the Company, if the Board of Directors
determines that such adjustment is necessary or appropriate to reflect the
relative economic interest of the Members of the Company; and (ii) the
liquidation of the Company within the meaning of Treasury Regulation
Section 1.704- 1(b)(2)(ii)(g);
(c) the Gross Asset Value of any Company asset distributed to any
Member shall be the gross fair market value of that asset on the date of
distribution, as determined by the Member receiving that distribution and
the other Member; and
(d) if an election under Code Section 754 has been made, the Gross
Asset Value of Company assets shall be increased (or decreased) to reflect
any adjustments to the adjusted basis of the assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to the extent that those
adjustments are taken into account in determining Capital Accounts pursuant
to Treasury Regulation Section 1.704-1(b)(2)(iv)(m) and Section 5.2(g)
hereof; provided, however, that Gross Asset Value shall not be adjusted
pursuant to this subsection (d) to the extent that the Board of Directors
determines that an adjustment pursuant to subsection (b) hereof is
necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this subsection (d).
If the Gross Asset Value of an asset has been determined or adjusted hereby,
that Gross Asset Value shall thereafter be determined by taking into account all
adjustments for Depreciation, if any, taken with respect to that asset for
purposes of computing Profits and Losses.
"Interest" means the interest of a Member in the Company representing such
Member's rights, powers and privileges as specified in this Agreement.
"Lien" means any pledge, lien (including tax lien), charge, claim,
encumbrance, security interest, mortgage, option, restriction on transfer
(including, without limitation, any buy-sell agreement or right of first refusal
or offer), forfeiture, penalty, equity or other right of another person of every
nature and description whatsoever.
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"Material Breach" shall mean a breach of an obligation under this Agreement
or any of the Ancillary Agreements which, if not cured as provided in Section
7.5, would have a material adverse impact on the sales, operations,
profitability, prospects or financial viability of the Company or the rights of
any Member under such agreement.
"Member" means any Person that executes this Agreement as a Member, and any
other Person admitted to the Company as an additional or substituted Member,
that has not made a disposition of such Person's entire Interest.
"Member Loan" means a loan to the Company from a Member in accordance with
Section 3.3 hereof.
"Member Minimum Gain" means an amount, with respect to each Member
Nonrecourse Debt, equal to the Minimum Gain that would result if such Member
Nonrecourse Debt were treated as a nonrecourse liability, determined in
accordance with Treasury Regulation Section 1.704-2(i).
"Member Nonrecourse Debt" shall have the meaning of "partner nonrecourse
debt" set forth in Treasury Regulation Section 1.704-2(b)(4).
"Minimum Gain" shall have the meaning set forth in Treasury Regulation
Section 1.704-2(d).
"Participating Percentage" shall have the meaning set forth in Section 1.4.
"Permitted Encumbrances" shall mean (a) liens for any current real estate
or ad valorem taxes or assessments not yet delinquent or being contested in good
faith by appropriate proceedings; (b) inchoate mechanic's, materialmen's,
laborer's, and carrier's liens and other similar inchoate liens arising by
operation of law or statute in the ordinary course of the business of the
contributing Member for obligations which are not delinquent and which will be
paid or discharged in the ordinary course of such business by the contributing
Member assumed by the Company in accordance with the Transfer Agreement, and (b)
Liens disclosed on Exhibit A (as to the Lear Assets) or Exhibit B (as to the
Donnelly Assets).
"Person" means an individual, firm, corporation, partnership, limited
liability company, limited liability partnership, association, estate, trust,
pension or profit-sharing plan, or any other entity, including any governmental
entity.
"Prime Rate" means the annual base rate of interest charged by Comerica
Bank, Detroit, Michigan, or any successor thereof, for corporate loans, and
referred to by such bank as its "prime rate" or, if no such rate is so referred
to by such bank, the annual rate of interest charged by such bank on 90-day
unsecured commercial loans to its most creditworthy borrowers, which rate is to
be adjusted on the first day of each calendar quarter.
"Products" means automobile or truck interior overhead modular systems and
components including hard trim components, harness and electrification interface
to body harness, electronic value added features, interior trunk and engine
compartment lighting components and assemblies, substrates and
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complete headliners, sun visors, overhead consoles, handles, hooks, and other
miscellaneous overhead trim installed above the "belt line" of an automobile or
truck, but excluding (a) mirrors and other rear vision systems and electronic
and other value added features incorporated into or attached to such mirrors and
rear vision systems, (b) windows, (c) sunroofs and (d) pillars which are not
attached to or an integral part of the headliner.
"Profits" and "Losses" means for each Fiscal Year or other period, an
amount equal to the Company's taxable income or loss for that year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) any income of the Company exempt from federal income tax not
otherwise taken into account in computing Profits or Losses shall be added
to that taxable income or loss;
(b) any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Treasury Regulation Section 1.704-1(b)(2)(iv)(i), shall be subtracted
from that taxable income or loss;
(c) in the event the Gross Asset Value of any Company asset is
adjusted as required by subsections (b) or (c) of the definition of Gross
Asset Value, the amount of that adjustment shall be taken into account as
gain or loss from the disposition of that asset (assuming the asset was
disposed of just prior to the adjustment) for purposes of computing Profits
or Losses in the Fiscal Year of adjustment;
(d) gain or loss resulting from any disposition of Company property
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the Adjusted Basis of that
property may differ from its Gross Asset Value;
(e) in lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing the taxable income or loss,
there shall be taken into account the Depreciation for the Fiscal Year or
other period; and
(f) any items of income, gain, loss or deduction that are specially
allocated shall not be taken into account in computing Profits or Losses.
"Purchase and Supply Agreement" shall mean an agreement between the Company
and a Member in substantially the form attached hereto as Exhibit G and H.
"Registered Agent" means the Registered Agent for service of process on the
Company in the State of Michigan, which Agent may be either an individual
resident of the State of Michigan or a corporation authorized to do business in
the State of Michigan.
"Registered Office" means the business office in the State of Michigan of
the Registered Agent.
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"Selling Member" shall mean a Member which desires to sell, transfer or
otherwise dispose of its Interest or Interest pursuant to the provisions of this
Agreement.
"Tax Matters Member" means the "tax matters partner" as defined in Code
Section 6231(a)(7).
"Transfer" means to, directly or indirectly, sell, assign, transfer, give,
donate, pledge, hypothecate, deposit, alienate, bequeath, devise or otherwise
transfer, dispose of or encumber to any Person other than the Company.
"Transferee" means a Person to whom a Transfer is made.
"Treasury Regulations" means pronouncements, as amended from time to time,
or their successor pronouncements, which clarify, interpret and apply the
provisions of the Code, and which are designated as "Treasury Regulations" by
the United States Department of the Treasury.
ARTICLE XIII.
Miscellaneous
13.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without giving effect to any
applicable principles of conflicts of laws.
13.2 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
(i) in person, (ii) to the extent receipt is confirmed, by telecopy, facsimile
or other electronic transmission service, (iii) by a nationally recognized
overnight courier service, or (iv) by registered or certified mail (postage
prepaid return receipt requested), to the parties at the following address:
To Lear: Lear Corporation
21557 Telegraph Road
Southfield, MI 48034
Attention: Vice President and General Counsel
Telecopy No. (248) 746-1677
To Donnelly: Donnelly Corporation
414 East Fortieth Street
Holland, MI 49423
Attention: John Donnelly
Telecopy No. (616) 786-6034
With copy to: Daniel C. Molhoek
Varnum, Riddering, Schmidt & Howlett
333 Bridge St. N.W.
Grand Rapids, Michigan 49504
Telecopy No. (616) 336-7000
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13.3 Severability. If any provision of this Agreement shall be conclusively
determined by a court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Agreement shall not be affected thereby.
13.4 Binding Effect. Except as otherwise provided herein, this Agreement
shall inure to the benefit of and be binding upon the Members, their respective
successors, legal representatives, and permitted assigns.
13.5 Pronouns and Plurals. All pronouns and any variations thereof are
deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the appropriate Person(s) may require.
13.6 No Third Party Rights. This Agreement is intended to create
enforceable rights between the parties hereto only, and creates no rights in, or
obligations to, any other Persons whatsoever.
13.7 Time is of Essence. Time is of the essence in the performance of each
and every obligation herein imposed.
13.8 Further Assurances. The parties hereto shall execute all further
instruments and perform all acts which are or may become necessary to effectuate
the intent and accomplish the purposes of this Agreement.
13.9 Estoppel Certificates. The Members hereby agree that, at the request
from time to time of any Member, they will each execute and deliver an estoppel
certificate stating, to the extent true, that this Agreement is in full force
and effect and that to the best of such Member's knowledge and belief there are
no defaults by any Member (or that certain defaults exist), as the case may be,
under this Agreement.
13.10 Schedules Included in Exhibits; Incorporation by Reference. Any
reference to an Exhibit to this Agreement contained herein shall be deemed to
include any Schedules to such Exhibit. Each of the Exhibits referred to in this
Agreement, and each Schedule to such Exhibits, is hereby incorporated by
reference in this Agreement as if such Schedules and Exhibits were set out in
full in the text of this Agreement.
13.11 Amendments. This Agreement may not be amended except by unanimous
written agreement of all of the Members executed by duly authorized officers.
13.12 Creditors. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Company.
13.13 Counterparts; Facsimile Transmission. This Agreement may be executed
by the parties hereto in counterparts, each of which shall be deemed to be an
original instrument, but all of which together shall constitute one and the same
instrument. The Agreement may be executed and delivered by facsimile
transmission.
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13.14 Entire Agreement; Section Headings. This Agreement constitutes the
entire Agreement among the parties hereto relating to the subject matter hereof
and supersedes all prior agreements, understandings, and arrangements, oral or
written, among the parties with respect to the subject matter hereof. The
Section headings in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
13.15 Assignment. This Agreement and each and every covenant, term and
condition hereof shall be binding upon and inure to the benefit of the Members
hereto and their respective successors and permitted assigns. Except as
otherwise specifically provided in this Agreement, neither this Agreement nor
any rights or obligations hereunder shall be assignable or be delegated directly
or indirectly by any Member hereto to a third party without the prior written
consent of all the Members to this Agreement.
13.16 No Agency Created. This Agreement does not create any agency
relationship between the Members. No Member hereto shall have any authority to
enter into, assume or create any obligations or agreements on behalf of or in
the name of any other of the Members.
13.17 Arbitration. Any dispute, controversy or claim (hereinafter
"Dispute") between the parties of any kind or nature whatsoever, arising under
or related to this Agreement whether arising in contract, tort or otherwise,
shall be resolved according to the following procedure. If a Dispute (excluding
business decisions to be voted on by Members or Directors) arises among the
Members under this Agreement or any Ancillary Agreement which is not resolved by
good faith negotiation, then such Dispute, upon 30 days' prior notice from one
Member to the other of its intent to arbitrate (an "Arbitration Notice"), shall
be submitted to and settled by arbitration; provided, however, that nothing
contained herein shall preclude any party hereto from seeking or obtaining (a)
injunctive relief, or (b) equitable or other judicial relief to enforce the
provisions hereof or to preserve the status quo pending resolution of disputes
hereunder. The parties specifically acknowledge and agree that the provisions of
the Noncompetition Agreements shall be specifically enforceable by a court of
competent jurisdiction and that any claim for damages under this Agreement or
any Ancillary Agreement (including the Noncompetition Agreements), although
arising out of the same facts and circumstances, shall nonetheless be resolved
through arbitration hereunder. Such arbitration shall be conducted in accordance
with the commercial arbitration rules of the American Arbitration Association
existing at the time of submission by one arbitrator. The Members shall attempt
to agree upon an arbitrator. If one cannot be agreed upon, the Member which did
not give the Arbitration Notice may request the Chief Judge of the United States
District Court for the Eastern District of Michigan or the Chief Judge of the
United States District Court for the Western District of Michigan to appoint an
arbitrator. If he or she will not, the arbitrator shall be appointed by the
American Arbitration Association. If an arbitrator so selected becomes unable to
serve, his or her successor shall be similarly selected or appointed. All
arbitration hearings shall be conducted on an expedited schedule, and all
proceedings shall be confidential. Either Member may at its expense make a
stenographic record thereof. The arbitrator shall apportion all costs and
expenses of arbitration (including the arbitrator's fees and expenses, the fees
and expenses of experts, and the fees and expenses of counsel to the parties),
between the prevailing and non-prevailing Member as the arbitrator deems fair
and reasonable. Any arbitration award shall be binding and enforceable against
the parties hereto and judgment may be entered thereon in any court of competent
jurisdiction. The arbitration will take place at Southfield, Michigan or Grand
Rapids, Michigan at the election of the Member not giving the Arbitration
Notice.
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13.18 Fair Market Value. The Fair Market Value of any Member's Interest
shall mean the consideration that a willing buyer will pay a willing seller to
accept. The parties will attempt to agree on such a Fair Market Value in the
manner provided in subsection (b). If the parties cannot agree on a Fair Market
Value, then the Fair Market Value shall be determined as follows:
(a) The Members shall attempt to mutually agree upon an independent
investment banker or independent appraiser of established reputation which
shall determine such Fair Market Value. The Members shall have sixty (60)
days after one Member has requested an appraisal to agree on such an
independent appraiser.
(b) If the Members cannot mutually agree on an independent appraiser
in accordance with the provisions of subsection (a), then:
(i) Each Member, within thirty (30) days, shall select an
independent investment banker or independent appraiser of established
reputation, qualified to determine the Fair Market Value of the
Interest.
(ii) The independent investment bankers or appraisers so selected
mutually shall select a third independent investment bankers or
appraiser of established reputation which is qualified to determine
the Fair Market Value of the Interest and which shall have no material
relationship with either party, and
(iii) The Fair Market Value shall be the value agreed upon by two
of the three independent investment bankers or appraisers so selected,
or absent agreement, the average of the two closest values calculated
by the investment bankers or appraisers.
(iv) If either Member fails to appoint an investment banker or
appraiser within thirty (30) days, the investment bankers or appraiser
appointed by the Member which does appoint an investment banker or
appraiser shall determine the Fair Market Value.
(c) The Fair Market Value of an Interest shall be the Fair Market Value of
the Company multiplied by a fraction the numerator is the Interests percentage
interest in the profits and losses of the Company and the denominator of which
is 100.
(d) Each Member shall have an opportunity to meet with the investment
bankers or appraisers to present its information relative to the Fair Market
Value being determined.
(e) Each Member shall bear the cost of any investment bankers or
independent appraiser that it selects. If only one investment banker or
appraiser has been selected or if a third investment banker or appraiser is
appointed, the cost of that investment banker or appraiser shall be borne
equally by the Members. Each Member shall bear its respective internal costs of
the appraisal.
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IN WITNESS WHEREOF, the parties have executed this Operating Agreement by
their duly authorized officer effective as of the day and year first above
written.
WITNESSED BY: DONNELLY CORPORATION
/s/ Daniel C. Molhoek By/s/ Dwane Baumgardner
Dwane Baumgardner
Its:Chief Executive Officer and President
Date:___________________________________
WITNESSED BY: LEAR CORPORATION
Kenneth Lango By /s/ J.F. McCarthy
Its Vice President
Date: __________________________________
WITNESSED BY: AUTOMOTIVE INDUSTRIES
MANUFACTURING, INC.
By Kenneth Lango By/s/ J.F. McCarthy
Vice Pres.
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EXHIBIT LIST
A. Promissory Note
B. Transfer Agreement
C-1 Donnelly Leased Worker Agreement
C-2 Lear Leased Worker Agreement
D-1 Donnelly Technology License Agreement
D-2 Lear Technology License Agreement
E. Purchase and Supply Agreement
F. Donnelly Noncompetition and Non-Solicitation Agreement
G. Lear Noncompetition and Non-Solicitation Agreement
H. EBITDA for 1998 and 1999
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Schedule 4.5(d)
Any entity which directly or through an Affiliate:
1) Manufactures and sells more than $750 million of automotive seats in
any year;
2) Manufactures and sells more than $100 million of automotive windows in
any year;
3) Manufactures and sells more than $50 million of automotive mirrors in
any year; or
4) Manufactures and sells more than $50 million of electronics for use in
automotive dashboards, consoles, overhead systems and mirrors in any
year.
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EXHIBIT B
AMENDED AND RESTATED
TRANSFER AGREEMENT
THIS AMENDED AND RESTATED TRANSFER AGREEMENT (this "Agreement") is entered
into as of this 31st day of October, 1997, by and among LEAR CORPORATION, a
Delaware corporation ("Lear"), AUTOMOTIVE INDUSTRIES MANUFACTURING INC., a
Delaware corporation ("AIM"), DONNELLY CORPORATION, a Michigan corporation
("Donnelly"), and LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C., a Michigan limited
liability company (the "Company"). Lear, AIM and Donnelly are sometimes referred
to in this Agreement as the "Transferors" or individually as a "Transferor."
RECITALS:
WHEREAS, Lear and Donnelly as members of the Company have executed an
Operating Agreement of the Company dated September 3, 1997 (the "Operating
Agreement"), which Operating Agreement provides for the transfer of certain
assets from Lear, Donnelly and Eurotrim to the Company and the assumption by the
Company of certain liabilities of Lear, Donnelly and Eurotrim;
WHEREAS, Lear and Donnelly and the Company have entered into a Transfer
Agreement, dated September 3, 1997 (the "Original Transfer Agreement"), and the
parties hereto desire that this Agreement should amend, restate and supersede
the Original Transfer Agreement;
WHEREAS, Donnelly desires to transfer to the Company all of the outstanding
common stock of Donnelly Eurotrim Limited, a corporation incorporated under the
laws of the Republic of Ireland ("Eurotrim");
WHEREAS, Lear desires to transfer to the Company the entire ownership
interest of Empetek autodily, s.r.o., a corporation incorporated under the laws
of the Czech Republic ("Empetek");
NOW THEREFORE, in consideration of and in reliance upon the mutual
representations, warranties and obligations in this Agreement and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree and hereby amend and restate the Original
Transfer Agreement as follows:
<PAGE>
ARTICLE 1
TRANSFER OF ASSETS
1.1 Definition Reference. Certain capitalized terms are defined in Article
10. Capitalized terms not defined herein shall have the meaning ascribed to them
in the Operating Agreement.
1.2 Transferred Lear Assets. As of the closing dates indicated (as defined
in Article 7), Lear and AIM will convey, transfer and assign to the Company,
free and clear of all Liens other than Permitted Encumbrances, and the Company
hereby accepts, the following assets (collectively, the "Transferred Lear
Assets"):
(a) the entire ownership interest of Empetek (to be transferred as of
the Initial Closing Date);
(b) Lear's Marlette, Michigan facility described on Schedule 1.2(b)(1)
and all machinery, equipment, tools, fixtures, furniture and other fixed
assets located at such facility, including but not limited to those assets
listed on Schedule 1.2(b)(2) and inventory and supplies associated
therewith (to be transferred as of the Initial Closing Date);
(c) the machinery, equipment, tools, fixtures, furniture and other
assets located at Lear's Sheboygan, Wisconsin facility and at Lear's Colne
and Tipton, England facilities are listed on Schedules1.2(c)(1), (2) and
(3), respectively (to be transfered as of the Initial Closing Date). The
inventory and supplies associated with the Sheboygan, Colne and Tipton
facilities will be transferred as of one or more Subsequent Closing Dates.
The inventories shall be at least equal to the amounts reflected on the
applicable balance sheets as of October 31, 1997, and AIM or Lear will
contribute to the Company an amount in cash equal to any shortfall in the
amount of inventory or the Company will refund to AIM or Lear an amount in
cash equal to any excess over the October 31, 1997 amount. Prior to
December 31, 1997, the parties will review the feasibility and desirability
of modifying the purchasing arrangement between the Company and Lear with
the Company assuming control of the production and/or inventory at the
Sheboygan, Colne and Tipton facilities.;
(d) all accounts receivable of Lear or AIM arising on or after
November 1, 1997, which are related to the business operations and assets
of the businesses referenced in (b) above, except retained tooling
receivables as provided in Subsection B below (to be transferred as of the
Initial Closing Date);
(e) all of the assets specifically identified in Schedule 1.2(e) or
otherwise reflected on the balance sheets included as part of Schedule
1.2(e) (as of the respective closing dates indicated); and
(f) all completed tooling which is related to the business operations
and assets of the businesses referred to in (a) - (c) above shall be
transferred (as of the respective closing dates indicated); all tooling
which is applicable to Products sold by Lear for vehicles
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in which the Product launch will occur prior to November 1, 1997, shall be
completed by Lear through customer approval and then transferred to the
Company. Any tooling which is related to the business operations and assets
of the businesses referred to in (a) - (c) above for future programs with a
start of production date after November 1, 1997, shall be transferred (as
of the respective closing dates indicated) at its work-in-process stage
together with any liabilities or prepaid assets associated with such work
in process tools.
Notwithstanding anything set forth in this Section 1.2, all assets of Lear or
AIM not described in (a) through (f) above, including, but not limited to, the
following assets, shall be excluded from the transfers contemplated hereby (the
"Excluded Lear Assets"):
A. all accounts receivable of Lear or AIM relating to the businesses
transferred as described in Subsection (c) above arising at any time, and
all accounts receivable of Lear or AIM relating to the businesses
transferred as described in Subsections (b) above arising prior to November
1, 1997;
B. accounts receivable or payments with respect to tooling completed
or to be completed by Lear as described in Subsection (f) above; and
C. all of the assets specifically identified in Schedule 1.2(C)
hereto.
1.3 Transferred Donnelly Assets. As of the closing dates indicated (as
defined in Article 7), Donnelly and Eurotrim will convey, transfer and assign to
the Company, free and clear of all Liens other than Permitted Encumbrances, and
the Company hereby accepts, the following assets (collectively, the "Transferred
Donnelly Assets"):
(a) Donnelly's 128th South facility in Holland, Michigan described on
Schedule 1.3(a)(1) and all machinery, equipment, tools, fixtures, furniture
and other fixed assets located at such facility, including but not limited
to the machinery, equipment and other tangible assets of DHT located at
such facility and those assets listed on Schedule 1.3(a)(2) and all
inventory and supplies associated therewith, but excluding certain
furniture and fixtures and equipment related to Donnelly Customer Business
Units located at such facility, including but not limited to those assets
listed on Schedule 1.3(a)(3) (to be transferred as of the Initial Closing
Date);
(b) certain specified machinery, equipment, tools, fixtures, furniture
and other assets located at Donnelly's Grand Haven, Michigan facility
described on Schedule 1.3(b) (to be transferred as of the Initial Closing
Date) and the inventory and supplies associated therewith (to be
transferred as of one or more Subsequent Closing Dates). The inventories
shall be at least equal to the amounts reflected on the applicable balance
sheet as of October 31, 1997, and Donnelly will contribute to the Company
an amount in cash equal to any shortfall in the amount of inventory or the
Company will refund to Donnelly an amount in cash equal to any excess over
the October 31, 1997 amount. Prior to December 31, 1997, the parties will
review the feasibility and desirability of modifying the purchasing
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arrangement between the Company and Donnelly with the Company assuming
control of the production and/or inventory at the Grand Haven facility);
(c) all of the issued and outstanding shares of capital stock of
Eurotrim (to be transferred as of the Initial Closing Date);
(d) [intentionally omitted]
(e) all of the assets specifically identified in Schedule 1.3(e) or
otherwise reflected on the balance sheets included as part of Schedule
1.3(e) (as of the respective closing dates indicated); and
(f) all completed tooling which is related to the business operations
and assets referred to in (a)-(b) above shall be transferred as of the
respective closing dates indicated; all tooling which is applicable to
Products sold by Donnelly for vehicles in which the Product launch will
occur prior to November 1, 1997, shall be completed by Donnelly through
customer approval and then transferred to the Company. Any tooling which is
related to the business operations and assets of the businesses referred to
in (a) - (b) above for future programs with a start of production date
after November 1, 1997, shall be transferred (as of the respective closing
dates indicated) at its work-in-process stage together with any liabilities
or prepaid assets associated with such work in process tools.
Notwithstanding anything set forth in this Section 1.3, all assets of Donnelly
not described in (a) through (f) above, including, but not limited to, the
following assets, shall be excluded from the transfers contemplated hereby (the
"Excluded Donnelly Assets"):
A. all accounts receivable of Donnelly arising at any time;
B. accounts receivable or payments with respect to tooling completed
or to be completed by Donnelly as described in Subsection (f) above; and C.
all of the assets specifically identified in Schedule 1.3C hereto.
1.4 Transfer of Contracts. As of the closing dates indicated on Schedule
1.4, Donnelly, Lear and AIM will convey, transfer and assign to the Company and
the Company will assume their respective rights and obligations under their
respective contracts identified on Schedule 1.4 (the "Assigned Contracts"),
subject to any required approvals. The Assigned Contracts will include
Donnelly's production and supply contract with Aeroplex. 1.5 Relocating Assets
and Operations. The responsibility for and expense of moving the transferred
assets shall allocated as follows:
(a) Lear shall be responsible for all of the relocation and set-up
expenses relating to the transfer of the Transferred Lear Assets located in
the Sheboygan, Wisconsin facility to the Marlette, Michigan facility, which
relocation shall be completed on or before July 1, 2000, unless otherwise
approved by the Members.
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(b) Lear shall be responsible for all of the relocation and set-up
expenses relating to the transfer of the Transferred Lear Assets located in
the Colne, England facility to the Tipton, England facility, which
relocation shall be completed on or before July 1, 2000, unless otherwise
approved by the Members.
(c) Lear shall be responsible for all of the relocation and set-up
expenses relating to the transfer of the Transferred Lear Assets located in
the Tipton, England facility (including the Lear Transferred Assets from
Colne, England) to another facility, at a location to be determined by the
Company, which relocation shall be completed on or before July 1, 2000,
unless otherwise approved by the Members.
(d) Donnelly shall be responsible for all of the relocation and set-up
expenses relating to the transfer of the Transferred Donnelly Assets
located in the Grand Haven, Michigan facility to the facility located at
128 South, Holland, Michigan, or to Marlette, Michigan which relocation
shall be completed on or before July 1, 2000 unless otherwise approved by
the Members.
1.6 Certain Production. With respect to the Grand Haven, Sheboygan, Colne
and Tipton facilities, any production being conducted at such facilities as of
the Closing Date applicable to such facility may continue to be conducted at
such facility at the discretion of the Transferor with respect to that facility.
With respect to production to be commenced after the Closing Date applicable to
such facility, the parties to this Agreement may by mutual written consent agree
to conduct such production at such facility; provided, however, that the Company
shall have the unilateral right (exercisable upon nine months advance notice) to
require that such product be removed from such facility to a location designated
by the Company.
1.7 Capital Expenditures. With respect to each of the facilities referenced
in Section 1.5 hereof, the Company shall pay the costs of those capital
expenditures related to the production of Products that are approved in advance
by the Company.
1.8 Eurotrim. The parties intend and agree to operate Eurotrim's business
at Eurotrim's present location in Naas, Ireland.
ARTICLE 2
ASSUMPTION OF LIABILITIES
2.1 Assumed Lear Liabilities. As of the closing dates indicated, the
Company will assume the following specified debts, liabilities and obligations
of Lear and AIM (the "Assumed Lear Liabilities"):
(a) all accounts payable of Lear and AIM incurred after November 1,
1997, which are related to the Transferred Lear Assets and the business
being transferred by Lear and AIM to the Company, except (i) costs to
complete tooling described in Section 1.2(f),
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(ii) costs to relocate equipment as provided in Section 1.5 and
(iii) accounts payable related to the business operation and assets
described in Section 1.2(c).
(b) those liabilities reflected on the balance sheets included in
Schedule 1.2(e) or otherwise specifically identified on Schedule 2.1(as of
the respective closing dates indicated).
2.2 Assumed Donnelly Liabilities. As of the closing dates indicated, the
Company will assume the following specified debts, liabilities and obligations
of Donnelly (the "Assumed Donnelly Liabilities"):
(a) all accounts payable of Donnelly incurred after November 1, 1997,
which are related to the Transferred Donnelly Assets and the business being
transferred by Donnelly to the Company, except (i) costs to complete
tooling described in Section 1.3(f), (ii) costs to relocate equipment as
provided in Section 1.5 and (iii) accounts payable related to the business
operation and assets described in Section 1.3(b); and
(b) those liabilities reflected on the balance sheets included in
Schedule 1.3(e) or otherwise specifically identified on Schedule 2.2 (as of
the respective closing dates indicated).
2.3 Excluded Liabilities. Except for the liabilities expressly assumed by
the Company under the terms of this Agreement, the Company is not assuming and
shall not be liable for any debts, liabilities or obligations of, or litigation
or claims against, Lear, AIM, Donnelly or their respective subsidiaries and
affiliates.
ARTICLE 3
CAPITAL CONTRIBUTION AND PRORATIONS
3.1 Capital Contributions. The assets transferred to the Company as
described in Article 1 are capital contributions and/or loans to the Company as
provided in the Operating Agreement.
3.2 Prorations. As of the applicable closing dates , the real and personal
property taxes, water, gas, electricity and other utilities, local business or
other license fees or taxes, rents and other similar periodic charges shall be
prorated between the appropriate Transferor and the Company, with such
Transferor bearing the pro rata portion of such taxes, charges and other amounts
which relate to the period prior to the date of this Agreement and the Company
bearing the pro rata portion of such taxes, charges and other amounts which
relate to the period on and after the date of this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
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Each of Lear, AIM and Donnelly (each a "Transferor") represents and
warrants to the Company and to the parties to this Agreement other than itself
as follows with respect to itself:
4.1 Corporate Status and Authority. Transferor is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to own,
lease and operate the Transferred Assets being transferred by such Transferor
pursuant to this Agreement and to carry on that portion of its business being
transferred to the Company pursuant to this Agreement. Transferor has the power
and authority to execute, deliver and perform this Agreement and all other
agreements and documents to be executed and delivered by it in connection
herewith. Transferor is qualified to do business as a foreign corporation in
each jurisdiction where the failure to do so would reasonably be expected to
have a materially adverse effect on the Transferred Assets or business being
transferred by such Transferor to the Company. The execution, delivery and
performance of this Agreement and the transfer to the Company by Transferor of
such Transferor's Transferred Assets have been duly authorized by all requisite
corporate action on Transferor's part. Transferor has duly executed this
Agreement, and this Agreement constitutes Transferor's legal, valid and binding
obligation, enforceable against it in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, moratorium,
reorganization or similar laws affecting creditors' rights and to equitable
principles.
4.2 Conflicts and Consents. Transferor's execution and delivery of this
Agreement, and the performance of its obligations hereunder, do not (a) conflict
with or violate any provision of Transferor's Articles of Incorporation or
Bylaws, (b) violate or, alone or with notice or the passage of time or both,
result in the breach or the termination of, or otherwise give any contracting
party the right to terminate or declare a default under, the terms of any
material written agreement relating to the business or the Transferred Assets
being transferred by such Transferor to the Company pursuant to this Agreement,
or (c) violate any judgment, order, decree, or any material law, statute,
regulation or other judicial or governmental restriction to which Transferor is
subject. Transferor is not required to make any filing with, or to obtain any
permit, authorization, consent or approval of, any governmental or regulatory
authority as a condition to the lawful performance by Transferor of its
obligations hereunder, except for governmental approvals pursuant to the Merger
Control Statute and Article 85.
4.3 Title to Assets. Transferror has good and marketable title to the
Transferred Assets being transferred by such Transferror to the Company pursuant
to this Agreement, free and clear of all Liens except for Permitted
Encumbrances. Title to the Transferred Assets being transferred by Transferor to
the Company pursuant to this Agreement does not, and to its knowledge there
exists no condition affecting the title to or use of any part of its Transferred
Assets which would, prevent the Company from occupying, using, or enforcing its
rights acquired hereunder in respect of any part of such Transferred Assets from
and after the date of this Agreement to the same full extent that Transferror
could continue to do so if the transactions contemplated hereby did not take
place.
4.4 Accounts Receivable. Those Transferred Assets being transferred by
Transferor to the Company which are accounts receivable have arisen in the
ordinary course of business, and are
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valid and collectible. None of Transferor's accounts receivable being
transferred to the Company are or will be subject to any set-off or
counterclaim.
4.5 Inventories. Those Transferred Assets being transferred by Transferor
which constitute finished goods inventory are saleable in the ordinary course of
business consistent with past practice. All of Transferor's work-in-process, raw
materials and supplies inventories which are included in the Transferred Assets
can be used or consumed in the usual and ordinary course of business as now
conducted and are not in amounts in excess of normal requirements.
4.6 Condition of Assets. All of the Transferred Assets being transferred by
the Transferor to the Company which are tangible assets are, in the aggregate,
in good operating condition, normal wear and tear excepted, are capable of being
used for their intended purpose in the ordinary course of business consistent
with past practice and are, in the aggregate, all the assets necessary to
conduct the business of Transferor being transferred to the Company.
4.7 Owned Real Property. A complete and accurate legal description of each
Transferor's Owned Real Property or Transferor's Leased Real Property included
in the Transferred Assets and being transferred to the Company pursuant to this
Agreement is set forth on Schedule 4.7. There are no currently pending
condemnation proceedings which affect such Transferor's Owned Real Property
being transferred or Transferor's Leased Real Property, the lease for which is
being transferred, to the Company pursuant to this Agreement nor are there any
currently ongoing improvements by any public authority, any part of the cost of
which will be assessed against such Owned Real Property. Since January 1, 1997,
Transferor has not experienced any material interruption in the delivery of
adequate service of any utilities or other public authorities required in the
operation of its business. The Transferor's Owned Real Property and Transferor's
Leased Real Property have adequate water supply, and storm and sanitary sewage
facilities for the current needs of the business as conducted by the Transferor.
The buildings located on the Owned Real Property are free of any material
structural defects or zoning, use or other restrictions which could reasonably
be expected to threaten their continued operation in substantially the same
manner as currently operated by the Transferor.
4.8 Environmental Matters. Except as set forth on Schedule 4.8(a) with
respect to Lear or AIM or on Schedule 4.8(b) with respect to Donnelly:
(a) Neither the Transferred Assets transferred by such Transferror nor
any real property leased by Transferor which lease is being assumed by the
Company nor any real property where the business being transferred by
Transferor to the Company is being conducted contain or have previously
contained any Hazardous Substances or underground storage tanks.
(b) To the Knowledge of Transferor, there has been no Release of any
Hazardous Substances at any or from any properties adjacent to any of
Transferor's Owned Real Property, any real property leased by Transferor
which lease is being assumed by the
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Company or any real property where the business being transferred to the
Company is being conducted.
(c) The business and Transferred Assets of Transferor being
transferred to the Company, any real property leased by Transferor which
lease is being assumed by the Company and any real property where the
business being transferred by Transferor to the Company is being conducted
have complied and are in compliance with all Environmental Laws in all
material respects.
(d) With respect to the business and the Transferred Assets being
transferred by Transferor to the Company, any real property leased by
Transferor which lease is being assumed by the Company and any real
property where the business being transferred by Transferor to the Company
is being conducted, Transferor has obtained and is in material compliance
with all permits, licenses, and other authorizations that are required
pursuant to Environmental Law.
(e) With respect to the business and Transferred Assets being
transferred by Transferor to the Company, any real property leased by
Transferor which lease is being assumed by the Company and any real
property where the business being transferred by Transferor to the Company
is being conducted, Transferor has not received any written or oral notice,
report, or information regarding actual or alleged violations of
Environmental Law, or any liabilities or potential liabilities, including
any investigatory, remedial, or corrective obligations relating to it or
its facilities arising under Environmental Law, the subject of which has
not been fully resolved or settled.
(f) With respect to the business and Transferred Assets being
transferred by Transferor to the Company, any real property leased by
Transferor which lease is being assumed by the Company and any real
property where the business being transferred by Transferor to the Company
is being conducted, Transferor has not treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled, or
released any substance, including without limitation any Hazardous
Substance, or owned or operated any property or facility (and no such
property or facility is contaminated by any such substance) in a manner
that has given or would give rise to liabilities, including any liability
for response costs, corrective action costs, personal injury, property
damage, natural resources damages, or attorney fees, pursuant to any
Environmental Law.
(g) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations for
site investigation or cleanup, or notification to or consent of government
agencies, pursuant to any Environmental Law.
(h) No environmental lien has attached to any of the Transferred
Assets being transferred to the Company by Transferor.
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(i) No facts, events, or conditions relating to the business or
Transferred Assets being transferred by such Transferor to the Company, any
real property leased by Transferor which lease is being assumed by the
Company or any real property where the business being transferred by
Transferor to the Company is being conducted will prevent, hinder, or limit
continued compliance with Environmental Law, give rise to any
investigatory, remedial, or corrective obligations pursuant to
Environmental Law, or give rise to any other liabilities pursuant to
Environmental Law.
4.9 Taxes. Transferor has filed all federal, state and local tax returns
required to be filed by it with respect to the business and Transferred Assets
being transferred by such Transferor to the Company, and has paid all taxes
which have become due pursuant thereto or otherwise, other than taxes the
liability for which is being contested in good faith. There are no tax claims,
audits or proceedings pending in connection with the properties, business,
income, expenses, net worth and franchises of Transferor and, to the Knowledge
of Transferor, there are no such threatened claims, audits or proceedings.
4.10 Financial Information. Schedule 4.10(a) with respect to Lear, AIM and
Empetek, and Schedule 4.10(b) with respect to Donnelly and Eurotrim contain
unaudited internal financial projections concerning the Transferred Assets and
business operations being transferred by such Transferor to the Company (the
"Financial Projections"). To the knowledge of Transferor, the assumptions
underlying such Transferor's Financial Projections are accurate and there are no
material facts known to such Transferor that would make such Financial
Projections or underlying assumptions inaccurate or invalid.
4.11 Litigation. No material claim, litigation, action, or proceeding is
pending, or, to the knowledge of Transferor, threatened, and no order,
injunction or decree is outstanding, against or relating to the business or
Transferred Assets being transferred by Transferor to the Company or the Assumed
Donnelly Liabilities or Assumed Lear Liabilities, as the case may be, of such
Transferor which are being assumed by the Company, and, to the Knowledge of
Transferor, there is no state of facts or event which would reasonably be
expected to form the basis for such a claim, litigation, action, investigation
or proceeding.
4.12 Employee Benefits. Except as disclosed in Schedule 4.12 to this
Agreement, with respect to the business, operations and Transferred Assets being
transferred by each Transferor to the Company:
(a) Transferor has delivered or made available to the other parties to
this Agreement prior to the execution of this Agreement copies of all of
Transferor's Benefit Plans currently adopted, maintained by, sponsored in
whole or in party by, or contributed to by Transferor.
(b) None of Transferor's Benefit Plans is or has been a "multiemployer
plan" within the meaning of Section 3(37) of ERISA.
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(c) All of Transferor's Benefit Plans are in material compliance with
the applicable terms of ERISA, the Internal Revenue Code and any other
applicable laws, rules or regulations.
(d) Each ERISA Plan of Transferor which is intended to be qualified
under Section 401(a) of the Internal Revenue Code has received a favorable
determination letter which takes into account the Tax Reform Act of 1986
and subsequent legislation for which a determination letter is available
from the Internal Revenue Service, and Transferor is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter.
(e) As of the date of the most recent actuarial valuation, no Pension
Plan of Transferor had any "unfunded current liability," as that term is
defined in Section 302(d)(8)(A) of ERISA, and the fair market value of the
assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA, which were determined
under actuarial factors that would apply if the plan terminated in
accordance with all applicable legal requirements and assuming the adoption
of interest rate and mortality tables described in Section 417(e)(3)(A)(i)
and the use of such interest rates published in January 1997, and assuming
that all participants take a lump sum distribution of their vested accrued
benefits on January 1, 1997. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position
of any Pension Plan of Transferor, (ii) no change in the actuarial
assumptions with respect to any Pension Plan of Transferor, and (iii) no
increase in benefits under any Pension Plan of Transferor as a result of
plan amendments or changes in applicable law which is reasonably likely to
materially adversely affect the funding status of any such plan.
4.13 Labor and Employment Matters. Except as disclosed on Schedule 4.13 to
this Agreement with respect to persons employed in connection with the business,
operations and Transferred Assets being transferred by such Transferor to the
Company: (a) Transferor is not a party to any collective bargaining or similar
agreement, (b) Transferor is in substantial compliance with any collective
bargaining or similar agreement to which it is a party and with all applicable
laws concerning employment and employment practices, terms and conditions of
employment, wages and hours, occupational safety and health, and is not engaged
in any material unfair labor or employment practices, (c) there is, and during
twelve (12) months prior to the date of this Agreement there has been, no labor
strike or other material dispute between Transferor and its employees, and (d)
there are no material charges, investigations, administrative proceedings or
formal complaints of discrimination pending against Transferor before any
federal, state or local agency or court.
4.14 Compliance with Contracts. With respect to the Assigned Contracts
listed on Schedule 1.4, except as provided on such Schedule: (a) the Assigned
Contracts are valid, binding and enforceable agreements in accordance with their
terms; (b) neither Transferor nor the other party to any Assigned Contract to
which such Transferor is a party is in default under or in breach of any
thereof; (c) no event has occurred which, with notice or lapse of time or both,
would
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constitute such a default or breach; and (d) there is no requirement to obtain
the written consent of any third party to the assignment thereof to the Company.
There have been no discussions or correspondence concerning the breach or
termination of any of the foregoing and there is no default under or any breach
of any of the foregoing by any other party thereto.
4.15 Compliance with Laws. Transferor holds all material governmental
permits, licenses, certificates, permits or other permissions necessary to use
and operate the Transferred Assets of Transferor. Transferor is presently using
the Transferred Assets and conducting its business in compliance with all
applicable statutes, ordinances, rules, regulations and orders of any
governmental authority, except for immaterial violations. Transferor is not
subject to or in default under any judgment, order or decree of any court,
administrative agency or other governmental authority applicable to the
Transferred Assets or the business conducted using the Transferred Assets.
4.16 Brokers and Finders. No broker, finder or other person or entity
acting in a similar capacity has participated on behalf of Transferor in
bringing about the transaction herein contemplated, rendered any services with
respect thereto or been in any way involved therewith.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES REGARDING EMPETEK
Lear and AIM, jointly and severally, represent and warrant to the Company
and Donnelly as follows:
5.1 Capitalization. The registered ownership interest of Empetek consists
of 26,354,000 Czech crowns, all of which have been contributed to Empetek. All
of the registered ownership interest of Empetek has been duly authorized, is
duly and validly issued and outstanding, is fully paid and nonassessable, and is
owned of record and beneficially solely by Lear, free and clear of any Liens,
charges or other encumbrances of any nature whatsoever. There are no outstanding
options, warrants, contracts, preemptive rights, proxies, calls, commitments or
demands or rights of any character obligating Empetek to issue any ownership
interest or options or rights with respect thereto, and there are no existing or
outstanding securities of any kind convertible or exchangeable for any ownership
interest of Empetek. The Articles of Incorporation, Bylaws, minute books and
stock books of Empetek which have been furnished to Donnelly are true and
complete and current up to the date of this Agreement.
5.2 Absence of Undisclosed Liabilities. Except to the extent specifically
reflected and adequately reserved against in the balance sheet of Empetek
included in Schedule 5.2 or otherwise disclosed in Schedule 5.2, Empetek had no
material liabilities or obligations whatsoever, whether accrued, absolute,
contingent or otherwise.
5.3 Material Contracts. Except as set forth on Schedule 5.3, Empetek is not
a party to nor bound by any contract or agreement that could reasonably be
expected to result in aggregate payments by Empetek or liability of Empetek in
excess of the amount identified in Schedule 5.3.
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5.4 Corporate Status and Authority. Empetek is a corporation duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation, with full corporate power and
authority to own, lease and operate its assets and to carry on its business as
presently conducted. Empetek is qualified to do business as a foreign
corporation in each jurisdiction where the failure to do so would reasonably be
expected to have a materially adverse effect on its assets or business. The
execution, delivery and performance of this Agreement by Lear has been duly
authorized by all requisite corporate action on Empetek's part.
5.5 Conflicts and Consents. Lear's execution and delivery of this
Agreement, and the performance of its obligations hereunder, do not (a) conflict
with or violate any provision of Empetek's Articles of Incorporation or Bylaws,
(b) violate or, alone or with notice or the passage of time or both, result in
the breach or the termination of, or otherwise give any contracting party the
right to terminate or declare a default under, the terms of any material written
agreement relating to Empetek's business or assets, or (c) violate any judgment,
order, decree, or any material law, statute, regulation or other judicial or
governmental restriction to which Empetek is subject.
5.6 Title to Assets. Empetek has good and marketable title to its assets,
free and clear of all Liens except for Permitted Encumbrances. Title to the
assets of Empetek does not, and to their knowledge there exists no condition
affecting the title to or use of any part of its assets which would, prevent
Empetek from occupying, using, or enforcing its rights acquired hereunder in
respect of any part of such sssets from and after the date of this Agreement to
the same full extent that Empetek could continue to do so if the transactions
contemplated hereby did not take place.
5.7 Accounts Receivable. Empetek's accounts receivable have arisen in the
ordinary course of business, and are valid and collectible. None of Empetek's
accounts receivable are or will be subject to any set-off or counterclaim.
5.8 Inventories. Empetek's finished goods inventory is saleable in the
ordinary course of business consistent with past practice. All of Empetek's
work-in-process, raw materials and supplies inventories which are included in
the Transferred Assets can be used or consumed in the usual and ordinary course
of business as now conducted and are not in amounts in excess of normal
requirements.
5.9 Condition of Assets. Empetek's tangible assets are, in the aggregate,
in good operating condition, normal wear and tear excepted, are capable of being
used for their intended purpose in the ordinary course of business consistent
with past practice and are, in the aggregate, all the assets necessary to
conduct the business of Empetek as presently conducted.
5.10 Owned Real Property. A complete and accurate legal description of
Empetek's Owned Real Property and Leased Real Property is set forth on Schedule
5.10. There are no currently pending condemnation proceedings which affect
Empetek's Owned Real Property being transferred or Leased Real Property nor are
there any currently ongoing improvements by any public authority, any part of
the cost of which will be assessed against such Owned Real Property. Since
January 1, 1997, Empetek has not experienced any material interruption in the
delivery of adequate
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service of any utilities or other public authorities required in the operation
of its business. Empetek's Owned Real Property and Leased Real Property have
adequate water supply, and storm and sanitary sewage facilities for the current
needs of the business as conducted by the Empetek. The buildings located on the
Owned Real Property are free of any material structural defects or zoning, use
or other restrictions which could reasonably be expected to threaten their
continued operation in substantially the same manner as currently operated by
Empetek.
5.11 Environmental Matters. Except as set forth on Schedule 5.11,
(a) Empetek's owned or leased real property does not contain and has
not previously contained any Hazardous Substances or underground storage
tanks.
(b) To the Knowledge of Lear, there has been no Release of any
Hazardous Substances at any or from any properties adjacent to any of
Empetek's Owned Real Property or any real property leased by Empetek.
(c) Empetek's business, assets and real property have complied and are
in compliance with all Environmental Laws in all material respects.
(d) Empetek has obtained and is in material compliance with all
permits, licenses, and other authorizations that are required pursuant to
applicable Environmental Law.
(e) Empetek has not received any written or oral notice, report, or
information regarding actual or alleged violations of Environmental Law, or
any liabilities or potential liabilities, including any investigatory,
remedial, or corrective obligations relating to it or its facilities
arising under Environmental Law, the subject of which has not been fully
resolved or settled.
(f) Empetek has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any substance,
including without limitation any Hazardous Substance, or owned or operated
any property or facility (and no such property or facility is contaminated
by any such substance) in a manner that has given or would give rise to
liabilities, including any liability for response costs, corrective action
costs, personal injury, property damage, natural resources damages, or
attorney fees, pursuant to any Environmental Law.
(g) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations for
site investigation or cleanup, or notification to or consent of government
agencies, pursuant to any Environmental Law.
(h) No environmental lien has attached to any of material assets of
Empetek.
(i) No facts, events, or conditions relating to Empetek or its assets
will prevent, hinder, or limit continued compliance with Environmental Law,
give rise to any
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investigatory, remedial, or corrective obligations pursuant to
Environmental Law, or give rise to any other liabilities pursuant to
Environmental Law.
5.12 Taxes. Empetek has filed all federal, state and local tax returns
required to be filed by it, and has paid all taxes which have become due
pursuant thereto or otherwise, other than taxes the liability for which is being
contested in good faith. There are no tax claims, audits or proceedings pending
in connection with the properties, business, income, expenses, net worth and
franchises of Empetek and, to the Knowledge of Lear, there are no such
threatened claims, audits or proceedings.
5.13 Litigation. No material claim, litigation, action, or proceeding is
pending, or, to the knowledge of Lear, threatened, and no order, injunction or
decree is outstanding, against or relating to Empetek, there is no state of
facts or event which would reasonably be expected to form the basis for such a
claim, litigation, action, investigation or proceeding.
5.14 Employee Benefits. Except as disclosed in Schedule 5.14 to this
Agreement, with respect to Empetek:
(a) Empetek has delivered or made available to the other parties to
this Agreement prior to the execution of this Agreement copies of all of
Empetek's Benefit Plans currently adopted, maintained by, sponsored in
whole or in party by, or contributed to by Empetek.
(b) All of Empetek's Benefit Plans are in material compliance with
theapplicable terms of all applicable laws, rules or regulations.
5.15 Labor and Employment Matters. Except as disclosed on Schedule 5.15 to
this Agreement: (a) Empetek is not a party to any collective bargaining or
similar agreement, (b) Empetek is in substantial compliance with any collective
bargaining or similar agreement to which it is a party and with all applicable
laws concerning employment and employment practices, terms and conditions of
employment, wages and hours, occupational safety and health, and is not engaged
in any material unfair labor or employment practices, (c) there is, and during
twelve (12) months prior to the date of this Agreement there has been, no labor
strike or other material dispute between Empetek and its employees, and (d)
there are no material charges, investigations, administrative proceedings or
formal complaints of discrimination pending against Empetek before any federal,
state or local agency or court.
5.16 Compliance with Contracts. With respect to the material contracts of
Empetek: (a) such contracts are valid, binding and enforceable agreements in
accordance with their terms; (b) neither Empetek nor the other party to such
material contract to which Empetek is a party is in default under or in breach
of any thereof; (c) no event has occurred which, with notice or lapse of time or
both, would constitute such a default or breach; and (d) there is no requirement
to obtain the written consent of any third party as a result of the transactions
contemplated by this Agreement. There have been no discussions or correspondence
concerning the breach or termination of any of
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the foregoing and there is no default under or any breach of any of the
foregoing by any other party thereto.
5.17 Compliance with Laws. Empetek holds all material governmental permits,
licenses, certificates, permits or other permissions necessary to use its assets
and operate its business. Empetek is presently using its assets and conducting
its business in compliance with all applicable statutes, ordinances, rules,
regulations and orders of any governmental authority, except for immaterial
violations. Empetek is not subject to or in default under any judgment, order or
decree of any court, administrative agency or other governmental authority
applicable to their respective assets and business.
5.18 Brokers and Finders. No broker, finder or other person or entity
acting in a similar capacity has participated on behalf of Empetek in bringing
about the transaction herein contemplated, rendered any services with respect
thereto or been in any way involved therewith.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES REGARDING EUROTRIM
Donnelly represents and warrants to Lear and AIM as follows:
6.1 Capitalization. The issued and outstanding capital stock of Eurotrim
consists of one ordinary share. All of the issued and outstanding capital stock
of Eurotrim has been duly authorized, is duly and validly issued and
outstanding, is fully paid and nonassessable, and is owned of record and
beneficially solely by Donnelly, free and clear of any Liens, charges or other
encumbrances of any nature whatsoever. There are no outstanding options,
warrants, contracts, preemptive rights, proxies, calls, commitments or demands
or rights of any character obligating Eurotrim to issue any shares of stock or
options or rights with respect thereto, and there are no existing or outstanding
securities of any kind convertible or exchangeable for shares of stock or other
securities of Eurotrim. The Articles of Incorporation, Bylaws, minute books and
stock books of Eurotrim which have been furnished to Lear are true and complete
and current up to the date of this Agreement.
6.2 Absence of Undisclosed Liabilities. Except to the extent specifically
reflected and adequately reserved against in the balance sheet of Eurotrim
included in Schedule 6.2 or otherwise disclosed in Schedule 6.2, Eurotrim had no
material liabilities or obligations whatsoever, whether accrued, absolute,
contingent or otherwise.
6.3 Material Contracts. Except as set forth on Schedule 6.3, Eurotrim is
not a party to or bound by any contract or agreement that could reasonably be
expected to result in aggregate payments by Eurotrim or liability of Eurotrim in
excess of the amount identified in Schedule 6.3.
6.4 Corporate Status and Authority. Eurotrim is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with full corporate
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power and authority to own, lease and operate its assets and to carry on its
business as presently conducted. Eurotrim is qualified to do business as a
foreign corporation in each jurisdiction where the failure to do so would
reasonably be expected to have a materially adverse effect on its assets or
business. The execution, delivery and performance of this Agreement by Donnelly
has been duly authorized by all requisite corporate action on Eurotrim's part.
6.5 Conflicts and Consents. Donnelly's execution and delivery of this
Agreement, and the performance of its obligations hereunder, do not (a) conflict
with or violate any provision of Eurotrim's Articles of Incorporation or Bylaws,
(b) violate or, alone or with notice or the passage of time or both, result in
the breach or the termination of, or otherwise give any contracting party the
right to terminate or declare a default under, the terms of any material written
agreement relating to Eurotrim's business or assets, or (c) violate any
judgment, order, decree, or any material law, statute, regulation or other
judicial or governmental restriction to which Eurotrim is subject.
6.6 Title to Assets. Eurotrim has good and marketable title to its assets ,
free and clear of all Liens except for Permitted Encumbrances. Title to the
Transferred Assets being transferred by Eurotrim to the Company pursuant to this
Agreement does not, and to its knowledge there exists no condition affecting the
title to or use of any part of its assets which would, prevent Eurotrim from
occupying, using, or enforcing its rights acquired hereunder in respect of any
part of such Assets from and after the date of this Agreement to the same full
extent that Eurotrim could continue to do so if the transactions contemplated
hereby did not take place.
6.7 Accounts Receivable. Eurotrim's accounts receivable have arisen in the
ordinary course of business, and are valid and collectible. None of Eurotrim's
accounts receivable are or will be subject to any set-off or counterclaim.
6.8 Inventories. Eurotrim's finished goods inventory is saleable in the
ordinary course of business consistent with past practice. All of Eurotrim's
work-in-process, raw materials and supplies inventories which are included in
the Transferred Assets can be used or consumed in the usual and ordinary course
of business as now conducted and are not in amounts in excess of normal
requirements.
6.9 Condition of Assets. Eurotrim's tangible assets are, in the aggregate,
in good operating condition, normal wear and tear excepted, are capable of being
used for their intended purpose in the ordinary course of business consistent
with past practice and are, in the aggregate, all the assets necessary to
conduct the business of Eurotrim as presently conducted.
6.10 Leased Real Property. A complete and accurate legal description of
Eurotrim's Leased Real Property is set forth on Schedule 6.10. There are no
currently pending condemnation proceedings which affect Eurotrim's Leased Real
Property nor are there any currently ongoing improvements by any public
authority, any part of the cost of which will be assessed against such Leased
Real Property. Since January 1, 1997, Eurotrim has not experienced any material
interruption in the delivery of adequate service of any utilities or other
public authorities required in the operation of its business. Eurotrim's Leased
Real Property has adequate water supply, and
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storm and sanitary sewage facilities for the current needs of the business as
conducted by the Eurotrim. The buildings located on the Leased Real Property are
free of any material structural defects or zoning, use or other restrictions
which could reasonably be expected to threaten their continued operation in
substantially the same manner as currently operated by the Eurotrim.
6.11 Environmental Matters. Except as set forth on Schedule 6.11,
(a) Eurotrim's Leased Real Property does not contain and has not
previously contained any Hazardous Substances or underground storage tanks.
(b) To the Knowledge of Donnelly, there has been no Release of any
Hazardous Substances at any or from any properties adjacent to any real
property leased by Eurotrim.
(c) Eurotrim's business, assets and real property have complied and
are in compliance with all Environmental Laws in all material respects.
(d) Eurotrim has obtained and is in material compliance with all
permits, licenses, and other authorizations that are required pursuant to
applicable Environmental Law.
(e) Eurotrim has not received any written or oral notice, report, or
information regarding actual or alleged violations of Environmental Law, or
any liabilities or potential liabilities, including any investigatory,
remedial, or corrective obligations relating to it or its facilities
arising under Environmental Law, the subject of which has not been fully
resolved or settled.
(f) Eurotrim has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any substance,
including without limitation any Hazardous Substance, or owned or operated
any property or facility (and no such property or facility is contaminated
by any such substance) in a manner that has given or would give rise to
liabilities, including any liability for response costs, corrective action
costs, personal injury, property damage, natural resources damages, or
attorney fees, pursuant to any Environmental Law.
(g) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations for
site investigation or cleanup, or notification to or consent of government
agencies, pursuant to any Environmental Law.
(h) No environmental lien has attached to any of material assets of
Eurotrim.
(i) No facts, events, or conditions relating to Eurotrim or its assets
will prevent, hinder, or limit continued compliance with Environmental Law,
give rise to any investigatory, remedial, or corrective obligations
pursuant to Environmental Law, or give rise to any other liabilities
pursuant to Environmental Law.
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6.12 Taxes. Eurotrim has filed all federal, state and local tax returns
required to be filed by it , and has paid all taxes which have become due
pursuant thereto or otherwise, other than taxes the liability for which is being
contested in good faith. There are no tax claims, audits or proceedings pending
in connection with the properties, business, income, expenses, net worth and
franchises of Eurotrim and, to the Knowledge of Donnelly, there are no such
threatened claims, audits or proceedings.
6.13 Litigation. No material claim, litigation, action, or proceeding is
pending, or, to the knowledge of Lear, threatened, and no order, injunction or
decree is outstanding, against or relating to Eurotrim, there is no state of
facts or event which would reasonably be expected to form the basis for such a
claim, litigation, action, investigation or proceeding.
6.14 Employee Benefits. Except as disclosed in Schedule 6.14 to this
Agreement, with respect to Eurotrim:
(a) Eurotrim has delivered or made available to the other parties to
this Agreement prior to the execution of this Agreement copies of all of
Eurotrim's Benefit Plans currently adopted, maintained by, sponsored in
whole or in party by, or contributed to by Eurotrim.
(b) All of Eurotrim's Benefit Plans are in material compliance with
the applicable terms of all applicable laws, rules or regulations.
6.15 Labor and Employment Matters. Except as disclosed on Schedule 6.15 to
this Agreement : (a) Eurotrim is not a party to any collective bargaining or
similar agreement, (b) Eurotrim is in substantial compliance with any collective
bargaining or similar agreement to which it is a party and with all applicable
laws concerning employment and employment practices, terms and conditions of
employment, wages and hours, occupational safety and health, and is not engaged
in any material unfair labor or employment practices, (c) there is, and during
twelve (12) months prior to the date of this Agreement there has been, no labor
strike or other material dispute between Eurotrim and its employees, and (d)
there are no material charges, investigations, administrative proceedings or
formal complaints of discrimination pending against Eurotrim before any federal,
state or local agency or court.
6.16 Compliance with Contracts. With respect to the material contracts of
Eurotrim: (a) such contracts are valid, binding and enforceable agreements in
accordance with their terms; (b) neither Eurotrim nor the other party to such
material contract to which such Eurotrim is a party is in default under or in
breach of any thereof; (c) no event has occurred which, with notice or lapse of
time or both, would constitute such a default or breach; and (d) there is no
requirement to obtain the written consent of any third party as a result of the
transactions contemplated by this Agreement. There have been no discussions or
correspondence concerning the breach or termination of any of the foregoing and
there is no default under or any breach of any of the foregoing by any other
party thereto.
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6.17 Compliance with Laws. Eurotrim holds all material governmental
permits, licenses, certificates, permits or other permissions necessary to use
its assets and operate its business. Eurotrim is presently using its assets and
conducting its business in compliance with all applicable statutes, ordinances,
rules, regulations and orders of any governmental authority, except for
immaterial violations. Eurotrim is not subject to or in default under any
judgment, order or decree of any court, administrative agency or other
governmental authority applicable to Eurotrim's asses and business.
6.18 Brokers and Finders. No broker, finder or other person or entity
acting in a similar capacity has participated on behalf of Eurotrim in bringing
about the transaction herein contemplated, rendered any services with respect
thereto or been in any way involved therewith.
ARTICLE 7
CLOSING
7.1 Closing. The consummation of the transactions and transfers
contemplated hereby shall take place at one or more closings (the "Closings").
The initial transfers contemplated hereby shall take place as of November 1,
1997 (the "Initial Closing Date") unless otherwise mutually agreed to by Lear,
AIM and Donnelly. The subsequent transfers contemplated hereby shall take place
at such dates and times (the "Subsequent Closing Dates") as are mutually agreed
to by Lear, AIM and Donnelly and in each case shall be on or before December 31,
1999. Notwithstanding the foregoing, each of the Closings shall be subject to
the fulfillment or waiver of the conditions precedent contained in Sections 7.2.
The transfers and deliveries described herein for each such Closing shall be
mutually interdependent and regarded as occurring simultaneously at such
Closing; and no such transfer or delivery shall become effective until all the
other transfers and deliveries provided for in herein with respect to such
Closing have also been consummated.
7.2 Conditions Precedent. The obligations of each party to this Agreement
to complete each Closing and consummate the transactions contemplated hereby are
contingent upon the fulfillment of each of the following conditions on or before
each such Initial Closing Date or Subsequent Closing Date, as the case may be,
except to the extent that such party waives one or more such conditions to its
obligations:
(a) Representations and Warranties. The representations and warranties
of the other parties to this Agreement shall be true and correct in all
material respects on and as of such Initial Closing Date or Subsequent
Closing Date, as the case may be, with the same effect as though such
representations and warranties had been made on and as of such date except
for representations and warranties that speak as of specific date other
than such Initial Closing Date or Subsequent Closing Date, which shall be
true and correct in all material respects as of such date.
(b) Consents and Approvals. All material consents, approvals, permits,
licenses and actions or filings or notices (including those required
pursuant to the European Union merger control statute or Article 85) to any
governmental or regulatory authority (including,
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but not limited to, authorities of the United States, the European Union,
any European country, or any other national, state or local governmental
authority) or of any third party necessary to permit the parties to perform
their respective obligations hereunder and to consummate the transactions
contemplated hereby shall have been duly obtained, made or given and shall
be in full force and effect, and all waiting periods under applicable laws
shall have expired or be terminated.
(c) Litigation. No claim, action, suit, arbitration or other
proceeding by or before any federal, state, local or foreign court or
governmental, regulatory or administrative agency or authority shall be
pending or threatened on the Initial Closing Date or the Subsequent Closing
Date, as the case may be, which seeks to enjoin, restrain or prohibit the
consummation, or to change in any material respect, the transactions
contemplated by this Agreement or seeks material damages from one or more
parties to this Agreement in connection with the contemplated transactions.
(d) Material Adverse Change. There shall have been no determination by
either Lear or Donnelly that the Closing and the consummation of the
transactions contemplated by this Agreement are not in the best interests
of such party and its shareholders by reason of a material adverse change
since the date of this Agreement in the Transferred Assets, business,
financial condition or results of operations of the businesses being
transferred by Lear and AIM (in the case of a determination by Donnelly) or
by Donnelly (in the case of a determination by Lear).
(e) Completion of Schedules. Each of the parties hereto shall have
completed the Schedules and Exhibits to be provided by such party pursuant
to this Agreement, the Operating Agreement and the Agreements contemplated
thereby in form and substance satisfactory to the other parties hereto.
(f) Completion of Tooling Schedules. Each party shall have completed
and delivered to the other parties schedules concerning such party's
tooling and such schedules shall be satisfactory in form and substance to
the other parties hereto.
(g) Closing Documentation. Each party shall have received at such
Closing the following documentation signed by all necessary parties to such
documentation:
(i) Bill of Sale. Each Transferor shall execute and deliver a
bill of sale in the form attached hereto as Exhibit A.
(ii) Assignment and Assumption. Each Transferor will execute an
assignment of accounts receivable, intangible assets and contracts and
the Company will execute assumptions of the transferred obligations
therewith.
(iii) Stock Transfer Agreement and Stock Power. At the Closing on
the Initial Closing Date, Lear shall execute and deliver to the
Company the Stock
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Transfer Agreement attached as Exhibit B-1 hereto with respect to the
ownership interest of Empetek, and Donnelly shall execute and deliver
to the Company the Stock Transfer Agreement attached as Exhibit B-2
hereto with respect to the outstanding shares of Eurotrim.
(iv) Warranty Deed. Each Transferor shall execute and deliver a
Warranty Deed with respect to Owned Real Property being transferred by
such Transferor to the Company.
(v) Title Insurance. With respect to Owned Real Property, the
Transferor transferring such Owned Real Property shall deliver to the
Company a written title insurance binder or policy for such Owned Real
Property naming the Company as an insured.
(vi) Other Agreements. The Operating Agreement among Lear,
Donnelly and the Company, and all other agreements referenced therein
will have been executed and delivered by all parties.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Repurchase of Accounts Receivable. If an account receivable that was
included in the Transferred Assets is not paid in full within ninety (90) days
after the Effective Date, then upon the written request of the Company the
Transferor that transferred such account receivable to the Company shall within
thirty (30) days after such written report repurchase such account receivable
from the Company for cash in an amount equal to the unpaid balance of such
account receivable. With respect to any account receivable of Transferor that is
not paid in full within ninety (90) days after the Effective Date, upon the
written request of the Company, such Transferor shall repurchase such account
receivable from the Company for cash in an amount equal to the unpaid balance of
such account receivable.
8.2 Expenses; Transfer Taxes. Each Transferor shall pay all real estate and
conveyance taxes, filing fees, survey fees and title insurance premiums with
respect to the Transferred Assets being transferred by such Transferor to the
Company. Each Transferor shall pay all of the expenses incident to the
transactions contemplated by this Agreement which are incurred by such
Transferor or its representatives.
8.3 Further Assurances. The parties hereto shall execute all further
instruments and perform all acts which are or may become necessary to effectuate
the intent and accomplish the purposes of this Agreement.
8.4 Assignment of Contracts. To the extent the assignment of any contract,
lease, commitment or other asset to be assigned to the Company pursuant to this
Agreement shall require the consent of any other person, this Agreement shall
not constitute a contract to assign the same if
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an attempted assignment would constitute a breach thereof or give rise to any
right of acceleration or termination. Each Transferor shall use its reasonable
best efforts to obtain consents to any such assignment. If such consent is not
obtained, the transferor agrees to cooperate with the Company in any reasonable
arrangement designed to provide for the Company the benefits thereunder,
including, but not limited to, having (a) the Company act as agent for such
Transferor; and (b) such Transferor enforce for the benefit of the Company, at
the Company's expense, any and all rights of such Transferor against the other
party thereto arising out of the cancellation by such other party or otherwise.
8.5 Waiver of Bulk Transfer Laws. The Company hereby waives compliance with
the provisions of any so-called "Bulk Transfer Laws," or any similar law as
enacted in any jurisdiction, to the extent applicable to the transactions
contemplated hereby.
8.6 Operation and Maintenance. Each Transferor agrees that from the date of
this Agreement until its tangible Transferred Assets are transferred to the
Company, such Transferor shall operate and maintain such Transferred Assets in
the ordinary course of its business.
ARTICLE 9
INDEMNIFICATION
9.1 Survival of Representations and Warranties. The representations and
warranties contained in Article 4 (with respect to Lear, AIM and Donnelly),
Article 5 (with respect to Lear and AIM), and Article 6 (with respect to
Donnelly) of this Agreement shall survive the Closing and continue to be binding
for a period of five (5) years after the date hereof. The covenants and
agreements of the parties hereto contained herein shall survive the Closing and
shall remain in full force and effect until they have been performed.
9.2 Indemnification by Lear. Lear and AIM shall jointly and severally
indemnify the Company and Donnelly and their respective directors, officers,
employees and agents (the "Donnelly Indemnified Parties") against and hold them
harmless from:
(a) Representations. All Liability, loss, damage, deficiency or
expense resulting from or arising out of any breach of any representation
or warranty by Lear or AIM herein;
(b) Covenants. All Liability, loss, damage or deficiency resulting
from or arising out of any breach or nonperformance of any covenant or
obligation made or incurred by Lear or AIM herein;
(c) Liabilities. Any imposition (including, but not limited to,
imposition by operation of any bulk transfer or other Law) by a third party
upon any of the Donnelly Indemnified Parties of any Liability of Lear or
AIM which the Company has not specifically agreed to assume pursuant to
this Agreement; and
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(d) Costs. Any and all reasonable costs and expenses (including, but
not limited to, reasonable legal, accounting, expert witness and consulting
fees) related to any of the foregoing.
9.3 Indemnification by Donnelly. Donnelly shall indemnify the Company, Lear
and AIM and their respective directors, officers, employees and agents (the
"Lear Indemnified Parties") against and hold them harmless from:
(a) Representations. All Liability, loss, damage, deficiency or
expense resulting from or arising out of any breach of any representation
or warranty by Donnelly herein;
(b) Covenants. All Liability, loss, damage or deficiency resulting
from or arising out of any breach or nonperformance of any covenant or
obligation made or incurred by Donnelly herein;
(c) Liabilities. Any imposition (including, but not limited to,
imposition by operation of any bulk transfer or other Law) by a third party
upon any of the Lear Indemnified Parties of any Liability of Donnelly which
the Company has not specifically agreed to assume pursuant to this
Agreement; and
(d) Costs. Any and all reasonable costs and expenses (including, but
not limited to, reasonable legal, accounting, expert witness and consulting
fees) related to any of the foregoing.
9.4 Indemnification for Misrepresented Financial Information.
Notwithstanding anything in this Article 9 to the contrary, in the event that a
Transferor's representation contained in Section 4.10 concerning Historical
Financial Information or Financial Projections materially differs from or
understates historical or expected financial results, that Transferor shall
compensate the other Member for the difference between the value of the
Transferor's business contributed to the Company based upon the information set
forth herein less the value of such business based upon the correct information
as determined pursuant to this Section 9.4. If the actual aggregate EBITDA for
1998 and 1999 for the Transferred Assets and related business operations
contributed by a Transferor to the Company is less than an amount equal to the
projected EBITDA contained in the Financial Projections (as defined in Schedule
9.4 hereto) minus $1,000,000, then within ninety (90) days after the end of 1999
the Transferor shall contribute to the Company an amount in cash equal to the
amount by which projected EBITDA minus $1,000,000 exceeds the actual aggregate
EBITDA for such years.
9.5 Third Party Claims. If any legal proceedings shall be instituted or any
claim asserted by any third party in respect of which Donnelly Indemnified
Parties on the one hand, or Lear Indemnified Parties on the other hand, may be
entitled to indemnity hereunder, the party asserting such right to indemnity
(the "Indemnitee") shall give the party from whom indemnity is sought (the
"Indemnifying Party") prompt written notice (the "Claims Notice") thereof. The
Claims Notice shall describe the asserted claim in reasonable detail and shall
indicate an estimate of the amount of the
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Liability that has been or may be suffered by the Indemnitee. A delay in giving
the Claims Notice shall only relieve the recipient of liability to the extent
the recipient suffers actual prejudice because of the delay. The Indemnifying
Party shall be entitled to assume the defense of any action, suit or claim
brought against the Indemnitee with respect to which the Indemnifying Party may
have any indemnity liability hereunder. The Indemnifying Party shall be
responsible for any legal or other expenses incurred by the Indemnifying Party
in connection with the defense thereof. In the event the Indemnifying Party
assumes such defense, the Indemnitee shall continue to have the right to be
represented, at its own expense, by counsel of its choice in connection with the
defense of such a proceeding or claim. Neither the Indemnifying Party nor the
Indemnitee shall make any settlement of any claim or consent to the entry of any
judgment without the written consent of the other party (which consent shall not
be unreasonably withheld). The parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
proceeding or claim. Each party, without cost to the other party, shall make
available to the other party and their attorneys and accountants all books and
records of such party relating to such proceeding or litigation.
ARTICLE 10
CERTAIN DEFINITIONS
When used in this Agreement, the following terms in all of their tenses and
cases shall have the meanings assigned to them below or elsewhere in this
Agreement:
"Affiliate" of any Person means any person directly or indirectly
controlling, controlled by, or under common control with, any such Person.
"Benefit Plan" of any party means any and all employee benefit plans of
such party as defined in ERISA, including, but not limited to, all pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus or other incentive plans, all other
employee programs, arrangements or agreements, all medical, vision, dental or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans currently adopted, maintained by, sponsored by or
contributed to by any party or its subsidiary for the benefit of employees,
retirees, dependents, spouses, directors, or other beneficiaries.
"Contracts" means any commitment, understanding, instrument, lease, pledge,
mortgage, indenture, note, license, agreement, purchase or sale order, contract,
promise, or similar arrangement evidencing or creating any obligation, whether
written or oral.
"DHT" means Donnelly Happich Technology, an entity affiliated with
Donnelly.
"Environmental Law" shall mean all federal, state, and local statutes,
regulations, ordinances, and similar provisions having the force or effect of
law, all judicial and administrative orders and determinations, all contractual
obligations, and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment including
without limitation all those relating to the presence, use, production,
generation, handling, transport, treatment, storage,
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disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any Hazardous Substance.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization as determined according to generally accepted accounting principles
consistently applied.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plan" of a party means a Benefit Plan of that party or any
subsidiary of such party which is an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA.
"Governmental Authority" means any foreign, federal, state, regional or
local authority, agency, body, court or instrumentality, regulatory or
otherwise, which, in whole or in part, was formed by or operates under the
auspices of any foreign, federal, state, regional or local government.
"Hazardous Substance" means any substance in any concentration which is or
could be detrimental to human health or safety or to the environment, currently
or hereafter listed, defined, or designated as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law, whether by type
or by quantity, including any substance containing any such substance as a
component. Hazardous Substance includes, without limitation, any toxic waste,
pollutant, contaminant, hazardous substance, toxic substance, hazardous waste,
special waste, industrial substance, oil or petroleum or any derivative or
byproduct thereof, radon, radioactive material, asbestos, asbestos-containing
material, urea, formaldehyde, foam insulation, lead and Polychlorinated
Biphenyls.
"Intellectual Property Rights" means know-how, manufacturing techniques,
trade secrets and confidential proprietary information, but does not include
patents and trademarks.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Knowledge" means with respect to Lear the actual knowledge as of the
applicable closing date of Frank Preston, Joseph McCarthy or any other manager
or staff employee of Lear or Empetek associated with the Transferred Lear Assets
and transferred business operations. "Knowledge" means with respect to Donnelly
the actual knowledge as of the applicable closing date of John Donnelly, William
R. Jellison, or any other manager or staff employee of Donnelly or Eurotrim
associated with the Transferred Donnelly Assets and transferred business
operations.
"Law" means any common law and any federal, state, regional, local or
foreign law, rule, statute, ordinance, rule, order or regulation in effect as of
the Effective Date (other than federal or state antitrust Laws as they may
relate to the transactions contemplated by this Agreement).
"Liabilities" means responsibilities, obligations, duties, commitments,
claims, and liabilities of any and every kind, whether known or unknown,
accrued, absolute, contingent or otherwise.
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"Lien" means any pledge, lien (including tax lien), charge, claim,
encumbrance, security interest, mortgage, option, restriction on transfer
(including, without limitation, any buy-sell agreement or right of first refusal
or offer), forfeiture, penalty, equity or other right of another Person of every
nature and description whatsoever.
"Owned Real Property" means those certain parcels of owned real property,
together with the buildings, structures and other improvements erected thereon,
and together with all easements, rights and privileges appurtenant thereto,
which are described in Schedule 4.7 hereto (or Schedule 5.10 hereto in the case
of Empetek).
"Pension Plan" of a party shall mean any ERISA Plan of that party or any
subsidiary of that party which is also a "defined benefit plan" as defined in
Section 414(j) of the Internal Revenue Code.
"Permitted Encumbrances" means all matters set forth in Schedule 9.1, and
shall also include the following:
(a) all liens for taxes and assessments, both general and special, and
other governmental charges which are not yet due and payable as of the
Effective Date;
(b) all land use, building and zoning codes and ordinances of general
effect, and other laws, ordinances, regulations, rules, orders, licenses
and determinations of any federal, state, county, municipal or other
governmental authority, now or hereafter enacted of general effect, made or
issued by any such governmental authority affecting the Owned Real
Property;
(c) all easements, rights-of-way, covenants, conditions, restrictions,
reservations, licenses, agreements, and other matters of record;
(d) all electric power, telephone, gas, sanitary sewer, storm sewer,
water and other utility lines, pipelines, service lines, and facilities of
any nature on, over or under the Owned Real Property, and all licenses,
easements and rights-of-way, and other agreements relating thereto; and
(e) other imperfections of title, easements and encumbrances, if any,
which taken together with items (a) through (d) above do not, individually
or in the aggregate, materially adversely affect the marketability or
insurability of title to any parcel of Owned Real Property or materially
detract from the Company's title to or ability to use the Transferred
Assets other than Owned Real Property.
"Person" means any individual, firm, corporation, partnership, limited
liability company, limited liability partnership, association, estate, trust,
pension or profit-sharing plan, or any other entity, including any government
entity.
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"Petroleum Products" means petroleum, gasoline, oil, fuel oil, diesel fuel
and petroleum solvents.
"Products" shall have the meaning attributed to it in the Operating
Agreement.
"RCRA" means Resource Conservation and Recovery Act of 1976, as amended.
"Release" means any direct or indirect spilling, pumping, pouring,
emitting, emptying, placing, discharging, injecting, escaping, leaking, dumping,
or disposing on or into any building or facility or the environment whether
intentional or unintentional.
"Storage" means storage as defined by RCRA as of the Effective Date or by
any similar Law of any jurisdiction where Transferor presently conducts
business.
"Tax" means any charge or assessment by or liability to any Governmental
Authority, including, but not limited to, any deficiency, interest or penalty.
"Transferred Assets" means the Transferred Lear Assets and the Transferred
Donnelly Assets, collectively.
"Treatment" means treatment as defined by RCRA as of the Effective Date or
by any similar Law of any jurisdiction where the Transferred Assets are located
as of the Effective Date.
ARTICLE 11
CONSTRUCTION
11.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without giving effect to any
applicable principles of conflicts of laws.
11.2 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
(i) in person, (ii) to the extent receipt is confirmed, by telecopy, facsimile
or other electronic transmission service, (iii) by a nationally recognized
overnight courier service, or (iv) by registered or certified mail (postage
prepaid return receipt requested), to the parties at the following address:
To Lear Lear Corporation
or AIM: 21557 Telegraph Road
Southfield, Michigan 48034
Attention: Vice President and General Counsel
Telecopy No. (248) 746-1677
To Donnelly Donnelly Corporation
or Eurotrim: 414 East Fortieth Street
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Holland, Michigan 49423
Attention: John Donnelly
Telecopy No. (616) 786-6034
With a copy to: Varnum, Riddering, Howlett & Schmidt LLP
Suite 1600, Bridgewater Place
333 Bridge Street, N.W., P.O. Box 352
Grand Rapids, Michigan 49504
Attention: Daniel Molhoek
Telecopy No. (616) 336-7000
To the Company: Lear Donnelly Overhead Systems, L.L.C.
39650 Orchard Hill Place
Novi, Michigan 49375
Attention: Richard Perreault
Telecopy No. _____________
11.3 Severability. If any provision of this Agreement shall be conclusively
determined by a court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Agreement shall not be affected thereby.
11.4 Binding Effect. Except as otherwise provided herein, this Agreement
shall inure to the benefit of and be binding upon the parties, their respective
successors, legal representatives and permitted assigns.
11.5 Pronouns and Plurals. All pronouns and variations thereof are deemed
to refer to the masculine, feminine, neuter, singular or plural as the identity
of the appropriate Person(s) may require.
11.6 No Third Party Rights. This Agreement is intended to create
enforceable rights between the parties hereto only, and creates no rights in, or
obligations to, any other Persons whatsoever.
11.7 Time is of Essence. Time is of the essence in the performance of each
and every obligation herein imposed.
11.8 Schedules Included in Exhibits; Incorporation by Reference. Any
reference to an Exhibit to this Agreement contained herein shall be deemed to
include any Schedules to such Exhibit. Each of the Exhibits referred to in this
Agreement, and each Schedule to such Exhibits, is hereby incorporated by
reference in this Agreement as if such Schedules and Exhibits were set out in
full in the text of this Agreement.
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11.9 Amendments. This Agreement may not be amended except by unanimous
written agreement of all of the parties hereto.
11.10 Creditors. None of the provisions of this Agreement shall be for the
benefit or enforceable by any creditors of any party hereto.
11.11 Counterparts; Facsimile Transmission. This Agreement may be executed
by the parties hereto in counterparts, each of which shall be deemed to be an
original instrument, but all of which together shall constitute one and the same
document. The Agreement may be executed and delivered by facsimile transmission.
11.12 Entire Agreement; Section Headings. This Agreement constitutes the
entire Agreement among the parties hereto relating to the subject matter hereof
and supersedes all prior agreements, understandings, and arrangements, oral or
written, among the parties with respect to the subject matter hereof. The
Section headings in this Agreement are for reference purposes only and shall be
affect in any way the meaning or interpretation of this Agreement.
11.13 Assignment. This Agreement and each and every covenant, term and
condition hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns. Except as otherwise
specifically provided in this Agreement, neither this Agreement nor any rights
or obligations hereunder shall be assignable or be delegated directly or
indirectly by any party hereto to a third party without the prior written
consent of all the parties to this Agreement.
11.14 Arbitration. Any dispute, controversy or claim (hereinafter
"Dispute") between the parties of any kind or nature whatsoever, arising under
or relating to this Agreement whether arising in contract, tort or otherwise,
shall be resolved according to the following procedure. If a Dispute arises
among two or more parties to this Agreement which is not resolved by good faith
negotiation, then such Dispute, upon 30 days' prior notice from one party to the
others of its intent to arbitrate (an "Arbitration Notice"), shall be submitted
to and settled by arbitration; provided, however that nothing contained herein
shall preclude any party hereto from seeking or obtaining (a) injunctive relief,
or (b) equitable or other judicial relief to enforce the provisions hereof or to
preserve the status quo pending resolution of disputes hereunder. Such
arbitration shall be conducted in accordance with the commercial arbitration
rules of the American Arbitration Association existing at the time of submission
by one arbitrator. The parties shall attempt to agree upon an arbitrator. If one
cannot be agreed upon, the Member which did not give the Arbitration Notice may
request the Chief Judge of the United States District Court for the Eastern
District of Michigan or the Chief Judge of the United States District Court for
the Western District of Michigan to appoint an arbitrator. If he or she will not
the arbitrator shall be appointed by the American Arbitration
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Association. If an arbitrator so selected becomes unable to serve, his or her
successor shall be similarly selected or appointed. All arbitration hearings
shall be conducted on an expedited schedule, and all proceedings shall be
confidential. Any party may at its expense make a stenographic record thereof.
The arbitrator shall apportion all costs and expenses of arbitration (including
the arbitrator's fees and expenses, the fees and expenses of experts, and the
fees and expenses of counsel to the parties), between the prevailing and
non-prevailing party as the arbitration panel deems fair and reasonable. Any
arbitration award shall be binding and enforceable against the parties hereto
and judgment may be entered thereon in
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<PAGE>
any court of competent jurisdiction. The arbitration will take place at
Southfield, Michigan, or Grand Rapids, Michigan, at the election of the Member
not giving the Arbitration Notice.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LEAR CORPORATION AUTOMOTIVE INDUSTRIES
("Lear") MANUFACTURING, INC.
("AIM")
By:_____________________________ By: J. F. McCarthy
Its:__________________________ Its:____________________________
DONNELLY CORPORATION LEAR DONNELLY OVERHEAD
("Donnelly") SYSTEMS, L.L.C.
(the "Company")
By:/s/ Dwane Baumgardner By: Richard Perreault
Dwane Baumgardner
Its: Chief Executive Officer and President Its:________________________
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LIST OF EXHIBITS AND SCHEDULES
Exhibit A Bill of Sale
Exhibit B-1 Empetek Stock Transfer Agreement
Exhibit B-2 Eurotrim Stock Transfer Agreement
Schedule 1.2(a) Transferred Lear Assets
Schedule 1.2(b) Excluded Lear Assets
Schedule 1.3(a) Transferred Donnelly Assets
Schedule 1.3(b) Excluded Donnelly Assets
Schedule 1.4 Assigned Contracts
Schedule 2.1 Assumed Lear Liabilities
Schedule 4.7 Owned Real Property
Schedule 4.8(a) Lear Environmental Disclosures
Schedule 4.8(b) Donnelly Environmental Disclosures
Schedule 4.10(a) Lear and Empetek Projected Financial Information
Schedule 4.10(b) Donnelly and Eurotrim Projected Financial Information
Schedule 4.12 Employee Benefits Disclosures
Schedule 4.13 Labor and Employment Matter Disclosures
Schedule 5.2 Empetek Undisclosed Liabilities
Schedule 5.3 Empetek Material Contracts
Schedule 5.10 Empetek Real property
Schedule 5.11 Empetek Environmental Matters
Schedule 5.14 Empetek Benefits
Schedule 5.15 Empetek Labor and Employment Matters
Schedule 6.2 Eurotrim Undisclosed Liabilities
Schedule 6.3 Eurotrim Material Contracts
Schedule 6.10 Eurotrim Real Property
Schedule 6.11 Eurotrim Environmental Matters
Schedule 6.14 Eurotrim Benefits
Schedule 6.15 Eurotrim Labor Employment Matters
Schedule 9.4 Projected EBITDA
Schedule 11.1 Permitted Encumbrances
<PAGE>
TRANSFER AGREEMENT
SCHEDULE 9.4
1. Projected aggregate EBITDA for calendar 1998 and 1999 for the
Transferred Lear Assets and related business operations contributed by
Lear, AIM and LIS is $24,131,000.
2. Projected aggregate EBITDA for calendar 1998 and 1999 for the
Transferred Donnelly Assets and related business operations
contributed by Donnelly is $15,903,000.
<PAGE>
EXHIBIT C-1
DONNELLY U.S. LEASED WORKER AGREEMENT
THIS LEASED WORKER AGREEMENT (this "Agreement") is entered into as of this
1st day of November, 1997 (the "Effective Date"), by and among DONNELLY
CORPORATION, a Michigan corporation, ("Donnelly") and LEAR DONNELLY OVERHEAD
SYSTEMS L.L.C., a Michigan limited liability company (together with its
subsidiaries, the "Company").
RECITALS:
WHEREAS, Lear and Donnelly Corporation as members of the Company have
executed an Operating Agreement of the Company dated September 3, 1997 (the
"Operating Agreement"); capitalized terms not defined herein shall have the
meaning ascribed to them in the Operating Agreement;
WHEREAS, the parties desire that the Company shall lease and eventually
employ (subject to the terms of this Agreement) those Donnelly employees
associated with the business being transferred by Donnelly to the Company as
contemplated by the Operating Agreement;
NOW THEREFORE, for good and valuable consideration including the mutual
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
ASSIGNMENT OF LEASED WORKERS
1.1 "Leased Workers" shall mean those persons identified on Schedule A who
are employed by Donnelly as of the effective date of their assignment to the
Company, as supplemented from time to time to include additional Donnelly
employees, if any, assigned to the Company as Leased Workers under this
Agreement. With respect to persons or positions identified on Schedule A,
Donnelly may substitute a different individual for the individual listed on
Schedule A. Donnelly's employees associated with Donnelly's Grand Haven,
Michigan facility are not Leased Workers and are not being assigned to the
Company pursuant to this Agreement.
1.2 Assignment of Leased Workers. Effective as of the Effective Date,
Donnelly hereby assigns the Leased Workers identified on Schedule A who are
currently employed by Donnelly (primarily at Donnelly's 128th South Facility in
Holland, Michigan) to perform the services performed by such Leased Workers
immediately prior to the Effective Date
<PAGE>
("Services") for the term of this Agreement. Schedule A will be supplemented
from time to time to include additional Donnelly employees, if any, assigned to
the Company as Leased Workers under this Agreement and to exclude Donnelly
employees whose employment with Donnelly terminates prior to their assignment to
the Company and employees who elect not to accept employment with the Company
and are reassigned by Donnelly.
1.3 Employee Compensation. While a Leased Worker is performing Services
under this Agreement, Donnelly will pay all wages and compensation and provide
all benefits to the Leased Worker, subject to payment by the Company for the
Services as provided by this Agreement.
1.4 Status. The Donnelly employees assigned to perform Services for the
Company are solely the employees of Donnelly and nothing contained in this
Agreement shall be construed to create any other relationship between the
parties. Donnelly has recruited, interviewed, tested, selected, hired and
trained the Leased Workers. Donnelly will maintain all necessary payroll and
personnel records and compute wages and withhold applicable federal, state and
local taxes and social security payments for the Leased Workers. Donnelly and
the Company shall cooperate to discipline, review and evaluate employees.
Donnelly has sole responsibility to determine compensation and terminate Leased
Workers assigned pursuant to this Agreement.
ARTICLE 2
PAYMENTS BY THE COMPANY TO DONNELLY
2.1 Payment. The Company agrees to pay Donnelly an amount equal to
Donnelly's direct costs (wages, compensation, withholding and employment taxes,
and bonuses) of employing the Leased Workers to perform the Services (as further
described on Schedule B) and an amount equal to Donnelly's indirect actual costs
related and appropriately allocated to the Leased Workers, including, but not
limited to, employee benefits, workers' compensation insurance, and payments to
the Michigan Employment Security Commission. Donnelly shall submit to the
Company monthly invoices for the Services, which invoices shall be due and
payable within seven (7) days of receipt.
ARTICLE 3
WORKERS' COMPENSATION AND OTHER MATTERS
3.1 Workers' Compensation. Donnelly shall maintain, at its expense,
workers' compensation insurance for Leased Workers, covering any compensable
work-related injuries or illnesses they sustain on the premises owned or leased
by the Company during
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their work assignment. Donnelly shall provide a copy of the workers'
compensation insurance certificate annually on its renewal date to the Company.
3.2 OSHA. The Company will provide Donnelly with all information required
under the Occupational Safety and Health Act, or other applicable laws,
regarding any work-related injuries or illnesses sustained by Leased Workers
while on Company premises during their work assignment.
3.3 General Liability Insurance. Donnelly shall maintain, at its expense,
general liability insurance to cover the tortious actions or negligence of
Leased Workers while on the premises of the Company during their work
assignment. Donnelly shall provide a copy of the liability insurance certificate
annually on its renewal date to the Company.
3.4 Unemployment Benefits. Donnelly shall be responsible for unemployment
benefits for Leased Workers.
3.5 Drug/Alcohol Policy. Leased Workers will be subject to Donnelly's
Employee Alcohol and Drug Testing policy. Donnelly will notify the Company if a
Leased Worker is selected for a drug and alcohol test, and will coordinate with
the Company the scheduling of the test. Donnelly will pay for the cost of the
aforementioned tests, and will recommend to the Company what disciplinary action
must be taken in the event of a positive test result.
3.6 Employment Laws. Donnelly and the Company shall comply with the
Americans with Disabilities Act, the Civil Rights Act, the Age Discrimination in
Employment Act, the Fair Labor Standards Act, and other applicable state and
federal labor and employment laws.
3.7 Safety. The Company shall provide the Leased Worker with (i) a suitable
workplace which complies with all applicable safety and health standards,
statutes and ordinances, (ii) all necessary information, training and safety
equipment with respect to hazardous substances, and (iii) adequate instructions,
assistance, supervision, and time to perform the services requested of them. The
Company is responsible for all claims, losses, damages and expenses concerning
(i) hazardous substances and all other pollutants and contaminants present at or
released from the workplace which the Company provides for the Leased Workers,
or (ii) any violations of applicable safety or health standards, statutes and
ordinances.
3.8 Employee Records. Personnel files for Leased Workers will be maintained
by Donnelly. The Company shall provide performance feedback to Leased Workers
and will provide Donnelly with written documentation of such feedback. All
information contained in personnel files for Leased Workers will be available to
appropriate staff of the Company
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<PAGE>
on request. For each Leased Worker that becomes an employee of the Company, that
employee's complete personnel file with be transferred to the Company.
ARTICLE 4
TRANSITION
4.1 Offer of Employment. The Company agrees to offer to employ each Leased
Worker between six (6) and fifteen (15) months after the effective date of the
assignment of such Leased Worker by Donnelly to the Company. The Leased Worker
shall have forty-five (45) days from the date of such employment offer to accept
or reject the offer. The terms of the employment offer shall include
compensation and benefits broadly comparable (as agreed by Donnelly) to the
compensation and benefits paid by Donnelly to such Leased Worker immediately
prior to such offer of employment by the Company. Donnelly and the Company shall
encourage Leased Workers to consider and accept employment offers from the
Company. If a Leased Worker is hired as an employee of the Company, this
Agreement shall no longer apply to that Leased Worker after the date of hire.
Notwithstanding the foregoing, Leased Workers who are fifty (50) years of age or
older and who have five (5) or more years of service at Donnelly will be leased
by the Company for a period of at least five (5) years.
4.2 Return to Donnelly. Leased Workers assigned as of the Effective Date
(but not new hires of the Company or temporary agency employees) will have the
opportunity to transfer to other Donnelly facilities through the Donnelly Job
Posting Program and at the time of such transfer will cease to be Leased
Workers. Donnelly will, at the request of the Company, replace any Leased
Workers who return to Donnelly with other Donnelly Leased Workers, temporary
agency employees, or new hires. In addition, after receiving an employment offer
from the Company pursuant to Section 4.1, each Leased Worker who was employed by
Donnelly prior to the Effective Date shall have forty-five (45) days from the
date of such offer to the Company to accept such offer or to elect to seek other
employment at Donnelly. Leased Workers who make such an election may return to
Donnelly through the provisions of Donnelly's Job Posting Program and/or Staff
Reduction Program. All Leased Workers shall remain Leased Workers until their
assignment to Donnelly or a Donnelly affiliate; provided, however, that the
Company may cease leasing any Leased Worker who does not accept the Company's
offer of employment within forty-five (45) days of such offer. The timing of any
such return shall be mutually agreed upon the respective human resource managers
of Donnelly and the Company, based upon the number of such employees and the
availability of other positions. In addition, if a significant number of the
Leased Workers elect to return to Donnelly, then Donnelly and the Board of
Directors of the Company agree to discuss and consult together concerning the
process for such return in order to help reduce any potential adverse impact on
the respective business operations of
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<PAGE>
Donnelly and the Company. All returns to Donnelly shall be subject to the
business needs and policies of Donnelly and the rights of Donnelly employees.
Leased Workers who become employees of the Company will separate their
employment from Donnelly as of the date they become an employee of the Company.
ARTICLE 5
INDEMNIFICATION
Donnelly shall indemnify and hold harmless the Company, its agents and
employees from and against any and all claims, losses, actions, damages,
expenses, and all other liabilities, including but not limited to attorney's
fees, arising out of or resulting from a Leased Worker's willful misconduct or
reckless performance of or failure to perform the work within the scope of the
assignment hereunder to the extent any such claim, loss, action, damage, expense
or other liability is attributable to bodily injury to or death of any person or
damage to or destruction of any property, whether belonging to the Company or to
another provided, however, that Donnelly shall not be liable for any injury,
death, damage or destruction to the extent caused by the negligent or willful
acts or omissions of the Company, its agents, employees or contractors. The
Company shall give notice in writing to Donnelly of any such claim, loss,
action, damage, expense or other liability within 15 days after discovery of the
event upon which the claim may be based or the learning of such claim, whichever
occurs first.
ARTICLE 6
CONSTRUCTION
6.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without giving effect to any
applicable principles of conflicts of laws.
6.2 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
(i) in person, (ii) to the extent receipt is confirmed, by telecopy, facsimile
or other electronic transmission service, (iii) by a nationally recognized
overnight courier service, or (iv) by registered or certified mail (postage
prepaid return receipt requested), to the parties at the following address:
To Donnelly: Donnelly Corporation
414 East Fortieth Street
Holland, Michigan 49423
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<PAGE>
Attention: John Donnelly
Telecopy No. (616) 786-6034
With a copy to: Varnum, Riddering, Howlett & Schmidt LLP
Suite 1600, Bridgewater Place
333 Bridge Street, N.W., P.O. Box 352
Grand Rapids, Michigan 49504
Attention: Daniel Molhoek
Telecopy No. (616) 336-7000
To the Company: Lear Donnelly Overhead Systems, L.L.C.
39650 Orchard Hill Place
Novi, Michigan 48375
Attention: Richard Perrault
Telecopy No. ________________
With a copy to: Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Attention: Vice President and
General Counsel
Telecopy No. (248) 746-1677
6.3 Severability. If any provision of this Agreement shall be conclusively
determined by a court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Agreement shall not be affected thereby.
6.4 Binding Effect. Except as otherwise provided herein, this Agreement
shall inure to the benefit of and be binding upon the parties, their respective
successors, legal representatives and permitted assigns.
6.5 No Third Party Rights. This Agreement is intended to create enforceable
rights between the parties hereto only, and creates no rights in, or obligations
to, any other Persons whatsoever.
6.6 Time is of Essence. Time is of the essence in the performance of each
and every obligation herein imposed.
6.7 Schedules; Incorporation by Reference. Any reference to a Schedule or
Exhibit to this Agreement contained herein shall be deemed to include any
Schedules to such Exhibit. Each of the Exhibits and Schedules to this Agreement,
and each Schedule to such
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<PAGE>
Exhibits, is hereby incorporated by reference in this Agreement as if such
Schedules and Exhibits were set out in full in the text of this Agreement.
6.8 Amendments. This Agreement may not be amended except by written
agreement executed by duly authorized officers of all of the parties hereto.
6.9 Entire Agreement; Section Headings. This Agreement, the Operating
Agreement, the agreements contemplated thereby, and any other related written
agreement between the parties hereto constitute the entire Agreement among the
parties hereto relating to the subject matter hereof and supersede all prior
agreements, understandings, and arrangements, oral or written, among the parties
with respect to the subject matter hereof. The Section headings in this
Agreement are for reference purposes only and shall be affect in any way the
meaning or interpretation of this Agreement.
6.10 Assignment. This Agreement and each and every covenant, term and
condition hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns. Except as otherwise
specifically provided in this Agreement or the Operating Agreement (particularly
Section 9.2(a) thereof), neither this Agreement nor any rights or obligations
hereunder shall be assignable or be delegated directly or indirectly by any
party hereto to a third party (other than an Affiliate of the Member) without
the prior written consent of all the parties to this Agreement.
6.11 Arbitration. Any dispute, controversy or claim (hereinafter "Dispute")
between the parties of any kind or nature whatsoever, arising under or relating
to this Agreement whether arising in contract, tort or otherwise, shall be
resolved according to the following procedure. If a Dispute (excluding business
decisions to be voted on by Members or Directors) arises among the Members under
this Agreement which is not resolved by good faith negotiation, then such
Dispute, upon 30 days' prior notice from one Member to the other of its intent
to arbitrate (an "Arbitration Notice"), shall be submitted to and settled by
arbitration; provided, however, that nothing contained herein shall preclude any
party hereto from seeking or obtaining (a) injunctive relief, or (b) equitable
or other judicial relief to enforce the provisions hereof or to preserve the
status quo pending resolution of disputes hereunder. Such arbitration shall be
conducted in accordance with the commercial arbitration rules of the American
Arbitration Association existing at the time of submission by one arbitrator.
The Members shall attempt to agree upon an arbitrator. If one cannot be agreed
upon, the Member which did not give the Arbitration Notice may request the Chief
Judge of the United States District Court for the Eastern District of Michigan
or the Chief Judge of the United States District Court for the Western District
of Michigan to appoint an arbitrator. If he or she will not, the arbitrator
shall be appointed by the American Arbitration Association. If an arbitrator so
selected becomes unable to serve, his or her successor shall be similarly
selected or appointed. All arbitration hearings shall be conducted on an
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<PAGE>
expedited schedule, and all proceedings shall be confidential. Either Member may
at its expense make a stenographic record thereof. The arbitrator shall
apportion all costs and expenses of arbitration (including the arbitrator's fees
and expenses, the fees and expenses of experts, and the fees and expenses of
counsel to the parties), between the prevailing and non-prevailing Member as the
arbitrator deems fair and reasonable. Any arbitration award shall be binding and
enforceable against the parties hereto and judgment may be entered thereon in
any court of competent jurisdiction. The arbitration will take place at
Southfield, Michigan or Grand Rapids, Michigan at the election of the Member not
giving the Arbitration Notice.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
DONNELLY CORPORATION
("Donnelly")
By /s/ Dwane Baumgardner
Its Chief Executive Officer and President
LEAR DONNELLY OVERHEAD SYSTEMS,
LLC
By/s/ Richard Perreault
-8-
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Schedule A Leased Workers
Schedule B Payment by Company to Donnelly
<PAGE>
EXHIBIT D-1
DONNELLY TECHNOLOGY LICENSE AGREEMENT
THIS TECHNOLOGY LICENSE AGREEMENT (this "Agreement") is entered into
effective as of November 1, 1997 (the "Effective Date"), by and among DONNELLY
CORPORATION, a Michigan corporation ("Donnelly"), (Lear and Donnelly are
sometimes referred to herein as the "Members"), and LEAR DONNELLY OVERHEAD
SYSTEMS L.L.C., a Michigan limited liability company (together with its
subsidiaries, the "Company"); and LEAR CORPORATION, a Delaware Corporation
("Lear").
RECITALS:
WHEREAS, Lear Corporation ("Lear") and Donnelly as members of the Company
have executed a revised Operating Agreement of the Company on the date hereof
(the "Operating Agreement") creating a joint venture between Lear and Donnelly;
capitalized terms not defined herein shall have the meaning ascribed to them in
the Operating Agreement;
WHEREAS, Lear is a party to this Agreement in order to protect its rights
and perform its obligations hereunder;
WHEREAS, Donnelly is the owner of certain intellectual property rights
principally covering or principally used in the manufacture of Products (as such
term is defined in the Operating Agreement);
WHEREAS, the parties desire to enter into this Agreement to provide certain
rights for the Company to license certain specified intellectual property rights
from Donnelly; and
WHEREAS, the Company may develop improvements to the intellectual property
rights licensed from Donnelly and may develop other intellectual property rights
and the parties desire to enter into this Agreement to provide certain rights
for Donnelly to license such improvements and intellectual property rights from
the Company;
NOW THEREFORE, for good and valuable consideration including the mutual
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS
1.1 "Intellectual Property Rights" shall mean United States, international
and foreign patents and patent applications (including United States provisional
applications and all PCT patent applications), any and all patents issuing
therefrom or otherwise corresponding thereto, and all divisionals,
continuations, continuations-in-part, reissues, reexamination certificates and
extensions thereof, describing and/or claiming Technology, and all mask works,
industrial design registrations and applications for such registrations,
technology, and all other proprietary rights covering or otherwise related to
Technology and/or processes for manufacture and/or use of Products embodying
Technology arising prior to or during the term of this Agreement.
1.2 "Technology" shall mean technological developments principally covering
or principally used in the manufacture of Products including, but not be limited
to, the technology described on Schedule A hereto, ideas, concepts, inventions,
processes, principles of operation, formulae, patterns, drawings, prints,
proposals, devices, software, compilations of related information, records,
specifications and the knowhow, arising before or during the term of this
Agreement. Technology shall not include existing or future technological
developments or intellectual property rights of Donnelly or its Affiliates
relating to or concerning either (a) "Electronic Components" as such term is
defined in the Purchase and Supply Agreement by and among the parties hereto,
(b) optics or lenses, or (c) bent or coated glass.
1.3 "Improvement" shall mean (i) any alteration, modification or
enhancement to Technology or Intellectual Property Rights which improves the
effectiveness, efficiency, performance or other attribute of, or otherwise
relates to, Technology or Intellectual Property Rights, or any element thereof,
or (ii) any new product or material which performs substantially the same
function as Technology or Intellectual Property Rights but does so through a
different method or process.
ARTICLE 2
LICENSE GRANT BY DONNELLY
2.1 License Grant. Donnelly hereby grants unto the Company a royalty-free,
paid-up, worldwide, exclusive license of Donnelly's Technology and Intellectual
Property Rights (a) identified as Group A and Group B on Schedule A attached
hereto to make, have made, use, and sell the Products (but not to make, have
made, use, or sell anything other than the Products) and (b) identified as Group
C on Schedule A attached hereto, to make, have made, use and sell those Products
included within the existing order for Volvo (but not to make, have made, use or
sell any other Product or anything other than Products). Notwithstanding the
exclusive license, Donnelly reserves the right to use its Technology and
Intellectual Property Rights to the extent not prohibited by the Noncompetition
and Non-Solicitation Agreement between Donnelly and Lear of even date. The term
of this license is described in Article 9 of this Agreement.
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<PAGE>
2.2 Sublicenses. The Company may not sublicense Donnelly's Technology or
Intellectual Property Rights without Donnelly's prior written consent; provided,
however, that the Company shall have the right to sublicense Donnelly's
Technology and Intellectual Property Rights to the Company's subsidiaries (any
non-U.S. subsidiaries shall be required to pay a commercially reasonable royalty
rate to the Company for such sublicense, which royalty rate shall be no less
than the royalty paid by such subsidiaries to Lear pursuant to the Company's
Technology License with Lear of even date).
ARTICLE 3
IMPROVEMENTS AND LICENSE GRANT BY THE COMPANY
3.1 Ownership of Improvements. The Company shall own and shall have all
rights, including Intellectual Property Rights, in all Improvements which are
conceived and reduced to practice by the Company's personnel or by third party
personnel working on the Company's behalf.
3.2 License Grant. The Company hereby grants and agrees to grant to
Donnelly or Lear, as the case may be, a royalty-free, paid-up, worldwide,
non-exclusive, non-transferrable license of the Improvements, Technology and
Intellectual Property Rights of the Company on the terms set forth in this
Agreement.
ARTICLE 4
JOINTLY DEVELOPED TECHNOLOGY
4.1 Jointly Developed Technology
(a) Technology and Intellectual Property Rights developed jointly by
Donnelly and the Company after the date of this Agreement shall be owned by
the Company, and the Company shall have all rights in and to such jointly
developed Technology and Intellectual Property Rights. Technology and
Intellectual Property Rights developed jointly by Donnelly and Lear or by
Donnelly, Lear and the Company shall be owned by the Company and the
Company shall have all rights in and to such jointly developed Technology
and Intellectual Property Rights.
(b) The Company hereby grants unto Donnelly a royalty-free, paid-up,
worldwide, non-assignable, non-transferrable, non-exclusive license of any
jointly developed Technology and Intellectual Property Rights on the terms
set forth in this Agreement.
ARTICLE 5
PROSECUTION OR MAINTENANCE OF
INTELLECTUAL PROPERTY RIGHTS
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5.1 Maintenance by Donnelly. Donnelly shall retain the right to (but shall
not be obligated to) prosecute and/or maintain [at the Company's] expense, all
of the Technology and Intellectual Property Rights licensed by Donnelly to the
Company pursuant to Article 2 of this Agreement. The Company shall have the
right to prosecute and/or maintain at the Company's expense any of the
Intellectual Property Rights licensed hereunder in any country when the Company
has been notified by Donnelly that Donnelly no longer wishes to prosecute or
maintain such Intellectual Property Rights in such country, and Donnelly hereby
agrees to notify the Company of its intent to cease prosecution or payment of
maintenance fees of any of such Intellectual Property Rights in any such
country, at least sixty (60) days prior to the date of any abandonment of any
right or the date of any required payment or filing which Donnelly does not
intend to make or file. With respect to any Intellectual Property Rights
abandoned by Donnelly and prosecuted and maintained by the Company pursuant to
this Section 5.2, the Company agrees to grant unto Donnelly a royalty-free,
paid-up, worldwide, non-exclusive license to such Intellectual Property Rights.
5.2 Maintenance by the Company. The Company shall retain the right to (but
shall not be obligated to) prosecute and/or maintain at its expense, all of the
Improvements, Technology and Intellectual Property Rights licensed by the
Company to Donnelly pursuant to Article 3 or Article 4 of this Agreement.
Donnelly shall have the right to prosecute and/or maintain at Donnelly's expense
any of the Intellectual Property Rights of the Company licensed hereunder in any
country when Donnelly has been notified by the Company that the Company no
longer wishes to prosecute or maintain such Intellectual Property Rights in such
country, and the Company hereby agrees to notify Donnelly of its intent to cease
prosecution or payment of maintenance fees of any of such Intellectual Property
Rights in any such country, at least sixty (60) days prior to the date of any
abandonment of any right or the date of any required payment or filing which the
Company does not intend to make or file.
ARTICLE 6
COOPERATION AND CONFIDENTIALITY
6.1 Exchange of Information. During the term of this License, Donnelly, the
Company and their respective Affiliates will exchange information concerning all
Technology and Intellectual Property Rights conceived or developed by any of
them relating to Products and processes or techniques used in the manufacture of
Products.
6.2 Cooperation. The Company and Donnelly agree to cooperate with each
other in the prosecution of pending applications concerning the Intellectual
Property Rights or any new applications based upon any Improvements thereto by
providing, upon request, technical information and data in an appropriate form
relating to the subject matter or any pending or issued applications and/or
improvements.
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<PAGE>
6.3 Confidentiality. The Company acknowledges that some of the Intellectual
Property Rights and Technology licensed pursuant to this Agreement or developed
by Donnelly or the Company after the date of this Agreement relate to
information which is not publicly available ("Confidential Information"),
including, without limitation, information exchanged pursuant to Section 6.1
hereof, the Technology listed or described in Schedule B and any jointly
developed Technology. The Company hereby agrees not to disclose the Confidential
Information to any third parties for a period of ten (10) years after the
receipt of such Confidential Information, except to only (a) those employees of
the Company having a legitimate business need-to-know and (b) consultants
engaged by the Company. The Company agrees that prior to making disclosures to
any consultant, it will obtain a confidentiality and non-use agreement. For
purposes of this section, any Affiliate of the Company other than Donnelly, Lear
or a subsidiary of the Company is deemed to be a third party.
6.4 Confidentiality Exceptions. Notwithstanding the provisions of Section
6.3, Confidential Information shall not include (a) information which is known
to the public or is generally known within the industry or business, (b)
information which the Company is required to disclose pursuant to law or order
of a court having jurisdiction (provided that the Company offers the Donnelly an
opportunity to obtain an appropriate protective order or administrative relief
against disclosure of such Confidential Information), and (c) information which
was legally acquired by the Company from a third party in good faith, provided
that such disclosure by the third party was not in breach of any agreement
between such third party and the other party hereto.
6.5 Protection of Rights. The parties hereto agree that it shall be the
policy of the Company to protect the Intellectual Property Rights and not to
infringe upon the intellectual property rights of third parties.
ARTICLE 7
INDEMNIFICATION
7.1 No Representation or Indemnification. Nothing in this Agreement is
intended to state or otherwise imply that the exercise of any right or license
granted by Donnelly pursuant to this Agreement by the Company will not infringe
rights of third parties. Donnelly does not undertake any obligation to indemnify
the Company against, or assume any responsibility for, any claim of infringement
by any third party relating to or arising out of any exercise of any right or
license referenced in this Agreement.
7.2 Limited Warranty. Donnelly warrants that to its knowledge, except as
set forth in Schedule C, no claim has been asserted that the exercise of rights
or licenses transferred or granted by Donnelly to the Company pursuant to this
Agreement infringe upon any third party rights.
7.3 No Indemnification by the Company Concerning non-Product Uses. The
Company does not undertake any obligation to indemnify Donnelly against, or
assume any
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<PAGE>
responsibility for, any claim of infringement by any third party relating to or
arising out of any exercise by Donnelly of any right or license granted by the
Company to Donnelly pursuant to this Agreement.
7.4 Indemnification by the Company Concerning Products. The Company agrees
to indemnify and hold harmless Donnelly and its Affiliates from and against any
loss, cost, expense (including, but not limited to, costs of investigation and
defense, attorney's fees, expert witnesses, consultants and litigation support
services), liability, settlement and damages as a result of any claim(s) that
the manufacture or sale of any Products after the Closingt Date infringes upon
any patent or other intellectual property rights of any third party.
ARTICLE 8
INFRINGEMENT OF LICENSED INTELLECTUAL PROPERTY RIGHTS
8.1 Action by the Company. The Company shall have the right but shall not
be obligated to institute proceedings in its own name or in the name of Donnelly
against any third party infringer (in the field of use of Products) of any
Intellectual Property Rights licensed by Donnelly to the Company pursuant to
this Agreement. If Donnelly or the Company becomes aware of any actual,
threatened, or apparent infringement of any of the licensed Intellectual
Property Rights by any Person in the field of use of Products, such party agrees
to provide the other party with written notice prior to suit of such actual,
threatened, or apparent infringement and agrees to furnish to the other party
any available evidence of such actual, threatened, or apparent infringement.
Donnelly agrees to cooperate in any proceedings instituted by the Company
against third party infringers and to provide information relating to such
proceedings which the Company may reasonably request. In the event that the
Company determines that it lacks standing to commence such a proceeding,
Donnelly agrees to execute such documents and take such actions as the Company
may reasonably request for the purpose of commencing such infringement
proceedings. The Company shall have the right to control prosecution of such
proceedings regardless of whether the proceedings are commenced in Donnelly's
name or in the name of the Company; provided, however, that in the event of a
counterclaim against Donnelly, the litigation shall be jointly managed by
Donnelly and the Company and Donnelly's costs and expenses (including, but not
limited to, reasonable attorney's fees) will be paid by the Company pursuant to
Section 7.4.
8.2 Action by Donnelly. In the event Donnelly notifies the Company or
receives notice from the Company of actual, threatened, or apparent infringement
of any licensed rights or Intellectual Property Rights by a third party, and the
Company does not institute proceedings against such a third party within sixty
(60) days of notification, then Donnelly may institute proceedings against such
a third party, at Donnelly's expense, and in the Company's name (if necessary).
The Company agrees to cooperate fully with the Company in such proceedings. Any
recovery awarded in such proceedings shall be retained by Donnelly.
ARTICLE 9
TERM AND TERMINATION
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<PAGE>
9.1 Term. The licenses granted hereunder shall continue so long as either
Lear or Donnelly are:
(a) Members of the Company or
(b) operating the business of the Company after a withdrawal by the
other unless otherwise terminated as provided herein.
9.2 Default. If any party fails to comply with any of its obligations
hereunder, and after notice from another party such failure continues for sixty
(60) days, such action shall constitute a default hereunder and under the
Operating Agreement; provided, however, if a default under this Agreement cannot
reasonably and with due diligence and good faith be cured within said 60-day
period, and if the defaulting party promptly commences and proceeds to complete
the cure of such default with due diligence and in good faith, the 60-day period
with respect to such default shall be extended to include such additional period
of time as may be reasonably necessary to cure such default.
9.3 Remedies on Default. Upon the occurrence of a default hereunder, which
is not cured during the applicable cure period, the non-breaching parties shall
have the rights and remedies available at law and in equity and may institute
arbitration and/or legal proceedings in accordance with Section 10.11 hereof
with respect to any damages or losses incurred by the non-defaulting party. If
the default is by a Member, and the default is a Material Default (as defined in
the Operating Agreement), the other Member shall also have all rights provided
in the Operating Agreement, including that included in Section 4.5(c) thereof.
ARTICLE 10
CONSTRUCTION
10.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without giving effect to any
applicable principles of conflicts of laws.
10.2 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
(i) in person, (ii) to the extent receipt is confirmed, by telecopy, facsimile
or other electronic transmission service, (iii) by a nationally recognized
overnight courier service, or (iv) by registered or certified mail (postage
prepaid return receipt requested), to the parties at the following address:
To Donnelly: Donnelly Corporation
414 East Fortieth Street
Holland, Michigan 49423
Attention: John Donnelly
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<PAGE>
Telecopy No. (616) 786-6034
With a copy to: Varnum, Riddering, Howlett & Schmidt LLP
Suite 1600, Bridgewater Place
333 Bridge Street, N.W., P.O. Box 352
Grand Rapids, Michigan 49504
Attention: Daniel Molhoek
Telecopy No. (616) 336-7000
To the Company: Lear Donnelly Overhead Systems, L.L.C.
39650 Orchard Hill Place
Novi, Michigan 48375
Attention: Richard Perreault
Telecopy No. ________________
With a copy to: Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Attention: Vice President and
General Counsel
Telecopy No. (248) 746-1677
10.3 Severability. If any provision of this Agreement shall be conclusively
determined by a court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Agreement shall not be affected thereby.
10.4 Binding Effect. Except as otherwise provided herein, this Agreement
shall inure to the benefit of and be binding upon the parties, their respective
successors, legal representatives and permitted assigns.
10.5 No Third Party Rights. This Agreement is intended to create
enforceable rights between the parties hereto only, and creates no rights in, or
obligations to, any other Persons whatsoever.
10.6 Time is of Essence. Time is of the essence in the performance of each
and every obligation herein imposed.
10.7 Schedules Included in Exhibits; Incorporation by Reference. Any
reference to an Exhibit to this Agreement contained herein shall be deemed to
include any Schedules to such Exhibit. Each of the Exhibits referred to in this
Agreement, and each Schedule to such Exhibits, is hereby incorporated by
reference in this Agreement as if such Schedules and Exhibits were set out in
full in the text of this Agreement.
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<PAGE>
10.8 Amendments. This Agreement may not be amended except by written
agreement executed by duly authorized officers of all of the parties hereto.
10.9 Entire Agreement; Section Headings. This Agreement, the Operating
Agreement and the agreements contemplated by the Operating Agreement constitute
the entire agreement among the parties hereto relating to the subject matter
hereof and supersede all prior agreements, understandings, and arrangements,
oral or written, among the parties with respect to the subject matter hereof.
The Section headings in this Agreement are for reference purposes only and shall
be affect in any way the meaning or interpretation of this Agreement.
10.10 Assignment. Except as otherwise specifically provided in this
Agreement or the Operating Agreement (particularly Section 9.2(a) thereof),
neither this Agreement nor any rights or obligations hereunder shall be
assignable or be delegated directly or indirectly by any party hereto to a third
party (other than an Affiliate of the Member) without the prior written consent
of all the parties to this Agreement.
10.11 Arbitration. Any dispute, controversy or claim (hereinafter
"Dispute") between the parties of any kind or nature whatsoever, arising under
or related to this Agreement whether arising in contract, tort or otherwise,
shall be resolved according to the following procedure. If a Dispute (excluding
business decisions to be voted on by Members or Directors) arises among the
Members under or relating to this Agreement which is not resolved by good faith
negotiation, then such Dispute, upon 30 days' prior notice from one Member to
the other of its intent to arbitrate (an "Arbitration Notice"), shall be
submitted to and settled by arbitration; provided, however, that nothing
contained herein shall preclude any party hereto from seeking or obtaining (a)
injunctive relief, or (b) equitable or other judicial relief to enforce the
provisions hereof or to preserve the status quo pending resolution of disputes
hereunder. Such arbitration shall be conducted in accordance with the commercial
arbitration rules of the American Arbitration Association existing at the time
of submission by one arbitrator. The Members shall attempt to agree upon an
arbitrator. If one cannot be agreed upon, the Member which did not give the
Arbitration Notice may request the Chief Judge of the United States District
Court for the Eastern District of Michigan or the Chief Judge of the United
States District Court for the Western District of Michigan to appoint an
arbitrator. If he or she will not, the arbitrator shall be appointed by the
American Arbitration Association. If an arbitrator so selected becomes unable to
serve, his or her successor shall be similarly selected or appointed. All
arbitration hearings shall be conducted on an expedited schedule, and all
proceedings shall be confidential. Either Member may at its expense make a
stenographic record thereof. The arbitrator shall apportion all costs and
expenses of arbitration (including the arbitrator's fees and expenses, the fees
and expenses of experts, and the fees and expenses of counsel to the parties),
between the prevailing and non-prevailing Member as the arbitrator deems fair
and reasonable. Any arbitration award shall be binding and enforceable against
the parties hereto and judgment may be entered thereon in any court of competent
jurisdiction. The arbitration will take place at Southfield, Michigan or Grand
Rapids, Michigan at the election of the Member not giving the Arbitration
Notice.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
DONNELLY CORPORATION
("Donnelly")
By/s/ Dwane Baumgardner
Dwane Baumgardner
Its Chief Executive Officer and President
LEAR DONNELLY OVERHEAD SYSTEMS,
LLC
By /s/Richard Perreault
Its ___________________________
LEAR CORPORATION
By /s/ J. F. McCarthy
Its ___________________________
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<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Schedule A Description of Licensed Donnelly Technology
Schedule B Confidential Information
Schedule C Claims Asserted
-11-
<PAGE>
SCHEDULE A
Donnelly License Agreement
Description of Licensed Technology
Title/
Country Serial No. Patent No. Patent Date Description
GROUP A
USA 132,004 4,807,096 21NO1989 Interior Light/Carrier Module
for Vehicles
USA 07/535,111 5,153,572 060C992 Touch-Sensitive Control Circuit
USA 07/598,129 5,189,417 23FE1993 Detection Circuit for Matrix
Touch Pad
USA 07/605,497 5,239,152 24AU1993 Touch Sensor Panel with Hidden
Graphic Mode
USA 07/909,782 5,475,577 12DE1995 Accessory Attachment Plate for
Vehicle Panels
USA 08/040,188 5,572,205 05NO1996 Touch Control System
USA 08/367,844 5,671,996 30SE1997 Vehicle/Instrumentation/Console
Lighting EPC
EPC 95650048.2 Vehicle Instrumentation/Console
USA 08/482029 5,667,896 16SE1997 Vehicle Window Assembly for
Mounting Interior Vehicle
USA 29/032,836 Rail Module
USA 60/027,996 Digital Compass
USA 08/740,701 Touch Control System
USA 29,057,275 Vehicle Rail Module Exterior
Surface Incorporating a Handle,
Coathook and Lamp
USA Continuation of
584 Vehicle Window Assembly for
Mounting Interior Vehicle
USA Vehicle Instrumentation/Console
Lighting
08/901,929 Pyroelectric Intrusion
Detection in Motor Vehicles
USA 117,220 4,862,594 9/5/89 Magnetic Compass System for a
Vehicle
USA 267,972 4,937,945 7/3/90 Magnetic Compass with Hall
Effect Encoder
USA 596,854 5,131,154 7/21/92 Magnetic Compass with Optical
Encoder
USA 811,578 5,255,442 10/26/93 Vehicle Compass with Electronic
Sensor
USA 142,509 5,644,851 7/8/97 Compensation System for
Electronic Compass
USA 457,621 5,632,092 5/27/97 Compensation System for
Electronic Compass
USA 823,469 Compensation System for
Electronic Compass
EPC 93/900861.1 Vehicle Electronic Sensor
Japan 511672/93 5,255,442 Vehicle Compass with Electronic
Sensor
EPC 95/904055.1 5,644,851 Compensation System for
Electronic Compass
Japan 7-512748 5,644,851 Compensation System for
Electronic Compass
USA 08/901,929 Pyroelectric Intrusion
Detection in Motor Vehicles
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<PAGE>
Country Serial No. Patent No. Patent Date Description
GROUP B
USA 29/071,095 Vehicular Coat
Hook Assembly
(Design)
Brazil PCT/US95/15705 Mounting Clip
Canada Mounting Clip
European PCT/US95/15705 Mounting Clip
Japan PCT/US95/15705 Mounting Clip
South Korea Mounting Clip
Mexico Mounting Clip
United
States 08/349,031 Mounting Clip
United
States 08/701,589 5,662,375 9/2/97 Mounting Clip
WIPO PCT/US95/15705
United
States 08/312,820 Modular Panel
Assembly
United
States 08/681,316 Modular Panel
Assembly
WIPO PCT/US95/12387 Modular Panel
Assembly
United
States 60,031,558 Single Lens, Push-
Push, Dual Lamp
Assembly
United
States Overhead Console
with Magnetic
Sensor Roof
Mounting
United
States Visor with
Structural Foam
Core
United
States CHMSL/Task Lamp
United
States Visor Detent
Control
United
States Blow Molded Visor
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<PAGE>
Title/
Country Serial No. Patent No. Patent Date Description
GROUP B
United
States Clamshell Visor
W/Heat Fabric
Edges
United
States Visor Construction
United
States Visor with Powered
Mirror Door
United
States 60/009/852 Vehicle Interior
Light w/Light Pipe
for Uniform
Illumination
United
States 08/784,028 Vehicle Interior
Light w/Light Pipe
For Uniform
Illumination
United
States Visor Mounting
United
States Clam Visor with
Lighted Mirror
United
States 60/012,088 Overhead Console
with Drop-Down
Door
United
States 60/034,375 Overhead Console
with Drop-Down
Door
United
States 08/804,354 Overhead Console
with Drop-Down
Door
United
States Flex Web Button
Gland
United
States Visor with Courtesy
Lighting
United
States Anti-Rotation
Mounting Clip
United
States Vanity Mirror
W/Dimmer Switch
United
States Vanity Mirror
W/Dimmer Switch
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<PAGE>
Title/
Country Serial No. Patent No. Patent Date Description
GROUP B
United
States Sunglass Holder for
Vehicle
United
States PCB Pin Clip
United
States Sun Visor with
Support Pin
United
States Electrochromic
Sunvisor
United
States Lighted Vanity
W/Mirror
United
States 60/040,833 Forward Sun
Protection With
Accessory Integration
United
States Windshield
Mounted Visor
United
States 60/023,104 Expandable Coat
Hook
United
States 60/025,166 Grab Handle
Assembly and Method of
Assembling Same
United
States Grab Handle Assembly and
Method of Assembling Same
United
States 60/021,096 Visor with
Integrally Molded
Unitary Frame
WIPO PCT/US97/11751 Visor with
Integrally Molded
Unitary Frame
United
States Visor Mirror and
Endcap Mirror
Assembly
United
States Vanity Lamp
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<PAGE>
Title/
Country Serial No. Patent No. Patent Date Description
GROUP B
United
States Overhead Console
Comp. Compass
United
States 60/022,238 Garage Door
Opener Bin
United
States 08/896,043 Garage Door
Opener Bin
United
States Sliding
Auxiliary Sun
Visor Blade
Assembly
United
States Happich Visor
Bracket Patent
United
States Visor with Pressed
Substrate/Molded
Frame Clamshell
United
States Pivoting Coat Hook
with Finger Access
Notch
United
States Vanity Mirror/Door
Spring, Lamp
Switch
United
States Overhead Console
with Garage Door
Opener
United
States 60/052,454 Vehicle Soft
Console with
Interchangeable
Accessor Bins and
In-Molded Skin and
Fastener
United
States Garnish Trim
Mounted
Components
United
States Illumination/Visor
Vanity Mirror
United
States Snap Together
Clamshell Visor
With Snap-in
Mirror Assembly
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<PAGE>
Title/
Country Serial No. Patent No. Patent Date Description
GROUP B
United
States Visor with Fabric
Plain and Tear Seal
at Eye Ends
United
States Aubiliary Visor
with Molded
Torque Connector
United
States Terminal Strip Bulb
Retainer
United
States EPP Clamshell
Visor
United
States Vehicle Sun Visor
with Rigid Interior
Skin
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<PAGE>
Title/
Country Serial No. Patent No. Patent Date Description
GROUP C
Ireland A vehicle rearview mirror and a
vehicle control system
incorporating such mirror
Ireland Push Button
Support Member
Ireland A Printed Circuit
Board Pin
Connector
Ireland Electro-Optic
Rearview Mirror
System (EC Mirror)
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<PAGE>
Schedule B
Confidential Technology
All manufacturing processes, methods or techniques used in the manufacture
of Products, including, but not limited to, those Product utilizing any of the
Technology or Intellectual Property Rights listed on Schedule A.
<PAGE>
Schedule C
Asserted Claims
Prince Corporation ("Prince") has asserted that products manufactured in
accordance with Intellectual Property Rights listed on Schedule A violate
patents of Prince Corporation.
In January 1995, Prince asserted Donnelly was in violation of its Patent
No. 953305. After some discussions between counsel for both parties, the matter
was dropped.
Approximately eight years ago, Prince contacted Donnelly about alleged
infringement of a compass. After preliminary meetings, no further assertions
were made.
Prince is currently asserting that Donnelly's consoles with garage door
openers violate Prince Patent No. 4,595,228. Donnelly does not believe it
infringes. Extensive corres-pondence and counterproposals have been exchanged,
including an offer to license the patent at $.17 per unit. Donnelly has provided
Lear with copies of the relevant correspondence.
<PAGE>
EXHIBIT D-2
LEAR TECHNOLOGY LICENSE AGREEMENT
THIS TECHNOLOGY LICENSE AGREEMENT (this "Agreement") is entered into as of
this 1st day of November, 1997 (the "Effective Date"), by and among LEAR
CORPORATION, a Delaware corporation ("Lear"), (Lear and Donnelly are sometimes
referred to herein as the "Members"), and LEAR DONNELLY OVERHEAD SYSTEMS L.L.C.,
a Michigan limited liability company (together with its subsidiaries, the
"Company"); and DONNELLY CORPORATION, a Michigan corporation ("Donnelly").
RECITALS:
WHEREAS, Lear and Donnelly as members of the Company have executed an
Operating Agreement of the Company dated September 3, 1997 (the "Operating
Agreement") creating a joint venture between Lear and Donnelly; capitalized
terms not defined herein shall have the meaning ascribed to them in the
Operating Agreement;
WHEREAS, Donnelly is a party to this Agreement in order to protect its
rights and perform its obligations hereunder;
WHEREAS, Lear is the owner of certain intellectual property rights
principally covering or principally used in the manufacture of Products (as such
term is defined in the Operating Agreement);
WHEREAS, the parties desire to enter into this Agreement to provide certain
rights for the Company to license certain specified intellectual property rights
from Lear; and
WHEREAS, the Company may develop improvements to the intellectual property
rights licensed from Lear and may develop other intellectual property rights and
the parties desire to enter into this Agreement to provide certain rights for
Lear to license such improvements and intellectual property rights from the
Company;
NOW THEREFORE, for good and valuable consideration including the mutual
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "Intellectual Property Rights" shall mean United States, international
and foreign patents and patent applications (including United States provisional
applications and all PCT patent applications), any and all patents issuing
therefrom or otherwise corresponding thereto, and all divisionals,
continuations, continuations-in-part, reissues, reexamination certificates and
extensions thereof, describing and/or claiming Technology, and all mask works,
industrial design registrations and applications for such registrations,
technology, and all other proprietary rights covering or
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<PAGE>
otherwise related to Technology and/or processes for manufacture and/or use of
Products embodying Technology arising prior to or during the term of this
Agreement.
1.2 "Technology" shall mean technological developments principally covering
or principally used in the manufacture of Products including, but not be limited
to, the technology described on Schedule A hereto, ideas, concepts, inventions,
processes, principles of operation, formulae, patterns, drawings, prints,
proposals, devices, software, compilations of related information, records,
specifications and the knowhow, arising before or during the term of this
Agreement. Technology shall not include existing or future technological
developments or intellectual property rights of Lear or its Affiliates relating
to or concerning the items and matters disclosed on attached Exhibit 1.
1.3 "Improvement" shall mean (i) any alteration, modification or
enhancement to Technology or Intellectual Property Rights which improves the
effectiveness, efficiency, performance or other attribute of, or otherwise
relates to, Technology or Intellectual Property Rights, or any element thereof,
or (ii) any new product or material which performs substantially the same
function as Technology or Intellectual Property Rights but does so through a
different method or process.
ARTICLE 2
LICENSE GRANT BY LEAR
2.1 License Grant. Lear hereby grants unto the Company a royalty-free,
paid-up, worldwide, exclusive license of Lear's Technology and Intellectual
Property Rights to make, have made, use, and sell the Products (but not to make,
have made, use, or sell anything other than the Products). Notwithstanding the
exclusive license, Lear reserves the right to use its Technology and
Intellectual Property Rights to the extent not prohibited by the Noncompetition
and Non-Solicitation Agreement between Lear and Lear of even date. The term of
this license is described in Article 9 of this Agreement.
2.2 Sublicenses. The Company may not sublicense Lear's Technology or
Intellectual Property Rights without Lear's prior written consent; provided,
however, that the Company shall have the right to sublicense Lear's Technology
and Intellectual Property Rights to the Company's subsidiaries (any non-U.S.
subsidiaries shall be required to pay a commercially reasonable royalty rate to
the Company for such sublicense, which royalty rate shall be no less than the
royalty paid by such subsidiaries to Lear pursuant to the Company's Technology
License with Lear of even date).
ARTICLE 3
IMPROVEMENTS AND LICENSE GRANT BY THE COMPANY
3.1 Ownership of Improvements. The Company shall own and shall have all
rights, including Intellectual Property Rights, in all Improvements which are
conceived and reduced to
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<PAGE>
practice by the Company's personnel or by third party personnel working on the
Company's behalf.
3.2 License Grant. The Company hereby grants and agrees to grant to Lear or
Donnelly, as the case may be, a royalty-free, paid-up, worldwide, non-exclusive,
non-transferrable license of the Improvements, Technology and Intellectual
Property Rights of the Company on the terms set forth in this Agreement.
ARTICLE 4
JOINTLY DEVELOPED TECHNOLOGY
4.1 Jointly Developed Technology.
(a) Technology and Intellectual Property Rights developed jointly by
Lear and the Company after the date of this Agreement shall be owned by the
Company, and the Company shall have all rights in and to such jointly
developed Technology and Intellectual Property Rights. Technology and
Intellectual Property Rights developed jointly by Lear and Donnelly or by
Lear, Donnelly and the Company shall be owned by the Company and the
Company shall have all rights in and to such jointly developed Technology
and Intellectual Property Rights.
(b) The Company hereby grants unto Lear a royalty-free, paid-up,
worldwide, non-assignable, non-transferrable, non-exclusive license of any
jointly developed Technology and Intellectual Property Rights on the terms
set forth in this Agreement.
ARTICLE 5
PROSECUTION OR MAINTENANCE OF
INTELLECTUAL PROPERTY RIGHTS
5.1 Maintenance by Lear. Lear shall retain the right to (but shall not be
obligated to) prosecute and/or maintain [at the Company's expense], all of the
Technology and Intellectual Property Rights licensed by Lear to the Company
pursuant to Article 2 of this Agreement. The Company shall have the right to
prosecute and/or maintain at the Company's expense any of the Intellectual
Property Rights licensed hereunder in any country when the Company has been
notified by Lear that Lear no longer wishes to prosecute or maintain such
Intellectual Property Rights in such country, and Lear hereby agrees to notify
the Company of its intent to cease prosecution or payment of maintenance fees of
any of such Intellectual Property Rights in any such country, at least sixty
(60) days prior to the date of any abandonment of any right or the date of any
required payment or filing which Lear does not intend to make or file. With
respect to any Intellectual Property Rights abandoned by Lear and prosecuted and
maintained by the Company pursuant to this Section 5.2, the Company agrees to
grant unto Lear a royalty-free, paid-up, worldwide, non-exclusive license to
such Intellectual Property Rights.
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<PAGE>
5.2 Maintenance by the Company. The Company shall retain the right to (but
shall not be obligated to) prosecute and/or maintain at its expense, all of the
Improvements, Technology and Intellectual Property Rights licensed by the
Company to Lear pursuant to Article 3 or Article 4 of this Agreement. Lear shall
have the right to prosecute and/or maintain at Lear's expense any of the
Intellectual Property Rights of the Company licensed hereunder in any country
when Lear has been notified by the Company that the Company no longer wishes to
prosecute or maintain such Intellectual Property Rights in such country, and the
Company hereby agrees to notify Lear of its intent to cease prosecution or
payment of maintenance fees of any of such Intellectual Property Rights in any
such country, at least sixty (60) days prior to the date of any abandonment of
any right or the date of any required payment or filing which the Company does
not intend to make or file.
ARTICLE 6
COOPERATION AND CONFIDENTIALITY
6.1 Exchange of Information. During the term of this License, Lear, the
Company and their respective Affiliates will exchange information concerning all
Technology and Intellectual Property Rights conceived or developed by any of
them relating to Products and processes or techniques used in the manufacture of
Products.
6.2 Cooperation. The Company and Lear agree to cooperate with each other in
the prosecution of pending applications concerning the Intellectual Property
Rights or any new applications based upon any Improvements thereto by providing,
upon request, technical information and data in an appropriate form relating to
the subject matter or any pending or issued applications and/or improvements.
6.3 Confidentiality. The Company acknowledges that some of the Intellectual
Property Rights and Technology licensed pursuant to this Agreement or developed
by Lear or the Company after the date of this Agreement relate to information
which is not publicly available ("Confidential Information"), including, without
limitation, information exchanged pursuant to Section 6.1 hereof, the Technology
listed or described in Schedule B and any jointly developed Technology. The
Company hereby agrees not to disclose the Confidential Information to any third
parties for a period of ten (10) years after the receipt of such Confidential
Information, except to only (a) those employees of the Company having a
legitimate business need-to-know and (b) consultants engaged by the Company. The
Company agrees that prior to making disclosures to any consultant, it will
obtain a confidentiality and non-use agreement. For purposes of this section,
any Affiliate of the Company other than Lear, Donnelly or a subsidiary of the
Company is deemed to be a third party.
6.4 Confidentiality Exceptions. Notwithstanding the provisions of Section
6.3, Confidential Information shall not include (a) information which is known
to the public or is generally known within the industry or business, (b)
information which the Company is required to disclose pursuant to law or order
of a court having jurisdiction (provided that the Company offers the Lear an
opportunity to obtain an appropriate protective order or administrative relief
against disclosure of such Confidential Information), and (c) information which
was legally acquired by the
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Company from a third party in good faith, provided that such disclosure by the
third party was not in breach of any agreement between such third party and the
other party hereto.
6.5 Protection of Rights. The parties hereto agree that it shall be the
policy of the Company to protect the Intellectual Property Rights and not to
infringe upon the intellectual property rights of third parties.
ARTICLE 7
INDEMNIFICATION
7.1 No Representation or Indemnification. Nothing in this Agreement is
intended to state or otherwise imply that the exercise of any right or license
granted by Lear pursuant to this Agreement by the Company will not infringe
rights of third parties. Lear does not undertake any obligation to indemnify the
Company against, or assume any responsibility for, any claim of infringement by
any third party relating to or arising out of any exercise of any right or
license referenced in this Agreement.
7.2 Limited Warranty. Lear warrants that to its knowledge, except as set
forth in Schedule C, no claim has been asserted that the exercise of rights or
licenses transferred or granted by Lear to the Company pursuant to this
Agreement infringe upon any third party rights.
7.3 No Indemnification by the Company Concerning non-Product Uses. The
Company does not undertake any obligation to indemnify Lear against, or assume
any responsibility for, any claim of infringement by any third party relating to
or arising out of any exercise of any right or license granted by the Company to
Lear pursuant to this Agreement.
7.4 Indemnification by the Company Concerning Products. The Company agrees
to indemnify and hold harmless Lear and its Affiliates from and against any
loss, cost, expense (including, but not limited to, costs of investigation and
defense, attorney's fees, expert witnesses, consultants and litigation support
services), liability, settlement and damages as a result of any claim(s) that
the manufacture or sale of any Products after the Closing Date infringes upon
any patent or other intellectual property rights of any third party.
ARTICLE 8
INFRINGEMENT OF LICENSED INTELLECTUAL PROPERTY RIGHTS
8.1 Action by the Company. The Company shall have the right but shall not
be obligated to institute proceedings in its own name or in the name of Lear
against any third party infringer (in the field of use of Products) of any
Intellectual Property Rights licensed by Lear to the Company pursuant to this
Agreement. If Lear or the Company becomes aware of any actual, threatened, or
apparent infringement of any of the licensed Intellectual Property Rights by any
Person in the field of use of Products, such party agrees to provide the other
party with written notice prior to suit of such actual, threatened, or apparent
infringement and agrees to furnish to the
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other party any available evidence of such actual, threatened, or apparent
infringement. Lear agrees to cooperate in any proceedings instituted by the
Company against third party infringers and to provide information relating to
such proceedings which the Company may reasonably request. In the event that the
Company determines that it lacks standing to commence such a proceeding, Lear
agrees to execute such documents and take such actions as the Company may
reasonably request for the purpose of commencing such infringement proceedings.
The Company shall have the right to control prosecution of such proceedings
regardless of whether the proceedings are commenced in Lear's name or in the
name of the Company; provided, however, that in the event of a counterclaim
against Lear, the litigation shall be jointly managed by Lear and the Company
and Lear's costs and expenses (including, but not limited to, reasonable
attorney's fees) will be paid by the Company pursuant to Section 7.4.
8.2 Action by Lear. In the event Lear notifies the Company or receives
notice from the Company of actual, threatened, or apparent infringement of any
licensed rights or Intellectual Property Rights by a third party, and the
Company does not institute proceedings against such a third party within sixty
(60) days of notification, then Lear may institute proceedings against such a
third party, at Lear's expense, and in the Company's name (if necessary). The
Company agrees to cooperate fully with the Company in such proceedings. Any
recovery awarded in such proceedings shall be retained by Lear.
ARTICLE 9
TERM AND TERMINATION
9.1 Term. The licenses granted hereunder shall continue so long as either
Lear or Lear are:
(a) Members of the Company or
(b) operating the business of the Company after a withdrawal by the
other unless otherwise terminated as provided herein.
9.2 Default. If any party fails to comply with any of its obligations
hereunder, and after notice from another party such failure continues for sixty
(60) days, such action shall constitute a default hereunder and under the
Operating Agreement; provided, however, if a default under this Agreement cannot
reasonably and with due diligence and good faith be cured within said 60-day
period, and if the defaulting party promptly commences and proceeds to complete
the cure of such default with due diligence and in good faith, the 60-day period
with respect to such default shall be extended to include such additional period
of time as may be reasonably necessary to cure such default.
9.3 Remedies on Default. Upon the occurrence of a default hereunder, which
is not cured during the applicable cure period, the non-breaching parties shall
have the rights and remedies available at law and in equity and may institute
arbitration and/or legal proceedings in accordance with Section 10.11 hereof
with respect to any damages or losses incurred by the non-defaulting
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party. If the default is by a Member, and the default is a Material Default (as
defined in the Operating Agreement), the other Member shall also have all rights
provided in the Operating Agreement, including that included in Section 4.5(c)
thereof.
ARTICLE 10
CONSTRUCTION
10.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without giving effect to any
applicable principles of conflicts of laws.
10.2 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
(i) in person, (ii) to the extent receipt is confirmed, by telecopy, facsimile
or other electronic transmission service, (iii) by a nationally recognized
overnight courier service, or (iv) by registered or certified mail (postage
prepaid return receipt requested), to the parties at the following address:
To Donnelly: Donnelly Corporation
414 East Fortieth Street
Holland, Michigan 49423
Attention: John Donnelly
Telecopy No. (616) 786-6034
With a copy to: Varnum, Riddering, Howlett & Schmidt LLP
Suite 1600, Bridgewater Place
333 Bridge Street, N.W., P.O. Box 352
Grand Rapids, Michigan 49504
Attention: Daniel Molhoek
Telecopy No. (616) 336-7000
To the Company: Lear Donnelly Overhead Systems, L.L.C.
39650 Orchard Hill Place
Novi, Michigan 48375
Attention: Richard Perreault
Telecopy No. ________________
With a copy to: Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Attention: Vice President and
General Counsel
Telecopy No. (248) 746-1677
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10.3 Severability. If any provision of this Agreement shall be conclusively
determined by a court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Agreement shall not be affected thereby.
10.4 Binding Effect. Except as otherwise provided herein, this Agreement
shall inure to the benefit of and be binding upon the parties, their respective
successors, legal representatives and permitted assigns.
10.5 No Third Party Rights. This Agreement is intended to create
enforceable rights between the parties hereto only, and creates no rights in, or
obligations to, any other Persons whatsoever.
10.6 Time is of Essence. Time is of the essence in the performance of each
and every obligation herein imposed.
10.7 Schedules Included in Exhibits; Incorporation by Reference. Any
reference to an Exhibit to this Agreement contained herein shall be deemed to
include any Schedules to such Exhibit. Each of the Exhibits referred to in this
Agreement, and each Schedule to such Exhibits, is hereby incorporated by
reference in this Agreement as if such Schedules and Exhibits were set out in
full in the text of this Agreement.
10.8 Amendments. This Agreement may not be amended except by written
agreement executed by duly authorized officers of all of the parties hereto.
10.9 Entire Agreement; Section Headings. This Agreement, the Operating
Agreement and the agreements contemplated by the Operating Agreement constitute
the entire agreement among the parties hereto relating to the subject matter
hereof and supersede all prior agreements, understandings, and arrangements,
oral or written, among the parties with respect to the subject matter hereof.
The Section headings in this Agreement are for reference purposes only and shall
be affect in any way the meaning or interpretation of this Agreement.
10.10 Assignment. Except as otherwise specifically provided in this
Agreement or the Operating Agreement (particularly Section 9.2(a) thereof),
neither this Agreement nor any rights or obligations hereunder shall be
assignable or be delegated directly or indirectly by any party hereto to a third
party (other than an Affiliate of the Member) without the prior written consent
of all the parties to this Agreement.
10.11 Arbitration. Any dispute, controversy or claim (hereinafter
"Dispute") between the parties of any kind or nature whatsoever, arising under
or related to this Agreement whether arising in contract, tort or otherwise,
shall be resolved according to the following procedure. If a Dispute (excluding
business decisions to be voted on by Members or Directors) arises among the
Members under or relating to this Agreement which is not resolved by good faith
negotiation, then such Dispute, upon 30 days' prior notice from one Member to
the other of its intent to arbitrate (an
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"Arbitration Notice"), shall be submitted to and settled by arbitration;
provided, however, that nothing contained herein shall preclude any party hereto
from seeking or obtaining (a) injunctive relief, or (b) equitable or other
judicial relief to enforce the provisions hereof or to preserve the status quo
pending resolution of disputes hereunder. Such arbitration shall be conducted in
accordance with the commercial arbitration rules of the American Arbitration
Association existing at the time of submission by one arbitrator. The Members
shall attempt to agree upon an arbitrator. If one cannot be agreed upon, the
Member which did not give the Arbitration Notice may request the Chief Judge of
the United States District Court for the Eastern District of Michigan or the
Chief Judge of the United States District Court for the Western District of
Michigan to appoint an arbitrator. If he or she will not, the arbitrator shall
be appointed by the American Arbitration Association. If an arbitrator so
selected becomes unable to serve, his or her successor shall be similarly
selected or appointed. All arbitration hearings shall be conducted on an
expedited schedule, and all proceedings shall be confidential. Either Member may
at its expense make a stenographic record thereof. The arbitrator shall
apportion all costs and expenses of arbitration (including the arbitrator's fees
and expenses, the fees and expenses of experts, and the fees and expenses of
counsel to the parties), between the prevailing and non-prevailing Member as the
arbitrator deems fair and reasonable. Any arbitration award shall be binding and
enforceable against the parties hereto and judgment may be entered thereon in
any court of competent jurisdiction. The arbitration will take place at
Southfield, Michigan or Grand Rapids, Michigan at the election of the Member not
giving the Arbitration Notice.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
DONNELLY CORPORATION
("Donnelly")
By/s/ Dwane Baumgardner
Dwane Baumgardner
Its Chief Executive Officer and President
LEAR DONNELLY OVERHEAD SYSTEMS,
LLC
By/s/ Richard Perreault
Its
LEAR CORPORATION
("Lear")
By /s/ J.F. McCarthy
Its
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LIST OF EXHIBITS AND SCHEDULES
Schedule A Description of Licensed Lear Technology
Schedule B Confidential Information
Schedule C Claims Asserted
Exhibit 1 Excluded Technology
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EXHIBIT 1
Excluded Technology
Technology shall not include existing or future technological developments
or intellectual property rights of Lear or its Affiliates relating to or
concerning . [To be mutually agreed upon by Lear and Donnelly within 30 days
after the date hereof].
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EXHIBIT E
PURCHASE AND SUPPLY AGREEMENT
THIS PURCHASE AND SUPPLY AGREEMENT (this "Agreement") is entered into as of
this 1st day of November, 1997 (the "Effective Date"), by and among LEAR
CORPORATION, a Delaware corporation ("Lear"), DONNELLY CORPORATION, a Michigan
corporation ("Donnelly"), (Lear and Donnelly are sometimes referred to herein as
the "Members"), Empetek autodily s.r.o., a corporation organized and existing
under the laws of the Czech Republic ("Empetek"), DONNELLY EUROTRIM LIMITED, a
corporation organized and existing under the laws of the Republic of Ireland
("Eurotrim") and LEAR DONNELLY OVERHEAD SYSTEMS L.L.C., a Michigan limited
liability company (together with its subsidiaries, the "Company").
RECITALS:
WHEREAS, Lear and Donnelly as members of the Company have executed an
Operating Agreement of the Company dated September 3, 1997 (the "Operating
Agreement"); capitalized terms not defined herein shall have the meaning
ascribed to them in the Operating Agreement; and
WHEREAS, the Company may request assistance from Lear or Donnelly with
respect to sales to original equipment manufacturers of vehicles ("OEMs"); and
WHEREAS, if requested by the Company, Lear and Donnelly will from time to
time enter into contracts with OEMs to produce Products (as such term is defined
in the Operating Agreement); and
WHEREAS, the parties desire to enter into this Agreement to provide the
terms of production and sale of the Products by the Company to Lear or Donnelly
for resale to the OEMs if the Company has requested such assistance with an OEM;
and
WHEREAS, the parties desire to enter into this Agreement to provide for
Donnelly and Lear to have certain rights as preferred suppliers to the Company.
NOW THEREFORE, for good and valuable consideration including the mutual
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
<PAGE>
ARTICLE 1
SALES AND MARKETING
1.1 Sales Representation to OEMs. At the request of the Company, Lear and
Donnelly will, from time to time, represent the Company by providing sales and
customer support as sales representative with respect to the Company's Products.
The Board of Directors of the Company will make such appointments. Its
determination of whether the Company, Lear, Donnelly or another party will be
appointed as sales representative of the Company's Products at any OEM shall be
based upon capacity, experience, the nature of the relationship with the OEM and
the cost to the Company. OEMs may be assigned to Lear or Donnelly from time to
time by the Company, and if accepted shall be "Lear OEMs" or "Donnelly OEMs" as
the case may be. The Board of Directors may also request Lear or Donnelly to
jointly provide sales and customer service or to cooperate with the Company to
provide sales and customer service to any OEM. The Board of Directors may, from
time to time, change or cancel the appointment of any party as a sales
representative for any OEM.
Should the Company appoint Lear or Donnelly as a sales representative, the
prices, terms and conditions of sale of Products from the Company to Lear and
Donnelly will be established by the Company. Lear and Donnelly will sell the
Company's Products to OEMs for the same price and on the same terms as it
purchases the Products from the Company, except to the extent the Board of
Directors permits Lear and Donnelly to recoup sales costs.
1.2 Responsibility for Non-OEM Customers. Sales and customer support of
Products sold to customers who are not OEMs (including the Members) shall be the
responsibility of the Company; provided, however, that if the primary sales
contact is with the OEM, then the responsibility for sales and customer support
shall be determined according to Section 1.1 hereof (even if the Product is sold
to a customer that is not an OEM).
1.3 Responsibility of Sales Representatives. In case Lear or Donnelly is
appointed as a sales representative to provide sales and customer support to any
OEM:
(a) Scope of Responsibilities. As used in this Agreement, sales and
customer support to be provided by Lear or Donnelly shall include the
following responsibilities and functions: primary customer contacts in the
acquisition phase of any project prior to assurances by the OEM that a
purchase will be made or issuance of a purchase order by an OEM (whichever
occurs first), including customer contacts with respect to design,
engineering and specifications, and may also include customer contacts
relating to prototyping, testing and program management.
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If Lear or Donnelly is providing sales and customer support to an OEM,
the Company and Lear or Donnelly will work together to coordinate all
activities. The following responsibilities and functions shall be the
responsibility of the Company: product design and development, program
management, engineering, quality assurance, prototyping, testing and
validation, and tooling. In addition, the Company will provide such
technical and design support as is required, including training Lear and
Donnelly personnel and working with the OEM.
Product research and development, design, engineering and customer
coordination for program management for the type of Products now sold by
Lear ("Lear R & D") will be performed by Lear and for the type of Products
now sold by Donnelly ("Donnelly R & D") will be performed by Donnelly until
sufficient personnel have been transferred to the Company. It is
anticipated that the Company will promptly retain sufficient resources to
provide Donnelly R & D and that Donnelly's support would be minimal.
(b) Costs and Expenses. Lear and Donnelly shall each be responsible
for their own direct and indirect costs and expenses of their respective
sales activities provided pursuant to this Agreement. Neither Lear nor
Donnelly will be reimbursed for any such expenses with respect to Prior
Contracts (as hereinafter defined) or New Contracts (as hereinafter
defined), except as specifically approved by the Board of Directors.
Lear will not be reimbursed for any costs incurred by it for Lear R &
D with respect to Prior Contracts. Donnelly will be reimbursed for any
costs incurred by it for performing Program Management and Advanced Quality
to the extent such services were included as expenses of the Company in the
business plans submitted by Donnelly. The reimbursement shall be in the
amounts set forth on Exhibit A, payable in the years set forth therein.
ARTICLE 2
CONTRACTS TO SUPPLY PRODUCTS TO OEMS
2.1 Parties to Product Contracts. Contracts to supply Products shall
be between the OEM and the Company unless the OEM is a "Lear OEM" or a
"Donnelly OEM". Contracts entered into after the Effective Date to supply
Products to Lear OEMs shall be between Lear and the Lear OEM, and purchase
orders under such contracts shall be issued by the Lear OEM to Lear.
Contracts entered into after the Effective Date to supply Products
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to Donnelly OEMs shall be between Donnelly and the Donnelly OEM, and purchase
orders under such contracts shall be issued by the Donnelly OEM to Donnelly.
Notwithstanding the foregoing, an OEM may contract directly with the Company or
obtain appropriate assurances from the Company if the OEM so requests.
2.2 Product Contracts Prior to the Effective Date. Contracts entered into
by Lear or Donnelly or projects sourced to them prior to the Effective Date and
included within their Business Plan to supply Products ("Prior Contracts") shall
remain between the parties to such Prior Contract.
2.3 Negotiation of Contracts. The Company and any other party providing
sales and customer support to an OEM agree to cooperate with each other in
preparing bids and negotiating contracts to supply Products to OEMs. The prices
and terms will be established based upon customer requirements and needs as
negotiated with the OEMs, provided that the final price and terms for any new
contract to supply Products to an OEM (a "New Contract") will be established by
the Company.
2.4 Company Contractual Commitment. With respect to each New Contract or
Prior Contract between Lear or Donnelly and an OEM, the Company agrees and
consents to be contractually bound to fulfill the contractual obligations of
Lear or Donnelly, as the case may be, with respect to such New Contract or Prior
Contract on the terms and conditions specified therein; provided, however, that
the price to be received by the Company and other terms shall be modified as
provided by this Agreement. The Company agrees to execute such documentation as
Lear, Donnelly or an OEM may deem reasonably necessary to evidence the
obligations of the Company pursuant to this Section 2.4.
2.5 Warranty and Indemnification. With respect to contracts between an OEM
and Lear or Donnelly with respect to Products, the Company will warrant to Lear
or Donnelly, as the case may be, the same warranties made by Lear or Donnelly to
the OEMs pursuant to the Prior Contracts and New Contracts. The Company agrees
to indemnify, defend and hold Lear and Donnelly and their respective officers,
directors, employees and affiliates harmless from and against any and all loss,
damage, claim, expense (including reasonable attorney's fees) or other liability
resulting from or relating to any warranty or product liability claim concerning
Products supplied by the Company, including Products supplied pursuant to Prior
Contracts or New Contracts; provided, however, that the Company makes no
warranty and shall have no obligation to indemnify a Member concerning
components supplied to the Company by such Member. The Company shall have the
right to participate in the negotiation, litigation and shall have the right to
approve any settlement (which approval will not be unreasonably withheld) of any
such claim for which the Company is obligated to indemnify pursuant to this
paragraph. With respect to components supplied by a Member or its Affiliate to
the Company, the manufacturer of such component
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shall provide the Company with a warranty comparable to the warranty customarily
provided by such manufacturer to third party purchasers of such components.
ARTICLE 3
PURCHASE ORDERS, INVOICING AND PAYMENT PROCEDURES
3.1 Purchase Orders. With respect to both New Contracts and Prior Contracts
between an OEM and Lear or Donnelly, it is contemplated that the OEM which is a
party to such contract will issue purchase orders to Lear or Donnelly, whichever
is a party to that contract. On the Effective Date, with respect to Prior
Contracts and promptly upon receipt of a new purchase order for Products, Lear
or Donnelly, as the case may be, shall promptly issue a corresponding purchase
order to the Company on the same terms and, except as permitted by this
Agreement, at the same price.
The purchase order terms and conditions from the Member to the Company will
include all terms and conditions contained in the OEM purchase order to the
Member, including delivery and product warranty terms. The Company shall
indemnify and hold harmless the Member from and against all loss, cost, expense
(including but not limited to costs of litigation and defense, attorneys fees,
expert witnesses, consultants and litigation support services or devices),
liability settlement or damages ("Damages") arising from any claim based on the
manufacture, assembly, delivery, sale or use of the Product, except for Damages
caused by the design or engineering performed by such Member.
3.2 Shipment of Product. Unless otherwise specified, Products shall be
shipped directly from the Company to the OEM purchasing such Product. Shipment
notices shall be transmitted simultaneously to the OEM and the Member
responsible for sales to that OEM.
3.3 Company Invoices to Lear or Donnelly.
(a) With respect to New Contracts between an OEM and Lear or Donnelly,
the Company will invoice Lear for Products shipped to Lear OEMs and will
invoice Donnelly for Products shipped to Donnelly OEMs. In the case of New
Contracts, the amount of such invoices shall be equal to 100% of the amount
to be invoiced to the OEM except as otherwise agreed to by the Member and
the Company pursuant to the last sentence of Section 1.4 hereof.
(b) With respect to Prior Contracts, the Company will invoice Lear or
Donnelly whichever is a party to such Prior Contract for Products shipped
to OEMs.
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(c) With respect to Products shipped directly to a Member for further
processing by that Member, the price from the Company to a Member shall be
determined by the Board of Directors of the Company.
3.4 Invoices to OEMs.
The parties shall agree on a method for promptly invoicing OEM customers.
3.5 Accounts Receivable.
(a) Lear and Donnelly shall each be responsible for accounting for,
managing and collecting accounts receivable owed to them by OEM customers.
(b) Company invoices to Donnelly or Lear shall result in an account
receivable owed by Donnelly or Lear, as the case may be, to the Company.
Any such accounts receivable shall be payable on the 30th prox day of the
month following invoicing. Such payment terms shall apply regardless of
whether Donnelly or Lear, as the case may be, has collected the
corresponding account receivable from the OEM; provided, however, that if
the actions or omissions of the Company are responsible for a delay in
payment by the OEM to Lear or Donnelly with respect to a particular
invoice, then the Company shall not receive payment of its corresponding
account receivable until the OEM has paid Lear or Donnelly, as the case may
be.
ARTICLE 4
COMPANY PURCHASES FROM MEMBERS
4.1 Donnelly as Preferred Supplier of Electronics.
(a) The Company agrees that Donnelly shall be the preferred supplier
of Electronic Components. For purposes of this Agreement, "Electronic
Components" shall mean those electronics described on Exhibit B which are
included within Products, except proprietary electronics of other Persons
consented to by Donnelly or specified by an OEM customer after Donnelly has
been given the opportunity to persuade the OEM customer to utilize Donnelly
Electronic Components or proprietary Electronic Components available
through Donnelly. Donnelly may add to the electronics specified on Exhibit
B from time to time any type of electronic device on which it has expended
or committed to expend $50,000 for Product Development.
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(b) When the Company intends to purchase Electronic Components, the
Company shall provide Donnelly with specifications for such Electronic
Components so that Donnelly may prepare a quotation for the Company's
consideration. The Company shall not provide specifications to or solicit
bids from any third party until such quotation has been submitted by
Donnelly, provided such submission by Donnelly is timely made. The Company
will not design, engineer, manufacture Electronic Components or purchase
any Electronic Components from any person other than Donnelly unless:
(i) Donnelly consents, or;
(ii) An OEM customer has specified another Person's Electronic
Component; and Donnelly has been given the opportunity to persuade the
OEM customer to purchase or specify a Donnelly Electronic Component;
or
(iii) Donnelly is not competitive in terms of technology, price,
quality and delivery of Electronic Component; provided, however, that
if the Company does not believe Donnelly is competitive, it shall
inform Donnelly the reasons it is not competitive and provide Donnelly
the opportunity to revise its quotations, specifications, or delivery
system; provided further, that with respect to any Products which will
be sold to countries of the European Economic Area, the Company shall
not inform Donnelly of the price or specific terms of any bid for
Electronic Components by any other Person.
Donnelly's status as preferred supplier of Electronic Components shall not
obligate Donnelly to supply any particular Electronic Component and shall not
obligate Donnelly to match any particular third party quotation.
4.2 Donnelly as Preferred Supplier of Rear Vision Systems. The Company
agrees that Donnelly shall be the preferred supplier of Rear Vision Systems. For
purposes of this Agreement, "Rear Vision Systems" shall include all systems to
provide vision or object detection behind or along side of a vehicle other than
by direct vision, including, but not limited to inside and outside mirrors,
camera systems, and blind spot detection systems and all features which are
added to or are a part thereof.
The Company will not purchase any Rear Vision Systems from any person other
than Donnelly unless:
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(a) Donnelly consents, or;
(b) An OEM customer has specified another Person's Rear Vision System;
and Donnelly has been given the opportunity to persuade the OEM customer to
purchase or specify a Donnelly Rear Vision System, or
(c) Donnelly is not competitive in terms of technology, price, quality
and delivery of Rear Vision Systems; provided, however, that if the Company
does not believe Donnelly is competitive, it shall inform Donnelly the
reasons it is not competitive and provide Donnelly the opportunity to
revise its quotations, specifications, or delivery system; provided
further, that with respect to any Products which will be sold to countries
of the European Economic Area, the Company shall not inform Donnelly of the
price or specific terms of any bid for Rear Vision Systems by any other
Person.
The Company will not engage in the business of designing, manufacturing,
assembling, or selling Rear Vision Systems, except to the extent of assembling
mirrors in connection with the integrated electronics and overhead system for
Volvo pursuant to the existing purchase order form Volvo to Eurotrim.
Donnelly's status as a preferred supplier of Rear Vision Systems shall not
obligate Donnelly to provide any particular Rear Vision System and shall not
obligate Donnelly to match any particular third party quotation.
4.3 Lear as Preferred Supplier. The Company agrees that Lear shall be the
preferred supplier of those components of Products to which the parties may
agree from time to time ("Lear Components"). The Company will not purchase any
Lear Components from any person other than Lear unless:
(a) Lear consents, or;
(b) An OEM customer has specified another Person's Lear Component; and
Lear has been given the opportunity to persuade the OEM customer to
purchase or specify a Lear Component manufactured by Lear, or
(c) Lear is not competitive in terms of technology, price, quality and
delivery of Lear Components; provided, however, that if the Company does
not believe Lear is competitive, it shall inform Lear the reasons it is not
competitive and provide Lear the opportunity to revise its quotations,
specifications, or delivery system; provided further, that with respect to
any Products which will be sold to countries of the European Economic Area,
the Company shall not inform Lear of the price or specific terms of any bid
for
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Lear Components by any other Person. Lear's status as a preferred supplier
of Lear Components shall not obligate Lear to supply any particular Lear
Components and shall not obligate Lear to match any particular third party
quotation.
4.4 Certain Supply Arrangements. Pursuant to the Transfer Agreement,
certain of Donnelly's assets and operations in its Grand Haven, Michigan
facility and certain of Lear's assets and operations in its Sheboygan, Wisconsin
and Colne and Tipton, England facilities (collectively, the "Designated
Facilities") will be transferred to the Company at a future date pursuant to the
Transfer Agreement. Prior to such transfer, Products produced by each of the
Designated Facilities by Lear or Donnelly, as the case may be, pursuant to New
Contracts and Prior Contracts shall be supplied to the Company on the prices and
terms described in Exhibit C until the date such Designated Facility is
transferred to the Company pursuant to the Transfer Agreement.
4.5 DHT Arrangements. With respect to Prior Contracts for which Donnelly's
affiliate DHT is a supplier and which are not assignable and with respect to
Prior Contracts or New Contracts manufactured under any license of DHT which
cannot be transferred or sublicensed, DHT will subcontract the Products from the
Company and the Company will supply the Products to DHT on the terms of such
Prior Contracts and New Contracts and DHT will resell the Products to the OEM
that is a party to such contracts.
ARTICLE 5
TERM AND TERMINATION
5.1 Term. This Agreement shall continue so long as Lear and Donnelly are
both Members of the Company unless otherwise terminated as provided herein.
5.2 Default. If any party fails to comply with any of its obligations
hereunder, and after notice such failure continues for thirty (30) days with
respect to a monetary default or sixty (60) days with respect to a non-monetary
default, such action shall constitute a default hereunder and under the
Operating Agreement, provided, however, if a non-monetary default under this
Agreement cannot reasonably and with due diligence and good faith be cured
within said 60-day period, and if the defaulting party promptly commences and
proceeds to complete the cure of such default with due diligence and in good
faith, the 60-day period with respect to such default shall be extended to
include such additional period of time as may be reasonably necessary to cure
such default. 5.3 Remedies on Default. Upon the occurrence of a default
hereunder which is not cured during the applicable cure period, the
non-breaching parties shall have the rights and remedies available at law and in
equity and may institute arbitration and/or legal proceedings in accordance with
Section 6.11 hereof with respect to any damages or losses
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incurred by the non-defaulting party. If the default is by a Member and the
default is a Material Default as defined in the Operating Agreement, the other
Member shall also have all rights provided in the Operating Agreement, including
that included in Section 4.5(c) thereof.
ARTICLE 6
CONSTRUCTION
6.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without giving effect to any
applicable principles of conflicts of laws.
6.2 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
(i) in person, (ii) to the extent receipt is confirmed, by telecopy, facsimile
or other electronic transmission service, (iii) by a nationally recognized
overnight courier service, or (iv) by registered or certified mail (postage
prepaid return receipt requested), to the parties at the following address:
To Lear: Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Attention: Vice President and
General Counsel
Telecopy No. (248) 746-1677
To Donnelly
or Eurotrim: Donnelly Corporation
414 East Fortieth Street
Holland, Michigan 49423
Attention: John Donnelly
Telecopy No. (616) 786-6034
With a copy to: Varnum, Riddering, Howlett & Schmidt LLP
Suite 1600, Bridgewater Place
333 Bridge Street, N.W., P.O. Box 352
Grand Rapids, Michigan 49504
Attention: Daniel Molhoek
Telecopy No. (616) 336-7000
To the Company: Lear Donnelly Overhead Systems, L.L.C.
39650 Orchard Hill Place
Novi, Michigan 48375
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Attention: Richard Perreault
Telecopy No. ________________
6.3 Severability. If any provision of this Agreement shall be conclusively
determined by a court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Agreement shall not be affected thereby.
6.4 Binding Effect. Except as otherwise provided herein, this Agreement
shall inure to the benefit of and be binding upon the parties, their respective
successors, legal representatives and permitted assigns.
6.5 No Third Party Rights. This Agreement is intended to create enforceable
rights between the parties hereto only, and creates no rights in, or obligations
to, any other Persons whatsoever.
6.6 Time is of Essence. Time is of the essence in the performance of each
and every obligation herein imposed.
6.7 Schedules Included in Exhibits; Incorporation by Reference. Any
reference to an Exhibit to this Agreement contained herein shall be deemed to
include any Schedules to such Exhibit. Each of the Exhibits referred to in this
Agreement, and each Schedule to such Exhibits, is hereby incorporated by
reference in this Agreement as if such Schedules and Exhibits were set out in
full in the text of this Agreement.
6.8 Amendments. This Agreement may not be amended except by written
agreement executed by duly authorized officers of all of the parties hereto.
6.9 Entire Agreement; Section Headings. This Agreement, the Operating
Agreement and the agreements contemplated by the Operating Agreement constitute
the entire Agreement among the parties hereto relating to the subject matter
hereof and supersede all prior agreements, understandings, and arrangements,
oral or written, among the parties with respect to the subject matter hereof.
The Section headings in this Agreement are for reference purposes only and shall
be affect in any way the meaning or interpretation of this Agreement.
6.10 Assignment. This Agreement and each and every covenant, term and
condition hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns. Except as otherwise
specifically provided in this Agreement or the Operating Agreement (particularly
Section 9.2(a) thereof), neither this Agreement nor any rights or obligations
hereunder shall be assignable or be delegated directly or indirectly by any
party hereto to a third party (other than an Affiliate of the Member) without
the prior written consent of all the parties to this Agreement.
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In the event either Member withdraws from the Company pursuant to Section
4.4 of the Operating Agreement, all of its rights hereunder and all contracts
between that Member and OEMs for the sale of Products shall be assigned to the
other Member. Provided, however, if an OEM will not permit such transfer, the
withdrawing Member will continue to fulfill its obligations to the OEM under its
contracts and to the Company under this Agreement.
6.11 Arbitration. Any dispute, controversy or claim (hereinafter "Dispute")
between the parties of any kind or nature whatsoever, arising under or related
to this Agreement whether arising in contract, tort or otherwise, shall be
resolved according to the following procedure. If a Dispute (excluding business
decisions to be voted on by Members or Directors) arises among the Members under
this Agreement or any Ancillary Agreement which is not resolved by good faith
negotiation, then such Dispute, upon 30 days' prior notice from one Member to
the other of its intent to arbitrate (an "Arbitration Notice"), shall be
submitted to and settled by arbitration; provided, however, that nothing
contained herein shall preclude any party hereto from seeking or obtaining (a)
injunctive relief, or (b) equitable or other judicial relief to enforce the
provisions hereof or to preserve the status quo pending resolution of disputes
hereunder. Such arbitration shall be conducted in accordance with the commercial
arbitration rules of the American Arbitration Association existing at the time
of submission by one arbitrator. The Members shall attempt to agree upon an
arbitrator. If one cannot be agreed upon, the Member which did not give the
Arbitration Notice may request the Chief Judge of the United States District
Court for the Eastern District of Michigan or the Chief Judge of the United
States District Court for the Western District of Michigan to appoint an
arbitrator. If he or she will not, the arbitrator shall be appointed by the
American Arbitration Association. If an arbitrator so selected becomes unable to
serve, his or her successor shall be similarly selected or appointed. All
arbitration hearings shall be conducted on an expedited schedule, and all
proceedings shall be confidential. Either Member may at its expense make a
stenographic record thereof. The arbitrator shall apportion all costs and
expenses of arbitration (including the arbitrator's fees and expenses, the fees
and expenses of experts, and the fees and expenses of counsel to the parties),
between the prevailing and non-prevailing Member as the arbitrator deems fair
and reasonable. Any arbitration award shall be binding and enforceable against
the parties hereto and judgment may be entered thereon in any court of competent
jurisdiction. The arbitration
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will take place at Southfield, Michigan or Grand Rapids, Michigan at the
election of the Member not giving the Arbitration Notice.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LEAR CORPORATION
("Lear")
By /s/ J. F. McCarthy
DONNELLY CORPORATION
("Donnelly")
By /s/ John Donnelly
DONNELLY EUROTRIM LIMITED
("Eurotrim")
By /s/ Richard Perreault
EMPETEK
By/s/ Richard Perreault
LEAR DONNELLY OVERHEAD SYSTEMS,
LLC
By /s/Richard Perreault
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LIST OF EXHIBITS AND SCHEDULES
Exhibit A Reimbursement for Prior Contracts
Exhibit B Electronic Components
Exhibit C Purchase Price from Member Facilities
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EXHIBIT C
Purchase Price from Member Facilities
Company Price as a percent
of price to customer
1998 1999 2000
Grand Haven 64 77.1 77.1
Sheboygan 90.5 91.9 91.9
Colne & Tipton 89.3 88.3 88
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EXHIBIT F
DONNELLY NONCOMPETITION AND NON-SOLICITATION AGREEMENT
THIS NONCOMPETITION AND NON-SOLICITATION AGREEMENT ("Agreement") is dated
as of November, 1997 by and among LEAR CORPORATION, a Delaware corporation
("Lear"), and DONNELLY CORPORATION, a Michigan corporation ("Donnelly").
Capitalized terms not otherwise defined herein shall have the meaning set forth
in the Operating Agreement (as defined below).
RECITALS
WHEREAS, as of the date hereof, Donnelly and Lear have been admitted as
members of Lear Donnelly Overhead Systems, L.L.C., a Michigan limited liability
company (the "Company"), and Lear and Donnelly have entered into an Operating
Agreement of the Company dated of even date herewith (the "Operating
Agreement");
WHEREAS, pursuant to, and in consideration of Lear's entering into the
Operating Agreement, Donnelly has agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants, agreements and understandings contained herein and in the Operating
Agreement, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Covenants.
(a) Unauthorized Disclosure. Donnelly acknowledges that given
Donnelly's relationship with the Company, Donnelly has and will transfer
certain information to the Company and/or Lear, and has been and will be
exposed to and has received and will receive information relating to the
confidential affairs of the Company, including, without limitation,
business and marketing plans, strategies, customer information, other
information concerning the Company's products, promotions, development,
financing, expansion plans, and other forms of information considered by
the Company to be confidential and in the nature of trade secrets
(collectively, the "Confidential Information"). The term Confidential
Information shall include, without limitation, information relating to the
Company's manuals, procedures, Products, designs, technology, practices,
pricing, and methods of designing, engineering, testing and manufacturing
Products except technology know-how, and other intellectual property rights
licensed by Donnelly to the Company. Donnelly agrees that, during the Term
and thereafter, it will keep all Confidential Information strictly
confidential; during the Term
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it will not use any Confidential Information except on behalf of the
Company; and during the Term and thereafter it will not disclose any
Confidential Information, either directly or indirectly, to any Person
without the prior written consent of Lear. This confidentiality covenant
has no temporal, geographical or territorial restriction. Upon termination
of this Agreement, Donnelly will promptly deliver to Lear all notes,
memoranda, writings, lists, files, reports, customer lists, correspondence,
tapes, disks, cards, maps, logs, data, drawings or any other tangible
product or document that has been produced by, received by or otherwise
submitted to Donnelly during or prior to the Term which constitutes or
embodies Confidential Information of the Company.
(b) Noncompetition. Except as provided on Exhibit A, Donnelly agrees
that it will not during the Term, directly or indirectly (including,
without limitation, through an Affiliate), be or become, own, manage,
operate, join, finance, advise or counsel, consult with, control, or
participate in the ownership, management, operation or control of, or be
connected in any other manner including, without limitation, being a
stockholder (excepting less than 1% stockholdings for investment purposes
only in securities of publicly held and traded companies), member, partner
or investor in, any Competing Enterprise. Competing Enterprise means any
Person engaged in a business or operation anywhere in the world
(collectively, the "Territory") which is directly or indirectly in the
business of designing, engineering, manufacturing, selling, marketing
and/or servicing of Products. Donnelly acknowledges and agrees that the
agreements contained in this Section 1(b) are reasonable and necessary to
protect the legitimate business interests of Lear and the Company and are
legal, valid and binding obligations of Donnelly enforceable to the fullest
extent permitted by applicable law.
(c) Non-Solicitation. Donnelly agrees that, during the Term, it will
not in any way, directly or indirectly (including, without limitation,
through an Affiliate), solicit for employment or endeavor to entice away
from the Company or Lear, any Person who is an employee or full time
consultant of the Company or Lear, other than Persons whose employment with
the Company or Lear shall have been terminated by the Company or Lear, as
the case may be, prior to the date of solicitation; provided, however, this
Section 1(c) shall not prevent Donnelly from employing any such Person who
contacts Donnelly on his or her own initiative without any direct or
indirect solicitation by, or encouragement from, Donnelly; provided
further, that this Section 1(c) shall not be deemed to prohibit any general
solicitations of employment not specifically directed at particular
employees of the Company or Lear.
(d) Remedies. Donnelly and Lear agree that any breach of the terms of
this Agreement would result in irreparable injury and damage to the Company
and/or Lear for which the Company and/or Lear would have no adequate remedy
at law; therefore, Donnelly also agrees that in the event of any such
breach, the Company and/or Lear shall be entitled to an immediate
injunction and restraining order to prevent such breach by
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Donnelly (including any and all Persons acting for or with it) without having to
prove actual damages or post a bond or other security, and to recover all costs
and expenses incurred by the Company, including reasonable attorneys' fees and
costs, in addition to any other remedies to which the Company and/or Lear may be
entitled at law or in equity. The terms of this Section 1(d) shall not be
construed as an election of remedies nor prevent the Company and/or Lear from
pursuing any other available remedies for any breach hereof, including, without
limitation, the recovery of damages. Donnelly and Lear further agree that the
provisions of the covenants set forth in this Section 1 are reasonable and
valid. Should a court of competent jurisdiction or arbitration tribunal
determine, however, that any provision of any of such covenants is unreasonable,
either in period of time, scope, geographical area or otherwise, the parties
hereto agree that the covenant shall be interpreted and/or reformed and be
enforced to the maximum extent that such court or arbitration tribunal deems
reasonable.
2. Exclusions to Noncompetition. Notwithstanding the provisions of Section
1(b) above, and any provision of the Operating Agreement:
(a) If Donnelly becomes aware of an opportunity for the manufacture or
sale of a Product which Donnelly believes the Company should pursue (the
"Opportunity"), Donnelly shall present that Opportunity together with all
relevant information regarding the Opportunity to the Company. The Board of
Directors of the Company shall meet within thirty (30) days after Donnelly
presents the Opportunity and all relevant information to the Company to
decide whether the Company should pursue the Opportunity. If the Company
does not undertake the Opportunity because one or more of the directors
appointed by Lear votes against it, then Donnelly may pursue that
Opportunity independently, even though it involves the manufacture or sale
of Products; provided, however:
(i) Donnelly shall not expand the scope of the Products being
manufactured or sold, the customer base for the Products, or the
geographic area in which the Products are manufactured or sold,
without again first offering each such Opportunity to the Company in
accordance with the provisions of Section 2(a) hereof (for direct sale
in the event of a purchaser other than an original equipment
manufacturer of automobiles or light duty trucks ("OEM") or for
manufacture under the terms of the Purchase and Supply Agreement in
the event the purchaser is an OEM).
(ii) The Company shall have an option for one (1) year after the
date Donnelly has begun the business of the Opportunity to purchase
Donnelly's interest in the Opportunity at a price equal to the sum of
the amount Donnelly paid for that Opportunity, capital expenditures
incurred by Donnelly in connection with such Opportunity, the net
operating loss incurred by Donnelly in connection with such
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Opportunity, and interest on such expenditures and losses at the rate
of Member loans to the Company.
(iii) For five (5) years following the expiration of the one (1)
year option period referenced in Section 2(a)(ii), the Company will
have continuing option to purchase Donnelly's interest in the
Opportunity for its Fair Market Value (as defined in the Operating
Agreement) as of the time of exercise of this option, payable in cash.
(b) If Donnelly has an opportunity to acquire a business (whether by
purchase of capital stock or assets or otherwise) which includes among
other lines of business the manufacture or sale of one or more Products
(the "Target Business"), Donnelly shall present the opportunity to the
Company. Donnelly may present the opportunity to purchase the entire Target
Business, or if Donnelly wishes to acquire the remaining portion of the
Target Business, shall offer the Company the option to acquire that portion
of the business of the Target Business relating to the manufacture or sale
of Products, in either case together with all relevant information
regarding the Target Business. The purchase price for the portion of the
Target Business relating to the manufacture or sale of Products shall be
allocated based upon the respective Fair Market Values of each portion of
the Target Business. The Board of Directors of the Company shall meet
within thirty (30) days after Donnelly presents the opportunity to acquire
the Target Business (or portion thereof relating to the manufacture or sale
of Products) and all relevant information regarding the Target Business to
the Company to decide whether the Company should acquire the Target
Business or portion thereof relating to the manufacture or sale of
Products, as the case may be. If the Company does not undertake to purchase
the Target Business or the portion of the Target Business relating to the
manufacture or sale of Products because one or more of the directors
appointed by Lear votes against it, then Donnelly may acquire the Target
Business or portion thereof relating to the manufacture or sale of Products
independently, even though it involves the manufacture or sale of Products.
In the event Donnelly acquires all or any portion of the Target Business
consisting of the manufacture or sale of Products:
(i) Donnelly shall not expand the scope of the Products being
manufactured or sold, the customer base for the Products, or the
geographic area in which the Products are manufactured or sold by the
Target Business, without again first offering each such opportunity to
the Company in accordance with the provisions of Section 2(b) (for
direct sale in the event of a purchaser other than an OEM or for
manufacture under the terms of a Purchase and Supply Agreement in the
event of a purchaser which is an OEM).
(ii) The Company shall have an option for one (1) year after the
date Donnelly has consummated the purchase of the Target Business or
portion thereof consisting of the manufacture or sale of Products to
purchase that portion of the Target
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Business relating to the manufacture or sale of Products, as the case
may be, for a price equal to the part of the following that is related
to the manufacture or sale of Products: the sum of the purchase price
for the Target Business, capital expenditures incurred by Donnelly in
connection with the Target Business, any net operating loss incurred
by Donnelly in connection with the Target Business, and interest on
any of the expenditures or losses at the rate of Member loans to the
Company.
(iii) For five years following the expiration of the one (1) year
option period referenced in Section 2(b)(ii), the Company will have a
continuing option to purchase Donnelly's interest in that portion of
the Target Business related to the manufacture or sale of Products for
its Fair Market Value (as defined in the Operating Agreement) as of
the time of exercise of this option, payable in cash.
(c) The determination of whether the Company will accept an
Opportunity presented pursuant to Section 2(a), acquire a Target Business
or the portion thereof relating to the manufacture or sale of Products
pursuant to Section 2(b), or exercise an option pursuant to Sections
2(a)(ii), 2(a)(iii), 2(b)(ii) or 2(b)(iii) will be made solely by the
directors of the Company appointed by Lear.
(d) As a condition to Donnelly's pursuing the Opportunity or Target
Business independently if the Company elects not to undertake the
Opportunity or acquire the Target Business, Donnelly shall (i) ensure that
the Opportunity and Donnelly's interest in the Opportunity or that part of
Target Business manufacturing or selling Products are transferable to the
Company, (ii) not sell or assign its interest in the Opportunity or the
part of the Target Business to an Affiliate unless the Affiliate agrees to
be bound by this Agreement, (iii) notify the Company at least sixty (60)
days prior to entering into an agreement to sell or assign all or any part
of its interest in the Opportunity or the Target Business during the period
of the options granted pursuant to Sections 2(a) (ii), 2(a)(iii), 2(b)(ii)
or 2(b)(iii) hereof, and (iv) not take any other actions which would
frustrate the intent and purpose of the options granted in this Section 2.
3. Acknowledgments.
(a) Interests of Lear. Donnelly acknowledges that (i) the business of
the Company is or may be carried on throughout the Territory, the Company
is interested in and solicits or canvasses opportunities throughout the
Territory and its competitors are located throughout the Territory, (ii)
the Company's reputation in the industry and its relationship with
customers are the result of the transfer of value from Lear and Donnelly,
(iii) the nature of the Company's business is such that the ongoing
relationship between the Company and its customers and suppliers are
material and have a significant effect on the ability of the Company to
continue its business successfully, and (iv) any injury or
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damage to the Company caused by a breach of the terms of this Agreement by
Donnelly would cause injury or damage to Lear.
(b) Advice of Counsel. Donnelly acknowledges that it has been
represented in connection with this Agreement and the Operating Agreement
by competent legal counsel of its choice and that it is fully informed of
all legal and practical implications of the covenants entered into by it.
Donnelly has entered into this Agreement and the Operating Agreement freely
and without any undue influence or coercion by Lear or any other Person.
4. Term. The term of this Agreement (the "Term") shall begin on the date
hereof and end on the date two (2) years after the date of the withdrawal of
Donnelly as a Member of the Company (whether by voluntary or involuntary
withdrawal, upon the sale or Transfer of its Interest to a Person other than an
Affiliate, or upon the complete liquidation and dissolution of the Company);
provided, however, in the event of any breach by Donnelly of the provisions of
Section 1(b) hereof, the Term shall be extended with respect to the covenants
contained in Section 1(b) for such period as such breach continues. Nothing in
this Agreement shall create any right in Donnelly to be or remain a Member of
the Company.
5. Termination of Agreement. This Agreement shall terminate at the end of
the Term except with respect to any breach of this Agreement that shall have
occurred prior to such termination and with respect to any provisions of this
Agreement which by their terms expressly continue in effect beyond the
expiration of the Term. The existence of any claim or cause of action by
Donnelly against Lear or the Company, whether predicated on this Agreement, the
Operating Agreement or otherwise, shall not constitute a defense to the
enforcement by Lear and/or the Company of the covenants and agreements contained
in Section 1 hereof.
6. Effectiveness. This Agreement shall become effective as of the date of
this Agreement.
7. Notices. Every notice relating to this Agreement shall be in writing and
shall be deemed given (i) upon delivery if sent by facsimile
transmission(provided receipt is confirmed by a report from the facsimile
machine from which the facsimile was transmitted); upon delivery if sent by
personal delivery; three (3) business days after mailing if mailed by registered
or certified mail, postage prepaid, return receipt requested; or one (1)
business day after sending if sent by reputable overnight courier, in each case
to the parties at the following addresses and/or facsimile numbers:
If to Donnelly:
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Donnelly Corporation,
414 East Fortieth Street
Holland, Michigan 49423
Attention: John Donnelly
Telecopy No. (616) 786-6034
If to Lear:
Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Attention: Vice President and General Counsel
Telecopy No. (248) 746-1677.
8. Binding Effect; Assignment. This Agreement shall be binding upon and
shall inure to the benefit of Lear, the Company and its successors and assigns.
This Agreement shall be binding upon and shall inure to the benefit of Donnelly
and its successors. Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by Donnelly without the prior written
consent of Lear.
9. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by duly authorized officers of Donnelly and Lear. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreement or
representation, oral or written, express or implied, with respect to the subject
matter hereof has been made by either party which is not expressly set forth in
this Agreement.
10. Entire Agreement. This Agreement sets forth the entire understanding of
the parties hereto with respect to the subject matter hereof and supersedes all
prior or contemporaneous agreements, promises, representations or
understandings, written or oral, between them as to such subject matter.
11. Heading. The headings contained herein are solely for the purpose of
reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
12. Severability. If any provision of this Agreement, or any application
thereof to any circumstances, is invalid, in whole or in part, such provision or
application shall
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to that extent be severable and shall not affect other provisions or
applications of this Agreement.
13. Definitions. For purposes of this Agreement:
(a) "Affiliate" means a Person who, with respect to any other Person,
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such other Person.
(b) "Control" means the right, directly or indirectly, to elect a
majority of the Board of Directors, Operating Committee or similar
governing body of an entity.
(c) "Person" means and includes, without limitation, an individual, a
partnership, a joint venture, a corporation, a limited liability company, a
trust, a business association or other entity, an unincorporated
organization, or a government or a governmental entity.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without reference to the
principles of conflict of laws.
15. Arbitration. Any dispute, controversy or claim (hereinafter "Dispute")
between the parties of any kind or nature whatsoever, arising under or relating
to this Agreement whether arising in contract, tort or otherwise, shall be
resolved according to the following procedure. The parties agree that if a
Dispute arises under this Agreement which is not resolved by good faith
negotiation, then such Dispute, upon 30 days' prior written notice from one
party to the other of its intent to arbitrate (an "Arbitration Notice"), shall
be submitted to and settled exclusively by final and binding arbitration;
provided, however, that nothing contained herein shall preclude any party hereto
from seeking or obtaining from a court of competent jurisdiction (a) injunctive
relief, or (b) equitable or other judicial relief to specifically enforce the
provisions hereof or to preserve the status quo pending resolution of disputes
hereunder. The parties specifically acknowledge and agree that the provisions of
Section 1 of this Agreement shall be specifically enforced by a court of
competent jurisdiction and that any claim for damages under this Agreement,
although arising out of the same facts and circumstances, shall nonetheless be
resolved through arbitration hereunder. Such arbitration shall be conducted in
accordance with Michigan law and the Commercial Arbitration Rules of the
American Arbitration Association existing at the time of submission by one
arbitrator. The Members shall attempt to agree upon an arbitrator. If one cannot
be agreed upon, the Member which did not give the Arbitration Notice may request
the Chief Judge of the United States District Court for the Eastern District of
Michigan or the Chief Judge of the United States District Court for the Western
District of Michigan to appoint an arbitrator. If an arbitrator so
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selected becomes unable to serve, his or her successor shall be similarly
selected or appointed. All arbitration hearings shall be conducted on an
expedited schedule, and all proceedings shall be confidential. Either party may
at its expense make a stenographic record thereof. The arbitrator shall
apportion all costs and expenses of arbitration (including the arbitrator's fees
and expenses, the reasonable fees and expenses of experts, and the fees and
expenses of counsel to the parties), between the prevailing and non-prevailing
party as the arbitrator deems fair and reasonable. Any arbitration award shall
be binding and enforceable against the parties hereto and judgment may be
entered thereon in any court of competent jurisdiction. The arbitration will
take place at Southfield, Michigan or Grand Rapids, Michigan at the election of
the Member not giving the Arbitration Notice.
16. Counterparts. This Agreement may be executed with counterpart signature
pages or in separate counterparts, each of which shall for all purposes be
deemed to be an original and all of which taken together shall constitute one
and the same Agreement.
17. Recitals. The Recitals to this Agreement are incorporated herein as a
part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Noncompetition
Agreement to be executed by their duly authorized officers as of the date first
written above.
LEAR CORPORATION
_____________________________ By /s/ J. F. McCarthy
Its:____________________________
DONNELLY CORPORATION
______________________________ By: /s/ Dwane Baumgardner
Dwane Baumgardner
Its:Chief Executive Officer and President
- 9 -
<PAGE>
EXHIBIT A
Donnelly shall be permitted to design, manufacture and sell electronics,
lenses and optics, and flat and curved coated glass for displays, to Persons
other than the Company, even if such electronics constitute or are part of
Products.
- 10 -
<PAGE>
EXHIBIT G
LEAR NONCOMPETITION AND NON-SOLICITATION AGREEMENT
THIS NONCOMPETITION AND NON-SOLICITATION AGREEMENT ("Agreement") is dated
as of [ ], 1997 by and among LEAR CORPORATION, a Delaware corporation ("Lear"),
and DONNELLY CORPORATION, a Michigan corporation ("Donnelly"). Capitalized terms
not otherwise defined herein shall have the meaning set forth in the Operating
Agreement (as defined below).
RECITALS
WHEREAS, as of the date hereof, Donnelly and Lear have been admitted as
members of Lear Donnelly Overhead Systems, L.L.C., a Michigan limited liability
company (the "Company"), and Lear and Donnelly have entered into an Operating
Agreement of the Company dated of even date herewith (the "Operating
Agreement");
WHEREAS, pursuant to, and in consideration of Donnelly's entering into the
Operating Agreement, Lear has agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants, agreements and understandings contained herein and in the Operating
Agreement, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Covenants.
(a) Unauthorized Disclosure. Lear acknowledges that given Lear's
relationship with the Company, Lear has and will transfer certain
information to the Company and/or Donnelly, and has been and will be
exposed to and has received and will receive information relating to the
confidential affairs of the Company, including, without limitation,
business and marketing plans, strategies, customer information, other
information concerning the Company's products, promotions, development,
financing, expansion plans, and other forms of information considered by
the Company to be confidential and in the nature of trade secrets
(collectively, the "Confidential Information"). The term Confidential
Information shall include, without limitation, information relating to the
Company's manuals, procedures, Products, designs, technology, practices,
pricing, and methods of designing, engineering, testing and manufacturing
Products except technology know-how and other intellectual property rights
licensed by Lear to the Company. Lear agrees that, during the Term and
thereafter, it will keep all
<PAGE>
Confidential Information strictly confidential; during the Term it will not
use any Confidential Information except on behalf of the Company; and
during the Term and thereafter it will not disclose any Confidential
Information, either directly or indirectly, to any Person without the prior
written consent of Donnelly. This confidentiality covenant has no temporal,
geographical or territorial restriction. Upon termination of this
Agreement, Lear will promptly deliver to Donnelly all notes, memoranda,
writings, lists, files, reports, customer lists, correspondence, tapes,
disks, cards, maps, logs, data, drawings or any other tangible product or
document that has been produced by, received by or otherwise submitted to
Lear during or prior to the Term which constitutes or embodies Confidential
Information of the Company.
(b) Noncompetition. Except as provided on Exhibit A, Lear agrees that
except through ownership in the Company it will not during the Term,
directly or indirectly (including, without limitation, through an
Affiliate), be or become, own, manage, operate, join, finance, advise or
counsel, consult with, control, or participate in the ownership,
management, operation or control of, or be connected in any other manner
including, without limitation, being a stockholder (excepting less than 1%
stockholdings for investment purposes only in securities of publicly held
and traded companies), member, partner or investor in, any Competing
Enterprise. Competing Enterprise means any Person engaged in a business or
operation anywhere in the world (collectively, the "Territory") which is
directly or indirectly in the business of designing, engineering,
manufacturing, selling, marketing and/or servicing of Products. Lear
acknowledges and agrees that the agreements contained in this Section 1(b)
are reasonable and necessary to protect the legitimate business interests
of Donnelly and the Company and are legal, valid and binding obligations of
Lear enforceable to the fullest extent permitted by applicable law.
(c) Non-Solicitation. Lear agrees that, during the Term, it will not
in any way, directly or indirectly (including, without limitation, through
an Affiliate), solicit for employment or endeavor to entice away from the
Company or Donnelly, any Person who is an employee or full time consultant
of the Company or Donnelly, other than Persons whose employment with the
Company or Lear shall have been terminated by the Company or Donnelly, as
the case may be, prior to the date of solicitation; provided, however, this
Section 1(c) shall not prevent Lear from employing any such Person who
contacts Lear on his or her own initiative without any direct or indirect
solicitation by, or encouragement from, Lear; provided further, that this
Section 1(c) shall not be deemed to prohibit any general solicitations of
employment not specifically directed at particular employees of the Company
or Donnelly.
(d) Remedies. Lear and Donnelly agree that any breach of the terms of
this Agreement would result in irreparable injury and damage to the Company
and/or Donnelly for which the Company and/or Donnelly would have no
adequate remedy at law;
- 2 -
<PAGE>
therefore, Lear also agrees that in the event of any such breach, the
Company and/or Donnelly shall be entitled to an immediate injunction and
restraining order to prevent such breach by Lear (including any and all
Persons acting for or with it) without having to prove actual damages or
post a bond or other security, and to recover all costs and expenses
incurred by the Company, including reasonable attorneys' fees and costs, in
addition to any other remedies to which the Company and/or Donnelly may be
entitled at law or in equity. The terms of this Section 1(d) shall not be
construed as an election of remedies nor prevent the Company and/or Lear
from pursuing any other available remedies for any breach hereof,
including, without limitation, the recovery of damages. Lear and Donnelly
further agree that the provisions of the covenants set forth in this
Section 1 are reasonable and valid. Should a court of competent
jurisdiction or arbitration tribunal determine, however, that any provision
of any of such covenants is unreasonable, either in period of time, scope,
geographical area or otherwise, the parties hereto agree that the covenant
shall be interpreted and/or reformed and be enforced to the maximum extent
that such court or arbitration tribunal deems reasonable.
2. Exclusions to Noncompetition. Notwithstanding the provisions of Section
1(b) above, and any provision of the Operating Agreement:
(a) If Lear becomes aware of an opportunity for the manufacture or
sale of a Product which Lear believes the Company should pursue (the
"Opportunity"), Lear shall present that Opportunity together with all
relevant information regarding the Opportunity to the Company. The Board of
Directors of the Company shall meet within thirty (30) days after Lear
presents the Opportunity and all relevant information to the Company to
decide whether the Company should pursue the Opportunity. If the Company
does not undertake the Opportunity because one or more of the directors
appointed by Donnelly votes against it, then Lear may pursue that
Opportunity independently, even though it involves the manufacture or sale
of Products; provided, however:
(i) Lear shall not expand the scope of the Products being
manufactured or sold, the customer base for the Products, or the
geographic area in which the Products are manufactured or sold,
without again first offering each such Opportunity to the Company in
accordance with the provisions of Section 2(a) hereof (for direct sale
in the event of a purchaser other than an original equipment
manufacturer of automobiles or light duty trucks ("OEM") or for
manufacture under the terms of the Purchase and Supply Agreement in
the event the purchaser is an OEM).
(ii) The Company shall have an option for one (1) year after the
date Lear has begun the business of the Opportunity to purchase Lear's
interest in the Opportunity at a price equal to the sum of the amount
Lear paid for that Opportunity, capital expenditures incurred by Lear
in connection with such Opportunity, the net
- 3 -
<PAGE>
operating loss incurred by Lear in connection with such Opportunity,
and interest on such expenditures and losses at the rate of Member
loans to the Company.
(iii) For five (5) years following the expiration of the one (1)
year option period referenced in Section 2(a)(ii), the Company will
have continuing option to purchase Lear's interest in the Opportunity
for its Fair Market Value (as defined in the Operating Agreement) as
of the time of exercise of this option, payable in cash.
(b) If Lear has an opportunity to acquire a business (whether by
purchase of capital stock or assets or otherwise) which includes among
other lines of business the manufacture or sale of one or more Products
(the "Target Business"), Lear shall present the opportunity to the Company.
Lear may present the opportunity to purchase the entire Target Business, or
if Lear wishes to acquire the remaining portion of the Target Business,
shall offer the Company the option to acquire that portion of the business
of the Target Business relating to the manufacture or sale of Products, in
either case together with all relevant information regarding the Target
Business. The purchase price for the portion of the Target Business
relating to the manufacture or sale of Products shall be allocated based
upon the respective Fair Market Values of each portion of the Target
Business. The Board of Directors of the Company shall meet within thirty
(30) days after Lear presents the opportunity to acquire the Target
Business (or portion thereof relating to the manufacture or sale of
Products) and all relevant information regarding the Target Business to the
Company to decide whether the Company should acquire the Target Business or
portion thereof relating to the manufacture or sale of Products, as the
case may be. If the Company does not undertake to purchase the Target
Business or the portion of the Target Business relating to the manufacture
or sale of Products because one or more of the directors appointed by
Donnelly votes against it, then Lear may acquire the Target Business or
portion thereof relating to the manufacture or sale of Products
independently, even though it involves the manufacture or sale of Products.
In the event Lear acquires all or any portion of the Target Business
consisting of the manufacture or sale of Products:
(i) Lear shall not expand the scope of the Products being
manufactured or sold, the customer base for the Products, or the
geographic area in which the Products are manufactured or sold by the
Target Business, without again first offering each such opportunity to
the Company in accordance with the provisions of Section 2(b) (for
direct sale in the event of a purchaser other than an OEM or for
manufacture under the terms of a Purchase and Supply Agreement in the
event of a purchaser which is an OEM).
(ii) The Company shall have an option for one (1) year after the
date Lear has consummated the purchase of the Target Business or
portion thereof consisting of the manufacture or sale of Products to
purchase that portion of the Target
- 4 -
<PAGE>
Business relating to the manufacture or sale of Products, as the case
may be, for a price equal to the part of the following that is related
to the manufacture or sale of Products: the sum of the purchase price
for the Target Business, capital expenditures incurred by Lear in
connection with the Target Business, any net operating loss incurred
by Lear in connection with the Target Business, and interest on any of
the expenditures or losses at the rate of Member loans to the Company.
(iii) For five years following the expiration of the one (1) year
option period referenced in Section 2(b)(ii), the Company will have a
continuing option to purchase Lear's interest in that portion of the
Target Business related to the manufacture or sale of Products for its
Fair Market Value (as defined in the Operating Agreement) as of the
time of exercise of this option, payable in cash.
(c) The determination of whether the Company will accept an
Opportunity presented pursuant to Section 2(a), acquire a Target Business
or the portion thereof relating to the manufacture or sale of Products
pursuant to Section 2(b), or exercise an option pursuant to Sections
2(a)(ii), 2(a)(iii), 2(b)(ii) or 2(b)(iii) will be made solely by the
directors of the Company appointed by Lear.
(d) As a condition to Lear's pursuing the Opportunity or Target
Business independently if the Company elects not to undertake the
Opportunity or acquire the Target Business, Lear shall (i) ensure that the
Opportunity and Lear's interest in the Opportunity or that part of Target
Business manufacturing or selling Products are transferable to the Company,
(ii) not sell or assign its interest in the Opportunity or the part of the
Target Business to an Affiliate unless the Affiliate agrees to be bound by
this Agreement, (iii) notify the Company at least sixty (60) days prior to
entering into an agreement to sell or assign all or any part of its
interest in the Opportunity or the Target Business during the period of the
options granted pursuant to Sections 2(a) (ii), 2(a)(iii), 2(b)(ii) or
2(b)(iii) hereof, and (iv) not take any other actions which would frustrate
the intent and purpose of the options granted in this Section 2.
3. Acknowledgments.
(a) Interests of Donnelly. Lear acknowledges that (i) the business of
the Company is or may be carried on throughout the Territory, the Company
is interested in and solicits or canvasses opportunities throughout the
Territory and its competitors are located throughout the Territory, (ii)
the Company's reputation in the industry and its relationship with
customers are the result of the transfer of value from Donnelly and Lear,
(iii) the nature of the Company's business is such that the ongoing
relationship between the Company and its customers and suppliers are
material and have a significant effect on the ability of the Company to
continue its business successfully, and (iv) any injury or
- 5 -
<PAGE>
damage to the Company caused by a breach of the terms of this Agreement by
Lear would cause injury or damage to Donnelly.
(b) Advice of Counsel. Lear acknowledges that it has been represented
in connection with this Agreement and the Operating Agreement by competent
legal counsel of its choice and that it is fully informed of all legal and
practical implications of the covenants entered into by it. Lear has
entered into this Agreement and the Operating Agreement freely and without
any undue influence or coercion by Donnelly or any other Person.
4. Term. The term of this Agreement (the "Term") shall begin on the date
hereof and end on the date two (2) years after the date of the withdrawal of
Lear as a Member of the Company (whether by voluntary or involuntary withdrawal,
upon the sale or Transfer of its Interest to a Person other than an Affiliate,
or upon the complete liquidation and dissolution of the Company); provided,
however, in the event of any breach by Lear of the provisions of Section 1(b)
hereof, the Term shall be extended with respect to the covenants contained in
Section 1(b) for such period as such breach continues. Nothing in this Agreement
shall create any right in Lear to be or remain a Member of the Company.
5. Termination of Agreement. This Agreement shall terminate at the end of
the Term except with respect to any breach of this Agreement that shall have
occurred prior to such termination and with respect to any provisions of this
Agreement which by their terms expressly continue in effect beyond the
expiration of the Term. The existence of any claim or cause of action by Lear
against Donnelly or the Company, whether predicated on this Agreement, the
Operating Agreement or otherwise, shall not constitute a defense to the
enforcement by Donnelly and/or the Company of the covenants and agreements
contained in Section 1 hereof.
6. Effectiveness. This Agreement shall become effective as of the date of
this Agreement.
7. Notices. Every notice relating to this Agreement shall be in writing and
shall be deemed given (i) upon delivery if sent by facsimile
transmission(provided receipt is confirmed by a report from the facsimile
machine from which the facsimile was transmitted); upon delivery if sent by
personal delivery; three (3) business days after mailing if mailed by registered
or certified mail, postage prepaid, return receipt requested; or one (1)
business day after sending if sent by reputable overnight courier, in each case
to the parties at the following addresses and/or facsimile numbers:
If to Lear:
- 6 -
<PAGE>
Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Attention: Vice President and General Counsel
Telecopy No. (248) 746-1677
If to Donnelly:
Donnelly Corporation,
414 East Fortieth Street
Holland, Michigan 49423
Attention: John Donnelly
Telecopy No. (616) 786-6034
8. Binding Effect; Assignment. This Agreement shall be binding upon and
shall inure to the benefit of Donnelly, the Company and its successors and
assigns. This Agreement shall be binding upon and shall inure to the benefit of
Lear and its successors. Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by Lear without the prior written
consent of Donnelly.
9. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by duly authorized officers of Lear and Donnelly. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreement or
representation, oral or written, express or implied, with respect to the subject
matter hereof has been made by either party which is not expressly set forth in
this Agreement.
10. Entire Agreement. This Agreement sets forth the entire understanding of
the parties hereto with respect to the subject matter hereof and supersedes all
prior or contemporaneous agreements, promises, representations or
understandings, written or oral, between them as to such subject matter.
11. Heading. The headings contained herein are solely for the purpose of
reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
12. Severability. If any provision of this Agreement, or any application
thereof to any circumstances, is invalid, in whole or in part, such provision or
application shall
- 7 -
<PAGE>
to that extent be severable and shall not affect other provisions or
applications of this Agreement.
13. Definitions. For purposes of this Agreement:
(a) "Affiliate" means a Person who, with respect to any other Person,
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such other Person.
(b) "Control" means the right, directly or indirectly, to elect a
majority of the Board of Directors, Operating Committee or similar
governing body of an entity.
(c) "Person" means and includes, without limitation, an individual, a
partnership, a joint venture, a corporation, a limited liability company, a
trust, a business association or other entity, an unincorporated
organization, or a government or a governmental entity.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without reference to the
principles of conflict of laws.
15. Arbitration. Any dispute, controversy or claim (hereinafter "Dispute")
between the parties of any kind or nature whatsoever, arising under or relating
to this Agreement whether arising in contract, tort or otherwise, shall be
resolved according to the following procedure. The parties agree that if a
Dispute arises under this Agreement which is not resolved by good faith
negotiation, then such Dispute, upon 30 days' prior written notice from one
party to the other of its intent to arbitrate (an "Arbitration Notice"), shall
be submitted to and settled exclusively by final and binding arbitration;
provided, however, that nothing contained herein shall preclude any party hereto
from seeking or obtaining from a court of competent jurisdiction (a) injunctive
relief, or (b) equitable or other judicial relief to specifically enforce the
provisions hereof or to preserve the status quo pending resolution of disputes
hereunder. The parties specifically acknowledge and agree that the provisions of
Section 1 of this Agreement shall be specifically enforced by a court of
competent jurisdiction and that any claim for damages under this Agreement,
although arising out of the same facts and circumstances, shall nonetheless be
resolved through arbitration hereunder. Such arbitration shall be conducted in
accordance with Michigan law and the Commercial Arbitration Rules of the
American Arbitration Association existing at the time of submission by one
arbitrator. The Members shall attempt to agree upon an arbitrator. If one cannot
be agreed upon, the Member which did not give the Arbitration Notice may request
the Chief Judge of the United States District Court for the Eastern District of
Michigan or the Chief Judge of the United States District Court for the Western
District of Michigan to appoint an arbitrator.
- 8 -
<PAGE>
If an arbitrator so selected becomes unable to serve, his or her successor shall
be similarly selected or appointed. All arbitration hearings shall be conducted
on an expedited schedule, and all proceedings shall be confidential. Either
party may at its expense make a stenographic record thereof. The arbitrator
shall apportion all costs and expenses of arbitration (including the
arbitrator's fees and expenses, the reasonable fees and expenses of experts, and
the fees and expenses of counsel to the parties), between the prevailing and
non-prevailing party as the arbitrator deems fair and reasonable. Any
arbitration award shall be binding and enforceable against the parties hereto
and judgment may be entered thereon in any court of competent jurisdiction. The
arbitration will take place at Southfield, Michigan or Grand Rapids, Michigan at
the election of the Member not giving the Arbitration Notice.
16. Counterparts. This Agreement may be executed with counterpart signature
pages or in separate counterparts, each of which shall for all purposes be
deemed to be an original and all of which taken together shall constitute one
and the same Agreement.
17. Recitals. The Recitals to this Agreement are incorporated herein as a
part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Noncompetition
Agreement to be executed by their duly authorized officers as of the date first
written above.
LEAR CORPORATION
_____________________________ By: /s/ J. F. McCarthy
Its:____________________________
DONNELLY CORPORATION
______________________________ By: /s/Dwane Baumgardner
Dwane Baumgardner
Its: Chief Executive Officer and President
- 9 -
<PAGE>
Exhibit A
Lear shall be permitted to:
1) Continue the design, manufacture and sale of:
(a) headliners for current models of the Ford Taurus and Windstar,
provided it subcontracts the substrate to the Company.
(b) the sunshade and MGB convertible hardtop currently manufactured
at its facility in Colne, England.
2) Design, manufacture and sell to Persons other than the Company,
interior pillar covers which are not integrated with or attached to
headliners.
3) Continue its 40% ownership of [Impassa], its joint venture in Mexico,
provided (a) Lear will take whatever action permitted by it under its
joint venture agreement to restrict Impassa from selling Products in
the Territory, and (b) the Company shall have an option to purchase
Lear's interest in Impassa at any time during the five years following
the date of this Agreement at a price of Fair Market Value (as defined
in the Operating Agreement), payable in cash.
4) Design, manufacture and sell to Persons other than the Company those
electronics described on a Schedule those electronics which Lear has
developed or to which Lear has rights and which are mutually agreed to
by Donnelly and Lear within 30 days after the date hereof, even if
such electronics constitute or are part of the Products.
<PAGE>
EXHIBIT H
1. Projected aggregate EBITDA for calendar 1998 and 1999 for the
Transferred Lear Assets and related business operations contributed by
Lear is $24,131,000.
2. Projected aggregate EBITDA for calendar 1998 and 1999 for the
Transferred Donnelly Assets and related business operations
contributed by Donnelly is $15,903,000.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
December 27, 1997, Donnelly Corporation financial statements and is
qualified in its entirety by reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> DEC-27-1997
<CASH> 5,783
<SECURITIES> 0
<RECEIVABLES> 69,647
<ALLOWANCES> 949
<INVENTORY> 43,226
<CURRENT-ASSETS> 151,327
<PP&E> 290,028
<DEPRECIATION> 124,699
<TOTAL-ASSETS> 358,590
<CURRENT-LIABILITIES> 102,041
<BONDS> 128,343
0
531
<COMMON> 998
<OTHER-SE> 96,079
<TOTAL-LIABILITY-AND-EQUITY> 358,590
<SALES> 359,976
<TOTAL-REVENUES> 359,976
<CGS> 299,189
<TOTAL-COSTS> 299,189
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,694
<INCOME-PRETAX> 9,909
<INCOME-TAX> 3,748
<INCOME-CONTINUING> 6,161
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,155
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.61
</TABLE>
