SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarter ended October 2, 1999 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 Identification No.)
incorporation or organization)
49 West Third Street, Holland, Michigan 49423-2813
(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 ___
5,984,721 shares of Class A Common Stock and 4,158,502 shares of Class B Common
Stock were outstanding as of October 29, 1999.
<PAGE>
DONNELLY CORPORATION
INDEX
Page
Numbering
---------
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Combined Consolidated Balance Sheets
- October 2, 1999 and July 3, 1999 3
Condensed Combined Consolidated Statements of Income
- Three months ended October 2, 1999 and September 26, 1998 4
Condensed Combined Consolidated Statements of Cash Flows
- Three months ended October 2, 1999 and September 26, 1998 5
Notes to Condensed Combined Consolidated Financial Statements 6-10
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 11-19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
PART II. OTHER INFORMATION
Item 1. Legal Proceeding 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS
<TABLE>
October 2, July 3,
In thousands 1999 1999
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,568 $ 3,413
Accounts receivable, less allowance of $1,705 and $1,665 92,400 73,925
Inventories 48,467 42,722
Prepaid expenses and other current assets 31,059 25,855
---------------- ----------------
Total current assets 178,494 145,915
Property, plant and equipment 336,037 320,994
Less accumulated depreciation 139,438 132,138
---------------- ----------------
Net property, plant and equipment 196,599 188,856
Investments in and advances to affiliates 23,525 28,588
Other assets 32,103 31,742
---------------- ----------------
Total assets $ 430,721 $ 395,101
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 90,895 $ 97,372
Other current liabilities 62,444 41,214
---------------- ----------------
Total current liabilities 153,339 138,586
Long-term debt, less current maturities 104,060 92,166
Deferred income taxes and other liabilities 53,240 54,657
---------------- ----------------
Total liabilities 310,639 285,409
---------------- ----------------
Minority interest 1,279 1,361
Preferred stock 531 531
Common stock 1,018 1,017
Other shareholders' equity 117,254 106,783
---------------- ----------------
Total shareholders' equity 118,803 108,331
---------------- ----------------
Total liabilities and shareholders' equity $ 430,721 $ 395,101
================ ================
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
Three Months Ended
-----------------------------------
October 2, September 26,
In thousands except share data 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 208,917 $ 189,603
Cost of sales 179,445 162,842
-------------- ------------
Gross profit 29,472 26,761
Operating expenses:
Selling, general and administrative 18,828 18,588
Research and development 7,820 9,285
-------------- ------------
Total operating expenses 26,648 27,873
-------------- ------------
Operating income (loss) 2,824 (1,112)
-------------- ------------
Non-operating (income) expenses:
Interest expense 1,433 2,010
Interest income (314) (171)
Royalty income (101) (107)
Gain on sale of equity investment (14,072) -
Other (income) expense, net 47 (172)
-------------- ------------
Total non-operating (income) expenses (13,007) 1,560
-------------- ------------
Income (loss) before taxes on income 15,831 (2,672)
Taxes on income (credit) 5,900 (1,040)
-------------- ------------
Income (loss) before minority interest and
equity earnings 9,931 (1,632)
Minority interest in net loss of subsidiaries 575 233
Equity in income (loss) of affiliated companies 427 (591)
-------------- ------------
Income (loss) before cumulative effect of
change in accounting principle 10,933 (1,990)
Cumulative effect of change in accounting principle (1,010) -
-------------- ------------
Net income (loss) $ 9,923 $ (1,990)
============== ============
Per share of common stock:
Basic EPS
Income (loss) before cumulative effect of
change in accounting principle $ 1.08 $ (0.20)
Cumulative effect of change in accounting principle (0.10) -
-------------- ------------
Net income (loss) $ 0.98 $ (0.20)
============== ============
Diluted EPS
Income (loss) before cumulative effect of
change in accounting principle $ 1.07 $ (0.20)
Cumulative effect of change in accounting principle (0.10) -
-------------- ------------
Net income (loss) $ 0.97 $ (0.20)
============== ============
Cash dividends declared $ 0.10 $ 0.10
Average common shares outstanding 10,135,059 10,078,032
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Three Months Ended
--------------------------------------
October 2, September 26,
In thousands 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 9,923 $ (1,990)
Adjustments to reconcile net income (loss) to net cash from
(for) operating activities:
Depreciation and amortization 6,601 6,321
Loss on sale of property and equipment (10) (3)
Gain on sale of equity investment (14,072) -
Deferred pension cost and postretirement benefits 1,513 1,481
Deferred income taxes (1,248) (278)
Minority interest loss (920) (469)
Equity in losses of affiliated companies (427) 591
Cumulative effect of change in accounting principle 1,010 -
Changes in operating assets and liabilities:
Repayment of accounts receivable (10,522) (194)
Accounts receivable (6,917) (3,990)
Inventories (5,299) (2,276)
Prepaid expenses and other current assets (9,060) (2,550)
Accounts payable and other current liabilities 12,787 6,108
Other (1,314) 461
---------------- ------------
Net cash from (for) operating activities (17,955) 3,212
================ ============
INVESTING ACTIVITIES
Capital expenditures (10,476) (12,903)
Proceeds from sale of property and equipment 26 369
Investments in and advances to equity affiliates (3,631) (1,824)
Proceeds from sale of equity investment 24,227 -
Other 96 (253)
---------------- ------------
Net cash from (for) investing activities 10,242 (14,611)
================ ============
FINANCING ACTIVITIES
Net proceeds from long-term debt 11,470 10,761
Common stock issuance 368 153
Dividends paid (1,023) (1,018)
---------------- ------------
Net cash from financing activities 10,815 9,896
================ ============
Effect of foreign exchange rate changes on cash 53 69
---------------- ------------
Increase (decrease) in cash and cash equivalents 3,155 (1,434)
Cash and cash equivalents, beginning of period 3,413 5,628
---------------- ------------
Cash and cash equivalents, end of period $ 6,568 $ 4,194
================ ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
DONNELLY CORPORATION
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
October 2, 1999
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 three months ended October 2, 1999,
should not be considered indicative of the results that may be expected for the
period ending December 31, 1999. The combined consolidated balance sheet at July
3, 1999, 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 July 3, 1999.
Effective July 4, 1999, the Company changed the date for the end of its fiscal
year from the Saturday nearest June 30 to December 31. For the transition period
from July 4, 1999 to December 31, 1999, the Company's fiscal quarter ended on
October 2. Both the quarters ended October 2, 1999, and September 26, 1998,
included 13 weeks. All year and quarter references relate to the Company's
fiscal year and fiscal quarters, unless otherwise stated.
NOTE B --- INVENTORIES
<TABLE>
Inventories consist of:
(In thousands) October 2, July 3,
1999 1999
---------- -----------
<S> <C> <C>
Finished products and work in process $ 16,920 $ 14,416
Raw materials 31,547 28,306
---------- -----------
$ 48,467 $ 42,722
========== ===========
</TABLE>
6
<PAGE>
NOTE C --- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share for each period reported:
<TABLE>
Three Months Ended
------------------------------
October 2, September 26,
In thousands, except per share data 1999 1998
- ---------------------------------------------------- ----------- ----------
<S> <C> <C>
Income (loss) before cumulative
effect of change in accounting principle $ 10,933 $ (1,990)
Less: Preferred stock dividends (10) (10)
----------- ----------
Income (loss) from continuing operations
available to common shareholders $ 10,923 $ (2,000)
=========== ==========
Weighted-average shares 10,135 10,078
Plus: Effect of dilutive stock options 43 -
----------- ----------
Adjusted weighted-average shares 10,178 10,078
=========== ==========
Basic EPS
Income (loss) before cumulative effect
of change in accounting principle $ 1.08 $ (0.20)
Cumulative effect of change in accounting
principle (0.10) -
----------- ----------
Net income (loss) $ 0.98 $ (0.20)
=========== ==========
Diluted EPS
Income (loss) before cumulative effect
of change in accounting principle $ 1.07 $ (0.20)
Cumulative effect of change in accounting
principle (0.10) -
----------- ----------
Net income (loss) $ 0.97 $ (0.20)
=========== ==========
</TABLE>
NOTE D---COMPREHENSIVE INCOME
Comprehensive income includes net income and all changes to shareholders'
equity, except those due to investments by owners and distributions to owners.
7
<PAGE>
Comprehensive income consists of the following (in thousands):
<TABLE>
Three Months Ended
--------------------------------
October 2, September 26,
1999 1998
------------ ------------
<S> <C> <C>
Net income (loss) $ 9,923 $ (1,990)
Other comprehensive income:
Foreign currency translation and
transaction adjustments 1,203 1,734
----------- ---------
Comprehensive income (loss) $ 11,126 $ (256)
=========== =========
</TABLE>
During the three-month periods ended October 2, 1999 and September 26, 1998,
translation and transaction adjustments of $1.2 million and $1.7 million,
respectively, were recorded directly in a component of shareholder's equity in
the accompanying condensed combined consolidated balance sheets. These resulted
from changes in the foreign currency translation adjustments of the Company's
net investments in its foreign subsidiaries, as well as foreign currency
denominated long-term advances to affiliates caused by fluctuations in exchange
rates. Total accumulated other comprehensive income totaled $(9.0) million and $
(6.3) million at October 2, 1999 and September 26, 1998, respectively.
NOTE E---SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
Three Months Ended
---------------------------------
(In thousands) October 2, September 26,
1999 1998
------------- -------------
<S> <C> <C>
Cash paid during the period for:
Interest $ 865 $ 1,247
Income taxes 1,452 21
Non-cash financing and investing activities:
Non-cash assets received, net of
liabilities assumed, as part
of the sale of the 50% interest in
Lear Donnelly Overhead Systems, LLC
(see Note F) $ 4,133 $ --
</TABLE>
NOTE F---INVESTMENTS IN AND ADVANCES TO AFFILIATES
On September 14, 1999, the Company sold its 50% interest in Lear Donnelly
Overhead Systems, LLC ("Lear Donnelly") to Lear Corporation ("Lear), its partner
in the joint venture, resulting in a one-time pretax gain of $14.1 million, or
$0.82 per share after tax. As consideration for its interest in Lear Donnelly,
the Company received a product line of Lear Donnelly and other net proceeds of
$28.4 million, which consisted of $24.2 million in cash as well as certain
assets, net of liabilities assumed. The value of the product line transferred to
the Company and other issues relating to the sale of the joint venture remain in
negotiation or arbitration for determination of final valuation and ownership.
Management recorded an estimate at the time of the sale for the expected outcome
of these negotiations based on the best information available. The final
determination may vary from the estimates established by management.
8
<PAGE>
Lear Donnelly operated by selling its products to Lear and the Company, which in
turn sold them to the final customers. Due to the transfer to Lear of the
Company's interior lighting and trim sales contracts included in the joint
venture, future annual net sales are expected to be reduced by approximately $65
to $70 million per year. As a result of the transaction, the financial results
of Lear Donnelly are no longer included in the Company's financial statements
after September, 1999. Since the joint venture operated at approximately
break-even since its formation, this is not expected to have a material impact
on the Company's future results of operations or financial position. However,
gross profit and operating margins as a percent of sales for future periods will
be favorably impacted by the sale.
NOTE G---NATURE OF OPERATIONS
The Company is an international supplier of automotive parts and component
systems through manufacturing operations and various joint ventures in North and
South America, Europe and Asia. The Company primarily supplies automotive
customers around the world with rear view mirror systems, modular window systems
and handle products. The Company's non-automotive products represent less than
4% of total net sales for each of the last three years.
The Company is primarily managed based on geographic segments and the product
markets they serve. The Company has two reportable segments: North American
Automotive Operations ("NAAO") and European Automotive Operations ("EAO"). The
operating segments are managed separately as they each represent a strategic
operational component that offers the Company's product lines to customers in
different geographical markets. The accounting polices of the reportable
operating segments are the same as those described in the summary of significant
accounting policies described in Note 1 - Summary of Significant Accounting
Policies, in the Company's 1999 Annual Report. Revenues are attributed to
segments based on the location of where the sales originate. The Company
evaluates performance based on segment profit, which is defined as earnings
before interest, taxes, depreciation and amortization, excluding significant
special gains, losses and restructuring charges. Due to the Company's corporate
headquarters being located in the United States, certain estimates are made for
allocations t NAAO of centralized corporate costs incurred in support of NAAO.
Centralized European overhead costs are included in EAO. The Company accounts
for intersegment sales and transfers at current market prices and intersegment
services at cost.
A summary of the Company's operations by its business segments follows:
<TABLE>
Other Intersegment Total
In thousands NAAO EAO Segments* Eliminations Segments
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Quarter ended October 2, 1999:
Revenues................................ $120,413 $ 62,599 $ 27,132 $(1,227) $208,917
Segment profit.......................... 10,874 1,505 1,896 -- 14,275
Quarter ended September 26, 1998:
Revenues................................ $107,886 $ 61,123 $ 21,304 $(710) $189,603
Segment profit.......................... 10,062 705 (121) -- 10,646
</TABLE>
* Other segments category includes the Company's automotive joint ventures and
North American non-automotive businesses.
9
<PAGE>
Reconciliations of the totals reported for the operating segments' profit to
consolidated income before income taxes in the combined consolidated financial
statements is shown below:
<TABLE>
October 2, September 26,
In thousands Quarter Ended 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Segment profit from reportable segments....................... $ 12,379 $ 10,767
Segment profit from other segments............................ 1,896 (121)
Interest, net................................................. (1,119) (1,839)
Depreciation and amortization................................. (6,601) (6,321)
Gain on sale of equity investments............................ 14,072 --
Corporate and other expenses*................................. (4,796) (5,158)
-------------------------------------
Income before taxes on income $ 15,831 $ (2,672)
=====================================
</TABLE>
* Corporate and other expenses category includes centralized corporate functions
including those for advanced research, corporate administration including
information technology, human resources and finance and other costs associated
with corporate development and financing initiatives.
Additional disclosures regarding the Company's products and services, geographic
areas, major customers and total assets are included in Note 3 - Nature of
Operations, in the Company's 1999 Annual Report.
NOTE H---CHANGE IN ACCOUNTING PRINCIPLE
Effective July 4, 1999, the Company adopted Statement of Position ("SOP") 98-5,
"Reporting on Costs of Start-up Activities." SOP 98-5 requires companies to
expense the costs of start-up activities and organization costs as incurred. A
one-time charge of $1.0 million, net of tax, was taken against net income as a
change in accounting principle for the write-off of previously capitalized
start-up and organization costs.
10
<PAGE>
ITEM 2. DONNELLY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FIRST QUARTER REPORT
FOR THE THREE MONTHS ENDED OCTOBER 2, 1999
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The terms "believe,"
"anticipate," "intend," "goal," "expect," and similar expressions may identify
forward-looking statements. 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, and that 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, (iv) market development
of specific products of the Company, including electrochromic mirrors, (v)
whether the Company successfully implements its European restructuring, (vi)
effects of the year 2000 on the Company's business and (vii) other risks and
uncertainties. The Company does not intend to update these forward-looking
statements.
OVERVIEW
Effective July 4, 1999, the Company changed the date for the end of its fiscal
year from the Saturday nearest June 30 to December 31. For the transition period
from July 4, 1999 to December 31, 1999, the Company's fiscal quarter ended on
October 2. For the quarters ended October 2, 1999 and September 26, 1998, the
Company's combined consolidated financial statements include Donnelly Hohe's
financial statements as of and for the periods ended August 31, 1999 and August
31, 1998, respectively. All year and quarter references relate to the Company's
fiscal year and fiscal quarters, unless otherwise stated.
The Company's net sales and net income may be subject to significant
fluctuations attributable primarily to production schedules of the Company's
major automotive customers. In addition, the Company has benefited from strong
product content on light trucks, including sport utility vehicles, as compared
to automobiles. These factors cause results to fluctuate from period to period
and year to year. The comparability of the Company's results on a period to
period basis is also affected by the Company's formation and disposition of
subsidiaries, joint ventures and alliances, and acquisitions and investments in
new product lines.
The Company is primarily managed based on geographic segments and the product
markets they serve. The Company has two reportable segments: North American
Automotive Operations ("NAAO") and European Automotive Operations ("EAO"). The
operating segments are managed separately as they each represent a strategic
operational component that offers the Company's product lines to customers in
different geographical markets.
11
<PAGE>
Mergers, Joint Ventures and Sale of Investments
In the second quarter of fiscal 1999, the Company merged its wholly owned
subsidiary, Donnelly Optics Corporation ("Optics") into a wholly owned
subsidiary of Applied Image Group, Inc. ("AIG"), a New York Corporation. As a
result of this transaction, the financial results of Optics, a non-reportable
segment, are no longer included in the Company's financial statements after
December 1, 1998.
In the second and third quarters of fiscal 1999, the Company sold its entire
interest in VISION Group plc ("VISION Group"). The Company's equity in the
financial results of VISION Group is no longer included in the Company's
financial statements after November 1999.
In the fourth quarter of fiscal 1999, the Company formed Schott Donnelly, a
50-50 joint venture with Schott North America Manufacturing, Inc., a wholly
owned subsidiary of Schott Corporation ("Schott"). In accordance with the LLC
operating agreement, losses generated by the joint venture will be allocated to
Schott until Schott has contributed $9.5 million.
On September 14, 1999, the Company sold its 50% interest in Lear Donnelly
Overhead Systems, LLC ("Lear Donnelly") to Lear Corporation ("Lear"), its
partner in the joint venture, resulting in a one-time pretax gain of $14.1
million, or $0.82 per share after tax. As consideration for its interest in Lear
Donnelly, the Company received a product line of Lear Donnelly and other net
proceeds of $28.4 million, which consisted of $24.2 million in cash as well as
certain assets, net of liabilities assumed. The total proceeds of the sale were
offset by the book value of the Company's investment in Lear-Donnelly at the
time of the sale of $9.5 million, the direct selling costs and other related
liabilities associated with the sale. The value of the product line transferred
to the Company and other issues relating to the sale of the joint venture remain
in negotiation or arbitration for determination of final valuation and
ownership. Management recorded an estimate at the time of the sale for the
expected outcome of these negotiations based on the best information available.
The final determination may vary from the estimates established by management.
Lear Donnelly operated by selling its products to Lear and the Company, which in
turn sold them to the final customers. In addition, due to the transfer of the
Company's interior lighting and trim sales contracts included in the joint
venture to Lear, future annual net sales will be reduced by approximately $65 to
$70 million per year.
RESULTS OF OPERATIONS
North American Automotive Operations
Net sales for NAAO increased by approximately 11.6% in the quarter ended October
2, 1999, compared to the first quarter of fiscal 1999. The increase was
primarily due to North America car and light truck build which was higher by
approximately 15% in the quarter as compared to the same period last year.
Overall sales in NAAO grew at a rate lower than industry vehicle build primarily
due to lower sales of handle products in the quarter compared to last year.
Sales for handle products are expected to remain lower than previous year
levels. Where the Company is experiencing strong growth in complete outside
mirrors, sales of these products at a rate slightly lower than industry vehicle
build due to change overs and timing of new program launches.
NAAO gross profit was higher for the quarter compared to the previous year
primarily due to the increased sales levels. However, gross profit margins were
slightly lower as a percent of net sales due to the continued rapid rate of
revenue growth in modular window net sales, relative to the net sales growth
12
<PAGE>
of other products, such as mirrors and door handles, which have higher gross
profit margins, as well as continued pricing pressures. The Company has
experienced a continued change in gross profit margin in recent years based on
the sales growth or change in mix between lower-margin and that of higher-margin
products. It is expected that future changes in revenue will be more balanced
between higher- and lower-margin products.
The Company's North American operating margins were slightly lower in the period
compared to the same period last year. Higher sales volumes and lower selling
and administrative costs as a percent to net sales were offset by an unfavorable
mix of lower margin products. During 1999, NAAO implemented a cost reduction
program to focus functional groups on best-in-class performance. This program
has allowed NAAO to leverage these expenses with increases in sales.
European Automotive Operations
Net sales for the Company's European operations, increased slightly in the first
quarter compared to the same period last year. However, the overall sales
increase for EAO was reduced by the weakening of the dollar relative to the
German mark and Irish punt for the comparable periods. If exchange rates in the
first quarter were consistent with the same period last year, EAO net sales
would have increased by 7.5%. The increase in sales was primarily due to strong
demand for electrochromic mirrors compared to last year supported by product
content on strong selling vehicles. European car build, while relatively flat
for the period, remained strong.
EAO gross profit margins improved slightly for the period compared to the first
quarter of fiscal 1999. EAO experienced strong improvements in gross profit
margins in both operating facilities in Ireland due to operational improvements
and stronger sales volumes while margins were slightly lower in Germany due to
costs associated with the EAO turnaround plan. Overall sales price pressures in
Europe were offset by improvements in purchase material costs, higher volumes
and general operations productivity improvements.
In February 1999, the Company announced a European turnaround plan. The
objective of the restructuring plan is to improve the overall operating
efficiency and customer service of the European organization by 1) re-organizing
certain manufacturing and customer service functions into a customer focused
structure, 2) consolidating two German manufacturing facilities, 3) implementing
throughout Europe the Donnelly Production System, the Company's approach to lean
manufacturing processes, 4) re-negotiating an existing labor contract and 5)
re-aligning sales and engineering functions throughout Europe.
In July 1999, the Company completed the re-negotiation of its labor contract in
Germany allowing for greater work flexibility rules, broader productivity
guidelines and a delay in certain wage increases until certain income
profitability targets are accomplished. For the quarter ended October 2, 1999,
cash payments of $0.6 million were applied against the Company's restructuring
reserves for the payment of severence and termination benefits. The Company has
substantively completed the re-alignment of the sales functions throughout
Europe. It is expected that the majority of the remaining actions associated
with the plan, most notably the consolidation of the German manufacturing
facilities and re-organization of manufacturing functions, will be completed by
the end of calendar year 2000. The total remaining restructuring reserve at
October 2, 1999 was $9.7 million, of which $8.6 million is classified as
short-term.
EAO operating losses were lower in the period compared to the first quarter of
1999. Contributing to this were the slightly improved gross profit margins and
lower research and development costs.
13
<PAGE>
Company
Net sales were $208.9 million in the quarter ended October 2, 1999, compared to
$189.6 million in the first quarter of fiscal 1999, an increase of approximately
10%. The increase is mainly due to higher sales volume in North America and high
dollar content on strong selling vehicles. Suppliers in the automotive industry
continue to experience significant price demands from their customers. While
these price demands continue to place significant pressure on the Company's
gross profit and operating margins, they did not have a material impact on net
sales for the quarter ended October 2, 1999, or the first fiscal quarter of
1999. The impact of price changes on the Company's gross profit margins is
dependant upon the ability of the Company to offset these decreases by
improvements in purchase material prices, product design changes and overall
operations productivity improvements.
Gross profit margins for each of the quarters ended October 2, 1999 and
September 26, 1998 was 14.1%. The flat gross profit margins are primarily due to
higher sales at the Company's Lear Donnelly joint venture and relatively greater
revenue growth of products with lower profit margins at NAAO. The Lear Donnelly
joint venture unfavorably impacted gross profit margins because certain sales
related to the joint venture were included in the net sales of the Company, but
the gross profit was recorded by Lear Donnelly, which the Company accounts for
under the equity method (see Note F).
Selling, general and administrative expenses were 9.0% and 9.8% of net sales for
the quarters ended October 2, 1999 and September 26, 1998, respectively. This is
primarily as a result of the Company's ability to leverage these expenses on
higher sales volumes in NAAO and the Optics merger.
Research and development expenses were 3.7% and 4.9% of net sales in the
quarters ended October 2, 1999 and September 26, 1998, respectively. These
expenses were lower for the quarter primarily due to the formation of the Schott
Donnelly LLC Smart Glass Solutions ("Schott Donnelly") joint venture, the Optics
merger and Donnelly Electronics, LLC. Research and development expenses for the
respective businesses and technologies contributed by the Company to these
ventures were transferred to the new ventures which are accounted for under the
equity or cost method of accounting. The Company's research and development
expenses were also lower due to the ability of EAO to leverage these costs.
The Company reported operating income of $2.8 million in the quarter ended
October 2, 1999, compared to a loss of $1.1 million in the first quarter of
fiscal 1999. The Company benefited from lower operating losses in Europe, the
Optics merger and the reduction of research and development expenses as a
percent of net sales.
Interest expense was $1.4 million in the quarter ended October 2, 1999, compared
to $2.0 million for the first quarter of fiscal 1999. Interest expense was lower
primarily due to lower average debt and capitalization of certain interest costs
during the quarter ended October 2, 1999, compared to the same period in 1999.
The Company recognized a one-time pretax gain of $14.1 million in the first
quarter associated with the sale of its investment in Lear Donnelly, (See Note
F.)
The Company's tax expense for the three-month period was $5.9 million on a
pretax income of $15.8 million for an effective tax rate of 37.3%, compared to
38.9% in the first quarter of fiscal 1999.
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Minority interest in net loss of subsidiaries increased to $0.6 million for the
quarter ended October 2, 1999, compared to $0.2 million in the first quarter of
fiscal 1999. The increase is due to net losses incurred at the Company's
Malaysian operations.
Equity in earnings (losses) of affiliated companies improved to $0.4 million in
the quarter ended October 2, 1999, compared to ($0.6) million in the first
quarter of fiscal 1999. This is primarily related to the sale of the Company's
interest in VISION Group, which was incurring operating losses in the prior
year, and operational improvements at the Company's joint ventures in China and
at the Lear Donnelly joint venture.
Effective July 4, 1999, the Company adopted Statement of Position ("SOP") 98-5,
"Reporting on Costs of Start-up Activities." SOP 98-5 requires companies to
expense the costs of start-up activities and organization costs as incurred. A
one-time charge of $1.0 million, net of tax, was taken against net income as a
change in accounting principle for the write-off of previously capitalized
start-up and organization costs.
During 1999, the Company continued to focus on implementing plans to improve
financial performance. In September 1998, four members from the Company's senior
management team began extended assignments in Europe to bring greater speed and
effectiveness to the restructuring and turnaround needed in Europe. In the third
quarter of fiscal 1999, this senior management team developed a turnaround plan
to restore the European operations to long-term profitability. The Company's
management has also implemented an effort in North America to re-focus
functional groups on best-in-class performance in terms of operational
effectiveness and cost efficiency. These actions combined with the impact of the
merger of Optics into Applied Image, the sale of the Company's interest in
VISION Group, the formation of Schott Donnelly and productivity improvements
made in North America and Europe are expected to improve the overall operating
performance and financial condition of the Company. The culmination of these
actions, combined with continued strong sales for the Company, has resulted in a
record nine-month period of operations earnings performance from January 1999
through September 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current ratio was 1.2 and 1.1 at October 2, 1999, and July 3,
1999, respectively. Working capital was $25.2 million on October 2, 1999,
compared to $7.3 million on July 3, 1999. Current assets increased more than
current liabilities from July 3, 1999 to October 2, 1999. Most of this increase
in current assets was attributable to a reduction in the level of accounts
receivable sold under the securitization at October 2, 1999 as compared to July
3, 1999.
At October 2, 1999, and July 3, 1999, a $28.1 million and $40.4 million
interest, respectively, had been sold under the Company's accounts receivable
securitization. Proceeds sold under this agreement are generally used to reduce
revolving lines of credit. The sale is reflected as a reduction of accounts
receivable and as an operating cash flow. The agreement expires in December
1999, however is renewable for one-year periods at the option of the Company.
The Company expects to extend the current agreement or replace it on comparable
terms.
Capital expenditures in the quarter ended October 2, 1999 and September 26,
1998, were $10.5 and $12.9 million, respectively. However, in the next twelve to
eighteen months, capital spending is
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expected to increase from these levels to support the continued launch of new
business orders, the implementation of new manufacturing, distribution and
administrative information systems globally and capital expenditures related to
the 1999 European turnaround plan.
The Company's $160 million multi-currency global revolving credit agreement had
borrowings against it of $33.8 million and $22.5 million in the Company's
combined consolidated balance sheets dated October 2, 1999, and July 3, 1999,
respectively. The Company's total long-term borrowing increased by $11.9 million
at October 2, 1999, compared to July 3, 1999, primarily due to seasonality in
the European Automotive Operations and the North American Automotive Operations,
combined with increased borrowing at Varitronix, EC in Malaysia.
The Company has announced significant restructuring plans in 1997 and 1999 to
improve the overall profitability of the Company's European operations. Cash
payments of approximately $9.7 million are expected to be required to support
these plans primarily for the payment of severance and voluntary termination
benefits. The majority of these payments are expected to be completed by the end
of calendar year 2000.
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. In
addition, the sale of the Company's investment in Lear Donnelly had a material
favorable impact on cash flows (see Note F). This transaction was completed on
September 14, 1999 and the related cash proceeds were used to reduce revolving
lines of credit. 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.
The Company's primary foreign investments are in Germany, Ireland, Spain,
France, Mexico, China, Brazil and Malaysia. Except for the Company's subsidiary
in Mexico, whose functional currency is the United States dollar, financial
statements of international companies are translated into United States dollar
equivalents at exchange rates as follows: (1) balance sheet accounts at year-end
rates and (2) income statement accounts at weighted average monthly exchange
rates prevailing during the year. Translation gains and losses are reported as a
separate component of shareholders' equity and are included in accumulated other
comprehensive income. For the subsidiary in Mexico, transaction and translation
gains or losses are reflected in net income for all accounts other than
intercompany balances of a long-term investment nature for which the translation
gains or losses are reported as a separate component of shareholders' equity.
Foreign currency transaction gains and losses included in other incom are not
material.
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.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" amends SFAS Nos. 52 and 107 and
supersedes SFAS Nos. 80, 105 and 119. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize all derivatives in the balance sheet at fair
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value. It also requires that unrealized gains and losses resulting from changes
in fair value be included in income or comprehensive income, depending on
whether the instrument qualifies as a hedge. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. The Company does
not expect the implementation of this new standard to have a material impact on
results of operations or financial position of the Company.
No other recently issued accounting standards are expected to have a material
impact on the Company
Year 2000 Data Conversion
The year 2000 issue is the result of computer programs written using two digits,
rather than four, to define the applicable year. Any of the Company's computers,
computer programs, manufacturing and administration equipment or products that
have date-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. If any of the Company's systems or equipment that
have date-sensitive software use only two digits, system failures or
miscalculations may result causing disruptions of operations, including among
other things, a temporary inability to process transactions or send and receive
electronic data with third parties or engage in similar normal business
activities.
During 1997, the Company formed an ongoing internal review team to address the
year 2000 issue that encompasses operating and administrative areas of the
Company. A team of the Company's global professionals has been engaged in a
process to work with Company personnel to identify and resolve significant year
2000 issues in a timely manner. In addition, executive management regularly
monitors the status of the Company's year 2000 remediation plans. The process
includes an assessment of issues and development of remediation plans, where
necessary, as they relate to internally used software, computer hardware and use
of computer applications in the Company's manufacturing processes and products.
In addition, the Company has engaged in an assessment process with suppliers
regarding the year 2000 issue.
The assessment, remediation and testing process has materially been completed at
the Company's North American, European and joint venture operations for all
facilities, products, embedded systems and information systems. In addition, the
Company has initiated formal communications with its suppliers and large
customers in North America and Europe to determine the extent to which the
Company is vulnerable to third-party failure to remediate their own year 2000
issues. Joint ventures have been analyzed utilizing the same process employed
internally within the Company. Critical suppliers have favorably performed under
interview and audit procedures and in management's assessment have their year
2000 remediation underway in a reasonable manner.
The Company's operations in North America are in the process of both replacing
their existing manufacturing, distribution and administrative applications with
new software which is year 2000 compliant, as well as making their current
legacy systems year 2000 compliant. The decisions to replace these systems were
primarily based on the ongoing and expected future industry requirements and the
inability of the current applications to meet these expectations. The Company
has not accelerated the plans to replace these systems because of the year 2000
issue. A contingency plan has been developed which includes continuing use of
current legacy system manufacturing and distribution software, which has been
remediated and is currently year 2000 compliant. No significant issues have been
identified by management that are expected to interrupt the Company's business
systems, product performance or supply to customers. Total cost of all North
American year 2000 inventory, analysis and testing was less than $0.5 million.
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In Europe, the Company has completed the remediation process for facilities,
embedded systems and information systems. The total cost of the remediation
process was approximately $0.9 million. The Company has utilized both internal
and external resources to reprogram, or replace and test, the software for year
2000 modifications. The Company has substantially completed its year 2000
assessment and remediation. The project costs attributable to software developed
for internal use to meet future industry requirements will be capitalized. Any
remaining year 2000 project cost, anticipated to be less than $1 million, will
be expensed as incurred over the next three months. Year 2000 preparations have
had no material impact other than these costs. The Company has received several
audits of year 2000 compliance from both customers and external auditors at
customer requests. The current status of all such external audits is a current
condition of acceptable year 2000 readiness.
In addition to the fact that the Company has substantially completed its
assessment, remediation and testing efforts, it has also initiated a year 2000
contingency planning process to identify, reduce and manage the risk to our
business and Customers of year 2000 failures on the part of others. The
contingency planning process is intended to identify the most reasonable likely
worst case scenarios and develop contingency plans to address them. While the
individual contingency plans vary by facility, the common recurring theme for a
worst case scenario is failure of local utilities and communications for 1 to 2
days. Contingencies planned by the Company include such key items as adequate
local power generation capability to ensure continuous operation of computers
and shipping, as well as, adequate on-hand finished goods to bridge such a gap
with continuous supply to customers. Contingency plans are complete for all of
the Company's facilities and processes.
Management believes that the Company is devoting the necessary resources to keep
remediated and tested systems year 2000 compliant.
Euro Conversion
Effective January 1, 1999, eleven of fifteen member countries of the European
Union established permanent rates of exchange between the members' national
currency and a new common currency, the "euro." In this first phase, the euro is
available for non-cash transactions in the monetary, capital, foreign exchange
and interbank markets. National currencies will continue to exist as legal
tender and may continue to be used in commercial transactions until the euro
currency is issued in January 2002 and the participating members' national
currency is withdrawn by July 2002. The Company's significant European
operations are all located in member countries participating in this monetary
union.
The Company created an internal, pan-European, cross-functional team, as well as
internal teams at each operation affected by the change to address operational
implementation issues and investigate strategic opportunities due to the
introduction of the euro. The Company has established action plans that are
currently being implemented to address the euro's impact on information systems,
currency exchange risk, taxation, contracts, competition and pricing. The
Company anticipates benefiting from the introduction of the euro through a
reduction of foreign currency exposure and administration costs on transactions
within Europe and increased efficiency in centralized European cash management.
The Company has commenced conversion of it's European operations from national
currency to the euro. The change in functional currency is proceeding as planned
and is expected to be completed in the middle of calendar 2001.
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The Company does not presently expect that the introduction and use of the euro
will materially affect the Company's foreign exchange hedging activities or the
Company's use of derivative instruments. Any costs associated with the
introduction of the euro will be expensed as incurred. The Company does not
believe that the introduction of the euro will have a material impact on the
results of operations or financial position of the Company.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in interest rates and foreign currency
exchange primarily in its cash, debt and foreign currency transactions. The
Company holds derivative instruments, including interest rate swaps and forward
foreign currency contracts. Derivative instruments used by the Company in its
hedging activities are viewed as risk management tools and are not used for
trading or speculative purposes. Analytical techniques are used to manage and
monitor foreign exchange and interest rate ris and include market valuation. The
Company believes it is, to a lesser degree, subject to commodity risk for price
changes that relate to certain manufacturing operations that utilize raw
commodities. The Company manages its exposure to changes in those prices
primarily through its procurement and sales practices. This exposure is not
considered material to the Company.
A discussion of the Company's accounting policies for derivative financial
instruments is included in the 1999 Annual Report, Summary of Significant
Accounting Policies in the Notes to the Combined Consolidated Financial
Statements. Additional information relating to financial instruments and debt is
included in Note 8 - Financial Instruments and Note 6 - Debt and Other Financing
Arrangements, in the Company's 1999 Annual Report.
International operations are primarily based in Europe and, excluding U.S.
export sales, which are principally denominated in U.S. dollars, constitute a
significant portion of the revenues and identifiable assets of the Company. A
predominant portion of these international revenues and identifiable assets are
based in German marks. The Company has significant loans to foreign affiliates
which are denominated in foreign currencies. Foreign currency changes against
the U.S. dollar affect the foreign currency transaction adjustments on these
long-term advances to affiliates and the foreign currency translation adjustment
of the Company's net investment in these affiliates, which impact consolidated
equity of the Company. International operations result in a large volume of
foreign currency commitment and transaction exposures and significant foreign
currency net asset exposures. Since the Company manufactures its products in a
number of locations around the world, it has a cost base that is diversified
over a number of different currencies, as well as the U.S. dollar, which serves
to counterbalance partially its foreign currency transaction risk. Selective
foreign currency commitments and transaction exposures are partially hedged. The
Company does not hedge its exposure to translation gains and losses relating to
foreign currency net asset exposures; however, when possible, it borrows in
local currencies to reduce such exposure. The Company is also exposed to
fluctuations in other currencies including: British pounds, French francs, Irish
punts, Japanese yen, Mexican pesos, Spanish pesetas, Malaysian ringit and
Brazilian reals. The fair value of the foreign currency contracts outstanding
has been immaterial each of the last two years.
The Company's cash position includes amounts denominated in foreign currencies.
The Company manages its worldwide cash requirements considering available funds
among its subsidiaries and the cost effectiveness with which these funds can be
accessed. The repatriation of cash balances from certain of the Company's
affiliates could have adverse tax consequences. However, those balances are
generally available without legal restrictions to fund ordinary business
operations. The Company has and will continue to transfer cash from those
affiliates to the parent and to other international affiliates when it is cost
effective to do so.
The Company manages its interest rate risk in order to balance its exposure
between fixed and variable rates while attempting to minimize interest costs.
Slightly over half of the Company's long-term debt is fixed and an additional
$30 million is effectively fixed through interest rate swaps.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 12, 1998, Metagal Industria E Cornercio Ltda ("Metagal") filed a
complaint against the Company in the U.S. District Court for the Eastern
District of Michigan. The complaint requests a declaratory judgment of
non-infringement and invalidity of two Company patents related to lights
integrated into automotive mirrors. The Company has denied Metagal's allegations
and has filed a counterclaim alleging that the importation and sale by Metagal
of certain automotive rear view mirrors incorporating light is an infringement
of the two patents at issue. The Company seeks an injunction against Metagal as
well as unspecified damages. The Company believes that the litigation will not
have a material adverse effect on the Company's financial condition, results of
operations or liquidity.
On October 6, 1998, the Company filed a complaint against Metagal in the U.S.
District Court for the Western District of Michigan. The lawsuit alleges that
the production and sale by Metagal of certain automotive rear view mirrors
incorporating lights infringes one of the Company's patents. The Company seeks
an injunction against Metagal, as well as unspecified damages. Metagal has
denied infringement and asserts that the Company's patent is invalid. This
lawsuit has recently been transferred to the Eastern District of Michigan, and
consolidated with Metagal's declaratory judgment action described above. The
Company believes that this litigation will not have a material adverse effect on
the Company's financial condition, results of operation or liquidity.
The Company and its subsidiaries are involved in certain other legal actions and
claims incidental to its business, including those arising out of alleged
defects, breach of contracts, product warranties, employment-related matters and
environmental matters. An estimated loss from a legal action or claim is accrued
when events exist that make the loss probable and the loss can be reasonably
estimated. Although the Company maintains accruals for such claims when
warranted, there can be no assurance that such accruals will continue to be
adequate. The Company believes that accruals related to such litigation and
claims are sufficient and that these items will be resolved without material
effect on the Company's financial position, results of operations and liquidity,
individually and in the aggregate.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 10.1 Redemption and Purchase Agreement dated September, 1999, by and
between Lear Corporation, Marlette JV Acquisition Corporation,
Donnelly Corporation and Lear Donnelly Overhead Systems, LLC.
Exhibit 10.2 Amendment dated September, 1999, to the Multicurrency Revolving
Credit Agreement dated as of September 16, 1997, as amended, by
and among Donnelly Corporation, Donnelly Hohe GmbH & Co. KG, the
borrowing subsidiaries party thereto, the banks named therein,
and Bank One, Michigan, as agent for the banks.
Exhibit 27 Financial Data Schedules
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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: November 16, 1999 /s/ J. Dwane Baumgardner
J. Dwane Baumgardner
(Chairman, Chief Executive
Officer, and President)
Date: November 16, 1999 /s/ Scott E. Reed
Scott E. Reed
(Senior Vice President, Chief
Financial Officer)
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EXHIBIT 10.1
REDEMPTION AND PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of September 14th, 1999, by and
between LEAR CORPORATION, a Delaware corporation ("Lear"), MARLETTE JV
ACQUISITION CORPORATION, a Delaware corporation ("Lear Affiliate"), DONNELLY
CORPORATION, a Michigan corporation ("Donnelly"), and LEAR DONNELLY OVERHEAD
SYSTEMS, L.L.C., a Michigan limited liability company (the "Company"). Lear,
Donnelly and the Company are sometimes collectively called the "Parties".
RECITALS:
The Company is engaged in the design, engineering and sale of automobile or
truck interior overhead modular systems and components. Lear and Donnelly each
hold a 50% membership interest in the Company. The Parties desire to first have
the Company redeem part of Donnelly's membership interest in the Company (the
"Donnelly Interest") and then have Lear and Lear Affiliate purchase the
remaining Donnelly Interest, and in connection therewith the parties desire to
enter into various related agreements and amendments and modifications of
certain existing agreements to reflect the termination of Donnelly's interest in
the Company on the terms and conditions hereinafter set forth.
In consideration of the premises and of the mutual covenants and agreements
contained herein, the parties hereby agree as follows:
<PAGE>
ARTICLE I
Partial Redemption and Sale of Donnelly Interest; Closing
1.1 Partial Redemption of the Donnelly Interest. Upon and subject to the
terms and conditions hereof, on the Closing Date the Company will first transfer
to Donnelly (a) all of the Company's rights, title and interest in and to the
land and buildings, structures and fixtures situated on or forming a part of the
property commonly known as 3401 128th Avenue, Holland, Michigan and legally
described on Schedule 1.1(a), including the fixtures listed on Schedule 1.1(b),
the Model Shop and the dedicated equipment therein described on Schedule 1.1(c)
(the "Dedicated Equipment") and (b) those assets of Eurotrim associated with the
manufacture of mirrors described on Schedule 1.1(d), in redemption of 3% of
Donnelly's membership interest in the Company (the "Donnelly Redeemed
Interest"). The said real estate, fixtures, Model Shop, Dedicated Equipment and
Eurotrim assets comprise the Holland Facility (the "Holland Facility"). The
Holland Facility will be transferred to Donnelly free and clear of all Liens and
the Company will pay the real estate transfer tax applicable to such transfer.
1.2 Excluded Assets. Notwithstanding Section 1.1 hereof, the Company's
rights in the following assets (collectively, the "Excluded Assets"), although
they relate to the Holland Facility, are to be retained by the Company and are
not to be sold, conveyed, assigned or transferred to Donnelly: all other assets
located at or used in connection with the operation of the Holland Facility,
including but not limited to, all machinery, equipment (other than the Dedicated
Equipment and the Optical Laboratory Equipment described on Schedule 1.2 which
belongs to Donnelly), tools, furniture and other tangible assets (including the
overhead crane), inventory, contracts and purchase orders.
1.3 Purchase and Sale of Donnelly's Remaining Membership Interest.
Immediately
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following the redemption of the Donnelly Redeemed Interest, Donnelly will sell,
convey and transfer, assign and deliver to Lear or its affiliate and Lear or its
affiliate shall purchase from Donnelly, Donnelly's remaining membership interest
in the Company (the "Remaining Donnelly Interest") free and clear of all Liens.
Prior to Closing, Lear shall determine the relative portion of the Remaining
Donnelly Interest to be purchased by Lear and Lear Affiliate and the purchase
price payable by said purchasers shall be allocated proportionately between Lear
and Lear Affiliate. The purchase price payable by Lear and Lear Affiliate to
Donnelly for the Remaining Donnelly Interest shall be (a) $28,750,000, cash, (b)
plus the difference between $6,250,000 and the value of the Eurotrim assets
associated with the manufacture of mirrors acquired by Donnelly pursuant to
Section 1.1 hereof and described on Schedule 1.1(d) which value shall be
determined by arbitration pursuant to Section 9.15 and settlement of the amount
due with respect to these assets shall be made pursuant to Section 9.16, (c)
plus or minus the outstanding amount of trade account receivables between the
Company and Donnelly as set forth on Schedule 1.3, (d) minus the amount of any
filing fees paid by Lear but payable by Donnelly under Section 9.2, (e) plus or
minus the agreed upon reimbursable tooling owed between Donnelly and the Company
as of the Closing Date as set forth on Schedule 1.3, (f) plus or minus the other
amounts set forth on the Closing Statement and (g) less $3,395,091 and
$1,277,705 to be retained pursuant to Section 4.18(b) and Section 4.18(c),
respectively (the "Purchase Price").
1.4 Closing. (a) Subject to the conditions set forth in this Agreement, the
redemption of the Donnelly Redeemed Interest and the purchase and sale of the
Remaining Donnelly Interest pursuant to this Agreement (the "Closing") shall
take place at the offices of Bodman, Longley & Dahling LLP in Troy, Michigan,
commencing at 10:00 o'clock A.M., local time, on the date hereof, or at such
other time, place and date as shall be mutually agreed on by Lear and Donnelly.
The date
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on which the Closing occurs is herein referred to as the "Closing Date" and the
Closing shall be deemed to be effective as of the Closing Date.
(b) At the Closing, Donnelly shall transfer to the Company the
Donnelly Redeemed Interest, free and clear of all Liens and restrictions
and the Company shall sell, assign, convey, transfer and deliver to
Donnelly, in payment for the redemption of the Donnelly Redeemed Interest,
good, valid and marketable title to the Holland Facility, free and clear of
all Liens by executing and delivering to Donnelly the instruments of
transfer (the "Holland Facility Instruments of Transfer") attached hereto
as Exhibit 1.4(b), and such other deeds, bills of sale, assignments,
opinions, certificates and other instruments and documents as Donnelly
shall require.
(c) At the Closing, Donnelly or Donnelly's assignee shall sell,
assign, convey, transfer and deliver to Lear or its affiliate good, valid
and marketable title to the Remaining Donnelly Interest, free and clear of
all Liens and restrictions by executing and delivering to Lear or its
affiliate the Assignment of Membership Interest attached hereto as Exhibit
1.4(c), and such other instruments and documents as Lear or the Company
shall require.
(d) At the Closing, Lear and Lear Affiliate, shall accept the
assignment of the Remaining Donnelly Interest and shall deliver to Donnelly
(by wire transfer to a bank account designated by Donnelly upon two (2)
business days' prior written notice to Lear) an amount equal to the
Purchase Price.
ARTICLE II
Representations and Warranties of Donnelly
Except as set forth in the attached disclosure schedule (the "Donnelly
Disclosure Schedule"), Donnelly represents and warrants to Lear and the Company
that the following representations and
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warranties are true and correct on the date hereof.
2.1 Organization . Donnelly is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan.
2.2 Authority Relative to Agreement . Donnelly has all requisite corporate
power and authority to execute and deliver this Agreement and the Ancillary
Documents and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement have been, and when executed and
delivered the Ancillary Documents will be, duly and validly authorized by the
Board of Directors of Donnelly, and no other corporate proceedings on the part
of Donnelly are necessary to authorize this Agreement or the Ancillary Documents
or to consummate the transactions contemplated hereby or thereby. This Agreement
has been, and when executed and delivered the Ancillary Documents will be, duly
and validly executed and delivered by Donnelly and constitute valid and binding
agreements of Donnelly, enforceable against Donnelly in accordance with their
respective terms, except for the application of bankruptcy or the similar
insolvency laws and except for the unavailability of equitable remedies .
2.3 Consents and Approvals; No Violation . Neither the execution and
delivery of this Agreement by Donnelly nor the consummation of the transactions
contemplated hereby will (i) conflict with or result in any breach of any
provision of the Articles of Incorporation or Bylaws of Donnelly, (ii) to
Donnelly's knowledge require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority
applicable to Donnelly, except in connection with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iii) assuming
compliance with the HSR Act, violate any order, writ, injunction, decree,
statute, or to Donnelly's knowledge, rule or regulation applicable to Donnelly
or any of its assets, which violation would in the opinion of Donnelly have a
material adverse effect on the
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business, operations or financial condition of Donnelly or impair in any
material respect its ability to consummate the transactions contemplated hereby,
or (iv) result in a violation or breach of, or constitute a default under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, lease, contract, agreement or other instrument or obligation to which
Donnelly is a party or by which it or any of its properties or assets may be
bound.
2.4 Title. Donnelly has, and upon consummation of the Closing (i) the
Company will acquire, good, valid and marketable right, title and interest in
and to the Donnelly Redeemed Interest and (ii) Lear will acquire, good, valid
and marketable right, title and interest in and to the Remaining Donnelly
Interest, free and clear of any and all Liens.
2.5 Broker. Donnelly has not employed any broker or finder nor incurred any
liability for a brokerage fee, commission or finder's fee in connection with the
transactions contemplated by this Agreement. Schedule
2.6 Disclosure. To the knowledge of Donnelly, there is no material fact
known to Donnelly that has not been disclosed to Lear or the Company that has or
could have a Material Adverse Effect.
ARTICLE III
Representations and Warranties of Lear
Except as set forth in the attached disclosure schedule (the"Lear
Disclosure Schedule"), Lear represents and warrants to Donnelly that the
following representations and warranties are true and correct on the date
hereof.
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3.1 Organization. Lear is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Lear Affiliate is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.
3.2 Authority Relative to Agreement . Lear and Lear Affiliate have all
requisite corporate power and authority to execute and deliver this Agreement
and the Ancillary Documents and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement have been, and
when executed and delivered the Ancillary Documents will be, duly and validly
authorized by the Board of Directors of Lear and of Lear Affiliate,
respectively, and no other corporate proceedings on the part of either Lear or
Lear Affiliate are necessary to authorize this Agreement or the Ancillary
Documents or to consummate the transactions contemplated hereby or thereby. This
Agreement has been, and when executed and delivered the Ancillary Documents will
be, duly and validly executed and delivered by Lear, Lear Affiliate and the
Company and constitute valid and binding agreements of Lear, Lear Affiliate and
the Company, enforceable against Lear, Lear Affiliate and the Company in
accordance with their respective terms, except for the application of bankruptcy
of similar insolvency laws and except for the unavailability of equitable
remedies.
3.3 Consents and Approvals; No Violation . Neither the execution and
delivery of this Agreement by Lear nor the consummation of the transactions
contemplated hereby will (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or Bylaws of Lear or Lear
Affiliate, (ii) to Lear's knowledge, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except in connection with the HSR Act, (iii) assuming
compliance with the HSR Act, violate any order, writ, injunction, decree,
statute, or to Lear's knowledge, rule or regulation applicable to Lear or any of
its assets, which violation would in the opinion of Lear have a material adverse
effect on the business,
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operations or financial condition of Lear or impair in any material respect its
ability to consummate the transactions contemplated hereby, or (iv) result in a
violation or breach of, or constitute a default under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license, lease,
contract, agreement or other instrument or obligation to which Lear is a party
or by which it or any of its properties or assets may be bound.
3.4 Title. The Company has, and upon the closing, Donnelly will acquire
good and marketable right, title and interest in and to the Holland Facility,
free and clear of any and all liens and encumbrances.
3.5 Disclosure. To the knowledge of Lear, there is no material fact known
to Lear that has not been disclosed to Donnelly that has or could have a
material adverse effect on the Holland Facility or any of the business or
obligations of the Company undertaken by Donnelly or for which Donnelly is
obligated under this Agreement or the Ancillary Documents..
3.6 Holland Facility. With regard to the Holland Facility:
(a) To the knowledge of Lear and the Company, the equipment, machinery
and other assets to be acquired by Donnelly pursuant to this Agreement, are
in good operating condition and repair (normal wear and tear accepted).
(b) Environmental Matters.
(i) To Lear's and the Company's knowledge the Company holds all
Environmental Permits necessary to conduct its Business as presently
conducted. Lear has received no notice from any governmental authority
with respect to the revocation or amendment of any Environmental
Permit;
(ii) To Lear's and the Company's knowledge there is no civil,
criminal or administrative action, suit, summons, citation, complaint,
claim, notice of violation, demand,
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judgment, order, lien, proceeding or hearing or any study, inquiry,
proceeding or investigation relating to the Business, threatened
against the Company based on, stemming from or related to any
Environmental Permit or any Environmental Law or any Hazardous
Substance.
(iii) To Lear's and the Company's knowledge the Holland Facility
is free of any Hazardous Substances (except those authorized pursuant
to and in accordance with Environmental Permits held by the Company)
and free of all contamination, including but not limited to
groundwater contamination, arising from, relating to, or resulting
from any such Hazardous Substances.
(iv) To Lear's and the Company's knowledge the Company has not
received any written notice or other communication that the Company is
or may be a potentially responsible person or otherwise liable in
connection with any waste disposal site allegedly containing any
Hazardous Substances, or other location used for the treatment,
storage or disposal of any Hazardous Substances manufactured,
generated or used at, or in connection with, or disposed of or
transported from, the Business.
"Environmental Laws" means any currently applicable federal, state, local,
municipal or foreign statute, ordinance or common law, and any rule, regulation,
code, plan, ordinance, order, decree, judgment, permit, grant, franchise,
concession, restriction, agreement, requirement or injunction issued, entered,
promulgated or approved thereunder, relating to the environment, human health or
safety or relating to occupational or environmental matters, including, without
limitation, any that restrict, prohibit, govern, regulate, permit, impose duties
or require any actions with respect to (i) the production, manufacture, use,
sale, storage, treatment, disposal, emission, discharge, dispersal,
dissemination, release, or threatened release of any substance, mixture,
material or product into or upon any environmental medium (including, without
limitation, air, surface water,
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groundwater and land surface or subsurface), or into the workplace, and (ii) the
presence, manufacture, generation, processing, distribution, use, sale,
treatment, recycling, receipt, storage, disposal, transport, arranging for
transportation, treatment or disposal, investigation, cleanup, response, removal
or handling of Hazardous Substances;
"Environmental Permits" means, collectively, permits, consents, licenses,
approvals, registrations, certifications and authorizations required under
Environmental Laws;
"Hazardous Substance" means, any substance that is designated as, is
defined to be, is listed as or has characteristics which are, hazardous or toxic
under any federal, state, local, municipal or foreign statute, ordinance, rule
or regulation, under the common law or under any decision of any court or any
governmental entity with jurisdiction over the Business or the Acquired Assets.
Without limiting the generality of the foregoing, Hazardous Substances shall
include (i) any mixture, compound, material or product that contains a Hazardous
Substance; (ii) petroleum products; (iii) asbestos; and (iv) polychlorinated
biphenyls.
ARTICLE IV
Covenants of the Parties
4.1 Consents; Filings. Lear and Donnelly will use their respective best
efforts to obtain the consents of all Persons and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, each of the parties
will file any Notification and Report Forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice under the HSR Act, will use its best
efforts to obtain an early termination of the applicable waiting period, and
will make any further filings pursuant thereto that may be
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necessary, proper, or advisable. Lear, Donnelly and/or the Company will file, or
cause to be filed, with governmental authorities all such other filings and
submissions under laws and regulations applicable to them, if any, as may be
required of Lear, Donnelly and the Company for the consummation of the
transactions contemplated by this Agreement. The parties will coordinate and
cooperate with one another in exchanging such information and reasonable
assistance as may be requested in connection with all of the foregoing.
4.2 Additional Agreements . Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best efforts at its own
expense to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement. In case at any time after the
Closing any further action is necessary or desirable to carry out the intent and
accomplish the purposes of this Agreement, each of the parties hereto shall take
all such action.
4.3 Notification of Certain Matters . Between the date hereof and the
Closing, each Party will give prompt notice in writing to the other Party of any
notice or other communication from any third person alleging that the consent of
such third person is or may be required in connection with the transactions
contemplated by this Agreement.
4.4 Transition Services Agreement. At the Closing, Donnelly and the Company
shall enter into a Transition Services Agreement (the "Transition Services
Agreement") in substantially the form of Exhibit 4.4 hereto, under which
Donnelly shall continue to provide the Company with the services identified in
the Transition Services Agreement.
4.5 Title Insurance. The Company shall deliver to Donnelly a commitment for
an owner's title insurance policy for the Holland Facility (the "Title
Commitment") bearing a date later than the date hereof issued by a title company
reasonably acceptable to Donnelly (the "Title Company") in
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the amount of $2,300,000 on its standard ALTA form. The Title Commitment shall
show title in the Company in the condition required herein. The Company shall
cause to be issued to Donnelly at Closing, a policy of the required title
insurance pursuant to the Title Commitment.
4.6 Holland Facility. At the Closing and following transfer of the Holland
Facility to Donnelly, Donnelly and the Company shall enter into a Lease of the
Holland Facility in substantially the form of Exhibit 4.6 (a) hereto (the
"Holland Facility Lease"), under which Donnelly shall lease the Holland Facility
until August 1, 2000 at a rental rate of $24,260 per month (which includes real
estate taxes). Real estate taxes will be prorated on a calendar year basis with
taxes presumed to be paid with respect to the calendar year in which they were
billed . Within one year after the Closing Date, the Company shall move the
operations conducted at the Holland Facility to other Lear facilities. Effective
upon hiring in accordance with the agreed upon timetable as set forth below,
Donnelly shall hire all non-management employees at the Holland Facility who
previously worked for Donnelly and shall interview and give preferential hiring
consideration to the other Company employees at the Holland Facility. Attached
hereto as Schedule 4.6(a) is a list of the Holland Facility employees to be
hired by Donnelly on the Closing Date. During the period following the Closing
that the Company continues to operate at the Holland plant, Donnelly agrees to
lease to the Company the persons listed on Schedule 4.6(a) pursuant to the
Holland Facility Leased Worker Agreement attached hereto as Exhibit 4.6(b).
Following the Closing, Donnelly and the Company shall agree on a timetable for
moving employees from the Company payroll to the status of leased employees.
Following the Closing, Donnelly shall be responsible for the employee severance
costs associated with the employees listed on Schedule 4.6(a). The Company shall
be responsible for severance costs for all other employees at the Holland
Facility.
4.7 Eurotrim. Lear and Donnelly shall cause the Company to use its
reasonable
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commercial efforts to close down the Eurotrim operation. The Company shall pay
any costs of the Eurotrim close down, including employee severance costs, which
costs shall include the severance costs of the employees listed on Schedule 4.7
hired by Donnelly. At the Closing, Donnelly and the Company shall enter into an
Agreement in substantially the form of Exhibit 4.7(a) hereto (the "Eurotrim
Agreement") under which Donnelly shall supply JCI-Becker with all mirrors and
incorporated electronics necessary for the existing project and the Company or
Eurotrim shall provide the Console (which include the consoles, map light and
lenses) to JCI-Becker for that project. In addition, Donnelly and the Company
will enter into an agreement in substantially the form attached as Exhibit
4.7(b) hereto (the "Eurotrim Leased Worker Agreement") under which Donnelly will
provide leased workers for use in manufacturing the Console at the Eurotrim
facility. Donnelly shall have no obligation to pay the Company or Lear for any
profit earned on mirrors since the date mirror production was moved out of the
Eurotrim facility or for the build of Eurotrim inventory. At Closing, (a) Lear
shall pay the full amount due Donnelly under the Eurotrim Leased Worker
Agreement and (b) Donnelly shall pay Lear the value of all inventory it acquired
when it removed the mirror production from the Eurotrim facility. Such amounts
shall be included in the Closing Statement. Accounts payable relating to
Eurotrim mirrors remain the obligation of Eurotrim and the Company.
4.8 New Technology Agreement. At the Closing, Donnelly and the Company
shall enter into a technology license agreement (the "New Technology License
Agreement"), in substantially the form of Exhibit 4.8 hereto, under which
Donnelly shall license and/or transfer certain patent, technology and
intellectual property rights to the Company. At the Closing, the Donnelly
Technology License Agreement dated November 1, 1997 shall be terminated.
4.9 Grand Haven Facility. Donnelly shall continue to manufacture Products
on behalf of
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the Company at Donnelly's Grand Haven Facility (the "Grand Haven Facility")
until August 1, 2000 and will sell such Products to the Company at the
percentage of the invoice price to the customer shown on Schedule 4.9(b) for
such Products. In the event Donnelly fails to build sufficient inventory for the
two Products identified on Schedule 4.9(b) as Chrysler BR/BE Ram Pickup O/H Con
Prem w/o Alarm and O/H Con Prem with Alarm equal to three (3) weeks average
shipments by December 1, 1999 and equal to four (4) weeks average shipments by
December 23, 1999 (the "Bank Inventory"), then the percentage for these two
Products after that date will decrease from 90.8% to 86.7%. Donnelly will ship
the Products constituting the Bank Inventory to the Company as it is produced
and the Company will pay for each such shipment of Product within thirty (30)
days after shipment. The Company shall have all sales, collection and program
management responsibilities with respect to such Products after the Closing
Date. During the period that Donnelly manufactures Products for the Company at
the Grand Haven Facility, Donnelly agrees to maintain normal operating inventory
sufficient to satisfy customer needs. At the Closing, Donnelly shall assign to
the Company all customer purchase orders for such Products pursuant to the
Termination and Assignment Agreement (as defined in Section 4.12). Such
assignment shall not include accounts receivable arising for Products
manufactured at the Grand Haven Facility prior to the Closing Date and billed to
the customer by Donnelly. Donnelly shall have collection responsibility for such
prior billings.
On or before August 1, 2000, the Company shall, at its expense, remove the
Company-owned assembly equipment located at the Grand Haven Facility (which
equipment is listed on Schedule 4.9(a)) to another Lear facility and continue
the manufacturing operation.
4.10 Non-Compete Agreements. At the Closing, the Donnelly Noncompetition
and Non- Solicitation Agreement dated November 1, 1997 shall be amended in
substantially the form of
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Exhibit 4.10 hereto (the "Amended Donnelly Non-Compete Agreement"). At the
Closing, the Lear Noncompetition and Nonsolicitation Agreement dated November 1,
1997 shall be terminated.
4.11 License Agreements. Donnelly and Prince Corporation are parties to a
Limited License Agreement dated March 9, 1998 (the "Prince License"). Donnelly
and Becker Group Europe GmbH are parties to a License Agreement dated February
3, 1998 (the "Happich License"). The Company presently manufactures certain
Products under the Prince License and the Happich License. If consents are not
obtained to assignments of the Prince License or the Happich License, Donnelly
will ship the Products constituting the Bank Inventory to the Company as it is
produced and the Company will pay for each such shipment of Product within
thirty (30) days after shipment. Donnelly shall retain the customer purchase
order for any product licensed under a non-assigned license and shall
subcontract the manufacturing rights to the Company to enable the Company to
continue in perpetuity to manufacture and sell, under the Prince License and the
Happich License, existing Products and Products identified on Schedule 4.11
which have been sold, but are not yet in production. Donnelly will pay the
Company for Products within seven (7) days of Donnelly's receipt of payment from
the customer for those Products. Donnelly shall give the Company advance notice
before incurring any costs in connection therewith and the Company will
reimburse Donnelly for all agreed upon costs so incurred. Donnelly hereby
indemnifies the Company and agrees to hold it harmless from any claim involving
an alleged violation of the Prince License or the Happich License, but only with
respect to existing Products and those Products identified on Schedule 4.11
which have been sold but are not yet in production, Donnelly shall not knowingly
take or omit to take any action under which the Prince License or the Happich
License would lapse or become invalid without the Company's prior written
consent.
4.12 Termination and Assignment Agreement. At the Closing, Donnelly and the
Company
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shall enter into a Termination and Assignment Agreement (the "Termination and
Assignment Agreement") in the form attached as Exhibit 4.12, whereunder
Donnelly's rights and obligations under the Purchase and Supply Agreement dated
November 1, 1997 would be terminated and Donnelly would assign to the Company
all purchase orders and contracts in the name of Donnelly or its Affiliates
relating to the Business of the Company, except the purchase order from Volvo or
JCI-Becker to Donnelly Mirrors Limited, which will be assigned only with respect
to the Console and only after approval from JCI-Becker or Volvo and except
purchase orders described in Section 4.11. If an assignment is not practical
because of customer requirements or patent licenses, Donnelly shall subcontract
purchase orders to the Company under a pass through agreement whereunder the
Company will pay Donnelly for all reasonable costs incurred and indemnify
Donnelly from all claims or obligations arising from the contract.
4.13 Aeroplex. At the Closing, Donnelly and the Company shall enter into an
agreement (the "Aeroplex Agreement") in substantially the form of Exhibit 4.13
hereto.
4.14 Mercedes-Benz Platform. At the Closing, Donnelly and the Company shall
enter into an agreement (the "Mercedes-Benz Platform Agreement") in
substantially the form of Exhibit 4.14 hereto.
4.15 General Assignment by Donnelly. At the Closing, Donnelly shall execute
and deliver an agreement of transfer and assignment (the "General Assignment")
in substantially the form of Exhibit 4.15 hereto.
4.16 Termination of Other Agreements. At the Closing, the parties and their
Affiliates shall terminate the Donnelly Leased Worker Agreement dated November
1, 1997, the Purchase and Supply Agreement dated November 1, 1997, the Services
Agreement dated November 1, 1997, the Labor Matters Side Letter dated November
1, 1997 and the Side Letter Concerning DML Sublease
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at Eurotrim Facility dated November 1, 1997.
4.17 Mutual Releases. At the Closing, Donnelly, on the one hand, and Lear
and the Company, on the other hand, shall enter into a mutual release (the
"Mutual Release") in substantially the form of Exhibit 4.17 hereto.
4.18 Tooling
(a) Amortized Tooling.
There is a balance of approximately $2,072,459 (as of July 31, 1999)
of Mercedes-Benz tooling owed to Donnelly which is currently being paid to
Donnelly by the Company by an amortization on a piece price basis, which
payments shall terminate upon the first to occur: (i) payment of $2,072,459
or (ii) the applicable Mercedes-Benz program is cancelled or out of
production; provided, that Donnelly shall be entitled to receive all
cancellation charges with respect to such tooling. As and when these
payments are received by the Company, the Company shall remit these amounts
to Donnelly within seven (7) days after receipt.
(b) Collectable Tooling.
There is approximately $8,800,000 of tooling for which purchase orders
have been received from customers ("Collectable Tooling"). Attached hereto
as Schedule 4.18(b) is a list of the Collectable Tooling. Included in
Schedule 4.18(b) are purchase orders from Ford Motor Company for $2,057,063
(the "Ford POs"). Lear and Donnelly agree that Collectable Tooling shall be
shared and accounted for as follows:
(i) The full amount of the Ford POs shall be subtracted from the
Collectable Tooling amount and the resulting balance of approximately
$6,790,182 (the "Net Collectable Tooling") shall be accounted for as
follows: (A) 50% of the Net Collectable Tooling (approximately
$3,395,091) shall be retained by Lear from the
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Purchase Price at Closing; (B) within seven (7) days after the Closing
Date or upon receipt of a customer purchase order for tooling,
whichever shall first occur, Donnelly shall invoice all customers for
the Net Collectable Tooling; (C) as and when payments are received for
Net Collectable Tooling whether by Lear or Donnelly, the recipient
shall pay to the other party 50% of all collections of Net Collectable
Tooling within seven (7) days after receipt.
(ii) With respect to the Ford POs, Donnelly agrees and covenants
that within seven (7) days of Lear's submission of purchase orders to
Donnelly for amounts due under the Ford POs, Donnelly shall invoice
Ford for these amounts. All amounts due under the Ford POs shall
belong to and paid to Lear. If such amounts are received by Donnelly,
Donnelly shall pay these amounts to Lear within seven (7) days after
receipt.
(c) Tooling Not Ready For Collection.
There is approximately $2,255,410 of tooling charges for which no customer
purchase order has been obtained ("Open Tooling"). The Open Tooling is described
in detail on Schedule 4.18(c). The Open Tooling shall be accounted for as
follows: (A) 50% of the Open Tooling (approximately $1,127,705) shall be
retained by Lear from the Purchase Price at Closing; (B) within seven (7) days
after the Closing Date or upon receipt of a customer purchase order for tooling,
whichever shall first occur, Donnelly shall invoice all customers for the Open
Tooling; (C) as and when payments are received for Open Tooling whether by Lear
or Donnelly, the recipient shall pay to the other party 50% of all collections
of Open Tooling within seven (7) days after receipt.
4.19 Billings. Immediately after the transfer of any purchase orders to the
Company from Donnelly have been approved by a customer, that customer billing
shall be processed solely by and
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in the name of the Company. Donnelly agrees to assist the Company and Lear in
the billing process and to generally cooperate with the Company and Lear with
respect to all billing matters and will use reasonable commercial efforts with
respect to this transition.
4.20 Customer Payments. If Donnelly receives any payments due to or
belonging to the Company or Lear under this Agreement, the Ancillary Documents
or otherwise, Donnelly shall turnover or remit such collections to the Company
or Lear within seven (7) days of such receipt. If such payments are not received
within said seven (7) day period, Donnelly shall pay interest on the amount due
at the rate of 10% per annum.
4.21 Use of Donnelly Name. Donnelly hereby authorizes and grants to the
Company and its successors and assigns the right to use the Donnelly name as
part of the name of the Company for a period of time not exceeding six (6)
months following the Closing Date.
4.22 Effectuation. To the extent that any of the contract rights for which
assignment to the Company by Donnelly is provided herein are not assignable or
may not be transferred without the consent of the other party, this Agreement
shall not constitute an assignment or an attempted assignment if such assignment
or attempted assignment would constitute a breach thereof. Donnelly will, both
before and after the Closing Date, upon the request of the Company or Lear, use
its best efforts to obtain the consent of the other party to the assignment to
the Company of any contract rights to be assigned pursuant hereto in cases in
which such consent is required. Whether a consent is requested or not, Donnelly
will cooperate with the Company and Lear in any reasonable arrangements designed
to provide for the Company the benefits under any such contract rights including
enforcement for the account of the Company any and all rights of Donnelly
against the other party or otherwise. If and to the extent that such consent is
required but is not obtained, the parties agree that, as between Donnelly and
the Company, the Company shall nevertheless assume
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all of Donnelly's responsibilities and be entitled to all of Donnelly's benefits
arising from and after the Closing Date under any such contract right as if such
contract right had in fact been assigned to the Company. The parties hereby
agree to cooperate in any reasonable arrangements to effect the foregoing
provision.
ARTICLE V
Conditions To Obligations Of Lear and the Company
The obligations of Lear and the Company required to be performed by them at
the Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by Lear as
provided herein except as otherwise required by applicable law:
5.1 Representations and Warranties; Agreements . Each of the
representations and warranties of Donnelly contained in this Agreement shall be
true and correct in all material respects as of the date hereof and (having been
deemed to have been made again at and as of the Closing) as of the Closing. Each
of the obligations of Donnelly required by this Agreement to be performed by it
at or prior to the Closing shall have been duly performed and complied with in
all material respects as of the Closing. At the Closing, Lear shall have
received a certificate, dated the Closing Date and duly executed by an officer
of Donnelly, to the effect that the conditions set forth in the preceding two
sentences have been satisfied.
5.2 Authorization; Consents . All corporate action necessary to authorize
the execution, delivery and performance of this Agreement and the Ancillary
Documents and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by Donnelly. Donnelly shall have
delivered to Lear a certified copy of resolutions adopted by its Board of
Directors authorizing the execution, delivery and performance of this Agreement,
the Ancillary
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Documents and the consummation of the transactions contemplated hereby and
thereby. Any filings required to be made in connection with the transactions
contemplated hereby shall have been made and all applicable waiting periods with
respect to each such filing, including any extensions thereof, shall have
expired or been terminated, or any notices to, and declarations, filings and
registrations with, and consents, authorizations, approvals and waivers from
governmental and regulatory bodies required to consummate the transactions
contemplated hereby and all other governmental, regulatory or third party
consents or waivers which, either individually or in the aggregate, if not made
or obtained, would have a Material Adverse Effect shall have been made or
obtained.
5.3 Opinion of Counsel . Lear shall have been furnished with the opinion of
Varnum, Riddering, Schmidt & Howlett counsel for Donnelly, dated the Closing
Date, in substantially the form attached hereto as Exhibit 5.3.
5.4 Absence of Litigation . No order, stay, injunction or decree of any
court shall be in effect (i) that prevents or delays the consummation of any of
the transactions contemplated hereby, or (ii) that would impose any material
limitation on the ability of Lear to effectively exercise full rights of
ownership of the Donnelly Interest. No action, suit or proceeding before any
court or any governmental or regulatory entity shall be pending or threatened,
and no investigation by any governmental or regulatory entity shall have been
commenced (and be pending) (A) seeking to restrain or prohibit (or questioning
the validity or legality of) the consummation of the transactions contemplated
by this Agreement, or (B) seeking material damages in connection therewith which
Lear, in good faith, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby.
5.5 Amended Services Agreement. Donnelly and the Company shall have entered
into
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the Amended Services Agreement in substantially the form attached hereto as
Exhibit 4.4.
5.6 Holland Facility Lease. Donnelly and the Company shall have entered
into the Holland Facility Lease in substantially the form attached hereto as
Exhibit 4.6.
5.7 Supply Agreement. Donnelly and the Company shall have entered into the
Supply Agreement in substantially the form attached hereto as Exhibit 4.7.
5.8 New Technology License Agreement. Donnelly and the Company shall have
entered into the New Technology License Agreement, substantially in the form
attached hereto as Exhibit 4.8.
5.9 Assignment of Purchase Orders. Donnelly shall have assigned to the
Company all customer purchase orders for Products produced for the Company at
the Grand Haven Facility.
5.10 Amended Non-Compete Agreement. The Company shall have received the
Amended Donnelly Non-Compete Agreement executed by Donnelly in substantially the
form attached hereto as Exhibit 4.10.
5.11 Prince/Happich Agreement. Donnelly and the Company shall have entered
into the Prince/Happich Agreement in substantially the form attached hereto as
Exhibit 4.11.
5.12 Termination and Assignment Agreement. Donnelly and the Company shall
have entered into the Termination and Assignment Agreement in substantially the
form attached hereto as Exhibit 4.12.
5.13 Aeroplex Agreement. Donnelly and the Company shall have entered into
the Aeroplex Agreement in substantially the form attached as Exhibit 4.13.
5.14 Mercedes-Benz Platform Agreement. Donnelly and the Company shall have
entered into the Mercedes-Benz Platform Agreement in substantially the form
attached as Exhibit 4.14.
5.15 General Assignment. Donnelly shall have executed and delivered the
General
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Assignment in substantially the form attached as Exhibit 4.15.
5.16 Mutual Releases. Donnelly, Lear and the Company shall have entered
into the Mutual Release in substantially the form attached hereto as Exhibit
4.16.
5.17 Termination of Other Agreements. Donnelly, Lear and the Company shall
have terminated the agreements listed above in Section 4.16.
ARTICLE VI
Conditions To Obligations Of Donnelly
The obligations of Donnelly required to be performed by it at the Closing
shall be subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, each of which may be waived by Donnelly as provided herein
except as otherwise required by applicable law:
6.1 Representations and Warranties; Agreements . Each of the
representations and warranties of Lear contained in this Agreement shall be true
and correct in all material respects as of the date hereof and (having been
deemed to have been made again at and as of the Closing) as of the Closing. Each
of the material obligations of Lear and the Company required by this Agreement
to be performed by it at or prior to the Closing shall have been duly performed
and complied with in all material respects as of the Closing. At the Closing,
Donnelly shall have received a certificate, dated the Closing Date and duly
executed by an officer of Lear, to the effect that the conditions set forth in
the preceding two sentences have been satisfied.
6.2 Authorization of the Agreement; Filings . All corporate action
necessary to authorize the execution, delivery and performance of this Agreement
and the Ancillary Documents and the consummation of the transactions
contemplated hereby and thereby shall have been duly and validly taken by Lear.
Lear shall have delivered to Donnelly a certified copy of resolutions adopted by
its
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Board of Directors authorizing the execution, delivery, and performance of this
Agreement, the Ancillary Documents and the consummation of the transactions
contemplated hereby and thereby. Any filings required to be made in connection
with the transactions contemplated hereby shall have been made and all
applicable waiting periods with respect to each such filing (including any
extensions thereof) shall have expired or been terminated.
6.3 Opinion of Counsel . Donnelly shall have been furnished with the
opinion of Bodman, Longley & Dahling LLP, counsel for Lear, dated the Closing
Date, in substantially the form attached hereto as Exhibit 6.3.
6.4 Absence of Litigation . No order, stay, injunction or decree shall have
been issued by any court of competent jurisdiction and be in effect restraining
or prohibiting the consummation of the transactions contemplated hereby. No
action, suit or proceeding before any court of competent jurisdiction or any
governmental or regulatory entity of competent jurisdiction shall be pending (or
threatened by any governmental or regulatory entity), and no investigation by
any governmental or regulatory entity shall have been commenced (and be pending)
(A) seeking to restrain or prohibit (or questioning the validity or legality of)
the consummation of the transactions contemplated by this Agreement, or (B)
seeking material damages in connection therewith which Donnelly, in good faith,
believes makes it undesirable to proceed with the consummation of the
transactions contemplated hereby.
6.5 Amended Services Agreement. Donnelly and the Company shall have entered
into the Amended Services Agreement in substantially the form attached hereto as
Exhibit 4.4.
6.6 Title Policy. Donnelly shall have received a title insurance policy
pursuant to the Title Commitment.
6.7 Holland Facility Lease. Donnelly and the Company shall have entered
into the
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Holland Facility Lease in substantially the form attached hereto as Exhibit
1.4(c).
6.8 Supply Agreement. Donnelly and the Company shall have entered into the
Supply Agreement in substantially the form attached hereto as Exhibit 4.7.
6.9 Prince/Happich Agreement. Donnelly and the Company shall have entered
into the Prince/Happich Agreement in substantially the same form attached hereto
as Exhibit 4.11.
6.10 Termination and Assignment Agreement. Donnelly and the Company shall
have entered into the Termination and Assignment Agreement, in substantially the
form attached hereto as Exhibit 4.12.
6.11 Aeroplex Agreement. Donnelly and the Company shall have entered into
the Aeroplex Agreement in substantially the form attached as Exhibit 4.13.
6.12 Mercedes-Benz Platform Agreement. Donnelly and the Company shall have
entered into the Mercedes-Benz Platform Agreement in substantially the form
attached as Exhibit 4.14.
6.13 Mutual Releases. Donnelly, Lear and the Company shall have entered
into the Mutual Release in substantially the form attached hereto as Exhibit
4.17.
6.14 Redemption. The Company shall have executed and delivered the Holland
Facility Instruments or transfer in substantially the form attached hereto as
Exhibit 1.4(b).
6.15 Payment. Lear and/or Lear Affiliate shall have paid the Purchase
Price.
6.16 Termination of Other Agreements. Donnelly, Lear and the Company shall
have terminated the agreements listed above in Section 4.16.
ARTICLE VII
Termination and Abandonment
7.1 Termination. This Agreement may be terminated at any time prior to the
date of
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Closing:
(a) by mutual written consent of Lear and Donnelly;
(b) by Lear, if there has been a violation or breach by Donnelly of
any agreement, representation or warranty contained in this Agreement which
has rendered the satisfaction of any condition to the obligations of Lear
impossible and such violation or breach has not been waived by Lear;
(c) by Donnelly, if there has been a violation or breach by Lear of
any agreement, representation or warranty contained in this Agreement which
has rendered the satisfaction of any condition to the obligations of
Donnelly impossible and such violation or breach has not been waived by
Donnelly; or
(d) by Lear or Donnelly if the Closing has not occurred on or before
September 30, 1999.
7.2 Procedure and Effect of Termination . In the event of termination of
this Agreement and abandonment of the transactions contemplated hereby by any or
all of the parties pursuant to Section 7.1, written notice thereof shall
promptly be given by the terminating party to the other party and this Agreement
shall terminate and the transactions contemplated hereby shall be abandoned,
without further action by any of the parties hereto; provided, however, that the
foregoing shall not be construed to deprive any party hereto of any remedy
hereunder, at law or in equity if this Agreement is terminated in violation of
this Agreement or if it is terminated pursuant to Section 7.1(b), (c) or (d)
hereof.
ARTICLE VIII
Indemnification
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8.1 Indemnification. The parties shall indemnify each other as set forth
below:
(a) Subject to Section 8.1(d), Donnelly shall indemnify and hold
harmless the Company, Lear, their affiliates and their respective officers,
directors, employees and agents, from and against any and all losses,
damages, liabilities and claims ("Losses") arising out of, based upon or
resulting from (i) any inaccuracy as of the Closing Date of any
representation or warranty of Donnelly which is contained in or made
pursuant to this Agreement or any Ancillary Document of which Lear did not
have knowledge on the Closing Date, and (ii) any breach or nonfulfillment
by Donnelly of any of its covenants, agreements or other obligations
contained in or made pursuant to this Agreement or any Ancillary Document
and shall reimburse Lear and the Company for any and all fees, costs and
expenses of any kind related thereto (including, without limitation, any
and all Legal Expenses (as defined below)). For purposes hereof, such fees,
costs and expenses shall be deemed to be Losses. As used in this Agreement,
"Legal Expenses" of a person shall mean any and all fees, costs and
expenses of any kind reasonably incurred by such person and its counsel in
investigating, preparing for, defending against or providing evidence,
producing documents or taking other action with respect to, any threatened
or asserted claim.
(b) Subject to Section 8.1(e), Lear shall indemnify and hold harmless
Donnelly from and against any and all Losses based upon or resulting from
(i) any inaccuracy as of the Closing Date of any representation or warranty
of Lear which is contained in or made pursuant to this Agreement or any
Ancillary Document of which Donnelly did not have knowledge on the Closing
Date, or (ii) any breach by Lear of any of its covenants, agreements or
other obligations contained in or made pursuant to this Agreement or any
Ancillary Document, and Lear shall reimburse Donnelly for any and all fees,
costs and expenses of any kind related thereto (including,
27
<PAGE>
without limitation, any and all Legal Expenses) and, for purposes hereof,
such fees, costs and expenses shall be deemed to be Losses.
(c) Promptly after receipt by any person entitled to indemnification
under this Section 8.1 (an "Indemnified Party") of notice of the
commencement of any action by a third party in respect of which the
Indemnified Party will seek indemnification hereunder, the Indemnified
Party shall notify each person that is or may be obligated to provide such
indemnification (an "Indemnifying Party") thereof in writing but any
failure to so notify the Indemnifying Party shall not relieve it from any
liability that it may have to the Indemnified Party other than to the
extent the Indemnifying Party is actually prejudiced by such failure. The
Indemnifying Party shall be entitled to participate in the defense of such
action and, provided that within 15 days after receipt of such written
notice the Indemnifying Party confirms in writing its responsibility
therefor, to assume control of such defense with counsel reasonably
satisfactory to such Indemnified Party; provided, however, that:
(i) the Indemnified Party shall be entitled to participate in the
defense of such claim and to employ counsel at its own expense to
assist in the handling of such claim; provided, however, that the
employment of such counsel shall be at the expense of the Indemnifying
Party if the Indemnified Party determines in good faith that such
participation is appropriate in light of defenses not available to the
Indemnifying Party, conflicts of interest or other similar
circumstances;
(ii) either Party shall obtain the prior written approval of the
other Party before entering into any settlement of such claim or
ceasing to defend against such claim (with such approval not to be
unreasonably withheld);
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<PAGE>
(iii) no Party shall consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to each
Indemnified Party of a full and complete release from all liability in
respect of such claim; and
(iv) the Indemnifying Party shall not be entitled to control (but
shall be entitled to participate at its own expense in the defense
of), and the Indemnified Party shall be entitled to have sole control
over, the defense or settlement of any claim to the extent the claim
seeks an order, injunction, non-monetary or other equitable relief
against the Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnified Party. After written
notice by the Indemnifying Party to the Indemnified Party of its
election to assume control of the defense of any such action, the
Indemnifying Party shall not be liable to such Indemnified Party
hereunder for any Legal Expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that the
Indemnifying Party shall be liable for such Legal Expenses if the
Indemnified Party determines in good faith that the incurrence of the
same is appropriate in light of defenses not available to the
Indemnifying Party, conflicts of interest or other similar
circumstances. If the Indemnifying Party does not assume control of
the defense of such claim as provided in this Section 8.1(c), the
Indemnified Party shall have the right to defend such claim in such
manner as it may deem appropriate at the cost and expense of the
Indemnifying Party, and the Indemnifying Party will promptly reimburse
the Indemnified Party therefor in accordance with this Section 8.1.
The reimbursement of fees, costs and expenses required by this Section
8.1 shall be made by periodic payments during the course of the
investigations or defense, as and when bills are received or expenses
incurred.
29
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(d) Notwithstanding anything herein to the contrary, Donnelly shall
have no liability for indemnification with respect to the matters described
in Section 8.1(a)(i) hereof: (A) unless and until the aggregate gross
amount of all Losses for which indemnification is sought from Lear under
Section 8.1(a)(i) exceeds $200,000; (B) to the extent that the amount of
all payments made by Donnelly under Section 8.1(a)(i) hereof on account of
Losses (except losses arising from a breach of Section 2.4) would exceed
$15,000,000 or (C) to the extent that the amount of all payments made by
Donnelly under Section 8(a)(1) hereof on account of all Losses, including
Losses arising from the breach of Section 2.4 would exceed the Purchase
Price.
(e) Lear shall have no liability for indemnification with respect to
the matters described in Section 8.1(b)(i) hereof: (A) unless and until the
aggregate gross amount of all Losses for which indemnification is sought
from Lear under Section 8.1(b)(i) hereof exceeds $200,000; or (B) to the
extent that the amount of all payments made by Lear under Section 8.1(b)(i)
hereof on account of Losses would exceed $15,000,000.
(f) The Company and Lear shall indemnify and hold harmless Donnelly
from all losses and Legal Expenses arising from the Business incurred after
Closing, except for liabilities and obligations undertaken by Donnelly
pursuant to this Agreement or the Ancillary Documents.
ARTICLE IX
Miscellaneous
9.1 Survival . All representations, warranties, covenants and agreements
contained in this Agreement, any Ancillary Document, or in any Schedule,
Exhibit, certificate, document or statement delivered pursuant hereto, shall
survive for twelve (12) months following closing and shall be deemed to have
been relied upon and shall not be affected in any respect by the Closing.
9.2 Expenses . Each of the parties hereto shall pay its own fees and
expenses (including
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<PAGE>
the fees of any attorneys, accountants, investment bankers or others engaged by
such party) in connection with this Agreement and the transactions contemplated
hereby whether or not the transactions contemplated hereby are consummated
except that Lear and Donnelly shall each pay one-half of all filing fees and
costs incurred in connection with the making of any filing or obtaining any
consent of any U.S. or foreign regulatory authority including any filing under
the Hart-Scott-Rodino Antitrust Improvements Act and with the European
Commission.
9.3 Headings . Section headings herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof.
9.4 Notices . All notices or other communications required or permitted
hereunder shall be given in writing and shall be deemed sufficient if delivered
by hand (including by courier), mailed by registered or certified mail, postage
prepaid (return receipt requested), or sent by facsimile, as follows:
If to Donnelly: Donnelly Corporation
49 W. Third St.
Holland, Michigan 49423
Attention: Chief Financial Officer
Facsimile: 616-786-5606
Confirmation: 616-786-5830
With required 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
Facsimile: (616) 336-7000
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If to Lear or the Company: Lear Corporation
21557 Telegraph Road
Southfield, MI 48034
Attention: General Counsel
Facsimile: (248) 447-1677
Confirmation: (248) 447-1714
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<PAGE>
With required copy to: Bodman, Longley & Dahling LLP
755 W. Big Beaver Road, Suite 2020
Troy, MI 48084
Attention: Terrence B. Larkin, Esq.
Facsimile: (248) 244-0780
Confirmation: (248) 362-2110
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or, if mailed, upon receipt thereof, or if by
facsimile, on production of a transmission report by the machine from which the
facsimile was sent which indicates that the facsimile was sent in its entirety
to the facsimile number of the recipient; provided, however, that any notice or
communication changing any of the addresses or facsimile numbers set forth above
shall be effective and deemed given only upon its receipt.
9.5 Assignment . This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, and the provisions of Article VIII hereof
shall inure to the benefit of the Indemnified Parties referred to therein. This
Agreement and the Ancillary Documents and any and all of the rights, interests,
or obligations hereunder and thereunder may be assigned by Lear, the Company and
their affiliates without the consent of the other Party. No assignment shall
release any Party from any liability or obligation under the assigned agreement.
In addition, Lear and the Company agree that with respect to the Donnelly
Interest the following will occur at Closing: first, the Donnelly Redeemed
Interest will be redeemed by the Company from Donnelly; immediately thereafter,
Donnelly will transfer and assign the Remaining Donnelly Interest to a wholly
owned subsidiary of Donnelly and Lear and/or Lear Affiliate will purchase the
Remaining Donnelly Interest from said subsidiary.
9.6 Tax Return Preparation. For federal and state income tax purposes, Lear
and Donnelly
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<PAGE>
agree to allocate each item of income, loss, deduction or credit of the Company
for the taxable year ending December 31, 1999 between them in accordance with
the "closing of the books" method applicable to the close of business on the
Closing Date under the applicable Treasury regulations under Section 706(d) of
the Internal Revenue Code of 1986, as amended.
9.7 Entire Agreement. This Agreement (including the Ancillary Documents)
embodies the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersedes all prior or contemporaneous
written or oral commitments, arrangements or understandings with respect thereto
including, without limitation, that certain letter agreement dated as of July 1,
1999 between Lear and Donnelly. There are no restrictions, agreements, promises,
warranties, covenants or undertakings with respect to the transactions
contemplated hereby other than those expressly set forth herein.
9.8 Modifications, Amendments and Waivers . At any time prior to the
Closing, to the extent permitted by law, (i) Lear and Donnelly may, by written
agreement, modify, amend or supplement any term or provision of this Agreement
and (ii) any term or provision of this Agreement may be waived in writing by the
party which is entitled to the benefits thereof.
9.9 Counterparts; Facsimile Transmission . This Agreement may be executed
with counterpart signature pages or in two or more counterparts, all of which
shall be considered one and the same agreement and each of which shall be deemed
an original, and this Agreement may be delivered by facsimile transmission with
the same effect as if a manually signed original was personally delivered.
9.10 Governing Law . This Agreement and the Ancillary Documents shall be
governed by the laws of the State of Michigan (regardless of the laws that might
be applicable under principles of conflicts of law) as to all matters,
including, without limitation, matters of validity, construction,
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<PAGE>
effect and performance.
9.11 Certain Definitions . For purposes of this Agreement:
An "Affiliate" or "affiliate" of a specified person is a person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified.
"Ancillary Documents" shall mean any agreement, certificate or other
document delivered at or prior to the Closing in connection herewith.
"Dollars" and the symbol "$" shall mean U.S. dollars.
"Lien" shall mean any pledge, lien (including without limitation any tax
lien), mortgage, charge, claim, encumbrance, security interest, 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.
"Material Adverse Effect" shall mean any change in, or effect on, the
Company with respect to the Company's business which is, or with reasonable
probability might be, materially adverse to the business, operations, assets,
properties, results of operations, prospects, or financial condition of the
Company.
"Person" or "person" shall mean an individual or any corporation,
partnership, joint venture, association, limited liability company, trust,
unincorporated organization, or other legal entity or a government or
governmental entity.
"Products" shall have the meaning set forth in the Company's Operating
Agreement dated November 1, 1997.
The phrase and word "to the knowledge," "known" and words of similar import
shall mean such facts or other matters that a Person is aware of and such facts
or other matters which were
35
<PAGE>
disclosed to such Person orally or in writing. Knowledge of a Person shall mean
knowledge of its CEO, Vice Chairman, COO , CFO, Treasurer, Director of Merger
and Acquisitions or General Counsel. Knowledge of Donnelly shall include its
legal counsel, Daniel Molhoek. Knowledge of Lear shall include Tim O'Keefe.
9.12 Severability . If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby and this Agreement will be construed and enforced as if such
invalid, illegal or unenforceable provisions had not been included herein. To
the extent permitted by applicable law, each party waives any provision of law
which renders any provision of this Agreement invalid, illegal or unenforceable
in any respect.
9.13 Specific Performance . Lear and Donnelly recognize that any breach of
the terms of this Agreement may give rise to irreparable harm for which money
damages would not be an adequate remedy, and accordingly agree that, in addition
to other remedies including damages, any non-breaching party shall be entitled
to enforce the terms of this Agreement by a decree of specific performance
without the necessity of proving the inadequacy as a remedy of money damages or
the posting of any security.
9.14 Third Parties . Nothing in this Agreement shall be deemed to be for
the benefit of, or enforceable by or on behalf of, any party other than the
parties to this Agreement and the Indemnified Parties.
9.15 Arbitration of Eurotrim Mirror Business and Assets. The parties have
agreed that the value of Eurotrim is $12.5 million, but have been unable to
agree as to the value of the Eurotrim Assets acquired by Donnelly and described
on Schedule 1.1(d) (the "Eurotrim Assets"). The parties agree that the value of
the Eurotrim Assets shall be resolved according to the following procedures.
36
<PAGE>
This matter shall be determined by a single arbitrator selected jointly by Lear
and Donnelly. If Lear and Donnelly are unable to agree on an arbitrator within
30 days after the Closing Date, the arbitrator shall be selected by the American
Arbitration Association located in Southfield, Michigan. The procedure will be
as follows:
(a) Within thirty (30) days after the appointment of an arbitrator,
Donnelly may request from the Company and the Company will promptly provide
to Donnelly any financial data regarding Eurotrim in its possession or
reasonably available to it.
(b) Within thirty (30) days after the Company has provided all of the
information requested by Donnelly, as evidenced by Donnelly's written
confirmation delivered to Lear, each party shall submit to the arbitrator
and the other party a written statement supporting its position on
valuation.
(c) Within fifteen (15) days after the written statements are
submitted, each party may submit a responsive statement to the arbitrator
and the other party.
(d) The parties shall not be permitted to take depositions.
(e) The arbitration shall take place at Southfield, Michigan within 30
days after written response statements have been delivered.
(f) The arbitration hearing shall be conducted on an expedited
schedule and all proceedings shall be confidential.
(g) The arbitrator shall establish the dates, times and general
conduct of the arbitration hearing. Each party shall be entitled to have up
to five (5) persons present at the hearing. Each party shall have a maximum
of 120 minutes to make an oral presentation to the arbitrator out of the
presence of the other party. Following such presentations, each party shall
remain available outside the presence of the other party for the
arbitrator's questions.
37
<PAGE>
(h) Each party shall bear its own expenses and attorneys fees and an
equal share of the fees and expenses of the arbitrator.
(i) The arbitrator shall submit a written report stating the
determination of the value of the Eurotrim Assets. Arbitration shall be the
exclusive method for determining the value of the Eurotrim Assets.
Any arbitration award shall be binding and enforceable against Donnelly and
Lear and judgment may be entered thereon in any court of competent jurisdiction.
9.16 Payment for Eurotrim Assets. Once the value of the Eurotrim Assets has
been determined by the arbitrator, then that amount shall be subtracted from
$6,250,000 and the resulting amount shall be paid by Lear or Lear Affiliate to
Donnelly in cash within two (2) business days of the date of the arbitrator's
decision, plus interest on such amount at a rate of 6% per annum for the number
of days elapsed from the Closing Date to the date of such payment. If the value
of the Eurotrim Assets is determined to be greater than $6,250,000, there will
be no payment due between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
WITNESSES: DONNELLY CORPORATION
_________________________ By: /s/ Scott Reed
Its: Senior VP and CFO
LEAR CORPORATION
_________________________ By: /s/ Joseph F. McCarthy
Its:___________________________
(signatures continued on next page)
38
<PAGE>
MARLETTE JV ACQUISITION
CORPORATION
__________________________ By: /s/ Joseph F. McCarthy
Its:___________________________
LEAR DONNELLY OVERHEAD
SYSTEMS, L.L.C.
__________________________ By: /s/ T.J. O'Keefe
Its: VP & CFO
39
<PAGE>
EXHIBITS
Exhibit 1.4(b) Holland Facility Instruments of Transfer
Exhibit 1.4(c) Assignment of Membership Interest
Exhibit 4.4 Transition Services Agreement
Exhibit 4.6(a) Holland Facility Lease
Exhibit 4.6(b) Holland Facility Leased Worker Agreement
Exhibit 4.7(a) Eurotrim Agreement
Exhibit 4.7(b) Eurotrim Leased Worker Agreement
Exhibit 4.8 New Technology Transfer and License Agreement
Exhibit 4.10 Amended Donnelly Non-Compete Agreement
Exhibit 4.12 Termination and Assignment Agreement
Exhibit 4.13 Aeroplex Agreement
Exhibit 4.15 General Assignment
Exhibit 4.17 Mutual Release
Exhibit 5.3 Varnum, Riddering, Schmidt & Howlett Opinion
Exhibit 5.4 Bodman, Longley and Dahling LLP Opinion
SCHEDULES
1.1(a) Legal Description of Holland Facility
1.1(b) Fixtures
1.1(c) List of Model Shop assets and other Dedicated Equipment
1.1(d) Eurotrim assets associated with manufacture of mirrors
1.2 List of Optical Laboratory Equipment
1.3 Accounts Receivable and Reimbursable Tooling
2. Donnelly Disclosure Schedule
3. Lear Disclosure Schedule
4.6(a) Holland Facility Employees to be hired by Donnelly
4.7 Eurotrim employees hired by Donnelly
4.9(a) Company-owned equipment located at Grand Haven
4.9(b) Grand Haven Product Margins
4.11 Products sold but not in production
4.18(b) Collectable Tooling
4.18(c) Open Tooling
40
<PAGE>
DONNELLY DISCLOSURE SCHEDULE
41
<PAGE>
LEAR DISCLOSURE SCHEDULE
42
<PAGE>
EXHIBITS TO
REDEMPTION AND PURCHASE AGREEMENT
Exhibit No.
1.4(b) Bill of Sale - Holland Facility Assets
1.4(c) Assignments of Member Interest
4.4 Transition Services Agreement
4.6(a) Lease
4.6(b) Holland Facility Leased Worker Agreement
4.7(a) Eurotrim Agreement
4.8 Technology Transfer and License Agreement
4.10 Donnelly amended Noncompetition and Non-solicition Agreement
4.12 Termination and Assignment Agreement
4.13 Aeroplex Agreement
4.15 General Assignment
4.17 Mututal Release and Waiver of Claims
<PAGE>
Exhibit 1.4(b)
BILL OF SALE - HOLLAND FACILITY ASSETS
For valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Lear Donnelly Overhead Systems, L.L.C., a Michigan limited
liability company ("Seller"), hereby sells, grants and conveys to Donnelly
Corporation, a Michigan corporation ("Buyer"), all of Seller's right, title and
interest in and to the property described in Exhibit A attached hereto and
incorporated herein.
Seller hereby warrants to Buyer that Seller is the lawful owner of the
property listed or described on Exhibit A hereto which are transferred hereby,
free and clear of all liens, claims or encumbrances of any kind, that Seller has
good right and full power to assign, transfer and convey the same as set forth
above, and that Seller will warrant and defend the same against all lawful
claims and demands.
Seller covenants with Buyer, and the Buyer's successors and assigns, that
Seller will do, execute and deliver, or will cause to be done, executed and
delivered, all further acts, transfers, assignments, other conveyances, powers
of attorney and assurances, to better assure, convey and confirm the property
listed or described on Exhibit A hereto to Buyer, and the Buyer's successors and
assigns, as the Buyer, and the Buyer's successors and assigns, may require.
This Bill of Sale will be governed by and construed in accordance with the
laws of the state of Michigan, without regard to conflict of law principles.
Witness the due execution hereof as of _____________, 1999.
LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C.
By: _______________________________________
Its: ______________________________________
<PAGE>
WARRANTY DEED FOR CORPORATION
KNOW ALL MEN BY THESE PRESENTS: That Lear Donnelly Overhead Systems, L.L.C., a
Michigan limited liaiblity company whose address is 21557 Telegraph Road,
Southfield, MI 48086 conveys and warrants to Donnelly Corporation, a Michigan
corporation whose address is 49 W. Third St., Holland, Michigan 49423, the
following described premises situated in the Township of Holland, County of
Ottawa and the State of Michigan, to wit:
Lot 3, Northside Industrial Center, according to the recorded plat
thereof, as recorded in Liber 27 of Plats, Page 19, Ottawa County
Records. 3401 128th Avenue
for the sum of One ($1.00) Dollar (a Real Estate Transfer Tax Affidavit is
being filed simultaneously herewith).
This property may be located within the vicinity of farmland or a farm
operation. Generally accepted agricultural and management practices which may
generate noise, dust, odors, and other associated conditions may be used and are
protected by the Michigan Right to Farm Act.
subject to easements and restrictions of record.
Dated this ____ day of _______________, 1999
Signed in the presence of: Signed by:
Lear Donnelly Overhead Systems, L.L.C., a
Michigan limited liability company
____________________________________ _________________________________________
*
____________________________________ By_______________________________________
* *
Its______________________________________
_________________________________________
_________________________________________
STATE OF MICHIGAN }
)ss.
COUNTY OF }.
The foregoing instrument was acknowledged before me this ____ day of __________
1999 by _______________ of Lear Donnelly Overhead Systems, L.L.C., a Michigan
limited liability company, on behalf of the company.
_______________________________________
*
Notary Public, County, Michigan
My commission expires:
<TABLE>
____________________________________________________________________________________________________________
County Treasurer's Certificate Township Treasurer's Certificate
Affix Revenue Stamps to Back of Deed
____________________________________________________________________________________________________________
<S> <C> <C>
When Recorded Return To: Send Subsequent Tax Bills To: Drafted By:
Daniel Molhoek Grantee Kenneth R. Lango
Varnum, Riddering, Howlett Bodman, Longley & Dahling LLP
& Schmidt LLP Suite 2020
Suite 1600 Bridgewater Place 755 W. Big Beaver Rd.
333 Bridge St. N.W. Troy, MI 48084
Grand Rapids, MI 49504
____________________________________________________________________________________________________________
Tax Parcel # 70-16-08-435-003 Recording Fee $ Revenue Stamps
____________________________________________________________________________________________________________
</TABLE>
<PAGE>
Exhibit 1.4(c)
ASSIGNMENT OF MEMBER INTEREST
For Value Received, DONNELLY CORPORATION, a Michigan corporation
("Donnelly") hereby sells, assigns, transfers, and delivers to LEAR DONNELLY
OVERHEAD SYSTEMS, LLC, a Michigan limited liability company ("LDOS"), that
portion of its membership interest in LDOS consisting of a three percent (3%)
Participating Percentage (the "Redeemed Member Interest").
Donnelly hereby warrants to the Purchaser that Donnelly is the lawful owner
of the Redeemed Member Interest which is transferred hereby, free and clear of
all liens, claims or encumbrances of any kind, that Donnelly has good right and
full power to assign, transfer and convey the same as set forth above, and that
Donnelly will warrant and defend the same against all lawful claims and demands.
Donnelly covenants with the Purchaser, and the Purchaser's successors and
assigns, that Donnelly will do, execute and deliver, or will cause to be done,
executed and delivered, all further acts, transfers, assignments, other
conveyance, powers of attorney and assurances, to better assure, convey and
confirm the Redeemed Member Interest to the Purchaser, as the Purchaser and the
Purchaser's successors and assigns, may require.
DONNELLY INVESTMENTS, INC.,
a Michigan corporation
By: ___________________________________
Its: ___________________________________
Dated: September __, 1999
<PAGE>
ASSIGNMENT OF MEMBER INTEREST
For Value Received, DONNELLY CORPORATION, a Michigan corporation
("Donnelly") hereby sells, assigns, transfers, and delivers to DONNELLY
INVESTMENTS, INC. ("Purchaser"), its successors and assigns that portion of its
member interest in and to LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C., a Michigan
limited liability company ("LDOS") consisting of a forty-seven percent (47%)
Participating Percentage in LDOS (the "Member Interest").
Donnelly hereby warrants to the Purchaser that Donnelly is the lawful owner
of the Member Interest which is transferred hereby, free and clear of all liens,
claims or encumbrances of any kind, that Donnelly has good right and full power
to assign, transfer and convey the same as set forth above, and that Donnelly
will warrant and defend the same against all lawful claims and demands.
Donnelly covenants with the Purchaser, and the Purchaser's successors and
assigns, that Donnelly will do, execute and deliver, or will cause to be done,
executed and delivered, all further acts, transfers, assignments, other
conveyance, powers of attorney and assurances, to better assure, convey and
confirm the Member Interest to the Purchaser, as the Purchaser and the
Purchaser's successors and assigns, may require.
DONNELLY INVESTMENTS, INC.,
a Michigan corporation
By: ___________________________________
Its: ___________________________________
Dated: September __, 1999
<PAGE>
ASSIGNMENT OF MEMBER INTEREST
For Value Received, DONNELLY INVESTMENTS, INC., a Michigan corporation
("Donnelly") hereby sells, assigns, transfers, and delivers to MARLETTE JV
ACQUISITION CORPORATION ("Purchaser"), its successors and assigns, that portion
of its member interest in and to LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C.,
("LDOS") consisting of a forty- seven percent (47%) Participating Percentage in
LDOS, a Michigan limited liability company (the "Transferred Member Interest").
Donnelly hereby warrants to the Purchaser that Donnelly is the lawful owner
of the Transferred Member Interest which is transferred hereby, free and clear
of all liens, claims or encumbrances of any kind, that Donnelly has good right
and full power to assign, transfer and convey the same as set forth above, and
that Donnelly will warrant and defend the same against all lawful claims and
demands.
Donnelly covenants with the Purchaser, and the Purchaser's successors and
assigns, that Donnelly will do, execute and deliver, or will cause to be done,
executed and delivered, all further acts, transfers, assignments, other
conveyance, powers of attorney and assurances, to better assure, convey and
confirm the Transferred Member Interest to the Purchaser, as the Purchaser and
the Purchaser's successors and assigns, may require.
DONNELLY INVESTMENTS, INC.,
a Michigan corporation
By: ___________________________________
Its: ___________________________________
Dated: September __, 1999
<PAGE>
Exhibit 4.4
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT ("Agreement"), is made as of ____, 1999,
between DONNELLY CORPORATION, a Michigan corporation ("Donnelly") and LEAR
DONNELLY OVERHEAD SYSTEMS, L.L.C., a Michigan limited liability company (the
"Company"). Donnelly and the Company are individually referred to sometimes as a
"party" and together as the "parties". Capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Purchase Agreement
(defined below).
RECITALS:
DONNELLY, LEAR CORPORATION ("Lear") and the COMPANY are parties to a
Redemption and Purchase Agreement dated the date hereof, (the "Purchase
Agreement") whereby Donnelly's membership interest in the Company was
terminated. As a material inducement to the Company and Lear entering into the
Purchase Agreement and consummating the transactions contemplated thereby and in
order to facilitate the orderly continuation of the Company's Business for a
transitional period after the Closing, Donnelly agrees to provide to the Company
certain administrative and other services.
1. SERVICES
1.1 Services Included: Cost of Services
(a) For a period commencing on the date hereof and continuing through
July 31, 2000, (the "Term"), Donnelly will provide to the Company the
following services: information technology, warehousing, human resources,
finance and engineering (singularly, a "Service"; collectively,
"Services"), in each case, (i) as described on Schedule A to this
Agreement, and (ii) to the extent necessary to the continued operation of
the Business in the ordinary course of business. The cost of each Service
(the "Cost") is as set forth on Schedule A and will be paid monthly in
arrears.. If the Company wishes to extend the term of a Service beyond the
Term, Donnelly and the Company shall negotiate in good faith to determine
if Donnelly can continue to provide the Service requested beyond the
expiration of the Term. If so extended, the Service requested will continue
to be provided for the extended term agreed upon at the Cost specified on
Schedule A or as otherwise agreed to by the parties.
(b) In connection with certain Services, during the Term employees of
a party may be located on the premises of the other party. Each party will
cause its employees located on the other party's premises to sign and
deliver to the other party a confidentiality agreement reasonably
acceptable to such other party and to comply with all applicable laws and
such other party's safety rules while on such premises.
1.2 Additional Services. The parties have attempted to identify and
specifically enumerate on Schedule A all Services required to be provided to the
Company in order to
<PAGE>
continue the uninterrupted operation of the Business at the Holland Facility
following the Closing Date. If the Company needs additional services, Donnelly
and the Company shall negotiate in good faith to determine if Donnelly can
provide the additional services upon mutually agreed terms and conditions. Any
such additional services shall also be provided at the actual cost incurred by
Donnelly in providing the applicable additional service or as otherwise agreed
to by the parties.
1.3 Terms of Payment; Dispute Resolution.
(a) Amounts owed for Services must be paid by the Company within 30
days after the receipt by the Company of an invoice therefor from Donnelly.
Any invoice for additional services shall be sufficiently detailed to
permit the Company to verify the charges for the particular Services
provided.
(b) All amounts due for Services rendered pursuant to the Agreement
shall be billed and paid in U.S. dollars.
(c) If there is a dispute between the Company and Donnelly regarding
the Services, Donnelly shall furnish to the Company reasonable
documentation to substantiate the amounts billed including, but not limited
to, listings of the dates, times and amounts of the Services in question.
Upon delivery of such documentation, the Company and Donnelly shall
cooperate and use their best efforts to resolve such dispute among
themselves. If the parties are unable to resolve their dispute within
thirty (30) calendar days of the initiation of such procedures, and the
Company believes in good faith and with a reasonable basis that the amounts
billed to the Company are inaccurate or are otherwise not in accordance
with the terms of this Agreement, then the parties will resolve such
dispute according to the dispute resolution mechanism set forth in Section
1.3(d) below.
(d) The Company and Donnelly agree that if a dispute arises between
them under this Agreement, then such dispute, upon ten (10) 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 in lieu of any judicial proceeding; provided,
however, that nothing contained in this Section 1.3(d) 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 ante pending resolution of disputes hereunder. Subject only to
the foregoing, no such dispute shall be made the subject of an action in a
court of law or equity by any party hereto but shall be submitted to
arbitration and finally determined in accordance with the provisions of
this Section 1.3(d). Such arbitration shall be conducted by the Southfield,
Michigan offices of the American Arbitration Association before a single
arbitrator in accordance with the Commercial Arbitration Rules of the
American Arbitration Association existing at the time of submission;
provided, however, the parties shall be permitted to conduct discovery as
provided in the Michigan Court Rules of 1985, as amended. If an arbitrator
so selected becomes unable to serve, his or her
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<PAGE>
successor shall be similarly selected or appointed. All arbitration
hearings shall be conducted on an expedited schedule commencing not later
than one-hundred twenty (120) days following selection of the arbitrator,
and all proceedings shall be confidential. Either party may at its expense
make a stenographic record thereof. Each party shall pay its own expenses
and each party shall pay one-half of the costs and expenses of the
arbitrator and the American Arbitration Association. 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.
1.4 Indemnification. Donnelly shall be indemnified against, and defended
and held harmless by the Company from, any losses incurred by Donnelly in
connection with any and all claims, investigations, audits, actions, causes of
action and suits arising from or relating to (i) the Services provided pursuant
to this Agreement; (ii) any actions taken by Donnelly in connection with such
Services or this Agreement; and (iii) the Company employees (including death,
personal injury and property damage); except to the extent that such losses
arose from the gross negligence, recklessness or intentional malfeasance of
Donnelly, in which case, the Company shall be indemnified against and held
harmless by Donnelly from any losses incurred by the Company as a result of such
gross negligence, recklessness or intentional malfeasance.
2. REQUIRED CONSENTS
Any consents, approvals or amendments to existing agreements of Donnelly
necessary to allow Donnelly to provide Services to the Company (the "Consents")
shall be obtained by Donnelly at the Company's cost. Donnelly shall consult with
the Company prior to incurring any such expense for which Donnelly is to be
reimbursed by the Company.
3. CONFIDENTIALITY
All written confidential or proprietary information and documentation
clearly marked "Proprietary" or other similar marking (the "Confidential
Information") relating to either party shall be held in confidence by the other
party to the same extent and in at least the same manner as such party protects
its own confidential or proprietary information of a similar nature. Neither
party shall disclose, publish, release, transfer or otherwise make available
Confidential Information of the other party in any form to, or for the use or
benefit of, any person or entity without the other party's approval. Each party
shall, however, be permitted to disclose relevant aspects of the other party's
Confidential Information to its officers, agents and employees and to the
officers, agents and employees of its affiliates to the extent that such
disclosure is reasonably necessary to the performance of its duties and
obligations under this Agreement, provided that such party shall take all
reasonable measures to ensure that 'Confidential Information of the other party
is not disclosed or duplicated in contravention of the provisions of this
Agreement by such officers, agents and employees. The obligations in this
Section 3 shall not (1) restrict any disclosure by either party pursuant to any
applicable law, or by order of any court or government agent (provided that the
disclosing party shall endeavor to give such notice to the non-disclosing
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<PAGE>
party as may be reasonable under the circumstances) or (2) apply with respect to
information that (a) is independently developed by the other party, (b) becomes
part of the public domain (other than through unauthorized disclosure by the
party), (c) is disclosed by the owner of such information to a third party free
of any obligation of confidentiality or (d) either party gained knowledge or
possession of free of any obligation of confidentiality.
4. TERMINATION
1. For Default. If either party fails to perform any of its material duties
or obligations pursuant to this Agreement an such failure is not cured within
thirty (30) days after notice to such party specifying the nature of such
failure, the other party may terminate this Agreement upon further notice to the
defaulting party.
2. For Convenience. The Company may terminate this Agreement in respect of
any or all of the Services provided to the Company by Donnelly at any time upon
a minimum of thirty (30) days' notice to Donnelly.
3. Effect of Termination. Upon (a) the expiration of this Agreement, (b)
the termination of this Agreement pursuant to Section 4.1 or (c) the termination
of all of the Services pursuant to Section 4.2, all costs and other sums owed by
the Company to Donnelly for Services provided through the date of such
expiration or termination shall be paid on the date of such expiration or
termination without setoff or recoupment for matters outside of this Agreement.
5. MISCELLANEOUS PROVISIONS
5.1 Notices. All notices, requests, consents, or other communication
permitted or required under this Agreement must be in writing and will be deemed
to have been given when personally delivered, or when sent if sent via facsimile
(with receipt confirmed), or on the first business day after being sent by
reputable overnight carrier, or on the third business day after being sent by
registered or certified first-class mail (with receipt confirmed), to the
following: If to Donnelly: With a copy to:
49 W. Third St. Daniel C. Molhoek, Esq.
Holland, Michigan 49423 Varnum, Riddering, Schmidt
Attention: CFO & Howlett LLP
Telecopy No. (616) 786-5606 Suite 1600
Bridgewater Place
333 Bridge St., N.W., P.O. Box 352
Grand Rapids, MI 49501-0352
Telecopy No. (616) 336-7000
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<PAGE>
If to The Company: With a copy to:
Lear Corporation Bodman, Longley & Dahling, LLP
21557 Telegraph Road 755 W. Big Beaver Rd., Suite 2020
Southfield, MI 48034 Troy, MI 48084
Attn:Vice President and General Counsel Attn: Terrence B. Larkin, Esq.
Fax: (248) 447-1677 Fax: (248) 244-0780
provided, however, if either party shall have designated a different addressee
by notice, then to the last addressee so designated.
5.2 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns,
but no rights, interests or obligations of either party may be assigned without
the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, the Company may
assign all or any part of this Agreement and of the Company's rights, interests
or obligations hereunder to one or more of its affiliates (provided that no such
assignment shall relieve the Company of any of its obligations hereunder).
5.3 Entire Agreement. This Agreement and Schedule A attached hereto
represent the entire agreement and understanding between the parties with
respect to the transactions contemplated herein and shall supersede all prior
agreements, understandings, arrangements, covenants, representations, or
warranties, written or oral, of any party dealing with the subject matter
hereof.
5.4 Waiver. Any waiver by Donnelly or the Company of any breach or of a
failure to comply with any provision of this Agreement (i) shall be valid only
if set forth in a written instrument signed by the party to be bound, and (ii)
shall not constitute, or be construed as, a continuing waiver of such provision,
or a waiver of any other breach of, or failure to comply with, any provision of
this Agreement.
5.5 Severability. Should any provision, or any portion thereof, of this
Agreement for any reason be held invalid or unenforceable, such decision shall
not affect the validity or enforceability of any of the other provisions, or
portions thereof, of this Agreement, which other provisions, and portions, shall
remain in full force and effect, and the application of such invalid or
unenforceable provision, or portion thereof, to persons or circumstances other
than those as to which it is held invalid or unenforceable shall be valid and be
enforced to the fullest extent permitted by law.
5.6 Amendment. This Agreement may be amended only in writing by duly
authorized representatives of the parties.
5.7 Third Parties. Nothing contained in this Agreement is intended to or
shall be construed to confer upon or give any person other than the parties and
their respective permitted successors and assigns, any claims, rights, or
remedies under or by reason of this Agreement.
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<PAGE>
5.8 Relationship. The performance by Donnelly of its duties and obligations
under this Agreement shall be that of an independent contractor and nothing
herein contained shall create or imply an agency relationship between Donnelly
and the Company, nor shall this Agreement be deemed to constitute a joint
venture or partnership between Donnelly and the Company.
5.9 Headings. The headings contained in this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof.
5.10 Counterparts. More than one counterpart of this Agreement may be
executed by the parties, and each fully-executed counterpart shall be deemed an
original, but all of which, together shall constitute one and the same
instrument. All signatures of the parties to this Agreement may be transmitted
by facsimile, and such facsimile will for all purposes be deemed to be the
original signature of the person whose signature it reproduces and will be
binding upon the party on whose behalf that person signed.
5.11 Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal laws of the
State of Michigan, without giving effect to its principles of conflict of laws.
IN WITNESS WHEREOF, the parties have caused this Transition Services
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
DONNELLY CORPORATION
a Michigan corporation,
By: ____________________________________
Its: ___________________________________
LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C.,
a Michigan limited liability company
By: ____________________________________
Its: ___________________________________
Dated: ____________, 1999
6
<PAGE>
Exhibit 4.6(a)
THIS LEASE is made on ______, 1999, between DONNELLY CORPORATION; a
Michigan corporation, as Landlord, and LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C., a
Michigan limited liability company, as Tenant, and the parties agree as follows:
DESCRIPTION
(1) Landlord, in consideration of the covenants and agreements to be
performed by Tenant, hereby leases to Tenant the premises, known as 3401
128th Street, Holland, Michigan, but excluding the Model Shop located
therein, (the "Leased Premises") the legal description of which is as
follows: Lot 3, Northside Industrial Center, as recorded in Liber 27 of
Plats on Page 19, Holland, Ottawa County, Michigan. Landlord shall have
access through the Leased Premises to the Model Shop.
TERM
(2) The term shall begin on the date of execution of this Lease
("Commencement Date") and will end on August 1, 2000 unless earlier
terminated. Tenant shall have the right to terminate this Lease at any time
during the term hereof by so notifying Landlord, which notice must be given
at least sixty (60) days prior to the date that Tenant intends to vacate
the Leased Premises. Attached hereto as Exhibit A is Tenant's proposed
timetable to vacate the Leased Premises. Any holding over after the
termination of the Lease shall be construed to be a tenancy from month to
month at 150% of the rent specified herein and shall otherwise be on the
terms and conditions of this Lease, so far as applicable.
RENT AND TAXES
(3) Tenant shall pay rent to Landlord at a rate of $24,260 per month
in advance on the first of the month, without deduction or setoff. Said
smount includes a monthly amount equal to one-twelfth (1/12th) of the real
estate taxes and assessments, assessed against the Leased Premises by the
local taxing authority based on current tax bills. Upon expiration of the
Lease or earlier termination thereof as set forth herein, taxes for the
partial month of such expiration or termination shall be prorated based on
the number of days Tenant occupied the Leased Premises until expiration or
termination.
ASSIGNMENT AND
SUBLETTING
(4) Tenant may not assign this Lease or sublet all or any portion of
the Leased
Premises without the prior written consent of Landlord, except that
Tenant may assign or sublet to Lear for the sole purpose of conducting the
business of Tenant existing on the date hereof by employees or former
employees of Tenant.
USE AND OCCUPANCY
(5) Tenant will use the Leased Premises exclusively for manufacturing
purposes consistent with its current operations at the Leased Premises.
INSURANCE
(6) Tenant shall indemnify and hold Landlord harmless from any claims,
damages, liability and expense in connection with loss of life and/or
damage to property arising out of any occurrence on or about the Leased
Premises. Notwithstanding the foregoing, Landlord shall not be indemnified
against liability for damage arising out of bodily injury to persons or
damage to property caused by its negligent, willful and malicious acts or
omissions. Tenant at Tenant's expense, shall maintain public liability
insurance including bodily injury and property damage insuring Tenant and
Landlord.
During the term of this Lease, Tenant shall keep all buildings and
improvements on the Leased Premises insured for the benefit of Landlord and
Tenant as their respective interests may appear, against loss or damage by
fire and customary extended coverage on a full replacement cost basis. All
proceeds payable at any time and from time to time by any insurance company
under such policies as a result of a casualty to the Leased Premises shall
be payable to Landlord; provided that Tenant shall, at Landlord's cost and
expense, cooperate fully with Landlord in order to obtain the largest
possible recovery and execute any and all consents and other instruments
and take all other actions necessary or desirable in order to effectuate
the same and to cause such proceeds to be paid as hereinbefore provided.
Any insurance required to be provided by Tenant pursuant to this Lease
may be provided by blanket insurance covering the Leased Premises and other
locations of Tenant provided such blanket insurance complies with all of
the other requirements of this Lease with respect to the insurance
involved. Any such insurance may contain Tenant's customary deductibles.
Tenant shall provide evidence of insurance to Landlord.
FIRE
(7) It is understood and agreed that if the Leased Premises are
damaged or destroyed in whole or in part by fire or other casualty during
the term neither Landlord nor Tenant shall be obligated to repair or
restore the same. In such event, either Landlord or Tenant shall have the
option of terminating this Lease.
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REPAIRS
(8) The parties hereto agree that Landlord shall not be required to
perform any repairs, replacements or maintenance to the Leased Premises.
Tenant will, at Tenant's expense, during the continuation of this Lease,
perform ordinary, customary maintenance of the Leased Premises and fixtures
including, but not limited to, the mechanical, plumbing and electrical
systems, roof and landscape maintenance and snow removal; provided,
however, that Tenant shall not be required to make any replacements of a
capital nature. Tenant shall also repair and/or replace any damage to the
Leased Premises or fixtures caused by Tenant, its agents, employees,
invitees, contractors or customers. Tenant shall promptly inform Landlord
of the need for replacements with respect to those items for which Tenant
is not responsible under the terms of this paragraph.
ALTERATIONS
(9) Tenant shall not make any material alterations, additions or
improvements to the Leased Premises without Landlord's written consent, and
all alterations, additions or improvements made by either of the parties
hereto upon the Leased Premises shall be the property of Landlord and shall
remain upon and be surrendered with the Leased Premises at the termination
of this Lease.
COMPLIANCE
WITH LAWS
(10) During the term of this Lease, the Tenant shall at Tenant's own
expense under penalty of forfeiture and damages promptly comply with all
lawful laws, orders, regulations or ordinances of all municipal, County and
State authorities affecting the Leased Premises hereby leased and the
cleanliness, safety, occupation and use of same. Tenant shall remediate any
environmental contamination of the Premises occurring from and after the
Commencement Date and shall indemnify and hold Landlord harmless from any
liability, cost and expenses relating thereto. Tenant's obligations in this
paragraph shall survive the expiration or other termination of this Lease.
EMINENT DOMAIN
(11) If any part of the Leased Premises shall be taken or condemned
for public use, and a part thereof remains which is susceptible of
occupation, this Lease shall, as to the part taken, terminate as of the
date the condemner acquires possession, and thereafter either Landlord or
Tenant may terminate this Lease.
CONDITION OF
PREMISES
(12) Tenant hereby accepts the Leased Premises in their present
condition at the date of the execution of this Lease. At the expiration or
earlier termination of this Lease, Tenant shall deliver up the Leased
Premises "broom clean" and in the same condition as of the Commencement
Date, reasonable wear and tear excepted. Landlord makes no representation
or warranty as to the condition of the Leased Premises and Landlord shall
not be liable for any latent or patent defect.
GAS, WATER,
HEAT, ELECTRICITY
(13) Tenant shall promptly pay all charges made against the Leased
Premises for gas, water, sewer, heat and electricity and any other utility
charges during the continuance of this lease, as the charges become due.
REENTRY
(14) If default be made in any of the covenants herein contained, or
if the Leased Premises shall be deserted or vacated, then it shall be
lawful for the Landlord, its certain attorney, heirs, representatives and
assigns, to reenter into, repossess the Leased Premises and the Tenant and
each and every occupant to remove and put out. Landlord may re-let the
Leased Premises on such terms and conditions as Landlord may determine, in
its reasonable discretion, and any monies received from such re-letting
shall be first applied to the expenses of such re-letting and thereafter
toward payment of all sums due or to become due Landlord hereunder, and if
a sufficient sum shall not be thus realized to pay such sums and other
charges, Tenant shall pay Landlord any deficiency monthly, and Landlord may
bring an action therefor if such monthly deficiency shall arise. Tenant
shall pay all costs of Landlord obtaining possession upon default,
including reasonable attorney fees.
QUIET ENJOYMENT
(15) Landlord covenants that Tenant, on payment of rent and taxes due
and performing all the covenants herein, shall and may peacefully and
quietly have, hold and enjoy the Leased Premises for the term.
REMEDIES NOT
EXCLUSIVE
(16) It is agreed that each and every of the rights, remedies and
benefits provided by this Lease shall be cumulative, and shall not be
exclusive of any other of said rights, remedies and benefits, or of any
other rights, remedies and benefits allowed by law.
WAIVER
(17) One or more waivers of any covenant or condition by Landlord
shall not be construed as a waiver of a further breach of the same covenant
or condition.
NOTICES
(18) Any notice which either party may or is required to give, shall
be given by mailing the same, postage prepaid, to Tenant at the premises,
(with a copy to Lear Corporation, 21557 Telegraph Road, Southfield,
Michigan 48034) or to Landlord, at 49 West Third Street, Holland, Michigan
49423, or at such
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<PAGE>
other place as may be designated by the parties from time to time.
IN WITNESS WHEREOF, The parties have hereunto set their hands and seals the
day and year first above written.
WITNESSED BY: TENANT
LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C.,
_________________________________ a Michigan limited liability company
By:__________________________
Its:_________________________
LANDLORD
DONNELLY CORPORATION,
_________________________________ a Michigan corporation
By:__________________________
Its:_________________________
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EXHIBIT A
TO
HOLLAND FACILITY LEASE
Tenant estimates that it will vacate the Leased Premises on or about
February 29, 2000.
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<PAGE>
Exhibit 4.6(b)
HOLLAND FACILITY LEASED WORKER AGREEMENT
THIS LEASED WORKER AGREEMENT (this "Agreement") is entered into as of this
____ day of _____________, 1999 (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 (the "Company").
RECITALS:
Donnelly, the Company and Lear Corporation are parties to a Redemption and
Purchase Agreement dated the date hereof (the "Purchase Agreement"). This
Agreement is entered into in order that the Company may lease certain Donnelly
employees for use in connection with the Company's continued operation of the
Holland Facility (as defined in the Purchase Agreement) pursuant to Section 4.7
of the Purchase 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 Definition. "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.
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, and as soon after the Effective Date as
practical, Donnelly will offer employment to the other employees listed on
Schedule A and will assign those persons who accept employment as Leased
Employees, to perform the services performed by such Leased Workers immediately
prior to the Effective Date ("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, or to remove employees no longer
assigned to the Company, as Leased Workers under this Agreement.
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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 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 the amounts set forth on
Schedule B for Services performed by Leased Workers. 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 coverage for Leased Workers, covering any compensable
work-related injuries or illnesses they sustain on the premises owned or leased
to the Company during their work assignment with respect to injuries first
occurring after the applicable Effective Date. 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 or exposure to hazardous materials
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
2
<PAGE>
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 decide 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 and medical 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 on request.
ARTICLE 4
TERM
On the date hereof, Donnelly and the Company have entered into a lease of
the Holland Facility (the "Holland Facility Lease"). The term of Holland
Facility Lease will end on August 1, 2000 unless earlier terminated. The term of
this Agreement shall commence on the Effective Date and shall terminate on
August 1, 2000 or such earlier date that the Holland Facility Lease is
terminated by the Company in accordance with the provisions contained therein
for early termination.
3
<PAGE>
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 fifteen (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 the Company: c/o Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Attention: Vice President and General Counsel
Telecopy No. (248) 447-1677
4
<PAGE>
To Donnelly: Donnelly Corporation
49 W. Third St.
Holland, Michigan 49423
Attention: Chief Financial Officer
Telecopy No. (616) 786-5606
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 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 and any other
related written agreement between the parties hereto 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.
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 Purchase Agreement, neither this
Agreement nor any rights or
5
<PAGE>
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.
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 party or Directors) arises among the parties under
this Agreement which is not resolved by good faith negotiation, then such
Dispute, upon thirty (30) days' prior notice from one party 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 parties shall attempt to agree upon an arbitrator. If one
cannot be agreed upon, the party 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
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 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 party not giving the Arbitration Notice.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
DONNELLY CORPORATION
By: ___________________________________
LEAR DONNELLY OVERHEAD
SYSTEMS, L.L.C.
By: ___________________________________
7
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Schedule A Leased Workers
Schedule B Payment by Company to Donnelly
8
<PAGE>
SCHEDULE B
All compensation except bonus times 132.5% for all office and 152.5% for
plant and the amount of all bonuses.
9
<PAGE>
Exhibit 4.7(a)
EUROTRIM AGREEMENT
This Agreement (the "Agreement") dated as of September __, 1999, by and
between DONNELLY CORPORATION, a Michigan corporation ("Donnelly") and LEAR
DONNELLY OVERHEAD SYSTEMS, L.L.C., a Michigan limited liability company (the
"Company").
RECITALS
Donnelly, the Company and Lear Corporation are parties to a Redemption and
Purchase Agreement dated the date hereof (the "Purchase Agreement"). This
Agreement is entered into pursuant to Section 4.7 of the Purchase Agreement.
NOW, THEREFORE, the parties intending to be legally bound, agree as
follows:
1. JCI-Becker Order. Attached hereto as Exhibit A is a copy of the
contract/purchase order that is the subject of this Agreement (the "JCI-Becker
Order"). Donnelly agrees to use its best efforts to obtain the approval of
JCI-Becker or Volvo to transfer the portion of the JCI-Becker Order relating to
the Console (as hereafter defined) to the Company. Donnelly and the Company will
cooperate to the fullest extent to obtain such approval.
2. Obligations of Donnelly. Donnelly shall supply JCI-Becker or Volvo with
all mirrors and incorporated electronics required under the JCI-Becker Order.
The mirrors and incorporated electronics are described in detail on Exhibit B
attached hereto. The mirrors and incorporated electronics will be supplied by
Donnelly on the prices and terms described in Exhibit B. Donnelly shall be
solely responsible for payment of any commissions due Intac International HB in
connection with the mirrors and incorporated electronics.
3. Obligations of the Company. After the approval of JCI-Becker or Volvo to
the partial transfer of the JCI Becker Order, the Company or Donnelly Eurotrim
Limited ("Eurotrim") shall supply JCI-Becker with the consoles, map light and
lenses (collectively, the "Console") required under the JCI-Becker Order. The
Console is described in detail on Exhibit C attached hereto. The Console will be
supplied by the Company or Eurotrim on the prices and terms described in Exhibit
C. The Company shall be solely responsible for payment of any commissions due
Intac International HB in connection with the Console. Until the approval of
JCI-Becker or Volvo to the partial transfer of the JCI-Becker Order, the Company
will supply consoles to Donnelly on the prices and terms set forth on Exhibit C,
will indemnify Donnelly from all claims, obligations and liability arising from
its sale of the Consoles.
4. Actions by Volvo. As of the date hereof, Volvo has not authorized the
procedures proposed above in Section 1 and 2. If, subsequent to the date hereof,
Volvo does not give its authorization, Donnelly will either obtain Volvo's
approval to subcontract the orders to the Company or Donnelly itself will
complete the orders and will pay all of its EBIT earnings
<PAGE>
(any depreciation of assets provided by Lear will not be subtracted in
determining this figure) on the manufacturing of the Consoles to the Company. If
the parties hereto are unable to agree on the determination of EBIT earnings on
the Consoles, this matter will be settled by arbitration in accordance with the
procedure set forth in Section 9.16 of the Purchase Agreement.
5. Eurotrim Assets. Section 1.1 of the Purchase Agreement provides that the
Eurotrim assets described on Schedule 1.1 (d) (the "Donnelly Eurotrim Assets")
to the Purchase Agreement will be acquired by Donnelly in connection with the
partial redemption of Donnelly's membership interest in the Company. As of the
date hereof, the parties have not determined the most appropriate method for
transferring the Donnelly/Eurotrim Assets to Donnelly. Accordingly, on the date
hereof, possession of the Donnelly/Eurotrim Assets will be given to Donnelly and
Donnelly will hold them as agent for Eurotrim. The parties shall forthwith
determine the appropriate manner to transfer all ownership rights to Donnelly.
All costs and expenses (including taxes, if any) will be borne equally by the
parties.
6. Termination. This Agreement shall terminate upon completion of the JCI-
Becker Order and receipt and disbursement to the parties of all amounts due
thereunder.
7. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns,
but no rights, interests or obligations of either party may be assigned without
the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, the Company may
assign all or any part of this Agreement and of the Company's rights, interests
or obligations hereunder to one or more of its affiliates (provided that no such
assignment shall relieve the Company of any of its obligations hereunder).
8. Entire Agreement. This Agreement represents the entire agreement and
understanding between the parties with respect to the transactions contemplated
herein and shall supersede all prior agreements, understandings, arrangements,
covenants, representations, or warranties, written or oral, of any party dealing
with the subject matter hereof.
9. Headings. The headings contained in this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof.
10. Counterparts. More than one counterpart of this Agreement may be
executed by the parties, and each fully-executed counterpart shall be deemed an
original, but all of which, together shall constitute one and the same
instrument. All signatures of the parties to this Agreement may be transmitted
by facsimile, and such facsimile will for all purposes be deemed to be the
original signature of the person whose signature it reproduces and will be
binding upon the party on whose behalf that person signed.
11. Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal laws of the
State of Michigan, without giving effect to its principles of conflict of laws.
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
DONNELLY CORPORATION
a Michigan corporation,
By: _____________________________________
Its: _____________________________________
LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C.,
a Michigan limited liability company
By: _____________________________________
Its: _____________________________________
3
<PAGE>
Exhibit 4.7(b)
EUROTRIM LEASED WORKER AGREEMENT
THIS EUROTRIM LEASED WORKER AGREEMENT (this "Agreement") is entered into by
and among DONNELLY CORPORATION, a Michigan corporation on behalf of itself and
on behalf of Donnelly Mirrors Limited, an Irish corporation (collectively,
"Donnelly"), EUROTRIM LIMITED, an Irish corporation ("Eurotrim") and LEAR
DONNELLY OVERHEAD SYSTEMS L.L.C., a Michigan limited liability company (together
with its subsidiaries, the "Company") as of this _____ day of September, 1999,
to be effective as of the effective date of the Redemption and Purchase
Agreement (the "Effective Date"),.
RECITALS:
WHEREAS, Lear Corporation and Donnelly Corporation as members of the
Company and the Company itself have executed a Redemption and Purchase Agreement
dated the date hereof (the "Redemption and Purchase Agreement") providing for
the redemption by the Company of part of Donnelly's membership interest and the
sale to a Lear affiliate of the remainder of Donnelly's membership interest in
the Company;
WHEREAS, the parties desire that Donnelly shall provide certain services to
Eurotrim for the term of this 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
SERVICES TO BE PROVIDED BY DONNELLY
1.1 "Personnel" shall mean those persons identified on Schedule A who are
either employed by or under contract with Donnelly, as supplemented from time to
time to include additional Donnelly employees or contract personnel, if any,
assigned by Donnelly to provide Services to Eurotrim pursuant to this Agreement.
The Personnel include "Management Personnel" and "Production Personnel" as
identified on Schedule A. Donnelly may substitute different individuals for
those listed on Schedule A.
1.2 Services. Effective as of the Effective Date, Donnelly shall provide
Services to Eurotrim for the term specified in Article 3. "Services" to be
provided shall include general administration, engineering and logistics by the
Management Personnel and shall include production by the Production Personnel.
<PAGE>
1.3 Employee and Contractor Compensation. While Personal are performing
Services under this Agreement, Donnelly will pay all wages or other compensation
and provide all benefits to the Personnel and the Management Team, subject to
payment by Eurotrim for the Services as provided by this Agreement.
1.4 Status. Personnel assigned to perform Services for Eurotrim are solely
the employees or contractors of Donnelly and nothing contained in this Agreement
shall be construed to create any other relationship between the parties.
Donnelly will maintain all necessary payroll and personnel records and compute
wages and withhold applicable taxes and other charges for the Personnel.
Donnelly has sole responsibility to determine compensation and terminate
Personnel assigned pursuant to this Agreement.
ARTICLE 2
PAYMENTS BY EUROTRIM TO DONNELLY
2.1 Payment. During the term of this Agreement, Eurotrim shall pay Donnelly
the following: (a) with respect to Management Personnel a fee of $____________
per month (prorated for partial months). The Personnel were employees of
Eurotrim. With the uncertainty of the transition, there was concern that those
employees would leave to seek other employment. Donnelly had been requested by
Eurotrim officials to provide management services and had been informed of the
likelihood of Eurotrim's subcontracting production to Donnelly and that no
Company entity would exist after closing of the Redemption and Purchase
Agreement. In order to retain the services of the Personnel, Donnelly entered
into agreements with them guaranteeing them for three or six months employment
and a bonus of one month's or two month's salary for each individual who stayed
the entire term of the employment agreement. Therefore, if Eurotrim or the
Company terminates this Agreement early, it shall continue paying to Donnelly
the monthly charge of $_______ through December 1, 1999; (b) with respect to
Production Personnel and any of Donnelly's employees assigned to perform
Services at Eurotrim, Eurotrim shall pay Donnelly a fee equal to Donnelly's
direct and indirect costs (including social benefits and other benefits) of such
Production Personnel for the hours worked at an amount equal to direct wages
plus ___%. 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
TERM AND TERMINATION
3.1 Term. The term of this Agreement shall be from the Effective Date
through December 1, 1999, unless extended by the written agreement of the
parties hereto. Eurotrim may terminate this Agreement prior to December 1, 1999,
by giving 45 days prior written notice of termination to Donnelly.
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<PAGE>
ARTICLE 4
ADDITIONAL TERMS
4.1 Severance. The Company and Eurotrim shall remain liable for all costs
with respect to pensions, benefits and severance for all service of Personnel
prior to the Effective Date.
4.2 Drug/Alcohol Policy. Personnel will be subject to Donnelly's Employee
Alcohol and Drug Testing policy. Donnelly will pay for the cost of the
aforementioned tests, and will determine what disciplinary action must be taken
in the event of a positive test result.
4.3 Employment Laws. Donnelly, Eurotrim and the Company shall comply with
all applicable laws applicable to the Personnel.
4.4 Safety. Eurotrim shall provide the Personnel 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.
Eurotrim 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 Eurotrim provides for the Personnel, or (ii)
any violations of applicable safety or health standards, statutes and
ordinances.
4.5 Records. Personnel files for Personnel will be maintained by Donnelly.
ARTICLE 5
NO LIABILITY
Donnelly shall not be liable for, and Eurotrim and the Company hold
harmless Donnelly, 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 the
performance of the Services by Personnel pursuant to this Agreement. Donnelly is
not responsible for the profitability or financial performance of Eurotrim or
the Company and does not make any representation or warranty with respect to
Eurotrim's productivity or profitability during the term of this Agreement.
Donnelly is an independent contractor with respect to Eurotrim and the Company.
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<PAGE>
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 telescope, 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
Facsimile No. (616) 786-6034
With a copy to: Varnum, Riddering, Howlett & Schmidt LP
Suite 1600, Bridgewater Place
333 Bridge Street, NW, P.O. Box 352
Grand Rapids, Michigan 49504
Attention: Daniel Molhoek
Facsimile No. (616) 336-7000
To the Company
or Eurotrim: Lear Donnelly Overhead Systems, L.L.C.
39650 Orchard Hill Place
Novi, Michigan 48375
Attention: Richard Perrault
Facsimile No. ________________
With a copy to: Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Attention: Vice President and
General Counsel
Facsimile 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.
-4-
<PAGE>
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 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 Redemption and
Purchase 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, 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.
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 arises under this
Agreement among the parties hereto which is not resolved by good faith
negotiation, then such Dispute, upon 30 days' prior notice from one party hereto
to the other parties 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
-5-
<PAGE>
(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 party 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 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 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 party 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__________________________________
LEAR DONNELLY OVERHEAD SYSTEMS, LLC
By__________________________________
EUROTRIM LIMITED
By__________________________________
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<PAGE>
SCHEDULE A
LIST OF PERSONNEL
OPEN
Management Personnel:
Production Personnel:
<PAGE>
Exhibit 4.8
TECHNOLOGY TRANSFER AND LICENSE AGREEMENT
This Technology Transfer and License Agreement (this "Agreement") is
entered into effective as of ___________, 1999 (the "Effective Date"), by and
between Donnelly Corporation, a Michigan corporation ("Donnelly") and Lear
Donnelly Overhead Systems L.L.C., a Michigan limited liability company (the
"Company").
RECITALS
Donnelly and Lear Corporation ("Lear") have heretofore been the members of
the Company. As of the Effective Date, Donnelly has redeemed in part its
membership interest and sold its remaining interest to Lear or its affiliates
pursuant to a Redemption and Purchase Agreement (the "Purchase Agreement").
In conjunction with the closing of the Purchase Agreement, Donnelly has
agreed to (a) license certain of its patents, technology and intellectual
property rights to the Company and its affiliates, and (b) transfer certain
patents, technology and intellectual property rights to the Company and receive
a license back from the Company, consistent with the previously executed
Donnelly Technology License Agreement dated November 1, 1997 (the "Prior
Agreement").
Donnelly and the Company desire to enter into this Agreement to provide for
such transfers and licenses.
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 I
Definitions
1.1 "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. A person or
entity shall be considered an Affiliate only so long as it continues to satisfy
these criteria for an Affiliate. Each respective licensee under this Agreement
shall be responsible for its Affiliates' compliance with this Agreement.
1.2 "Company Improvements" means Improvements to the Technology licensed
under the Prior Agreement which were conceived by Company personnel or by third
party personnel working on the Company's behalf and owned by the Company.
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1.3 "Donnelly Affiliate" means any entity in which Donnelly has a direct or
indirect ownership interest of at least 50%.
1.4 "Electronic Components" means those electronics described on Schedule B
hereto which are included within Products.
1.5 "Group A Items" means the items identified on Group A on Schedule A
hereto (except the Rail Module Serial No. 29/032,836 and the Vehicle Rail Module
Exterior Surface Incorporating a Handle, Coathook and Lamp Serial No.
29,057,275). This definition includes, but is not limited to, any and all
materials and technical, written and graphic information (embodied in whatever
media and format) relating to Group A Items and/or processes for design,
application, manufacture and/or use thereof, including, but not limited to,
data, know-how, drawings, blue prints, specifications, engineering, technical
and cost data, engineering and design information, testing and quality control
procedures, operating techniques, processes and computer software.
1.6 "Group B Items" means the items identified on Group B on Schedule A
hereto and the Rail Module Serial No. 29/032,836 and the Vehicle Rail Module
Exterior Surface Incorporating a Handle, Coathook and Lamp Serial No. 29,057,275
which are included within Group A in Schedule A hereto. This definition
includes, but is not limited to, any and all materials and technical, written
and graphic information (embodied in whatever media and format) relating to
Group B Items and/or processes for design, application, manufacture and/or use
thereof, including, but not limited to, data, know-how, drawings, blue prints,
specifications, engineering, technical and cost data, engineering and design
information, testing and quality control procedures, operating techniques,
processes and computer software.
1.7 "Group C Items" means the items identified on Group C on Schedule A
hereto. This definition includes, but is not limited to, any and all materials
and technical, written and graphic information (embodied in whatever media and
format) relating to Group C Items and/or processes for design, application,
manufacture and/or use thereof, including, but not limited to, data, know-how,
drawings, blue prints, specifications, engineering, technical and cost data,
engineering and design information, testing and quality control procedures,
operating techniques, processes and computer software.
1.8 "Intellectual Property Rights" means 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 the Prior Agreement.
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1.9 "Improvement" means (i) any alteration, modification or enhancement to
Products which improves the effectiveness, efficiency, performance or other
attribute of, or related to, an Item, or any element thereof, and (ii) any new
product or material which performs substantially the same function as Products,
but does so through a different method or process.
1.10 "Items" means the Group A Items, Group B Items and Group C Items
collectively.
1.11 "Jointly Developed Technology" means Technology and Intellectual
Property Rights developed jointly between Donnelly and the Company, Donnelly and
Lear, and/or Donnelly, Lear and the Company under the Prior Agreement.
1.12 "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.
1.13 "Prior Agreement" means the Donnelly Technology License Agreement
between Lear, the Company and Donnelly dated November 1, 1997.
1.14 "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 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.
1.15 "Technology" shall mean technological developments principally
covering or principally used in the manufacture of Products including, but not
limited to, the technology described as Group A Items or Group B Items 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 the Prior 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, (b) optics or lenses, or (c) bent or coated glass.
ARTICLE 2
Transfer And Sale Of Group B Proprietary Rights
2.1 Sale by Donnelly to the Company. Donnelly hereby agrees to assign,
sell, transfer, convey and deliver to the Company its entire right, title and
interest, including, but not limited to, all Intellectual Property Rights, in
and to the Group B Items, free and clear of all
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liabilities, obligations, liens, pledges, mortgages, security interests or other
encumbrances of any kind. The Group B Items shall be transferred pursuant to the
Assignment Agreements attached hereto and such other assignments, agreements and
documents as the Company shall reasonably require to effectuate said transfer
and sale.
ARTICLE 3
Licenses
3.1 License of Group A Items. Donnelly hereby grants to the Company and its
Affiliates a perpetual, royalty-free, paid-up, worldwide, non-exclusive license
(with the right to sublicense without any royalty obligation to Donnelly) to
copy, manufacture, have manufactured, use, sell, offer to sell, create
derivative works of, create Improvements to, modify, enhance, adapt, translate,
disassemble, decompile, reverse engineer and distribute the Group A Items solely
as incorporated within, or in association with, the design, development,
manufacture, testing and sale of the Products. Donnelly retains ownership of the
Group A Items.
3.2 License of Group B Items. The Company hereby grants to Donnelly a
perpetual, royalty-free, paid-up, worldwide, exclusive license, except as to the
Company, Lear and each of their Affiliates, to copy, manufacture, have
manufactured, use, sell, offer to sell, create derivative works of, create
Improvements to, modify, enhance, adapt, translate, disassemble, decompile,
reverse engineer and distribute the Group B Items solely as incorporated within,
or in association with, the design, development, manufacture, testing and sale
of products and materials in all fields except Products. Donnelly is prohibited
from using the Group B Items or any rights granted in this license for any
purpose related to the design, development, manufacture, testing and/or sale of
Products. Notwithstanding the foregoing, the license to Donnelly of the Group B
Items shall terminate immediately upon Donnelly ceasing to be an independent,
public corporation. In such event all rights under the license of the Group B
Items contained in this Article (including any sublicense to a Donnelly
Affiliate) shall terminate immediately.
3.2.1 Sublicensing of License Rights to Group B Items. Donnelly's
license rights to the Group B Items are nontransferable and nonassignable
by Donnelly other than to a Donnelly Affiliate; provided however that a
Donnelly Affiliate shall have no right to further transfer, assign, rent,
pledge, lease, sell or sublicense any of the license rights to the Group B
Items.
3.3 License of Group C Items. Donnelly, Lear and the Company have entered
into a Supply Agreement of even date under which Donnelly agrees to supply
mirrors and electronics to JCI-Becker or Volvo under the existing purchase
order. To the extent Donnelly does not supply such mirrors or electronics,
whether or not at the insistence of JCI-Becker, or Volvo, Donnelly agrees to
grant to the Company and its Affiliates a royalty-free, paid-up, worldwide
non-exclusive license (with the right to sublicense) to copy, manufacture, have
manufactured, use, sell, offer to sell, create derivative works of, create
Improvements to, modify, enhance, adapt, translate, disassemble, decompile,
reverse engineer and distribute the Group C Items solely as incorporated within,
or in association with, the design, development, manufacture, testing and sale
of the Products to JCI- Becker or Volvo under purchase orders or contracts
existing as of the Effective Date or any renewals or extensions thereof.
Donnelly retains ownership of the Group C Items.
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ARTICLE 4
Improvements, Jointly Developed Technology And Licenses Granted
Between The Company And Donnelly
4.1 Ownership of Company Improvements and Jointly Developed Technology. The
Company owns all rights, title and interest, including, but not limited to, all
Intellectual Property rights in and to all Company Improvements and Jointly
Developed Technology.
4.2 License Grant of Company Improvements and Jointly Developed Technology.
The Company hereby grants and agrees to grant to Donnelly, a royalty-free,
paid-up, worldwide, non-exclusive, non-transferrable license of Company
Improvements and Jointly Developed Technology in accordance with, and subject to
all of the terms of, the license granted to Donnelly in Article 3.2.
4.3 Ownership of Donnelly Improvements. Donnelly owns all rights, title and
interest, including, but not limited to Intellectual Property Rights in and to
all Donnelly Improvements.
4.4 License Grant of Technology. Donnelly hereby grants and agrees to grant
to the Company, a royalty-free, paid-up, worldwide, non-exclusive,
non-transferable license of the Technology in accordance with, and subject to
all of the terms of, the license granted to Company in Articles 3.1 and 3.3
respectively.
ARTICLE 5
Confidentiality
5.1 Confidentiality. Under the Prior Agreement, Donnelly and the Company
had access to information that the other considered to be confidential and/or a
trade secret. This information included, but was not limited to, technical
know-how, technical specifications, software code, manners of conducting
business and operations, strategic business plans, systems, results of testing,
financial information, product information, concepts, compilations of data, and
customer, vendor and third-party information ("Confidential Information"). Each
party shall use the other's Confidential Information only in relation to its
obligation under this Agreement. Each party shall maintain the confidentiality
of all Confidential Information and shall protect the confidentiality of the
Confidential Information in the same manner which it protects its own
information of like kind, but in no event shall either party take less than
reasonable precautions to prevent the unauthorized disclosure of the
Confidential Information. Each party is permitted to disclose Confidential
Information to its employees and authorized subcontractors on a need to know
basis only, provided that all such employees and subcontractors have written
confidentiality obligations to that party. Each party shall be responsible for,
and shall indemnify and hold the other party harmless against any damages
arising from, any unauthorized disclosure of Confidential Information. These
confidentiality provisions do not apply to information that is
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entirely in the public domain; was known to either party prior to access to the
information; received lawfully from a third party through no breach of any
obligation of confidentiality owed to the other party; is created by that
party's employees independently of the other party's Confidential Information,
or any information at all following a period of ten (10) years from the date of
its receipt.
ARTICLE 6
Warranties/Termination of Existing Agreement
6.1 Donnelly Warranty. Donnelly represents and warrants that except with
respect to the Prince License (as defined below) and with respect to Patent No.
5,791,772, which is titled in Chrysler Corporation but should be jointly titled
in Donnelly and Chrysler Corporation to its knowledge (i) the Items are free and
clear of all liens and claims and (ii) the Items do not infringe upon the
proprietary rights of any third parties nor have any claims of infringement been
made. The Prince License means the Limited License Agreement between Prince
Corporation and Donnelly dated March 9, 1998.
6.2 Termination of the Prior Agreement. This Agreement supersedes the Prior
Agreement. The Prior Agreement is null and void as of the Effective Date.
6.3 No Other Rights. Except as expressly set forth in this Agreement,
Donnelly has no rights of any kind whatsoever in any of the Company's
Intellectual Property Rights or technology including but not limited to, any
rights acquired or to be acquired by the Company under the Lear Technology
License Agreement dated November 1, 1997.
ARTICLE 7
Construction
7.1 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.
7.2 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 addresses:
To Donnelly: Donnelly Corporation
49 W. Third St.
Holland, Michigan 49423
Attention: CFO
Telecopy No. (616) 786-5606
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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: c/o Lear Corporation
21557 Telegraph Road
Southfield, MI 48034
Attention: Vice President and
General Counsel
Telecopy No. (248) 447-1677
7.3 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.
7.4 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.
7.5 No Third Party Rights. This Agreement is intended to create enforceable
rights between the parties hereto and their successors and assigns only, and
creates no rights in, or obligations to, any other Persons whatsoever.
7.6 Amendments. This Agreement may not be amended except by written
agreement executed by duly authorized officers of the parties hereto.
7.7 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.
7.8 Assignment. Except as otherwise specifically provided in this Section,
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. In
addition, the licenses contained in this Agreement may not be assigned by
operation of law by any party hereto pursuant to a merger, acquisition, sale of
substantially all of its assets or other corporate restructuring. This Agreement
and any and all of the rights, interests, licenses or obligations hereunder may
be assigned by the Company to Lear and its affiliates without the consent of
Donnelly.
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7.9 Waiver. Any waiver of a provision of this Agreement or of a party's
right or remedy under this Agreement must be in writing, signed by that party,
to be effective. Failure, neglect, or delay by a party to enforce the provisions
of this Agreement or its rights or remedies at any time, will not be deemed a
waiver of such party's rights or remedies and will not affect the validity of
this Agreement, or part thereof, or prejudice such party's right to take
subsequent actions.
7.10 Surviving Provisions. All provisions of this Agreement relating to
confidentiality, ownership, limitations of liability and any other subject that
would, by its nature, be deemed to survive termination of this Agreement, shall
survive the termination of this Agreement.
7.11 Relationship of Parties. The relationship between Donnelly and the
Company is that of independent contract. Nothing in this Agreement shall be
construed as creating a relationship of joint venturers, partners,
employer-employee, or agent. Neither party has the authority to create any
obligations for the other, or to bind the other to any representation or
document.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
DONNELLY CORPORATION
By: _______________________________________
Its: _______________________________________
LEAR DONNELLY OVERHEAD SYSTEMS, LLC
By: _______________________________________
Its: _______________________________________
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ASSIGNMENT
WHEREAS, DONNELLY CORPORATION ("Assignor"), whose full post office address
is 49 W. Third Street, Holland, Michigan 49423, United States of America, is the
owner of the U.S. Patents and Applications listed in the attached Addendum.
AND WHEREAS, LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C., whose full post office
address is 21557 Telegraph Road, Southfield, Michigan 48034, United States of
America, is desirous of acquiring the entire right, title and interest in the
said Letters Patents and Applications.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the aforesaid DONNELLY CORPORATION does hereby sell and
assign to the aforesaid LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C., its entire
right, title and interest in and to the above-mentioned United States Letters
Patents and Applications, the same to be held and enjoyed by the aforesaid LEAR
DONNELLY OVERHEAD SYSTEMS, L.L.C., to the full end of the term for which any
such Letters Patent or issued Application is granted as fully and entirely as
the same could have been enjoyed by the aforesaid DONNELLY CORPORATION if this
Assignment and sale had not been made, including the right to sue for past
infringements; and hereby requests the Commissioner of Patents to issue the said
Letters Patent to the aforesaid LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C., in
accordance with this Assignment.
DONNELLY CORPORATION
By:__________________________________
Position:____________________________
Date:________________________________
Page 1 of 2
<PAGE>
ADDENDUM
Issued Patents
--------------
Des. 403,998
5,662,375
5,688,022
5,791,772
Pending Applications
--------------------
08/349,031
08/312,820
08/804,354
29/059,275
Page 2 of 2
<PAGE>
ASSIGNMENT AGREEMENT
1. Parties; Effective Date. This Assignment Agreement ("Assignment") is
between Donnelly Corporation ("Assignor") and Lear Donnelly Overhead
Systems, L.L.C. (the "Assignee") and is made pursuant to the terms of
the Technology Transfer And License Agreement between the parties
dated September __, 1999 (the "Agreement"). This Assignment is
effective as of September __, 1999.
2. Terms of Agreement. Unless otherwise specified in this Assignment, the
terms of the Agreement shall apply to and are incorporated into this
Assignment and all capitalized terms in this Assignment shall have the
meanings ascribed to them in the Agreement. The terms of this
Assignment shall govern any conflicts or inconsistencies with the
terms of the Agreement.
3. Assigned Materials. Assignor owns the rights to the materials and
items which are set forth on Exhibit A to this Assignment ("Group B
Items"), which consist of (i) those items described in Group B on
Schedule A to the Agreement and (ii) U.S. Design Patent No. 403,498
(Serial No. 29/032,806) entitled "Rail Module" and U.S. Patent
application Serial No. 29/057,275 entitled "Vehicle Rail Module
Exterior Surface Incorporating a Handle, Coathook and Lamp" which are
included in Group A on Schedule A. For the purposes of this
Assignment, Assigned Materials includes (a) all Group B Items; (b) any
and all materials and technical, written and graphic information
(embodied in whatever media and format) relating to Group B Items
and/or processes for design, application, manufacture and/or use
thereof; and (c) data, know-how, drawings, blue prints,
specifications, engineering, technical and cost data, engineering and
design information, testing and quality control procedures, operating
techniques, processes and computer software (object code and source
code versions) with respect to Group B Items.
4. Assignment. For good and valuable consideration, the receipt and
sufficiency of which is acknowledged by the signing of this
Assignment, Assignor hereby assigns, sells, transfers, conveys and
delivers to Assignee its entire right, title and interest, including,
but not limited to, all Intellectual Property Rights, in and to the
Assigned Materials, free and clear of all liabilities, obligations,
liens, pledges, mortgages, security interests or other encumbrances of
any kind.
5. Assistance. Assignor agrees to provide, at no additional cost, its
best efforts to assist as required by Assignee to perfect its
interests in the Assigned Materials, such as cooperation with
Assignee's attorneys in the preparation of applications for copyright
protection or patent protection of the Assigned Materials.
________________________________________________________________________________
Assignor _________________ Assignee ________________
<PAGE>
Made and executed by Assignor in favor of Assignee this ____ day of September,
1999.
Donnelly Corporation
By: _______________________________________
(signature)
Name: _____________________________________
(signature)
Title: ____________________________________
STATE OF MICHIGAN )
) SS.
COUNTY OF )
On this __ day of September, 1999, before me, a Notary Public in and for
said County and State, personally appeared ____________, who, being duly sworn,
deposes and says that he is the _____________ of Assignor Corporation, the
corporation described in the above Assignment and that he executed the above
assignment as a free act on behalf and with full authority of Assignor
Corporation.
_________________________________
NOTARY PUBLIC
Assignor _____________ Assignee ______________
<PAGE>
Exhibit 4.10
DONNELLY AMENDED NONCOMPETITION AND
NON-SOLICITATION AGREEMENT
THIS AMENDED NONCOMPETITION AND NON-SOLICITATION AGREEMENT ("Agreement") is
dated as of ___________, 1999 by and among LEAR CORPORATION, a Delaware
corporation ("Lear"), DONNELLY CORPORATION, a Michigan corporation ("Donnelly")
and LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C., a Michigan limited liability company
("Company"). Capitalized terms not otherwise defined herein shall have the
meaning set forth in the Purchase Agreement (as defined below).
RECITALS
Lear, Donnelly and the Company are parties to a Redemption and Purchase
Agreement dated _______, 1999 (the "Purchase Agreement") whereunder Donnelly's
member interest in the Company was terminated. Pursuant to, and in consideration
of Lear and the Company entering into the Purchase 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 Purchase
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 past relationship with the Company, Donnelly has transferred
certain information to the Company and/or Lear, and has been exposed to and
has received 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
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thereafter, it will keep all Confidential Information strictly
confidential; during the Term and thereafter it will not use any
Confidential Information except pursuant to the Purchase Agreement and the
Ancillary Documents dated the date hereof between Donnelly, Lear and 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 time, geographical or territorial restriction. Upon termination of
this Agreement, Donnelly will promptly deliver to Lear, or at Donnelly's
option destroy, 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,
except for such items which Donnelly must retain for warranty, insurance,
legal or accounting purposes, which retained items shall be marked by
Donnelly as confidential.
(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, 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 l(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 l(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 l(c) shall not be deemed to prohibit any general
solicitations of employment not specifically directed at particular
employees of the Company or Lear; provided further, that this Section 1(c)
shall not prevent Donnelly from soliciting for employment (i) Eurotrim
employees who make mirrors, (ii) Donnelly hired Eurotrim employees, or
(iii) Holland Facility employees.
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(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 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
l(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. 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 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 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 freely and without any undue influence or coercion by Lear
or any other Person.
3. 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 hereof; provided,
however, in the event of any breach by Donnelly of the provisions of Section
l(b) hereof, the Term shall be extended with respect to the covenants contained
in Section l(b) for such period as such breach continues.
4. 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
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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 Purchase 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 I hereof.
5. Effectiveness. This Agreement shall become effective as of the date of
this Agreement.
6. Termination of Existing Agreement. The Donnelly Noncompetition and Non-
solicitation Agreement dated November 1, 1997 is canceled effective as of the
date hereof and is of no further force or effect.
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: Donnelly Corporation
49 W. Third Street
Holland, Michigan 49423
Attention: CFO
Telecopy No. (616) 786-5606
With a copy to: Daniel C. Molhoek, Esq.
Varnum, Riddering, Schmidt & Howlett LLP
Bridgewater Place
Grand Rapids, MI 49501-0352
Telecopy No. (616) 336-7000
If to Lear or
the Company: 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
4
<PAGE>
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 the Company. 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 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.
(d) "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 feature,
interior trunk and engine compartment lighting
5
<PAGE>
components and assemblies, substrates and 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.
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 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.
6
<PAGE>
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:________________________________________
Its:_______________________________________
DONNELLY CORPORATION
By:_______________________________________
Its:______________________________________
LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C.
By:_______________________________________
Its:______________________________________
7
<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. [OPEN ISSUE]
8
<PAGE>
Exhibit 4.12
TERMINATION AND ASSIGNMENT AGREEMENT
This Agreement (the "Agreement") dated as of September ___, 1999, by and
between Donnelly Corporation, a Michigan corporation ("Donnelly"), Lear
Corporation, a Delaware corporation ("Lear"), 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 (the "Company").
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Purchase Agreement (defined below).
RECITALS
Donnelly, the Company and Lear are parties to a Redemption and Purchase
Agreement dated the date hereof (the "Purchase Agreement"). This Agreement is
entered into pursuant to Section 4.12 of the Purchase Agreement.
NOW, THEREFORE, the parties intending to be legally bound, agree as
follows:
1. Termination Agreements. Effective immediately, the following agreements
between the parties are null and void and of no further force and effect:
Purchase and Supply Agreement, Donnelly Leased Worker Agreement, Services
Agreement, Labor Matters Side Letter, Side Letter concerning DML Sublease at
Eurotrim Facility and Transfer Agreement, all dated November 1, 1997. In
addition, all Donnelly's rights and obligations under the Operating Agreement of
Lear Donnelly Overhead Systems, L.L.C., dated November 1, 1997 are hereby
terminated.
2. Assignment. Donnelly on behalf of itself and its Affiliates, hereby
sells, transfers and delivers to the Company, its successors and assigns, its
entire right, title and interest in and to the contracts, purchase orders and
agreements listed on Exhibit A hereto ("Assigned Contracts"), including purchase
orders and accounts receivable for and rights of collection with respect to
tooling. Notwithstanding the preceding sentence, the purchase orders from Volvo
or JCI-Becker to Donnelly Mirrors Limited listed on Exhibit B hereto are
assigned by Donnelly to the Company only with respect to the Console and only
after approval from Volvo or JCI-Becker, which approval Donnelly agrees to
request forthwith. This assignment excludes accounts receivable with respect to
shipments of Product by Donnelly prior to the date hereof.
3. Non-Assigned Contracts. Attached hereto on Exhibit C is a list of
contracts or purchase orders to which Donnelly or its Affiliates are parties and
relating to the Business but because of customer requirements, patent licenses
or other reasons cannot be assigned to the Company (the "Non-Assigned
Contracts"). Donnelly hereby subcontracts to the Company all of Donnelly's
manufacturing obligations under the Non-Assigned Contracts at the same prices
<PAGE>
2
Donnelly receives from the customers. Donnelly will pay the Company for such
Products within two (2) business days after Donnelly receives payment from the
customer for such Products. The Company agrees to pay Donnelly for all
reasonable costs, if any, incurred by Donnelly in connection with such sale or
subcontract and agrees to indemnify and hold harmless Donnelly and its
Affiliates, as the case may be, from all claims or obligations assumed by the
Company with respect to the Non-Assigned Contracts. The Company will have all
sales, customer and program management responsibility. Donnelly's only
responsibility with respect to the sale of Products will be to invoice the
customer and to pay the Company for purchased Products when Donnelly receives
payment from the customer.
4. Customer Payments. During a transition period invoicing for Products
under Assigned Contracts will be processed by Donnelly using its own customer or
product codes. With respect to any payments received by Donnelly and which
belong to the Company under contracts and purchase orders assigned by Donnelly
and its affiliates to the Company, Donnelly agrees to remit such payments to the
Company within seven (7) days of receipt thereof. If such payments are not
received within said seven (7) day period, Donnelly shall pay interest on the
amount due at the rate of 10% per annum. The Company shall hold Donnelly and its
affiliates harmless, as the case may be, from all claims or obligations which
arise by processing invoices through Donnelly's system other than claims arising
from the negligence or wrongful acts of Donnelly..
5. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns,
but no rights, interests or obligations of either party may be assigned without
the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, the Company may
assign all or any part of this Agreement and of the Company's rights, interests
or obligations hereunder to one or more of its affiliates (provided that no such
assignment shall relieve the Company of any of its obligations hereunder).
6. Entire Agreement. This Agreement represents the entire agreement and
understanding between the parties with respect to the transactions contemplated
herein and shall supersede all prior agreements, understandings, arrangements,
covenants, representations, or warranties, written or oral, of any party dealing
with the subject matter hereof.
7. Headings. The headings contained in this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof.
8. Counterparts. More than one counterpart of this Agreement may be
executed by the parties, and each fully-executed counterpart shall be deemed an
original, but all of which, together shall constitute one and the same
instrument. All signatures of the parties to this Agreement may be transmitted
by facsimile, and such facsimile will for all purposes be deemed to be the
original signature of the person whose signature it reproduces and will be
binding upon the party on whose behalf that person signed.
<PAGE>
3
9. Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal laws of the
State of Michigan, without giving effect to its principles of conflict of laws.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
DONNELLY CORPORATION
a Michigan corporation,
By: _____________________________________
Its: _____________________________
LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C.,
a Michigan limited liability company
By: _____________________________________
Its: _____________________________
LEAR CORPORATION,
a Delaware corporation
By: _____________________________________
Its: _____________________________
EMPETEK autodily s.r.o.
By: _____________________________________
Its: _____________________________
DONNELLY EUROTRIM LIMITED
By: _____________________________________
Its: ____________________________
<PAGE>
SCHEDULE 4.11
Nissan HS 124 extendable visor.
<PAGE>
Exhibit 4.13
AEROPLEX AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of _____, 1999, by and between
DONNELLY CORPORATION, a Michigan corporation ("Donnelly") and LEAR DONNELLY
OVERHEAD SYSTEMS, L.L.C., a Michigan limited liability company (the "Company").
RECITALS:
A. On the date hereof, Donnelly divested itself of its member interest in
the Company pursuant to a Redemption and Purchase Agreement dated the date
hereof.
B. A dispute exists between Donnelly, the Company and Aeroplex s.a. de c.v.
("Aeroplex") under which Aeroplex alleges the existence of a contract or
contracts relating to the supply of automotive visors, including and perhaps
based upon a letter of intent between Donnelly and Aeroplex dated on or about
October 14, 1996 (the "Disputed Contract"). Pursuant to the Amended and Restated
Transfer Agreement dated October 31, 1997, Donnelly's then existing letter of
intent with Aeroplex was assigned to the Company.
C. Donnelly and the Company have agreed that the responsibility for the
settlement of the Disputed Contract and payment of obligations thereunder, if
any, shall be governed by this Agreement.
NOW, THEREFORE, the parties intending to be legally bound, agree as
follows:
1. Obligations of the Company.
(a) The Company shall have the obligation to defend and/or settle any
claims made by Aeroplex under or in connection with the Disputed Contract.
Except as provided in paragraphs 2 or 4, the Company shall have sole
control over the defense or settlement of any claim by Aeroplex under the
Disputed Contract.
(b) The Company shall be solely responsible to pay all Aeroplex
losses, damages, liabilities and claims ("Losses") arising out of or based
upon the Disputed Contract up to a maximum of $1 million dollars. A copy of
the above reference letter of intent is attached hereto as Exhibit A.
(c) The Company shall indemnify and hold harmless Donnelly from and
against any and all Losses, up to a maximum of $1 million dollars arising
out of or based upon the Disputed Contract.
<PAGE>
2. Joint Obligations of the Company and Donnelly. The Company and Donnelly
shall be jointly responsible to pay all Aeroplex Losses arising out of or based
upon the Disputed Contract to the extent such Losses net of any proceeds from
the sale of any equipment exceed $1 million dollars in the aggregate. The
Company shall obtain the prior written approval of Donnelly before entering into
a settlement of any claim where the settlement amount exceeds $1 million dollars
(with such approval not to be unreasonably withheld).
3. Cooperation. Donnelly covenants and agrees that it shall fully cooperate
with the Company as the Company deems necessary or appropriate to defend and
settle claims made by Aeroplex under or in connection with the Disputed
Contract, including, without limiting the generality of the foregoing,
authorizing Donnelly's employees and agents to provide the Company, at
Donnelly's expense, with such records, documents and information in the
possession of or under the control of Donnelly and with such other reasonable
assistance as the Company may require.
4. Rights of Donnelly to Participate In Defense of Claims. Donnelly shall
be entitled to participate in the defense of Aeroplex claims made under or in
connection with the Disputed Contract and to employ counsel at its own expense
to assist in the handling of such claims.
5. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns,
but no rights, interests or obligations of either party may be assigned without
the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, the Company may
assign all or any part of this Agreement and of the Company's rights, interests
or obligations hereunder to one or more of its affiliates (provided that no such
assignment shall relieve the Company of any of its obligations hereunder).
6. Entire Agreement. This Agreement represents the entire agreement and
understanding between the parties with respect to the transactions contemplated
herein and shall supersede all prior agreements, understandings, arrangements,
covenants, representations, or warranties, written or oral, of any party dealing
with the subject matter hereof.
7. Headings. The headings contained in this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof.
8. Counterparts. More than one counterpart of this Agreement may be
executed by the parties, and each fully-executed counterpart shall be deemed an
original, but all of which, together shall constitute one and the same
instrument. All signatures of the parties to this Agreement may be transmitted
by facsimile, and such facsimile will for all purposes be deemed to be the
original signature of the person whose signature it reproduces and will be
binding upon the party on whose behalf that person signed.
2
<PAGE>
9. Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal laws of the
State of Michigan, without giving effect to its principles of conflict of laws.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
DONNELLY CORPORATION
a Michigan corporation,
By: _____________________________________
Its: ____________________________________
LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C.,
a Michigan limited liability company
By: _____________________________________
Its: ____________________________________
Dated: ____________, 1999
3
<PAGE>
MUTUAL RELEASE AND
WAIVER OF CLAIMS
This Mutual Release and Waiver of Claims ("Release") dated as of _____,
1999, by and between AEROPLEX s.a. de c.v. ("Aeroplex"), DONNELLY CORPORATION, a
Michigan corporation ("Donnelly"), LEAR CORPORATION, a Delaware corporation
("Lear"), and LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C., a Michigan limited
liability company ("LDOS").
RECITALS
Donnelly and Aeroplex are parties to a certain letter of intent dated on or
about October 14, 1996 (the "Letter of Intent"). LDOS and Lear are or may become
successors in interest to Donnelly with respect to the Letter of Intent.
Aeroplex has asserted other claims against Donnelly, LDOS and Lear related to
manufacture, purchase and supply of certain visors ("Claims"). The parties have
agreed to execute and deliver this Release of all rights and claims they have or
may have against each other in connection with the Letter of Intent and Claims
as of the date of this Release (the "Effective Date").
NOW, THEREFORE, in consideration of the payment of $750,000.00 to Aeroplex
and the promises and the mutual covenants, agreements and understandings
contained herein, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Mutual Releases and Waiver of Claims through the Effective Date
(a) Donnelly, LDOS and Lear and their respective successors, and
assigns (the "Donnelly/Lear Releasors") hereby absolutely and
unconditionally, expressly remise, release, acquit and forever discharge
Aeroplex and its, successors, and assigns and its directors, officers and
agents, (all of which are hereafter referred to both individually and
collectively as the "Aeroplex Releasees"), from any and all claims,
actions, causes of action, contribution, indemnification, demands,
liabilities, debts, amounts, contracts, agreements, covenants, damages,
costs, fees, losses, expenses, suits, and controversies of every
conceivable kind, character and nature whatsoever, in law or equity, which,
as of the Effective Date, the Donnelly/Lear Releasors now have or have had,
whether now known or unknown, which could be asserted by any of the
Donnelly/Lear Releasors against the Aeroplex Releasees with respect to the
Letter of Intent, the Claims or any matters related thereto.
(b) Aeroplex and its successors, assigns (the "Aeroplex Releasors")
hereby absolutely and unconditionally, expressly remise, release, acquit
and forever discharge Donnelly, LDOS and Lear and their respective
successors, and assigns, and their directors, officers and agents, (all of
which are hereafter referred to both individually and collectively as the
"Donnelly/Lear Releasees"), from any and all claims, actions, causes of
action, contribution, indemnification, demands, liabilities, debts,
amounts, contracts, agreements, covenants, damages, costs, fees, losses,
expenses, suits, and controversies of every conceivable kind, character and
nature whatsoever, in law or equity, which, as of the Effective Date the
Aeroplex Releasors now have or have had, whether now known or
<PAGE>
unknown, which could be asserted by any of the Aeroplex Releasors against
the Donnelly/Lear Releasees with respect to the Letter of Intent, the
Claims or any matters related thereto.
(c) LDOS and Lear and their respective successors, and assigns, (the
"LDOS and Lear Releasors") hereby absolutely and unconditionally, expressly
remise, release, acquit and forever discharge Donnelly and its, successors,
and assigns and its directors officers and agents (all of which are
hereafter referred to both individually and collectively as the "Donnelly
Releasees"), from any and all claims, actions, causes of action,
contribution, indemnification, demands, liabilities, debts, amounts,
contracts, agreements, covenants, damages, costs, fees, losses, expenses,
suits, and controversies of every conceivable kind, character and nature
whatsoever, in law or equity, which, as of the Effective Date, LDOS and
Lear Releasors now have or have had, whether now known or unknown, which
could be asserted by any of the LDOS and Lear Releasors against the
Donnelly Releasees with respect to the Letter of Intent, the Claims or any
matters related thereto.
(d) Donnelly and its successors, assigns, (the "Donnelly Releasors")
hereby absolutely and unconditionally, expressly remise, release, acquit
and forever discharge LDOS and Lear and their respective successors, and
assigns and their directors officers and agents (all of which are hereafter
referred to both individually and collectively as the "LDOS and Lear
Releasees"), from any and all claims, actions, causes of action,
contribution, indemnification, demands, liabilities, debts, amounts,
contracts, agreements, covenants, damages, costs, fees, losses, expenses,
suits, and controversies of every conceivable kind, character and nature
whatsoever, in law or equity, which, as of the Effective Date, the Donnelly
Releasors now have or have had, whether now known or unknown, which could
be asserted by any of the Donnelly Releasors against the LDOS and Lear
Releasees with respect to the Letter of Intent, the Claims or any matters
related thereto.
2. Tooling
Aeropolex agrees to hold and maintain any tooling belonging to Nissan,
Mercedes-Benz, Lear, Donnelly or LDOS. Aeroplex further agrees to immediately
comply with any instructions from Lear or LDOS with respect to the return or
disposition of the tooling.
3. Entire Agreement
This Release (a) constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof, (b) supersedes all prior or
contemporaneous negotiations and oral or written understandings, agreements and
commitments, if any, and (c) may not be amended or supplemented except by an
instrument in writing signed by both parties hereto.
4. Governing Law
This Release shall be governed by and construed in accordance with the
substantive laws of the State of Michigan without giving effect to any
applicable principles of conflicts of law.
5
<PAGE>
5. Counterparts
This Release may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
Witness the due execution of this Release hereof as of the date first above
written.
AEROPLEX s.a. de c.v.
By:____________________________________
Its:___________________________________
DONNELLY CORPORATION,
a Michigan corporation
By:____________________________________
Its:___________________________________
LEAR CORPORATION,
a Delaware corporation
By:____________________________________
Its:___________________________________
LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C.,
a Michigan limited liability company
By:____________________________________
Its:___________________________________
6
<PAGE>
Exhibit 4.15
GENERAL ASSIGNMENT
This General Assignment (this "Assignment") is made and delivered as of
___________, 1999, by and between DONNELLY CORPORATION, a Michigan corporation
("Donnelly") pursuant to the REDEMPTION and PURCHASE AGREEMENT (the "Purchase
Agreement") among DONNELLY, LEAR CORPORATION, and LEAR DONNELLY OVERHEAD
SYSTEMS, L.L.C. (the "Company"). All capitalized terms used but not defined in
this Assignment will have the meaning ascribed to them in the Purchase
Agreement, unless the context requires otherwise.
NOW, THEREFORE, pursuant to the Purchase Agreement, and for good and
valuable consideration, the receipt and sufficiency is hereby acknowledged,
Donnelly on behalf of itself and its Affiliates hereby assign to the Company all
of its and their right, title and interest in and to the Company's Operating
Agreement dated November 1, 1997 and the Amended And Restated Transfer Agreement
dated October 31, 1997.
Donnelly covenants that it will do, execute and deliver, or will cause to
be done, executed and delivered, all further acts, transfers, assignments, other
conveyances, powers of attorney and assurances, to better assure, convey and
confirm the assignment as contemplated by this Assignment.
Signed as of the date first written above.
DONNELLY CORPORATION
a Michigan corporation, and on behalf of its Affiliates
By: ___________________________________________________
Its: __________________________________________________
<PAGE>
Exhibit 4.17
MUTUAL RELEASE AND
WAIVER OF CLAIMS
This Mutual Release and Waiver of Claims ("Release") dated as of _____,
1999, by and between DONNELLY CORPORATION, a Michigan corporation ("Donnelly"),
LEAR CORPORATION, a Delaware corporation ("Lear"), and LEAR DONNELLY OVERHEAD
SYSTEMS, L.L.C., a Michigan limited liability company ("Company"). Capitalized
terms not otherwise defined herein shall have the meaning set forth in the
Purchase Agreement (as defined below).
RECITALS
Lear, Donnelly and the Company are parties to a Redemption and Purchase
Agreement dated the date hereof (the "Purchase Agreement") whereunder Donnelly's
member interest in the Company was terminated. Donnelly on the one hand, and
Lear and the Company on the other hand have agreed to execute and deliver this
Release of all rights and claims they have or may have against each other in
connection with the Company and its operations as of the date of this Release
(the "Effective Date"), except as to the matters set forth herein.
NOW, THEREFORE, in consideration of the promises and the mutual covenants,
agreements and understandings contained herein and in the Purchase Agreement,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1. Mutual Releases and Waiver of Claims through the Effective Date
(a) Except for the Non-Released Claims (as defined below), the Company
and Lear and their respective successors, and assigns (the "Company and
Lear Releasors") hereby absolutely and unconditionally, expressly remise,
release, acquit and forever discharge Donnelly and its, successors, and
assigns and its directors, officers and agents, including those who served
as directors of the Company (all of which are hereafter referred to both
individually and collectively as the "Donnelly Releasees"), from any and
all claims, actions, causes of action, contribution, indemnification,
demands, liabilities, debts, amounts, contracts, agreements, covenants,
damages, costs, fees, losses, expenses, suits, and controversies of every
conceivable kind, character and nature whatsoever, in law or equity, which,
as of the Effective Date, the Company and Lear Releasors now have or have
had, whether now known or unknown, which could be asserted by any of the
Company and Lear Releasors with respect to the Company and its operations.
(b) Except for the Non-Released Claims, Donnelly and its successors,
assigns (the "Donnelly Releasors") hereby absolutely and unconditionally,
expressly remise, release, acquit and forever discharge the Company and
Lear and their respective successors, and assigns, and their directors,
officers and agents, including those who served as directors of the Company
(all
<PAGE>
of which are hereafter referred to both individually and collectively as
the "Company and Lear Releasees"), from any and all claims, actions, causes
of action, contribution, indemnification, demands, liabilities, debts,
amounts, contracts, agreements, covenants, damages, costs, fees, losses,
expenses, suits, and controversies of every conceivable kind, character and
nature whatsoever, in law or equity, which, as of the Effective Date the
Donnelly Releasors now have or have had, whether now known or unknown,
which could be asserted by any of the Donnelly Releasors with respect to
the Company and its operations.
2. Non-Released Claims.
This Release shall not apply to the following matters (the "Non-Released
Claims"): (i) the Donnelly Releasees are not released from (A) claims arising
under or in connection with the Purchase Agreement and the Ancillary Documents,
(B) claims by the Company for defective goods and products purchased from, or
furnished or supplied to the Company by, Donnelly and (C) the obligation to
arbitrate disputes under the Company's Operating Agreement or other agreements
or documents executed upon the formation of the Company; (ii) the Company and
Lear Releasees are not released from (A) claims arising under or in connection
with the Purchase Agreement and the Ancillary Documents, (B) claims for
defective goods and products purchased from, or furnished to Donnelly by, the
Company, (C) claims under the Side Letter Concerning Eurotrim Lease Indemnity
dated November 1, 1997, (D) any obligations or liabilities of the Company
arising out of the Business (as defined in the Purchase Agreement) to the extent
any of such obligations or liabilities are asserted against Donnelly, (E) Lear's
obligations as the Tax Matters Member under the Company's Operating Agreement,
(F) the Company's indemnity obligation under Section 6.6 of the Company's
Operating Agreement and (G) the obligation to arbitrate disputes under the
Company's Operating Agreement or other agreements or documents executed upon the
formation of the Company.
3. Entire Agreement
This Release (a) constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof, (b) supersedes all prior or
contemporaneous negotiations and oral or written understandings, agreements and
commitments, if any, and (c) may not be amended or supplemented except by an
instrument in writing signed by both parties hereto.
4. Governing Law
This Release shall be governed by and construed in accordance with the
substantive laws of the State of Michigan without giving effect to any
applicable principles of conflicts of law.
5. Counterparts
This Release may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
2
<PAGE>
Witness the due execution of this Release hereof as of the date first above
written.
DONNELLY CORPORATION,
a Michigan corporation
By:____________________________________
Its:___________________________________
LEAR CORPORATION,
a Delaware corporation
By:____________________________________
Its:___________________________________
LEAR DONNELLY OVERHEAD SYSTEMS, L.L.C.,
a Michigan limited liability company
By:____________________________________
Its:___________________________________
<PAGE>
EXHIBIT 10.2
BANK ONE, MICHIGAN, as Agent
611 Woodward Avenue
Detroit, Michigan 48226
September ____, 1999
Donnelly Corporation
Donnelly Hohe GmbH & Co. KG
Donnelly Euroglas Systems SARL
414 East 40th Street
Holland, Michigan 49423
Re: Multicurrency Revolving Credit Loan Agreement dated as of
September 16, 1997, as amended (the "Loan Agreement") by and
among Donnelly Corporation (the "Company"). Donnelly Hohe
GmbH & Co. KG, the Borrowing Subsidiaries party thereto
(collectively with the Company, the "Borrowers"), the Banks
named therein (collectively, the "Banks" and individually, a
"Bank") and Bank One, Michigan, as agent for the Banks,
successor Agent to The First National Bank of Chicago (in
such capacity, the "Agent")
Ladies and Gentlemen:
The Company has requested a modification to Section 7.2(j) of the Loan
Agreement to increase the aggregate amount of Receivables permitted to be sold
thereunder. Each of the undersigned Banks hereby consents to such modification.
The Agent, the Borrowers and the undersigned Banks hereby agree that Section
7.2(j) of the Loan Agreement shall be modified by deleting the reference in
clause (A) therein to "$50,000,000" and inserting "$75,000,000" in place
thereof.
The agreement of the Banks set forth herein shall not become binding on the
Banks until a duly authorized officer of the Borrowers and the Required Banks
shall have executed the counterpart of this letter and delivered such
counterpart to the Agent. Except as specifically modified above, the Loan
Agreement and the other Loan Documents shall remain in full force and effect and
are hereby ratified and confirmed. The terms used but not defined herein shall
have their respective meanings ascribed thereto in the Loan Agreement. This
letter may be executed in any number of counterparts, and telecopied signatures
shall be valid and enforceable.
Very truly yours,
BANK ONE, MICHIGAN, Individually as a Bank and as
Agent
By: ________________________________
Its: ___________________________
<PAGE>
DEUTSCHE GENOSSENSHAFT BANK, CAYMAN
ISLAND BRANCH
By: __________________________________
Its: _____________________________
DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES, Individually and as
Documentation Agent
By: __________________________________
Its: _____________________________
SOCIETE GENERALE, CHICAGO BRANCH
By: ___________________________________
Its: ______________________________
COMERICA BANK
By: ___________________________________
Its: ______________________________
THE NORTHERN TRUST COMPANY
By: ___________________________________
Its: ______________________________
BANK OF AMERICA, N.A.
By: ___________________________________
Its: ______________________________
-2-
<PAGE>
Accepted and Agreed to as
of September ____, 1999
DONNELLY CORPORATION
By: /s/ Charlie R. Pear
Its: Treasurer
DONNELLY HOHE GmbH & CO. KG
By: /s/ John Donnelly
Its: Chief Operating Officer
DONNELLY EUROGLAS SYSTEMS SARL
By: /s/ John Donnelly
Its: Chief Operating Officer
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary finanical information extracted from April 3,
1999 Donnelly Corporation financial statements and is qualified in its entirety
by reference to such financial statement
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-04-1999
<PERIOD-END> OCT-02-1999
<CASH> 6,568
<SECURITIES> 0
<RECEIVABLES> 92,400
<ALLOWANCES> 0
<INVENTORY> 48,467
<CURRENT-ASSETS> 178,494
<PP&E> 336,037
<DEPRECIATION> 139,438
<TOTAL-ASSETS> 430,721
<CURRENT-LIABILITIES> 153,339
<BONDS> 104,060
0
531
<COMMON> 1,028
<OTHER-SE> 117,254
<TOTAL-LIABILITY-AND-EQUITY> 430,721
<SALES> 208,917
<TOTAL-REVENUES> 208,917
<CGS> 179,445
<TOTAL-COSTS> 179,445
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,433
<INCOME-PRETAX> 15,831
<INCOME-TAX> 5,900
<INCOME-CONTINUING> 10,933
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,020)
<NET-INCOME> 9,923
<EPS-BASIC> 0.98
<EPS-DILUTED> 0.97
</TABLE>
