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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER 33-56048
KEY PLASTICS HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 38-2653726
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
21333 HAGGERTY ROAD SUITE 200
NOVI, MICHIGAN
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
48375
(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (248) 449-6100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the registrant's voting stock held by
non-affiliates: Not Applicable. The Company is privately held.
The number of shares outstanding of the registrant's common stock as of
March 27, 1998, was 342,076. As of such date the registrant held a 75 percent
equity interest in the Company (as defined herein).
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ITEM 1. BUSINESS
THE COMPANY - BACKGROUND
Key Plastics Holdings, Inc. ("Key") was formed in January 1986 under
the name of Key Plastics, Inc. to acquire the plastics manufacturing operations
of Key International Manufacturing, Inc., which operations had been involved in
plastics manufacturing for over 20 years. The Company is a global supplier of
highly engineered plastic components and assemblies to automotive original
equipment manufacturers and Tier I suppliers. The Company believes it is the
largest independent supplier of plastic door handle assemblies, decorative
bezels and pressurized bottles in North America for the automotive industry.
The Company provides the automotive industry with comprehensive
plastics manufacturing capabilities, including design and engineering,
high-precision injection molding, automated manufacturing and assembly, plastic
painting and material and product testing. The Company operates from its world
headquarters and technical center, 14 manufacturing and two paint facilities in
North America and three facilities in Europe with painting and manufacturing
capabilities.
On February 9, 1998 Key contributed substantially all of its assets and
liabilities to Key Plastics Technology, L.L.C. ("Technology"), a wholly owned
subsidiary of Key (the "Restructuring"). Subsequently, Technology changed its
name to Key Plastics, L.L.C. and Key Plastics, Inc. changed its name to Key
Plastics Holdings, Inc. As used herein, the "Company" refers to Key through
February 9, 1998 and Technology thereafter. Pursuant to the Restructuring,
Technology became the primary obligor under the Credit Agreement dated March 24,
1997 by and among the Company (as defined therein), the lenders party thereto
from time to time and NBD Bank, as agent for such lenders, as amended (the
"Senior Credit Agreement"); the Senior Notes (The "Senior Notes") issued
under the Indenture, dated November 17, 1992, by and between the Company and
Society National Bank, as amended; and the Senior Subordinated Notes (the
"Senior Subordinated Notes") issued under the Indenture dated March 24, 1997
by and between the Company and Marine Midland Bank, as Trustee (the
"Indenture"). Also, on February 9, 1998, a third party investor purchased a 25
percent equity interest in Technology (the "Investment").
As of March 9, 1998, the Senior Credit Agreement was amended to allow
the Company to obtain an additional $20 million, five and one half year
amortizing term loan, Key Plastics International, S.N.C. to obtain a French
Franc 93.9 million, five and one half year amortizing term loan and Key
Plastics, U.K. to obtain (pound)6.3 million, five and one half year amortizing
term loan. As a result of these actions, the Company expects for France and the
UK to realize lower interest rates and establish a natural hedge for its net
assets in those countries. Futhermore, the Company had $33 million of
availability under its Senior Credit Agreement on March 27, 1998 after
completing these actions.
The Company is privately owned by management and employees. Since its
incorporation in 1987, the Company has elected to be taxed as a corporation
under Subchapter S (a "Subchapter S corporation") of the Internal Revenue Code
of 1986, as amended (the "Code"), and after the Restructuring, a limited
liability company. The Company has made, and intends to continue to make,
distributions to its shareholders to pay their income tax obligations as a
result of the Company's pass through status.
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PRODUCTS
The Company is a global designer and manufacturer of highly engineered,
value-added plastics components and assemblies for automobiles, light trucks and
minivans. The Company considers itself to be the largest independent supplier of
plastic door handle assemblies, radio bezels and pressurized bottles. The
Company is also a major supplier of speaker grilles, air louvers, electrical
connector covers and interior trim components. The Company believes these
components are typically more difficult for a customer to produce in-house or
for a competitor to replicate due to the substantial investment required in
specialized engineering, design and manufacturing capabilities. Management
further believes such products have strong worldwide growth potential and high
margins.
The Company offers comprehensive manufacturing capabilities, including
design and engineering, high-precision injection molding, automated
manufacturing and assembly, plastics painting and material and product testing.
The Company also has extensive tool making capabilities and designs and builds
approximately one-third of the tooling used in the manufacture of its products.
INTERNATIONAL OPERATIONS
The Company has acquired strategic positions in Europe in order to
serve its customers on a global basis. In 1997 the UK, Portugal and France
accounted for 22.1% of the Company's net sales. This expansion resulted in the
addition of new customers such as Rover, Renault and Sommer Allibert.
The Company prices its products in the United Kingdom, Portugal and
France in the currency of the country in which the products are sold and, in the
United States and Mexico, in United States dollars. To the extent that prices
are in the currency of the country in which the products are sold, the prices of
such products in dollars will vary as the value of the dollar fluctuates against
such currencies. There can be no assurance that there will not be increases in
the value of the dollar against such currencies that will reduce the dollar
return to the Company on the sale of its products in such countries. The Company
is presently engaged in limited currency hedging transactions in Portugal,
involving the purchase of Portuguese escudos to make local payments.
MANUFACTURING OPERATIONS
Product Manufacturing. The Company's core manufacturing technologies
are small press injection molding, automated assembly, pad printing, painting,
laser etching, sonic welding and hot plate welding. As part of its strategy to
supply highly engineered, value-added components, the Company has substantially
expanded the use of automation and robotics in its assembly operations. These
capabilities enhance quality and reliability and reduce labor costs.
The Company has organized its production process to minimize the number
of manufacturing functions and the frequency of material handling. In
addition, the Company utilizes, where practical, a flexible manufacturing
process which uses cellular manufacturing to allow a continuous flow of parts
with minimal set-up time. Such cellular manufacturing utilizes machine vision,
robotics and a palletized approach and can be easily converted from one product
application to the other with re-programming and new pallets at a cost lower
than traditional work cell approach.
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Paint Operations. The Company believes its broad base of class A paint
application capabilities positions it well for supplying the domestic and
foreign exterior trim market. The Company is able to provide both high-bake,
high solids painting, which is traditionally preferred by domestic OEMs, and
low-bake, two component painting, which is preferred by foreign OEMs. The
Company has also developed paint application technology utilizing innovative
robotic applications which has enabled the Company to reduce costs by improving
paint transfer efficiency.
Quality. The Company has a strong quality assurance program and has
made substantial investments in technology to monitor and improve quality.
Included among these investments are CAD/CAM equipment, statistical process
control systems, failure mode and effect systems, process-controlled molding
machines and automated assembly equipment. In addition, the Company has material
and product test laboratories that monitor product reliability and which are
accredited by its major OEM customers, and the Company's engineering functions
are ISO 9001 certified. All of the Company's manufacturing facilities are QS
9000 certified or will be QS 9000 certified by April 30, 1998.
THE OEM SUPPLIER INDUSTRY
The Company competes in the global automotive original equipment
manufacturer supplier industry. The OEM supplier industry is cyclical and, in
large part, dependent upon the overall strength of consumer demand for light
trucks and passenger cars. The automotive industry is currently characterized by
a number of factors which affect the Company. These factors include (i) OEMs'
demand for suppliers with efficient, comprehensive research and development,
design and manufacturing capabilities, (ii) consolidation of suppliers as a
result of increasing OEM demands, and (iii) the globalization of the OEM
supplier base. As a result of these factors, suppliers must (i) continually
demonstrate the ability to satisfy, in cost efficient ways, the OEMs' design and
manufacturing demands and (ii) establish international positions which can
effectively supply and service the OEMs.
Management believes that the Company has achieved its current
leadership position and is well positioned to benefit from emerging trends in
the global automotive markets as a result of several key competitive strengths,
including: (i) demonstrated technological expertise and innovation in developing
highly engineered systems and components; (ii) strong relationships with major
OEMs; (iii) an emphasis on quality management; (iv) the ability to supply its
customers globally; and (v) state of the art equipment and facilities.
RAW MATERIALS
The principal raw materials used by the Company are engineered plastic
resins such as nylon, polypropylene and ABS, all of which are available from
several suppliers. The Company has no reason to believe that there will not be
an ample supply of its raw materials for the reasonably foreseeable future, but
the Company cannot make any prediction as to the future price of such raw
materials. The Company is generally not able to pass on to its customers any
increase in raw material costs. As the Company has grown, the increased
purchasing volume, in many cases, has enabled it to hold or reduce raw material
costs. As a result the Company, in the past three years, has not experienced any
significant increases in the prices of its raw materials.
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CUSTOMERS
The Company's direct sales to its principal customers, Ford Automotive
Operations ("Ford"), General Motors Corporation ("GM"), and Chrysler Corporation
("Chrysler") accounted for approximately 50%, 13% and 8%, respectively, of the
Company's consolidated net sales in fiscal year 1997. If sales to those OEMs'
Tier I suppliers are included, the Company's sales to Ford, GM and Chrysler
accounted for approximately 55%, 15% and 11%, respectively, of the Company's
consolidated net sales in fiscal year 1997. The Company's business is dependent
upon consumer demand for the specific models and product lines that incorporate
the Company's parts. The Company's arrangements with its OEMs are typically in
the form of purchase orders that may be canceled by the OEMs. However, the
Company believes that cancellation of purchase orders is rare, due, in part, to
the OEM production interruption likely to be caused by changing suppliers. The
loss of any of these customers could adversely effect the Company's revenues.
COMPETITION
The Company's business is highly competitive. A large number of actual
or potential competitors exist, including the internal component operations of
the OEMs as well as independent suppliers. Some of the Company's competitors
include Donnelly Corporation, Lear Corp., ADAC Corporation, Summit Plastic Co.,
LDM Technologies, Inc., Fawn Industries, Inc., Lacks Industries, Inc., United
Technologies, Inc., and Geiger Technik., although none of these competitors
compete with the Company along all product lines. The Company competes on the
basis of quality, cost, timely delivery and customer service and, increasingly,
on the basis of design and engineering capability, painting capability, new
product innovation and product testing capability.
The Company's business is increasingly competitive due to the supplier
consolidation resulting from changing OEM policies. The Company principally
competes for new business both at the beginning of the development of new models
and upon the redesign of existing models by its major customers. New model
development generally begins two to four years prior to the marketing of such
models to the public. Because of the large investment by OEMs in tooling and the
long lead time required to commence production, OEMs generally do not change a
supplier during a program.
EMPLOYEES
At December 31, 1997, the Company employed approximately 3,730 persons
in North America and Europe. The Company believes that relations with its
employees are good. Hourly employees at the Company's Plymouth, Michigan
facility (approximately 9% of all employees) and Key U.K. (approximately 10% of
all employees) are the only employees represented by collective bargaining
units. The Plymouth employees are represented by Local 7639 International Union
of United Paper Workers pursuant to a collective bargaining agreement, which
expires on December 7, 2000. The workforce at Key's Coventry facility in the
United Kingdom is represented by two unions: Amalgamated Electrical and
Engineering Union ("AEEU") and Manufacturing, Scientific and Finance Union
("MSF"). Both AEEU and MSF follow the traditional negotiation patterns seen in
Great Britain by renegotiating terms and conditions on an annual basis.
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ENVIRONMENTAL MATTERS
The Company and its operations are subject to comprehensive and
frequently changing federal, state and local environmental and occupational
health and safety laws and regulations, including laws and regulations governing
emissions of air pollutants, discharges of waste and storm water, and the
disposal of hazardous wastes. The Company is also subject to liability for the
investigation and remediation of environmental contamination (including
contamination caused by other parties) at the properties it owns or operates and
at other properties where the Company or predecessors have arranged for the
disposal of hazardous substances. As a result, the Company is involved, from
time to time, in administrative and judicial proceedings and inquiries relating
to environmental matters. The Ohio Environmental Protection Agency has raised
questions about the air permit status of the Company's facility in Montpelier,
Ohio. The Company expects to resolve these questions without making significant
financial expenditures. The Company does not believe there are any other pending
investigations at the Company's plants or sites relating to environmental
matters.
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ITEM 2. PROPERTIES
All of the Company's facilities are owned by the Company, except for
the Company's world headquarters and the Company's facilities in Grand Rapids,
Michigan and Coventry, U.K., which are leased. Management believes that its
facilities are adequate for its present needs. The Company's operations are
located in the following communities.
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FOOTAGE DESCRIPTION OF USE
<S> <C> <C>
Novi, MI ..................... 29,000 World Headquarters and
Technical Center
Plymouth, MI ................. 168,000 Manufacturing
Felton, PA (Plant 1) ......... 53,000 Manufacturing
Felton, PA (Plant 2) ......... 39,060 Manufacturing
Hamilton, IN ................. 54,000 Manufacturing
York, PA (Plant 1) ........... 22,000 Manufacturing
York, PA (Plant 2) ........... 40,000 Manufacturing
Montpelier, OH ............... 79,000 Painting
Hartford City, IN ............ 50,000 Painting and Assembly
Chihuahua, MX (Plant 1)....... 65,000 Manufacturing
Grand Rapids, MI ............. 56,000 Manufacturing
South Bend, IN ............... 80,000 Manufacturing
Coventry, UK ................. 100,000 Manufacturing and Painting
Leiria, Portugal ............. 84,000 Manufacturing and Painting
Port Huron, MI................ 52,000 Manufacturing
Chesterfield, MI.............. 44,000 Painting and Assembly
Chihuahua, MX (Plant 2) ...... 55,000 Manufacturing
Ashley, IN.................... 21,000 Manufacturing
Kendalville, IN............... 25,000 Manufacturing
Belleme, France .............. 90,000 Manufacturing
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is, from time to time, involved in routine litigation
arising out of the ordinary course of its business. The Company believes
currently pending or threatened litigation will not have a material adverse
effect on the consolidated financial condition or results of operations of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SEURITY HOLDERS.
Not Applicable.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Key's common equity is privately held by 26 persons, Technology's
equity interests are held by two persons. The equity interest of the Company
therefore, has no established public trading market. Key has elected to be taxed
as an S Corporation and Technology is organized as a limited liability company.
The Company is not subject to federal income taxes. The Company's policy is to
pay dividends to the equity holders for the income taxes due on their share of
the Company's taxable income. In addition, certain covenants of the Senior Note
Indenture, Senior Credit Agreement and Restated Operating Agreement restrict the
Company's ability to pay cash dividends. See Note 1 to Notes to Consolidated
Financial Statements.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated
financial data of Key Plastics, Inc. for the five year period ended December 31,
1997. The selected consolidated financial data for such fiscal years were
derived from the audited consolidated financial statements of the Company. The
audited consolidated financial statements of the Company for each of the three
years in the period ended December 31, 1997 are included elsewhere in this
Annual Report on Form 10-K together with the report thereon of Coopers &
Lybrand, L.L.P., independent accountants. The following table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the historical consolidated financial statements
of the Company presented elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
($ in Thousands)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $306,001 $217,087 $179,251 $194,112 $149,658
Gross Profit 66,257 39,452 37,544 36,060 28,756
Selling, general and
administrative expenses 33,724 16,532 15,531 13,955 10,362
Interest expense 22,112 15,754 14,861 12,752 11,575
Net income before extraordinary 8,845 7,051 7,079 8,569 5,920
item, minority interest and
foreign income tax
Extraordinary item-loss on early
retirement of debt (5,192) -- -- -- --
Net income $ 1,679 $ 7,051 $ 7,080 $ 8,569 $ 5,920
BALANCE SHEET DATA:
Total assets $282,904 $193,204 $126,090 $121,853 $ 96,556
Total debt 219,228 144,283 119,640 111,060 102,859
Long-term debt 216,575 82,521 102,467 103,522 85,818
Total shareholders' equity
(deficit) (12,261) (15,563) (20,875) (23,427) (29,841)
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following management's discussion and analysis of financial
condition and results of operations should be read in conjunction with the
Company's Consolidated Financial Statements (including the notes thereto)
appearing elsewhere in this Annual Report on Form 10-K
1997 FISCAL YEAR COMPARED TO 1996 FISCAL YEAR
Net sales of the fiscal year ended December 31, 1997 (the "1997 Fiscal
Year") increased by $88.9 million, or 40.9%, over net sales for the fiscal year
ended December 31, 1996 (the "1996 Fiscal Year"). Of the increase, approximately
$34 million resulted from acquisitions completed during 1997. Sales increased a
further $31 million over the 1996 Fiscal Year as a result of the full year
effect of the acquisitions in the UK and Portugal completed in 1996. The
remainder of the increase, approximately $24 million, resulted primarily from
additional programs.
Gross profit for the 1997 Fiscal Year increased by $24.4 million,
primarily as a result of the increased sales discussed above. The gross profit
margin increased by 2.5%, from 19.2% in the 1996 Fiscal Year to 21.7% in the
1997 Fiscal Year. The increase is attributed primarily to operating efficiencies
within the Company's existing businesses and to slightly higher margins
experienced in the businesses acquired during 1996 and 1997.
Selling, general and administrative expenses (SG&A) for the 1997 Fiscal
Year increased by $14.9 million from $18.9 in 1996. Approximately $6 million of
the increase represents the full year effect of 1996 acquisitions. The Company's
European operations incur SG&A costs at several times that of the North American
operations. This is attributed to two primary factors. First, the acquired
businesses, primarily in Europe, tend to be separate, self sustained enterprises
with individual administrative and engineering staffs. The Company believes
opportunities exist to leverage its European and, to a lesser extent North
American, resources to eliminate redundancies . Secondly, the Company believes
SG&A costs in the areas of Europe where it has operations are greater due to the
economic and regulatory environments of those countries and will tend to be
higher than the Company's North American operations.
The Minority interest for 1997 relates to the portion of MaP's 1997 net
income attributable to the minority shareholders. As the MaP acquisition was
completed November 1, 1996, the minority interest for earnings from that date to
December 31, 1996 was immaterial.
As discussed more fully under the heading of Liquidity and Capital
Resources, the Company refinanced its debt during the first quarter of 1997. As
part of that refinancing, $40.1 million of the Company's 14% Senior Notes due
November 1999 (the "Old Notes") were tendered and retired. The premium related
to the repurchase of the Old Notes, the related fees and the pro rata portion of
the unamortized debt issuance costs for the Old Notes were recorded as an
extraordinary item of approximately $5.2 million in the 1997 income statement.
Interest expense increased from $15.8 million in the 1996 Fiscal Year
to $22.1 million in the 1997 Fiscal Year as a result of higher average debt,
offset in part by lower average interest rates, resulting primarily from
borrowings related to acquisitions and capital asset purchases.
Net income for the 1997 Fiscal Year decreased from the 1996 Fiscal Year
as a result of the foregoing.
1996 FISCAL YEAR COMPARED TO 1995 FISCAL YEAR
Net sales of the fiscal year ended December 31, 1996 (the "1996 Fiscal
Year") increased by $37.8 million, or 21.1%, over net sales for the fiscal year
ended December 31, 1995 (the "1995 Fiscal Year"). The increase is primarily
attributable to the Clearplas Acquisition, which accounted for $24.2 million of
the increase in net sales of the Company from the 1995 Fiscal Year, and to the
MaP Acquisition, which accounted for $5.3 million of the increase in net sales
of the Company from the 1995 Fiscal Year. In addition, North American product
sales (which are primarily U.S. sales) increased by $10.2 million, or 6.6%,
primarily due to new program launches. Tooling sales declined by $1.9 million,
or $7.3%. This decline, however, is not indicative of future program activity in
that tooling related inventory at December 31, 1996 increased by $7.4 million to
$17.6 million from $10.2 million at December 31, 1995.
Gross profit for the 1996 Fiscal Year increased by $4.2 million, or
11.2%, over gross profit for the 1995 Fiscal Year. The gross profit margin
decreased by 1.7%, from 20.9% in the 1995 Fiscal Year to 19.2% in the 1996
Fiscal Year. This decrease stemmed primarily from increased price concessions
(1.4%).
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Selling, general and administrative expenses (SG&A) for the 1996 Fiscal
Year increased by $3.3 million. The increase results from additional SG&A from
the MaP and Clearplas Acquisitions of $4.7 million, partially offset by lower
North American SG&A. As a percent of net sales, SG&A was unchanged at 8.7% of
sales in the 1995 and 1996 Fiscal Years.
Interest expense increased from $14.8 million in the 1995 Fiscal Year
to $15.8 million in the 1996 Fiscal Year as a result of higher average debt,
resulting primarily million from borrowings related to acquisitions and
capital asset purchases.
Net income for the 1996 Fiscal Year remained substantially unchanged
from the 1995 Fiscal Year as a result of the foregoing.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal cash requirements are to meet debt payments,
fund its capital plan (including, where necessary, acquisitions) and for working
capital needs. The Company anticipates that its operating cash flow, together
with additional available borrowings under the Senior Credit Facility, will be
sufficient to meet the aforementioned requirements.
Net cash provided from operations was $7.8 million in the 1997 Fiscal
Year compared to $14.5 million in the 1996 Fiscal Year. The relative decrease in
cash from operations primarily relates to an increase of $16.7 million in the
Company's tooling inventory. This increase represents tools for programs that
will launch primarily in the second half of 1998 and in early 1999.
Net cash used in investing activities of $59.1 million consisted of
$40.2 million of capital spending, $14.6 million of which related to
acquisitions. Fiscal 1997 capital expenditures include injection molding
machines, assembly equipment and automation and an expansion of the Company's
Hartford City paint facility. The Company believes 1998 capital acquisitions
will be approximately $25 million. Actual capital expenditures may be greater
as a result of acquisitions or new business opportunities.
During 1997 the Company refinanced its outstanding debt as follows. On
February 19, 1997, the Company commenced a tender offer to repurchase all of the
Old Notes. On March 24, 1997, the Company entered into a Senior Credit Facility,
which provides for borrowings of up to $140 million, and completed a private
offering of Senior Subordinated Notes in the aggregate principal amount of $125
million, with proceeds of approximately $121 million, after discounts,
commissions and expenses. The Senior Subordinated Notes were subsequently
registered on July 3, 1997. Loans under the Senior Credit Facility are secured
by substantially all of the assets of the Company and constitute Senior Debt of
the Company.
As of March 9, 1998, the Senior Credit Agreement was amended to allow
the Company to obtain an additional $20 million, Key Plastics International,
S.N.C. to obtain a French Franc 93.9 million and Key Plastics, U.K. to obtain
(pound)6.3 million, all five and one half year amortizing term loans. As a
result of these actions, the Company expects for France and the UK to realize
lower interest rates and establish a natural hedge for its net assets in those
countries. Futhermore, the Company had $33 million of availability under its
Senior Credit Agreement on March 27, 1998 after completing these actions.
Net cash provided by financing activities in 1997 was $63.5 million.
Cash dividends attributable to shareholder tax payments of $.7 million were paid
in 1997. On February 10,1998 a portion of the proceeds from the Investment,
$7.2 million, was accounted for as additional paid in capital and used to pay
down debt.
At December 31, 1997, the Company had total indebtedness of $219.2
million, of which $125.0 million was incurred pursuant to the notes issued under
the Indenture dated March 24, 1997, $33.8 million was incurred pursuant to the
Company's Senior Credit Facility and $24.4 million was incurred pursuant to the
notes issued under the Indenture dated November 17, 1992 by and between the
Company and Society Bank (now known as Mellon Bank), as amended.
YEAR 2000 COSTS
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the year. The Company has determined
that it will be required to replace portions of its software so that its
computer systems will properly utilize dates beyond December 31, 1999. The
Company believes that with modifications to existing software and conversions
to new software, the Year 2000 issue will be successfully resolved. The Company
does not expect the cost to resolve this issue to be material.
ITEM 7A. QUANTITATIVE AND QUATITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary financial information
included in this Annual Report on Form 10-K are set forth on the Index to
Consolidated Financial Statements appearing on page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
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ITEM 10. DIRECTORS AND OFFICERS
The following are the directors and executive officers of the Company:
Name Age Position with the Company
Joel D. Tauber 62 Director
George Mars 60 Director
David C. Benoit 49 Chief Executive Officer and a Director
Leonard R. Griffin 46 President and Chief Operating Officer
and a Director
Stephen Eisenstein 36 Director
A.E. "Gene" Stull 50 Vice President, Sales and Marketing
Calvin A. Saur 46 Vice President, Engineering
Douglas C. Chapple 46 Vice President, Eastern Group
Henry J. Wojtaszek 54 Vice President, Western Group
E.R. "Skip" Autry 43 Chief Financial Officer
William J. Luka 51 Vice President, Quality
Richard J. Blough 51 Vice President, Administration
and Human Resources
Mark J. Abbo 45 Treasurer
David M. Smith 34 Corporate Controller
Joel D. Tauber formed the Company with Messrs. Mars and Benoit in 1986
and has been a director and Chairman of the Board since that time. The Company
was formed to acquire the assets of the plastics division of Key International
Manufacturing, Inc. ("KIMI" ), a company involved in plastics manufacturing for
over twenty years and in which Mr. Tauber served as President. Mr. Tauber is a
manufacturing executive, business consultant and investor. Mr. Tauber is
President of Keyco Bond Fund, Inc. and serves as Chairman of the Board of
Complex Tooling & Molding, Inc., Keywell Corporation and KMGI, Inc.
George Mars formed the Company with Messrs. Tauber and Benoit in 1986,
has been a director since that time and Co-Chairman of the Board since 1995.
Prior to his retirement, Mr. Mars served as President of the Company from 1986
to 1995. Mr. Mars was a General Manager of the plastics division of KIMI.
David C. Benoit formed the Company with Messrs. Tauber and Mars and has
been a director since the Company's formation in 1986. Mr. Benoit was Executive
Vice President of the Company from 1986 to 1995, when he was appointed to his
current position of Chief Executive Officer. Mr. Benoit was Chief Financial
Officer of KIMI and has 17 years experience in the automotive industry. Mr.
Benoit is also a member of the Board of Directors for Complex Tooling & Molding,
Inc.
Leonard R. Griffin, President and Chief Operating Officer of the
Company, joined the Company in April 1995 and joined the Board of Directors
in February 1998. Prior to joining the Company, Mr. Griffin served for five
years as President of Woodbridge Inoac, Inc., a joint venture partnership
formed by Woodbridge Group, a Canadian plastics company and Inoac, Ltd., a
Japanese automotive parts supplier. Prior to serving as President of
Woodbridge, Mr. Griffin was General Manager of Rockwell International's
Automotive Plastics Products Operations. Mr. Griffin's business experience
consists of over 28 years in the automotive industry, including the
foregoing, and years spent in management, manufacturing and quality control
capacities at Libbey Owens Ford (now known as Aeroquip-Vickers Corporation)
and Allen Industries.
Stephen Eisenstein is a founding partner of Paribas Principal Partners.
Prior to founding Paribas Principal Partners, Mr. Eisenstein was a Managing
Director in Banque Paribas' U.S. Merchant Banking Group. Mr. Eisenstein serves
on the Boards of Atlantic Coast Fire Protection, Inc., Collins & Aikman
Floorcoverings, Inc. and Paribas Principal, Inc.
A.E. Stull has been Vice President, Sales and Marketing of the Company
since November 1991, and has served in various other capacities at the Company
since 1988. Mr. Stull joined the Company in November 1988 and served as Vice
President, Sales and Marketing of the Company's Plymouth Division until November
1991 when he became Vice President, Sales and Marketing for all Company
operations. Prior to joining the Company, Mr. Stull was Director of Sales for
Magna International, Inc., Tesma Group, an automotive supplier.
Calvin A. Saur has been employed at the Company since 1986 and, since
May 1995, has been Vice President, Engineering of the Company. Prior to
attaining his present position, Mr. Saur held various other positions at the
Company, including Vice President, Research and Development. Mr. Saur has been
employed in the automotive industry for 27 years.
Douglas C. Chapple has been Vice President, Eastern Group of the
Company since November 1996. Prior to joining the Company, Mr. Chapple was, from
1994 to 1996, Vice President, Manufacturing of Dott Industries, Inc., a
privately owned finisher and decorator of plastic products, including painted
interior components, exterior grilles and encapsulated assemblies. Before
joining Dott Industries, Inc., Mr. Chapple was employed, for over 17 years, by
General Motors Corporation in a variety of manufacturing and engineering
capacities, including Director of Engineering at GM's Inland Fisher Guide
Division.
Henry J. Wojtaszek has been employed at the Company for 12 years in
various manufacturing capacities, and since 1996, has been Vice President,
Western Group. Mr. Wojtaszek has been employed in the automotive industry for 35
years and has been a president of the Society of Plastics Engineers.
Christian Coumans joined the Company in May of 1997 as Vice President
of International Operations. Mr. Coumans has over 25 years of automotive
manufacturing experience. Prior to joining the Company Mr. Coumans worked for
Sommer Allibert, S.A. where he held a variety of positions in marketing,
international development and operations.
11
<PAGE> 12
E.R. "Skip" Autry, Vice President, Finance and Procurement, is the
Chief Financial Officer of the Company and joined the Company in 1995. Prior to
joining the Company, Mr. Autry held various finance positions at Chrysler
Corporation from 1986 to 1995, including, Director, Corporate Accounting,
Manager, Corporate Investments and Analysis and Controller, Corporate Staff.
From 1976 to 1986, Mr. Autry held various positions at Coopers & Lybrand,
specializing in manufacturing and publicly held companies.
William J. Luka has been Vice President, Quality of the Company since
1993. Prior to joining the Company, Mr. Luka was employed at Ford Motor Company
for three years as a Supplier Quality Engineer Auditor, where he was actively
involved in the development of Ford's QOS Methodology. Among his various duties,
Mr. Luka is responsible for implementing ISO-9000 throughout the Company. Mr.
Luka has been employed in the automotive industry for 27 years and has been
certified as a QS Auditor by the QS 9000 Registration Accreditation Board.
Richard J. Blough has been Vice President, Administration and Human
Resources of the Company since 1996. Prior to joining the Company, Mr. Blough
was Vice President, Human Resources at Electro-Wire Products, Inc., for two
years, Electro-Wire Products supplies wiring and electrical components to the
automotive and heavy truck industries. Prior to joining the Company, from 1989
to 1994, Mr. Blough was Director of Human Resources for the corporate office at
American Brass Company Incorporated.
Mr. Blough has 28 years experience in the automotive industry.
Mark J. Abbo is a certified public accountant and was formerly
employed by Coopers and Lybrand, he has been Treasurer of the Company since
1993. Mr. Abbo joined the Company in 1988 as Corporate Controller and held
that position until he was appointed Treasurer in 1993.
David M. Smith joined the Company as the Corporate Controller in
February 1997. From 1992 to 1997 Mr. Smith was employed at the Federal-Mogul
Corporation most recently in the postion of International Controller for
Europe, Africa & Asia. Mr. Smith's previous experience includes five years with
Ernst & Young working with automotive suppliers and financial services firms.
12
<PAGE> 13
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information as to the cash
compensation earned by each of the Company's five most highly paid current
executive officers who earned more than $100,000 for services rendered to the
Company during the three years ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
NAME AND TITLE YEAR SALARY BONUS COMPENSATION
<S> <C> <C> <C> <C>
David C. Benoit 1997 $290,000 $145,000 $2,700(a)
Chief Executive Officer 1996 275,000 125,000 1,300(a)
1995 361,000 37,500 1,500(a)
Leonard R. Griffin 1997 250,000 120,900 4,600(a)
President(c) 1996 240,000 106,000 700(a)
1995 156,125 76,042 --
Douglas Chapple 1997 157,500 34,800 1,900(a)
Vice President, Eastern Group(d) 1996 25,000 -- --
A.E. Stull 1997 142,480 46,000 3,900(a)
Vice President, Sales & Marketing 1996 137,000 39,200 1,300(a)
1995 137,000 35,000 1,500(a)
Calvin A. Saur 1997 124,000 27,000 2,900(a)
Vice President, Engineering 1996 117,000 24,250 1,300(a)
1995 110,000 20,000 1,500(a)
</TABLE>
- ----------
(a) Represents 401K match amounts for the account of the named executive in
1997. Prior to 1997 represents profit sharing amounts paid to the named
executive officers.
(b) Represents fees earned in capacity as a director of the Company and/or
amounts contributed to the Company's retirement savings plan on behalf of
the named executive officer.
(c) Joined the Company in 1995.
(d) Joined the Company in 1996.
CHANGE OF CONTROL ARRANGEMENTS - LONG TERM INCENTIVE PLAN
The Company's Long Term Incentive Plan (the "LTIP") is intended to
provide additional incentive to officers, including the executive officers named
in the Summary Compensation Table, and other eligible key employees of the
Company. The LTIP provides compensation to the employees who are included in the
LTIP and who remain employees as of the date of the occurrence of a Third Party
Transaction (as defined) of the
13
<PAGE> 14
Company. A Third Party Transaction is defined as an initial public offering of
the Company's Common Stock, a sale of all or substantially all of the Company's
Common Stock or a sale of all or substantially all of the Company's assets. In
the event that a Third Party Transaction occurs, each eligible employee will be
entitled to payment based on a formula equal to the Total Incentive Pool (as
defined) multiplied by the result obtained by multiplying a factor assigned to
each employee at the time such employee is included in the LTIP times the
employee's Cumulative Base Compensation. Cumulative Base Compensation means the
total base compensation earned by such employee from the date of inclusion in
the LTIP to the date of occurrence of a Third Party Transaction. The factor
assigned to each employee is based upon the level of management in which the
employee is included. Total Incentive Pool means the total of all Cumulative
Base Compensation of every eligible employee. The LTIP will fund upon the
occurrence of a Third Party Transaction and terminates as of the date of such
occurrence.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Key's Common
Stock as of March 27, 1998 owned by the directors of the Key, the named
executive officers, and all directors and officers as a group, and by other
holders known to the Company as having beneficial ownership of more than five
percent of the Common Stock. As of March 27,1998, Key and a third party
investor beneficially owned 75 percent and 25 percent, respectively, of the
Company.
Each person exercises sole investment and voting rights with respect to the
shares of Common Stock shown in the table below unless otherwise stated. The
address of each of the following persons is Suite 200, 21333 Haggerty Road,
Novi, Michigan 48375.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
OF COMMON STOCK OUTSTANDING
DIRECTORS, OFFICERS AND FIVE PERCENT HOLDERS OWNED BENEFICIALLY SHARES(a)
<S> <C> <C>
Joel D. Tauber ................................. 90,828 20.0%
David C. Benoit ................................ 79,833(a) 17.6%
George Mars .................................... 62,065 13.6%
Calvin A. Saur ................................. 9,228 2.0%
A.E. Stull ..................................... 6,000 1.3%
Leonard R. Griffin ............................. 6,101 1.3%
Douglas Chapple................................. 1,000 0.2%
All directors and officers as a
group (13 persons)........................... 272,803 79.7%
</TABLE>
(a) 79,833 shares are held by the David C. Benoit Trust, of which Mr. Benoit is
the Trustee and beneficiary.
Messrs. Tauber, Mars and Benoit, if they vote their shares in a
combination which exceeds 50% of the outstanding Common Stock, have the ability
to elect a majority of the Board of Directors of Key and determine the outcome
of any other matter submitted to shareholders for approval. There are no
arrangements, however, among any of the shareholders of Key, including
such persons, with respect to the voting or disposition of the Common Stock
and there are no arrangements between the shareholders and Key, except that
(i) shareholders may not make any dispositions which could result in the
termination of the Company's S Corporation status and (ii) certain shareholders
are parties to an Equityholders Agreement as described in Item 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Shareholder Agreement. Each Shareholder, including Messrs. Tauber, Mars
and Benoit, has entered into a shareholder agreement with Key. Pursuant to such
agreement, a shareholder may not transfer shares of the Key's Common Stock
without the written consent of the Key, except that no consent is required for
transfers to a decedent shareholder's beneficiaries, but only if such transfers
would not result in the disqualification of the Key as a Subchapter S
corporation.
Tax Allocation Agreement. Key has entered into a Tax Allocation
Agreement with each of its shareholders relating to federal and certain state
and local income tax liabilities of Key. This agreement generally provides that
(i) in any fiscal year in which Key has a net operating loss for tax purposes,
each shareholder will pay to Key an amount equal to the net tax benefit realized
by the shareholder as a result of the allocation to the shareholder of such net
operating loss incurred by Key, up to the amount of dividends received by the
shareholders and not previously repaid to Key, (ii) if in any fiscal year Key
distributes dividends relating to the shareholders' tax liability which exceed
the actual liability at the highest marginal tax rated based on Key's net
taxable income for such fiscal year, each shareholder will pay to Key, as a
contribution to capital, an amount equal to the difference between the dividends
paid to the shareholder during such fiscal year and the actual liability at the
highest marginal tax rate based on the
14
<PAGE> 15
net taxable income allocated to the shareholder for such fiscal year, and (iii)
if Key's S election is disallowed or revoked for any taxable year for which such
election was in effect, each shareholder will pay to Key the full amount of any
distribution -made to the shareholder with respect to such taxable year for
payment of taxes for income of Key allocated to the shareholder. Each
shareholder has pledged the shareholder's common stock in Key to secure any debt
that the shareholder may owe to Key pursuant to the Tax Allocation Agreement. In
addition, Key has the right to set off any amounts owed to Key by the
shareholder under the Tax Allocation Agreement against any future dividends or
redemption payments payable by Key to the shareholder.
Consulting Arrangements. The Company has a consulting arrangements with
each of Messrs. Tauber and Mars. Mr. Tauber and Mr. Mars are each paid $10,000
per month for services provided to the Company. In addition, Mr. Mars receives
compensation at a rate of $1,000 per diem, plus out-of-pocket expenses, for each
day of services provided, which services are not compensated for by the $10,000.
In 1997, Mr. Tauber and Mr. Mars earned $120,000 and $120,000, respectively.
Non-Competition and Non-Disclosure Agreements. On February 9, 1998
each of Messrs. Tauber, Mars and Benoit entered into Non-Competition and
Non-Disclosure Agreements with the Company, pursuant to which they have agreed,
during the term of the agreements and for 6 months after termination of their
affiliation with the Company, to not compete with the Company within a 50 mile
radius of any company facility or disclose or use confidential information
without the consent of the Company, except as required in executing their
duties to the Company.
Equityholders Agreement. As of February 9, 1998, Key, Technology, a
third party investor, and each of Messrs. Tauber, Mars and Benoit
entered into an Equityholders Agreement (the "Equityholders Agreement").
Pursuant to the terms of the Equityholders Agreement, the parties agreed to
certain restrictions on the transfer of equity interests in Key and
Technology, and granted certain parties tag-along rights, bring-along rights,
rights of first refusal and preemtive rights related to transfers of equity
interest in Key and Technology and sales or transfer of all assets or equity
interests in Technology. The parties also agreed to certain matters of
corporate governance of Key and Technology and other matters.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
The Consolidated Financial Statements filed with this report
are listed on Page F-1.
2. Financial Statement Schedules:
No financial statement schedules, for which provision is made
in the applicable accounting regulations of the Securities and
Exchange Commission, are required under the related
instructions or are immaterial and, therefore, have been
omitted.
3. Exhibits:
The exhibits filed with this Report are listed on the "Exhibit
Index" on page E-1.
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the period
ended December 31, 1997.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K,
including, without limitation, statements containing the words "believes,"
"anticipates," "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of the Private Securities Reform
Act of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: international, national and local general economic and market
conditions; demographic changes; the size and growth of the automobile market or
the plastic automobile component market; consumer demand for the particular
models or lines that use the Company's parts; the ability of the Company to
sustain, manage or forecast its growth; the size, timing and mix of purchases of
the Company's products; new product development and introduction; existing
government regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; dependence upon OEMs (as defined); liability and
other claims asserted against the Company; competition; the loss of significant
customers or suppliers; fluctuations and difficulty in forecasting operating
results; changes in business strategy or development plans; business
disruptions; product recalls; warranty costs; the ability to attract and retain
qualified personnel; the ability to protect technology; the ability to realize
planned cost savings in its acquisitions; retention of earnings; and other
factors referenced in this Annual Report on Form 10-K. Certain of these factors
are discussed in more detail elsewhere in this Annual Report on Form 10-K,
including, without limitation, under the captions "Selected Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business." Given these uncertainties, users of
this Annual Report on Form 10-K are cautioned not to place undue reliance on
such forward-looking statements. The Company disclaims any obligation to
update any such factors or to publicly announce the result of any revisions to
any of the forward-looking statements contained or incorporated by reference
herein to reflect future events or developments.
15
<PAGE> 16
KEY PLASTICS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Accountants..................................... F-2
Consolidated Balance Sheets -- December 31, 1997 and 1996 ............ F-3
Consolidated Statements of Income -
Years Ended December 31, 1997, 1996, and 1995........................ F-4
Consolidated Statements of Shareholders' Deficit --
Years Ended December 31, 1997, 1996, and 1995......................... F-5
Consolidated Statements of Cash Flows -
Years Ended December 31, 1997, 1996 and 1995........................ F-6
Notes to Consolidated Financial Statements............................ F-7-15
F-1
<PAGE> 17
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Key Plastics, Inc.:
We have audited the accompanying consolidated balance sheets of Key
Plastics, Inc. and Subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of income, shareholders' deficit, and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Key
Plastics, Inc. and Subsidiaries as of December 31, 1997 and 1996 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Coopers & Lybrand Sig.
Detroit, Michigan
March 14, 1998
F-2
<PAGE> 18
KEY PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 6,918 $ --
Accounts receivable, net 58,186 43,131
Inventories 54,867 35,635
Prepaid expenses 3,529 2,076
-------- --------
Total current assets 123,500 80,842
Property, plant and equipment, net 124,285 98,908
Intangibles, net 29,482 8,516
Other assets 5,637 4,938
-------- --------
Total assets $282,904 $193,204
======== ========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 2,653 $ 61,762
Accounts payable 46,389 35,707
Outstanding checks in excess of cash balances -- 5,372
Accrued interest 5,236 5,275
Accrued payroll 3,942 3,527
Other accrued liabilities 12,746 9,422
-------- --------
Total current liabilities 70,966 121,065
Capital lease obligation 1,514 2,057
Long-term debt 216,575 82,521
Other long-term obligations 6,110 3,123
Shareholders' equity (deficit):
Common stock, par value $.30 per share; 450,000
shares authorized and 321,908 and 315,908
shares issued and outstanding for 1997
and 1996, respectively 97 95
Additional paid-in capital 12,497 9,786
Shareholder notes receivable (277) --
Accumulated deficit (24,740) (25,703)
Currency translation 162 259
-------- --------
Total shareholders' equity (deficit) (12,261) (15,563)
-------- --------
Total liabilities and shareholders' equity (deficit) $282,904 $193,204
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 19
KEY PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales $306,001 $217,086 $179,251
Cost of sales 239,744 175,301 141,707
Selling, general and administrative expenses 33,724 18,866 15,531
-------- -------- --------
32,533 22,919 22,013
Amortization of Goodwill 1,576 114 72
Interest expense and amortization of debt
issuance costs 22,112 15,754 14,861
-------- -------- --------
Income before foreign income taxes, minority
interest and extraordinary item 8,845 7,051 7,080
Foreign income tax expense 374 -- --
Minority interest 1,600 -- --
-------- -------- --------
Income before extraordinary item 6,871 7,051 7,080
Extraordinary item - debt refinancing, see Note 5 (5,192) -- --
-------- -------- --------
Net income $ 1,679 $ 7,051 $ 7,080
======== ======== ========
Earnings -- Basic per common share:
Income before extraordinary item $ 21.38 $ 22.29 $ 22.05
Net earnings per common share $ 5.22 $ 22.29 $ 22.05
Earnings -- Diluted per common share:
Income before extraordinary item $ 20.51 $ 21.33 $ 21.18
Net earnings per common share $ 5.01 $ 21.33 $ 21.18
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 20
KEY PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL SHAREHOLDER
---------------- PAID-IN NOTES ACCUMULATED CURRENCY
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT TRANSLATION TOTAL
------ ------ ---------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1994 325,401 $ 98 $10,502 $(34,027) $(23,427)
Dividend distributions, $6.54 per share (4,025) (4,025)
Purchase and constructive retirement
of common stock (8,567) (3) (500) (503)
Net income 7,080 7,080
------- ---- ------- ----- -------- --------
Balances, December 31, 1995 316,834 95 10,002 (30,972) (20,875)
Dividend distributions, $5.63 per share (1,782) (1,782)
Purchase and constructive retirement of
common stock (926) -- (216) (216)
Currency translation $259 259
Net income 7,051 7,051
------- ---- ------- ----- -------- ---- --------
Balances, December 31, 1996 315,908 95 9,786 (25,703) 259 (15,563)
Dividend distributions, $2.27 per share (716) (716)
Purchase and constructive retirement
of common stock -- (38) (38)
Issuance of common stock 6,000 2 353 $(355) 0
Shareholder contribution 2,396 2,396
Payment on shareholder notes 78 78
Currency translation (97) (97)
Net income 1,679 1,679
------- ---- ------- ----- -------- ---- --------
Balances, December 31, 1997 321,908 $ 97 $12,497 $(277) $(24,740) $162 $(12,261)
======= ==== ======= ===== ======== ==== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 21
KEY PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 1997, 1996, AND 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,679 $ 7,051 $ 7,080
--------- -------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary item--loss on early retirement of debt 5,192
Depreciation 14,842 9,175 6,971
Amortization 2,009 657 641
Decrease (increase) in assets:
Accounts receivable (4,499) (13,725) (737)
Inventories (13,793) (13,571) 4,784
Prepaid expenses 601 (906) (36)
Increase (decrease) in liabilities:
Accounts payable 3,026 16,517 (7,318)
Other accrued liabilities (1,212) 9,296 310
--------- -------- --------
Total adjustments 6,166 7,443 4,615
--------- -------- --------
Net cash provided by operating activities 7,845 14,494 11,695
--------- -------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment, net (25,621) (16,738) (14,047)
Property, plant and equipment from acquired businesses (14,598) (23,109) --
Increase in intangible assets (18,153) (6,093) --
Increase in other assets, net (6,068) (2,009) (1,815)
--------- -------- --------
Net cash used in investing activities (64,440) (47,949) (15,861)
Cash flows from financing activities:
Net borrowings under debt agreements 323,944 45,464 14,125
Principal payments under debt agreements and
capital lease obligations (246,376) (16,042) (5,546)
Long-term agreements to finance acquisitions -- 1,677 --
Costs to secure new financing (5,865) -- --
Cash portion of extraordinary item (4,460)
Purchase of common stock (38) (216) (502)
Dividend distributions (716) (1,782) (4,025)
Shareholder capital contribution 2,396 -- --
Change in outstanding checks (5,372) 4,354 115
--------- -------- --------
Net cash provided by financing activities 63,513 33,455 4,167
--------- -------- --------
Net increase in cash
6,918 0 0
Cash, beginning of year 0 0 0
--------- -------- --------
Cash, end of year $ 6,918 $ 0 $ 0
========= ======== ========
Supplemental disclosure of cash flow information -
Cash paid during the year for interest $ 21,674 $ 13,889 $ 13,209
========= ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 22
KEY PLASTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION -- The consolidated financial statements include the accounts of
Key Plastics, Inc. and its majority-owned or controlled subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated.
INVENTORIES -- Inventories are stated at the lower of cost or market with cost
determined using the FIFO (first-in, first-out) method.
REVENUE RECOGNITION:
Manufactured Parts -- Sales are recognized on manufactured parts when
the parts are shipped to the customer. Returns and allowances are recorded as a
reduction of sales in the period they occur.
Tooling -- Costs of tooling purchased or produced are included in
work-in-progress inventory. Generally, such tooling is owned by the customer and
used by the Company for the production of parts for the respective customer.
Income from contracts for the manufacture of customer tooling is accounted for
under the completed-contract method of accounting, which recognizes revenue upon
completion of contracts or identifiable segments. Costs in excess of customer
reimbursement are capitalized and amortized over the related part's production
period. Such capitalized costs, net of amortization, are included in other
assets.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation is
determined using the straight-line method over the estimated useful lives of the
assets.
The general ranges of lives are as follows:
Building and improvements.................................. 25 to 30 years
Machinery and equipment.................................... 3 to 15 years
Furniture and fixtures..................................... 3 to 10 years
Maintenance and repairs are expensed; renewals and betterments are
capitalized. Upon retirement, replacement, or sale, gains or losses are included
in income. The costs of major refurbishments and improvements to tools, utilized
in the manufacturing process, are capitalized in property, plant and equipment
and amortized over the lesser of three years or the remaining useful life of the
tool.
INTANGIBLES:
Goodwill -- Goodwill represents the excess of amounts paid and
liabilities assumed over the fair value of identifiable tangible and intangible
assets acquired. This amount is amortized using the straight-line method over a
period of 15 years. The company evaluates the carrying value of goodwill for
potential impairment on an ongoing basis. Such evaluations compare operating
income before amortization of goodwill to the amortization recorded for the
operations to which the goodwill relates. The company also considers projected
future operating results, trends and other circumstances in making such
estimates and evaluations.
Deferred Financing Costs -- Deferred financing costs represent costs
incurred in connection with obtaining financing. These costs are amortized over
the period the loans are outstanding.
Other Intangibles -- Other intangibles are amortized using the
straight-line method over five to 10 years.
Preproduction Costs -- Preproduction costs associated with the start-up
of manufacturing activities related to new parts are included in the cost of
sales in the period incurred.
INCOME TAXES -- The Company has elected to be taxed as an S-Corporation. Under
the provisions of this election, the Company is not subject to federal income
taxes. The Company's policy is to pay dividends to shareholders for the income
taxes due on the shareholders' share of the Company's taxable income. Under the
terms of a shareholder tax allocation agreement, the shareholders are required
to make additional capital
F-7
<PAGE> 23
KEY PLASTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
contributions to the Company equivalent to the income tax benefit resulting from
their share of the Company's taxable losses. The additional capital
contributions are recorded when received.
EARNINGS PER COMMON SHARE -- Earnings per share is based on the weighted average
number of shares of common stock outstanding and, to the extent dilutive, stock
options and warrants outstanding during the period.
MAJOR CUSTOMER AND CONCENTRATION OF CREDIT RISK -- The Company manufactures
injection molded plastic parts for sale primarily to domestic automobile
manufacturers and their suppliers. Substantially all of the Company's net sales
and accounts receivable are with three domestic automobile manufacturers and
their suppliers. Net sales to one of these customers accounted for approximately
50 percent of net sales in 1997, 58 percent of net sales in 1996 and
approximately 57 percent of 1995 net sales. Net sales to a second one of these
customers accounted for 13 percent of 1997 sales, approximately 9 percent of
sales in 1996 and approximately 10 percent of 1995 net sales. The change in
these percentages reflects the increased diversity of the Company's automotive
customer base.
ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the period.
Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION-- Assets and liabilities of international
subsidiaries are translated at the exchange rates as of the balance sheet date.
Related translation adjustments are reported as a component of stockholders'
equity. Revenues and expenses are translated at the average rates in effect for
the period.
DERRIVATIVE FINANCIAL INSTRUMENTS--The Company limits it use of derivative
financial instruments to forward exchange contracts to hedge significant foreign
currency transactions. As of December 31, 1997, the Company purchased a
Portuguese escudo forward with a notional amount of $8 million to hedge a
transaction expected to close in the first quarter of 1998. At December 31, 1997
there was no deferred gain or loss related to foreign exchange contracts.
EFFECT OF ACCOUNTING PRONOUNCEMENT - In 1997, the Financial Accounting Standards
Board issued Statement No. 130, Reporting Comprehensive Income. This Statement
establishes standards for the reporting and display of comprehensive income and
its components in a full set of general purpose financial statements. Statement
130 is effective for years beginning after December 15, 1997. Beginning in 1998,
the Company will provide information relating to comprehensive income to conform
to the requirements.
RECLASSIFICATIONS -- Certain reclassifications have been made in the prior year
financial statements to conform with the presentation used in 1997.
2. INVENTORIES
The components of inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
(Dollars in Thousands)
1997 1996
------- -------
<S> <C> <C>
Raw materials...................................... $9,071 $7,860
Work in process.................................... 2,438 2,584
Finished goods..................................... 9,005 7,587
Customer tooling in process........................ 34,353 17,604
------- -------
Total......................................... $54,867 $35,635
======= =======
</TABLE>
F-8
<PAGE> 24
KEY PLASTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
(Dollars in Thousands)
1997 1996
-------- -------
<S> <C> <C>
Land................................................ $2,591 $2,160
Building and improvements........................... 35,038 26,849
Machinery and equipment............................. 129,304 111,057
Furniture and fixtures.............................. 7,281 4,641
Construction-in-progress............................ 8,916 1,845
-------- -------
Total.......................................... 183,130 146,552
Less accumulated depreciation....................... 58,845 47,644
-------- -------
Total.......................................... $124,285 $98,908
======== =======
</TABLE>
4. INTANGIBLES
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
(Dollars in Thousands)
1997 1996
-------- -------
<S> <C> <C>
Goodwill............................................ $24,746 $ 6,592
Deferred financing Costs............................ 7,582 4,164
Other intangibles................................... 836 836
------- -------
Total............................................... 33,164 11,592
Less accumulated amortization....................... 3,682 3,076
------- -------
Total............................................... $29,482 $ 8,516
======= =======
</TABLE>
F-9
<PAGE> 25
KEY PLASTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
Senior Subordinated Notes, due March 2007, requiring
semiannual interest payments at the rate of 10.25% ...................... $125,000 --
Term loan, bank, due September 2004, requiring quarterly
interest payments at LIBOR plus 2.5 (8.4% at
December 31, 1997) ..................................................... 15,000 --
Revolving credit loan, bank, due December 2003, requiring
monthly interest payments at prime plus .5% and LIBOR
plus 2.25%. (These rates varied from 8.1% to 9.0% at
December 31, 1997) ...................................................... 33,837 --
Senior Notes, due November 1999, requiring semiannual
interest payments at the rate of 14% .................................... 24,365 $ 65,000
Revolving credit facility, bearing interest at LIBOR plus
2.5% (8.3% at December 31, 1997), payable in British
Pounds Sterling ......................................................... 9,246 9,831
Revolving credit loan, bank, due May 1, 1997 requiring
monthly interest payments at prime
(8.5% at December 31, 1997) .............................................. -- 28,988
Subordinated Shareholders' Notes due August 2000, requiring
semiannual interest payment at the rate of 12% .......................... 8,535 --
Other ....................................................................... 11,780 31,929
-------- --------
Total .................................................................. $219,228 $144,283
Less current maturities ..................................................... 2,653 61,762
-------- --------
Total .................................................................. $216,575 $ 82,521
======== ========
Principal payments of long-term debt for each of the next five years and
beyond is as follows:
Current maturities........................................................... $ 2,653
1999......................................................................... 26,182
2000......................................................................... 1,749
2001......................................................................... 1,368
2002 and thereafter.......................................................... 187,276
</TABLE>
F-10
<PAGE> 26
KEY PLASTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
5. LONG-TERM DEBT -- (CONTINUED)
The Company's financing agreements contain many restrictive loan
covenants, some of which require the Company to maintain minimum levels of
working capital, require the maintenance of specified financial ratios, and
restrict specified payments, including dividends. Under the most restrictive
covenant, the Company must maintain a specified minimum fixed charge ratio,
which could limit the Company's capital expenditures.
Substantially all of the Company's assets are pledged as collateral for
long-term debt.
At December 31, 1997, the Company had the following additional open
letters of credit. Economic Development Revenue Bonds of $3.2 million are
collateralized by a $3.6 million letter of credit. A $1.5 million Industrial
Development Revenue Bond is collateralized by a $1.5 million bank letter of
credit. The revolving credit facility payable in British Pounds Sterling is
collateralized by a $10.6 million bank letter of credit. The Company is
self-insured in the State of Michigan for workers' compensation. As such, the
Company has a bank letter of credit in the amount of $0.5 million to serve as
collateral for any potential claims.
On March 24, 1997, the Company retired $40.1 million of the 14% Senior
Notes due 1999 (the "Old Notes") as part of a tender offer. The premium for
the repurchase of the Old Notes and the write-off of unamortized debt issuance
costs have been accounted for as an extraordinary item. Concurrently, the
Company issued $125 million of 10.25% Senior Subordinated Notes, due March
2007, in a private placement. These notes were subsequently registered in July
of 1997. Also during March 1997 the Company entered into a new $140 million
Senior Credit Facility consisting of $125 million in revolving credit due
December 2003 with various interest rates at prime plus 1/2% and LIBOR plus
2.25% and a $15 million term loan due September 2004 with interest at LIBOR
plus 2.5%.
The carrying amount of the bank debt and the remaining other long-term
debt instruments approximate fair value as the floating rates inherent in this
debt reflect changes in overall market interest rates.
F-11
<PAGE> 27
KEY PLASTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
6. LEASES
During 1994, the Company entered into four capital leases for a
production plant and various equipment in Mexico. The assets recorded under the
capital leases are included in property plant and equipment in the accompanying
consolidated balance sheets consist of the following:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Land................................................... $407 $407
Production facility.................................... 2,171 2,171
Equipment.............................................. 208 208
------ ------
Total............................................. 2,786 2,786
------ ------
Less accumulated amortization.......................... 228 130
------ ------
Total.................................................. $2,558 $2,656
====== ======
</TABLE>
Present value of net minimum lease payments under the capital leases is
$1.4 million.
During 1995, the Company entered into a 10 year operating lease for its
Worldheadquarters located in Novi, Michigan. The executive, engineering and
sales departments moved to this location. The Company also has an operating
lease for the Grand Rapids, Michigan plant that expires in 2000. The rental
expense related to these leases amounted to $682 in 1997, $530 in 1996 and $406
in 1995.
Minimum future lease obligations on capital and operating leases in
effect at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<C> <C> <C>
1998..................................................... $865 $1,628
1999..................................................... 649 1,650
2000..................................................... -- 1,439
2001..................................................... -- 901
2002..................................................... -- 714
Thereafter............................................... -- 1,548
</TABLE>
7. EMPLOYEE BENEFITS AND COMPENSATION COMMITMENTS
RETIREMENT AND PROFIT SHARING PLANS - Effective January 1, 1997 the
Company began providing a defined contribution retirement plan to substantially
all of its employees in the United States. Contributions are matched by the
Company up to a maximum of three percent. This plan replaced a profit sharing
plan, which provided for contributions determined at the Board of Directors'
discretion.
STOCK OPTIONS - The Company issued options to employees to purchase
shares of common stock at exercise prices averaging $83 and $61 in 1997 and
1995, respectively. No new options were issued in 1996. The exercise price
represents management's estimate of fair market value of the shares at the date
of issuance of the option. At December 31, 1997, options outstanding and
exercisable totaled 23,168 shares.
F-12
<PAGE> 28
KEY PLASTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
7. EMPLOYEE BENEFITS AND COMPENSATION COMMITMENTS -- (CONTINUED)
The following table summarizes the activity related to the Company's stock
option plans:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
OPTIONS PRICE PER SHARE
------- ---------------
<S> <C> <C>
Outstanding at January 1, 1995 ........................ 21,812 $25.15
Granted ............................................. 5,556 $61.10
Exercised ........................................... --
Forfeited ........................................... --
------
Outstanding at December 31, 1995 ...................... 27,368 $32.45
Granted ............................................. --
Exercised ........................................... 4,700 $24.40
Forfeited ........................................... --
------
Outstanding at December 31, 1996 ...................... 22,668 $34.12
Granted ............................................. 4,200 $82.94
Exercised ........................................... 3,700 $25.00
Forfeited ........................................... --
------
Outstanding at December 31, 1997 ...................... 23,168 $39.14
======
</TABLE>
CHANGE IN CONTROL AGREEMENT -- Certain key management are included in a long
term incentive plan. The plan provides for payments upon the occurrence of an
initial public offering, sale of all or substantially all of the Company's
stock or sale of all or substantially all of the Company's assets. Payment is
based upon a formula specified in the plan.
8. LITIGATION AND CLAIMS
The Company is subject to various legal and regulatory proceedings and
claims which arise in the ordinary course of business. In the opinion of
management, the amount of any liability which may result with respect to these
actions will not materially affect the financial position of the Company.
Additionally, the Company is under review by the Ohio Environmental
Protection Agency ("OEPA") for possible violations of environmental emission
standards and permitting regulations at its Ohio facility. The Company is in the
process of providing the information requested by the OEPA and is taking the
necessary steps to comply with the regulations. At this point, no fines and
penalties have been assessed against the Company. However, based on current
information, management believes that the results of the investigation will not
materially affect the financial position of the Company.
9. ACQUISITIONS
The Company accounted for the following acquisitions as purchases. The
consolidated statements of operations include the operating results of the
acquired businesses from the date of acquisition.
F-13
<PAGE> 29
KEY PLASTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
9. ACQUISITIONS -- (CONTINUED)
During 1997, the Company completed three acquisitions, which expanded
its automotive plastic injection molding, assembly and painting capabilities and
booked business. On March 28, 1997 the Company purchased three North American
manufacturing facilities of the Aeroquip Division of the Aeroquip-Vickers
Corporation. On June 30, 1997 the Company purchased the assets of T.D. Shea
Manufacturing Inc., an OEM supplier of decorative appliques with two factories
in Indiana. On September 5, 1997 the Company acquired the Clearplas France
division of Ascot Ltd. located in Belleme, France. Pro forma results of
operations as if these acquisitions had been consumated on January 1, 1997 and
January 1, 1996,respectively, are not materially different from the historical
results of operations.
During 1996, the Company acquired Clearplas, Ltd. (Clearplas) and Materias
Plasticas, S.A. (MaP). Both companies are automotive suppliers specializing in
injection molding, painting and assembly. At December 31, 1996 and 1997, Other
Long-Term Obligations includes $1.7 and $1.8 million, respectively, representing
the present value of deferred payments for the acquired shares for the MaP
acquisition.
The Company acquired MaP pursuant to an agreement which provided for
the Company's acquisition of 38% of the voting stock of the Company and an
option to purchase all of the remaining shares of MaP. Commencing in 1996, the
agreement gives the Company significant operational control, including the
appointment of a majority of the Board of Directors, appointment of the general
manager and the ability to influence significant operational decisions. The
option is subject to MaP meeting certain performance criteria during 1998, with
payment of the purchase price for the option and the 38% to occur in 1999.
Minority interest in the accompanying Consolidated Statements of Income
represents income attributable to Map shareholders other than the Company. Other
accrued liabilities include approximately $1.6 million representing the other
shareholder's interest in the net assets of MaP at December 31, 1997.
10. SEGMENT DATA
The Company is a global supplier of highly engineered plastic
components for the automotive industry. Its comprehensive plastics manufacturing
capabilities include design and engineering, high-precision injection molding,
automated manufacturing and assembly, plastic painting and material and product
testing. The Company conducts manufacturing, assembly and painting operations
from 16 facilities in North America and three facilities in Europe. All of these
activities constitute a single business segment. Prior to 1996, nearly all of
the Company's operations and assets were within North America.
Financial information summarized by geographic area is as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net Sales:
North America (primarily U.S) ................ $238,475 $187,636
Europe ....................................... 67,526 29,450
-------- --------
$306,001 $217,086
======== ========
Operating Income:
North America (primarily U.S) ............... $ 26,215 $ 22,250
Europe ....................................... 4,709 555
-------- --------
$ 30,924 $ 22,805
======== ========
Identifiable Assets:
North America (primarily U.S) ................ $219,132 $150,147
Europe ....................................... 63,772 43,056
-------- --------
$282,904 $193,204
======== ========
</TABLE>
F-14
<PAGE> 30
KEY PLASTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
10. SEGMENT DATA -- (CONTINUED)
Transfers between geographic areas are not significant, and when made,
are recorded at prices comparable to normal unaffiliated customer sales.
The information presented above was prepared in accordance with Financial
Accounting Board Statement No. 14. In 1997, the Financial Accounting Standards
Board issued Statement No. 131, Disclosures about Segments of an Enterprise and
Related Information. The statement supercedes Statement 14 and establishes
standards for the way selected information about operating segments in annual
and interim financial reports is presented. Statement 131 is effective for years
beginning after December 15, 1997. For the year ended 1998, the Company will
provide information to conform to Statement 131.
11. EARNINGS PER SHARE
The company adopted Statement of Financial Accounting Standard no. 128,
"Earnings per Share" for financial statements for the year ended December 31,
1997. This statement simplifies the standards for computing Earnings Per Share
(EPS) and requires the presentation of both Basic EPS and Diluted EPS on the
face of the Income Statement, as well as a reconciliation of the numerators and
denominators used in the calculation. Earnings per share for 1996 and 1995 have
been restated to reflect the new standard.
<TABLE>
<CAPTION>
1997 1996 1995
(in thousands, except
per share amounts) Income Shares Income Shares Income Shares
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net income before extraordinary item $ 6,871 321.4 $7,051 316.4 $7,080 321.1
Extraordinary item (5,192) -- -- -- -- --
------- ----- ------ ----- ------ -----
Net income and shares 1,679 321.4 7,051 316.4 7,080 321.1
Net dilutive effect of options -- 13.7 -- 14.2 -- 13.1
------- ----- ------ ----- ------ -----
Net income and diluted shares $ 1,679 335.1 $7,051 330.6 $7,080 334.2
======= ====== ======
Basic earnings per common share:
Basic EPS before extraordinary item $21.38 $22.29 $22.05
Extraordinary item ($16.15) -- --
------- ------ ------
Basic EPS $5.22 $22.29 $22.05
======= ====== ======
Diluted earnings per common share:
Diluted EPS before extraordinary item $20.61 $21.33 $21.18
Extraordinary item ($15.50) -- --
------- ------ ------
Diluted EPS $5.01 $21.33 $21.18
======= ====== ======
</TABLE>
12. SUBSEQUENT EVENT
On February 9, 1998 the Company contributed significantly all of its
assets and liabilities to Key Plastics, L.L.C., a company wholly owned by
Key Plastics, Inc. Also, Key Plastics, Inc. changed its name to Key Plastics
Holdings, Inc.
* * * * * *
F-15
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
KEY PLASTICS HOLDINGS, INC.
Dated: March 30, 1998
By: /s/ E.R. Autry
-------------------------------
E.R. Autry
Vice President and Chief
Financial Officer
/s/ David M. Smith
-------------------------------
David M. Smith
Corporate Controller
(Principal Accounting Officer)
Dated: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ David C. Benoit Chief Executive Officer and Director March 30, 1998
- ---------------------- (Principal Executive Officer)
David C. Benoit
/s/ Leonard R. Griffin Chief Operating Officer, President March 30, 1998
- ---------------------- and Director
Leonard R. Griffin
/s/ George Mars Director March 30, 1998
- ----------------------
George Mars
<PAGE> 32
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1 Articles of Incorporation of Key, as amended.
Incorporated herein by reference to Exhibit 3.1 to
Key's Registration Statement No. 33-56048.
3.1.1 * Certificate of Amendment of Articles of
Incorporation of Key, filed February 10, 1998.
3.2 * Restated Articles of Organization of Technology.
3.3 Bylaws of Key, as amended. Incorporated herein by
reference to Exhibit 3.1 to Key's Annual Report on
Form 10-K for the year ended December 31, 1995.
3.3.1 * Amendment to the Bylaws of Key, effective February 9,
1998.
3.4 * Amended and Restated Operating Agreement of Technology.**
4.1 Indenture, dated November 17, 1992, by and between the
Company (as defined therein) and Society National Bank, as
Trustee (the "Senior Note Indenture"), including 14% Senior
Notes issued thereunder. Incorporated herein by referenced
to Exhibit 4.1 to Key's Registration Statement No. 33-56048.
4.1.1 * Supplemental Indenture to the Senior Note Indenture, dated
as of February 9, 1998.
4.2 Loan Agreement, dated as of August 1, 1989, between Key and
the Town of Hamilton, Indiana. Incorporated herein by
reference to Exhibit 4.5 of Key's Registration Statement
33-56048.
4.3 Reimbursement Agreement, dated as of November 17, 1992,
between the Key and Comerica Bank. Incorporated herein by
reference to Exhibit 4.6 to the Key's Registration
Statement No. 33-56048.
4.4 Loan Agreement, dated as of December 1, 1987, between Key
and the Economic Development Corporation of the Township of
Plymouth, Michigan. Incorporated herein by reference to
Exhibit 4.7 to Key's Registration Statement No. 33-56048.
<PAGE> 33
4.5 Reimbursement Agreement, dated as of December 1, 1987,
between Key and Manufacturers Bank of Detroit, as amended.
Incorporated herein by reference to Exhibit 4.8 to Key's
Registration Statement 33-56048.
4.7 Indenture, dated March 24, 1997, by and between the Company
(as defined therein) and Marine Midland Bank, as Trustee
(the "Senior Subordinated Note Indenture"). Incorporated
herein by reference to Exhibit 4.6 to Key's Registration
Statement No. 333-26729.
4.7.1 * First Amendment to the Senior Subordinated Note Indenture,
made as of February 9, 1998.
4.7.2 * Supplemental Indenture to the Senior Subordinated Note
Indenture, dated as of February 9, 1998.
4.8 10 1/4% Senior Subordinated Notes dated March 24, 1997.
Incorporated herein by reference to Exhibit 4.9 to Key's
Registration Statement No. 333- 26729.
10.1 Amended and Restated Tax Allocation Agreement dated as of
August 9, 1988 between Key and each of its shareholders, as
amended. Incorporated herein by reference to Exhibit 10.1 to
Key's Registration Statement No. 33-56048.
10.2 Credit Agreement, dated as of March 24, 1997, by and among
the Company (as defined therein), the lenders party thereto
from time to time and NBD Bank, as agent for such lenders
(the "Credit Agreement"). Incorporated herein by reference
to Exhibit 10.2 to Key's Registration Statement No. 333-
26729.
10.3 Mortgage, Security and Assignment of Rents (Michigan Form)
dated as of March 24, 1997 by and among Key, the lenders,
and NBD Bank, as agent for
<PAGE> 34
\
such lenders. Incorporated herein by reference to Exhibit
10.3 to Key's Registration Statement No. 333-26729.
10.4 Mortgage, Security and Assignment of Rents (Indiana Form)
dated as of March 24, 1997 by and among Key, the lenders,
and NBD Bank, as agent for such lenders. Incorporated herein
by reference to Exhibit 10.4 to Key's Registration Statement
No. 333-26729.
10.5 Open-Ended Mortgage, Security Agreement and Assignment of
Rents (Ohio Form) by and among Key, the lenders, and NBD
Bank, as agent for the lenders. Incorporated herein by
reference to Exhibit 10.5 to Key's Registration Statement
No. 333-26729.
10.6 Security Agreement, dated as of March 24, 1997 by and among
Key, the lenders, and NBD Bank, as agent for such lenders
(the "Security Agreement"). Incorporated herein by reference
to Exhibit 10.7 to Key's Registration Statement No.
333-26729.
10.8 * Contribution and Assignment Agreement, dated as of
February 9, 1998, by Key to Technology.
10.9 * Assumption Agreement, made as of February 9, 1998 by and
between Key and Technology.
10.10 * Equityholders Agreement, dated as of February 9, 1998, by
and among Key, the Company, Paribas Principal Incorporated
and the other Shareholders signatory thereto.**
21.1 * Subsidiaries of the Registrant.
27.1 * Financial Data Schedule (EDGAR version only).
* Filed herewith
** A portion of this document has been redacted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission
("SEC"). An unredacted version of this document has been filed separately
with the SEC.
<PAGE> 1
Exhibit 3.1.1
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
- --------------------------------------------------------------------------------
Date Received | | (FOR BUREAU USE ONLY)
FEB 10 1990 | |
- -----------------------------
| | FILED
| |
- ------------------------------------------------- FEB 10 1998
Name |
| Administrator
Janice M. Thieleman c/o Dykema Gossett PLLC | MI DEPT OF CONSUMER &
- ------------------------------------------------- INDUSTRY SERVICES CORPORATION,
Address | SECURITIES & LAND DEVELOPMENT
| BUREAU
400 Renaissance Center |
- -------------------------------------------------
City State Zip Code |
|
Detroit Michigan 48243-1668| EFFECTIVE DATE:
- --------------------------------------------------------------------------------
Document will be returned to the name and address
you enter above
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT AND NONPROFIT CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
- --------------------------------------------------------------------------------
1. The present name of the corporation is: Key Plastics, Inc.
------------------
2. The identification number assigned by the Bureau is: | 270-932 |
------------------
3. The location of the registered office is:
21333 Haggerty Road #200 Novi, Michigan 48275
-------------------------------------------------------------------------------
(Street Address) (City) (Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. Article 1 of the Articles of Incorporation is hereby amended to read as
---
follows:
The name of the corporation is Key Plastics Holdings, Inc.
- --------------------------------------------------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 2
- -------------------------------------------------------------------------------
5. (For amendments adopted by unanimous consent of incorporators before the
first meeting of the board of directors of trustees.)
The foregoing amendments to the Articles of Incorporation was duly adopted
on the ___________ day of _____________, 19______, in accordance with the
provisions of the Act by the unanimous consent of the incorporator(s) before
the first meeting of the Board of Directors or Trustees.
Signed this __________ day of __________________, 19________
------------------------------------ ------------------------------------
(Signature) (Signature)
------------------------------------ ------------------------------------
(Type or Print Name) (Type or Print Name)
------------------------------------ ------------------------------------
(Signature) (Signature)
------------------------------------ ------------------------------------
(Type or Print Name) (Type or Print Name)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6. (For profit corporations, and for nonprofit corporations whose articles
state the corporation is organized on a stock or on a membership basis.)
The foregoing amendment to the Articles of Incorporation was duly adopted
on the 28th day of January, 1998 by the shareholders if a profit
---- ------- --
corporation, or by the shareholders or members if a nonprofit corporation
(check one of the following)
[X] at a meeting. The necessary votes were cast in favor of the amendment.
[ ] by written consent of the shareholders or members having not less than
the minimum number of votes required by statute in accordance with
Section 407(1) and (2) of the Act if a nonprofit corporation, or
Section (407)(1) of the Act if a profit corporation. Written notice to
shareholders or members who have not consented in writing has been
given. (Note: Written consent by less than all of the shareholders or
members is permitted only if such provision appears in the Articles of
Incorporation.)
[ ] by written consent of all the shareholders or members entitled to vote
in accordance with Section 407(3) of the Act if a nonprofit
corporation, or Section 407(2) of the Act if a profit corporation.
Signed this 4th day of February, 1998
--- -------- --
By /s/ Leonard R. Griffin
----------------------------------------
Leonard R. Griffin President
-------------------------------------------
(Type or Print Name) (Type or Print Name)
- -------------------------------------------------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 1
EXHIBIT 3.2
______________________________________________________________________________
| DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES |
| CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU |
| |
______________________________________________________________________________
|(FOR BUREAU USE ONLY) |DATE RECEIVED|
| | FEB 10 1998 |
| FILED |_____________|
| FEB 10 1998 | |
| Administrator |_____________|
| MI DEPT OF CONSUMER & INDUSTRY SERVICES | |
| CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU |_____________|
|EFFECTIVE DATE: | |
______________________________________________________________________________
| | | | | | | | | |
| CORPORATION IDENTIFICATION NUMBER | B | 0 | 7 | - | 0 | 6 | 2 | |
| | | | | | | | | |
______________________________________________________________________________
RESTATED ARTICLES OF ORGANIZATION
FOR USE BY DOMESTIC LIMITED LIABILITY COMPANIES
Pursuant to the provisions of Act 23, Public Acts of 1993, as
amended, the undersigned executes the following Articles:
1. The name of the limited liability company is Key Plastics Technology, L.L.C.
2. The identification number assigned by the Bureau is B07-062.
3. There are no other former names of the limited liability company.
4. The date of filing the original Articles of Organization was September 17,
1996.
The following Restated Articles of Organization supersede the
Articles of Organization, as amended, and shall be the Articles of Organization
for the limited liability company.
ARTICLE I
NAME
The name of the limited liability company is Key Plastics L.L.C.
<PAGE> 2
ARTICLE II
PURPOSES
The purpose or purposes for which the limited liability company
is formed is to engage in any activity within the purposes for which a limited
liability company may be formed under the Act.
ARTICLE III
DURATION
The duration of the limited liability company is perpetual.
ARTICLE IV
REGISTERED OFFICE AND RESIDENT AGENT
The address of the registered office and the mailing address is
21333 Haggerty Road, Suite 200, Novi, Michigan 48375. The name of the resident
agent at the registered office is David C. Benoit.
ARTICLE V
MANAGEMENT
The limited liability company shall be managed by one or more
managers.
These restated Articles amend the Articles of Organization and
were approved on February 3, 1998 in accordance with Section 604(3) of the Act
by the unanimous vote of all of the members entitled to vote.
The undersigned is a member and a manager of the limited
liability company and he signed these Articles on February 4, 1998.
/s/ David C. Benoit
------------------------------
David C. Benoit
<PAGE> 3
These Articles were prepared by,
and when filed please return to:
Steven E. Grob
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243
(313) 568-6849
Name of Person or Organization Remitting Fees:
Dykema Gossett PLLC
<PAGE> 1
EXHIBIT 3.3.1
AMENDMENT TO BYLAWS OF
KEY PLASTICS, INC.
The Board of Directors ("Board") of Key Plastics, Inc., a Michigan
corporation (the "Company"), by unanimous vote at a meeting of the Board on
January 28, 1998, hereby amends the Bylaws of the Company (the "Bylaws"),
pursuant to Article XII of the Bylaws, and in accord with Section 231 of the
Michigan Business Corporation Act, effective February 9, 1998, as follows:
Sections 5.01, 5.02, 5.03 and 5.07 of the Bylaws is deleted and
replaced in its entirety by the following:
5.01 NUMBER AND ELECTION. The business and affairs of the corporation
shall be managed by the Board. The Board shall initially consist of five (5)
directors. By August 9, 1998, the size of the Board shall be increased to eight
(8) directors. When the size of the Board is from five (5) to seven (7)
directors, one (1) of the directors shall be appointed by Paribas Principal
Incorporated, a New York corporation ("Paribas") and the remaining directors
shall be elected at each annual meeting of the shareholders, each to hold office
until the next annual meeting of shareholders and until his successor is elected
and qualified, or until his resignation or removal. When the size of the Board
is eight (8) directors, two (2) of the directors shall be appointed by Paribas
and six shall be elected at each annual meeting of the shareholders, each to
hold office until the next annual meeting of shareholders and until his
successor is elected and qualified, or until his resignation or removal. When
the size of the Board is less than eight (8) directors, Paribas shall also be
entitled to appoint one observer who may participate in meetings of the
directors. The directors need not be residents of Michigan or shareholders of
the corporation. Notwithstanding the foregoing, the rights of Paribas set forth
in this Section 5.01 shall terminate as provided in Section 5.13.
5.02 RESIGNATION AND REMOVAL. Any director can resign by written notice
to the corporation. The resignation is effective upon its receipt by the
corporation or a subsequent time as set forth in the notice of resignation. Any
director elected by the shareholders, or all the directors elected by the
shareholders (but not the directors appointed by Paribas) may be removed, with
or without cause, by vote of the holders of a majority of the shares entitled to
vote at an election of directors. Any director appointed by Paribas, or all the
directors appointed by Paribas (but not the directors elected by the
shareholders) may be removed, with or without cause, by Paribas. Notwithstanding
the foregoing, the rights of Paribas set forth in this Section 5.02 shall
terminate as provided in Section 5.13.
5.03 VACANCIES. Vacancies in the Board of directors eligible for
election by the shareholders occurring by reason of death, resignation, removal,
increase in the number of directors or otherwise shall be filled by the
affirmative vote of a majority of the remaining directors that were elected by
the shareholders, though less than a quorum of the Board, unless filled by
proper action of the shareholders of the corporation. Each person so elected
shall be a
<PAGE> 2
director for a term of office continuing only until the next election of
directors by the shareholders. Vacancies on the Board of the directors eligible
for appointment by Paribas by reason of death, resignation, removal, increase in
the number of directors or otherwise shall be filled by proper action by
Paribas. Notwithstanding the foregoing, the rights of Paribas set forth in this
Section 5.03 shall terminate as provided in Section 5.13.
5.07 QUORUM. The number of directors required to constitute a quorum
for the transaction of business shall vary depending upon the size of the Board
as follows:
Size of Board Number Required for Quorum
----------------- --------------------------
5 3
6 4
7 4
8 5
A majority of the members of a committee of the Board constitutes a quorum for
the transaction of business of the committee. Approval by the Board shall
require a majority of the Board, and not just a majority of the quorum, except
as a larger vote may be required by the laws of the State of Michigan. The vote
of a majority of the directors present at any meeting of a committee at which
there is a quorum shall be the acts of the committee, except as a larger vote
may be required by the laws of the State of Michigan. A member of the Board or
of a committee designated by the Board may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in a
meeting in this manner constitutes presence in person at the meeting.
Notwithstanding the foregoing, the rights of Paribas set forth in this Section
5.07 shall terminate as provided in Section 5.13.
Section 5.08 of the Bylaws are amended by adding the following sentence
at the end of said section:
The Board shall cause a director appointed by Paribas to be on each
material committee of the corporation and on each governing board or each
material committee of each subsidiary of the corporation except for Materias
Plasticas S.A. Notwithstanding the foregoing, the rights of Paribas set forth in
this Section 5.08 shall terminate as provided in Section 5.13.
Article V of the Bylaws are amended by adding at the end of such
Article, the following Sections 5.11 and 5.12:
5.11 LIMITATION ON POWERS. (a) Subject to the provisions of Section
5.13, notwithstanding any other provision set forth in this Article V or any
other provision contained in these Bylaws to the contrary, no agreement of
merger of the corporation may be adopted by the Board except with the approval
of at least 90% of the Board then in office.
2
<PAGE> 3
(b) Subject to the provisions of Section 5.13, notwithstanding any
other provision set forth in this Article V or any other provision contained in
these Bylaws to the contrary, except with the approval of at least 90% of the
Board, no act shall be taken, sum expended, decision made, obligation incurred
or power exercised by the Board on behalf of the corporation, and the Board
shall cause each of its subsidiaries to abstain from acting with respect to the
following:
(i) incur indebtedness unless the incurrence of such indebtedness
would be permitted under the Indenture Agreement dated March
24, 1997, entered into by the corporation, several affiliates
of the corporation and Marine Midland Bank, as amended (the
"Indenture"), as in effect on February 9, 1998 and whether any
amounts remain outstanding thereunder, and any less
restrictive amendments thereto;
(ii) the sale or other disposition of any type, in a single
transaction or series of related transactions, of assets, the
gross proceeds from any such sale which exceeds $15,000,000,
or the sale or other disposition of assets, the gross proceeds
from all such sales occurring after February 9, 1998 which
exceeds $30,000,000, in the aggregate;
(iii) capital expenditures in any fiscal year in excess of 125% of
such year's budget as approved by the Board;
(iv) enter or permit any of its subsidiaries to enter into any
business other than Permitted Business (as defined in the
Indenture as in effect on February 9, 1998);
(v) all other mergers, acquisitions (of stock, assets or
otherwise), partnerships, joint ventures, purchases of assets
and similar transactions, in excess of $75 million
individually or $150 million in the aggregate beginning on
February 9, 1998, provided, however, that this restriction
shall not apply to such a transaction that results in a sale
of substantially all of the assets of the corporation;
(vi) amendments to the Articles of Incorporation of the
corporation;
(vii) file for bankruptcy or other liquidation, winding up or
dissolutions events; and
(viii) the issuance of equity of the Company, except for the
following:
(a) the amount received for such offered interest is, on
a proportionate basis, equal to or in excess of 110%
of the amount paid by Paribas for its member interest
in Key Plastics Technology, L.L.C., a Michigan
limited liability company ("Technology"), or, if such
equity interest is issued prior to January 31, 1999,
unless the amount received is at least equal to the
amount paid by Paribas, or
3
<PAGE> 4
(b) an issuance of equity to use as consideration in an
acquisition of a business or assets or a joint
venture or similar transaction approved by the Board.
5.12 VOTE AS MEMBER OF TECHNOLOGY. Notwithstanding any other provision
set forth in this Article V or any other provision contained in these Bylaws to
the contrary, whenever any action is required by the corporation as a member of
Technology, such action shall be taken by a majority of the shareholders of the
corporation voting in accordance with their equity ownership of the corporation.
5.13 TERMINATION OF CERTAIN PROVISIONS. Upon the occurrence of a
Qualified Public Offering, as defined in the Equityholders Agreement between the
Company, Technology, Paribas and certain shareholders of the Company, dated
February 9, 1998 (the "Equityholders Agreement"), all vote requirements of
greater than 50% contained in these Bylaws including, without limitation, those
contained in Sections 5.11 and 12.01 shall terminate. In addition, at such time
that Paribas' interest in Technology is equal or below 15%, Paribas shall be
entitled to appoint only one (1) director under Section 5.01 hereof and at such
time as Paribas' interest in Technology is equal or below 5%, Paribas is not
entitled to appoint any director under Section 5.01 hereof.
Article XII of the Bylaws is deleted and replaced in its entirety by
the following:
ARTICLE XII
AMENDMENTS
12.01 AMENDMENTS. The Bylaws of the corporation may be amended, altered
or repealed, in whole or in part, by the shareholders or by the Board of
Directors at any meeting duly held in accordance with these Bylaws, provided
that notice of the meeting includes notice of the proposed amendment,
alternation or repeal, provided, however, that: (i) subject to the provisions of
Section 5.13, Sections 5.01, 5.02, 5.03, 5.07, 5.11 or the last sentence of
Section 5.08 may not be amended, altered or repealed, in whole or in part,
without the approval of at least 90% of the Board and (ii) notwithstanding any
other provision set forth in this Article XII or any other provision contained
in these Bylaws to the contrary, Section 5.12 may not be amended, altered or
repealed, in whole or in part, without the approval of majority of the
shareholders of the corporation voting in accordance with their equity ownership
of the corporation.
4
<PAGE> 1
EXHIBIT 3.4
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
KEY PLASTICS TECHNOLOGY, L.L.C.
* Approximately 5 pages of this document has been redacted pursuant to
a request for confidential treatment pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended, to the Securities and
Exchange Commission (the "SEC"). An unredacted version of this
document has been filed separately with the SEC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Recitals ............................................................ 1
1. Organization of Company ............................................. 2
1.1 Formation .................................................... 2
1.2 Name and Office .............................................. 2
1.3 Duration ..................................................... 2
1.4 Registered Office and Resident Agent ......................... 2
2. Definitions ......................................................... 2
3. Purposes ............................................................ 6
4. Capital Contributions; Borrowings ................................... 6
4.1 Initial Capital Contributions of Members ..................... 6
4.2 Additional Capital Contributions ............................. 6
4.3 Withdrawals .................................................. 7
4.4 Borrowings ................................................... 7
4.5 Additional Members ........................................... 7
5. Management .......................................................... 8
5.1 Generally .................................................... 8
5.2 Management Committee ......................................... 8
5.3 Management Committee Meetings ................................ 9
5.4 Powers of the Management Committee ........................... 10
5.5 Limitations on Powers ........................................ 11
5.6 Self-Dealing ................................................. 12
5.7 Liability of the Members and Committee Members ............... 13
5.8 Indemnity .................................................... 13
5.9 Compensation and Reimbursement ............................... 14
5.10 Devotion of Time to Company .................................. 14
5.11 Resignation .................................................. 14
5.12 Removal ...................................................... 14
5.13 Vacancies .................................................... 14
5.14 Termination of Certain Provisions ............................ 14
6. Meetings of Members ................................................. 15
6.1 Rights of the Members ........................................ 15
6.2 Voting ....................................................... 15
6.3 Meetings ..................................................... 15
6.4 Consent ...................................................... 15
7. Capital Accounts; Profits and Losses; Distributions ................. 16
7.1 Capital Accounts ............................................. 16
7.2 Allocation of Profits and Losses ............................. 16
7.3 Distributions ................................................ 17
7.4 Other Allocations ............................................ 17
(a) Compliance With Treasury Regulations ................... 17
(b) Only Required Modifications ............................ 18
(c) Company Minimum Gain Chargeback ........................ 18
(d) Member Minimum Gain Chargeback ......................... 18
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
(e) Qualified Income Offset ................................ 18
(f) Gross Income Allocation ................................ 19
(g) Allocation of Nonrecourse Deductions ................... 19
(h) Member Nonrecourse Deductions .......................... 19
(i) Curative Allocations ................................... 19
(j) Advice of Accountants .................................. 19
(k) Section 754 Election ................................... 19
(l) Imputed Interest ....................................... 20
(m) Contributed Property ................................... 20
7.5 Share of Excess Nonrecourse Liabilities ...................... 20
8. Adjustments to Membership Percentages ............................. 20
9. Term of Company ................................................... 22
9.1 Commencement ................................................. 22
9.2 Dissolution .................................................. 22
10. Application of Assets ............................................. 23
11. Restrictions on Assignability of Interests ........................ 23
11.1 Permitted Assignments ....................................... 23
11.2 Admission of Assignees as Members ........................... 23
11.3 Restrictions on Transfers ................................... 24
12. Section 754 Election .............................................. 24
13. Arbitration ....................................................... 25
14. Investment Representations ........................................ 25
15. Amendments ........................................................ 25
16. Miscellaneous Provisions .......................................... 26
16.1 Books of Account; Reports .................................... 26
16.2 Bank Accounts and Investment of Funds ........................ 26
16.3 Accounting Decisions ......................................... 26
16.4 Federal Income Tax Election .................................. 26
16.5 Entire Agreement ............................................. 27
16.6 Notices ...................................................... 27
16.7 Further Execution ............................................ 27
16.8 Binding Effect ............................................... 27
16.9 Severability ................................................. 27
16.10 Captions .................................................... 27
16.11 Counterparts ................................................ 28
16.12 Michigan Law to Control ..................................... 28
EXHIBIT A .......................................................... A-1
EXHIBIT B .......................................................... B-1
</TABLE>
ii
<PAGE> 4
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
KEY PLASTICS TECHNOLOGY, L.L.C.
THIS AMENDED AND RESTATED OPERATING AGREEMENT of Key Plastics
Technology, L.L.C., a Michigan limited liability company ("Company"), is made
and entered into as of February 9, 1998 by and among (i) the Company, (ii) Key
Plastics, Inc., a Michigan corporation ("Plastics"), and (iii) Paribas Principal
Incorporated, a New York corporation ("Paribas") (parties (ii) and (iii)
together referred to as the "Members").
Recitals:
A. The Company is a Michigan limited liability company that was
formed under the Act pursuant to Articles of Organization
filed with the Michigan Department of Consumer and Industry
Services ("Department") on September 16, 1996, and an
Operating Agreement effective as of September 16, 1996
("Operating Agreement").
B. The name of the Company is Key Plastics Technology, L.L.C. Its
name will be changed to Key Plastics L.L.C. pursuant to an
Amendment to the Articles that will be filed with the
Department as soon as practicable after the effective date of
this Agreement.
C. Effective February 9, 1998, Plastics contributed all of its
assets (except the Excluded Assets) and liabilities to the
Company as a capital contribution.
D. After giving effect to the Securities Purchase Agreement
pursuant to which Paribas purchased its equity interest in the
Company, Paribas shall own a 25% interest in the Company.
E. The parties now wish to amend and restate the Operating
Agreement to reflect the events described in recitals B.
through D. above.
<PAGE> 5
Therefore, the Operating Agreement shall be amended and restated in its
entirety to read as follows:
1. ORGANIZATION OF COMPANY.
1.1 Formation. The Company is a limited liability company that was
formed under the Act pursuant to Articles of Organization filed with the
Department on September 16, 1996 and this Agreement.
1.2 Name and Office. The name of the Company shall be Key Plastics
Technology, L.L.C. and its office shall be located at 21333 Haggerty Road, Suite
200, Novi, Michigan 48375, or such other place as the Management Committee may
determine from time to time.
1.3 Duration. The Company's existence shall be perpetual unless the
Company shall be sooner dissolved and its affairs wound up in accordance with
the Act or this Agreement.
1.4 Registered Office and Resident Agent. The Company's registered
office shall be at 21333 Haggerty Road, Suite 200, Novi, Michigan 48375 and the
name of its resident agent at such address shall be David C. Benoit. The
registered office and resident agent may be changed from time to time in
accordance with the Act. If the resident agent shall ever resign, the Company
shall promptly appoint a successor.
2. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
The "Act" means the Michigan Limited Liability Company Act, being Act
No. 23, Public Acts of 1993, as amended.
"Adjusted Deficit Capital Account Balance" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Company Fiscal Year, (1) increased by any amounts which such
Member is obligated to restore under Treasury Regulation Section
1.704-1(b)(2)(ii)(c), plus an amount equal to such Member's share of Company
Minimum Gain and such Member's share of Member Nonrecourse Debt Minimum Gain and
(2) decreased by the items described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition of Adjusted Capital
Account Deficit is intended to comply with the provisions of Treasury Regulation
Sections 1.704-1(b)(2)(ii)(d) and 1.704-2, and will be interpreted consistently
with those provisions.
"Affiliate" means (i) any person directly or indirectly controlling,
controlled by or under common control with another person, (ii) a person owning
or controlling five percent (5%) or more of the outstanding voting securities of
such other person, (iii) any officer, director, member
2
<PAGE> 6
or partner of such person, or (iv) a person who is an officer, director, member,
partner or holder of five percent (5%) or more of any of the voting interests of
any person described in clauses (i) through (iii) of this sentence.
"Agreement" means this Operating Agreement and amendments adopted in
accordance with this Agreement and the Act.
The "Articles" means the Articles of Organization, including any
restatements or amendments, which are filed with the Michigan Department of
Consumer and Industry Services.
"Book Value" means with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(a) the initial Book Value of any asset contributed (or deemed
contributed) to the Company shall be such asset's gross fair
market value at the time of such contribution;
(b) the Book Value of all Company assets shall be adjusted to
equal their respective gross fair market values at the times
specified in Treasury Regulations under Code Section 704(b) if
the Company so elects;
(c) if the Book Value of an asset has been determined pursuant to
clause (a) or (b), such Book Value shall thereafter be
adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Profits and Losses.
"Capital Accounts" shall have the meaning set forth in Section 7.1 of
this Agreement.
"Capital Contributions" means the amount of cash, property, or services
contributed or obligated to be contributed to the Company by a Member.
"Cause" means actions by the Management Committee that cause material
damage to the Company as a result of the Management Committee's fraud, willful
misconduct, gross negligence, misappropriation of funds or property, or actions
taken in violation of this Agreement.
The "Code" means the U.S. Internal Revenue Code of 1986, as amended.
"Committee Member" means an individual appointed to the Management
Committee by a Member pursuant to Section 5.2.
"Company Minimum Gain" means an amount determined in accordance with
Treasury Regulation Section 1.704-2(d) for partnership minimum gain by
computing, with respect to each nonrecourse liability of the Company (as defined
in Treasury Regulation Section 1.752-1(a)(2)),
3
<PAGE> 7
the amount of gain (of whatever character), if any, that would be realized by
the Company if (in a taxable transaction) it disposed of property subject to
such liability in full satisfaction thereof, and by then aggregating the amounts
so computed.
"Depreciation" means for each Fiscal Year of the Company or
other period, an amount equal to the depreciation, amortization or other cost
recovery deduction allowable under the Code with respect to an asset for such
year or other period, except that if the Book Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount which bears the same ratio to such
beginning Book Value as the federal income tax depreciation, amortization or
other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Book
Value using any reasonable method selected by the Management Committee.
"Equityholders Agreement" means the Equityholders Agreement dated as of
February 9, 1998 by and among the Company, Holdings and Paribas, as amended.
The "Fiscal Year" of the Company, and its taxable year for Federal
income tax purposes, shall be the calendar year.
"Indenture" means the Indenture Agreement dated March 24, 1997, entered
into by Plastics, several Affiliates of Plastics, and Marine Midland Bank, as
amended.
"Insolvent" means such time as when the value of the Company's assets
become less than the sum of its liabilities or the Company becomes unable to pay
its debts as they become due in the usual course of business, as defined in the
Act.
"Majority" means the affirmative vote or consent of a majority in
number of the Committee Members of the Management Committee.
"Majority Interest" means those members holding more than 50% of the
Membership Percentages held by the Members.
"Management Committee" means the Management Committee provided for in
Section 5.2.
"Member Nonrecourse Debt" shall have the meaning, and be determined in
the same manner as, partner nonrecourse debt pursuant to Treasury Regulation
Section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" means the amount, with respect
to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such
4
<PAGE> 8
Member Nonrecourse Debt were treated as a nonrecourse liability of the Company,
determined in the same manner as partner nonrecourse debt minimum gain in
accordance with Treasury Regulation Sections 1.704-2(i)(3) and 1.704-2(i)(5).
"Member Nonrecourse Deductions" shall have the meaning, and be
determined in the same manner as, partner nonrecourse deduction pursuant to
Treasury Regulation Section 1.704-2(i)(2).
"Members" are the persons designated as such in Exhibit A. Any
reference to a Member shall, unless the context clearly requires otherwise,
include a reference to his predecessor and successor (other than a mere assignee
not made a substitute Member) in interest.
"Membership Percentages" means the Members' respective interests in the
Company as set forth in Exhibit A, but subject to revision pursuant to Sections
4, 8 and 11 of this Agreement.
"Nonrecourse Deductions" shall have the meaning set forth in Treasury
Regulation Sections 1.704-2(c) and 1.704-2(b)(1).
"Person" means a natural person, trust, estate, partnership, limited
liability company or any incorporated or unincorporated organization.
"Profits and Losses" means the Company's taxable income or
loss for each Fiscal Year (or other period) determined in accordance with the
accounting methods followed by the Company for federal income tax purposes (for
this purpose all items of income, gain, loss, deduction or credit required to be
separately stated pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss) as determined by the independent certified public
accountants employed by the Company, with the following adjustments:
(a) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits and Losses
shall be added to such taxable income or loss;
(b) any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures under Code
Section 704(b) and not otherwise taken into account in computing Profits and
Losses shall be subtracted from such taxable income or loss;
(c) in the event the Book Value of any Company asset is
adjusted, the amount of such adjustment shall be taken into account as gain or
loss from the disposition of such asset for purposes of computing Profits or
Losses;
5
<PAGE> 9
(d) any gain or loss resulting from any disposition of Company
property with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Book Value of such property
rather than its adjusted tax basis;
(e) in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year or other
period; and
(f) notwithstanding the foregoing, any items which are
specially allocated pursuant to Section 7.4 shall not be taken into account in
computing Profits and Losses.
"Treasury Regulations" includes proposed, temporary and final
regulations promulgated under the Code and the corresponding sections of any
regulations subsequently issued that amend or supersede such regulations.
All references to statutory provisions shall be deemed to include
reference to corresponding provisions of subsequent law.
The singular shall include the plural, and vice versa, where necessary.
3. PURPOSES.
The Company may engage in any lawful business permitted by the Act or
by the laws of any jurisdiction in which the Company may do business. The
Company shall have the authority to do all things necessary or convenient to the
accomplishment of its purposes and to operate its business, including all powers
granted by the Act. No Member need afford the Company or any Member the
opportunity of acquiring any property or investing or otherwise participating in
any other enterprise.
4. CAPITAL CONTRIBUTIONS; BORROWINGS.
4.1 Initial Capital Contributions of Members. The Members shall make
the Initial Capital Contributions set forth in Exhibit A. The values of the
Members' Initial Capital Contributions shall be as set forth on Exhibit A. No
interest shall accrue on any Capital Contribution made to the Company unless
otherwise agreed by the Members in writing, or otherwise provided in this
Agreement.
4.2 Additional Capital Contributions.
(a) Additional Capital Contributions shall be made by the
Members to the Company only upon the request of the Management Committee. If the
Management Committee
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<PAGE> 10
determines that additional capital is necessary, then each Member may, without
obligation, contribute a portion of the capital call in proportion to his
Membership Percentage. If a Member fails to contribute any part of his capital
contribution, then the other Members shall have the option to contribute the
shortfall. If all Members contribute their proportionate shares of the capital
call (based upon their Membership Percentages), then there will be no change in
Membership Percentages. However, if the Members do not each contribute their
proportionate shares, then the Management Committee shall determine the fair
market value of a one percent interest in the Company (the "Percentage Value")
as if the Company were issuing additional equity (at the time the capital call
is made). The Membership Percentages shall then be revised to reflect the
amounts contributed as if those Members making contributions were purchasing
Membership Percentages on the basis of the Percentage Value. The balance of the
total Membership Percentages (100% less the Membership Percentages deemed sold)
will be allocated among the Members in proportion to their Membership
Percentages immediately prior to the capital contribution.
(b) None of the terms, covenants, obligations or rights
contained in this Section 4.2 is or shall be deemed to be for the benefit of any
such person or entity other than the Members and the Company, and no such third
person shall under my circumstances have any right to compel any actions or
payments by the Members.
4.3 Withdrawals. No Member shall be entitled to be repaid any portion
of his Capital Contribution or withdraw from the Company except as provided in
this Agreement. A Member who withdraws in violation of this Agreement shall not
be entitled to receive the fair market value of his interest after the
withdrawal but shall only be entitled to distributions he otherwise would have
received as a nonwithdrawing Member. In addition, a withdrawing Member shall
lose all his voting rights as a Member of the Company and, if he is a Committee
Member, shall resign or be removed immediately from that position.
4.4 Borrowings. The Company may borrow sums for Company purposes from
any source, including any Member, as determined by a Majority of the Committee
Members provided that such borrowing is: (i) not prohibited by any applicable
law, regulation or agreement, (ii) conducted on an arm's-length basis, and (iii)
not in violation of the restrictions on transactions with affiliates set forth
in Section [8.4] of the Securities Purchase Agreement.
4.5 Additional Members. No additional Members shall be admitted to the
Company without the approval of the Management Committee.
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5. MANAGEMENT.
5.1 Generally.
Except as otherwise provided in Section 5.5, the business and affairs
of the Company shall be managed by the Management Committee. Any Person dealing
with the Company, other than a Member or a Member's Affiliate, may rely on the
authority of the Management Committee in taking any action in the name of the
Company without inquiry into the provisions of this Agreement or compliance with
it, regardless of whether that action actually is taken in accordance with the
provisions of this Agreement.
5.2 Management Committee.
(a) The Management Committee shall initially consist of five
(5) Committee Members. Each Committee Member shall be deemed a Manager within
the provisions of the Act. Within six (6) months from the effective date of this
Agreement, the size of the Management Committee shall be increased to eight (8)
Committee Members. When the size of the Management Committee is from five (5) to
seven (7) Committee Members, one (1) of the Committee Members shall be appointed
by Paribas and the remaining Committee Members shall be appointed by Key
Plastics. When the size of the Management Committee is eight (8) Committee
Members, two (2) of the Committee Members shall be appointed by Paribas and six
(6) shall be appointed by Key Plastics. When the size of the Management
Committee is less than eight (8) Committee Members, Paribas shall also be
entitled to appoint one observer who may participate in Management Committee
meetings.
(b) Each Member may appoint one or more alternates for the
Committee Members appointed by it. An alternate shall have all the powers of the
Committee Member in his absence or inability to serve. Each Committee Member may
vote by delivering his proxy to another Committee Member. Each Member shall have
the power to remove any Committee Member appointed by it by delivering written
notice of such removal to such Committee Member and to the other Committee
Members. Vacancies on the Management Committee shall be filled by the Member
which appointed the Committee Member previously holding the position which is
then vacant.
(c) The Management Committee shall cause a Committee Member
appointed by Paribas to be on each material committee of the Company and on each
governing board or each material committee of each subsidiary of the Company.
(d) Notwithstanding the foregoing, Paribas' rights under this
Section 5.2 shall terminate in accordance with Section 5.14.
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5.3 Management Committee Meetings.
(a) The Management Committee shall meet at least annually at
the offices of the Company in Novi, Michigan, or such other times or places as
the Management Committee shall determine (unless such meeting shall be waived by
all Committee Members) or on the call of any two (2) Committee Members upon (i)
two (2) business days' notice to all Committee Members by telephone or facsimile
for a meeting by telephone or (ii) five (5) business days' notice by telephone
or facsimile for a meeting in person. An agenda for each meeting shall be
prepared in advance by the secretary of the Committee and circulated to the
Committee Members. The number of Members of the Management Committee required to
constitute a quorum shall vary depending upon the size of the Management
Committee as follows:
<TABLE>
<CAPTION>
Size of Management Number Required
Committee For Quorum
------------------ ---------------
<S> <C>
5 3
6 4
7 4
8 5
</TABLE>
Approval of the Management Committee shall require a Majority
of the Committee Members, and not just a majority of the quorum. With respect to
ministerial actions, the Management Committee may act without a meeting if: (i)
the action taken is approved in writing before or after such action by the
number of Committee Members necessary to take such action and (ii) written
notice of such action is given to the Committee Members who did not provide such
written consent. With respect to other actions, the Management Committee may act
without a meeting if: (i) the action taken is approved in writing before such
action by all of the Committee Members; or (ii) the action is verbally approved
by the Management Committee in advance and subsequently approved in writing by
all of the Committee Members. Written minutes of all meetings shall be
maintained, and the minutes for each meeting shall be approved at a subsequent
meeting of the Management Committee.
(b) The Management Committee may adopt whatever rules and
procedures relating to its activities as it may deem appropriate, provided that
such rules and procedures shall not be inconsistent with or violate the
provisions of this Agreement, and provided that such rules and regulations shall
permit meetings by telephone, video conferencing or the like, and shall permit
Committee Members to participate in meetings by telephone or video conference or
the like or by written proxy, and such participation shall be deemed attendance
for purposes of determining whether a quorum is present.
(c) The Management Committee may by written resolution
delegate its powers, but not its responsibilities, to employees of a Member or
to any other person. Such delegation of
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<PAGE> 13
powers may include the authority to execute and deliver any notes, mortgage,
evidence of indebtedness, contract, certificate, statement, conveyance or other
instrument in writing, and any assignment or endorsement thereof.
(d) The Management Committee may by resolution appoint
officers of the Company (which may include a chief executive officer, a
president, a chief financial officer, a treasurer, a secretary and one or more
vice presidents, assistant treasurers and assistant secretaries and any other
officer positions), which officers shall be vested with such powers and duties,
shall hold their offices for such terms, and shall be entitled to such
compensation, as shall be determined from time to time by the Management
Committee; provided, however, that the compensation of any current officer of
Plastics shall not be increased to more than three times such officer's
compensation as of the effective date of this Agreement without the consent of
85% of the Management Committee.
5.4 Powers of the Management Committee.
(a) The Management Committee shall have control over the
conduct of the Company's day-by-day affairs. Except as provided in Section 5.5,
all decisions of the Management Committee shall be made by majority vote (based
on number) of the Committee Members. The Management Committee shall have the
power to do all things appropriate to the accomplishment of the purposes of the
Company, including (but not limited to): (1) employing contractors,
professionals and employees (including Affiliates), defining their duties, and
establishing their compensation or remuneration; (2) collecting and receiving
rents, profits or income from any property owned by the Company and to disburse
Company funds for Company purposes; (3) paying all Company obligations; (4)
purchasing and maintaining insurance on behalf of the Company and its Members
and employees or agents against any liability or expense asserted against or
incurred by the Company or such persons; (5) performing all ministerial acts and
duties relating to the payment of all indebtedness, taxes and assessments due or
to become due with regard to any property owned by the Company, and to give and
receive notices, reports, and other communications arising out of or in
connection with the ownership, indebtedness, or maintenance of the property; (6)
transacting the Company's business under an assumed name or name other than its
name as set forth in the Articles; (7) appointing any Member or other person as
agent for service of process on the Company as required by the law of any state
in which the Company transacts business; (8) commencing, prosecuting or
defending any proceeding in the Company's name; and (9) doing such other acts as
may facilitate the Company's business.
(b) Any future amendments to this Agreement shall, to the
extent necessary, be reflected in amendments to the Articles to be filed by the
Management Committee with the Michigan Department of Consumer and Industry
Services. The Management Committee will deliver a copy of each such document to
each Member.
(c) Subject to the other provisions of this Section 5, the
Management Committee shall have full power to act for and to bind the Company to
the extent provided by Michigan law.
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<PAGE> 14
(d) Plastics shall act as "tax matters partner" of the
Company, as defined in Code Section 6231(a)(7) and solely for the purposes of
this Section 5.4(d) shall have all the powers and obligations of a tax matters
partner pursuant to the Code. The tax matters partner shall not take any action
or make any decision that will result in the Company, or its Members on a pass
through basis, paying a tax liability in excess of $250,000 in the aggregate
without prior written consent of Members owning at least 85% of the total
Membership Percentages (which consent shall not be unreasonably withheld or
delayed).
5.5 Limitations on Powers.
(a) Notwithstanding the foregoing and any other provision
contained in this Agreement to the contrary, no merger of the Company shall be
effected except with the approval of at least 90% of the Management Committee
and with the consent of a Majority Interest of the Members.
(b) Notwithstanding the foregoing and any other provision
contained in this Agreement to the contrary until the occurrence of a Qualified
Public Offering as defined in the Equityholders Agreement, except with the
approval of at least 90% of the Committee Members, no act shall be taken, sum
expended, decision made, obligation incurred or power exercised by the
Management Committee on behalf of the Company, and the Management Committee
shall cause each of its subsidiaries to abstain from acting,with respect to the
following:
(i) incur indebtedness unless the incurrence of
such indebtedness would be permitted under
the Indenture as in effect on the date
hereof and whether any amounts remain
outstanding thereunder, and any less
restrictive amendments thereto;
(ii) the sale or other disposition of any type,
in a single transaction or series of related
transactions, of assets, the gross proceeds
from any such sale which exceeds
$15,000,000, or the sale or other
disposition of assets, the gross proceeds
from all such sales occurring after the
effective date of this Agreement which
exceeds $30,000,000, in the aggregate;
(iii) capital expenditures in any fiscal year in
excess of 125% of such year's budget as
approved by the Management Committee;
(iv) enter or permit any of its subsidiaries to
enter into any business other than Permitted
Business (as defined in the Indenture as in
effect on the date of this Agreement);
(v) all other mergers, acquisitions (of stock,
assets or otherwise), partnerships, joint
ventures, purchases of assets and similar
11
<PAGE> 15
transactions, in excess of $75 million
individually or $150 million in the
aggregate beginning on the effective date of
this Agreement, provided, however, that this
restriction shall not apply to such a
transaction that results in a sale of
substantially all of the assets of the
Company;
(vi) amendments to the Articles of Organization
of the Company;
(vii) file for bankruptcy or other liquidation,
winding up or dissolution events; and
(viii) the issuance of equity of the Company,
except for the following:
(a) the amount received for
such offered interest is,
on a proportionate basis,
equal to or in excess of
110% of the amount paid
by Paribas for its Member
Interest or, if such
equity is issued prior to
January 31, 1999, unless
the amount received is at
least equal to the amount
paid by Paribas, or
(b) an issuance of equity to use as
consideration in an acquisition of a
business or assets or a joint
venture or similar transaction
approved by the Management
Committee.
5.6 Self-Dealing. Subject to the provisions of Section 8.4 of the
Securities Purchase Agreement and this Section 5.6, any Committee Member, Member
and any Affiliate may deal with the Company, directly or indirectly, as vendor,
purchaser, employee, agent or otherwise. No contract or other act of the Company
shall be voidable or affected in any manner by the fact that a Committee Member,
Member or his Affiliate is directly or indirectly interested in such contract or
other act apart from his interest as a Committee Member or Member, nor shall any
Committee Member or Member or his Affiliate be accountable to the Company or the
other Members in respect of any profits directly or indirectly realized by him
by reason of such contract or other act, and such interested Committee Member or
Member shall be eligible to vote or take any other action as a Committee Member
or Member in respect of such contract or other act as it would be entitled were
he or his Affiliate not interested therein. Notwithstanding the foregoing
provisions of this Section 5.6, (a) any direct or indirect interest of a
Committee Member, Member or Affiliate in any contract or other act, other than
his interest as a Member, shall be disclosed to all other Members, and (b) such
contract or other act shall be determined to be arm's-length by the Management
Committee and shall be approved by the Management Committee, unless the same is
specifically authorized herein. Any present contracts or arrangements are
excepted from the above approval requirements.
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<PAGE> 16
5.7 Liability of the Members and Committee Members. So long as each
Member (whether in its capacity as a Member, or if applicable, as a Committee
Member or other expressly authorized agent of the Company) and Committee Member
acts in good faith with respect to the conduct of the business and affairs of
the Company, and in the manner in which it reasonably believes to be in the best
interests of the Company or otherwise in accordance with the provisions of this
Agreement, neither such Member nor any such Committee Member shall be liable or
accountable to the Company or to any of the Members in damages or otherwise for
any error of judgment, for any mistake of fact or of law, or for any other act
or thing which it may do or refrain from doing or suffer to be done in
connection with the business and affairs of the Company, except in the case of
(i) such Person's willful misconduct or gross negligence, (ii) actions taken by
any such Person in violation of this Agreement, (iii) the receipt by any such
Person of a financial benefit to which it is not entitled pursuant to this
Agreement, (iv) any vote by such Person to approve a distribution to the Members
of funds of the Company in violation of this Agreement or the Act or (v) any
actions which are governed by the Equityholders Agreement, in which case the
provisions of the Equityholders Agreement shall apply. A Member who knowingly
receives a distribution made by the Company which is either in violation of this
Agreement or when the Company is Insolvent, is liable to the Company for
repayment of the distribution.
5.8 Indemnity. The Company shall indemnify, defend and hold each
Member, each Committee Member, and each officer, director, stockholder, member,
employee, agent, affiliate, subsidiary or assignee of each Member (including any
such Person in its capacity as an agent or Committee Member) provided any such
Person is properly acting in its capacity as a Member, Committee Member,
officer, director, stockholder, member, employee or agent, and within the
express authority granted herein (collectively, the "Indemnities") free and
harmless of, from and against any expenses, losses, claims, costs, damages and
liabilities, including without limitation, judgments, fines, amounts paid in
settlement and expenses (including without limitation, attorneys' fees and
expenses, court costs, investigation costs and litigation costs) incurred by any
Indemnitee in any civil, criminal or investigative proceeding in which it is
involved or threatened to be involved by reason of the Member being a Member in
the Company or such Person being a Committee Member, provided that the Member or
such Person acted in good faith, within what it reasonably believed to be the
scope of its authority and for a purpose which it reasonably believed to be in
the best interests of the Company and the Members or otherwise in compliance
with the provisions of this Agreement; provided, however (i) that the Company
shall not be required to indemnify any Indemnitee, and any such Indemnitee shall
be liable, for any loss, expense or damage which the Company may suffer as a
result of (A) such Indemnitee's willful misconduct, gross negligence or bad
faith in failing to perform its duties hereunder; (B) actions taken by such
Indemnitee in violation of this Agreement or in violation of the Equityholders
Agreement (in which case the terms of the Equityholders Agreement shall apply),
(C) the receipt by such Indemnitee of any financial benefits to which it is not
entitled pursuant to this Agreement or (D) the vote by such Indemnitee for a
distribution of funds of the Company in violation of this Agreement or the Act;
(ii) the Company shall not be required to indemnify any Indemnitee for any
breach of the provisions of this Agreement, or for any loss, expense or damage
which it may suffer as a result of the breach of this Agreement by the Member to
which the Indemnitee is related; and (iii) any liability hereunder shall
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<PAGE> 17
be limited solely to the assets and properties of the Company, and no Member (or
any Affiliate of any Member) shall have any liability or obligation hereunder.
5.9 Compensation and Reimbursement. The Management Committee shall
receive no compensation for managing the affairs of the Company unless approved
by an affirmative vote of the Management Committee. The Management Committee
shall be reimbursed by the Company for reasonable expenses incurred in attending
Management Committee meetings. The Management Committee shall not be entitled to
reimbursement from the Company of any other expenses of the Company incurred and
paid for by the Management Committee on behalf of the Company unless approved in
advance by the Management Committee.
5.10 Devotion of Time to Company. The Management Committee shall not
be required to manage the Company as their sole and exclusive function and they
may have other business interests and may engage in other activities in addition
to those relating to the Company. Neither the Company nor any Member shall have
any rights, by virtue of this Agreement, to share or participate in such other
investments or activities of the Committee Members or to the income or proceeds
derived therefrom. The Committee Members shall incur no liability to the Company
or to any of the Members as a result of engaging in any other business or
venture.
5.11 Resignation. Any Committee Member may resign at any time by
giving written notice to the Management Committee. The resignation of any
Committee Member shall take effect upon receipt of notice thereof or at such
later time as shall be specified in such notice; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. The resignation of a Committee Member who is also a Member shall not
affect the Committee Member's rights as a Member and shall not constitute a
withdrawal of a Member.
5.12 Removal. At a meeting called expressly for that purpose, a
Committee Member may be removed with Cause, by the affirmative vote of a
Majority Interest of Members, or as provided in Section 5.2. The removal of a
Committee Member who is also a Member shall not affect the Committee Member's
rights as a Member and shall not constitute a withdrawal of a Member.
5.13 Vacancies. Any vacancy occurring for any reason in the number of
Committee Members of the Company shall be filled in accordance with Section 5.2.
5.14 Termination of Certain Provisions. Notwithstanding any other
provisions of this Agreement, upon the occurrence of a Qualified Public Offering
(as defined in the Equityholders Agreement) all provisions in this Agreement
requiring the consent, approval or vote of more than 50% of the Management
Committee Members shall terminate, and thereafter all decisions by the
Management Committee Members shall be made by majority vote (based on number) of
the Committee Members. In addition, when Paribas' Membership Percentage in the
Company is 20% or less, Paribas shall be entitled to appoint only one (1)
Management Committee Member under Section 5.2. Further, when Paribas' Membership
Percentage in the Company is 10% or less, Paribas shall not be entitled to
appoint anyone to the Management Committee. Whenever Paribas'
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<PAGE> 18
Membership Percentage in the Company is 20% or less, Paribas shall not be
entitled to appoint an observer to participate in Management Committee meetings.
6. MEETINGS OF MEMBERS.
6.1 Rights of the Members. The Members (other than in their capacity
as members of the Management Committee) shall have no right to take part in,
vote on, or interfere in any manner with the management, conduct or control of
the Company or its business, and shall have no right or authority whatsoever to
act for or on behalf of the Company.
6.2 Voting.
(a) All Members shall be entitled to vote on any matter
submitted to a vote of the Members. Unless a greater vote is required by the
Act, the Articles, this Agreement, or the Equityholder Agreement, the
affirmative vote or consent of a Majority Interest of the Members entitled to
vote or consent on such matter shall be required.
(b) Notwithstanding any other provision of this Agreement,
upon the occurrence of a Qualified Public Offering (as defined in the
Equityholders Agreement) all provisions in this Agreement requiring the consent,
approval or vote of more than a Majority Interest of the Members shall
terminate, and thereafter all decisions to be made by the Members shall be made
by the vote of a Majority Interest of the Members.
6.3 Meetings. An annual meeting of Members for the transaction of such
business as may properly come before the Meeting, may be held at such place, on
such date and at such time as the Majority Interest shall determine. Special
meetings of Members for any proper purpose or purposes may be called at any time
by the holders of at least fifteen percent (15%) of the Membership Percentages
of all Members. The Company shall deliver or mail written notice stating the
date, time, place and purposes of any meeting to each Member entitled to vote at
the meeting. Such notice shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting. Meetings may be conducted in
person or by telephone conference of the Members.
6.4 Consent. Any ministerial action permitted to be taken by the
Members may be taken without a meeting, without prior notice, and without a
vote, if consents in writing, setting forth the action so taken, are signed by
Members having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all Members entitled to
vote on the action were present and voted. Any other action required or
permitted to be taken at an annual or special meeting of the Members may be
taken without a meeting, without prior notice, and without a vote, if: (i)
consents in writing, setting forth the action so taken, are signed by Members
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<PAGE> 19
owning at least 85% of the total Membership Percentages; or (ii) the action is
verbally approved by the Members in advance and subsequently consented to in
writing by Members owning at least 85% of the total Membership Percentages.
Every written consent shall bear the date and signature of each Member who signs
the consent. Prompt notice of the taking of action without a meeting by less
than unanimous written consent shall be given to all Members who have not
consented in writing to such action. In addition, the Company may give all the
Members written notice of the action, event or agreement and state in the notice
that any Member who does not indicate his disapproval by written notice to the
Company within a specified period of time (not less than 30 days after mailing
of the notice) shall be deemed to have given his consent or approval to the
action or event or to have made the agreement referred to in the notice. In such
event, any Member who does not indicate his disapproval by written notice to the
Company within the time specified shall be deemed to have given his written
consent, approval or agreement.
7. CAPITAL ACCOUNTS; PROFITS AND LOSSES; DISTRIBUTIONS.
7.1 Capital Accounts. A separate capital account (a "Capital Account")
shall be established and maintained for each Member in accordance with Treasury
Regulations Section 1.704-1(b)(2). Without limiting the foregoing, each Member's
Capital Account shall be credited with the sum of (i) the amount of money
contributed by such Member to the Company and the fair market value of property
contributed by such Member to the Company (net of any liabilities that the
Company assumes or to which the property is taken subject under Code Section 752
adjusted as required by Treas. Reg. Sections 1.704-1(b)(2)(iv)(g) and
1.704-1(b)(4)(i) (relating to certain adjustments relating to book value) and
(ii) allocations to such Member of items of the Company's income, including
items of tax-exempt income or gain. Each Member's Capital Account shall be
decreased by the sum of (x) the amount of money distributed to such Member and
the fair market value of property distributed to such Member (net of liabilities
assumed by such Member or to which the property is taken subject under Code
Section 752) and (y) items of the Company's loss and deduction, including
non-deductible expenditures. If any property other than cash is distributed to a
Member, the Capital Accounts of the Members shall be adjusted as if the property
had instead been sold by the Company for a price equal to its fair market value
and the proceeds distributed, and further adjusted as provided in Treas. Reg.
Section.1.704-1(b)(2)(iv)(e) to reflect the manner in which the unrealized
income, gain, loss and deduction inherent in such property (not already
reflected in the Member's Capital Account) would be allocated to such Member
if there were a taxable disposition of such property for its fair market value
on the date of distribution.
7.2 Allocation of Profits and Losses.
(a) The Profits and Losses of the Company shall be determined
as of the end of each Fiscal Year of the Company and, except as provided in
Section 7.4, shall be allocated among the Members in proportion to their
respective Membership Percentages.
(b) If there is an addition, withdrawal or substitution of, or
any other change in the interest of, any Member during the period covered by an
allocation, then subject to any
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<PAGE> 20
agreement between the persons affected, the Profits and Losses for the period
shall be allocated among the varying interests consistent with the provisions of
Code Section 706(d) and any regulations promulgated thereunder. If Code Section
706(d) or any regulation thereunder allow alternative methods of allocation, the
Majority Interest shall determine, in its sole discretion, which alternative
methods to use in allocating Profits and Losses among the varying interests.
7.3 Distributions.
(a) The Company may distribute to the Members from time to
time, but no less frequently than annually, such sums as the Management
Committee determines to be available for distribution and not required to
provide for current or anticipated Company needs. At a minimum, the Company
shall distribute quarterly amounts sufficient to enable the Members to pay their
Federal and state income tax on their shares of income from the Company assuming
that all Members are in the Maximum Combined Federal and State Tax Bracket ("Tax
Distributions"); provided, however, that such Tax Distributions shall be subject
to the constraints contained in the Indenture. The "Maximum Combined Federal and
State Tax Bracket" shall be equal to: (i) the highest marginal Federal income
tax bracket for individuals, plus (ii) the highest weighted individual income
tax bracket for the States in which the Company does business (weighted based
upon the apportionment of the Company's income among such states). If the
Company incurs a taxable loss in any Fiscal Year, then, for purposes of
computing Tax Distributions in subsequent Fiscal Years, such loss shall be
carried forward to subsequent Fiscal Years and shall reduce the amount of
taxable income in such future Fiscal Year or Years. Except as provided in
Section 7.3(a) and Section 10, all distributions to Members shall be in
proportion to their Membership Percentages.
(b) No distributions shall be declared and paid unless, after
the distribution is made, the Company would be able to pay its debts as they
become due in the usual course of business and the assets of the Company are in
excess of the sum of: (i) the Company's liabilities, plus (ii) the amount that
would be needed to satisfy the preferential rights of other Members upon
dissolution that are superior to the rights of the Member(s) receiving the
distribution.
7.4 Other Allocations. Notwithstanding the foregoing provisions of
this Section 7 or any other provision of this Agreement, the following
provisions shall apply:
(a) Compliance With Treasury Regulations. It is anticipated
that the Company will be treated as a partnership for federal income tax
purposes and, accordingly, the partnership tax provisions of the Code shall
apply to the Company and its Members. It is the intent of the Members that each
Member's distributive share of income, gain, loss, deduction, or credit (or item
thereof) shall be determined and allocated in accordance with this Section 7 to
the fullest extent permitted by Section 704(b) of the Code. In order to preserve
and protect the determinations and allocations provided for in this Section 7,
the Management Committee, with the consent of Members owning at least 85% of the
total Membership Percentages (which consent shall not be unreasonably withheld),
is authorized and directed to allocate income, gain, loss, deduction, or credit
(or item thereof) arising in any year differently than otherwise provided for in
this Section 7 to the extent that
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allocating income, gain, loss, deduction, or credit (or item thereof) in the
manner provided for in this Section 7 would cause the determinations and
allocations of each Member's distributive share of income, gain, loss,
deduction, or credit (or item thereof) not to be permitted by Section 704(b) of
the Code and Treasury Regulations promulgated thereunder. Any allocation made
pursuant to this Section 7.4 shall be deemed to be a complete substitute for any
allocation otherwise provided for in this Section 7 and no amendment of this
Agreement or approval of any Member shall be required. The terms used in this
Section 7 shall have the same meaning as in such Treasury Regulations.
(b) Only Required Modifications. In making any allocation
(the "new allocation") under Section 7.4, the Management Committee is authorized
to act only after having been advised by the Company's accountants that, under
Section 704(b) of the Code and the Treasury Regulations thereunder (i) the new
allocation is necessary, and (ii) the new allocation is the minimum modification
of the allocations otherwise provided for in this Section 7 necessary in order
to assure that, either in the then current year or in any preceding year, each
Member's distributive share of income, gain, loss, deduction, or credit (or item
thereof) is determined and allocated in accordance with this Section 7 to the
fullest extent permitted by Section 704(b) of the Code and the Treasury
Regulations thereunder.
(c) Company Minimum Gain Chargeback. If there is a net
decrease in Company Minimum Gain during a Fiscal Year so that an allocation is
required by Treasury Regulation Section 1.704-2(f), then each Member shall be
specially allocated items of income and gain for such year (and, if necessary,
subsequent Fiscal Years) equal to such Member's share of the net decrease in
Company Minimum Gain as determined by Treasury Regulation Section 1.704-2(g)(2).
Such allocations shall be made in a manner and at a time which will satisfy the
requirements of Treasury Regulation Section 1.704-2(f)(1).
(d) Member Minimum Gain Chargeback. If there is a net
decrease in the Member Nonrecourse Debt Minimum Gain during any Fiscal Year, any
Member who has a share of such Member Nonrecourse Debt Minimum Gain (as
determined in the same manner as partner nonrecourse debt minimum gain under
Treasury Regulation Section 1.704-2(i)(5)) shall be specially allocated items of
income or gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years)
equal to such Member's share of the net decrease in the Member Nonrecourse Debt
Minimum Gain in the manner and to the extent required by Treasury Regulation
Section 1.704-2(i)(4).
(e) Qualified Income Offset. If a Member unexpectedly
receives an adjustment, allocation, or distribution described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), any of which causes or
increases an Adjusted Deficit Capital Account Balance in such Member's Capital
Account, then he will be specially allocated items of income and gain in an
amount and manner sufficient to eliminate such deficit balance created or
increased by such adjustment, allocation, or distribution as quickly as
possible; provided, however, an allocation pursuant to this Section 7.4(e) will
be made if and only to the extent that such Member would have an Adjusted
Capital Account Deficit after all other allocations provided for in Section 7
have been tentatively made as if this Section 7.4(e) were not in the Agreement.
18
<PAGE> 22
(f) Gross Income Allocation. If a Member has an Adjusted
Deficit Capital Account Balance at the end of a Company taxable year, such
Member shall be allocated items of income and gain in the amount of such
Adjusted Deficit Capital Account Balance as quickly as possible in order to
eliminate it.
(g) Allocation of Nonrecourse Deductions. Nonrecourse
Deductions shall be allocated among the Members in proportion to their
respective Membership Percentages.
(h) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions shall be allocated to the Member who bears the economic risk of loss
with respect to the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Treasury Regulation Section
1.704-2(i)(1).
(i) Curative Allocations. If the Company is required by
Section 7.4(a), (c), (d), (e), (f), (g) or (h) to make any new allocation in a
manner other than as provided for in this Section 7 without regard thereto, then
the Management Committee is authorized and directed, insofar as it is permitted
to do so by Section 704(b) of the Code, to allocate income, gain, loss,
deduction, or credit (or item thereof) arising in the current Fiscal Year (or
subsequent Fiscal Years, if necessary) in such manner so as to bring the
proportions of income, gain, loss, deduction, or credit (or item thereof)
allocated to the Members as nearly as possible to the proportion otherwise
contemplated by this Section 7 without regard thereto; provided, however, that
Nonrecourse Deductions shall not be taken into account except to the extent that
there has been a reduction in Company Minimum Gain and Member Nonrecourse
Deductions shall not be taken into account except to the extent that there has
been a reduction in Member Minimum Gain and provided further that such
Nonrecourse Deductions and Member Nonrecourse Deduction shall not in any event
be taken into account to the extent that the Management Committee reasonably
determines that such allocations are likely to be offset by subsequent
allocations pursuant to Section 7.4(c) or (d).
(j) Advice of Accountants. Allocations made by the Management
Committee under this Section 7.4 in reliance upon the advice of the Company's
accountants shall be deemed to be made pursuant to any fiduciary obligation to
the Company and the Members.
(k) Section 754 Election. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining capital accounts,
the amount such adjustment to the capital accounts shall be treated as an item
of gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreased such basis) and such gain or loss shall be specially
allocated to the Members in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
(l) Imputed Interest. If any Member makes a loan to the
Company, or the Company makes a loan to any Member, and interest in excess of
the amount actually payable is
19
<PAGE> 23
imputed under Code Sections 7872, 483, or 1271 through 1288 or corresponding
provisions of subsequent Federal income tax law, then any item of income or
expense attributable to any such imputed interest shall be allocated solely to
the Member who made or received the loan and shall be credited or charged to his
Capital Account, as appropriate.
(m) Contributed Property. Income, gain, loss or deduction
with respect to any property contributed by a Member shall, solely for tax
purposes, be allocated among the Members, to the extent required by Code Section
704(c) and the related Treasury Regulations, to take account of the variation
between the adjusted tax basis of such property and its Book Value at the time
of contribution to the Company. If the Book Value of any Company property is
adjusted as provided in Treasury Regulation Section 1.704-1(b)(2)(iv),
subsequent allocations of income, gain, loss and deduction and the Book Value of
such property shall be adjusted as provided in Code Section 704(c) and the
related Treasury Regulations. If Code Section 704(c) and the regulations
thereunder allow alternative methods of making such acquired allocations, the
Management Committee shall determine, in its sole discretion, which alternative
method to use. Allocations under this Section 7.4(m) are solely for purposes of
federal, state and local taxes and shall not affect, or in any way be taken into
account in computing, any Member's Capital Account or share of Profits, Losses,
or other items or distributions under any provision of this Agreement.
7.5 Share of Excess Nonrecourse Liabilities. For purposes of
calculating the Members' shares of "excess nonrecourse liabilities" of the
Company (within the meaning of Treasury Regulation Section 1.752-3(a)(3)), the
Members intend that they be considered as sharing profits of the Company in
proportion to their respective Membership Percentages.
8. ADJUSTMENT TO MEMBERSHIP PERCENTAGES.
* Approximately 3 pages of this part of this document has been redacted
pursuant to a request for confidential treatment filed with the SEC. An
unredacted version of this document has been filed separately with the
SEC.
20
<PAGE> 24
9. TERM OF COMPANY.
9.1 Commencement. The term of the Company began on the date the
Articles of Organization were filed with the Michigan Department of Consumer and
Industry Services and became effective under the Act.
9.2 Dissolution. The Company shall be dissolved and its affairs be
wound up upon the occurrence of any of the following events:
(a) The sale or other disposition of substantially all of the
assets of the Company;
(b) By the written consent of all the Members; or
(c) Upon entry of a decree of judicial dissolution.
22
<PAGE> 25
10. APPLICATION OF ASSETS.
Upon dissolution of the Company, the Company shall cease
carrying on its business and affairs and shall commence winding up of the
Company's business and affairs and complete the winding up as soon as
practicable. The Company affairs shall be concluded by the Management Committee.
The assets of the Company may be liquidated or distributed in kind, as
determined by the Management Committee, and the same shall first be applied to
the payment of, or to a reserve for the payment of Company liabilities
(including such provision for contingent or unforeseen liabilities as the
Management Committee deems appropriate) and then to the Members in accordance
with their respective positive Capital Accounts after allocations pursuant to
Sections 7.2 and 7.4 for the current Fiscal Year. If Company assets are
distributed in kind, the assets so distributed shall be valued at their current
fair market values and the unrealized appreciation or depreciation in value of
the assets shall be allocated to the Members' Capital Accounts in the manner
described in Section 7.2 and 7.4 as if such assets had been sold, and such
assets shall then be distributed to the Members in accordance with their
respective positive Capital Accounts as so adjusted. To the extent that Company
assets cannot either be sold without undue loss or readily divided for
distribution in kind to the Members, then the Company may, as determined by the
Management Committee, convey those assets to a trust or other suitable holding
entity established for the benefit of the Members in order to permit the assets
to be sold without undue loss and the proceeds thereof distributed to the
Members at a future date. The legal form of the holding entity, the identity of
the trustee or other fiduciary, and the terms of its governing instrument shall
be determined by the Management Committee.
11. RESTRICTION ON ASSIGNABILITY OF INTERESTS.
11.1 Permitted Assignments. A Member's assignment of all or a portion
of its interest in the Company shall be restricted as provided in Article II of
the Equityholders Agreement. A permitted assignment shall not of itself
substitute the assignee as Member or entitle the assignee to participate in the
management of the Company. Such assignee shall be only entitled to receive, to
the extent assigned, the distributions the assigning Member would otherwise be
entitled to. No assignment of a Company interest shall be effective with respect
to the Company until written notice is given to the Company.
11.2 Admission of Assignees as Members. An assignee (other than
Permitted Transferees (as defined in the Equityholders Agreement, who shall
automatically be admitted) shall not be admitted as a Member unless such
admission is approved by Members owning at least 85% of the total Membership
Percentages (unless the Member is an assignee of an interest for which Paribas
declined to exercise its right of first refusal, in which case the assignee may
be admitted with the approval of the Management Committee). Such consent may be
withheld in each Member's sole discretion. The Members may require a substitute
Member to pay the legal and other costs incurred by the Company in effecting his
admission. If admitted, the substitute Member has, to the extent assigned, all
of the rights and powers, and is subject to all the restrictions and liabilities
of a
23
<PAGE> 26
Member. In addition, the assignee shall provide the Company with the information
and agreements that the Company deems necessary in connection with the
assignment.
11.3 Restrictions on Transfers. Notwithstanding the other provisions
of this Section 11, no Member shall sell, assign, transfer, exchange, mortgage,
pledge, grant, hypothecate, or otherwise dispose of any interest in the Company
except in compliance with Section 11 and Article II of the Equityholders
Agreement. No Member shall dispose of his interest in the Company without (1)
the prior written consent of all the Members if the effect of the assignment
would be to terminate the Company within the meaning of Code Section 708(b), and
(2) the opinion of counsel in form and substance satisfactory to counsel for the
Company that registration is not required under the Securities Act of 1933 and
applicable state law. In no event shall any Member assign his interest in the
Company if such assignment would violate any applicable state or Federal
securities law. The Members acknowledge that their interests in the Company have
not been registered under any securities Act and agree that such interests will
not be transferred without registration under any applicable such Act or
exemption therefrom. Any attempted disposition of a Member's interest in the
Company in violation of Section 11 shall be null and void ab initio.
12. SECTION 754 ELECTION.
In the event of the transfer of a Member's interest in the Company by
sale or exchange, or upon the death of a Member, the Company, if the person
acquiring such interest so requests and the Management Committee consents, shall
elect pursuant to Code Section 754, to adjust the basis of the Company property.
Each Member hereby agrees to provide the Company with all information necessary
to give effect to such election. The transferee shall reimburse the Company for
any reasonable costs incurred as a result of such election, as determined by the
Management Committee.
13. ARBITRATION.
Except for disputes concerning Section 5.5 and Section 8 of this
Agreement (which will be arbitrated in New York pursuant to Section 11.13 of the
Securities Purchase Agreement) any disputes arising out of this Agreement which
cannot be resolved by the Members themselves or pursuant to the terms of this
Agreement shall be submitted to binding arbitration in Oakland
24
<PAGE> 27
County, Michigan in accordance with the American Arbitration Association
Commercial Arbitration Rules. The arbitrator(s) shall have the power to grant
any remedy or relief that they deem just and equitable, including, but not
limited to injunctive relief, whether interim and/or final. Each party to this
Agreement retains the right to seek interim measures from a judicial authority,
and any such request shall not be deemed incompatible with the agreement to
arbitrate or a waiver of the right to arbitrate. Judgment upon the arbitration
award may be entered in a court of competent jurisdiction. The arbitrator(s)
will be entitled to apportion the costs of the arbitration proceedings and to
award the prevailing party attorney fees, and costs on such basis as the
arbitrator(s) may determine.
14. INVESTMENT REPRESENTATION.
Each Member represents and warrants to each other and to the Company he
is acquiring his respective interest in the Company for his own personal account
for investment, and without a view to transferring, reselling, or distributing
such interest. In addition, no Member shall sell or dispose of his interest in
the Company in a manner that violates any Federal or state securities laws. Each
Member shall indemnify and hold the Company harmless from and against all
liability, costs and expenses, including reasonable attorneys' fees, incurred by
the Company or the Members, as a result of a breach of the representations and
warranties made in this Section by such Member.
15. AMENDMENTS.
This Agreement or the Articles may be amended only by written agreement
of Members owning at least fifty-one percent (51%) of the Membership
Percentages; provided, however, that no amendment may be made without the
consent of Paribas if such amendment would adversely affect the rights or
obligations of Paribas.
25
<PAGE> 28
16. MISCELLANEOUS PROVISIONS.
16.1 Books of Account; Reports.
(a) The Company shall keep true and complete books of account
and records of all Company's business and affairs as required by the Act. The
books of account and records shall be kept at the principal office of the
Company. The Company shall maintain at such office (i) a list of names and
addresses of all Members; (ii) a copy of the Articles together with executed
copies of all powers of attorney pursuant to which the Articles have been
executed; (iii) copies of the Company's Federal, state and local income tax
returns and reports for the three most recent years; (iv) copies of the
Company's current Agreement; (v) copies of the financial statements (monthly,
quarterly, and annual) of the Company for the three most recent years; (vi)
annual budgets of the Company; (vii) all information delivered to lenders or any
Member; (viii) notices of material events; and (ix) such other information as a
Member shall reasonably request. Such Company records shall be available to any
Member or his designated representative during ordinary business hours at the
reasonable request and expense of such Member.
(b) The Company will use its best efforts to furnish, or cause
to be furnished, the following items on the dates indicated:
(1) an annual report consisting of an income
statement for the prior year and a balance sheet as of the year ended -
annually.
(2) Member information tax returns
(Schedule K-1) - March 31.
16.2 Bank Accounts and Investment of Funds. All funds of the Company
shall be deposited in its name in such checking accounts, savings accounts, time
deposits, or certificates of deposit or shall be invested in such other manner,
as shall be designated by the Management Committee from time to time.
Withdrawals shall be made upon such signature or signatures as the Management
Committee may designate.
16.3 Accounting Decisions. All decisions as to accounting matters,
except as specifically provided to the contrary herein, shall be made by the
Management Committee in accordance with generally accepted accounting principles
consistently applied. Such decisions shall be acceptable to the accountants
retained by the Company, and the Management Committee may rely upon the advice
of the accountants as to whether such decisions are in accordance with generally
accepted accounting principles.
16.4 Federal Income Tax Election. The Company shall, to the extent
permitted by applicable law and regulations and upon obtaining any necessary
approval of the Commissioner of Internal Revenue, elect to use such methods of
depreciation, and make all other Federal income tax elections in such manner, as
the Management Committee determines to be most-
26
<PAGE> 29
favorable to the Members. The Management Committee may rely upon the advice of
the accountants retained by the Company as to the availability and effect of all
such elections.
16.5 Entire Agreement. This Agreement, the Purchase Agreement and the
Equityholders Agreement constitute the entire agreement between the parties and
may be modified only as provided herein. No representations or oral or implied
agreements have been made by any party hereto or his agent, and no party to this
Agreement, the Purchase Agreement and the Equityholders Agreement relies upon
any representation or agreement not set forth in it. This Agreement, the
Purchase Agreement and the Equityholders Agreement supersede any and all other
agreements, either oral or written, by and among the Company and its Members.
They expressly supersede the Terms Sheet executed by the Members in January of
1998.
16.6 Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if (i) physically delivered, telephonically transmitted by telecopier or
other similar means, (ii) one (1) day after having been delivered to Federal
Express or other delivery courier for next day delivery, with proof of delivery
to the recipient received by the courier in the form of a signature of
recipient, or (iii) three (3) days after having been deposited in the United
States Mail, as certified mail with return receipt requested and with postage
prepaid, addressed to the Members at the addresses listed in Exhibit A. The
addresses and other information so indicated for any Member may be changed by a
Member by written notice to the Company.
16.7 Further Execution. Upon request of the Company from time to time,
the Members shall execute and swear to or acknowledge any amended Articles and
any other writing which may be required by any rule or law or which may be
appropriate to the effecting of any action by or on behalf of the Company or the
Members which has been taken in accordance with the provisions of this
Agreement, the Securities Purchase Agreement and the Equityholders Agreement.
16.8 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties, their successors and permitted assigns.
None of the provisions of this Agreement shall be construed as for the benefit
of or as enforceable by any creditor of the Company or the Members or any other
person not a party to this Agreement.
16.9 Severability. The invalidity or unenforceability of any provision
of this Agreement in a particular respect shall not affect the validity and
enforceability of any other provision of this Agreement or of the same provision
in any other respect.
16.10 Captions. All captions are for convenience only, do not form a
substantive part of this Agreement and shall not restrict or enlarge any
substantive provisions of this Agreement.
27
<PAGE> 30
16.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one instrument. The Company shall have custody of counterparts
executed in the aggregate by all Members.
16.12 Michigan Law to Control. The validity and interpretation of, and
the sufficiency of performance under, this Agreement shall be governed by
Michigan law.
The parties have executed this Agreement to be effective on the date
first above written.
COMPANY:
Key Plastics Technology, L.L.C., a Michigan limited
liability company
By: Key Plastics, Inc., a Michigan
corporation, its Member
By: /s/ Mark J. Abbo
---------------------------------------
Its: Treasurer
---------------------------------------
MEMBERS:
Key Plastics, Inc., a Michigan corporation
By: /s/ Mark J. Abbo
---------------------------------------
Its: Treasurer
---------------------------------------
28
<PAGE> 31
Paribas Principal Incorporated, a New York
corporation
By: /s/ Stephen Eisenstein
---------------------------------------
Its: Partner
---------------------------------------
29
<PAGE> 32
* Approximately 2 pages of this part of this document has been redacted
pursuant to a request for confidential treatment filed with the SEC. An
unredacted version of this document has been filed separately with the
SEC.
A-1
<PAGE> 1
EXHIBIT 4.1.1
SUPPLEMENTAL INDENTURE
Supplemental Indenture (this "Supplemental Indenture"), dated as of
February 9, 1998, by and among Key Plastics, Inc., a Michigan corporation (the
"Company"), Key Plastics Technology, L.L.C., a Michigan limited liability
company and majority-owned subsidiary of the Company ("Key Technology"), and
Chase Manhattan Trust Company, National Association, formerly known as Mellon
Bank, F.S.B. (successor to KeyBank National Association, formerly known as
Society National Bank), as Trustee under the indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture, dated as of November 17, 1992 as amended to date (the
"Indenture"), providing for the issuance of an aggregate principal amount of
$65,000,000 of 14% Senior Notes due 1999 (the "Securities"); and
WHEREAS, pursuant to each of a Contribution and Assignment Agreement
(the "Contribution Agreement") and an Assumption Agreement (the "Assumption
Agreement"), a related documents thereto, between the Company and Key
Technology, each dated on even date herewith, the Company has contributed,
assigned, transferred, conveyed and delivered substantially all of its
properties and assets and assigned substantially all of its liabilities to Key
Technology, each as more particularly set forth in the Contribution Agreement
and the Assumption Agreement; and
WHEREAS, Key Technology intends to assume all the obligations of the
Company under the Securities and the Indenture; and
WHEREAS, pursuant to Section 5.02 of the Indenture, from and after the
date hereof Key Technology shall succeed to, and be substituted for, and may
exercise every right and power of the Company under the Indenture; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, each of
the Company, Key Technology and the Trustee mutually covenant and agree for the
equal and ratable benefit of the holders of the Senior Subordinated Notes as
follows:
i. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the
Indenture.
<PAGE> 2
ii. Agreement to Assume Obligations. Key Technology hereby
agrees to assume all the obligations of the Company under the
Securities and the Indenture.
iii. Company Obligations. The Company shall be relieved of all
obligations under the Securities and the Indenture.
iv. No Recourse Against Others. Pursuant to Section 11.10 of the
Indenture, no director, officer, employee, stockholder or
incorporator of Key Technology shall have any liability for any
obligations of Key Technology under the Securities, the
Indenture or this Supplemental Indenture or for any claim
based on, in respect of, or by reason of, such obligations or
their creation. Each Security holder by accepting a Security
waives and releases all such liability. Such waiver and
release is part of the consideration for the issuance of the
Securities.
v. Governing Law. The laws of the State of New York, as applied
to contracts made and performed within the State of New York,
shall govern this Supplemental Indenture, without regard to
principles of conflicts of law.
vi. Duplicate Originals. All parties may sign any number of
copies of this Supplemental Indenture. Each signed copy shall be
an original but all of them together represent the same
agreement.
vii. Headings. The headings of the Sections of this Supplemental
Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first written
above.
KEY PLASTICS, INC.
By: /s/ Mark J. Abbo
--------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant
Secretary
KEY PLASTICS TECHNOLOGY, L.L.C.
By: Key Plastics, Inc.
Title: Managing Member
By: /s/ Mark J. Abbo
----------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant
Secretary
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION, as Trustee
By: /s/ Robert Schmidt
--------------------------
Name: Robert Schmidt
----------------------
Title: Vice President
---------------------
3
<PAGE> 1
EXHIBIT 4.7.1
FIRST AMENDMENT TO INDENTURE
THIS FIRST AMENDMENT to the Indenture, dated as of March 24, 1997, by
and among Key Plastics, Inc., a Michigan corporation, as Issuer (the "Company"),
Key Plastics International LLC, a Michigan limited liability company, Key
Plastics Automotive LLC, a Michigan limited liability company, Key Plastics
Technology, LLC, a Michigan limited liability company, Key Mexico A, LLC, a
Michigan limited liability company and Key Mexico B, a Michigan limited
liability company, as Guarantors (the "Guarantors") and Marine Midland Bank, as
Trustee (the "Trustee") is made as of the 9th day of February, 1998 by and among
the Company, the Guarantors and the Trustee.
Section 9.01 of the Indenture provides, among other things, that the
Company and the Guarantors, when authorized by a Board Resolution (such term and
all other capitalized terms used and not defined herein shall have the meanings
assigned to such terms in the Indenture), and the Trustee may amend the
Indenture, without the consent of any Holder of a Senior Subordinated Note, for
certain purposes, as set forth therein. This Amendment is being entered into for
the purposes set forth in Section 9.01(a), has been duly authorized by the Board
of Directors of the Company and each of the Guarantors, and the Trustee has
received such other documents as required by Section 9.01 in order to authorize
the Trustee to enter into this Amendment.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO THE INDENTURE
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
(a) Section 1.01 of the Indenture is hereby amended by deleting the
definition of "Board of Directors" and substituting therefore the following:
"Board of Directors" means the Board of Directors or Management
Committee of the Company, or any authorized committee of the Board of Directors
or authorized subcommittee of the Management Committee.
(b) Section 1.01 of the Indenture is amended by deleting the definition
of "Change of Control" and substituting therefore the following:
"Change of Control" means the occurrence of any of the following: (i)
the adoption of a plan relating to the liquidation or dissolution of the
Company, (ii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that (a) prior
to an Initial Public Offering, any "Person" (as such term is used in Section
13(d)(3) of
<PAGE> 2
the Exchange Act), other than the Principals and their Related Parties, (1)
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power rather than
number of shares), (2) becomes a shareholder of the Company with the right to
appoint or remove directors of the Company holding 50% or more of the voting
rights at meetings of the Board of Directors on all, or substantially all,
matters or (3) becomes able to exercise the right to give directions with
respect to the operating and financial policies of the Company with which the
relevant directors are obligated to comply by reason of (A) provisions contained
in the organization documents of the Company, or (B) the existence of any
contract permitting such Person to exercise control over the Company, or (b)
after an Initial Public Offering, any "Person" (as defined above), other than
the Principals and their Related Parties, becomes the "beneficial owner" (as
such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except
that a Person shall be deemed to have "beneficial ownership" of all securities
that such Person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 30% of the total of the Voting
Stock of the Company (measured by voting power rather than number of shares),
and, the Principals, collectively, are the "beneficial owners" of a lesser
percentage of the Voting Stock of the Company than such other "Person" and do
not have the right or ability by voting power, contract or otherwise, to elect
or designate for election, a majority of the Board of Directors of the Company,
(iii) the first day on which a majority of the members of the Board of Directors
of the Company are not Continuing Directors, (iv) the Company consolidates with,
or merges with or into, any Person or the Company and its Subsidiaries taken as
a whole sells, assigns, conveys, transfers, leases or otherwise disposes of all
or substantially all of its assets to any Person, or any Person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which any of the outstanding Voting Stock of the Company is
converted into or exchanged for cash, securities or other property, other than
any such transaction where the Voting Stock of the Company outstanding
immediately prior to such transaction is converted into or exchanged for Voting
Stock (other than Disqualified Stock) of the surviving or transferee Person
constituting a majority of the outstanding shares of such Voting Stock of such
surviving or transferee Person (immediately after giving effect to such
issuance) or (v) the Company and its Subsidiaries taken as a whole sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person pursuant to a transaction in which
none of the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property.
ARTICLE 5
SUCCESSORS
(a) Article 5 of the Indenture is hereby amended by deleting Article 5
in its entirety and substituting therefore the following:
2
<PAGE> 3
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate or merge with or into
(whether or not the Company is the surviving Person), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions, to another Person unless (i) the
Company is the surviving Person or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a Person organized or existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) the Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Company
under the Senior Subordinated Notes and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; (iv)
except in the case of a merger of the Company with or into a Guarantor, the
Company or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09; and (v) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, sale, assignment, transfer, lease, conveyance or
other disposition and such supplemental indenture complies with this Article and
that all conditions precedent herein provided for relating to such transaction
have been complied with.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
Person formed by such consolidation or into or with which the Company is merged
or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor Person and not to the Company), and may exercise
every right and power of the Company under this Indenture with the same effect
as if such successor Person had been named as the Company herein; provided,
however, that the predecessor Company shall not be relieved from the obligation
to pay the principal of and interest on the Senior Subordinated Notes except in
the case of a sale of all of the Company's assets that meets the requirements of
Section 5.01 hereof.
3
<PAGE> 4
Section 2. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS AMENDMENT.
Section 3. HEADINGS
The Headings of the Sections of this Amendment have been inserted for
convenience of reference only, are not to be considered a part of this Amendment
and shall in no way modify or restrict any of the terms or provisions hereof.
Section 4. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Amendment. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 5. THE TRUSTEE.
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Amendment or for or in respect of
the recitals contained herein, all of which recitals are made solely by the
Company and the Guarantors.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and attested, all as of the date first written above.
KEY PLASTICS, INC.
By: /s/ Mark J. Abbo
----------------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
KEY PLASTICS INTERNATIONAL LLC
By: Key Plastics, Inc.,
By: /s/ Mark J. Abbo
----------------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
4
<PAGE> 5
KEY PLASTICS AUTOMOTIVE LLC
By: Key Plastics, Inc., a Member
By: /s/ Mark J. Abbo
---------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
KEY PLASTICS TECHNOLOGY LLC
By: Key Plastics, Inc., a Member
By: /s/ Mark J. Abbo
---------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
KEY MEXICO A, LLC
By: Key Plastics, Inc., a Member
By: /s/ Mark J. Abbo
---------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
KEY MEXICO B, LLC
By: Key Plastics, Inc., a Member
By: /s/ Mark J. Abbo
---------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
5
<PAGE> 6
MARINE MIDLAND BANK, as Trustee
By: /s/ Marcia Markowski
------------------------
Name: Marcia Markowski
--------------------
Title: Assistant Vice President
-------------------------
6
<PAGE> 1
EXHIBIT 4.7.2
SUPPLEMENTAL INDENTURE
Supplemental Indenture (this "Supplemental Indenture"), dated as of
February 9, 1998, by and among Key Plastics, Inc., a Michigan corporation (the
"Company"), Key Plastics International, L.L.C., a Michigan limited liability
company, Key Plastics Automotive, L.L.C., a Michigan limited liability company,
Key Plastics Technology, L.L.C., a Michigan limited liability ("Key
Technology"), Key Mexico A, L.L.C., a Michigan limited liability company, and
Key Mexico B, a limited liability company, as Guarantors (the "Guarantors"), and
Marine Midland Bank, as Trustee under the indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company, as Issuer, and the Guarantors have heretofore
executed and delivered to the Trustee an indenture, dated as of March 24, 1997
and amended as of even date herewith (the "Indenture"), providing for the
issuance of an aggregate principal amount of $125,000,000 of 10 1/4% Senior
Subordinated Notes due 2007 (the "Senior Subordinated Notes"); and
WHEREAS, pursuant to each of a Contribution and Assignment Agreement
(the "Contribution Agreement") and an Assumption Agreement (the "Assumption
Agreement") between the Company and Key Technology, each dated on even date
herewith, the Company has contributed, assigned, transferred, conveyed and
delivered substantially all of its properties and assets and assigned
substantially all of its liabilities to Key Technology, each as more
particularly set forth in the Contribution Agreement and the Assumption
Agreement; and
WHEREAS, Section 5.01 of the Indenture provides, in relevant part, that
the Company shall not sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of its properties or assets in one or more related
transactions unless the Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the obligations
of the Company under the Senior Subordinated Notes and the Indenture; and
WHEREAS, Key Technology intends to assume all the obligations of the
Company under the Senior Subordinated Notes and the Indenture; and
WHEREAS, pursuant to Section 5.02 of the Indenture, from and after the
date hereof Key Technology shall succeed to, and be substituted for (so that the
provisions of the Indenture referring to the "Company" shall refer instead to
Key Technology and not the Company), and may exercise every right and power of
the Company under the Indenture; provided , however, that the Company shall not
be relieved from the obligation to pay the principal of and interest on the
Senior Subordinated Notes; and
<PAGE> 2
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, each of
the Company, Key Technology and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Senior Subordinated Notes as
follows:
i. Capitalized Terms. Capitalized terms used
herein without definition shall have the meanings
assigned to them in the Indenture.
ii. Agreement to Assume Obligations. Key Technology
hereby agrees to assume all the obligations of the
Company under the Senior Subordinated Notes and the
Indenture and to be bound by all other applicable
provisions of the Indenture.
iii. Company Obligations. The Company shall be
relieved of all obligations under the Senior
Subordinated Notes and the Indenture; provided,
however, that the Company agrees that it shall not
be relieved from the obligation to pay the principal
of and interest on the Senior Subordinated Notes.
iv. No Recourse Against Others. Pursuant to Section
12.07 of the Indenture, no officer, employee,
director, incorporator or stockholder of the Company
or Key Technology shall have any liability for any
Obligations of the Company or Key Technology under
the Senior Subordinated Notes, the Indenture or this
Supplemental Indenture, or for any claim based on, in
respect of, or by reason of, such Obligations or the
creation of any such Obligation.
v. Governing Law. The internal laws of the State of
New York shall govern this Supplemental Indenture,
without regard to the conflict of laws provisions
thereof.
vi. Counterparts. This Supplemental Indenture may be
executed in any number of counterparts and by the
parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an
original and all of which taken together shall
constitute one and the same agreement.
2
<PAGE> 3
vii. Effect of Headings. The Section headings herein
are for convenience only and shall not affect the
construction hereof.
viii. The Trustee. The Trustee shall not be
responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this
Supplemental indenture, or for or in respect of the
recitals contained herein, all of which recitals are
made solely by the Company and the Guarantors.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and attested, all as of the date first written above.
KEY PLASTICS, INC.
By: /s/ Mark J. Abbo
------------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
KEY PLASTICS INTERNATIONAL LLC
By: Key Plastics, Inc.,
By: /s/ Mark J. Abbo
------------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
KEY PLASTICS AUTOMOTIVE LLC
By: Key Plastics, Inc., a Member
By: /s/ Mark J. Abbo
------------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
3
<PAGE> 4
KEY PLASTICS TECHNOLOGY LLC
By: Key Plastics, Inc., a Member
By: /s/ Mark J. Abbo
---------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
KEY MEXICO A, LLC
By: Key Plastics, Inc., a Member
By: /s/ Mark J. Abbo
--------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
KEY MEXICO B, LLC
By: Key Plastics, Inc., a Member
By: /s/ Mark J. Abbo
---------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
MARINE MIDLAND BANK, as Trustee
By: Marcia Markowski
-----------------------
Name: Marcia Markowski
------------------
Title: Assistant Vice President
----------------------------
4
<PAGE> 1
EXHIBIT 10.8
CONTRIBUTION AND ASSIGNMENT AGREEMENT
KNOW ALL MEN BY THESE PRESENTS that, as of February 9, 1998 (the
"Execution Date"), KEY PLASTICS, INC., a Michigan corporation ("Key"), does
hereby contribute, assign, transfer, convey and deliver unto Key Plastics
Technology, L.L.C., a Michigan limited liability company and majority-owned
subsidiary of Key ("Key Technology"), or its successors and assigns, the
following:
All assets, properties, goodwill, business as a going concern, rights,
privileges, claims, patents and licenses owned, leased or used by Key, except
the Excluded Assets (as defined herein) (the "Contributed Assets"). The
Contributed Assets shall include, without limitation, the following:
(a) Balance Sheet Assets. All assets, tangible and intangible,
reflected on Key's Balance Sheet as of December 31, 1997 (the "Closing
Balance Sheet"), which Closing Balance Sheet is attached to this
Agreement as Exhibit A.
(b) Cash and Receivables. All cash, deposits (including security
deposits), certificates of deposit and other cash equivalents (other
than cash or cash equivalents in an amount not greater than $1,000 and
certain proceeds from the exercise of stock options as described herein
as Excluded Assets) and all accounts receivable and other receivables
(except certain receivables described herein as Excluded Assets).
(c) Inventories. All inventories (including raw materials, work in
process, finished goods and any such inventories on consignment) as
acquired in the normal course of business.
(d) Tangible Assets. All machinery, equipment, furniture, fixtures,
automobiles, trucks and other vehicles, leasehold improvements and
other tangible property used in the Business.
(e) Intangible Assets. All trademark registrations and applications
therefor, trade name and names (whether or not registered or
registerable), including, without limitation, the name "Key Plastics"
and the goodwill pertaining thereto; all copyrights, labels and other
trade rights, whether or not registered; all patents and pending patent
applications; all inventions, processes, methods, patterns, devices,
formulae, discoveries, improvements and other know-how, whether
patentable or not; all plans, specifications and other data relating to
customer's requirements for products; any and all employer's shop
rights; all trademark licenses, royalty agreements, and patent
licenses; and all causes of action of Key for the infringement of
trademarks, trade names, labels and patents.
(f) Contract Rights. All rights, claims and benefits of Key under all
leases, purchase orders, franchises, sales contracts and all other
contracts of whatever nature or
<PAGE> 2
description, other than rights under any Employee Plans existing as of
the Execution Date. "Employee Plans" shall mean all plans, contracts,
programs and arrangements with respect to employees engaged in the
Business, including, but not limited to, employment agreements, union
contracts and supplemental agreements, pensions, profit sharing
arrangements, bonuses, deferred compensation, retirement, stock option,
restricted stock, phantom stock, disability, death benefit, severance,
medical and hospitalization, insurance, vacation, dependent care,
salary continuation, and other employee benefit plans, programs or
arrangements, now or at any time maintained by Key or under which Key
has or had any obligation in respect of any employee of Key.
(g) Warranties. All rights under third party warranties, including
manufacturer warranties relating to the Contributed Assets.
(h) Books and Records. All books and records, customers lists and all
other data relating to the Contributed Assets.
(i) Proprietary Claims. Any and all rights, claims or causes of action
against any employee, former employee or other person arising out of
any agreement or covenant not to compete or any similar agreement, or
the disclosure or use or threatened disclosure or threatened use of any
proprietary information of Key, including (but not limited to) any
invention, discovery, improvement, process, method, formula, treatment,
knowhow, pattern, device, compilation of information, list of
customers, document or record of information.
(j) Subsidiary/Affiliate Interests. All of Key's equity interest in its
subsidiaries or affiliates, including Key's equity interest in Key
Plastics Automotive, L.L.C., a Michigan limited liability company; Key
Plastics International, a Michigan limited liability company; Key
Mexico A, L.L.C., a Michigan limited liability company ("Key Mexico
A"); Key Mexico B, L.L.C., a Michigan limited liability company; Ley
Plastic France, S.A.S., a French Societe par actions simplifiee; and
Materias Plasticas, S.A., excluding, however, Key's equity interest in
Key Plastics de Mexico, S. de R.L. de C.V., a Mexican Sociedad de
Responsabilidad Limitada de Capital Variable ("Key Mexico").
(k) Other Claims. All other claims and causes of action.
(l) Other. All other assets related to the kEY'S Business of every
kind, nature and description, wherever located, whether tangible or
intangible, including Key's goodwill and all rights and causes of
action thereto, except for the Excluded Assets (as defined herein).
With all the foregoing TO HAVE AND TO HOLD, unto Key Technology, its successors
and assigns, FOREVER.
2
<PAGE> 3
Key Technology is not acquiring, and Key is not contributing any of the
following assets of Key, which are referred to herein as the "Excluded Assets":
(a) Corporate Records. Minute books, stock transfer records and
financial records.
(b) Cash. Cash or cash equivalents in an amount not greater than $1,000
and proceeds related to the exercise of stock options and related
collections of Key shareholder notes receivable related to the issuance
of capital stock of Key prior to the effective date of that certain
Securities Purchase Agreement by and among Key, Key Technology and
Paribas Principal Incorporated, dated February 9, 1998.
(c) Receivables. Certain Key shareholder notes receivable related to
the issuance of capital stock of Key prior to the effective date of
that certain Securities Purchase Agreement by and among Key, Key
Technology and Paribas Principal Incorporated, dated February 9, 1998.
(d) Excluded Subsidiary. All of Key's equity interest in Key Mexico,
such equity interest in Key Mexico to be contributed to Key Mexico A.
(e) Employee Plans. All Employee Plans existing as of the Execution
Date.
Key hereby authorizes Key Technology to take any and all action in
connection with any of the Contributed Assets, in the name of Key or in its own
or any other name.
Key hereby warrants, covenants and agrees that it:
(i) is hereby conveying title to the Contributed Assets free
and clear of any and all liabilities, obligations, claims, liens and
encumbrances (whether absolute, accrued, contingent or otherwise),
except those specifically assumed by Key Technology by an Assumption
Agreement dated as of even date herewith;
(ii) will warrant and defend the contribution of the
Contributed Assets against each and every person or persons claiming or
who claims against any or all of the same; and
(iii) will take all steps necessary to put Key Technology, its
successors or assigns, in actual possession and operating control of
the Contributed Assets.
Key hereby covenants that it shall, from time to time, make,
acknowledge, execute and deliver, or cause to be made, acknowledged, executed
and delivered, such instruments, acts, consents, deeds, transfers, assignments,
powers and assurances as Key Technology may reasonably require to more
effectively convey, transfer, assign, grant and vest in and to Key
3
<PAGE> 4
Technology and to put Key Technology in possession of any of the Contributed
Assets being contributed, conveyed, assigned, granted, transferred and delivered
hereunder.
This Agreement shall be binding upon, inure to the benefit of and be
enforceable by, Key and Key Technology and their respective successors and
assigns.
4
<PAGE> 5
IN WITNESS WHEREOF, the duly authorized officers of Key have executed
this General Assignment and Contribution Agreement on behalf of Key, intending
to be legally bound on the date first written above.
KEY PLASTICS, INC.,
a Michigan corporation
By: /s/ Mark J. Abbo
------------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant
Secretary
Accepted and Agreed:
KEY PLASTICS TECHNOLOGY, L.L.C.,
a Michigan limited liability company
By: Key Plastics, Inc.
Title: Member
By: /s/ Mark J. Abbo
--------------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
5
<PAGE> 1
EXHIBIT 10.9
ASSUMPTION AGREEMENT
This Assumption Agreement is made as of February 9, 1998 by and between
Key Plastics, Inc., a Michigan corporation, and Key Plastics Technology, L.L.C.,
a Michigan limited liability company and majority-owned subsidiary of Key ("Key
Technology").
WITNESSETH:
WHEREAS, Key and Key Technology have concurrently herewith executed a
Contribution and Assignment Agreement (the "Contribution Agreement") under which
Key undertook to contribute, grant, assign, transfer, convey and deliver unto
Key Technology all of its assets, properties, goodwill, business as a going
concern, rights, privileges, claims, patents and licenses owned, leased or used
by Key, except as otherwise expressly provided therein; and
WHEREAS, Key Technology desires to perform, pay or discharge all of
Key's liabilities, other than the Excluded Liabilities (as defined herein);
NOW, THEREFORE, Key Technology hereby agrees as follows:
1. Subject to the limitations contained herein, Key Technology hereby
undertakes, assumes and agrees to perform, pay or discharge, to the extent not
heretofore performed, paid or discharged, Key's obligations and duties, whether
known or unknown, fixed or contingent, including, without limitation, the
following:
(a) Liabilities and obligations of Key under contracts, leases
and other obligations in effect on the date hereof.
(b) Liabilities and obligations of Key arising in the normal
course of business existing on the date hereof.
(c) Liabilities of Key under litigation in existence on the
date hereof.
(d) Claims asserted against Key on or prior to the date hereof
but not in litigation.
(e) Claims asserted against Key after the date hereof and
arising out of events occurring on or prior thereto (including, but not limited
to products manufactured or sold, or services rendered, by Key on or prior to
the date hereof).
(f) Claims arising out of any default by Key prior to the date
hereof.
(g) All liabilities for sales, use and similar taxes, if any,
arising out of the contribution of assets pursuant to the Contribution
Agreement.
<PAGE> 2
2. Anything in the preceding paragraph 1 to the contrary
notwithstanding, it is expressly understood that Key Technology is not assuming,
or agreeing to perform, pay or discharge the following liabilities, which are
referred to herein as the "Excluded Liabilities":
(a) Any liabilities or obligations of Key with respect to any
transaction or event occurring after the date hereof.
(b) Any liabilities for any claims or losses to the extent
covered by insurance carriers by Key or for Key's benefit.
(c) Any liabilities or obligations of Key relating to any
Employee Plans in existence on the date hereof, including, without limitation
any liabilities arising out of the nonqualification, if any, of any Employee
Plans prior to the date hereof. "Employee Plans" shall mean all plans,
contracts, programs and arrangements with respect to employees engaged in the
Business, including, but not limited to, employment agreements, union contracts
and supplemental agreements, pensions, profit sharing arrangements, bonuses,
deferred compensation, retirement, stock option, restricted stock, phantom
stock, disability, death benefit, severance, medical and hospitalization,
insurance, vacation, dependent care, salary continuation, and other employee
benefit plans, programs or arrangements, now or at any time maintained by Key or
under which Key has or had any obligation in respect of any employee of Key.
3. Nothing contained herein shall require Key Technology to pay,
perform or discharge any liabilities or obligations expressly assumed hereunder
so long as Key Technology shall in good faith contest or cause to be contested
the amount or validity thereof, and Key shall, to the best of its ability but at
Key Technology's expense, assist Key Technology in so contesting such claims.
4. Other than as specifically set forth above, Key Technology assumes
no liabilities or obligations of Key of any kind, character or description by
this Assumption Agreement.
5. This Assumption Agreement is made solely for the benefit of Key and
its permitted successors and assigns, and not for the benefit of any third party
or parties.
6. This Assumption Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Assumption Agreement to be
executed on the day and year first written above.
KEY PLASTICS TECHNOLOGY, L.L.C.
a Michigan limited liability company
By: Key Plastics, Inc.
Title: Member
By: /s/ Mark J. Abbo
--------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
KEY PLASTICS, INC.,
a Michigan corporation
By: /s/ Mark J. Abbo
--------------------
Name: Mark J. Abbo
Title: Treasurer and Assistant Secretary
3
<PAGE> 1
Exhibit 10.10
EXECUTION COPY
================================================================================
EQUITYHOLDERS AGREEMENT
Dated as of February 9, 1998
By and Among
KEY PLASTICS, INC.,
KEY PLASTICS TECHNOLOGY, L.L.C.
PARIBAS PRINCIPAL INCORPORATED
and
THE OTHER SHAREHOLDERS SIGNATORY HERETO
================================================================================
* A portion of this document has been redacted pursuant to
a request for confidential treatment pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended, to the Securities and
Exchange Commission (the "SEC"). An unredacted version of this
document has been filed separately with the SEC.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE I CERTAIN DEFINITIONS............................................................... 2
SS. 1.1 Certain Definitions............................................................... 2
ARTICLE II TRANSFER OF SHARES................................................................ 6
SS. 2.1 Restrictions...................................................................... 6
SS. 2.2 Permitted Transfers............................................................... 7
SS. 2.3 Sales by Equityholders Subject to Tag-Along Rights................................ 9
SS. 2.4 Grant to Plastics of Bring-Along Rights........................................... 12
SS. 2.5 Right of First Refusal............................................................ 13
SS. 2.6 Grant of Preemptive Rights to Equityholders....................................... 15
*
ARTICLE III CORPORATE GOVERNANCE.............................................................. 17
SS. 3.1 Board of Directors of Plastics.................................................... 17
SS. 3.2 Management Committee of the Company............................................... 17
SS. 3.3 Election.......................................................................... 17
ARTICLE IV MISCELLANEOUS..................................................................... 17
SS. 4.1 Entire Agreement.................................................................. 17
SS. 4.2 Captions.......................................................................... 17
SS. 4.3 Counterparts...................................................................... 17
SS. 4.4 Notices........................................................................... 18
SS. 4.5 Successors and Assigns............................................................ 19
SS. 4.6 GOVERNING LAW..................................................................... 19
SS. 4.7 Arbitration....................................................................... 19
SS. 4.8 Benefits Only to Parties.......................................................... 20
SS. 4.9 Termination; Survival of Benefits................................................. 20
SS. 4.10 Publicity......................................................................... 20
SS. 4.11 Confidentiality................................................................... 20
SS. 4.12 Expenses.......................................................................... 21
SS. 4.13 Amendments; Waivers............................................................... 21
SS. 4.14 Severability...................................................................... 21
SCHEDULE 1.0 The Shareholders
EXHIBIT A Form of Shareholder's Consent
</TABLE>
* A portion of this document has been redacted at this point pursuant to a
request for confidential treatment filed with the SEC. An unredacted
version of this document has been filed separately with the SEC.
(i)
<PAGE> 3
EQUITYHOLDERS AGREEMENT
EQUITYHOLDERS AGREEMENT (as amended from time to time, this
"Agreement"), dated as of February 9, 1998, by and among Key Plastics
Technology, L.L.C., a Michigan limited liability company (the "Company"), Key
Plastics, Inc., a Michigan corporation ("Plastics"), David C. Benoit ("Benoit"),
Joel D. Tauber ("Tauber") and George Mars ("Mars" and together with Benoit and
Tauber, the "Shareholders") and Paribas Principal Incorporated, a New York
corporation (together with its Permitted Transferees, "PPI").
W I T N E S S E T H :
WHEREAS, Benoit owns 79,833 shares of Common Stock, Tauber owns 90,828
shares of Common Stock and Mars owns 62,065 shares of Common Stock of Plastics;
WHEREAS, Plastics and the Company have entered into (i) a Contribution
and Assignment Agreement and (ii) an Assumption Agreement, each dated as of
February 9, 1998 (collectively, the "Contribution Agreement" and together with
any bills of sale, assignments, licenses, leases and other agreements executed
in connection therewith, the "Contribution Documents") whereby Plastics has
transferred all of its assets (other than the "Excluded Assets" as defined in
the Contribution Agreement) and liabilities to the Company as a capital
contribution in the Company;
WHEREAS, the Company, Plastics and PPI have entered into a Securities
Purchase Agreement (as amended from time to time, the "Securities Purchase
Agreement"), dated as of February 9, 1998, pursuant to which, on the date
hereof, PPI shall purchase from the Company and the Company shall issue a
Membership Interest in the Company which initially represents a 25% Membership
Percentage;
WHEREAS, the Company and each of Plastics and PPI, as members have
entered into an Operating Agreement relating to the operation of the Company (as
amended from time to time, the "Operating Agreement").
WHEREAS, the Company, Plastics, PPI and the Shareholders each desire
to enter into this Agreement, INTER ALIA, to regulate and limit certain rights
in connection with the Equity Securities and to limit the sale, assignment,
transfer, encumbrance or other disposition of such Equity Securities as set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
<PAGE> 4
ARTICLE I
CERTAIN DEFINITIONS
ss. 1.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with, such Person; provided, however, that, an Affiliate shall include
any entity that directly or indirectly (including through limited partner or
general partner interests) owns more than 5% of any class of the equity of any
other entity.
"Agreement" shall have the meaning set forth in the first paragraph of
this Agreement.
"Banker Proposal" shall have the meaning set forth in Section 2.7 of
this Agreement.
"Benoit" shall have the meaning set forth in the first paragraph of
this Agreement.
"Board" shall mean the Board of Directors of Plastics.
"Business Day" shall mean any day except a Saturday, a Sunday or other
day on which commercial banks are required or authorized to close in New York,
New York.
"Common Stock" shall mean the Common Stock of Plastics, par value
$0.30 per share.
"Company" shall have the meaning set forth in the first paragraph of
this Agreement.
"Company Proposal" shall have the meaning set forth in Section 2.7 of
this Agreement.
"Contribution Agreement" shall have the meaning set forth in the
recitals of this Agreement.
"Contribution Documents" shall have the meaning set forth in the
recitals of this Agreement.
"Equityholder" shall mean each Member and each Shareholder.
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<PAGE> 5
"Equity Securities" shall mean Membership Interests or Common Stock.
"Initiating Shareholder" shall have the meaning set forth in
Section 2.3(I) (a) of this Agreement.
"Interest Transfer Notice" shall have the meaning set forth in Section
2.3(II)(a) of this Agreement.
"Issuer" shall have the meaning set forth in Section 2.6 of this
Agreement.
*
"Management Committee" shall have the meaning set forth in the
Operating Agreement.
"Mars" shall have the meaning set forth in the first paragraph of this
Agreement.
"Member" shall mean any Person who holds a Membership Interest in the
Company.
"Membership Interest" shall mean, with respect to each Member, such
Member's interest in the Company which represents the Membership Percentage in
the Company of such Member.
"Membership Percentage" shall have the meaning set forth in the
Operating Agreement.
"New Securities" shall mean Common Stock or Membership Interests of
any class and any other equity securities of the Company or Plastics which are
not limited to a fixed sum or a fixed percentage of par value in respect of
participation in dividends and distributions
* A portion of this document has been redacted at this point
pursuant to a request for confidential treatment filed with the SEC.
An unredacted version of this document has been filed separately with
the SEC.
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<PAGE> 6
in liquidation, whether authorized now or in the future, and any rights, options
or warrants to purchase any such common stock ("Options"), and securities
(including, without limitation, debt obligations) of any type whatsoever, that
are, or may become, convertible into or exchangeable for any such common stock,
Membership Interests or Options; provided that "New Securities" shall not
include (i) shares sold pursuant to a public offering pursuant to an effective
registration statement filed under the Securities Act or (ii) shares of Common
Stock or Membership Interests issued to employees of Plastics or the Company in
an aggregate amount, not to exceed, collectively beginning immediately after the
effectiveness of this Agreement, 3% of the Membership Interests outstanding
immediately after giving effect to this Agreement, or Options exercisable into
such shares of Common Stock or Membership Interests. For the purposes of the 3%
limitation contained in item (ii) of the preceding sentence, each issuance of
shares of Common Stock shall be deemed to be an issuance of Membership Interests
with a percentage equal to the product of (A) the number of shares of Common
Stock so issued divided by the total number of Shares outstanding on the date
hereof multiplied by (B) the Membership Percentage of the Membership Interest
owned by Plastics on the date hereof.
"Offering Equityholder" shall have the meaning set forth in
Section 2.5 of this Agreement.
"Operating Agreement" shall have the meaning set forth in the recitals
of this Agreement.
"Options" shall have the meaning set forth in the definition of New
Securities.
"Permitted Transfer" shall have the meaning set forth in
Section 2.2(a) of this Agreement.
"Permitted Transferee" shall have the meaning set forth in
Section 2.2(a) of this Agreement.
"Person" shall mean and include natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Plastics" shall have the meaning set forth in the first paragraph of
this Agreement.
"Plastics Offer" shall have the meaning set forth in
Section 2.5(a)(II) of this Agreement.
"Plastics Offer Notice" shall have the meaning set forth in Section
2.5(a)(II) of this Agreement.
"PPI" shall have the meaning set forth in the first paragraph of this
Agreement.
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<PAGE> 7
"PPI Offer" shall have the meaning set forth in Section 2.5(a)(I) of
this Agreement.
"PPI Offer Notice" shall have the meaning set forth in
Section 2.5(a)(I) of this Agreement.
"Preemptive Notice" shall have the meaning set forth in Section 2.6 of
this Agreement.
"Preemptive Price" shall mean the price equal to the fair market value
of the New Securities as determined in good faith by (i) the Board, in the case
of an issuance by Plastics and (ii) by the Management Committee, in the case of
an issuance by the Company.
"Pro Rata Amount" shall mean, (i) with respect to any calculation
relating to the relative ownership of Plastics, for each Shareholder and each
transaction, the quotient obtained by dividing (A) the number of shares of
Common Stock held by such Shareholder by (B) the aggregate number of shares of
Common Stock held by all Shareholders who are participating in such transaction;
and (ii) with respect to any calculation relating to the relative ownership of
the Company, for each Member and each transaction, the quotient obtained by
dividing (A) the Membership Percentage held by such Member by (B) the aggregate
Membership Percentages held by all Members who are participating in such
transaction.
"Qualified Public Offering" shall mean a widely distributed sale of
securities issued in exchange for Membership Interests pursuant to an
underwritten public offering pursuant to an effective registration statement
filed with the SEC pursuant to the Securities Act which yields net proceeds to
the Company in cash equal to 20% of the total equity value of the Company
calculated by using the initial public offering price.
"Regulated Holder" shall mean any Equityholder which is subject to the
provisions of Regulation Y or the SBIA or which is an Affiliate of any entity
subject to the provisions of Regulation Y or the SBIA.
"Regulation Y" shall mean Regulation Y promulgated by the Board of
Governors of the Federal Reserve, pursuant to the Bank Holding Company Act of
1956, as amended, or any successor regulation thereto.
"Regulatory Problem" shall mean, with respect to any Equityholder, any
set of facts, events or circumstances the existence of which would cause such
Equityholder to believe that there is a substantial risk of assertion by a
governmental entity (which belief shall be reasonable in light of the prevailing
regulatory environment) that such Equityholder is or would be in violation of
any law, regulation, rule or other requirement of any governmental authority
(including without limitation, the SBIA).
"Sale of the Business" shall mean any transaction or series of
transactions (whether structured as a stock sale, merger, consolidation,
reorganization, asset sale or other-
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<PAGE> 8
wise), which results in the sale or transfer of all the assets of the Company
and its Subsidiaries or 100% of the Membership Interests of the Company to an
unaffiliated bona fide third party in which all consideration (i) payable to
holders of Membership Interests is distributed PRO RATA pursuant to equity
ownership and (ii) which is payable to PPI in cash or other consideration
satisfactory to PPI.
"SBIA" shall mean the Small Business Investment Act of 1958, as
amended, and the regulations promulgated thereunder.
"SEC" shall mean, at any time, the Securities and Exchange Commission
or any other federal agency at such time administering the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Securities Purchase Agreement" shall have the meaning set forth in
the recitals of this Agreement.
"Share Transfer Notice" shall have the meaning set forth in Section
2.3(I)(a) of this Agreement.
"Shareholder" shall have the meaning set forth in the first paragraph
of this Agreement.
"Tauber" shall have the meaning set forth in the first paragraph of
this Agreement.
"Transfer" shall have the meaning set forth in Section 2.1(a) of this
Agreement.
ARTICLE II
TRANSFER OF SHARES
ss. 2.1 RESTRICTIONS. (a) No Equityholder shall sell, assign, pledge,
or in any manner, transfer any Equity Securities or any right or interest
therein, to any Person (each such action, a "Transfer") except for Permitted
Transfers.
(b) From and after the date hereof, all certificates representing
shares of Common Stock held by any Stockholder shall bear a legend which shall
state as follows:
The shares represented by this certificate are subject to certain
restrictions against transfer set forth in an Equityholders Agreement,
dated as of February 9, 1998, as may be amended from time to time. A copy
of such Equityholders Agreement has been filed in the chief executive
office of the Company in the
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<PAGE> 9
State of Michigan, where the same may be inspected daily during business
hours.
(c) In addition to the legend required by Section 2.1(b) above, all
certificates representing shares of Common Stock held by any of the Stockholders
shall bear a legend which shall state as follows:
The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and such
shares may not be offered, sold, pledged or otherwise transferred except
(1) pursuant to an exemption from, or in a transaction not subject to, the
registration requirements under the Securities Act or (2) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any State of the United
States.
(d) Promptly upon the execution and delivery of this Agreement, each
Stockholder currently holding shares of Common Stock shall deliver to the
Secretary of Plastics all certificates then held by such Stockholder
representing such shares of Common Stock which do not have such legends affixed
thereto as are required by this Section 2.1. Plastics shall cause such legends
to be affixed promptly to each of such certificates and such certificates to be
returned promptly to the registered holder thereof.
(e) The Company and Plastics, agree that it will not cause or permit
the Transfer of any Equity Securities to be made on its books unless the
Transfer is permitted by this Agreement and has been made in accordance with the
terms hereof.
(f) Each Equityholder agrees that it will not effect any Transfer of
Equity Securities unless such Transfer is made (i) pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption from
the registration requirements of the Securities Act and (ii) in accordance with
any applicable securities laws of any State of the United States.
ss. 2.2 PERMITTED TRANSFERS. (a) Notwithstanding anything to the
contrary contained herein, an Equityholder may at any time effect any of the
following Transfers (each a "Permitted Transfer", and each transferee of such
Equityholder in respect of such Transfer, a "Permitted Transferee"):
(i) Any Transfer of any or all Common Stock owned by a
Shareholder following such Shareholder's death by will or intestacy to such
Shareholder's legal representative, heir or legatee;
(ii) Any Transfer of any or all Common Stock owned by a
Shareholder as a gift or gifts during such Shareholder's lifetime to such
Shareholder's spouse, children, sibling, grandchildren or a trust or other legal
entity for the benefit of such Shareholder or any of the foregoing;
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<PAGE> 10
(iii) Any Transfer by Mars to any Person;
(iv) Any Transfer by PPI (I) made pursuant to
Section 2.2(b), (II) to Companie Financiere de Paribas or any subsidiary of
Compagnie Financiere de Paribas and (III) to an employee of PPI;
(v) Any Transfer by any Equityholder which is made in
accordance with Sections 2.3, 2.4, 2.5 or 2.7;
(vi) Any Transfer by an Equityholder which is made pursuant
to Article VII of the Securities Purchase Agreement; and
(vii) Any Transfer made by Benoit or Tauber of Shares of
Common Stock to an employee of the Company or Plastics with respect to shares of
Common Stock or Membership Interests purchased by Benoit or Tauber, as the case
may be, from employees of the Company or Plastics.
(b) Notwithstanding any other provision of this Agreement to the
contrary, in the event that PPI or any of its Affiliates shall determine that if
PPI or such Affiliate, shall continue to hold some or all of the Equity
Securities or any other securities of the Company or Plastics held by it, there
is a material risk that such ownership will result in the violation of any
statute, regulation or rule of any governmental authority (including, without
limitation, Regulation Y) or the cost of continuing to hold such securities has,
in the reasonable judgment of PPI or such Affiliate, significantly increased
based on a statute, regulation or rule of any governmental authority or any
change thereof, PPI or such Affiliate, may sell, exchange or otherwise dispose
of such securities or other securities, in as prompt and orderly a manner as is
reasonably necessary. In connection with the foregoing, in the event that PPI
determines to sell its Membership Interest in accordance with the foregoing, the
Company and PPI shall negotiate in good faith for a period of 30 days with the
intent of determining a fair price at which the Company shall purchase the
Membership Interest required to be sold and in the event that no agreement can
be reached or the Company otherwise does not purchase such Membership Interests
within such 30 day period, the Company and Plastics shall cooperate with PPI or
such Affiliate in, at PPI's election, (i) disposing of such securities to a
third party (other than a third party which is a direct competitor of the
Company) or (ii) exchanging all or any portion of such voting securities on a
share-for-share basis for shares of a non-voting security of the Company or
Plastics (such non-voting security to be identical in all respects to such
voting securities or other securities, except that they shall be non-voting and
shall be convertible or exercisable into voting securities on such conditions as
are requested by PPI in light of the regulatory considerations prevailing).
Without limiting the foregoing, at the reasonable request of PPI or such
Affiliate, the Company or Plastics shall provide (and authorize PPI or such
Affiliate, to provide) financial and other information concerning the Company
and Plastics to any prospective purchaser of such securities owned by PPI or
such Affiliate, and shall amend this Agreement, the articles of organization of
the Company or Plastics, the operating agreement of the Company, and any related
agreements and instruments and shall take such additional actions in order to
effectuate and reflect the foregoing. Neither the Company nor Plastics shall
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<PAGE> 11
be required to provide any such information unless the recipient thereof signs a
confidentiality agreement reasonably satisfactory to Plastics.
(c) In any such Transfer referred to above in Section 2.2(a) (other
than pursuant to Section 2.2(a)(vi) of this Agreement), the Permitted Transferee
shall agree in writing to be bound by all the provisions of this Agreement and
shall execute and deliver to each of the Company, Plastics and PPI a counterpart
to this Agreement. Each Permitted Transferee shall hold such Equity Securities
subject to the provisions of this Agreement and shall be deemed to be a
"Shareholder" hereunder if such Permitted Transferee receives Common Stock and
shall be deemed to be a "Member" if such Permitted Transferee receives a
Membership Interest, as if such Permitted Transferee were an original signatory
hereto and shall be deemed to be a party to this Agreement.
ss. 2.3 SALES BY EQUITYHOLDERS SUBJECT TO TAG-ALONG RIGHTS. (I) (a)
In the event that Benoit or Tauber (either Benoit or Tauber, the "Initiating
Shareholder") proposes to effect a Transfer (other than a Permitted Transfer
described in Section 2.2(a)(i), 2.2(a)(ii), 2.2(a)(vi) or 2.2(a)(vii), or
pursuant to Section 2.7 hereof) then such Initiating Shareholder shall promptly
give written notice (the "Share Transfer Notice") to PPI at least thirty (30)
days prior to the closing of such Transfer. The Share Transfer Notice shall
describe in reasonable detail the proposed Transfer including, without
limitation, the name of, the type and the number of shares of Common Stock to be
purchased by, the transferee, the purchase price of each share of Common Stock
to be sold, any other significant terms of such sale and the date such proposed
sale is expected to be consummated.
(b) PPI shall have the right, exercisable upon delivery of an
irrevocable written notice to the Initiating Shareholder within twenty (20) days
after receipt of the Share Transfer Notice, to participate in such proposed sale
on the same terms and conditions as set forth in the Share Transfer Notice;
PROVIDED HOWEVER, that PPI shall not be required to make representations and
warranties other than relating to its authority to give effect to such
transaction and its title to its Membership Interest and PPI shall not be
required to provide any indemnity in connection with any such Transfer, unless
all sellers in such Transfer provide such an indemnity, and in the event that
all sellers are required to provide an indemnity in connection with such
Transfer, PPI shall not be liable for more than the lesser of (A) its pro rata
share of such indemnification payments (based upon the total consideration
received by PPI divided by the total consideration received by all sellers in
such Transfer) and (B) the net proceeds actually received by PPI as
consideration for its Membership Interest in such Transfer. PPI shall have the
right to sell all or any portion of the Membership Interest owned by it as
determined in accordance with the calculation set forth below. If PPI elects to
participate in the sale described in the Share Transfer Notice it shall indicate
in its notice of election to the Initiating Shareholder the maximum Membership
Percentage it desires to sell in such sale. PPI shall be entitled to sell a "pro
rata portion" of such maximum percentage. For purposes of this Section 2.3(I),
"pro rata portion" shall mean a fraction, the numerator of which is the total
number of shares of Common Stock the Initiating Shareholder proposed to be sold
in the Share Transfer Notice and the denominator of which is the total number of
shares of Common Stock held by Benoit and Tauber immediately prior to the sale
proposed in the Share Transfer Notice. In the event the
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<PAGE> 12
transferee named in the Share Transfer Notice is not willing to purchase all of
the shares of Common Stock and Membership Interests proposed to be sold by the
Initiating Shareholder and PPI pursuant to this paragraph, then the number of
shares of Common Stock and Membership Interests to be sold by each of the
Shareholders and PPI shall be equitably and proportionately reduced.
(c) PPI shall effect its participation in the sale by delivering
on the date scheduled for such sale to the Initiating Shareholder for delivery
to the prospective transferee one or more certificates or other evidence of
transfer, in proper form for transfer, which represent the Membership Interest
which PPI is entitled to sell in accordance with Section 2.3(I)(b). Such
certificate, certificates or other evidence of transfer that PPI delivers to the
Initiating Shareholder shall be delivered on such date to such transferee in
consummation of the sale of the Equity Securities pursuant to the terms and
conditions specified in the Share Transfer Notice, and the Initiating
Shareholder shall concurrently therewith remit to PPI that portion of the sale
proceeds to which PPI is entitled by reason of its participation in such sale.
The Initiating Shareholder's sale of the Equity Securities in any sale proposed
in a Share Transfer Notice shall be effected on substantially the terms and
conditions set forth in such Share Transfer Notice.
(d) The exercise or non-exercise of the rights of PPI hereunder
to participate in one or more sales of the Equity Securities made by the
Initiating Shareholder shall not adversely affect its rights to participate in
subsequent sales of Equity Securities subject to this Section 2.3(I).
(e) Notwithstanding anything to the contrary herein, the
provisions of this Section 2.3(I) will not apply to any Transfer which (i) in
the case of a Transfer by Benoit or any of his Permitted Transferees holding
shares of Common Stock pursuant to a Transfer effected pursuant to Section
2.2(a)(i) or (ii), when aggregated with all other Transfers of shares of Common
Stock by Benoit and such Permitted Transferees, excluding Transfers effected by
Benoit to such Permitted Transferees after the date hereof and excluding
Transfers effected pursuant to Section 2.2(a)(vi), includes not more than 3,992
shares of Common Stock (as such number may be adjusted for stock splits, reverse
stock splits and stock dividends), (ii) in the case of Tauber or any of his
Permitted Transferees holding shares of Common Stock pursuant to a Transfer
effected pursuant to Section 2.2(a)(i) or (ii), when aggregated with all other
Transfers of shares of Common Stock by Tauber and such Permitted Transferees,
excluding Transfers effected by Tauber to such Permitted Transferees after the
date hereof and excluding Transfers effected pursuant to Section 2.2(a)(vi),
includes not more than 9,083 shares of Common Stock (as such number may be
adjusted for stock splits, reverse stock splits and stock dividends). In no
event may Benoit and his Permitted Transferees holding shares of Common Stock
pursuant to a Transfer effected pursuant to Section 2.2(a)(i) or (ii) effect
Transfers of more than 7,983 shares of Common Stock (as such number may be
adjusted for stock splits, reverse stock splits and stock dividends) held by him
on the date hereof other than pursuant to Section 2.2(a)(i), (ii) or (vi). For
the purposes of the limitations contained in this Section 2.3(e), each sale of
Membership Interests by Plastics shall be deemed to be a sale by Benoit and
Tauber of a number of shares of Common Stock equal to the product of (A) the
number of
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<PAGE> 13
shares of Common Stock owned by Benoit or Tauber, as the case may be, at the
time of such sale, multiplied by (B) a fraction, the numerator of which is the
number of shares of Common Stock owned by Benoit or Tauber, as the case may be,
at the time of such sale and the denominator of which is the total number of
shares of Common Stock then outstanding, and multiplied by (C) a fraction, the
numerator of which is the Membership Percentage represented by the Membership
Interest sold by Plastics and the denominator of which is the Membership
Percentage represented by the total Membership Interest owned by Plastics
immediately prior to such sale.
(f) Neither Plastics nor any of its Affiliates or Shareholders
will receive any economic benefits (including without limitation any management,
advisory or closing fees) in connection with any Transfer made pursuant to this
Section 2.3(I) unless PPI receives its pro rata share of such economic benefits
(based upon the total consideration received by PPI divided by the total
consideration received by all sellers in such Transfer). PPI shall receive the
same amount and type of consideration as each Shareholder in connection with a
Transfer subject to this Section 2.3(I) and in each case, on the same terms and
conditions. PPI will receive an amount per percentage unit sold which is equal
to the amount received per percentage unit sold indirectly by the Initiating
Shareholder with respect to the shares of Common Stock sold.
(II) (a) In the event that Plastics proposes to effect a Transfer
(other than pursuant to Section 2.4) then Plastics shall promptly give written
notice (the "Interest Transfer Notice") to PPI at least twenty (20) days prior
to the closing of such Transfer. The Interest Transfer Notice shall describe in
reasonable detail the proposed Transfer including, without limitation, the name
of, the type and the number of Equity Securities to be purchased by, the
transferee, the purchase price of each such Equity Interest to be sold, any
other significant terms of such sale and the date such proposed sale is expected
to be consummated.
(b) PPI shall have the right, exercisable upon delivery of an
irrevocable written notice to Plastics within ten (10) days after receipt of the
Interest Transfer Notice, to participate in such proposed sale on the same terms
and conditions as set forth in the Interest Transfer Notice; PROVIDED HOWEVER,
that PPI shall not be required to make representations and warranties other than
relating to its authority to give effect to such transaction and its title to
its Membership Interest and PPI shall not be required to provide any indemnity
in connection with any such Transfer, unless all sellers in such Transfer
provide such indemnity, and in the event that all sellers are required to
provide an indemnity in connection with such Transfer, PPI shall not be liable
for more than the lesser of (A) its pro rata share of such indemnification
payments (based upon the total consideration received by PPI divided by the
total consideration received by all sellers in such Transfer) and (B) the net
proceeds actually received by PPI as consideration for its Membership Interest
in such Transfer. PPI shall have the right to sell all or any portion of the
Membership Interest owned by it as determined in accordance with the calculation
set forth below. If PPI elects to participate in the sale described in the
Interest Transfer Notice it shall indicate in its notice of election to Plastics
the maximum Membership Percentage it desires to sell in such sale. PPI shall be
entitled to sell a "pro rata portion" of such maximum percentage. For purposes
of this Section 2.3(II), "pro rata portion" shall mean, a fraction, the
numerator of which is the total Membership Percentage proposed to be sold by
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<PAGE> 14
Plastics in the Interest Transfer Notice and the denominator of which is the
total Membership Percentage owned by Plastics immediately prior to the sale
proposed in the Interest Transfer Notice. In the event the transferee named in
the Interest Transfer Notice is not willing to purchase all of the Membership
Interest proposed to be sold by Plastics and PPI pursuant to this paragraph,
then the Membership Interest to be sold by each of Plastics and PPI shall be
proportionately reduced.
(c) PPI shall effect its participation in the sale by delivering on
the date scheduled for such sale to Plastics for delivery to the prospective
transferee one or more certificates or other evidence of ownership, in proper
form for transfer, which represent the Membership Interest which PPI is entitled
to sell in accordance with Section 2.3(II)(b). Such certificate, certificates or
other evidence of Transfer that PPI delivers to Plastics shall be delivered on
such date to such transferee in consummation of the sale of the Equity
Securities pursuant to the terms and conditions specified in the Interest
Transfer Notice, and Plastics shall concurrently therewith remit to PPI that
portion of the sale proceeds to which PPI is entitled by reason of its
participation in such sale. Plastics's sale of the Equity Securities in any sale
proposed in a Interest Transfer Notice shall be effected on substantially the
terms and conditions set forth in such Interest Transfer Notice.
(d) The exercise or non-exercise of the rights of PPI hereunder to
participate in one or more sales of the Equity Securities made by Plastics shall
not adversely affect its rights to participate in subsequent sales of Equity
Securities subject to this Section 2.3(II).
(e) Neither Plastics nor any of its Affiliates or Shareholders will
receive any economic benefits (including without limitation any management,
advisory or closing fees) in connection with any Transfer made pursuant this
Section 2.3(II) unless PPI receives its pro rata share of such economic benefits
(based on the total consideration received by PPI divided by the total
consideration received by all sellers in such Transfer). PPI shall receive the
same amount and type of consideration as Plastics in connection with a Transfer
subject to this Section 2.3(II) and in each case, on the same terms and
conditions. PPI will receive an amount per percentage unit sold which is equal
to the amount received per percentage unit sold by Plastics.
ss. 2.4 GRANT TO PLASTICS OF BRING-ALONG RIGHTS. (a) At the request
of Plastics, PPI agrees to vote all of its Membership Interest and shall sell
all of its Membership Interest, in each case as directed by Plastics, in
connection with and for the purpose of approving a Sale of the Business, to a
bona fide third party who is not an Affiliate of Plastics, the Company or any of
the Shareholders. Each time Members meet, or act by written consent in lieu of
meeting, for the purpose of approving a Sale of the Business, PPI agrees to vote
all of its Equity Securities, and if such Sale of the Business is structured as
a stock sale, to sell all (but not less than all) of its Equity Securities, as
directed by Plastics.
(b) In furtherance of its covenants in Section 2.4(a) and subject to
Section 2.4(c), PPI hereby agrees to cooperate fully with Plastics and the
purchaser in any such Sale
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of the Business and to execute and deliver such documents (including purchase
agreements) and instruments reasonably necessary to effect such Sale of the
Business. If any proceeds of any Sale of the Business are received or maintained
by the Company, then the Company, simultaneously with the consummation of such
Sale of the Business, will distribute such assets to the Members based on the
Membership Percentages of such Members.
(c) Notwithstanding anything to the contrary contained herein, PPI
shall not be required to comply with the obligations set forth in this Section
2.4 unless the following conditions are satisfied: (i) upon the consummation of
the Sale of Business, PPI will receive its Pro Rata Amount of the aggregate
gross consideration paid by the purchaser to the Members in connection with any
Sale of the Business, (ii) PPI shall not be required to accept any consideration
other than cash or other consideration reasonably acceptable to PPI and in no
event shall PPI be required to accept any consideration that would cause it to
have a Regulatory Problem, (iii) PPI shall only be required to make
representations and warranties relating to its authority to give effect to such
transaction and its title to its Membership Interest, (iv) PPI shall not be
required to provide an indemnity in connection with any Sale of Business, unless
all sellers in such Sale of the Business provide such indemnity, and in the
event that all sellers are required to provide an indemnity in connection with
the Sale of the Business, PPI shall not be liable for more than the lesser of
(A) its PRO RATA share of such indemnification payments (based upon the total
consideration received by PPI divided by the total consideration received by all
sellers in such Sale of the Business) and (B) the net proceeds actually received
by PPI as consideration for its Membership Interest in such Sale of the
Business, (v) neither Plastics nor any of its Affiliates or Shareholders will
receive any economic benefits (including without limitation any management,
advisory or closing fees) which are not made available in a PRO RATA basis to
PPI, (vi) if such Sale of the Business would entitle PPI to a price per
percentage unit which is less than the price per percentage unit paid by PPI
pursuant to the Securities Purchase Agreement, PPI shall not be required to
participate in such Sale of the Business unless it receives a fairness opinion
from an investment bank selected by PPI as to the fairness of the Sale of the
Business to PPI, (vii) PPI shall receive the same amount and type of
consideration on a unit-for-unit basis as each other Member in connection with
any Sale of the Business and in each case, on the same terms and conditions and
(viii) PPI shall not be required to make any out of pocket expenses in
connection with any Sale of the Business.
ss. 2.5 RIGHT OF FIRST REFUSAL. (a)(I) Prior to Benoit, Tauber or
Plastics (the "Offering Equityholder") effecting any Transfer (excluding a
Permitted Transfer pursuant to Section 2.3), other than a Permitted Transfer,
the Offering Shareholder shall deliver to PPI a notice (which may be the same
notice as the Share Transfer Notice or the Interest Transfer Notice except with
respect to Transfers covered by Section 2.3(I)(e), the "PPI Offer Notice") which
shall offer to sell such Equity Securities to PPI. The PPI Offer Notice shall
describe in reasonable detail the proposed Transfer including, without
limitation, the amount of interests or shares of Equity Securities to be sold,
the purchase price of each interest or share of Equity Securities to be sold,
the name and the binding commitment to purchase of the proposed transferee and a
summary of any other significant terms of such sale (the "PPI Offer"), it being
understood that if the proposed Transfer is made in connection with a Sale of
the Business or a Qualified Public Offering under Section 2.7, then Section 2.3
and the subsequent provisions
-13-
<PAGE> 16
of this Section 2.5 shall not apply. PPI shall have the right to purchase the
Equity Securities offered to be sold pursuant to the PPI Offer by delivering a
notice to the Offering Equityholder within thirty (30) days from the date of its
delivery, which notice shall state the number of offered Equity Securities
proposed to be purchased by PPI. Notwithstanding the foregoing, with respect to
Transfers by Benoit or Tauber which are subject to Section 2.5(a), the parties
hereto agree that if the Purchaser elects to exercise its rights contained in
this Section 2.5, then at the request of Plastics, in lieu of transferring such
shares of Common Stock to the Purchaser, the Purchaser shall have the right to
purchase an equivalent interest in the Company; PROVIDED HOWEVER, that the
Purchaser shall only be required to accept such other securities to the extent
that the sale of shares of Common Stock to the Purchaser would result in
Plastics losing its "subchapter S" tax status.
(II) Prior to PPI effecting any Transfer, other than a Permitted
Transfer, PPI shall deliver to Plastics a notice, (the "Plastics Offer Notice")
which shall offer to sell such Equity Securities to Plastics. The Plastics Offer
Notice shall describe in reasonable detail the proposed Transfer including,
without limitation, the amount of interests or shares of Equity Securities to be
sold, the purchase price of each interest of Equity Securities to be sold, the
name and the binding commitment to purchase of the proposed transferee and a
summary of any other significant terms of such sale (the "Plastics Offer"), it
being understood that if the proposed Transfer is made in connection with a Sale
of the Business or a Qualified Public Offering under Section 2.7, then Section
2.3 and the subsequent provisions of this Section 2.5 shall not apply. Plastics
shall have the right to purchase the Equity Securities offered to be sold
pursuant to the Plastics Offer by delivering a notice to PPI within thirty (30)
days from the date of its delivery, which notice shall state the number of
offered Equity Securities proposed to be purchased by Plastics.
(b) If PPI, in the case of a Transfer pursuant to Section 2.5(a)(I),
or Plastics, in the case of a Transfer pursuant to Section 2.5(a)(II), does not
elect to purchase all of the Equity Securities offered pursuant to the right of
first refusal provided in Section 2.5(a), the Offering Equityholder shall be
permitted to consummate the sale but only pursuant to the terms set forth in the
PPI Offer Notice or the Plastics Offer Notice, as the case may be, and only
within sixty (60) days of the expiration of the thirty (30) day period set forth
above. Notwithstanding anything to the contrary contained herein, PPI shall not
be entitled to effect a Transfer of any Equity Securities to a Person that is a
direct competitor of Plastics or the Company, without the prior consent of
Plastics.
(c) Notwithstanding anything to the contrary herein, the provisions of
this Section 2.5 will not apply to any Transfer which (i) in the case of a
Transfer by Benoit or any of his Permitted Transferees holding shares of Common
Stock pursuant to a Transfer effected pursuant to Section 2.2(a)(i) or (ii),
when aggregated with all other Transfers of shares of Common Stock by Benoit and
such Permitted Transferees, excluding Transfers effected by Benoit to such
Permitted Transferees after the date hereof and excluding Transfers effected
pursuant to Section 2.2(a)(vi), includes not more than 3,992 shares of Common
Stock (as such number may be adjusted for stock splits, reverse stock splits and
stock dividends), (ii) in the case of Tauber or any of his Permitted Transferees
holding shares of Common Stock pursuant
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<PAGE> 17
to a Transfer effected pursuant to Section 2.2(a)(i) or (ii), when aggregated
with all other Transfers of shares of Common Stock by Tauber and such Permitted
Transferrers, excluding Transfers effected by Tauber to such Permitted
Transferees after the date hereof and excluding Transfers effected pursuant to
Section 2.2(a)(vi), includes not more than 9,083 shares of Common Stock (as such
number may be adjusted for stock splits, reverse stock splits and stock
dividends). In no event may Benoit and his Permitted Transferees holding shares
of Common Stock pursuant to a Transfer effected pursuant to Section 2.2(a)(i) or
(ii) effect Transfers of more than 7,983 shares of Common Stock (as such number
may be adjusted for stock splits, reverse stock splits and stock dividends) held
by him on the date hereof other than pursuant to Section 2.2(a)(i), (ii) or
(vi). For the purposes of the limitations contained in this Section 2.5(c), each
sale of Membership Interests by Plastics shall be deemed to be a sale by Benoit
and Tauber of a number of shares of Common Stock equal to the product of (A) the
number of shares of Common Stock owned by Benoit or Tauber, as the case may be,
at the time of such sale, multiplied by (B) a fraction, the numerator of which
is the number of shares of Common Stock owned by Benoit or Tauber, as the case
may be, at the time of such sale and the denominator of which is the total
number of shares of Common Stock then outstanding, and multiplied by (C) a
fraction, the numerator of which is the Membership Percentage represented by the
Membership Interest sold by Plastics and the denominator of which is the
Membership Percentage represented by the total Membership Interest owned by
Plastics immediately prior to such sale.
ss. 2.6 GRANT OF PREEMPTIVE RIGHTS TO EQUITYHOLDERS. In the event
(and on each occasion) that the Company or Plastics (the "Issuer") shall decide
to undertake an issuance of New Securities, the Issuer will give to PPI in both
cases, and to Plastics, in the case of an issuance by the Company, written
notice (a "Preemptive Notice") of the Issuer's decision, describing the amount,
type and terms of such New Securities, the purchase price to be paid by the
purchasers of such New Securities and the general terms upon which the Issuer
has decided to issue the New Securities (including, without limitation, the
expected timing of such issuance which will in no event be more than ninety (90)
days after the date upon which such Preemptive Notice is given or less than
sixty (60) days after the date upon which such Preemptive Notice is given). PPI
in the case of an issuance by either the Company or Plastics, and Plastics in
the case of an issuance by the Company, shall have twenty (20) days from the
date on which they receive the Preemptive Notice to agree to purchase their Pro
Rata Amount of such New Securities for the Preemptive Price and upon the general
terms specified in the Preemptive Notice by giving written notice to the Issuer
and stating therein the quantity of New Securities to be purchased by any such
Person. If, in connection with such a proposed issuance of New Securities,
Plastics or PPI shall for any reason fail or refuse to give such written notice
to the Issuer within such 10-day period, Plastics or PPI shall, for all purposes
of this Section 2.6, be deemed to have refused (in that particular instance
only) to purchase any of such New Securities and to have waived (in that
particular instance only) all of its rights under this Section 2.6 to purchase
any of such New Securities and the Issuer may issue such New Securities without
further compliance with this Section 2.6 for a period of 30 days beginning
immediately after such 10-day period.
-15-
<PAGE> 18
(a) In the event a Regulated Holder has the right to acquire any
voting New Securities under this Section 2.6, but is prohibited from exercising
such right under applicable law, the Company or Plastics shall, at such
Regulated Holder's request, offer to sell to such Regulated Holder, New
Securities that do not have voting rights but otherwise have the same terms as
such voting New Securities.
*
* A portion of this document has been redacted at this point
pursuant to a request for confidential treatment filed with the SEC.
An unredacted version of this document has been filed separately with
the SEC.
-16-
<PAGE> 19
ARTICLE III
CORPORATE GOVERNANCE
ss. 3.1 BOARD OF DIRECTORS OF PLASTICS. Each Shareholder agrees to
vote all of the shares of Common Stock of Plastics held by such Shareholder and
all other voting securities over which he or it has voting control and will take
all other necessary or desirable action within his or its control (whether in
his or its capacity as a shareholder, director or officer of Plastics, or
otherwise), and Plastics shall take all necessary or desirable action within its
control, in order to elect and maintain a Board in accordance with the
provisions set forth in the bylaws of Plastics, as in effect on the date hereof.
ss. 3.2 MANAGEMENT COMMITTEE OF THE COMPANY. (a) Each Member agrees
to vote all of the Membership Interests held by such Member and all other voting
securities over which it has voting control and will take all other necessary or
desirable action within his or its control (whether in his or its capacity as a
member, manager or officer of the Company or otherwise), and the Company shall
take all necessary or desirable action within its control, in order to elect and
maintain a Management Committee in accordance with the provisions set forth in
the Operating Agreement, as in effect on the date hereof.
ss. 3.3 ELECTION. Promptly upon the execution and delivery of this
Agreement, the Shareholders shall each execute a written shareholders' consent
in the form of EXHIBIT A attached hereto for purposes of electing directors to
the Board.
ss. 3.4 VOTE BY PLASTICS SHAREHOLDERS. The parties hereby agree that
whenever any action is required by Plastics as a member of the Company, such
action shall be taken by a majority of the shareholders of Plastics voting in
accordance with their equity ownership of Plastics.
ARTICLE IV
MISCELLANEOUS
ss. 4.1 ENTIRE AGREEMENT. This Agreement, the Purchase Agreement and
the Operating Agreement contain the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior arrangements
or understandings (whether written or oral) with respect thereto.
ss. 4.2 CAPTIONS. The Article and Section captions used herein are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
ss. 4.3 COUNTERPARTS. For the convenience of the parties, any number
of counterparts of this Agreement may be executed by the parties hereto and each
such executed counterpart shall be deemed to be an original instrument.
-17-
<PAGE> 20
ss. 4.4 NOTICES. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given, made or served, if in writing and
delivered by personal delivery, overnight courier, telecopier or registered or
certified mail, return-receipt requested and postage prepaid addressed as
follows:
If to the Company, to:
Key Plastics Technology, L.L.C.
21333 Haggerty Road
Suite 200
Novi, Michigan 48375
Attention: David C. Benoit
Telephone: (248) 449-6196
Facsimile: (248) 449-6195
If to Plastics, to:
Key Plastics, Inc.
21333 Haggerty Road
Suite 200
Novi, Michigan 48375
Attention: David C. Benoit
Telephone: (248) 449-6196
Facsimile: (248) 449-6195
with a copy to its counsel:
Dykema Gossett PLLC
400 Renaissance Center
Detroit, MI 48243-1668
Attention: Aleksandra A. Miziolek
Telephone: (313) 568-6800
Facsimile: (313) 568-6915
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<PAGE> 21
if to PPI to:
Paribas Principal Incorporated
787 Seventh Avenue
New York, New York 10019
Attention: Stephen Eisenstein
Telephone: (212) 841-2127
Facsimile: (212) 841-2502
with a copy to its counsel:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: John M. Reiss, Esq.
Telephone: (212) 819-8200
Facsimile: (212) 354-8113,
if to any of the Shareholders of Plastics, to the addresses set forth
opposite each of their names on SCHEDULE 1.0 attached hereto,
or to such other address as any such party hereto may, from time to time,
designate in writing to all other parties hereto, and any such communication
shall be deemed to be given, made or served as of the date so delivered or, in
the case of any communication delivered by mail, as of the date so received.
ss. 4.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the Company, Plastics, PPI, the Shareholders and
their respective successors, assigns and Permitted Transferees. The rights of an
Equityholder under this Agreement may not be assigned or otherwise conveyed by
such Person except in connection with a Transfer of Securities which is in
compliance with this Agreement.
ss. 4.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO SUCH STATE'S CHOICE OF LAW PROVISIONS.
ss. 4.7 ARBITRATION. Any controversy or claim arising out of or
relating to this contract, or the breach thereof, shall be settled by
arbitration pursuant to the American Arbitration Association Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof. The place of arbitration
shall be New York, New York. The arbitrator(s) shall have the power to grant any
remedy or relief that they deem just and equitable, including but not limited to
injunctive relief, whether interim and/or final. Each party hereto retains the
right to seek interim measures from
-19-
<PAGE> 22
a judicial authority, and any such request shall not be deemed incompatible with
the agreement to arbitrate or a waiver of the right to arbitrate.
ss. 4.8 BENEFITS ONLY TO PARTIES. Nothing expressed by or mentioned
in this Agreement is intended or shall be construed to give any Person, other
than the parties hereto and their respective successors or assigns and Permitted
Transferees, any legal or equitable right, remedy or claim under or in respect
of this Agreement or any provision herein contained. This Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective successors and
assigns and Permitted Transferees, and for the benefit of no other Person.
ss. 4.9 TERMINATION; SURVIVAL OF BENEFITS. This Agreement shall
terminate after the Company has consummated a Qualified Public Offering;
PROVIDED HOWEVER that (i) PPI shall retain its rights set forth in Section 2.3
hereof and Benoit and Tauber shall remain subject to the obligations set forth
in Section 2.3 hereof, until PPI no longer holds 10% of the total outstanding
equity of the Company (or its successor) and (ii) the voting agreements set
forth in Sections 3.1 and 3.2 shall continue in accordance with the terms of the
Bylaws of Plastics and the Operating Agreement of the Company, respectively,
each as in effect on the date hereof.
ss. 4.10 PUBLICITY. Except as otherwise required by applicable laws or
regulations, none of the parties hereto shall issue or cause to be issued any
press release or make or cause to be made any other public statement in each
case relating to or connected with or arising out of this Agreement or the
matters contained herein, without obtaining the prior written consent of PPI,
Plastics and the Company to the contents and the manner of presentation and
publication thereof.
ss. 4.11 CONFIDENTIALITY. Each of the parties hereto hereby agrees
that throughout the term of this Agreement it shall keep (and shall cause its
directors, officers, employees, representatives and outside advisors and its
Affiliates to keep) all non-public information relating to the Company and
Plastics (including any such information received prior to the date hereof)
confidential except information which (i) becomes known to such Shareholder or
PPI from a source, other than the Company, Plastics, either its directors,
officers, employees, representatives or outside advisors, which source is not
obligated to the Company or Plastics to keep such information confidential, (ii)
becomes generally available to the public through no breach of this Agreement by
any party hereto and (iii) with respect to any Equityholder, any information
which is requested to be delivered or disclosed by any regulatory or other
governmental authority claiming jurisdiction over any such Equityholder. Each of
the parties hereto agrees that such non-public information (a) shall be
communicated only to those of its directors, officers, employees,
representatives, outside advisors and Affiliates who need to know such
non-public information and (b) will not be used by such party or its directors,
officers, employees, representatives, outside advisors or Affiliates either to
compete with the Company or Plastics or to conduct itself in a manner
inconsistent with the antitrust laws of the United States or any State.
Notwithstanding the foregoing, a party hereto may disclose non-public
information if required to do so by a court of competent jurisdiction or by any
governmental agency; PROVIDED, HOWEVER, that prompt notice of such required
disclosure be given to
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<PAGE> 23
the Company, Plastics and PPI prior to the making of such disclosure so that the
Company, Plastics and/or PPI may seek a protective order or other appropriate
remedy. In the event that such protective order or other remedy is not obtained,
the party hereto required to disclose the non-public information will disclose
only that portion which such party is advised by opinion of counsel is legally
required to be disclosed and will request that confidential treatment be
accorded such portion of the non-public information.
ss. 4.12 EXPENSES. The Company or Plastics shall reimburse each of the
respective members of its Membership Committee or Board, as the case may be, who
are not employees of the Company for their travel and out-of-pocket expenses
incurred in connection with their serving on the Membership Committee or Board,
as the case may be. Employees of the Company or Plastics who incur expenses in
connection with their attendance of meetings of the Membership Committee or
Board in the performance of their duties shall also be reimbursed in accordance
with the Company's or Plastic's usual expense reimbursement policies. The
parties hereto agree that the prevailing party or parties, as the case may be,
in any action, suit, arbitration or other proceeding arising out of or with
respect to this Agreement or the transactions contemplated hereby shall be
entitled to reimbursement of all costs of litigation, including reasonable
attorneys' fees, from the non-prevailing party. For purposes of this Section
4.12, each of the "prevailing party" and the "non-prevailing party" in any
action, suit, arbitration or other proceeding shall be the party designated as
such by the court, arbitrator or other appropriate official presiding over such
action, suit, arbitration or other proceeding, such determination to be made as
a part of the judgment rendered thereby.
ss. 4.13 AMENDMENTS; WAIVERS. No provision of this Agreement may be
amended, modified or waived without the prior written consent of PPI, Plastics,
the Company and the holders of more than fifty percent (50%) of the Common Stock
then outstanding, PROVIDED, no amendment, modification or waiver which adversely
affects the rights of any Shareholder may be made without such Shareholder's
consent.
ss. 4.14 SEVERABILITY. In case any provision in this Agreement shall
be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this
Equityholders Agreement as of the date first set forth above.
KEY PLASTICS, INC.
By /s/ Mark J. Abbo
----------------------------------------
Name: Mark J. Abbo
Title: Tresurer
KEY PLASTICS TECHNOLOGY, L.L.C.
By /s/ Mark J. Abbo
----------------------------------------
Name: Mark J. Abbo
Title: Tresurer of Key Plastics, Inc.,
a member
PARIBAS PRINCIPAL INCORPORATED
By /s/ Stephen Eisenstein
----------------------------------------
Name: Stephen Eisenstein
Title: Partner
/s/ David C. Benoit
------------------------------------------
David C. Benoit
/s/ Joel D. Tauber
------------------------------------------
Joel D. Tauber
/s/ George Mars
------------------------------------------
George Mars
<PAGE> 25
SCHEDULE 1.0
Number of Shares of
Common Stock Held at
Shareholder of Plastics Notice Address Closing
----------------------- -------------- --------------------
David C. Benoit
Joel D. Tauber
George Mars
Member of Plastics Membership Percentage Held at Closing
------------------ -------------------------------------
Key Plastics, Inc.
Paribas Principal Incorporated
1
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Jurisdiction of Organization
Name of Subsidiary or Incorporation
----------------------------
Key Plastics International L.L.C. Michigan
Key Plastics Automotive L.L.C. Michigan
Key Plastics, L.L.C. Michigan
Key Plastics de Mexico, S.R.L. Mexico
Key Mexico A, L.L.C. Michigan
Key Mexico B, L.L.C. Michigan
Materias Plasticas, S.A. Portugal
Key Plastics, U.K. United Kingdom
Clearplas, Ltd. United Kingdom
Key Plastics International, S.N.C. France
Key Plastics France, S.A.S. France
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1997 AND CONSOLIDATED
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE COMPANY'S 1997 FORM 10-K FILING.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 6,918
<SECURITIES> 0
<RECEIVABLES> 58,186
<ALLOWANCES> 0
<INVENTORY> 54,867
<CURRENT-ASSETS> 123,500
<PP&E> 124,285
<DEPRECIATION> 0
<TOTAL-ASSETS> 282,904
<CURRENT-LIABILITIES> 70,966
<BONDS> 216,575
97
0
<COMMON> 0
<OTHER-SE> (12,358)
<TOTAL-LIABILITY-AND-EQUITY> 282,904
<SALES> 306,001
<TOTAL-REVENUES> 306,001
<CGS> 239,744
<TOTAL-COSTS> 273,468
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,112
<INCOME-PRETAX> 8,845
<INCOME-TAX> 374
<INCOME-CONTINUING> 6,871
<DISCONTINUED> 0
<EXTRAORDINARY> (5,192)
<CHANGES> 0
<NET-INCOME> 1,679
<EPS-PRIMARY> 5.22
<EPS-DILUTED> 5.01
</TABLE>
