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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 0-22580
JPE, INC.
775 Technology Drive, Suite 200, Ann Arbor, MI 48108
(734) 662-2323
Incorporated in Michigan IRS Employer Identification Number 38-2958730
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Class Exchange on Which Registered
Common Stock ___
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]
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]
Based on the closing price on March 15, 1999, the aggregate market value of the
Registrant's Common Stock held by non-affiliates of the Registrant was
approximately $1,177,289.
The number of shares of the Registrant's Common Stock outstanding at March 15,
1999 was 4,602,180.
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<PAGE>
TABLE OF CONTENTS
Item Page
- ---- ----
PART I
1. Business ........................................................... 3
2. Properties ......................................................... 10
3. Legal Proceedings .................................................. 10
4. Submission of Matters to a Vote of Security Holders ................ 11
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters ............................................... 11
6. Selected Financial Data ............................................ 12
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................... 14
8. Financial Statements and Supplementary Data ........................ 21
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............................... 46
PART III
10. Directors and Executive Officers of the Registrant ................. 47
11. Executive Compensation ............................................. 50
12. Security Ownership of Certain Beneficial Owners
and Management .................................................... 57
13. Certain Relationships and Related Transactions ..................... 57
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K ....................................................... 58
Signatures ......................................................... 59
FINANCIAL STATEMENT SCHEDULES
JPE, Inc. and Subsidiary Financial Statement Schedules ............. 60
Exhibit Index ...................................................... 62
<PAGE>
PART I
ITEM 1. BUSINESS
FORWARD LOOKING INFORMATION
This Annual Report on Form 10-K contains, and from time to time the Company
expects to make, certain forward-looking statements regarding its business,
financial condition and results of operations. In connection with the "Safe
Harbor" provisions of the Private Securities Reform Act of 1995 (the "Reform
Act"), the Company intends to caution investors that there are several important
factors that could cause the Company's actual results to differ materially from
those projected in its forward-looking statements, whether written or oral, made
herein or that may be made from time to time by or on behalf of the Company.
Investors are cautioned that such forward-looking statements are only
predictions and that actual events or results may differ materially. The Company
undertakes no obligation to publicly release the results of any revisions to the
forward-looking statements to reflect events or circumstances or to reflect the
occurrence of unanticipated events.
The Company wishes to ensure that any forward-looking statements are accompanied
by meaningful cautionary statements in order to comply with the terms of the
safe harbor provided by the Reform Act. Accordingly, the Company has set forth a
list of important factors that could cause the Company's actual results to
differ materially from those expressed in forward-looking statements or
predictions made herein and from time to time by the Company. Specifically, the
Company's business, financial condition and results of operations could be
materially different from such forward-looking statements and predictions as a
result, among other things, of (i) customer pressures that could impact sales
levels and product mix, including customer sourcing decisions, customer
evaluation of market pricing on products produced by the Company and customer
cost-cutting programs; (ii) operational difficulties encountered during the
launch of major new OEM programs; (iii) the availability of funds to the Company
to continue operations pending consummation of a sale or an investment in the
Company and a restructuring of the Company's debt; (iv) approval of the court
order for the Plans of Reorganization for the Company's subsidiaries, Starboard
Industries, Inc. and Plastic Trim, Inc.; and (v) the ability to consummate a
transaction which permits restructuring of the Company's debt and infusion of
additional capital (see "Liquidity and Capital Resources").
GENERAL AND RECENT INFORMATION
JPE, Inc. (together with its subsidiaries, the "Company"), through its five
operating subsidiaries, manufactures and distributes automotive and truck
components to original equipment manufacturers ("OEMs") and to the aftermarket.
During 1998 and 1997, the Company experienced financial difficulty resulting in
a strategy to sell certain subsidiaries, obtain additional capital and
restructure its debt.
At December 31, 1998, three of the Company's five operating subsidiaries,
Plastic Trim, Inc. ("PTI"), Starboard Industries, Inc. ("Starboard") and JPE
Canada Inc. ("JPEC"), were operating under court ordered protection. On
September 15, 1998, PTI and Starboard filed voluntary petitions for relief under
Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court
for the Eastern District of Michigan. On August 27, 1998, the Ontario Court
(General Division) Commercial List issued an order to appoint an Interim
Receiver for JPEC pursuant to Section 47 of the Bankruptcy and Insolvency Act of
Canada. Collectively, these companies represent the Company's Trim Group. The
Company's two other operating subsidiaries, Dayton Parts, Inc. ("DPI") and
Industrial & Automotive Fasteners, Inc. ("IAF"), continue to operate without
court protection.
<PAGE>
On October 28, 1998, the Company completed the sale of substantially all of the
assets of its wholly-owned subsidiary, Allparts, Inc. ("Allparts"), to R&B, Inc.
for $10.1 million and the assumption of trade payables and accrued liabilities
of $1.5 million, for a total sales price of $11.6 million. The assets of
Allparts on October 28, 1998 totaled $16.6 million, resulting in a loss of $5.2
million. The net proceeds of $9.9 million were used to pay down U.S. Bank debt.
This transaction was reported in the Company's Current Report on Form 8-K filed
on November 12, 1998.
On February 8, 1999, under court order, the Company sold substantially all the
assets of JPEC for approximately Cdn. $21.0 million, which proceeds were used to
pay Canadian bank debt and other secured debt provided by a major customer. In
conjunction with the sale of all of its assets, JPEC filed an assignment in
bankruptcy. JPEC has no assets to pay its unsecured debt and, as such, JPEC will
be dissolved. The Company has provided an unsecured guarantee in the amount of
Cdn. $2.0 million for a portion of the JPEC debt. The proceeds of the sale were
not sufficient to fully pay JPEC's secured lender, and the Company continues to
be indebted to such lender under this guarantee in an amount of approximately
Cdn. $820,000. The Company is negotiating with JPEC's secured lender to settle
amounts due under the guarantee.
On March 26, 1999, the Company sold the stock of IAF for approximately $20.0
million. As part of this transaction, certain vendors of IAF agreed to accept a
30% payment for past due payables and union employees agreed to accept annuity
contracts in lieu of their postretirement health care and life insurance
benefit, which resulted in a forgiveness of liabilities of approximately $3.4
million. The Company will recognize a loss of approximately $4.0 million as a
result of the stock sale. The $19.2 million of net proceeds of this transaction
were used to pay down U.S. Bank debt.
On February 25, 1999, the Company filed Plans of Reorganization for PTI and
Starboard with the United States Bankruptcy Court, pursuant to which those
companies would emerge from pending Chapter 11 bankruptcy proceedings. This
action is dependent on the consummation of an investment in the Company by ASC
Holdings, Inc. described below. As part of the bankruptcy proceedings, unsecured
creditors of PTI and Starboard would forgive 70% of their claims, which will
result in a forgiveness of liabilities of approximately $4.1 million. These
Plans are subject to confirmation by the Bankruptcy Court scheduled for April
16, 1999.
The Company reached an agreement in principal with ASC Holdings, Inc., pursuant
to which a company to be formed would acquire common and preferred stock of the
Company to initially have voting control and an economic interest of 95% of the
Company. The current stockholders of the Company would retain the remaining
equity in the Company, subject to further dilution of 511,353 common stock
warrants, in the event of the exercise of such warrants that will be issued to
the Company's bank lenders in exchange for loan concessions in excess of $12.0
million. In addition, the current stockholders of the Company, and the Company's
bank group would receive warrants that would entitle them to purchase 15% of the
voting power and economic interest in the Company, exercisable two years after
the consummation of the ASC Holdings, Inc. investment, subject to obtaining
prescribed EBITDA levels. As such, current stockholders of the Company would
experience substantial dilution upon the ASC Holdings, Inc. investment, but
would have the potential of increasing their aggregate percentage ownership in
the future. Pursuant to the agreement in principle, ASC Holdings, Inc. would
invest $18.4 million in the Company and would provide or arrange a loan to JPE
in the amount of approximately $51.6 million. The Company and ASC Holdings, Inc.
are continuing to negotiate the final terms and structure of the foregoing
investment by ASC Holdings, Inc. which is subject to a number of conditions,
including execution of a definitive agreement, approval of the bankruptcy courts
having jurisdiction over PTI and Starboard and approval of the Company's bank
group lenders. There can be no assurance that the parties will reach agreement
on mutually satisfactory terms or that the conditions to consummating the
transaction will be satisfied.
<PAGE>
If all of the transactions described above are completed, the Company would
consist of three operating subsidiaries, DPI, PTI and Starboard, with estimated
1999 annual revenues of approximately $155 million and total assets of
approximately $75 million.
The following table sets forth information regarding the Company's sales in
certain classes of similar products as percentages of net sales for the periods
indicated.
<TABLE>
<CAPTION>
Percentage of Net Sales(1)
Year ended December 31,
------------------------------
1996 1997 1998(2)
---- ---- ----
<S> <C> <C> <C>
OEM:
Trim Products.......................... 46.8% 54.3% 51.8%
Fasteners.............................. 16.2 13.8 14.8
Aftermarket (truck and automotive
replacement parts):
Heavy-duty undercarriage parts......... 30.4 25.7 27.4
Brake systems.......................... 6.6 6.2 6.0
------ ------ ------
100.0% 100.0% 100.0%
====== ====== ======
<FN>
(1) See also Note 15 to the Notes to Consolidated Financial Statements for
additional operating segment information.
(1) Represents actual sales by all of the operating subsidiaries for 1998.
Includes sales of Trim Products segment (18.7%) which have been carried as
an equity investment and sales for Allparts ("Aftermarket-Brake systems")
through its divestiture date of October 28, 1998.
</FN>
</TABLE>
ORIGINAL EQUIPMENT
The Company's OEM group consisted of four operations in 1998: Starboard, PTI,
JPEC and IAF. Starboard manufactures and supplies luster, painted and
co-extruded metallic decorative and functional exterior trim parts. PTI
manufactures and supplies decorative extruded plastic exterior trim. JPEC
manufactures, paints and supplies plastic injection-molded exterior trim.
Starboard, PTI and JPEC supply parts directly to OEMs and to suppliers which
sell to OEMs ("Tier 1 suppliers"). All of the parts supplied are utilized in
automotive and light truck applications. These three companies represent the
Trim Products segment.
IAF manufactures and supplies decorative, specialty and standard wheel nuts for
domestic OEMs and certain Japanese transplants for use on automobiles and light
trucks. In addition, IAF uses its proprietary process to manufacture stainless
steel capped wheel nuts. This business represented the Fastener segment.
As previously described, JPEC and IAF have been sold in 1999 as part of the
Company's restructuring.
<PAGE>
AFTERMARKET
The Company's aftermarket group consisted of two operations in 1998: DPI and
Allparts. These two businesses represent the Truck and Automotive Replacement
Parts segment. DPI manufactures and distributes springs and spring-related
products and distributes a variety of other undercarriage replacement parts for
trucks and trailers, consisting of suspension, brake, wheel-end and steering
products. Almost all of DPI's springs and spring-related products are
manufactured at its plant in Harrisburg, Pennsylvania. Other products sold by
DPI are purchased from third party manufacturers. DPI sells products to the
truck and trailer parts independent aftermarket under the brand names "Stanley
Springs," "Dayton Parts" and "BATCO."
Allparts distributes hydraulic brake system products for the independent
automotive and light truck aftermarket. Allparts sold its brake parts under the
brand names of "Brakeware" and "Tru-Torque." This business was sold in October
1998.
MANUFACTURING OPERATIONS
ORIGINAL EQUIPMENT
Starboard manufactures decorative exterior trim. Starboard's primary
manufacturing processes include roll forming, bending, pierce and end forming,
and co-extrusion of steel and PVC. Decorative and functional parts produced by
Starboard are often plated, painted or heat treated by third parties before
final shipment to the customer. Decorative products are utilized in fascia, body
side, window trim and reveal, garnish and wheel well trim applications.
PTI manufactures extruded and injection molded plastic exterior trim products.
The extruded products are manufactured primarily from PVC plastic which is
extruded at high temperatures into parts of varying dimensions. The injection
molded parts are produced utilizing TPO plastic compound which is injected into
a product mold at high temperatures. These parts are assembled before being
shipped to the customer. The parts are used primarily for decorative and styling
purposes in the production of passenger cars, light trucks, minivans, and
sport-utility vehicles. PTI manufactures three primary products: (1) body side
moldings, which serve aesthetic and functional purposes and are affixed to the
side of a vehicle; (2) reveal moldings, which surround a vehicle's windshield
and backlight glass and cover the gap between the edge of the glass and the car
body; and (3) bumper fascia moldings, which are bright or colored decorative
inserts attached to plastic bumpers and bumper pads, and are primarily aesthetic
in nature.
There is no discussion of the manufacturing operations of JPEC and IAF as these
businesses have been sold.
AFTERMARKET
DPI manufactures springs, spring assemblies and spring-related products for the
heavy-duty truck and trailer aftermarket. The Company has the capability of
producing more than 17,000 spring types. These products require heating,
trimming, bending and final heat treatment prior to assembly and painting. This
manufacturing process is similar to the methods used by the OEM spring
manufacturers.
<PAGE>
MARKETING, DISTRIBUTION AND CUSTOMERS
ORIGINAL EQUIPMENT
The Company's OEM business supplies products to domestic OEMs either directly or
through Tier 1 suppliers. In the year ended December 31, 1998, approximately 52%
of the Company's net sales were to OEM customers. Sales to significant customers
for the year ending December 31, 1998 were as follows:
Actual
------
General Motors 29%
Chrysler Corporation 16%
No other OEM customer accounts for more than 10% of the Company's net sales.
The Company sells its exterior trim products through an exclusive sales agency
that specializes in the Company's products. The Company and its sales agency
work directly with its customers, including the three major U.S. automobile
manufacturers, to design and develop products to satisfy market demands. Most of
the parts the Company produces have lead times of one to four years from product
award to production. The Company has been awarded new business for each of the
1999-2002 model years.
Because the Company's OEM business supplies its customers on a "just-in-time"
basis, it does not currently maintain a backlog.
AFTERMARKET
The Company distributes springs and spring-related products manufactured by DPI,
as well as other undercarriage replacement parts, including wheel-end products
(such as brake drums, cast spoke wheels, rotors and calipers), brake hardware,
suspension parts (such as hangers, bushings, shocks and suspension kits) and
steering components (such as king pin sets, ball joints, drag links and tie rod
ends).
DPI uses its own sales force to sell products for heavy and medium-duty trucks
and trailers throughout the continental United States, Mexico, Central America
and parts of Canada to approximately 1,800 customers. Although most of DPI's
products are for the repair and maintenance needs of heavy and medium-duty
trucks, trailers and mobile equipment, DPI also sells some products for
light-duty trucks. In addition to on-the-road trucks and trailers, DPI
distributes undercarriage replacement parts for specialty vehicles such as
garbage trucks, cement trucks, construction equipment and farm equipment.
DPI sells its products primarily to spring service shops, fleet distributors,
manufacturers of specialty vehicles, warehouse distributors and wheel and rim
distributors. These outlets in turn sell parts to local truck fleets,
redistribute parts to smaller outlets such as local repair garages or install
the parts themselves on the end-users' vehicles.
SEASONALITY
The OEM business experiences seasonal fluctuations that are consistent with
those of other OEM suppliers. The Company typically experiences decreased sales
and operating income from its OEM business during the second half of each year
due to OEM model changeovers and vacation periods.
<PAGE>
The aftermarket business is subject to minor seasonal fluctuations, with demand
for aftermarket parts tending to be higher in the second and third quarters
because end-users tend to make more vehicle repairs at those times.
COMPETITION
ORIGINAL EQUIPMENT
The OEM supplier industry is highly competitive and comprised of many companies
of various sizes. Demand for parts and components sold to OEMs is driven by the
demand for sales of new vehicles. The Company believes that the number of such
competitors will decrease in response to the OEMs' pressure for supplier
consolidation. The Company's largest competitors for exterior trim include Magna
International Inc., Decoma, Venture Holdings Trust, Standard Products, LDM and
Guardian Industries Corp. Many of the Company's competitors are divisions or
subsidiaries of companies which are substantially larger and more diversified
than the Company. In addition, many of the Company's competitors have greater
financial and other resources than the Company.
The Company competes for new business both at the beginning of the development
of new models and upon the redesign of existing models. Competitive factors in
the market for the Company's OEM products include quality, reliability, cost,
timely delivery, technical expertise and development capability.
AFTERMARKET
The truck parts aftermarket in which DPI operates is highly competitive. DPI has
numerous competitors. However, the product line of DPI is narrow and focuses on
specific markets. There is no one competitor that dominates any product line in
which DPI participates. Some of the Company's more significant competitors are
Triangle Auto Spring Co. and Meritor, Inc. In addition, some of the Company's
competitors are well-established truck or automotive suppliers which have
greater financial and other resources than the Company. Among the primary
competitive factors affecting this market are price, product fill rates, product
quality, breadth of product line and customer service.
SUPPLIERS AND RAW MATERIALS
The principal raw materials used by DPI and Starboard in their manufacturing
operations are various types and grades of steel, all of which are readily
available. The principal raw materials used by PTI are acrylic foam tape, paint,
PVC, and thermo plastic olefin (TPO) compounds, all of which are readily
available.
During 1998, DPI's primary supplier of heavy and medium-duty brake drums decided
to increase pricing significantly. Since the customers of DPI would not accept a
price increase and DPI will not sell these products at a loss, DPI has
temporarily discontinued the sale of these parts. Due to the uncertainty of the
Company's future, DPI has not been able to locate a replacement source for these
parts. DPI believes that these products can be supplied by offshore
manufacturers. These parts represent approximately $10 million of annual sales.
<PAGE>
INTELLECTUAL PROPERTY
The Company has a number of patents and patent applications pending in both the
United States and certain foreign jurisdictions for processes related to its
plastic injection molded products. Notwithstanding its patent portfolio, the
Company believes that the design, quality and pricing of its products and its
relations with its customers are substantially more important to its business
than patent protection.
There can be no assurance that patents will be issued from any pending
applications or that any claims allowed from existing or pending patents will be
sufficiently broad to protect the Company's technology. The Company believes
that it is not dependent to any material extent upon any one patent or group of
patents.
Governmental Regulations
The Company is subject to various federal, state, provincial and local laws and
regulations relating to the operation of its businesses and the manufacture of
its products, including those relating to product safety guidelines; generation,
handling and disposal of waste; discharge and emission controls; and protection
of health and the environment. These laws include the Clean Water Act, the Clean
Air Act, the Resource Conservation and Recovery Act ("RCRA") and the
Comprehensive Environmental Response, Compensation and Liability Act in the
United States, together with implementing regulations and similar state laws and
regulations. In part, these laws and regulations govern the manner in which the
Company handles various wastes, discharges, emissions and environmental
conditions at or attributable to its operations or facilities.
Operations at some of the Company's facilities have been and continue to be
sources of emissions and discharges of various materials, including air
emissions from coating and painting operations and discharges of process
wastewaters. For example, various Company facilities have been the sites of
releases of polychlorinated biphenyl-contaminated oil, mineral spirits, fuel and
quench oils and, possibly, other materials. Some of these materials remain at
and about the sites of these facilities. Some of DPI's Harrisburg, Pennsylvania
facilities are believed to be located on a former municipal landfill because
materials associated with municipal landfills have been found at these
facilities. In addition, at various Company facilities, substances have been and
currently are used that are classified as hazardous under RCRA or as pollutants,
contaminants or hazardous, toxic or regulated substances under other applicable
laws. The parties from whom the Company acquired its operations have, to various
degrees, agreed to limited indemnification of the Company against some
environmental claims under the various acquisition agreements with the Company,
but there can be no assurance that these indemnities will be adequate to cover
all liabilities and expenses that may arise. Although the Company does not know
the amounts of any liabilities or expenses it may incur in the future in
connection with the investigation or remediation of materials or conditions in
connection with the control of emissions and discharges at its facilities, it
does not believe that these liabilities and expenses will have a material
adverse effect on its financial condition or results of operations (although
there could be such effects in particular periods).
Developments with regard to laws, regulations and enforcement policies could
result in additional, presently unquantifiable, costs or liabilities to the
Company or might in the future restrict the Company in ways that could require
it to modify, supplement or replace existing equipment and facilities and to
change or cease present methods of operation. Furthermore, laws, regulations and
governmental policies are subject to change and no assurance can be given that
existing laws, regulations and policies will not be amended or that new laws,
regulations and policies will not be adopted that will impose more extensive
regulation, cost or liability on the Company in the future.
<PAGE>
EMPLOYEES
The Company had a total of approximately 1,550 employees on December 31, 1998,
approximately 1,050 of whom were located in the United States. Approximately 604
employees were represented by labor unions, at the Company's JPEC, IAF and PTI
operations. The Company will have approximately 925 employees of whom 165 are
represented by labor unions following the sale of JPEC and IAF. Employees at
PTI's Jamestown operations have voted to form a local under the United
Electrical, Radio & Machine Workers of America, and the first contract is
currently under negotiation. This will increase the number of employees
represented by labor unions by 170.
ITEM 2. PROPERTIES
The following list indicates by location the principal manufacturing,
distribution and administrative facilities of the Company following the sale of
the subsidiaries previously described. All owned U.S. facilities are subject to
liens under the Forbearance Agreement:
<TABLE>
<CAPTION>
Building Size
Primary Use (Approximate Owned
of the Facility Location Square Feet) or Leased Segment
--------------- -------- ------------- --------- -------
<S> <C> <C> <C> <C>
Corporate headquarters Ann Arbor, MI 5,200 Leased Corporate
Manufacturing and administrative East Tawas, MI 100,000 Owned Trim Products
Manufacturing and administrative Beavercreek, OH 105,000 Owned Trim Products
Finishing and distribution Jamestown, OH 90,000 Owned Trim Products
Manufacturing Harrisburg, PA 100,000 Owned Replacement Parts
Distribution and administrative Harrisburg, PA 150,000 Leased Replacement Parts
</TABLE>
The Company's buildings, machinery and equipment are in adequate operating
condition, and are suitable and adequate for current production requirements.
ITEM 3. LEGAL PROCEEDINGS
On September 15, 1998, two of the Company's subsidiaries, PTI and Starboard,
filed voluntary petitions for relief under Chapter 11 of the Federal Bankruptcy
Code in the United States Bankruptcy Court for the Eastern District of Michigan.
PTI and Starboard have filed Plans of Reorganization with the United States
Bankruptcy Court, pursuant to which they would emerge from Chapter 11 bankruptcy
proceedings. These Plans of Reorganization are contingent upon consummation of
an investment in the Company by ASC Holdings, Inc.
(see discussion under "General and Recent Information").
On February 8, 1999, JPEC filed an assignment in bankruptcy pursuant to the
Bankruptcy and Insolvency Act of Canada in the Ontario Court (General Division)
Commercial List. JPEC sold all of its assets under court order and, as such,
will be dissolved by the court.
Other than the bankruptcy matters mentioned above, neither the Company nor any
of its subsidiaries is a party to, nor are any of its properties the subject of,
any pending legal proceedings, other than certain ordinary routine litigation
incidental to their businesses, which in the opinion of management is not
material.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Through August 5, 1998, the Company's Common Stock traded on the Nasdaq National
Market tier of The Nasdaq Stock MarketSM under the symbol "JPEI." The Company's
Common Stock continues to trade on the OTC Bulletin Board. The following table
indicates the high and low sale prices for the Company's Common Stock as
reported on the Nasdaq National Market or the OTC Bulletin Board for the last
two years. Such over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
MARKET PRICE
-------------------------------------------
QUARTER 1997 1998
------- ---- ----
High Low High Low
First $8.50 $6.75 $6.25 $4.19
Second 7.75 6.38 4.88 1.00
Third 7.69 5.44 2.75 0.31
Fourth 8.25 5.25 1.31 0.16
On March 15, 1999, there were approximately 136 holders of record of the
Company's Common Stock and approximately 1,431 beneficial shareholders.
The Company has never declared or paid any dividends on shares of Common Stock
and has no intention of declaring or paying any dividends on shares of Common
Stock in the foreseeable future. The Company intends to retain its earnings, if
any, for the development of its business.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below, as of and for the periods ended
December 31, 1994, 1995, 1996, 1997 and 1998, are derived from the Company's
financial statements, audited by PricewaterhouseCoopers LLP, independent
accountants, and should be read in conjunction with the Company's audited
financial statements and notes thereto included elsewhere in this Report on Form
10-K (the "Company's Financial Statements"). The selected financial data set
forth below should also be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in Item 7 of
this Report on Form 10-K. Certain amounts from prior years have been
reclassified to conform with the 1998 presentation.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income statement data:
Net sales $70,073 $169,202 $201,453 $287,066 $210,122
Cost of goods sold 51,994 134,156 166,714 246,903 186,657
------- -------- -------- -------- --------
Gross profit 18,079 35,046 34,739 40,163 23,465
Selling, general and administrative
expenses 11,892 21,361 24,600 29,254 27,609
Charge for impairment of goodwill -- -- 4,300 -- --
Charge for subsidiaries under
court-ordered protection -- -- -- -- 28,490
Discontinuance of stamping operations -- -- -- 2,164 --
Loss on sale of subsidiary -- -- -- -- 5,190
Other expense -- -- -- 618 1,983
Loss in affiliate companies -- -- -- -- 1,713
Interest expense, net 1,029 6,456 7,225 10,464 13,085
------- -------- -------- -------- --------
Income (loss) before income taxes 5,158 7,229 (1,386) (2,337) (54,605)
Income tax expense (benefit) 1,968 2,780 203 (194) (1,035)
------- -------- -------- -------- --------
Net income (loss) $ 3,190 $ 4,449 $ (1,589) $ (2,143) $(53,570)
======= ======== ======== ======== ========
Earnings (loss) per common share
assuming dilution $ .83 $1.09 $ (.35) $ (.47) $(11.64)
===== ===== ====== ====== =======
Weighted average shares outstanding
and common stock equivalents 3,865 4,098 4,574 4,602 4,602
===== ===== ===== ===== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------
1994 1995 1996 1997 1998(2)
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance sheet data at end of period:
Working capital (deficit) $22,084 $ 39,955 $ 42,138 $(59,181)(1) $(62,815)(1)
Total assets 66,492 145,229 174,725 193,215 76,974
Long-term debt (including current
maturities) 25,973 83,375 110,001 9,272 (1) 50
Total liabilities 40,979 108,482 138,947 159,721 97,115
Total shareholders' equity (deficit) 25,513 36,747 35,778 33,494 (20,141)
<FN>
1. Working capital and long-term debt reflect the classification of the
Company's U.S. and Canadian debt arrangements of $103,875 and $84,492
outstanding as current at December 31, 1997 and 1998, respectively. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Liquidity and Capital Resources."
2. In 1998, the Company has used the equity method of accounting for certain
subsidiaries from the dates of their respective bankruptcy filings. As
such, their assets and liabilities are netted into the balance sheet
caption "Investment in Affiliate Companies" which totaled $14,661 at
December 31, 1998. The details of assets and liabilities are shown in Notes
6 and 7 to the Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto to assist in understanding the Company's
results of operations, its financial position, cash flows, capital structure and
other relevant financial information.
RECENT INFORMATION
See discussion under "General and Recent Information" under "Item 1 - Business"
of this Form 10-K.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net sales for the year ended December 31, 1998 were $210.1 million compared to
$287.1 million for the previous year, a decrease of 27%. The significant factors
contributing to this decrease are shown in the reconciliation below (in millions
of dollars).
Sales for 1997 $287.1
Less: Trim product sales using the equity method
for 1998 since bankruptcy filing dates (48.3)
No sales for Allparts in November and December
of 1998 due to sale (3.1)
GM strike (8.5)
Closure of Starboard stamping business (7.0)
Reduction in JPEC sales due to lower volumes (10.1)
------
Sales for 1998 $210.1
======
Other offsetting factors influencing sales activity for 1998 include the impact
of the bankruptcy filings on sales for the truck and automotive replacement
segment. The increase in sales which had been anticipated as a result of the
purchase of BATCO in April of 1997 was offset by the loss in sales due to the
bankruptcy filings.
Gross profit decreased to $23.5 million for the year ended December 31, 1998
compared with $40.2 million for the year ended December 31, 1997. The factors
contributing to this decrease consist of the following items (in millions of
dollars).
Gross profit for 1997 $ 40.2
Less: Trim product on equity method (3.8)
Lost margin due to sale of Allparts (1.1)
Impact of GM strike (1.0)
Lower sales volume for JPEC (1.0)
Launch costs and other manufacturing
inefficiencies (8.0)
Write down of PTI inventory to net
realizable value (1.8)
------
Gross profit for 1998 $ 23.5
======
<PAGE>
The launch costs and other manufacturing inefficiencies occurred in the first
half of 1998 relating to the launch of the YC-7 trim program by JPEC, the GMT
800 program by PTI, and the high stress spring line at DPI. The $8 million
amount also includes the impact of pricing pressures in the truck and automotive
replacement parts segment as well as a product mix change at PTI as certain high
margin jobs were replaced with lower margin jobs. The Company has obtained some
pricing relief from the OEM's to partially offset the lower margins at PTI
effective March 1, 1999.
Selling, general and administrative expenses for the year ended December 31,
1998 total $27.6 million or 13.1% of sales. This percentage is 11.8% adjusting
for the impact of equity accounting for subsidiaries under court ordered
protection. This compares to $29.3 million or 10.2% of sales for the year ended
December 31, 1997. The increase in this percentage is partially attributable to
additional bad debt expense whereby the major customers of PTI and Starboard
were only required to pay 85% of their outstanding receivables at the filing
date. The remaining portion of the increase is attributable to the truck and
automotive replacement parts business and relates to servicing the BATCO product
line which was acquired in April 1997, additional bad debt expense and to a
large worker's compensation claim which was settled.
The charge for subsidiaries under court ordered protection for the year ended
December 31, 1998 totaled $28.5 million. This charge related to the impairment
of long-term assets in PTI, Starboard and JPEC as shown in Note 5 to the
consolidated financial statements. The Company believes that the charge reduces
the assets of such businesses to net realizable value in accordance with
generally accepted accounting principles. This charge has no impact on the
Company's cash flow. Since the bankruptcy filings, the Company has recognized
the financial results of these subsidiaries on the equity method. The net loss
in these affiliate companies for the period September 16, 1998 to December 31,
1998 was $1.7 million. Included in this loss are reorganization expenses for PTI
and Starboard of $723,000.
On October 28, 1998, the Company completed the sale of substantially all the
assets of its subsidiary, Allparts, Inc. The sales price was approximately $11.6
million, consisting of cash of $10.1 million and assumption of accounts payable
and accrued liabilities of approximately $1.5 million. The assets on October 28,
1998 were approximately $16.6 million and expenses related to this transaction
were $242,000, resulting in a net loss on the sale of $5.2 million.
Other expense for the year ended December 31, 1998 primarily represents costs
associated with the bankruptcy filings and the Forbearance Agreement for legal,
professional and financial advisors. Other expense for the year ended December
31, 1997 was primarily foreign exchange transaction losses associated with JPEC.
Interest expense for the year ended December 31, 1998 was $13.1 million compared
to $10.5 million for the year ended December 31, 1997. Included in interest
expense are facility fees and amendment fees of $1.4 million and $376,000 for
1998 and 1997, respectively. The additional increase in interest expense is due
to higher interest rates caused by the default on the U.S. bank debt.
Income tax benefit for the year ended December 31, 1998 was $1.0 million
compared to $194,000 for the year ended December 31, 1997. The Company has
provided a valuation reserve of $4.2 million against net deferred taxes. JPE,
Inc. has not recognized any tax benefit associated with a loss carryforward of
approximately $15.0 million, of which $1.9 million relates to the Company's 1997
purchase of BATCO. This loss carryforward may be utilized to offset gains if the
Company is successful in restructuring its debts as described in Note 13 to the
consolidated financial statements.
<PAGE>
The net loss for the year ended December 31, 1998 totals $53.6 million or $11.64
per share assuming dilution. The net loss for the year ended December 31, 1997
was $2.1 million or $0.47 per share assuming dilution. The change in net loss is
explained by the factors described above.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net sales for the year ended December 31, 1997 were $287 million compared to
$201 million for the previous year. The net sales increase of 43% is principally
attributable to the full year effect of the acquisition of JPEC completed in
December 1996 and the acquisition of BATCO in April 1997. For the year ended
December 31, 1997, net sales for the Company were 68% to OEM customers and 32%
to aftermarket customers. (See Note 15 to the consolidated financial statements
for segment information.)
Gross profit increased to $40.2 million for the year ended December 31, 1997
compared with $34.7 million for the prior year. The gross margin percentages
were 14.0% and 17.2% for 1997 and 1996, respectively. The decline in gross
margin is a result of production difficulties at the Company's JPEC operation
which was purchased out of bankruptcy in December 1996. JPEC's gross profit for
1997 was $1.5 million on sales of $61.4 million. Based on unaudited financial
data for 1996, the operations of Pebra Inc. (now JPEC) would have reported a
gross loss of $2.3 million on sales of $68.9 million. Excluding JPEC's results,
the gross margin for 1997 would have been 17.1%. The gross margin for the
Company's OEM businesses, without JPEC, in 1997 was 11.1% compared to 12.4% and
16.4% for the years ended 1996 and 1995, respectively. This gross margin
percentage decline is attributable to additional production costs incurred by
Starboard in connection with implementing its plan to exit the stamping business
and excessive launch costs and scrap at PTI.
During the third quarter of 1997, management discontinued Starboard's stamping
operations, which resulted in the resourcing of stamped parts to other
third-party suppliers, the sale of Starboard's stamping assets, a reduction in
the workforce and a major re-layout of Starboard's East Tawas, Michigan
production facility to improve productivity of its roll-forming and co-extrusion
operations. Management made this decision based on the negative impact the
stamping business had on the operating results of Starboard and the OEM Trim
Group as a whole. As a result of this discontinuance of stamping operations, the
Company recorded a charge of $2.25 million relating to the loss on disposal of
assets, employee severances and other costs directly related to the stamping
business.
Selling, general and administrative expenses increased 19% to $29.3 million for
the year ended December 31, 1997 compared to $24.6 million for 1996. The
increase in spending is a result of the full year impact of the JPEC acquisition
made in December 1996 and the acquisition of BATCO in April 1997. Selling,
general and administrative expense as a percentage of sales was 10.2% and 12.2%
for the years ending December 31, 1997 and 1996, respectively. The decline in
this percentage is attributable to management efforts to contain costs in its
Aftermarket and OEM businesses and the increasing significance of the OEM
business to the Company. Amortization of goodwill for the year ended December
31, 1997 was $1.4 million versus $1.3 million for the same period in 1996. The
increase in goodwill amortization expense is attributable to the acquisition of
BATCO, partially offset by the reduction in goodwill due to the impairment
charge recorded in 1996.
Other non-operating expense in 1997 consists principally of foreign currency
transaction losses of $468,000 incurred by JPEC related to its net U.S. dollar
liability position. The functional currency for JPEC is the Canadian dollar
which weakened from Cdn. $1.365 to Cdn. $1.43 per U.S. dollar.
<PAGE>
Interest expense increased to $10.5 million in 1997 compared to $7.2 million for
the year ended December 31, 1996. The increase is a result of funds borrowed to
finance the acquisitions of JPEC in December 1996 and BATCO in April 1997 and a
slightly higher debt level as a result of capital additions to enhance existing
production technologies and capabilities. The average borrowing rates for 1997
and 1996 were 8.2% and 7.8%, respectively. Interest expense includes facility
fees and debt agreement amendment fees of $376,000 for 1997 compared to $293,000
for 1996.
The effective tax rate for the year ended December 31, 1997 was a benefit of 8%
compared to a tax rate of 15% for the year ended December 31, 1996. The unusual
tax rate relationship for 1997 is attributable to non-deductible goodwill and
losses that occurred in Michigan, whose tax is not income based, which are
offset by a foreign tax benefit associated with JPEC's losses. There was only a
nominal foreign tax benefit in 1996.
Net loss for the year ended December 31, 1997 was $2.1 million compared to a net
loss of $1.6 million for the year ended December 31, 1996. Loss per share
assuming dilution for the year ended December 31, 1997 was $0.47 per share as
compared to a loss per share assuming dilution of $0.35 for the same period in
1996. These changes are a result of the factors mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are its U.S. and Canadian credit
agreements and its debtor-in-possession financing agreements for Starboard and
PTI.
The Company's principal source of liquidity for its U.S. companies is the
Forbearance Agreement dated August 10, 1998, as amended by First Amendment dated
August 31, 1998, Second Amendment dated September 4, 1998, Third Amendment dated
September 16, 1998, Fourth Amendment dated October 1, 1998, Fifth Amendment
dated December 1, 1998 and Sixth Amendment dated March 26, 1999 (the
"Forbearance Agreement"). The Forbearance Agreement is collateralized by all of
the Company's assets, with the exception of JPEC's assets, the inventories of
Starboard and PTI, and the post-petition accounts receivable of Starboard and
PTI. At December 31, 1998, borrowings outstanding under the Forbearance
Agreement totaled $84.5 million.
The Company's Third Amended and Restated Credit Agreement dated December 31,
1996, as amended by Amendment No. 1 dated as of April 16, 1997, Amendment No. 2
dated as of August 14, 1997 (effective June 30, 1997), Amendment No. 3 dated as
of February 13, 1998 and Amendment No. 4 dated as of May 15, 1998 (the "Credit
Agreement") expired on October 27, 1998.
Pursuant to the Forbearance Agreement, the lender agreed to grant certain
accommodations and to forbear from taking action to collect the indebtedness
outstanding under the Credit Agreement until January 1, 2000. The Forbearance
Agreement provides for financing based on an asset formula with maximum
borrowings ranging from a low of $86.5 million in January 1999 to a high of
$89.7 million in November 1999 plus an over-formula ranging from a low of $42.7
million in November 1998 to a high of $48.2 million in December 1999. With the
sale of IAF, the over-formula amount has been reduced to a low of $38.5 million
in April 1999 with a maximum borrowing of $68.3 million at April 30, 1999.
During 1998, the U.S. lenders have received significant payments originating
from the sale of Allparts in October 1998 in the amount of $9.9 million and from
Starboard's and PTI's collection of pre-petition receivables, refinancing of
inventory and other payments totaling $11.0 million. Subsequent to year end, the
sale of IAF resulted in a payment of $19.2 million and additional collections
have reduced the debt outstanding under the Forbearance Agreement to $67.4
million at March 31, 1999.
<PAGE>
At December 31, 1998, Current Liabilities exceeded Current Assets by $62.8
million, reflecting the classification of the amount outstanding to the Bank
Group pursuant to the Forbearance Agreement of $84.5 million as a current
liability. Excluding the amount outstanding to the Bank Group pursuant to the
Forbearance Agreement, working capital at December 31, 1998 would have been
$21.7 million as compared to $44.7 million at December 31, 1997. The decrease in
working capital also reflects the classification change for the assets and
liabilities of subsidiaries being reported under the equity method of
accounting. The working capital of those entities, excluding bank debt and
debtor-in-possession financing, is $16.6 million. The remaining decrease in
working capital is attributed to the sale of Allparts. As described in Note 19
to the consolidated financial statements and below, the Company's liquidity and
capital resources are dependent on consummation of certain transactions. Cash
used by operations was $1 million for the year ended December 31, 1998.
During 1997, the Company acquired all of the outstanding capital stock of BATCO
for total consideration of $5.5 million plus a five year earn-out not to exceed
$3.9 million based on achieving certain sales levels. The acquisition was
financed from borrowings under the Credit Agreement. There was no payout in 1998
under the earn-out formula.
On December 20, 1996, JPEC entered into a Cdn. $28.7 million credit agreement
with a Canadian bank (the "Canadian Credit Facility"), primarily to fund the
acquisition of Pebra Inc. In addition to funding the acquisition of Pebra Inc.,
the Canadian Credit Facility permitted JPEC to borrow funds in the form of
advances for operating requirements and capital expenditures. Repayment terms of
borrowings under the facility varied based on the nature of the advance.
Advances under the Canadian Credit Facility were collateralized by substantially
all of the assets of JPEC. JPEC defaulted under the Canadian Credit Facility in
1998. The Canadian bank had a trustee appointed which sold substantially all of
the assets of JPEC on February 8, 1999. The sale proceeds were insufficient to
retire all secured debt and JPEC filed for bankruptcy, which will eliminate all
unpaid debts of JPEC; however, the Company had provided a guarantee of the JPEC
debt in the amount of $2.0 million to the Canadian bank. After application of
the sale proceeds, the amount owed under the guarantee is approximately Cdn.
$820,000. The Company is in discussions with the Canadian bank to resolve this
outstanding amount.
In connection with the filing for protection from creditors under Chapter 11 of
the U.S. Bankruptcy Code for Starboard and PTI (the "debtor companies"), the
debtor companies entered into separate debtor-in-possession financing agreements
to provide for post-petition financing (the "DIP financing") which expires on
September 15, 2000. There is a prepayment penalty of 3% of the commitment amount
if the debt is paid off before September 15, 1999, unless payment is the result
of a sale of debtor's assets. This debt is not shown on the Company's
consolidated balance sheet as these subsidiaries are reported under the equity
method.
PTI obtained DIP financing which provides for up to $21 million in asset based
loans with an out-of-formula allowance not to exceed $6 million. PTI paid
closing fees in the amount of $110,000 and monthly service fees of $3,500. At
December 31, 1998, borrowings outstanding under PTI's DIP financing totaled
$14.2 million.
Starboard obtained DIP financing which provides for up to $6 million in asset
based loans with an out-of-formula allowance not to exceed $2 million. Starboard
paid closing fees in the amount of $35,000 and monthly service fees of $1,000.
At December 31, 1998, borrowings outstanding under Starboard's DIP financing
totaled $3.9 million.
<PAGE>
On February 18, 1999, the Company reached an agreement in principle with ASC
Holdings, Inc., pursuant to which a company to be formed would acquire common
and preferred stock of the Company to initially have voting control and an
economic interest of 95% of the Company. The current stockholders of JPE, Inc.
would retain the remaining equity in the Company, subject to further dilution of
511,353 common stock warrants, in the event of the exercise of such warrants
that will be issued to the Company's bank lenders in exchange for loan
concessions in excess of $12.0 million. In addition, the current stockholders of
the Company and the Company's bank group would receive warrants that would
entitle them to purchase 15% of the voting power and economic interest in the
Company, exercisable two years after the consummation of the ASC Holdings, Inc.
investment, subject to obtaining prescribed EBITDA levels. As such, current
stockholders of the Company would experience substantial dilution upon the ASC
Holdings, Inc. investment, but would have the potential of increasing their
aggregate percentage ownership in the future. Pursuant to the agreement in
principle, ASC Holdings, Inc. would invest $18.4 million in the Company and
would provide or arrange a loan to JPE in the amount of approximately $51.6
million. The Company and ASC Holdings, Inc. are continuing to negotiate the
final terms and structure of the foregoing investment by ASC Holdings, Inc.
which is subject to a number of conditions, including execution of a definitive
agreement, approval of the bankruptcy courts having jurisdiction over PTI and
Starboard and approval of the Company's bank group lenders. There can be no
assurance that the parties will reach agreement on mutually satisfactory terms
or that the conditions to consummating the transaction will be satisfied.
PTI and Starboard have filed reorganization plans with the Bankruptcy Court that
are subject to a confirmation hearing scheduled for April 16, 1999. Under these
plans, PTI's and Starboard's unsecured creditors as of September 15, 1998 will
be paid 30% of their pre-petition claims. This will result in a forgiveness of
liabilities of approximately $4.1 million.
There can be no assurance that a transaction with ASC Holdings, Inc. can be
consummated on terms that are adequate to restructure the Company's obligations
to its bank group, to meet its obligations to the Canadian lender and which are
satisfactory under the terms of the Reorganization Plans which remain to be
approved by the Bankruptcy Court. If the transaction with ASC Holdings, Inc. is
not consummated, the Company's ability to continue as a going concern is
uncertain.
YEAR 2000
PTI's and Starboard's business systems require updating to become Year 2000
compliant. DPI's business system has been updated and will be Year 2000
compliant in April 1999. The Company's manufacturing operations do not rely on
highly sophisticated date driven processes and, as such, compliance with Year
2000 requirements is not significant in the manufacturing area. Each of the
Company's business systems is being updated or a replacement system is being
purchased. The Company estimates that the total cost to be spent in 1999 to
become Year 2000 compliant is approximately $355,000 relating to new hardware
and software programs. In addition, there will be costs for training employees
on the new systems which will be accounted for as operating expense.
The Company has also been in contact with its customers and suppliers and has
requested that they complete questionnaires to determine any impact on the
Company's operations. In general, the suppliers and customers have developed or
are in the process of developing plans to address Year 2000 issues. The Company
will continue to monitor and evaluate the progress of suppliers and customers on
this critical matter.
Based on the progress the Company has made in addressing its Year 2000 issues
and the plans and timelines to complete this project, the Company does not
foresee significant risks associated with its Year 2000 compliance at this time.
The Company has not developed a detailed contingency plan, but given the current
status of its progress, it appears that all systems will be compliant. However,
if the Company identifies significant risks related to its Year 2000 compliance
or its progress deviates from the anticipated timeline, the Company will develop
contingency plans as deemed necessary at that time.
<PAGE>
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," becomes effective for all fiscal
quarters for all fiscal years beginning after June 15, 1999 (effective January
1, 2000 for the Company).
SFAS No. 133 is not currently applicable to the Company.
The American Institute of Certified Public Accountants' Statement of Position
No. 98-5, "Reporting on the Costs of Start-Up Activities," is effective for
fiscal years beginning after December 15, 1998 and will not have a material
effect on the Company's financial statements.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JPE, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants 22
Consolidated Balance Sheets as of December 31,
1997 and 1998 23
Consolidated Statements of Operations and
Comprehensive Income for the Years Ended
December 31, 1996, 1997 and 1998 24
Consolidated Statements of Shareholders'
Equity for the Years Ended December 31,
1996, 1997 and 1998 25
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1996, 1997
and 1998 26
Notes to Consolidated Financial Statements 27-45
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of JPE, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and comprehensive income, of cash flows,
and of changes in shareholders' equity present fairly, in all material respects,
the financial position of JPE, Inc. and its subsidiaries at December 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule listed in Item 14(a)(2) of this Form 10-K presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. At December 31, 1998, current
liabilities exceed current assets by $63 million which reflects the current
classification of the revolving credit agreement of $84 million which has been
in default since June 1998. The Company incurred net losses in 1996, 1997, and
1998 and has negative cash flow from operations of $1 million in 1998. As
discussed in Notes 5, 6 and 7 to the consolidated financial statements, three of
the Company's subsidiaries were under court ordered protection in 1998. As
discussed in Note 19 to the consolidated financial statements, the Company has
entered into a letter of intent pursuant to which a substantial investment would
be made in the Company in exchange for a voting and equity interest of 95%,
certain subsidiaries would concurrently emerge from bankruptcy and the Company's
bank debt would be restructured subject, in each case, to the satisfaction of
several conditions. These uncertainties raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
/s/ PricewaterhouseCoopers LLP
--------------------------
April 1, 1999
<PAGE>
JPE, INC.
<TABLE>
CONSOLIDATED BALANCE SHEETS
at December 31,
(amounts in thousands, except share data)
<CAPTION>
ASSETS
1997 1998
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 29 $ 394
Accounts receivable, net of
allowance for doubtful accounts
of $374 and $684 at December 31,
1997 and 1998, respectively 37,997 12,151
Inventory 39,412 18,572
Other current assets 8,375 1,413
-------- --------
Total current assets 85,813 32,530
Investment in affiliate companies -- 14,661
Property, plant and equipment, net 72,981 20,963
Goodwill, net 31,962 7,458
Other assets 2,459 1,362
-------- --------
Total assets $193,215 $ 76,974
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $105,402 $ 84,492
Short term debt 7,723 --
Accounts payable 25,219 8,273
Accrued liabilities 6,336 1,931
Income taxes 314 14
Loan guaranty -- 635
-------- --------
Total current liabilities 144,994 95,345
Deferred income taxes 3,804 157
Other liabilities 1,651 1,563
Long-term debt, non-current 9,272 50
-------- --------
Total liabilities 159,721 97,115
-------- --------
Commitments and contingencies -- --
Shareholders' equity:
Preferred stock, no par value,
3,000,000 authorized, no shares
issued and outstanding -- --
Common stock, no par value,
15,000,000 authorized, 4,602,180
issued and outstanding at December 31,
1997 and 1998 28,051 28,051
Accumulated other comprehensive loss (271) (336)
Retained earnings (accumulated deficit) 5,714 (47,856)
-------- --------
Total shareholders' equity (deficit) 33,494 (20,141)
-------- --------
Total liabilities and
shareholders' equity $193,215 $ 76,974
======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
JPE, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
for the years ended December 31,
(amounts in thousands, except per share data)
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net sales $201,453 $287,066 $210,122
Cost of goods sold 166,714 246,903 186,657
-------- -------- --------
Gross profit 34,739 40,163 23,465
Selling, general and
administrative expenses 24,600 29,254 27,609
Charge for subsidiaries under
court ordered protection -- -- 28,490
Charge for impairment of goodwill 4,300 -- --
Loss on sale of Allparts, Inc. -- -- 5,190
Discontinuance of stamping operations -- 2,164 --
Other expenses -- 618 1,983
Affiliate companies' losses -- -- 1,713
-------- -------- --------
Income (loss) before interest and taxes 5,839 8,127 (41,520)
Interest expense, net 7,225 10,464 13,085
-------- -------- --------
Loss before taxes (1,386) (2,337) (54,605)
Income tax expense (benefit) 203 (194) (1,035)
-------- -------- --------
Net loss $ (1,589) $ (2,143) $(53,570)
======== ======== ========
Other comprehensive expense
Foreign currency translation adjustment -- (271) (65)
-------- -------- --------
Comprehensive loss $ (1,589) $ (2,414) $(53,635)
======== ======== ========
Basic loss per common share $ (.35) $ (.47) $(11.64)
====== ====== =======
Weighted average shares outstanding 4,574 4,602 4,602
===== ===== =====
Loss per common share
assuming dilution $ (.35) $ (.47) $(11.64)
====== ====== =======
Weighted average shares outstanding
and common stock equivalents 4,574 4,602 4,602
===== ===== =====
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
JPE, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31
(amounts in thousands, except share data)
<CAPTION>
Accumulated
Common Stock Other
Shares Comprehensive Retained
Outstanding Amount Loss Earnings Total
----------- ------ ------------- -------- -----
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1996 4,473,930 $27,301 -- $ 9,446 $ 36,747
Employee Stock Plan 108,550 410 410
Tax benefit from exercised
stock options 210 210
Net loss (1,589) (1,589)
--------- ------- ------ -------- --------
Balances, December 31, 1996 4,582,480 27,921 -- 7,857 35,778
Employee Stock Plan 19,700 77 77
Options granted for
consulting services 25 25
Tax benefit from exercised
stock options 28 28
Foreign currency translation
adjustment (271) (271)
Net loss (2,143) (2,143)
--------- ------- ------ -------- --------
Balances, December 31, 1997 4,602,180 28,051 (271) 5,714 33,494
Foreign currency translation
adjustment (65) (65)
Net loss (53,570) (53,570)
--------- ------- ------ -------- --------
Balances, December 31, 1998 4,602,180 $28,051 $ (336) $(47,856) $(20,141)
========= ======= ====== ======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
JPE, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31,
(amounts in thousands)
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,589) $ (2,143) $(53,570)
Depreciation and amortization 7,416 10,412 8,669
Loss on sale of Allparts, Inc. -- -- 5,190
Discontinuance of stamping operations -- 2,250 --
Write-down of assets related to subsidiaries
under court ordered protection -- -- 31,855
Charge for impairment of goodwill 4,300 -- --
Disposal of property and equipment 98 1,296 --
Affiliate companies' losses -- -- 1,713
Adjustments to reconcile net loss to net
cash provided by (used for)
operating activities:
Changes in operating assets and
liabilities:
Accounts receivable (936) (9,109) 8,020
Inventory 729 (1,322) 3,586
Other current assets (1,534) 1,898 1,072
Accounts payable 2,487 4,260 (5,254)
Accrued liabilities and income taxes (1,168) (4,140) 1,095
Deferred income taxes 257 620 (3,487)
-------- -------- --------
Net cash provided by (used for)
operating activities 10,060 4,022 (1,111)
-------- -------- --------
Cash flows from investing activities:
Acquisition of Pebra Inc. (JPE Canada Inc.) (21,662) -- --
Purchase of property and equipment (13,150) (13,172) (3,071)
Cash proceeds from sale of property and
equipment -- 1,200 --
Acquisition of Brake, Axle and Tandem
Company -- (5,518) --
Purchase of patent (1,466) -- --
Cash proceeds from sale of Allparts, Inc. -- -- 9,891
Cash received from equity investees -- -- 11,037
-------- -------- --------
Net cash provided by (used for)
investing activities (36,278) (17,490) 17,857
-------- -------- --------
Cash flows from financing activities:
Sale of common stock 410 102 --
Repayments of other debt (10,100) (1,727) (427)
Net borrowings (payments) under
revolving loan 19,270 11,675 (19,389)
Net borrowings under Canadian
credit facility 17,456 1,059 3,983
Borrowings (repayments) under
capital lease -- 1,555 (195)
Tax benefit from options 210 28 --
-------- -------- --------
Net cash provided by (used for)
financing activities 27,246 12,692 (16,028)
-------- -------- --------
Effect of currency translation on cash -- (511) (353)
-------- -------- --------
Cash and cash equivalents:
Net increase (decrease) in cash 1,028 (1,287) 365
Cash, beginning of period 288 1,316 29
-------- -------- --------
Cash, end of period $ 1,316 $ 29 $ 394
======== ======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FINANCIAL STATEMENT PRESENTATION - 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 at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Certain financial
statement items have been reclassified to conform to the current year's
format.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of JPE, Inc. (the "Company"), and its
wholly-owned subsidiaries, Dayton Parts, Inc. ("Dayton Parts"), Allparts,
Inc. ("Allparts"), SAC Corporation ("Starboard"), Industrial & Automotive
Fasteners, Inc. ("IAF"), Plastic Trim, Inc. ("PTI") and JPE Canada Inc.
("JPEC"), from the dates of acquisition (the "Acquisitions"), December 31,
1992, July 31, 1994, September 30, 1994, February 28, 1995, March 31, 1995,
and December 23, 1996, respectively. During the third quarter of 1998,
three of the Company's subsidiaries were placed under court ordered
protection. On September 15, 1998, PTI and Starboard filed voluntary
petitions for relief under Chapter 11 of the Federal Bankruptcy Code in the
United States Bankruptcy Court for the Eastern Division of Michigan. On
August 27, 1998, the Ontario Court (General Division) Commercial List
issued an order to appoint an Interim Receiver for JPEC pursuant to Section
47 of the Bankruptcy and Insolvency Act of Canada. Under these conditions,
generally accepted accounting principles do not allow the Company to
consolidate these subsidiaries from the dates of their respective filings.
The Company has utilized the equity method of accounting in preparing the
financial statements for the year ended December 31, 1998. All significant
intercompany accounts and transactions with the consolidated subsidiaries
have been eliminated in the preparation of the consolidated financial
statements.
BUSINESS - JPE, Inc. is a manufacturer and distributor of automotive and
truck components for the original equipment manufacturers and the
replacement parts markets principally in North America. Total sales for the
year ended December 31, 1998 were approximately 41% for trim products, 18%
for fasteners and 41% to the replacement parts markets, excluding sales of
trim products by subsidiaries that are being accounted for using the equity
method.
CONCENTRATION OF CREDIT RISK - Accounts receivable of the Company, which
represent the principal concentration of credit risk, result from sales to
companies in the automotive, light truck and heavy duty truck original
equipment and aftermarket industries. Credit is extended based upon an
evaluation of the customer's financial condition and collateral is not
required from customers.
INVENTORY - Inventory is valued at the lower of cost or market using the
first-in, first-out ("FIFO") cost method.
FOREIGN CURRENCY TRANSLATION - Transaction gains and losses arising from
the settlement of foreign currency transactions and the increase or
decrease in recorded functional currency amounts are charged to the related
period's statement of operations. Included in other expense are foreign
currency transaction losses of $91 and $468 in 1998 and 1997, respectively.
Translation adjustments arising from the translation of foreign subsidiary
financial statements are recorded as a separate component of stockholders'
equity and as other comprehensive income or loss.
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION - Property, plant and
equipment are recorded at cost. Costs assigned to property, plant, and
equipment purchased as part of an acquisition are based on the fair value
of such assets on the date of the acquisition or an allocation of total
purchase price if the fair value of assets acquired exceeds the purchase
price. Improvements are capitalized, and expenditures for maintenance and
repairs are charged to operations as incurred. Gains or losses on sales and
retirements of properties are included in the determination of the results
of operations. Provisions for depreciation of property, plant, and
equipment have been computed using the straight-line method based on
estimated useful lives of the related assets.
GOODWILL - Costs in excess of net assets of acquired companies are
amortized over 25 years using the straight-line method. Accumulated
amortization at December 31, 1997 and 1998 was $3,699 and $1,032,
respectively. The recoverability of goodwill is evaluated annually.
DEFERRED FINANCING COSTS - Deferred financing costs associated with
borrowings are being amortized over their respective periods. Accumulated
amortization at December 31, 1997 and 1998 was $466 and $563, respectively.
At December 31, 1998, all deferred financing costs have been fully
amortized to expense.
EARNINGS PER COMMON SHARE - The Company has adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." In accordance with the
pronouncement, basic earnings per share is computed by dividing earnings by
the sum of the weighted average number of common shares outstanding during
the period. Diluted earnings per share includes common stock equivalents
(options and warrants) outstanding during the year. Common stock
equivalents would increase the weighted average shares outstanding by
12,058, 4,439 and 28,034 shares, respectively, for the years ended December
31, 1996, 1997 and 1998. These shares are not included in the computation
in any year there is a loss.
STOCK BASED COMPENSATION - Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," encourages, but does not
require companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has elected to continue to
measure compensation costs using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess of the quoted market price of the
Company's stock at the date of grant over the amount an employee must pay
to acquire the stock.
CASH AND CASH EQUIVALENTs - Cash and cash equivalents include investments
in highly liquid instruments with a maturity of three months or less.
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
2. INVENTORY:
Inventory consisted of the following at December 31:
1997 1998
---- ----
Raw materials $15,211 $ 1,606
Work in process and components 2,435 1,411
Finished goods 19,309 13,291
Tooling 2,457 2,264
------- -------
$39,412 $18,572
======= =======
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following at December 31:
1997 1998
---- ----
Land $ 2,838 $ 1,123
Buildings 15,967 4,823
Machinery and equipment 68,978 24,345
Furniture and fixtures 5,866 4,338
------- -------
93,649 34,629
Less accumulated depreciation (20,668) (13,666)
------- -------
$72,981 $20,963
======= =======
4. ACCRUED LIABILITIES:
Accrued liabilities consisted of the following at December 31:
1997 1998
---- ----
Accrued compensation $ 1,254 $ 415
Accrued interest 817 767
Accrued employee benefits 1,458 193
Accrued taxes 566 20
Other 2,241 536
------- -------
$ 6,336 $ 1,931
======= =======
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
5. CHARGES FOR SUBSIDIARIES UNDER COURT ORDERED PROTECTION:
During the third quarter of 1998, three of JPE's subsidiaries were placed
under court ordered protection. On September 15, 1998, PTI and Starboard
filed voluntary petitions for relief under Chapter 11 of the Federal
Bankruptcy Code in the United States Bankruptcy Court for the Eastern
District of Michigan. On August 27, 1998, the Ontario Court (General
Division) Commercial List issued an order to appoint an Interim Receiver
for JPEC pursuant to Section 47 of the Bankruptcy and Insolvency Act of
Canada. JPE has applied the accounting treatment of various Financial
Accounting Standards to write down the assets of these subsidiaries to
their estimated net realizable value. The following adjustments were
recorded to these balance sheet accounts:
<TABLE>
<CAPTION>
PTI Starboard JPEC Total
--- --------- ---- -----
<S> <C> <C> <C> <C>
Goodwill $13,222 $5,333 -- $18,555
Fixed assets 8,000 -- -- 8,000
Accounts receivable 1,156 350 -- 1,506
Inventory 1,759 -- -- 1,759
Patents -- -- $1,300 1,300
Loan guarantee -- -- 635 635
Other assets -- -- 100 100
------- ------ ------ -------
Total $24,137 $5,683 $2,035 $31,855
======= ====== ====== =======
These charges have been reflected on the income statement in the following
captions:
Cost of sales $ 1,759 -- -- $ 1,759
Selling, general and
administrative 1,156 $ 350 $ 100 1,606
Charge for subsidiaries
under court ordered
protection 21,222 5,333 1,935 28,490
------- ------ ------ -------
Total $24,137 $5,683 $2,035 $31,855
======= ====== ====== =======
</TABLE>
6. INVESTMENT IN U.S. AFFILIATE COMPANIES:
JPE's subsidiaries, PTI and Starboard, are debtors-in-possession under
Chapter 11 of the Federal Bankruptcy Code. Under these conditions,
generally accepted accounting principles do not allow the Company to
consolidate these subsidiaries from the date of filing their voluntary
petitions with the Bankruptcy Court. On February 25, 1999, both
subsidiaries filed a Plan of Reorganization and Disclosure Statement with
the Court. These plans are subject to confirmation by the Bankruptcy Court
scheduled for April 16, 1999. If the plans are approved, these two
subsidiaries will emerge from Chapter 11. Note 19 describes details of the
plans in conjunction with a proposed investment into JPE.
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
6. INVESTMENT IN U.S. AFFILIATE COMPANIES, CONTINUED:
The Investment in U.S. affiliate companies on the Consolidated Balance
Sheet at December 31, 1998 is comprised of the following (amounts in
thousands):
<TABLE>
<CAPTION>
PTI Starboard Total
--- --------- -----
<S> <C> <C> <C>
Cash $ 196 $ 522 $ 718
Receivables 12,176 3,992 16,168
Inventory 5,322 514 5,836
Other current assets 353 1,370 1,723
Property, plant and equipment, net 16,228 4,356 20,584
------- ------- -------
Total Assets $34,275 $10,754 $45,029
------- ------- -------
Liabilities not subject to compromise:
Current liabilities
Accounts payable $ 260 $ 272 $ 532
Accrued liabilities 1,729 875 2,604
Other liabilities 100 368 468
Debtor-in-possession financing 14,194 3,874 18,068
Liabilities subject to compromise 4,566 1,270 5,836
------- ------- -------
Total Liabilities $20,849 $ 6,659 $27,508
------- ------- -------
Net Equity $13,426 $ 4,095 $17,521
======= ======= =======
</TABLE>
The results of operations for these subsidiaries since their filing date
has been recorded on the equity method. Summarized statements of operations
from September 16, 1998 to December 31, 1998 are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
PTI Starboard Total
--- --------- -----
<S> <C> <C> <C>
Sales $22,658 $ 6,422 $29,080
Cost of sales 20,924 5,241 26,165
------- ------- -------
Gross profit 1,734 1,181 2,915
Selling, general and
administrative expense 1,936 328 2,264
Other reorganization expenses 386 337 723
------- ------- -------
Income (loss) before interest
and taxes (588) 516 (72)
Interest expense 319 81 400
------- ------- -------
Income (loss) before taxes (907) 435 (472)
Income tax expense (benefit) (20) 88 68
------- ------- -------
Net income (loss) $ (887) $ 347 $ (540)
======= ======= =======
</TABLE>
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
7. INVESTMENT IN JPE CANADA INC.:
At December 31, 1998, JPE Canada Inc. ("JPEC") was under the control of an
Interim Receiver appointed pursuant to Section 47 of the Bankruptcy and
Insolvency Act of Canada. The duties of the Interim Receiver included
commencing the process of realizing value of the assets for the benefit of
The Bank of Nova Scotia, the secured lender. On December 8, 1998, The Bank
of Nova Scotia, the Interim Receiver, General Motors Corporation and
General Motors of Canada Limited entered into an agreement to sell
substantially all the assets of JPEC to the Ventra Group, Inc. This
agreement required that JPEC make an assignment in bankruptcy prior to
closing. On February 8, 1999, JPEC filed an assignment in bankruptcy with
the Ontario Court (General Division) Commercial List and substantially all
the assets of JPEC were sold for approximately $13.7 million. The secured
bank loans of JPEC were approximately $14.8 million at closing. The balance
sheet and income statement for JPEC have been recorded on the equity method
from the appointment of the Interim Receiver on August 27, 1998. The unpaid
liabilities of JPEC at closing will be eliminated through the bankruptcy
proceeding, resulting in a gain of approximately $2.9 million to be
recognized in the first quarter of 1999.
The following is a summary of JPEC's Balance Sheet at December 31, 1998 and
Statement of Operations from August 28 to December 31, 1998 (amounts in
thousands):
Receivables $ 4,390
Inventory 3,709
Other assets 703
Fixed assets 14,839
-------
Total Assets 23,641
-------
Bank debt 19,251
Accounts payable 5,421
Accrued liabilities 1,085
Other liabilities 744
-------
Total Liabilities 26,501
-------
Net Deficit $(2,860)
=======
Sales $19,194
Cost of sales 18,304
-------
Gross profit 890
Selling, general and administrative expense 709
Other expense 1,082
-------
Loss before interest and taxes (901)
Interest expense 342
-------
Loss before taxes (1,243)
Tax benefit 70
-------
Net Loss $(1,173)
=======
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
8. SALE OF ALLPARTS, INC.:
On October 28, 1998, JPE sold substantially all of the assets of its
wholly-owned subsidiary, Allparts, Inc., to R&B, Inc. for $10.1 million and
the assumption of trade payables and accrued liabilities of $1.5 million,
for a total sales price of $11.6 million. The expenses related to this
transaction totaled $0.2 million. The assets of Allparts, Inc. on October
28, 1998 totaled $16.6 million. The loss on the sale of Allparts, Inc. was
$5.2 million. The net proceeds of $9.9 million were used to pay down U.S.
Bank debt.
9. SUBSEQUENT EVENT - SALE OF IAF:
On March 26, 1999, JPE sold the stock of IAF to MacLean-Fogg Corporation
for $20.0 million. The sale agreement required certain vendors to
compromise their accounts receivable from IAF to 30% of the outstanding
balance and union employees to accept annuity contracts in lieu of their
postretirement health care and life insurance benefits. JPE will record a
gain in the first quarter of 1999 for the forgiveness of these liabilities
of approximately $3.4 million, offset by a loss on the sale of stock of
approximately $4.0 million. The net proceeds of $19.2 million were used to
pay down U.S. Bank debt.
10. FINANCING:
JPE is in default under its credit agreement with its U.S. bank group. JPE
has a Forbearance Agreement under which the lender agreed to grant certain
accommodations and to forbear until January 1, 2000. This Agreement
provides financing based on an asset formula. The Forbearance Agreement is
collateralized by all of the Company's assets, with the exception of JPEC's
assets, the inventories of Starboard and PTI, and the post-petition
accounts receivable of Starboard and PTI. At December 31, 1998, the
borrowings under the Forbearance Agreement totaled $84.5 million. This
Agreement provides continued financing for the Company and its subsidiaries
that have not filed for bankruptcy. The Agreement provides that any
proceeds from pre-petition inventory and receivables will be used to
permanently reduce debt under the Forbearance Agreement. From their filing
date to December 31, 1998, these subsidiaries made total payments of
approximately $11 million. In addition, under the Bankruptcy Court order,
any sale of pre-petition collateral other than inventory and receivables
will first reduce debt under the Forbearance Agreement for PTI of $8.4
million and Starboard of $3.6 million and then be used to reduce
post-petition debt, with any remaining proceeds to be applied to debt under
the Forbearance Agreement subject to certain offsets. At December 31, 1998,
the Company has classified the amount owed on the Forbearance Agreement as
current portion of long-term debt.
PTI and Starboard have post-petition loans as provided by a financing
order, which are collateralized by post-petition receivables and
inventories. The debtor-in-possession financing agreements provide for up
to $21 million for PTI and up to $6 million for Starboard with interest at
8.75%. These debt instruments are reflected on the consolidated balance
sheet through investment in affiliate companies (see Note 6).
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
10. FINANCING, CONTINUED:
At December 31, 1997, the Company had borrowings consisting of the
following:
December 31, 1997
-----------------
Revolving credit agreement with banks due
October 1998. $103,875
Credit agreement between JPE Canada Inc.
and a Canadian bank 16,422
Other 2,100
--------
Total Debt $122,397
========
At December 31, 1997 and 1998, the average effective borrowing rate was
8.2% and 9.75%, respectively. The credit agreement provides for a facility
fee which is payable quarterly in arrears. Facility and amendment fees were
$293 in 1996, $376 in 1997, $1,440 in 1998, and are included as interest
expense.
11. STOCK OPTIONS AND WARRANTS:
The Company has granted certain officers, directors, key employees and
consultants stock options under the 1993 Stock Incentive Plan for Key
Employees of JPE, Inc. The options granted under this plan give the bearer
the right to purchase stock at a fixed price, determined at the date of
grant.
Under the JPE Stock Incentive Plan for Key Employees (the "Plan"), the
total number of shares of common stock that may be granted is 732,608. The
Plan provides that shares granted come from the Company's authorized but
unissued common stock and that the price of the options granted qualifying
as incentive options will not be less than 100 percent of the fair market
value of the shares on the date of the grant. Substantially all options
that have been granted under the Plan vest equally over a four year period
and expire on various dates, typically ten years after the date of grant.
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
11. STOCK OPTIONS AND WARRANTS, CONTINUED:
Information regarding the Plan, the prior plan and the JPE Director Stock
Option Plan for 1996, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Exercise Options Exercise
Shares Price Exercisable Price
------ -------- ----------- --------
<S> <C> <C> <C> <C>
Balance, January 1, 1996 649,578 $10.26 191,198 $ 6.33
Options exercised (108,550) $ 3.78
Options terminated and expired (597,418) 11.24
Options granted 537,000 7.67
-------
Balance, December 31, 1996 480,610 $ 7.61 168,981 $ 8.26
Options exercised (19,700) $ 3.87
Options terminated and expired (130,910) 9.07
Options granted 86,750 7.09
-------
Balance, December 31, 1997 416,750 $ 7.22 178,500 $ 7.25
Options exercised -- --
Options terminated and expired (243,250) $ 6.86
Options granted 359,000 1.59
-------
Balance, December 31, 1998 532,500 $ 3.58 187,188 $ 6.86
=======
</TABLE>
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Options available for grant at end of year 294,640 323,814 200,108
Option price range at end of year $3.26-$13.50 $6.625-$8.00 $0.30-$8.00
Option price range for exercised shares $3.26-$4.01 $3.26-$7.25 --
Weighted average grant date fair value
of options granted $4.44 $3.61 $0.66
Weighted average remaining contractual
life 8 years 7.5 years 8.5 years
</TABLE>
On December 16, 1996, the Company elected to reprice 415,000 of the
outstanding options to the then fair market value of $7.25.
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
11. STOCK OPTIONS AND WARRANTS, CONTINUED:
During 1994, the Company granted warrants to purchase 100,000 shares of
common stock at $9.50 per share. The warrants were exercisable on the grant
date and expire ten years from the date of grant.
The Company has elected to adopt the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation." Accordingly, no compensation cost has been recognized
for the stock option plan. Had compensation cost for the Company's plan
been determined based on the fair value at the grant date for awards in
1996, 1997 and 1998 consistent with the provisions of SFAS No. 123, the
Company's net loss and loss per share would have changed to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net loss - as reported $(1,589) $(2,143) $(53,570)
Net loss - pro forma $(1,810) $(2,380) $(53,336)
Loss per share assuming dilution - as reported $(.35) $(.47) $(11.64)
Loss per share assuming dilution - pro forma $(.40) $(.52) $(11.59)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996, 1997 and 1998: dividend yield of 0%;
expected volatility of 56%; risk-free interest rate of 6.3%; and expected
lives of 6 years.
The pro forma disclosures may not be representative of the effects on
reported net income and earnings per share because only stock options
granted beginning in 1995 are reflected in the pro forma amounts. Other
factors that may impact pro forma disclosures in future years include the
vesting period of stock options, timing of additional grants and number of
additional shares granted.
12. EMPLOYEE BENEFIT PLANS:
The Company has several different defined contribution plans consisting of
a 40l(k) plan and profit sharing plans which cover substantially all U.S.
based non-union employees. The Company's contribution is discretionary. The
charges to operations for the years ended December 31, 1996, 1997 and 1998
were $1,639, $1,258 and $567, respectively.
The Company contributes to a multiemployer defined benefit plan for the IAF
employees covered under its collective bargaining agreement. This plan is
composed of hundreds of different participating employers and many
international and local unions. Pension benefits are determined on a
formula basis which recognize length of service and benefit units. One
benefit unit is credited for each 1,800 hours of service in covered
employment. The Company has charged to expense $122, $151 and $176 for the
years ended December 31, 1996, 1997 and 1998, respectively.
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
12. EMPLOYEE BENEFIT PLANS, CONTINUED:
The Company also provides health care and life insurance benefits for the
union employees of IAF. These employees become eligible for benefits if
they qualify for retirement while working for the Company. The following
table presents the plan's status at December 31:
1997 1998
---- ----
Accumulated postretirement
benefit obligation $(1,368) $ (964)
Unrecognized prior service cost -- (403)
Unrecognized net loss (gain) 119 (48)
------- -------
Recorded accumulated postretirement
benefit obligation $(1,249) $(1,415)
======= =======
The following table presents net periodic benefit cost for the year ended
December 31:
1996 1997 1998
---- ---- ----
Service cost $117 $171 $128
Interest cost 72 95 77
Amortization of prior service cost -- -- (24)
---- ---- ----
Net periodic benefit cost $189 $266 $181
==== ==== ====
The accumulated postretirement benefit obligation was determined using an
assumed discount rate of 7.0% and 6.5% in 1997 and 1998, respectively. The
assumed annual health care cost trend rate was 8.0% and 7.5% for 1997 and
1998, respectively, decreasing to 5% in 2001. A one percentage point
increase in the assumed health care cost trend rate would have increased
the 1998 accumulated postretirement cost by $51 and would have increased
the accumulated postretirement benefit obligation by $203. On March 26,
1999, the Company sold the stock of IAF, and this liability was forgiven by
the union in exchange for annuity contracts to be provided by the new
owner.
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
13. INCOME TAXES:
Income tax expense (benefit) at December 31, 1996, 1997 and 1998 is as
follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income tax:
U.S. $(1,301) $ 63 $(48,544)
Foreign (85) (2,400) (6,061)
------- ------- --------
(1,386) (2,337) (54,605)
Current payable (refundable):
Federal $ (395) (456) (366)
State 378 333 441
Foreign -- 43 (19)
------- ------- --------
Total current payable (refundable) (17) (80) 56
------- ------- --------
Deferred:
Federal 96 606 (1,649)
State 157 88 (283)
Foreign (33) (808) 841
------- ------- --------
Total deferred 220 (114) (1,091)
------- ------- --------
Total income tax expense (benefit) $ 203 $ (194) $ (1,035)
======= ======= ========
</TABLE>
The 1996, 1997 and 1998 provision for income taxes differs from the amount
of income tax determined by applying the statutory U. S. federal income tax
rate to pretax income as a result of the following:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Statutory U. S. federal tax rate (34%) (34%) (34%)
State taxes, net of federal tax benefit 26 12 --
Non-deductible write-off of equity investment 10 -- --
Goodwill amortization 14 10 --
Foreign tax rate in excess of U.S. federal tax rate -- 2 --
Establishment of valuation reserve -- -- 32
All other (1) 2 --
---- ---- ----
Effective tax rate 15% ( 8%) ( 2%)
==== ==== ====
</TABLE>
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
13. INCOME TAXES, CONTINUED:
Deferred income taxes reflect the estimated future tax effect of temporary
differences between the amount of the assets and liabilities for financial
reporting purposes and such amounts as measured by tax laws and
regulations. At December 31, 1998, the Company's taxable net operating loss
carryover amounted to $15.0 million of which $1.9 million relates to the
Company's 1997 purchase of BATCO. The Company's utilization of this net
operating loss carryover is limited to future years' taxable income. A
valuation reserve at 100% was provided against net deferred tax assets to
reflect the Company's limited use of net operating loss carryovers and
future tax deductions for U.S. Federal tax purposes. At December 31, 1997
and 1998, deferred tax assets and liabilities are as follows:
1997 1998
---- ----
Deferred tax assets:
Goodwill $ 827 $ 780
Inventory 551 527
Allowance for doubtful accounts 243 380
Employee benefits 800 522
AMT tax credit 357 78
Net operating loss 1,461 2,904
All other 117 275
Patents -- 442
------- -------
Total deferred tax assets 4,356 5,908
------- -------
Deferred tax liabilities:
Property and equipment 5,065 1,819
LIFO inventory 183 --
Accrued liabilities 274 --
------- -------
Total deferred tax liabilities 5,522 1,819
------- -------
Net deferred tax assets (liabilities) (1,166) 4,089
Valuation reserve -- (4,164)
------- --------
Net deferred tax liabilities $(1,166) $ (75)
======= =======
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
14. SUPPLEMENTAL CASH FLOW INFORMATION:
Selected cash payments and noncash activities for the years ended December
31, 1996, 1997 and 1998 were as follows:
1996 1997 1998
---- ---- ----
Cash paid for interest $6,780 $10,226 $12,978
Cash paid for income taxes 83 535 275
Noncash investing and
financing activities:
Increase in fixed assets for
revised allocation of purchase
price of JPE Canada -- 2,070 --
15. SEGMENT INFORMATION:
In 1998, JPE, Inc. adopted FAS 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company manages and reports its
operating activities under three segments: Trim Products, Fasteners, and
Truck and Automotive Replacement Parts. The Trim Products segment consists
of decorative and functional exterior trim sold to Original Equipment
Manufacturers ("OEM's"). Fasteners are decorative, specialty and standard
wheel nuts sold to the OEM's and to the replacement market. The Truck and
Automotive Replacement Parts segment consists of heavy-duty vehicle
undercarriage parts and brake systems for the automotive industry. JPE,
Inc. sold its brake systems segment during 1998 (see Note 8). In 1999, JPE,
Inc. also sold a portion of its Trim Products segment (see Note 7) and its
Fasteners segment (see Note 9).
The accounting policies for the segments are the same as those presented in
Note 1. There are no inter-segment sales and management does not allocate
interest or corporate expenses to the segments. The Company evaluates the
performance of its segments and allocates resources to them based on
Operating Income. Segment profit (loss) is defined as sales minus cost of
goods sold and selling, general and administrative expenses. Other items
relate to non-recurring transactions, such as bankruptcy-related
transactions or sales of portions of segments.
Information by operating segment is summarized below:
<TABLE>
<CAPTION>
Trim Replacement
Products Fasteners Parts Total
-------- --------- ----------- -----
<S> <C> <C> <C> <C>
Sales to unaffiliated customers
1998 $ 85,671 $38,342 $86,109 $210,122
1997 155,964 39,527 91,575 287,066
1996 94,197 33,805 73,451 201,453
</TABLE>
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
15. SEGMENT INFORMATION, CONTINUED:
<TABLE>
<CAPTION>
Trim Replacement
Products Fasteners Parts Total
-------- --------- ----------- -----
<S> <C> <C> <C> <C>
Segment profit (loss)
1998 $ (8,218) $ 1,460 $ 5,509 $ (1,249)
1997 3,677 1,473 8,706 13,856
1996 6,456 (400) 6,698 12,754
Other charges
1998 $ 26,704 $ 58 $ 5,243 $ 32,005
1997 2,782 -- -- 2,782
1996 -- 4,300 -- 4,300
Affiliate companies' losses
1998 $ 1,713 -- -- $ 1,713
1997 -- -- -- --
1996 -- -- -- --
Depreciation and amortization
1998 $ 4,744 $ 1,574 $ 1,996 $ 8,314
1997 6,305 1,624 2,165 10,094
1996 3,797 1,540 1,875 7,212
Segment assets
1998 -- * $23,479 $37,642 $ 61,121
1997 104,661 24,368 60,771 189,800
1996 102,012 24,930 42,123 169,065
Expenditures for segment assets
1998 $ 1,613 $ 458 $ 994 $ 3,065
1997 8,963 1,543 8,099 18,105
1996 31,050 2,295 1,324 34,669
<FN>
* Trim Products segment is being recognized through Investment in
Affiliates of $14,661. Total assets for the Trim Products segment at
December 31, 1998 were $68,671.
</FN>
</TABLE>
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
15. SEGMENT INFORMATION, CONTINUED:
A reconciliation of segment profit (loss) for reportable segments to
consolidated loss before taxes is as follows:
1996 1997 1998
---- ---- ----
Segment profit (loss) $ 12,754 $ 13,856 $ (1,249)
Other charges (4,300) (2,782) (32,005)
Equity net loss -- -- (1,713)
Corporate expense (2,615) (2,947) (2,895)
Costs related to bankruptcy
and forbearance agreements -- -- (3,658)
Interest expense (7,225) (10,464) (13,085)
-------- -------- --------
Loss before taxes $ (1,386) $ (2,337) $(54,605)
======== ======== ========
A reconciliation of segment assets to consolidated assets is as follows:
1996 1997 1998
---- ---- ----
Segment Assets $169,065 $189,800 $ 61,121
Corporate Assets 5,660 3,415 1,192
Investment in Affiliates -- -- 14,661
-------- -------- --------
$174,725 $193,215 $ 76,974
======== ======== ========
The Company's sales to individual customers in excess of 10% of total
revenue were:
1996 1997 1998
---- ---- ----
General Motors Corporation 36% 44% 29%
Chrysler Corporation 14% 11% 16%
The Company had export sales of approximately $26.5, $29.0 and $29.2
million, principally to Canada and Central America, for the years ended
December 31, 1996, 1997 and 1998, respectively. The Company operates in the
North American geographic area.
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
16. ACQUISITIONS:
On April 16, 1997, DPI acquired all of the issued and outstanding capital
stock of Brake, Axle and Tandem Company ("BATCO"). This acquisition has
been accounted for as a purchase. The purchase price of $5,518 was
allocated to the assets acquired and liabilities assumed. The values of the
assets acquired and liabilities assumed with the purchase of BATCO were
based on the fair values at the date of acquisition. In 1998, BATCO was
merged into DPI with no change of assets or liabilities from this
transaction.
The value of assets and liabilities assumed for the purchase of BATCO was
comprised of the following on April 16, 1997.
BATCO
-----
Accounts receivable and other assets $ 2,020
Inventory 1,770
Property, plant and equipment 293
Goodwill 6,263
Deferred tax asset 653
-------
Total 10,999
Accounts payable and accrued
expenses (5,481)
-------
Total, net $ 5,518
=======
The following unaudited pro forma summary for the year ended December 31,
1997 assumes that the acquisition of BATCO had occurred on January 1, 1997.
The significant adjustments relate to the inclusion of amortization of
goodwill, an increase in interest expense based on an increase in long-term
obligations, and the related income tax effects.
1997
----
Revenues $292,576
Operating profit 8,474
Loss before income taxes (2,769)
Net loss (2,393)
Loss per common share - assuming dilution ($0.52)
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
17. GOODWILL IMPAIRMENT:
During the third quarter of 1996, management identified that a significant
change had occurred in the product mix of its IAF subsidiary since its
purchase in March 1995. In accordance with SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of," management recorded a $4.3 million impairment writedown of the
goodwill associated with the acquisition of IAF. The goodwill was
originally valued at $6.8 million when IAF was acquired and, subsequent to
the adjustment, had a net unamortized carrying value of approximately $2.1
million as of December 31, 1996. The writedown of $4.3 million was
calculated based on the then estimated fair market value of the IAF
business of $21.3 million.
18. DISCONTINUANCE OF STAMPING OPERATIONS:
During the third quarter of 1997, management discontinued the production of
Starboard's stamping operations. This resulted in resourcing the stamped
parts to other third-party suppliers, the sale of Starboard's stamping
assets, reducing the workforce and a major re-layout of Starboard's East
Tawas, Michigan production facility to improve productivity of its
roll-forming and co-extrusion operations. Management made this decision
based on the negative impact the stamping business had on the operating
results of Starboard and the OEM Trim Group as a whole. As a result of this
discontinuance of stamping operations, the Company recorded a charge of
$2.25 million relating to the loss on disposal of assets, employee
severances and other costs directly related to the stamping business.
<PAGE>
JPE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
19. SUBSEQUENT EVENT - RESTRUCTURING OF JPE, INC.:
On February 18, 1999, the Company reached an agreement in principle with ASC
Holdings, Inc., pursuant to which a company to be formed would acquire
common and preferred stock of the Company to initially have voting control
and an economic interest of 95% of the Company. The current stockholders of
JPE, Inc. would retain the remaining equity in the Company, subject to
further dilution of 511,353 common stock warrants, in the event of the
exercise of such warrants that will be issued to the Company's bank lenders
in exchange for loan concessions in excess of $12.0 million. In addition,
the current stockholders of the Company and the Company's bank group would
receive warrants that would entitle them to purchase 15% of the voting
power and economic interest in the Company, exercisable two years after the
consummation of the ASC Holdings, Inc. investment, subject to obtaining
prescribed EBITDA levels. As such, current stockholders of the Company
would experience substantial dilution upon the ASC Holdings, Inc.
investment, but would have the potential of increasing their aggregate
percentage ownership in the future. Pursuant to the agreement in principle,
ASC Holdings, Inc. would invest $18.4 million in the Company and would
provide or arrange a loan to JPE in the amount of approximately $51.6
million. The Company and ASC Holdings, Inc. are continuing to negotiate the
final terms and structure of the foregoing investment by ASC Holdings, Inc.
which is subject to a number of conditions, including execution of a
definitive agreement, approval of the bankruptcy courts having jurisdiction
over PTI and Starboard and approval of the Company's bank group lenders.
There can be no assurance that the parties will reach agreement on mutually
satisfactory terms or that the conditions to consummating the transaction
will be satisfied.
PTI and Starboard have filed reorganization plans with the Bankruptcy Court
that are subject to a confirmation hearing scheduled for April 16, 1999.
Under these plans, PTI's and Starboard's unsecured creditors as of
September 15, 1998 will be paid 30% of their pre-petition claims. This will
result in a forgiveness of liabilities of approximately $4.1 million.
JPE, Inc. would consist of three manufacturing facilities, Dayton Parts,
Inc., Plastic Trim Inc. and Starboard Industries, Inc., with 1999 annual
revenues of approximately $155 million and total assets of approximately
$75 million. The forgiveness of bank debt would be recognized as a gain in
the second quarter of 1999. This transaction and the ASC investment is
expected to increase Shareholders' Equity to approximately $10 million.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
Directors
---------
<CAPTION>
Percent of
Total Shares of
Shares of Common Stock
Positions and Offices Common Stock of the Company
with the Company Beneficially Beneficially Term
and Other Owned as of Owned as of to
Name of Director Age Principal Occupations March 15, 1999 March 15, 1999 Expire
- ---------------- --- --------------------- -------------- --------------- ------
<S> <C> <C> <C> <C> <C>
Richard P. Eidswick (1)(2) 62 Chairman of the Board and 90,000 1.9 2000
(September 1998) Director of the Company;
Partner in Arbor Partners,
LLC
Richard R. Chrysler (3) 56 President, Chief Executive -- * 2000
(November 1998) Officer and Director of the
Company
David E. Cole (4) 60 Director of the Company; 3,000 * 2001
(May 1997) Director of Office for the
Study of Automotive
Transportation at University
of Michigan's Transportation
Research Institute
Otto Gago (5) 63 Director of the Company 37,462 * 2000
(May 1993) Thoracic and Cardiovascular
Surgeon
Other Executive Officers
------------------------
James J. Fahrner (6) 47 Executive Vice President and 78,250 1.7 --
Chief Financial Officer
All Directors and
Executive Officers as a
Group (5 persons) (7) 208,712 4.5
<FN>
* Less than 1%.
(1) Consists of (a) 40,000 shares owned by Mr. Eidswick jointly with his wife
and (b) 50,000 shares held in Mr. Eidswick's individual retirement account.
Does not include 4,100 shares held in Mrs. Eidswick's individual retirement
account.
(2) Does not include 50,000 shares subject to stock options exercisable on the
earlier of January 1, 2000 or the month end at which the Company reports a
positive net worth for such month.
(3) Does not include 200,000 shares subject to stock options exercisable on the
earlier of January 1, 2000 or the month end at which the Company reports a
positive net worth for such month.
(4) Consists of (a) 500 shares owned by Dr. Cole jointly with his wife and (b)
2,500 shares subject to stock options exercisable within 60 days of March
15, 1999.
(5) Consists of (a) 27,962 shares held in Dr. Gago's individual retirement
account and (b) 9,500 shares subject to stock options exercisable within 60
days of March 15, 1999. Does not include (a) 215,627 shares held by Dr.
Gago's wife and (b) 15,000 shares held by a charitable foundation
established by Dr. and Mrs. Gago.
(6) Consists of (a) 3,000 shares owned by a trust of which Mr. Fahrner is
trustee and a beneficiary and (b) 75,250 shares subject to stock options
exercisable within 60 days of March 15, 1999.
(7) Includes 87,250 shares subject to stock options exercisable within 60 days
of March 15, 1999 by the Company's directors and executive officers as a
group.
</FN>
</TABLE>
Information Relating to Directors
---------------------------------
Following each director's name is a brief account of his business
experience during the past five years.
Richard P. Eidswick
- -------------------
Mr. Richard P. Eidswick has been a Managing Director of Arbor Partners,
LLC, a venture capital firm, since 1997. Mr. Eidswick founded Network Express in
1990 and served as that company's President and CEO until its sale in 1996. Mr.
Eidswick is a director of Steeplechase Software, Inc.; CMS Technologies and
Genitor Corporation. Mr. Eidswick became a Director of the Company and Chairman
of the Board in September 1998.
Richard R. Chrysler
- -------------------
Mr. Richard R. Chrysler has been President and Chief Executive Officer of
the Company since November 1998. Prior to joining the Company, he was president
of R.C.I., a worldwide supplier of automotive and electronic related components.
Mr. Chrysler also served as a member of the U.S. House of Representatives from
1994 to 1996. Mr. Chrysler became a Director of the Company in November 1998.
David E. Cole
- -------------
Dr. David E. Cole has been the Director of the Office for the Study of
Automotive Transportation (OSAT) at the University of Michigan's Transportation
Research Institute since 1978. He has worked extensively on internal combustion
engines, vehicle design, and overall automotive industry trends. Dr. Cole is a
director of the Automotive Hall of Fame and is on the Board of Trustees of Hope
College. Dr. Cole became a Director of the Company in May 1997.
<PAGE>
Otto Gago
- ---------
Dr. Otto Gago has been a thoracic and cardiovascular surgeon since 1967. He
currently practices in Ann Arbor, Michigan. Dr. Gago is also an investor in new
businesses and real estate ventures. Dr. Gago became a Director of the Company
in May 1993.
During the fiscal year ended December 31, 1998, the Board of Directors of
the Company held twenty-six meetings.
Executive Officers
------------------
The current executive officers of the Company are identified below. Officers are
appointed by the Board of Directors and serve at its discretion.
Name Age Position
Richard R. Chrysler 56 President, Chief Executive Officer
and Director
James J. Fahrner 47 Executive Vice President and Chief
Financial Officer
Richard R. Chrysler has been President, Chief Executive Officer and a Director
of the Company since November 1998. Prior to joining the Company, Mr. Chrysler
was president of R.C.I., a worldwide supplier of automotive and electronic
related components. Mr. Chrysler also served as a member of the U.S. House of
Representatives from 1994 to 1996.
James J. Fahrner has been Executive Vice President and Chief Financial Officer
of the Company since November 1998. He has been with the Company since June
1995, serving as Vice President and Chief Financial Officer from June 1995 to
May 1997, as Senior Vice President and Chief Financial Officer from May 1997 to
January 1998, and as Executive Vice President - OEM Group of the Company from
January 1998 to November 1998. From November 1990 until June 1995, Mr. Fahrner
served as Vice President-Chief Financial Officer, Treasurer of Gelman Sciences
Inc., a manufacturer of microfiltration products.
Section 16(a) Beneficial Ownership Compliance
---------------------------------------------
Section 16(a) of the Securities and Exchange Act of 1934 generally requires
the Company's Directors and Executive Officers and persons who own more than 10%
of a registered class of the Company's equity securities ("10% owners") to file
with the Securities and Exchange Commission and, prior to August 1998, the
Nasdaq Stock Market, Inc. initial reports of ownership and reports of changes in
ownership of common stock of the Company. Directors, Executive Officers and 10%
owners are required by Securities and Exchange Commission regulation to furnish
the Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on review of copies of such reports furnished to the
Company and written representations that no other reports were required to be
filed during the 1998 fiscal year, all Section 16(a) filing requirements
applicable to its Directors, Executive Officers and 10% owners were met.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Directors
-------------------------
Each director who is not also an officer or employee of the Company
receives a semi-annual director's fee of $3,000 and is reimbursed for expenses
of attending Board of Directors and committee meetings.
In addition, non-employee directors receive grants for stock options
pursuant to the JPE, Inc. Director Stock Option Plan (the "Director Plan"). Each
non-employee director of the Company who was a member of the Board on April 27,
1995, the date the Director Plan was adopted by the Board, was granted an option
to purchase 5,000 shares of Common Stock of the Company and each non-employee
director who is subsequently first elected or appointed to serve as a member of
the Board is automatically granted on the date of such election an option to
purchase 5,000 shares of Common Stock of the Company at an exercise price equal
to the fair market value of the Company's Common Stock on the date of such
grant. On the date of each annual meeting of shareholders subsequent to April
27, 1995, each non-employee director serving on or elected to the Board on such
date shall receive an option to purchase 3,000 shares of Common Stock of the
Company at an exercise price equal to the fair market value of the Company's
Common Stock on the date of such grant.
In recognition of the added responsibilities of overseeing the
restructuring and/or sale of the Company, Richard P. Eidswick, Chairman of the
Board of Directors, is a party to a consulting agreement, dated November 9,
1998, with the Company pursuant to which he will be paid the sum of $4,166.67
per month, plus reimbursement of expenses, for these duties. The agreement may
be terminated by either party upon not less than seven days' notice. In
connection with the consulting agreement, Mr. Eidswick was also granted options
to purchase 50,000 shares of the Company's Common Stock under the JPE, Inc. 1993
Stock Incentive Plan at an exercise price equal to the fair market value of the
Company's Common Stock on the date of such grant. The options vest on the
earlier of January 1, 2000 or the month end at which the Company's financial
reporting for such month reports a positive net worth.
Summary Compensation Table
--------------------------
The following table sets forth information for the fiscal years ended
December 31, 1996, 1997 and 1998 concerning compensation of the Company's Chief
Executive Officer and each of the Company's executive officers whose total
annual salary and bonus exceeded $100,000 in 1998:
<PAGE>
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------- ------------
Fiscal Other Annual Stock Option All Other
Name and Position Year Salary (1) Bonus Compensation (2) Shares (#) Compensation (3)
- ----------------- ------ ---------- ----- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Richard R. Chrysler (4) 1998 $ 36,112 -0- -- 200,000 -0-
President, Chief
Executive Officer
and Director
James J. Fahrner 1998 $201,877 -0- (5) -- 30,000 $5,425
Executive Vice 1997 160,563 -0- -- -0- 9,550
President and 1996 153,125 $40,000 -- 95,000 (6) 9,250
Chief Financial
Officer
John Psarouthakis (7) 1998 $177,089 -0- -- -0- $6,875
Former Chairman of 1997 250,008 -0- -- -0- 9,550
the Board, President 1996 233,333 $50,000 -- 110,000 (8) 9,250
Chief Executive
Officer and Director
Donna L. Bacon (9) 1998 $191,877 -0- -- 40,000 $5,450
Former Executive 1997 165,988 -0- -- -0- 9,550
Vice President, 1996 152,500 $40,000 -- 75,000 (10) 9,250
Secretary and
General Counsel
<FN>
(1) Amounts represent the dollar value of base salary earned by the named
executive officer during the fiscal year covered as reported on the
officer's W-2.
(2) The dollar value of perquisites provided to each of the named executive
officers does not exceed the lesser of $50,000 or 10% of the total of
annual salary and bonus reported for the named executive officer.
(3) Represents the amount contributed to an account for the employee's benefit
by the Company under the Company's 401(k) Savings Plan, unless otherwise
indicated.
(4) Mr. Chrysler was hired on November 9, 1998 as President, Chief Executive
Officer and Director at an annual salary of $250,000.
(5) Mr. Fahrner was entitled to a $175,000 payment under his Stay Bonus
Agreement at December 31, 1998 which has been deferred to June 30, 1999 as
described below.
(6) Includes options to purchase 25,000 shares of the Company's Common Stock
that were canceled in connection with the December 16, 1996 repricing of
options. See "Ten-Year Option/SAR Repricings" below.
(7) Dr. Psarouthakis resigned as Chairman of the Board, President, Chief
Executive Officer and Director of the Company effective September 11, 1998.
(8) Represents options granted as replacement options in connection with the
December 16, 1996 repricing of options. See "Ten-Year Option/SAR
Repricings" below.
(9) Ms. Bacon resigned as Executive Vice President, Secretary and General
Counsel of the Company effective as of December 15, 1998.
(10) Includes options to purchase 15,000 shares of the Company's Common Stock
that were canceled in connection with the December 16, 1996 repricing of
options. See "Ten-Year Option/SAR Repricings" below.
</FN>
</TABLE>
<PAGE>
Stay Bonus Agreement
--------------------
James J. Fahrner and Registrant entered into a Stay Bonus Agreement
pursuant to which Mr. Fahrner is entitled to receive a stay bonus of $525,000
payable upon the earlier of (i) December 31, 1998 (in the amount of ($175,000
followed by two additonal equal installments on dates certain ending on January
1, 2000), and (ii) the occurrence of any of the following: (x) the completion of
Registrant's debt restructuring, (y) the emergence of Reistrant from a
bankruptcy proceeding, or (z) a change of control (as defined in the Stay Bonus
Agreement). Mr. Fahrner has agreed that if the December 31, 1998 installment is
paid by June 30, 1999 in the total amount of $175,000, he will waive any claim
for the balance under the Stay Bonus Agreement. See Exhibit 10.8 to Registrant's
Form 10-Q for the quarter ended September 30, 1998 and Exhibit 10.44 to this
Form 10-K.
Aggregated Option Exercises in the Last Fiscal Year
and Fiscal Year End Option Values
---------------------------------------------------
The following table sets forth information concerning (i) each exercise of
stock options during the fiscal year ended December 31, 1998 by each named
executive officer of the Company and (ii) the value of unexercised stock options
held by such persons as of December 31, 1998:
<TABLE>
<CAPTION>
Value of
Unexercised
Number of In-the-Money
Unexercised Options Options at
Shares at December 31, 1998 December 31, 1998
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable (1)
- ---- ----------- -------- -------------------- -----------------
<S> <C> <C> <C> <C>
Richard R. Chrysler -- -- 0/200,000 $0/40,000
James J. Fahrner -- -- 60,250/38,750 0/0
John Psarouthakis -- -- 0/0 0/0
Donna L. Bacon (2) -- -- 66,750/0 0/0
<FN>
(1) In calculating the value of unexercised in-the-money options at December
31, 1998, the Company used a market value of $0.50 per share, the closing
price for shares of Common Stock on the OTC Bulletin Board on December 31,
1998.
(2) These options terminated March 15, 1999 and were not exercised.
</FN>
</TABLE>
Option Grants in Last Fiscal Year
---------------------------------
The following table sets forth information concerning grants of stock
options to the Company's named executive officers during the fiscal year ended
December 31, 1998:
<PAGE>
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
% of Total Potential Realizable Value
Options at Assumed Annual Rates
Number of Granted to Exercise of Stock Price Appreciation
Options Employees in Price Per Expiration For Option Term (3)
Name Granted Fiscal Year Share (1) Date (2) 5% 10%
- ---- --------- ------------ --------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Richard R. Chrysler 200,000 (4) 56% $0.3000 11/9/08 $ 37,733 $ 95,625
James J. Fahrner 30,000 (5) 8% $5.1875 1/21/08 $ 97,871 $248,026
Donna L. Bacon 40,000 (5) 11% $5.1875 1/21/08 $130,496 $330,702
<FN>
(1) The exercise price is to be paid in full in cash or, with the consent of
the Compensation Committee, in Common Stock or by a promissory note payable
to the order of the Company which is acceptable to the Compensation
Committee.
(2) The options may expire earlier in certain circumstances such as the
executive's death or permanent disability or the termination of his
employment with the Company.
(3) The dollar amounts under these columns assume a compounded annual market
price increase for the underlying shares of Common Stock from the date of
grant to the end of the option term of 5% and 10%. This format is
prescribed by the Commission and is not intended to forecast future
appreciation of shares of Common Stock. The actual value, if any, an
executive may realize will depend on the excess of the market price for
shares of Common Stock on the date the option is exercised over the
exercise price. Accordingly, there is no assurance that the value realized
by an executive will be at or near the value estimated above. Potential
Realizable Value is not calculated for options that were replaced during
the fiscal year ended December 31, 1996.
(4) The options become exercisable on the earlier of January 1, 2000 or the
month end at which the Company's financial reporting for such month reports
a positive net worth.
(5) The options become exercisable as to up to 25% of the underlying shares of
Common Stock on the first anniversary date of the date of grant and 25%
each year thereafter.
</FN>
</TABLE>
<PAGE>
Ten-Year Option/SAR Repricings
------------------------------
On December 16, 1996, the Board of Directors of JPE, Inc. acknowledged the
effort that would be required from its key employees to implement changes at the
Company's operations and to effect a successful turnaround of Pebra Inc., that
was acquired on December 23, 1996. The Board of Directors determined that the
most effective and economical method to motivate and reward such employees would
be to reprice all outstanding options of then current, active employees.
Therefore, the Board of Directors approved an option exchange for then current,
active employees entitling such employees to cancel their outstanding options in
exchange for new options with an exercise price of $7.25 per share, the fair
market value of the Company's stock on the date of exchange. The new options
were subject to the same vesting schedule as the canceled options, including the
same vesting commencement date, with the same termination date; provided that if
the canceled option was an incentive stock option, it became a non-qualified
option.
By the JPE, Inc. Board of Directors
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price of Exercise Option Term
Underlying Stock at Price at Remaining
Options/ Time of Time of at Date of
SARs Repricing Repricing New Repricing
Repriced or or Exercise or
Name Date or Amended Amendment Amendment Price Amendment
---- ---- ---------- --------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
James J. Fahrner 12/16/96 30,000 $7.25 $14.00 $7.25 8.58 years
15,000 7.25 10.50 7.25 8.92 years
15,000 7.25 9.875 7.25 9.67 years
10,000 7.25 7.75 7.25 9.92 years
John Psarouthakis 12/16/96 20,000 7.25 12.65 7.25 1.92 years
23,678 7.25 11.55 7.25 3.92 years
66,322 7.25 10.50 7.25 8.92 years
Donna L. Bacon 12/16/96 30,000 7.25 10.75 7.25 7.83 years
15,000 7.25 10.50 7.25 8.92 years
15,000 7.25 7.75 7.25 9.92 years
</TABLE>
Tax Deductibility of Executive Compensation
-------------------------------------------
During 1993, Section 162(m) of the Internal Revenue Code was enacted to
limit the corporate deduction for compensation paid to each of the five most
highly compensated executive officers of a publicly-held corporation to $1
million per year, unless certain requirements are met. The Compensation
Committee has reviewed the impact of this legislation on the Company's executive
compensation plans and concluded that this legislation should not apply to limit
the deduction for executive compensation paid by the Company in 1998.
Report of Compensation Committee
--------------------------------
The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this Form 10-K
into any filing under the Securities Act of 1933 or under the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this information by reference, and shall not be deemed filed under such Acts.
<PAGE>
Introduction and Organization
-----------------------------
The Compensation Committee of the Board of Directors, composed of
non-employee directors, reviews and develops compensation programs for key
management, evaluates executive performance, administers the Company's
compensation programs and makes recommendations as to compensation matters to
the Board of Directors.
General Policies
----------------
The Compensation Committee's overall compensation policy with regard to
executive officers is to provide a compensation package that is intended to
attract and retain qualified executives and to provide incentives to achieve the
Company's goals and increase shareholder value. The Compensation Committee
implements this policy through base salaries, bonuses and grants of stock
options, stock appreciation rights and restricted stock.
Base Salaries
-------------
Base salary is determined for each of the Company's key executives by the
Compensation Committee based upon recommendations of the Company's Chief
Executive Officer. Factors affecting executive salary determinations include
experience, leadership, the Company's performance and achievements, individual
initiative, performance and achievements and an evaluation of the
responsibilities of the position held by the executive. No specific weighting of
factors is used.
Bonuses
-------
The Company awards its executive officers discretionary bonuses deemed
appropriate by the Compensation Committee. Bonuses are intended to provide
incentives to achieve the Company's financial and operational goals and increase
shareholder value, as well as to recognize an executive's individual
contributions to the Company. Factors affecting executive bonus determinations
include an evaluation of the Company's results and the executive's initiative,
performance and achievements, and the executive's salary. The Compensation
Committee does not use any specific weighting of factors. The Compensation
Committee obtains recommendations from the Chief Executive Officer as to
executive officer bonuses based on an evaluation of each individual executive's
performance during the year.
Long-Term Incentives
--------------------
The Compensation Committee believes that executive ownership of the
Company's stock, together with compensation plans that foster the alignment of
management's interests with those of the Company's shareholders, are in the best
interests of shareholders and management. Under the Company's 1993 Stock
Incentive Plan, the Compensation Committee approved grants of stock options to
executive officers and to other key employees. Awards under the 1993 Stock
Incentive Plan are intended to provide participants with an increased incentive
to make significant contributions to the long-term performance and growth of the
Company, to join the interests of participants with the interests of
shareholders of the Company and to facilitate attracting and retaining key
employees of exceptional ability.
The Compensation Committee's policy is to award stock options in amounts
reflecting the participant's position and the ability to influence the Company's
overall performance. In determining the size of individual awards, the
Compensation Committee also considers the amounts of options outstanding and
previously granted both in the aggregate and with respect to the optionee, the
amount of shares remaining available for grant under the Company's stock
incentive plan, the amount of stock owned by the executive and the aggregate
amount of the current awards. Generally, the exercise price for stock options
will be at or above the fair market value of the underlying shares on the date
of the grant.
<PAGE>
Other Compensation
------------------
The Company has adopted certain employee benefit plans, including its
401(k) savings plan and health benefit plans, in which executive officers have
been permitted to participate. Benefits under these plans are not directly or
indirectly tied to the Company's performance.
Chief Executive Officer Compensation
------------------------------------
The compensation of the Chief Executive Officer is determined based upon
the same criteria as are used for other executive officers. The Chief Executive
Officer does not participate in the approval of his own compensation, but does
participate in the discussion of the Company's performance and makes
recommendations concerning the compensation of executives reporting to him.
By the Compensation Committee
Richard P. Eidswick
David E. Cole
Otto Gago
Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------
The Company's Compensation Committee was established in May 1993 and
currently consists of Messrs. Eidswick, Cole and Gago. None of these directors
has ever been an officer or employee of the Company or any of its subsidiaries.
Stock Performance Graph
-----------------------
The following table compares the cumulative return since December 31, 1993
on a hypothetical investment in JPE, Inc. (JPEI), the Nasdaq National Market
(U.S.) Index and other motor vehicle equipment manufacturers and distributors.
The stock price performance shown on the graph is not necessarily indicative of
future price performance.
<TABLE>
COMPARISON OF 50 MONTH CUMULATIVE TOTAL RETURN*
Among JPE, Inc., The Nasdaq Stock Market-US Index
and a Peer Group
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
JPE, Inc. 100 78 80 58 45 4
Peer Group 100 65 58 78 81 81
Nasdaq Stock Market (U.S.) 100 98 138 170 208 294
<FN>
* $100 invested on 12/31/93 in stock or Index - including reinvestment of
dividends. Fiscal year ending December 31.
</FN>
</TABLE>
<PAGE>
Assumes $100 invested on December 31, 1993 in JPE, Inc., Nasdaq National
Market (U.S.) Index and other motor vehicle equipment manufacturers and
distributors (APS Holding Corp., Excel Industries, Hahn Automotive Warehouse,
MascoTech, Inc., Simpson Industries, Inc., Standard Products Co. and Tower
Automotive), weighted for market capitalization.
Total return equals price appreciation plus dividends and assumes
reinvestment of dividends.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information relating to the beneficial ownership of
outstanding shares of Common Stock by each person who is known to the Company to
be the beneficial owner of more than 5% of the outstanding shares of Common
Stock as of March 15, 1998:
<TABLE>
<CAPTION>
Shares Beneficially Owned
-------------------------
Name and Address Percent
of Beneficial Owner Number of Class (3)
- ------------------- ------ ------------
<S> <C> <C>
Dr. John Psarouthakis (1) 683,012 (2) 14.8%
c/o Ferguson & Widmayer, P.C.
538 N. Division
Ann Arbor, Michigan 48104
<FN>
(1) Former Chairman of the Board, President, Chief Executive Officer and a
Director of the Company.
(2) Consists of (a) 643,012 shares owned by a trust of which Dr. Psarouthakis
is trustee and a beneficiary and (b) 40,000 shares held by a charitable
foundation established by Dr. Psarouthakis.
(3) On March 15, 1998, the Company had issued and outstanding 4,602,180 shares
of Common Stock.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES And Reports on Form 8-K
(a) Listing of Documents
(1) Financial Statements
The Company's Consolidated Financial Statements included in Item
8 hereof, as required at December 31, 1997 and 1998, and for the
years ended December 31, 1996, 1997 and 1998, consist of the
following:
o Report of Independent Accountants
o Consolidated Balance Sheets
o Consolidated Statements of Operations and Comprehensive Income
o Consolidated Statements of Shareholders' Equity
o Consolidated Statements of Cash Flows
o Notes to Consolidated Financial Statements
(2) Financial Statement Schedule
The financial statement schedule of the Company appended hereto,
as required for the years ended December 31, 1996, 1997 and 1998,
consists of the following:
VIII. Valuation and Qualifying Accounts
(3) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
On November 12, 1998, Registrant filed a report on Form 8-K reporting
that substantially all of the assets of its wholly-owned subsidiary,
Allparts, Incorporated, had been sold to R&B, Inc., on October 28,
1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf on April 15, 1999 by the undersigned, thereunto duly authorized.
JPE, INC.
By: /s/ Richard R. Chrysler
-------------------------------
Richard R. Chrysler
President, Chief Executive Officer
and Director
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:
/s/ Richard P. Eidswick Chairman of the Board April 15, 1999
- ------------------------------ and Director
Richard P. Eidswick
/s/ Richard R. Chrysler President, Chief Executive April 15, 1999
- ------------------------------ Officer and Director
Richard R. Chrysler (Principal Executive Officer)
/s/ James J. Fahrner Executive Vice President April 15, 1999
- ------------------------------ and Chief Financial Officer
James J. Fahrner (Principal Financial Officer
and Principal Accounting
Officer)
/s/ David E. Cole Director April 15, 1999
- ------------------------------
David E. Cole
/s/ Otto Gago Director April 15, 1999
- ------------------------------
Otto Gago
<PAGE>
JPE, INC.
FINANCIAL STATEMENT SCHEDULES
PURSUANT TO ITEM 14(a)(2) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
The schedule, as required, for the years ended December 31, 1996, 1997 and 1998:
Page
----
VIII. Valuation and Qualifying Accounts 61
<PAGE>
JPE, INC.
<TABLE>
SCHEDULE VIII - VALUATION ACCOUNTS
for the years ended December 31, 1996, 1997 and 1998
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- ----------------------- -------- --------
Balance at Charges to Charges Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
- ----------- --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Accounts receivable, allowance
for doubtful accounts:
January 1, 1996 through
December 31, 1996 $369,000 $ 104,000 $ -- $ (211,000) $262,000
======== ========== ======== =========== ========
January 1, 1997 through
December 31, 1997 $262,000 $ 165,000 $160,000 $ (213,000) $374,000
======== ========== ======== =========== ========
January 1, 1998 through
December 31, 1998 $374,000 $1,951,000 $ (3,000) $(1,638,000)(1) $684,000
======== ========== ======== =========== ========
<FN>
1. The adjustment in Column D is to reduce the valuation account for Starboard
and PTI allowance for doubtful accounts that is recognized under the equity
method of accounting utilized for these subsidiaries.
</FN>
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
2.1 Asset Purchase Agreement dated December 31, 1992, among Varity
Corporation, a subsidiary of Varity Corporation formerly known as
Dayton Parts, Inc., the Registrant and JPE Acquisition I, Inc.,
incorporated by reference to Exhibit 2 to the Registrant's
Registration Statement on Form S-1 (File No. 33-68544).
2.2 Stock Purchase Agreement dated December 13, 1994 by and among JPE,
Inc. and the Shareholders of SAC Corporation, incorporated by
reference to Registrant's Current Report on Form 8-K dated December
28, 1994.
2.3 Asset Purchase Agreement dated February 28, 1995 among JPE Acquisition
II, Inc., Key Manufacturing Group Limited Partnership and TTD
Management, Inc., incorporated by reference to Exhibit 2 to
Registrant's Current Report on Form 8-K dated March 14, 1995.
2.4 Acquisition Agreement dated as of April 6, 1995 among JPE, Inc., PTI
Acquisition Corp. and Plastic Trim, Inc., incorporated by reference to
Exhibit 2 to Registrant's Current Report on Form 8-K dated April 24,
1995.
2.5 Agreement of Purchase and Sale dated November 15, 1996 between JPE,
Inc., in trust for 1203462 Ontario Inc., and Pebra Inc., incorporated
by reference to Registrant's Current Report on Form 8-K dated January
6, 1997.
2.6 Stock Purchase Agreement dated April 16, 1997 among JPE, Inc., Dayton
Parts, inc. and the Stockholders of Brake, Axle and Tandem Company,
incorporated by reference to Registrant's Current Report on Form 8-K
dated April 30, 1997.
2.7 Asset Purchase Agreement, dated as of August 28, 1998, by and between
R&B, Inc. and Allparts, Inc., incorporated by reference to Exhibit 2.1
to Registrant's Current Report on Form 8-K dated November 12, 1998.
2.8 Amendment No. 1, dated October 15, 1998, to Asset Purchase Agreement,
dated as of August 28, 1998, by and between R&B, Inc. and Allparts,
Inc., incorporated by reference to Exhibit 2.2 to Registrant's Current
Report on Form 8-K dated November 12, 1998.
2.9 Agreement dated December 8, 1998 between The Bank of Nova Scotia,
Ventra Group Inc., General Motors Corporation, General Motors of
Canada Limited and Grant Thornton Limited, filed with this report.
2.10 Stock Purchase Agreement dated as of March 26, 1999 by and among JPE,
Inc., Industrial & Automotive Fasteners, Inc. and MacLean Acquisition
Company, filed with this report.
3.1 Articles of Incorporation, incorporated by reference to Exhibit 3.1 to
the Registrant's Registration Statement on Form S-1 (File No.
33-68544).
3.2 Bylaws, amended as of February 5, 1999, filed with this report.
4 Form of Certificate for Shares of the Common Stock, incorporated by
reference to Exhibit 4 to the Registrant's Registration Statement on
Form S-1 (File No. 33-68544).
<PAGE>
10.1 Shareholder Agreement (Conformed Copy), incorporated by reference to
Exhibit 10.6 to the Registrant's Registration Statement on Form S-1
(File No. 33-68544).
10.2 Indemnification Agreement dated September 1, 1993, between the
Registrant and Dr. John Psarouthakis, incorporated by reference to
Exhibit 10.7 to the Registrant's Registration Statement on Form S-1
(File No. 33-68544).
10.3 Indemnification Agreement dated September 1, 1993, between the
Registrant and Dr. Otto Gago, incorporated by reference to Exhibit
10.8 to the Registrant's Registration Statement on Form S-1 (File No.
33-68544).
10.4 Indemnification Agreement dated September 1, 1993, between the
Registrant and John F. Daly, incorporated by reference to Exhibit 10.9
to the Registrant's Registration Statement on Form S-1 (File No.
33-68544).
10.5 Indemnification Agreement dated September 1, 1993, between the
Registrant and Donald R. Mandich, incorporated by reference to Exhibit
10.10 to the Registrant's Registration Statement on Form S-1 (File No.
33-68544).
10.6 JPE, Inc. Warrant to Purchase Common Stock issued by the Registrant in
favor of Roney & Co., incorporated by reference to Exhibit 10.11 to
the Registrant's Registration Statement on Form S-1 (File No.
33-68544). Pursuant to its terms, the foregoing Warrant was
surrendered and exchanged for substitute Warrants identical to the
foregoing Warrant in all respects except for the name of the
substitute Warrant holder and the number of shares of the Registrant's
Common Stock for which the substitute Warrants are exercisable, which
terms are as follows:
Number of Shares
of Common Stock for
Warrant Holder which Warrant is Exercisable
-------------- ----------------------------
Roney & Co. 10,000
John C. Donnelly 6,250
James C. Penman 6,250
Dan B. French, Jr. 2,500
10.7 Exclusive Distributor Agreement dated December 31, 1992, between
Dayton Walther Corporation ("DWC") and Dayton Parts, incorporated by
reference to Exhibit 10.14 to the Registrant's Registration Statement
on Form S-1 (File No. 33-68544).
10.8 Exclusive Distributor Agreement dated December 31, 1992, between DWC
and Dayton Parts, incorporated by reference to Exhibit 10.15 to the
Registrant's Registration Statement on Form S-1 (File No. 33-68544).
10.9 Letter Agreement dated December 31, 1992, from Kelsey-Hayes Company to
JPE Acquisition I, Inc. (now known as Dayton Parts), incorporated by
reference to Exhibit 10.16 to the Registrant's Registration Statement
on Form S-1 (File No. 33-68544).
10.10 Lease Agreement dated May 3, 1993, between Central Storage & Transfer
Company of Harrisburg, Inc. ("CSTCH") and Dayton Parts, as amended by
First Addendum to Lease dated May 3, 1993, between CSTCH and Dayton
Parts, incorporated by reference to Exhibit 10.17 to the Registrant's
Registration Statement on Form S-1 (File No. 33-68544).
<PAGE>
10.11 JPE, Inc. 1993 Stock Incentive Plan for Key Employees, as amended,
incorporated by reference to Exhibit 28 to the Registrant's
Registration Statement on Form S-8 (File No. 33-92236).
10.12 Form of JPE, Inc. Warrant to purchase an aggregate of 100,000 shares
of Common Stock at $9.50 per share issued by the Registrant in favor
of the sellers of SAC Corporation, incorporated by reference to
Exhibit 4.a. to the Registrant's Form 8-K dated December 28, 1994.
10.13 Third Amendment to JPE, Inc. 1993 Stock Incentive Plan for Key
Employees, incorporated by reference to Exhibit 10.14 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995.
*10.14 JPE, Inc. Director Stock Option Plan, incorporated by reference to
Exhibit 28 to the Registrant's Registration Statement on Form S-8
(File No. 33-93328).
10.15 Form of Indemnification Agreement dated February 8, 1995, between the
Registrant and Donna L. Bacon, incorporated by reference to Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995.
10.16 Form of Indemnification Agreement between the Registrant and James J.
Fahrner, incorporated by reference to Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.
10.17 Form of Indemnification Agreement between Registrant and C. William
Mercurio, incorporated by reference to Exhibit 10.19 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1996.
10.18 Third Amended and Restated Credit Agreement dated as of December 31,
1996, by and among Comerica Bank, other participants and JPE, Inc.
(the "Credit Agreement"), incorporated by reference to Exhibit 10.20
to Registrant's Annual Report on Form 10-K for the year ended December
31, 1996.
10.19 Credit Agreement dated as of December 20, 1996 between JPE Canada
Inc. and The Bank of Nova Scotia, incorporated by reference to Exhibit
10.21 to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996.
10.20 Form of Indemnification Agreement between the Registrant and David E.
Cole, filed, incorporated by reference to Exhibit 10.22 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1997.
10.21 Amendment 1 dated April 16, 1997 to the Credit Agreement, incorporated
by reference to Exhibit 10.23 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1997.
10.22 Amendment 2 dated August 14, 1997, effective June 30, 1997, to the
Credit Agreement, incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
10.23 Amendment 3 dated February 13, 1998 to the Credit Agreement,
incorporated by reference to Exhibit 10.25 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997.
10.24 Amendment 4 and Limited Waiver, dated as of May 15, 1998, to the
Credit Agreement, incorporated by reference to Exhibit 10.4 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998.
10.25 Letter Agreement (the "Forbearance Agreement"), dated August 10, 1998
among the Banks, Comerica Bank, as Agent, JPE, Inc. and its
subsidiaries, incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998.
<PAGE>
10.26 First Amendment dated August 31, 1998 to Forbearance Agreement,
incorporated by reference to Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
10.27 Second Amendment dated September 4, 1998 to Forbearance Agreement,
incorporated by reference to Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
10.28 Third Amendment dated September 16, 1998 to Forbearance Agreement,
incorporated by reference to Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
10.29 Fourth Amendment dated October 1, 1998 to Forbearance Agreement,
incorporated by reference to Exhibit 10.4 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
10.30 Final Order Authorizing Postpetition Financing and Providing Adequate
Protection for Plastic Trim, Inc. dated October 29, 1998, incorporated
by reference to Exhibit 10.5 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998.
10.31 Final Order Authorizing Postpetition Financing and Providing Adequate
Protection for Starboard Industries, Inc. dated October 29, 1998,
incorporated by reference to Exhibit 10.6 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
*10.32 Executive Severance Agreement dated February 20, 1998 between
Registrant and Donna L. Bacon, incorporated by reference to Exhibit
10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998.
*10.33 Amendment No. 1, dated May 21, 1998, to Executive Severance Agreement
between Registrant and Donna L. Bacon, incorporated by reference to
Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998.
*10.34 Executive Severance Agreement dated February 20, 1998 between
Registrant and James J. Fahrner, incorporated by reference to Exhibit
10.2 to Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998.
*10.35 Amendment No. 1, dated May 21, 1998, to Executive Severance Agreement
between Registrant and James J. Fahrner, incorporated by reference to
Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998.
*10.36 Stay Bonus Agreement, dated as of September 1, 1998, between JPE,
Inc. and Donna L. Bacon, incorporated by reference to Exhibit 10.7 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
*10.37 Stay Bonus Agreement, dated as of September 21, 1998, between JPE,
Inc. and James J. Fahrner, incorporated by reference to Exhibit 10.8
to Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
*10.38 Stay Bonus Agreement, dated as of September 30, 1998, between JPE,
Inc. and Karen A. Radtke, incorporated by reference to Exhibit 10.9 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
10.39 Fifth Amendment, dated December 1, 1998, to Forbearance Agreement,
filed with this report.
10.40 Sixth Amendment, dated March 26, 1999, to Forbearance Agreement,
filed with this report.
10.41 Form of Indemnification Agreement, dated as of September 30, 1998,
between the Registrant and Richard P. Eidswick, filed with this
report.
10.42 Form of Indemnification Agreement, dated as of November 9, 1998,
between the Registrant and Richard R. Chrysler, filed with this
report.
<PAGE>
10.43 Form of letter dated November 28, 1998 from Dr. John Psarouthakis
terminating Shareholder Agreement, filed with this report.
*10.44 Letter dated February 5, 1999 amending terms of Stay Bonus Agreement
between the Registrant and James J. Fahrner, filed with this report.
*10.45 Letter dated February 5, 1999 amending terms of Stay Bonus Agreement
between the Registrant and Karen A. Radtke, filed with this report.
21 Subsidiaries of the Registrant, filed with this report.
23 Consent of PricewaterhouseCoopers LLP
* Indicates management contract or compensatory plan or arrangement.
THIS AGREEMENT is made the 8th day of December, 1998.
B E T W E E N:
THE BANK OF NOVA SCOTIA
(the "Vendor")
- and -
VENTRA GROUP INC.
(the "Purchaser")
- and -
GENERAL MOTORS CORPORATION and
GENERAL MOTORS OF CANADA LIMITED
(collectively "GM")
GRANT THORNTON LIMITED
(the "Interim Receiver").
WHEREAS:
A. Each of the Vendor and GM is a secured creditor of JPE Canada Inc. (the
"Company").
B. The Company is in default under its lending arrangements with the Vendor and
GM.
C. By order of J.M. Ferron, Registrar of the Ontario Court of Justice (General
Division) dated August 27, 1998, the Interim Receiver was appointed as the
Interim Receiver of the Company.
D. The Vendor has marketed and now wishes to sell to the Purchaser and the
Purchaser wishes to purchase from the Vendor, all of the Vendor's and the
Company's right, title and interest in the undertaking, property and assets of
the Company.
NOW THEREFORE, for value, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS
In this Agreement, the following terms have the following meanings unless
the context otherwise requires:
1.1.1 "Purchased Property" means the Vendor's and the Company's right, title and
interest in the undertaking, property and assets of the Company comprised of the
Parcels described in Section 3.2.
1.1.2 "Real Property" means the Vendor's and the Company's right, title and
interest in the real property described as Parcel II in Section 3.2.
1.1.3 "Purchase Price" means the aggregate of the amounts listed under the
heading "Price" in Section 3.2.
1.1.4 "Permitted Encumbrances" means those liens, charges, encumbrances and
qualifications to title of the Purchased Property listed in annexed Schedule
"E".
1.1.5 "Trustee" means the party named as Trustee in Bankruptcy of the Company.
1.2 CURRENCY
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in lawful money of Canada.
ARTICLE II
BANKRUPTCY AND COURT ORDER
2.1 BANKRUPTCY AND COURT ORDER
It is agreed that prior to the Closing Date, either the Company shall make
a voluntary assignment in bankruptcy or that a petition and receiving order
shall be applied for by GM and the Vendor placing the Company into bankruptcy.
In addition, the Vendor and GM shall make application to the Ontario Court of
Justice (General Division) for an order (the "Approval Order"), inter alia,
approving of the purchase and sale transaction contemplated in this Agreement,
dispensing with the issuance of notices of sale under the Mortgages Act and, if
necessary, under the Personal Property Security Act. The Approval Order shall be
substantially in the form annexed hereto as Schedule "F". If at the Closing
Date, the Company is an undischarged bankrupt and the Approval Order has been
obtained, then the Agreement shall be completed in accordance with its terms and
if not, then this Agreement shall be considered to be terminated and the Deposit
(as herein defined) shall be returned to the Purchaser with interest earned
thereon and thereafter the Vendor and the Purchaser shall not be under any
further obligation to the other.
ARTICLE III
AGREEMENT OF PURCHASE AND SALE
3.1 PURCHASED PROPERTY
The Purchaser agrees to purchase from the Vendor and the Vendor agrees to
sell to the Purchaser on the Closing Date at the Time of Closing (as hereafter
defined), the Purchased Property for the Purchase Price subject to the terms and
conditions contained in this Agreement.
3.2 PURCHASE PRICE
The Purchase Price attributable to the Parcels comprising the Purchased
Property shall be the following:
<TABLE>
<CAPTION>
Parcel Description Price
- ------ ----------- -----
<S> <C> <C>
Parcel I Inventory of the Company comprised of:
(a) work in progress At the lower of market or
Company's standard cost in
effect as of October 1, 1998,
less reasonable allowance for
obsolete, unusable, damaged
items, and any items requiring
rework. (For purposes of this
clause, "market" for an item will
be determined by calculating the
percentage of completion for
such item and multiplying such
percentage by the price for the
related finished product.)
(b) raw materials and non-painted At the lower of market or cost
regrind inventory to the Company for all raw
materials on hand including
any freight and delivery costs
paid by the Company, but excluding
any raw materials held by Company
on consignment and with a reasonable
allowance for obsolete, excessive
and unusable items.
Parcel II The following real property owned by }
the Company as described in annexed }
Schedule "A" and municipally known as: }
}
(i) 675 Trillium Drive }
Kitchener, Ontario }
}
(ii) 775 Technology Drive } $15,000,000.00 Canadian
Peterborough, Ontario } Dollars for Parcels II - IV,
} inclusive (to be allocated
Parcel III Machinery and equipment of the } among the parcels by the
Company, including without limitation } Purchaser, and the Vendor
those items described in annexed } acting reasonably)
Schedule "D" }
}
Parcel IV Other assets not included in Parcels I-III }
and specifically including, without }
limitation, those assets referred to on }
annexed Schedule "B", save and except }
the Excluded Assets (as hereinafter }
defined). }
</TABLE>
3.3 EXCLUDED ASSETS
There shall be specifically excluded from the Purchased Property the
following assets of the Company (the "Excluded Assets"), namely:
(a) finished goods inventory, painted regrind inventory and obsolete inventory
of the Company;
(b) accounts receivable of the Company, including without limitation, the
tooling accounts receivable; and
(c) the equipment described in Schedule "G" (provided this equipment is the
same equipment that GM has agreed to sell to the Purchaser by letter dated
December 9, 1998).
3.4 PAYMENT OF THE PURCHASE PRICE
The Purchase Price shall be paid by the Purchaser to the Vendor as follows:
(a) The Purchaser shall deliver to the Vendor with a copy of this Agreement
signed by the Purchaser, a certified cheque drawn on, or a bank draft of, a
Schedule I Canadian chartered bank, payable to KPMG Inc. as agent of The
Bank of Nova Scotia in the amount of $1,000,000.
(b) If this Agreement is accepted by the Vendor and approved by GM and the
Interim Receiver, the said cheque or draft shall constitute a cash deposit
(the "Deposit") and shall be deposited in an interest-bearing bank account
to be applied toward the Purchase Price for the benefit of the Purchaser.
(c) On the Closing Date, subject to the provisions of Section 8.3, the
Purchaser shall pay to the Vendor, or to whom the Vendor shall in writing
direct, the balance of the Purchase Price (which shall be the Purchase
Price adjusted as contemplated in Section 3.11, less the Deposit and any
interest earned thereon) and all taxes referred to in Section 3.9 by
certified cheque drawn on, or bank draft of, a Schedule I Canadian
chartered bank.
3.5 ACCEPTANCE
If this Agreement is accepted by the Vendor and approved by GM and the
Interim Receiver, then such acceptance shall be communicated to the Purchaser by
5:00 p.m. (Toronto time) December 22, 1998 by notice in writing sent by the
Vendor or KPMG Inc. to the Purchaser at the address set forth and in the manner
provided in Section 9.11.
3.6 RETURN OF DEPOSIT CHEQUES
Any cheque or draft of the Purchaser accompanying this Agreement that is
not accepted by the Vendor shall be returned to the Purchaser by prepaid postage
mail or courier addressed to the Purchaser, at the address set forth below.
3.7 AGREEMENT OF PURCHASE AND SALE
This Agreement, once signed by the Purchaser, accepted by the Vendor and
approved by GM and the Interim Receiver, shall constitute a binding agreement of
purchase and sale between the parties hereto for the Purchased Property subject
to the Company being bankrupt, and the Approval Order described in Article II
being obtained and the conditions in Article VI being satisfied by the Closing
Date.
3.8 CLOSING DATE
The completion of the Agreement will take place at 10:00 a.m. ("Time of
Closing") on January 25, 1999 or such other date as the Vendor and Purchaser
shall agree in writing (the "Closing Date") at the office of the Vendor's
solicitors, Borden & Elliot, Scotia Plaza, 40 King Street West, Toronto,
Ontario, M5H 3Y4.
3.9 PAYMENTS ON THE CLOSING DATE
The Purchaser shall pay, on the Closing Date, and shall be liable for, in
addition to the Purchase Price, any and all applicable federal and provincial
taxes, duties or like charges exigible in connection with the transfer of the
Purchased Assets including, without limitation, all land transfer taxes, all
federal and provincial sales, use, consumption and similar taxes and all goods
and services tax imposed under the Excise Tax Act (Canada), unless the Purchaser
or this transaction is exempt under the relevant taxing statute and the
Purchaser complies to the reasonable satisfaction of the Vendor with all
requirements as to certification, filing or otherwise to validly qualify for
such exemption. Where necessary, the Vendor agrees to execute and deliver such
elections or other documents reasonably required to permit the Purchaser to
claim any available exemption. The Purchaser will deliver an Indemnity Agreement
at closing in a form reasonably satisfactory to the Vendor indemnifying the
Vendor against any tax, interest or penalty incurred by the Vendor as a result
of the failure of the Purchaser to pay any such taxes, duties or charges
referred to above except those that arise from Vendor's omission or
misrepresentation.
3.10 TAXES NOT ASSUMED
The Purchaser does not assume and shall not be liable for any taxes under
the Income Tax Act (Canada) or any other taxes or other amounts whatsoever which
may be or become payable by the Company, the Vendor or any third party from or
as a consequence of the operation of any aspect of the Company's business or
using the Purchased Assets prior to the Closing Date. Neither the Vendor, nor
GM, nor the Interim Receiver shall be liable to the Purchaser for any of the
foregoing taxes, other taxes or other amounts (except with respect to GM as
otherwise provided in Section 6.3(i)).
3.11 ADJUSTMENTS
Adjustments to the Purchase Price shall be made on the Closing Date for
realty taxes and utilities with respect to the Real Property, the Closing Date
itself being for the account of the Purchaser.
3.12 PENSION PLANS NOT TO BE ASSUMED
Neither the Vendor, nor GM, nor the Interim Receiver, nor the Purchaser
adopts or assumes or shall be liable for any duties, liabilities or obligations
under any pension plan established for employees of the Company or under any
agreements or documents relating to such plans (except in the case of GM as
provided in Section 6.3(i).
3.13 COMPANY'S EMPLOYEES TO BE HIRED
The Vendor and GM acknowledge having been informed that, subject to the
provisions contained in the tentative, amended Collective Agreement as
negotiated between the representatives of the National Automobile, Aerospace,
Transportation and General Workers Union of Canada ("CAW - Canada") and its
Locals 1564 and 1987 (the "Union") and the Purchaser, the Purchaser intends only
to offer employment effective from the Closing Date to such of the employees of
the Company as the Purchaser, in its sole discretion, may determine and only
upon such terms as the Purchaser may in writing, agree to with such employees or
the Union.
ARTICLE IV
REAL PROPERTY AND OTHER PURCHASED PROEPRTY
4.1 REAL PROPERTY AND OTHER PURCHASED PROPERTY
The Purchaser shall examine title to the Real Property ("Title") at its own
expense and shall not call for the production of any bill of sale, assignment,
title deed, abstract or survey or proof or evidence of title or to have
furnished to it any copies of any such documents other than those in the
possession or within the reasonable control of the Vendor. The Purchaser shall
be allowed until 5:00 p.m. on January 15, 1999 to satisfy itself as to Title at
its own expense. If within such time, the Purchaser shall furnish the Vendor
with any valid objection as to Title which the Vendor shall be unable or
unwilling to remove at or before the Closing Date, and which the Purchaser will
not waive, the Agreement shall at or before the Closing Date be null and void,
the Deposit shall be returned to the Purchaser, with interest earned thereon,
and thereafter the Vendor and the Purchaser shall not be under any further
obligation to the other.
4.2 NO REPRESENTATIONS
The Purchaser acknowledges that except as expressly otherwise provided in
this Agreement, the Vendor, KPMG Inc., GM and the Interim Receiver have not
made, do not make and shall not be required to make any representation or
warranty with respect to the condition of the Purchased Property and that none
of the Vendor, KPMG Inc., GM or the Interim Receiver shall have any liability or
obligation with respect to the value, state or condition of the Purchased
Property, any deficiencies therein or repairs or replacements or other work
required with respect thereto, whether or not within the knowledge of the
Vendor, KPMG Inc., GM or the Interim Receiver, or any of their respective
officers, directors, agents, employees or contractors, all of which shall be
accepted and assumed by the Purchaser as of the Closing Date. The Vendor, KPMG
Inc., GM and the Interim Receiver make no representation or warranty of any kind
that the present use of the Purchased Property or the future use thereof
intended by the Purchaser is or will be lawful or permitted.
4.3 BUILDING AND ZONING
The Purchaser agrees to accept the Vendor's right, title and interest in
the Real Property and fixtures subject to municipal requirements, including
without limitation, building and zoning by-laws, the limitations, reservations,
provisions and conditions expressed in any original grants from the Crown, as
may be varied by statute and minor easements for hydro, telephone and like
services and restrictions and covenants that run with the Real Property
providing all such municipal requirements, restrictions, covenants, limitations,
reservations, provisions and conditions are being complied with.
4.4 DEED TO REAL PROPERTY
Subject to obtaining the Approval Order, the Vendor will deliver, or cause
to be delivered, a transfer/deed of land in registerable form to transfer its
right, title and interest in the Real Property to the Purchaser on the Closing
Date.
4.5 PLANNING ACT
The Agreement shall be effective to create an interest in the Real Property
only if the provisions of the Planning Act (Ontario) are complied with, failing
which, the Agreement shall be terminated, in which event the Deposit shall be
returned to the Purchaser forthwith with interest earned thereon and thereafter
the Vendor and the Purchaser shall not be under any further obligation to the
other.
4.6 RISK AND INSURANCE
The Purchased Property shall be at the risk of the Purchaser only after the
Closing Date. Until the Time of Closing, in the vent of material damage to the
Purchased Property, the Purchaser may either have the proceeds of any insurance
which is carried by the Company (if available to the Purchaser) and complete the
Agreement or may cancel the Agreement and have the Deposit returned with
interest earned thereon but without compensation of any other kind whatsoever.
Where any damage is not material to either the Purchased Assets or the business
as presently conducted by the Company, the Purchaser shall be obliged to
complete the Agreement and be entitled to receive the proceeds of the insurance
carried by the Company (if available to the Purchaser) which is referable to
such damage. The Purchaser agrees that all the insurance maintained by the
Company shall be cancelled on the Closing Date and that the Purchaser shall be
responsible for placing its own insurance thereafter.
4.7 "AS IS - WHERE IS"
By entering into this Agreement, the Purchaser acknowledges that it has
inspected the Purchased Property, that subject to provisions of 4.6, the
Purchased Property is sold on an "as is, where is" basis on the Closing Date and
that no representation, warranty or condition is expressed or implied as to
title, description, fitness for purpose, existence, merchantable quality,
conditions or quality thereof or, in respect of any other matter or thing
whatsoever (except as otherwise expressly provided in this Agreement). Without
limitation, all of the Purchased Property is specifically offered as it exists
on the Closing Date with no adjustments to be allowed to the Purchaser for
changes in conditions, qualities or quantities from the date hereof to the
Closing Date, except as provided for in Article VIII. The Purchaser acknowledges
and agrees that the Vendor is not required to inspect the Purchased Property or
any part thereof and the Purchaser shall be deemed, at its own expense, to have
relied entirely on its own inspection and investigation. The Purchaser
acknowledges that all warranties and conditions, express or implied, pursuant to
all applicable legislation do not apply hereto and are hereby waived by the
Purchaser. Furthermore, the Purchaser acknowledges that it shall be the
Purchaser's sole responsibility to obtain and pay the costs of any consents,
permits, licenses or other authorizations necessary for the transfer of such
right, title and interest, if any, as the case may be, to the Purchaser or for
the operation or use of the Purchased Property. The Purchaser further
acknowledges that any information obtained from the Vendor, KPMG Inc., GM or the
Interim Receiver, or any of their respective officers, directors, agents,
employees or contractors has been provided solely for the convenience of the
Purchaser and is not warranted to be accurate or complete and does not form part
of the terms hereof. The provisions of this Section shall survive the
termination of the Agreement.
4.8 FAILURE TO CLOSE
If the Purchaser fails to comply with any provision of this Agreement and
wrongfully fails to complete the Agreement, the Deposit, together with any
interest accrued thereof, and all other payments made in connection with the
Purchase Price shall be forfeited as liquidated damages and, without limiting
the rights and remedies the Vendor may have hereunder or at law, the Purchased
Property may be resold by the Vendor and provided the Vendor has acted in a
commercially reasonable manner in doing so, the deficiency, if any, arising on
such resale, together with all charges and expenses attending the same or
occasioned by the defaulting Purchaser, less the amount of the Deposit, shall be
made good on demand by the defaulting Purchaser, or paid forthwith to the Vendor
on demand, as the case may be.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
5.1 PURCHASER REPRESENTATION AND WARRANTIES
The Purchaser represents and warrants that:
(a) it is a corporation duly incorporated, organized and subsisting under the
laws of Ontario, Canada;
(b) it has the corporate power and authority to enter into and perform its
obligations under the Agreement and all necessary actions and approvals
have been taken or obtained by the Purchaser to authorize the creation,
execution, delivery and performance of this Agreement and this Agreement
has been duly executed and delivered by the Purchaser and constitutes a
legal, valid and binding obligation of the Purchaser, and this Agreement is
enforceable against the Purchaser in accordance with its terms;
(c) it is not a non-Canadian for the purpose of the Investment Canada Act
(Canada) and it is not a non-resident of Canada within the meaning of the
Income Tax Act (Canada); and
(d) it has received a term sheet from The Toronto-Dominion ("TD") Bank which it
has accepted under which TD has committed to provide sufficient funds to
the Purchaser to complete the purchase herein which is subject only to
conditions which have been disclosed to the Vendor.
5.2 VENDOR REPRESENTATION AND WARRANTIES
The Vendor represents and warrants to the Purchaser that:
(a) the Vendor has not discharged, assigned or encumbered the security granted
to it by the Company except for certain priority arrangements entered into
between the Vendor and GM and which will be discharged or released from the
Purchased Assets by GM at Closing;
(b) no person, firm or corporation who is entitled to do so has to date taken
any action to redeem any of the Purchased Property and given notice of such
action to the Vendor and no action or proceeding at law or in equity is to
the knowledge of the Vendor pending or threatened by any party to enjoin,
restrict or prohibit the Vendor's sale to the Purchaser of the Purchased
Property.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS FOR THE BENEFIT OF VENDOR
The obligation of the Vendor to complete the Agreement is subject to the
terms and conditions of this Agreement and the satisfaction of the following
terms and conditions at or prior to the Closing Date, which following terms and
conditions are for the sole benefit of the Vendor and which may be waived by the
Vendor in its sole discretion:
(a) the representations and warranties of the Purchaser in Section 5.1 are true
and accurate as of the Closing Date;
(b) no action or proceeding at law or in equity shall be pending or threatened
by any person, firm, government, governmental authority, regulatory body or
agency to enjoin, restrict or prohibit the purchase and sale of the
Purchased Property;
(c) the ability to sell the Purchased Property shall not have been removed from
the control of the Vendor by any means or process; and
(d) no party shall take any action to redeem any of the Purchased Property.
6.2 CONDITIONS FOR VENDOR NOT SATISFIED
In the event any of the conditions in Section 6.1 is not satisfied as of
the Closing Date, this Agreement shall thereupon at the option of the Vendor or
rendered null and void and the Purchaser shall be entitled only to the return of
the Deposit with accrued interest earned thereon and thereafter the Vendor and
the Purchaser shall not be under any further obligations to the other.
6.3 CONDITIONS FOR BENEFIT OF PURCHASER
The obligation of the Purchaser to complete the Agreement is subject to the
terms and conditions of this Agreement and the satisfaction of the following
terms and conditions at or prior to the Closing date, which following terms and
conditions are for the sole benefit of the Purchaser and which may be waived by
the Purchaser in its sole discretion:
(a) The representations and warranties of the Vendor in Section 5.2 are true
and correct as of the Closing Date.
(b) All of the terms, covenants and conditions of this Agreement to be
performed or complied with by the Vendor or otherwise at or prior to the
Time of Closing shall have been performed or complied with and all other
conditions herein for the benefit of the Purchaser shall have been
satisfied in accordance with their terms.
(c) Notwithstanding any other provisions hereof, between the date of this
Agreement and the Time of Closing, no material adverse change shall have
occurred with respect to the business of the Company or the prospects
thereof or any of the Purchased Assets, considered as a whole. In this
paragraph "material adverse change" shall mean an event such as a major
product recall, the expense of which would in all likelihood have to be
borne by the Purchaser following the Closing Date, the loss of a majority
of the key management of the Company who cannot be replaced in the short
term, a major labour dispute or other event similar to the foregoing in
scope and magnitude.
(d) On the Closing Date, the Company shall be an undischarged bankrupt and the
Approval Order shall have been issued by the Ontario Court of Justice
(General Division) and no appeal shall have been initiated within the
applicable time period.
(e) At the Time of Closing, the Purchaser shall have satisfied itself, acting
reasonably, that Purchaser is acquiring from Vendor good and marketable
title to the real and personal property which is included in the Purchased
Assets free and clear of any encumbrances, liens, charges or claims which
rank pari passu wit or prior to the Vendor's security other than the
Permitted Encumbrances and any claims which the Vendor may undertake to
satisfy and indemnify Purchaser from or that the Transfer of the Purchased
Assets has been vested in the Purchaser pursuant to the Approval Order free
of all such encumbrances, liens, charges or encumbrances.
(f) On or before January 15, 1999, the National Automobile, Aerospace,
Transportation and General Workers Union of Canada (CAW - Canada) and its
locals 1524 and 1987 (the "Union") shall have ratified the tentative
amended collective agreement as negotiated between its representatives and
the Purchaser with respect to the business to be carried by the Purchaser
following completion of the transaction of purchase and sale contemplated
herein.
(g) On the Closing Date, the Purchaser's Banks shall advance the funds
necessary to fund the Purchase Price in accordance with the terms contained
in the term Sheet offered by the Toronto-Dominion Bank and accepted by the
Purchaser.
(h) The Purchaser shall on o before the Closing Date, have obtained the right
to occupy the real properties leased by the Company and municipally known
as 725 and 739 Monaghan Rd., Peterborough, Ontario for the 90 day occupancy
period from the Closing Date upon the understanding that the Purchaser
shall be responsible for the occupation rent during such period either
pursuant to the Approval Order or an Occupation Agreement between the
Interim Receiver or the Trustee and the Purchaser.
(i) On the Closing Date, the Purchaser shall have entered into an agreement
with General Motors Corporation ("GMC") indemnifying the purchaser with
respect to all amounts pertaining to the Company and its employees in
respect of each of the following, namely:
(i) unremitted source deductions under the Income Tax Act, and Canada
Pension Plan premiums and Unemployment Insurance premiums;
(ii) accrued vacation pay entitlements of the Company's employees, if any,
to the extent they exceed in the aggregate $500,000;
(iii) remittances and assessments due pursuant to the provisions of the
Workplace Safety and Insurance Act, Pension Benefits Act (excluding,
for greater certainty, any obligation to pay or be responsible for any
unfunded deficiency under any existing Pension Plan of the Company
upon such plan's wind-up), Excise Tax and Corporations Tax Act;
(iv) unpaid suppliers who have delivered any asset included in the
Purchased Assets (i) within 30 days prior to the Time of Closing or
(ii) who has delivered to the Vendor, Interim Receiver, or Trustee,
written demand for repossession; and
(v) all amounts due and payable by the Company for property taxes and
utilities;
such Agreement to be in a form reasonably satisfactory to the Purchaser.
(j) On the Closing Date, at the Time of Closing, the Purchaser shall have
obtained possession or control of the Purchased Assets.
6.4 CONDITIONS FOR PURCHASER NOT SATISFIED
In the event any of the conditions in Section 6.3 is not satisfied by the
date indicated, this Agreement shall thereupon at the option of the Purchaser be
rendered null and void and the Purchaser shall be entitled to the return of the
Deposit with accrued interest thereon and thereafter the Vendor and Purchaser
shall not be under any further obligation to the other.
ARTICLE VII
COVENANTS OF THE PURCHASER
7.1 COVENANTS OF THE PURCHASER
(a) the Purchaser shall ensure that the representations and warranties of the
Purchaser contained herein are true and correct at the Time of Closing on
the Closing Date;
(b) the Purchaser will not enter into any agreements with the Ministry of the
Environment and Energy before the Time of Closing, without the prior
written consent of the Vendor.
7.2 COVENANTS OF THE VENDOR
(a) At the Time of Closing, the Vendor shall deliver to the Purchaser such
deeds of conveyance, bills of sale, assignments and instruments, in such
form as may be reasonably necessary so as to convey to the Purchaser all of
the right, title and interest of the Vendor in and to the Purchased Assets.
(b) Between the date of the acceptance of this Agreement by the Vendor and the
Time of Closing, the Interim Receiver will make reasonable efforts to cause
the Company to provide access to and to permit the Purchaser, through its
representatives, to make such investigation of, the operations, properties,
assets and records of the Company and of its financial and legal condition
as the Purchaser deems necessary or advisable. The Interim Receiver shall
make reasonable efforts to cause the Company to make available for
discussions with the Purchaser and its authorized representatives, the
persons responsible for managing the Company's business and, to the extent
reasonably possible, the auditors, environmental consultants, engineers and
other similar consultants who have provided services to or with respect to
the Company's business and it is expressly acknowledged that the Purchaser
shall be permitted access to the representatives of the bargaining unit for
the Company's employees. Any fees and expenses required to be paid to the
auditors, environmental consultants, engineers and other similar
consultants referred to above shall be paid by the Purchaser at the time of
the said discussions. Until the Time of Closing or the termination of this
Agreement in accordance with its terms, the Interim Receiver shall make
reasonable efforts to cause the Company to cooperate with the Purchaser in
the conduct of the Purchaser's investigations and due diligence and shall
authorize governmental agencies, authorities and other similar third
parties as Purchaser may deem advisable, acting reasonably, to provide
information concerning the Company to the Purchaser. The Purchaser through
its representatives, shall be permitted to enter upon the Company's
premises during usual business hours to carry out such reasonable tests,
audits and inspections as it deems necessary or advisable, provided such
tests, audits and inspections are carried out in a commercially reasonable
manner and do not interfere with the operations of the Company. Provided
however, it is expressly acknowledged and agreed that the Purchaser shall
not assume any management, care or control over any assets of the Company,
including any of the Purchased Assets for purposes of any Federal or
Provincial Environmental Legislation or other legislation of any kind as a
result of any steps taken by the Purchaser pursuant to any rights of access
or investigation by its representatives conducted under the provisions of
this Agreement. The Vendor shall in its application for the Approval Order
apply for the order to include provisions allowing access to the Purchaser
on the same basis as contemplated in this paragraph 7.2(c).
ARTICLE VIII
SPECIAL ARRANGEMENT FOR INVENTORY AND RECEIVABLES
AND ENVIRONMENTAL RESERVE
8.1 MANAGEMENT OF INVENTORY DURING INTERIM PERIOD
From the time of acceptance of this Agreement until the Time of Closing, GM
and the Interim Receiver shall make reasonable efforts to cause the Company to
consult on a regular basis with the Purchaser as to the Company's current
inventory levels and requirements.
8.2 PRELIMINARY INVENTORY CALCULATION
It is expressly acknowledged and agreed that in the calculation of the
Purchase Price at the Time of Closing attributable to the inventory described in
Parcel I, the parties will use the inventory as it is recorded in the financial
records of the Company as at December 31, 1998.
8.3 HOLDBACK WITH RESPECT TO INVENTORY
It is expressly acknowledged and agreed that an amount equal to 25% of the
Purchase Price which is attributable to Parcel I (inventory) and which is
otherwise payable by the Purchaser to the Vendor on the Closing Date in
accordance with the provisions hereof, shall instead be placed in escrow, on the
Closing Date in accordance with an escrow agreement in the form annexed hereto
as Schedule "C" (the "Escrow Agreement"). The Purchaser, GM and the Interim
Receiver each agree to execute the Escrow Agreement on the Closing Date. In this
Agreement, the term "Escrow Agent" shall mean the Interim Receiver, as referred
to in the Escrow Agreement and the term "Escrow Funds" shall have the meaning
attributed thereto in the Escrow Agreement.
8.4 AUDIT/FINAL ADJUSTMENTS TO PURCHASE PRICE WITH RESPECT TO INVENTORY
Forthwith after the closing Date and as of the Closing Date, the Purchaser
shall cause a physical count and valuation to be conducted of the inventory of
the Company described in Parcel I (the "Closing Inventory"). The representatives
of the auditors of the Purchaser (the "Purchaser's Auditors") and BBK Ltd.
("BBK") (being the representatives of GM), the Interim Receiver and
representatives of the Company will be permitted to attend and observe at the
inventory court and carry out at their own expense such procedures s they deem
appropriate. This count and valuation shall be conducted by employees of the
Purchaser who were formerly employees of the Company and who are knowledgeable
of the inventory and its costing. The inventory shall be valued s set forth in
Section 3.2 and the count and valuation will be conducted and completed as
quickly as possible after the Closing Date. If the parties are unable to agree
to a resolution of any differences within fifteen (15) days after completion of
the physical count, the parties agree that the resolution of such differences
shall be submitted to the Toronto office of Deloitte & Touche (the "Arbitrator")
for a final and binding determination. In the event that Deloitte & Touche are
unable to accept the appointment, the Purchaser and GM shall appoint a mutually
agreeable substitute. The arbitrator's fees and expenses shall be allocated and
paid based upon the relative difference between the respective positions of the
parties as submitted to the Arbitrator and the final determination of the
Arbitrator. The Purchaser shall make available to the Interim Receiver, the
Purchaser's Auditors, BBK, and if necessary, the Arbitrator, the books and
records utilized in conducting the Closing Inventory together with the employees
working on the Closing Inventory.
8.5 FINAL PURCHASE PRICE
The "Final Purchase Price" shall be the Purchase Price adjusted upwards or
downwards, by the difference between the value with respect to the inventory of
the Company as finally agreed upon by the Vendor, GM and the Purchaser or as
determined by the Arbitrator and the values with respect to the inventory of the
Company otherwise used to calculate the Purchase Price, in accordance with this
agreement, on the Closing Date.
8.6 FINAL DETERMINATION
Immediately upon final determination of the Final Purchase Price, the
Purchaser, and GM shall jointly notify the Escrow Agent of the amount of any
final adjustment in accordance with the notice provisions of the Escrow
Agreement. If an amount is due to the Purchaser as a refund of excess Purchase
Price previously paid, the Escrow Agent shall pay that amount to the Purchaser
from the Escrow Funds pursuant to the Escrow Agreement. If the amount due to the
Vendor is less than the balance of the Escrow Funds, the remaining balance of
the Escrow Funds shall be paid by the Escrow Agent to the Purchaser. If an
amount is due to the Vendor in excess of the Escrow Funds, such amount shall be
paid to the Vendor by the Purchaser on demand. All amounts contemplated by this
Section 8.6 shall be made by cheque within five (5) business days after final
determination of the Final Purchase Price. Notwithstanding the foregoing, if a
portion of the holdback is not the subject matter of a dispute referred to in
Section 8.4, such portion shall be released if an irrevocable direction
addressed to the Escrow Agent agreeing to the release of such portion signed by
the Vendor, Purchaser, GM, BBK and the Interim Receiver is delivered to the
Escrow Agent.
ARTICLE IX
GENERAL
9.1 TIME OF ESSENCE
All stipulations as to time are strictly of the essence.
9.2 TENDER
Any tender of documents or money hereunder may be made upon the Vendor or
the Purchaser at their respective solicitors or at the address in Section 9.11.
9.3 KPMG
KPMG Inc. acts in its capacity as agent of the Vendor and neither KPMG Inc.
nor any of its officers, directors, agents, employees or contractors shall have
any personal or corporate liability or obligation under or in connection with
the Agreement.
9.4 NO ASSIGNMENT
The Purchaser shall not be entitled to assign its rights and obligations
under this Agreement without the prior written consent of the Vendor.
9.5 GOVERNING LAW
The validity and interpretation of the Agreement shall be governed by the
laws of Ontario and the laws of Canada applicable in the Province of Ontario,
and such Agreement shall enure to the benefit of and be binding upon the parties
thereto, and their respective successors or permitted assigns, as the case may
be.
9.6 NO COMMISSIONS
The Vendor shall not be required to pay any commission or brokerage fee
whatsoever in connection with any sale pursuant to the Agreement.
9.7 SURVIVAL OF OBLIGATIONS, REPRESENTATIONS
Unless otherwise specifically stated herein, all obligations,
representations and warranties of the parties contained in the Agreement shall
survive the completion of the sale.
9.8 ENTIRE AGREEMENT
The Agreement shall constitute the entire agreement between the parties to
it pertaining to the subject matter thereof and shall supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties and there shall be no agreements or
understandings between the parties in connection with the subject matter thereof
except as specifically set forth herein and except a separate agreement between
the Vendor and GM which does not bind the Purchaser. No supplement,
modification, waiver or termination of the Agreement or any part thereof shall
be binding, unless executed in writing by the parties to be bound thereby,
provided that the time provided for doing any matter or thing contemplated
herein may be abridged or extended by written agreement, in letter form or
otherwise, executed by the duly authorized solicitors for the parties. This
Agreement may be executed in one or more counterparts, which together shall
constitute one and the same Agreement. Any counterpart of this Agreement may be
executed and delivered by telecopier as sufficient evidence of the Agreement of
any party executing and delivering a counterpart.
9.9 HEADINGS AND REFERENCES
The headings in this Agreement introducing Sections and subsections are for
convenience of reference only and shall not affect the interpretation of the
Agreement. All references to the parties hereto shall be read with such changes
in number and gender as may be appropriate, according to whether the party is a
male or female person or a corporation or partnership, and if more than one
parson, shall be deemed joint and several. References to Sections are references
to sections in this Agreement.
9.10 FURTHER ASSURANCES
The parties hereby undertake and agree with each other to execute and
deliver such other documents, papers, matters and assurances as the other party
may reasonably require or request in connection with the Agreement for the
purposes of the more effectual carrying out of the Agreement. All expenses in
connection with such further documents, papers and assurances shall be borne by
the party requesting the same.
9.11 NOTICES
Any notice or other communication required or permitted to be given under
the Agreement shall be in writing and shall be given by telecopier, prepaid
registered mail or personal delivery and shall be conclusively deemed to have
been given and received on the day on which it was delivered or sent by
telecopier, or five days after deposited in the post office or telegraph office
as the case may be, (personal delivery including delivery by commercial courier)
to the Purchaser, the Vendor and the other parties as follows:
If to the Vendor: The Bank of Nova Scotia
Special Accounts Management
One Financial Place
1 Adelaide Street East, 9th Floor
TORONTO, Ontario
M5C 2W8
Attention: Vice-President
Facsimile: (416)933-1357
with a copy to: KPMG Inc.
Suite 3300, Commerce Court West
P.O. Box 31, Stn. Commerce Court
TORONTO, Ontario
M5L 1B2
Attention: Michael Creber
Senior Vice-President
Facsimile: (416)777-3364
with a copy to: Borden & Elliott
Scotia Plaza
40 King Street West
TORONTO, Ontario
M5H 3Y4
Attention: William S. Robertson
Facsimile: (416)361-7078
If to GM: General Motors Corporation
3031 West Grant Boulevard, 8th Floor
DETROIT, Michigan 48202
Attention: Christopher F. Dubay
Facsimile: (810)986-6702
with a copy to: Thornton Grout Finnigan
2200 - 77 King Street West
Royal Trust Tower
Toronto-Dominion Centre
TORONTO, Ontario
M5K 1K7
Attention: James H. Grout
Facsimile: (416)304-1313
with a copy to: General Motors of Canada Limited
1908 Colonel Same Drive
OSHAWA, Ontario
L1H 8P7
Attention: Lawrence Worral and
Heather Innes
Facsimile: (905)644-4491
with a copy to: Honigman, Miller, Schwartz and Cohn
2290 First National Building
DETROIT, Michigan 48226-3583
Attention: Donald F. Baty, Jr.
Facsimile: (313)465-7315
If to Interim Receiver: Grant Thornton Limited
19th Floor, South Tower
Royal Bank Plaza
200 Bay Street, Box 55
TORONTO, Ontario
M5J 2P9
Attention: Allan A. Rutman
Facsimile: (416)360-4949
If to Purchaser: Ventra Group Inc.
1900 West Big Beaver Road
Suite 250
TROY, Michigan 48084
Attention: Richard Stanley
Executive Vice-President
Facsimile: (248)816-1040
with a copy to: McGuire, McFarlane & Thomas
Barristers and Solicitors
P.O. Box 996
61 Dover Street
CHATHAM, Ontario
N7M 5L6
Attention: R. John McFarlane
Facsimile: (519)351-7566
9.12 SCHEDULES
The following are the Schedules annexed hereto and incorporated by
reference and deemed to be part hereof:
- Schedule "A" - Real Property of the Company;
- Schedule "B" - Other Assets of the Company (Parcel IV);
- Schedule "C" - Escrow Agreement;
- Schedule "D" - Machinery and Equipment of the Company (Parcel III);
- Schedule "E" - Permitted Encumbrances;
- Schedule "F" - Approval Order approving sale of Purchased Assets;
- Schedule "G" - Special Excluded Assets.
ARTICLE X
OFFER AND ACCEPTANCE
10.1 OFFER AND ACCEPTANCE
This Agreement, when signed by the Purchaser and before it is signed by the
Vendor, s hall be considered to be a form of offer by the Purchaser to purchase
the Purchased Property from the Vendor on, and subject to, the terms and
conditions contained herein. The offer shall be open for acceptance by the
Vendor and approval and agreement by GM and the Interim Receiver until 5:00 p.m.
(Toronto time) on the 22nd day of December, 1998 at which time, if not accepted
by the Vendor and approve and agreed to by GM and the Interim Receiver, this
offer shall be null and void. The expression "this Agreement" or "the Agreement"
herein shall mean the agreement resulting from the acceptance by the Vendor and
approval and agreement by GM and Interim Receiver of the offer.
IN WITNESS WHEREOF the Purchaser has signed this Agreement by a person
authorized to do so on the Purchaser's behalf.
VENTRA GROUP INC.
By: /s/ W. Dwight Rollins
---------------------------------
Name: W. Dwight Rollins
Title: Chief Financial Officer
ACCEPTANCE
The Vendor hereby accepts this offer and GM and t he Interim Receiver
hereby approve and agree to this offer as of the day of December, 1998.
THE BANK OF NOVA SCOTIA
By:
Name:
Title:
GENERAL MOTORS OF CANADA GENERAL MOTORS CORPORATION
LIMITED
By: By:
Name: Name:
Title: Title:
GRANT THORNTON LIMITED
By:
Name:
Title:
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of this
26th day of March, 1999 by and between MACLEAN ACQUISITION COMPANY, a Delaware
corporation (together with its successors and permitted assigns, "Purchaser"),
INDUSTRIAL & AUTOMOTIVE FASTENERS, INC., a Michigan corporation (the "Company"),
and JPE, Inc., a Michigan corporation ("Seller").
W I T N E S S E T H:
WHEREAS, the Company operates a business engaged in the manufacture and
sale of metal wheel nuts (the "Business");
WHEREAS, Seller owns 100% of the issued and outstanding shares of common
stock, no par value of the Company (the "Shares");
WHEREAS, Seller desires to sell all of the Shares and Purchaser desires to
acquire the Shares on the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
agreements and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Purchaser, the Company and Seller hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 General. Each term defined in the preamble of this Agreement and in the
recitals of this Agreement shall have the meaning set forth above whenever used
herein, unless otherwise expressly provided or unless the context clearly
requires otherwise.
1.2 Definitions. As used herein, the following terms shall have the
meanings ascribed to them in this Section 1.2:
Accounts Receivable. All present and future rights to payment for
goods sold or services rendered whether or not earned by performance,
including, without limitation, all lease payments receivable and accounts
or notes receivable owned or held by the Company.
Adverse Consequences. All allegations, charges, complaints, actions,
suits, proceedings, hearings, investigations, claims, demands, judgments,
orders, decrees, stipulations, injunctions, damages, dues, penalties,
fines, costs, amounts paid in settlement, Liabilities, Taxes, interest,
Liens, losses, expenses and fees, including all accounting, consultant and
attorneys' fees and court costs, costs of expert witnesses and other
expenses of litigation.
Affiliate. As set forth in Rule 12b-2 of the regulations promulgated
under the Securities Exchange Act of 1934.
Agreement. This Stock Purchase Agreement, together with all Exhibits
and Schedules referred to herein, as amended, modified or supplemented from
time to time in accordance with the terms hereof.
Alternative Transaction. As defined in Section 5.6.
Authority. Any governmental, regulatory or administrative body, agency
or authority, any court of judicial authority, any arbitrator or any
public, private or industry regulatory authority, whether foreign, federal,
state or local.
Business. As defined in the Recitals hereto.
CERCLA. Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss. 9601, et seq.
Closing. The actual conveyance, transfer, assignment and delivery of
the Shares to Purchaser in exchange for the consideration payable to Seller
pursuant to this Agreement.
Closing Date. Five (5) days following the date on which Purchaser and
Seller mutually agree all closing conditions have been satisfied (or will
be satisfied on the Closing Date) or waived or such other date as Purchaser
and Seller may mutually agree to in writing, in either case, upon which the
Closing shall occur.
Code. Internal Revenue Code of 1986, as from time to time amended,
including the regulations promulgated thereunder, or any successor statute
and the regulations proposed or promulgated thereunder.
Company. As defined in the preamble hereto.
Composition Agreement. As defined in Section 6.1(l).
Confidential Information. As defined in Section 9.2.
Contracts. All contracts, leases, subleases, arrangements, commitments
and other agreements of the Company, including all customer agreements,
service agreements, vendor agreements, purchase orders, computer software
licenses, hardware lease or rental agreements, contract claims, and all
other arrangements and understandings related to the Business, including,
without limitation, those items which are listed on Schedule 1.2 to this
Agreement under the heading "Contracts".
DOJ. United States Department of Justice.
Environmental Claims. As defined in Section 3.10.4.
Environmental Law(s). Each and every Law, Order, Permit or similar
requirement of each and every Authority, pertaining to (i) the protection
of human health, safety, the environment, natural resources and wildlife,
(ii) the protection or use of surface water, groundwater, rivers and other
bodies of water, (iii) the management, manufacture, possession, presence,
use, generation, transportation, treatment, storage, disposal, Release,
threatened Release, abatement, removal, remediation or handling of, or
exposure to, any Hazardous Substance or (iv) pollution, including without
limitation, as amended, CERCLA, RCRA, the Clean Air Act, 42 U.S.C. ss. 7401
et seq., and the Federal Water Pollution Control Act, 33 U.S.C. ss. 1251,
et seq.
Equipment and Improvements. All machinery, equipment, improvements,
facilities and structures, buildings, installations, fixtures,
improvements, betterments and additions located on or within the Real
Property, trucks, automobiles, appliances, parts, tools, furniture, office
furniture, office supplies and office equipment, fixtures, computers,
computer terminals and printers, telephone systems, telecopiers and
photocopiers, and other tangible personal property of every kind and
description that are located upon or within the Real Property, which are
owned or leased by the Company, or are utilized in connection with the
Business.
ERISA. Employee Retirement Income Security Act of 1974.
Financial Statements. The unaudited balance sheets and statements of
income, changes in stockholders' equity and cash flows of the Business as
of and for the three years ended December 31, 1996, 1997 and 1998, copies
of which are attached hereto as Schedule 3.21.
FTC. United States Federal Trade Commission.
GAAP. Generally accepted accounting principles in the United States
consistently applied.
Hazardous Substance. Any substance which is (i) defined as a hazardous
substance, hazardous material, hazardous waste, pollutant or contaminant
under any Environmental Law, (ii) a petroleum hydrocarbon, including crude
oil or any fraction thereof, (iii) hazardous, toxic, corrosive, flammable,
explosive, infectious, radioactive or carcinogenic, or (iv) regulated
pursuant to any Environmental Law.
Intangibles. All discoveries and inventions (whether patentable or
unpatentable), patents, trade names, trademarks, service marks, copyrights,
trade secrets, customer and supplier lists, processes and techniques,
domain names, registrations and applications for any thereof, and all
technical know-how and other intellectual property rights or intangibles
used by the Company in the operation of the Business, and all goodwill
associated therewith, licenses and sublicenses granted and obtained with
respect thereto and rights thereunder, improvements thereto, remedies
against infringement thereof and rights to protection of interests therein
under all applicable Laws.
Inventories. All of the Company's inventory, consumable supplies,
spare parts and repair materials and any and all other inventories of the
Company, plus any replacements for or additions to such inventories
acquired on or before the Closing Date, and minus any items of inventory
sold or consumed by the Company in the Ordinary Course of Business on or
before the Closing Date.
IRS. Internal Revenue Service.
ISRA. Industrial Site Recovery Act, Title 13: chapter 1K-6, and the
rules and regulations promulgated thereunder.
Law. Any law, statute, regulation, rule, ordinance, requirement,
announcement or other binding action or requirement of an Authority.
Leased Real Property. Those certain parcels of land more fully
described on Schedule 1.2 to this Agreement under the heading "Leased Real
Property".
Liabilities. Any obligation or liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated and whether due or
to become due), including, without limitation, any liability for Taxes.
Lien. Any lien (statutory or other), mortgage, pledge, hypothecation,
collateral assignment, deposit for security arrangement, encumbrance,
preference or security agreement of any kind or nature whatsoever
(including, without limitation, the interest of a vendor or lessor under
any conditional sale, capitalized lease or other title retention agreement)
other than Permitted Liens.
Material Adverse Effect.A material adverse effect on the business,
results of operations, condition (financial or otherwise), assets,
liabilities or prospects of the Business or the Company taken as a whole.
Old Payables. The unpaid accounts payable of the Company in the names
and amounts as are reflected on Schedule 2.2(d).
Order. Any decree, order, judgment, writ, award, injunction,
stipulation or consent of or by an Authority.
Ordinary Course of Business. The ordinary course of business of the
Company in accordance with past custom and practice (including with respect
to quantity and frequency).
Owned Real Property. Those certain parcels of land more fully
described on Schedule 1.2 to this Agreement under the heading "Owned Real
Property," together with all privileges and appurtenances thereto and all
plants, buildings, structures, installations, fixtures, fittings,
improvements, betterments and additions situated thereon and together with
all easements and rights-of-way used or useful in connection therewith.
Permitted Liens. Those certain: (i) inchoate landlord's lien arising
under any Contract relating to Leased Real Property; (ii) liens for Taxes
not yet due and payable and which are adequately reserved for on the
Financial Statements; (iii) liens being contested in good faith and which
are adequately reserved for on the Financial Statements; and (iv) liens
identified as "true leases" pursuant to financing statements.
Permits. As defined in Section 3.18.
Person. Any natural person, corporation, limited liability company,
partnership, firm, joint venture, joint-stock company, trust, association,
Authority, unincorporated entity or organization of any kind.
Plan. As defined in Section 3.12(a).
Prepaid Expenses. All deposits and advances, prepaid expenses and
other prepaid items of the Company and all rights of the Company to receive
discounts, refunds, rebates, awards and the like.
Purchase Price. As defined in Section 2.2.
Purchaser. As defined in the preamble hereto.
RCRA. Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, et
seq.
Real Property. Collectively, the Owned Real Property and the Leased
Real Property.
Real Property Leases. All leases to the Leased Real Property.
Reference Date. December 31, 1998.
Related Entities. As defined in Section 9.5(a)(i).
Release. Any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing into the
environment (including without limitation the abandonment or discarding of
barrels, containers and other receptacles containing any Hazardous
Substance).
Securities Act. The Securities Act of 1933.
Seller's Knowledge. The knowledge of any officer or director of the
Company or Seller, in each case, after reasonable inquiry and
investigation.
Shares. As defined in the Recitals hereto.
Taxes. As defined in Section 3.13(a).
1.3 Interpretation. Unless otherwise expressly provided or unless the
context requires otherwise, (a) all references in this Agreement to Articles,
Sections, Schedules and Exhibits shall mean and refer to Articles, Sections,
Schedules and Exhibits of this Agreement; (b) all references to statutes and
related regulations shall include all amendments of the same and any successor
or replacement statutes and regulations; (c) words using the singular or plural
number also shall include the plural and singular number, respectively; (d)
references to "hereof", "herein", "hereby" and similar terms shall refer to this
entire Agreement (including the Schedules and Exhibits hereto); and (e)
references to any Person shall be deemed to mean and include the successors and
permitted assigns of such Person (or, in the case of an Authority, Persons
succeeding to the relevant functions of such Person).
ARTICLE II
PURCHASE AND SALE, PURCHASE PRICE
AND OTHER RELATED MATTERS
2.1 Sale and Purchase of Shares. Subject to the terms and conditions of
this Agreement, and in reliance upon the representations, warranties, covenants
and agreements made in this Agreement by the Company and Seller, as the case may
be, Purchaser shall purchase and accept from Seller, and Seller shall sell,
transfer, convey, assign and deliver to Purchaser on the Closing Date, the
Shares, free and clear of any Liens. At the Closing, Seller shall deliver to
Purchaser the certificates evidencing the Shares.
2.2 Payment of the Purchase Price.
(a) The amount payable by Purchaser to Seller in consideration for the
Shares shall be an aggregate amount equal to TWENTY MILLION DOLLARS
($20,000,000.00).
(b) The amounts payable under this Section 2.2 shall be referred to
herein as "Purchase Price" and shall be paid by Purchaser to Seller by wire
transfer to an account designated by Seller in immediately available funds.
The aggregate Purchase Price shall be paid on the Closing Date.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF SELLER AND THE COMPANY
As an inducement to Purchaser to enter into and perform its obligations
under this Agreement, and in consideration of the covenants of Purchaser
contained herein, each of Seller and the Company (subject to Section 5.12)
represents, warrants and covenants to Purchaser as follows:
3.1 Corporate Status; Authority of Seller and the Company; Enforceability.
(a) Each of Seller and the Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Michigan. To Seller's Knowledge, there are no other States in which the
Company, as a matter of reasonable business judgment, should qualify to
transact business as a foreign corporation.
(b) Each of Seller and the Company has the requisite corporate power
and authority necessary to (i) own, lease, operate or otherwise hold its
properties and assets and to carry on its businesses as presently
conducted, and (ii) execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery by the Company and Seller
of this Agreement, and the performance by the Company and Seller of their
respective obligations hereunder, have been duly and validly authorized and
approved by all necessary corporate action on the part of the Company and
Seller, as the case may be.
(c) This Agreement is binding upon, and enforceable against, each of
the Company and Seller in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights
generally and by general principles of equity (whether in a proceeding at
law or in equity).
(d) Neither the execution or delivery of this Agreement by Seller or
the Company, nor the performance by Seller or the Company of their
respective obligations under this Agreement will (assuming the receipt of
all consents referred to in Section 3.17), conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any Contract or Permit to which Seller or the Company is a party or is
bound, the articles of incorporation or bylaws of the Company or Seller, or
any applicable Law or Order to which the Company or Seller is a party or by
which the Company or Seller is bound.
3.2 Ownership of Stock; No Other Securities.
(a) The total number of shares of capital stock and the par value
thereof which the Company is authorized to issue and the number of such
shares which are issued and outstanding are as follows:
Issued and
Class Authorized Shares Outstanding Shares
----- ---------- ------ ------------------
Common Stock, no par value 60,000 100
No shares of the Company's capital stock are held as treasury stock.
(b) There are no outstanding options, conversion rights, phantom stock
plans, warrants or other rights in existence to acquire from the Company
any of its shares of capital stock.
(c) The Shares have been duly and validly issued and are fully paid
and nonassessable and are not subject to any preemptive rights; and there
are no voting trust agreements or other contracts, agreements or
arrangements restricting voting or dividend rights or transferability with
respect to the outstanding shares of capital stock of the Company.
(d) The Company has not violated in any material respect any federal,
state or local Law in connection with the offer for sale or sale and
issuance of its outstanding shares of capital stock or any other
securities.
(e) Other than as set forth in Schedule 3.2(e), the Company does not
own any securities or any other direct or indirect interest in any other
Person.
3.3 Trade Names, Trademarks and Copyrights. Schedule 1.2 to this Agreement,
under the heading "Intangibles", contains a true and complete list of all
trademarks, service marks, trade names, domain names and copyrights and their
registrations or applications, if any, owned by the Company or in which the
Company has any rights or licenses, together with a brief description of each.
To Seller's Knowledge, there is no infringement or alleged infringement by any
Person of any such trademark, service mark, trade name or copyright. The Company
is not now infringing on any trademark, service mark, trade name, domain names
or copyright belonging to any other Person. The Company is not a party to any
license, agreement or arrangement, whether as licensor, licensee, franchisor,
franchisee or otherwise (except as a licensee of software as disclosed on
Schedule 3.4), with respect to any trademark, service mark, trade name, domain
name or any copyright or any application therefor. The Company owns, or holds
adequate licenses or other rights to use, all trademarks, service marks, trade
names, domain names and copyrights currently used in the Business, including,
without limitation, those listed on Schedule 1.2 to this Agreement under the
heading "Intangibles".
3.4 No Patent Rights. Set forth on Schedule 3.4 hereto are all patents,
inventions, industrial models, processes, designs, formulas or applications for
patents that the Company owns, holds, or has any right, license or immunity with
respect to. To Seller's Knowledge, there is no infringement or alleged
infringement by any Person of any such patents, inventions, industrial models,
processes, designs, formulas or applications for patents. The Company is not now
infringing on any patent or other right belonging to any Person. Except as set
forth on Schedule 3.4 hereto, the Company is not a party to any license,
agreement or arrangement, whether as licensee, licensor or otherwise, with
respect to any patent, application for patent, invention, design, model,
process, trade secret, formula or any software. The Company owns all right,
title and interest in and to any and all software (other than validly licensed
software) used or necessary in the operation of the Business free and clear of
any adverse claim of any employee or any other Person.
3.5 Contracts. Schedule 3.5 to this Agreement, under the heading
"Contracts", contains a complete list of all material Contracts to which the
Company is a party or by which the Company or its assets are currently bound and
copies of such written Contracts have been provided to Purchaser. Except as set
forth on Schedule 3.5, the Company is not a party to any Contract not entered
into in the Ordinary Course of Business. Each of the Contracts is legal, valid
and binding upon the Company and, to Seller's Knowledge, the other parties
thereto except as limited by bankruptcy and insolvency laws and by other laws
affecting the rights of creditors generally. Except as set forth on Schedule
3.5, to Seller's Knowledge, there is no default or event that with notice or
lapse of time, or both, would constitute a default by any party to any of the
Contracts. Except as set forth on Schedule 3.5, the Company has not received
notice that any party to any of the Contracts intends to cancel or terminate any
of such agreements or to exercise or not exercise any options under any of such
agreements.
3.6 No Violations. Except as set forth on Schedule 3.6, neither the
execution, delivery and performance of this Agreement by Seller and the Company
nor the consummation of the sale of the Shares or any other transaction
contemplated by this Agreement, does or will, after the giving of notice, or the
lapse of time, or otherwise, (a) conflict with, result in a breach of, or
constitute a default or a violation under, the articles of incorporation or
by-laws of Seller or the Company or any Law or Order by which Seller, the
Company or their assets is bound, or Contract to which the Company is a party or
is bound; (b) result in the creation of any Lien or other adverse interest upon
any of the Shares or the Company's assets; (c) terminate, amend or modify, or
give any party the right to terminate, amend, modify, abandon, or refuse to
perform, any Contract to which the Company is a party or is bound; or (d)
accelerate or modify, or give any party the right to accelerate or modify, the
time within which, or the terms under which, any duties or obligations are to be
performed, or any rights or benefits are to be received, under any Contract to
which the Company is a party or is bound.
3.7 Litigation. Schedule 3.7 to this Agreement sets forth a brief
description of all suits, actions, arbitrations, and legal, administrative and
other proceedings and governmental investigations pending or, to Seller's
Knowledge, threatened against or affecting the Company or the Business.
3.8 Personnel Identification and Compensation. Schedule 3.8 to this
Agreement contains a true and complete list of the names, addresses and titles
of all current officers, directors and employees of the Company. The Company has
previously delivered to Purchaser a true and correct schedule stating the rates
of compensation payable, including bonuses, (or paid, as the case may be) to
each such person.
3.9 Existing Employment Contracts. The Company has no union contracts,
employment contracts or similar arrangements except those described on Schedule
3.9 hereto. There is no pending or, to Seller's Knowledge, threatened labor
dispute, strike or work stoppage affecting the Business.
3.10 Environmental. Except as set forth on Schedule 3.10:
3.10.1 Predecessors. For purposes of this Section 3.10, the Company
shall be deemed to include any predecessor to the Company and any Persons
from which the Company has assumed liabilities by operation of Law.
3.10.2 Compliance with Environmental Laws. The Real Property, and all
uses and conditions of the Real Property and the Business have been and are
in compliance with all Environmental Laws. Any real property formerly owned
or leased by the Company or otherwise related to the Business were in
compliance with all Environmental Laws during the Company's period of
ownership or operation of such formerly owned or operated real property or
any use or condition thereof.
3.10.3 No Release of Hazardous Substances. There is no Release or
threatened Release of any Hazardous Substance existing on, beneath or from
the surface, subsurface or ground water associated with the Real Property
or any real property formerly owned or operated by the Company or upon
which Hazardous Substances generated by the Company or the Business came to
be located, nor, to Seller's Knowledge, is there or has there been any
Release or threatened Release of Hazardous Substances adjacent to, from or
in the vicinity of the Real Property currently occurring or occurring at
any time in the past.
3.10.4 No Proceedings. There exists no Order nor any demand,
allegation, suit, claim, proceeding, citation, directive, summons,
investigation, information request, notice of violation or other notice
pending or threatened pursuant to any Environmental Law relating to (a) the
ownership, lease, occupation or use of the Real Property or any formerly
owned, leased, occupied or used real property by the Company or, to
Seller's Knowledge, any other present or former owner, tenant, occupant or
user of the Real Property, (b) any alleged violation of or liability under
any Environmental Law by the Company, or (c) the suspected presence,
Release or threatened Release of any Hazardous Substance on, under, in or
from the surface, subsurface, or groundwater associated with the Real
Property, or any formerly owned, leased, occupied or used real property,
(d) any actual or alleged damage, injury, threat or harm to health, safety,
natural resources or the environment (collectively referred to herein as
"Environmental Claims"), and the Company has no knowledge of any facts or
circumstances that could reasonably be expected to form the basis of an
Environmental Claim.
3.10.5 Documents. The Company has provided to Purchaser any and all
documents, correspondence, pleadings, reports, assessments, analytical
results, Permits or other records concerning Environmental Laws or
Hazardous Substances.
3.10.6 Transfer Statutes. No Environmental Law including, without
limitation, the ISRA, imposes any obligation on the Company for site
investigation or cleanup, or notification to or consent of any Authority or
any Person as the result of the consummation of the transactions
contemplated hereunder.
3.10.7 Limitation of Environmental Representation. Notwithstanding
anything in this Section 3.10 to the contrary, there shall be no violation
of the representations and warranties contained herein with respect to
matters disclosed on that certain Phase II Environmental Site Assessment
report (or the related Phase I report) prepared for Purchaser by Clayton
Environmental Consultants, nor shall there by any such violation to the
extent that there exist violations of, or obligations under, Environmental
Laws, the complete remediation of or compliance with which, in the
aggregate, can be accomplished for an expenditure not in excess of
$500,000.
3.11 Certain Transactions. Except as set forth on Schedule 3.11, all
current or contracted for purchases, sales, leases, management agreements
or other transactions, if any, between the Company, on the one hand, and
any officer, director, stockholder or key employee or Affiliate thereof, or
officer, director, stockholder or key employee of any Affiliate, on the
other hand, have been made on the basis of prevailing market rates and
terms such that from the prospective of the Company, all such transactions
have been entered into on terms no less favorable than those which would
have been available from unrelated third parties in the Ordinary Course of
Business. Except as set forth on Schedule 3.11 hereto, neither any officer,
director or employee of the Company, nor any spouse, child or other
relative of any of such persons, owns, or has any interest, directly or
indirectly, in any of the real or personal property owned by or leased to
the Company or any copyrights, patents, trademarks, domain names, trade
names or trade secrets owned or licensed by the Company.
3.12 Employee Benefit Matters. Except as set forth on Schedule 3.12:
(a) Schedule 3.12 to this Agreement contains a true, complete and
correct list of each pension, retirement, profit sharing, savings, stock
option, restricted stock, severance, termination, bonus, fringe benefit,
insurance, supplemental benefit, medical, education reimbursement or other
employee benefit plan, program, agreement or arrangement, including each
"employee benefit plan" as defined in Section 3(3) of ERISA, with respect
to which the Company may have any liability (each a "Plan").
(b) True, complete and correct copies of the following items relating
to each Plan, where applicable, have been delivered to Purchaser:
(i) the plan document and related trust agreement and insurance
contracts, including any amendments (including descriptions of
vacation and severance policies);
(ii) the most recent determination letter received from the IRS
with respect to each such Plan that is intended to be qualified under
Section 401 of the Code;
(iii) the most recent summary plan description, summary of
material modifications and all material communications to
participants;
(iv) the most recent annual report (5500 series) and schedules;
(v) the most recent actuarial valuation; and
(vi) if the Plan is a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA, the most recent annual contribution required to
be made to such Plan, and any information which has been provided to
the Company regarding withdrawal liability under such Plan.
(c) Each Plan complies with, and has been operated and administered
substantially in accordance with its terms and the applicable provisions of
ERISA and the Code, including COBRA, and all other applicable Laws, and
there are no actions, suits or claims pending or threatened against any
Plan or any administrator or fiduciary thereof, nor do any facts exist
which could give rise to any such action, suit or claim. Neither the
Company nor any fiduciary of any Plan has engaged in a prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code.
(d) Each of the Plans that is intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified.
(e) The Company has no liability with respect to a plan termination
under Title IV of ERISA, a funding deficiency under Section 412 of the Code
or Section 302 of ERISA or a withdrawal from a "multiemployer plan" as
defined in (f) below or under Section 4063 of ERISA. The Company has not
engaged in any transaction which could subject it to liability under
Section 4069 of ERISA or Section 4212(c) of ERISA. All contributions or
payments due and owing as required by Section 302 of ERISA, Section 412 of
the Code or the terms of any Plan have been made by the due date for such
contributions or payments. With respect to each Plan which is a
multiemployer plan, the Company has paid or accrued all contributions
pursuant to the terms of the applicable collective bargaining agreement
required to be paid or accrued by it. With respect to each Plan which is
covered by Title IV of ERISA, the market value of assets (exclusive of any
contribution due to such Plan) equals or exceeds the present value of
benefit liabilities as of the latest actuarial valuation date for such Plan
(but not prior to 12 months prior to the date hereof,) determined on the
basis of a shutdown of the Company in accordance with actuarial assumptions
used by the PBGC in single-employer plan terminations, and since its last
valuation date there have been no amendments to such Plan that materially
increased the present value of accrued benefits nor any other material
adverse changes in the funding status of such Plan.
(f) None of the Plans is a plan subject to Title IV of ERISA or a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA. No
Plan which is a "welfare plan" within the meaning of Section 3(2) of ERISA
provides benefits with respect to employees beyond termination of
employment other than coverage required by law.
(g) The Company is not now nor has ever been, a member of a
"controlled group of corporations" within the meaning of Section 414(b) of
the Code, a member of a group under "common control" within the meaning of
Section 414(c) of the Code, or a member of an "affiliated service group"
within the meaning of Section 414(m) of the Code.
For purposes of this Section 3.12, "Company" shall be deemed to include
each of the Company's Affiliates.
3.13 Tax Matters.
(a) The term "Taxes" means all net income, capital gains, gross
income, gross receipts, sales, use, transfer, ad valorem, franchise,
profits, license, capital, withholding, payroll, employment, excise, goods
and services, severance, stamp, occupation, premium, property, assessments
or other governmental charges of any kind whatsoever, together with any
interest, fines and any penalties, additions to tax or additional amounts
incurred or accrued under applicable federal, state, local or foreign tax
law or assessed, charged or imposed by any Authority, domestic or foreign,
provided that any interest, penalties, additions to tax or additional
amounts that relate to Taxes for any taxable period (including any portion
of any taxable period ending on or before the Closing Date) shall be deemed
to be Taxes for such period, regardless of when such items are incurred,
accrued, assessed or charged. For the purposes of this Section 3.13 and
Section 5.8, the Company shall be deemed to include any predecessor to the
Company and any Person from which the Company incur a liability for Taxes
as a result of transferee liability, joint and several liability, a
contract or otherwise.
(b) Except as disclosed on Schedule 3.13, the Company has duly and
timely filed (and prior to the Closing Date will duly and timely file)
true, correct and complete Tax returns, reports or estimates, all prepared
in accordance with applicable Laws, for all years and periods (and portions
thereof), for all jurisdictions (whether federal, state, local or foreign)
in which any such returns, reports or estimates are required to be filed by
any applicable Law on or prior to the Closing Date. All Taxes due and
payable have been paid (or will be paid prior to the Closing), and there is
no current liability for any Taxes due and payable. Any charges, accruals
and reserves for Taxes provided for on the Financial Statements are
adequate. There are no existing liens for Taxes upon any of the Company's
assets except for Taxes not yet due and payable and which are adequately
reserved for on the Financial Statements or will be adequately reserved for
at the time of Closing. The Company has provided to Purchaser copies of all
federal, state and foreign tax returns filed by or for the Company for the
past three (3) years. All applicable sales Taxes, to the extent due, were
paid by the Company when the Shares were acquired by the Company.
(c) The Company has (i) withheld all required amounts from its
employees, agents, contractors and nonresidents and remitted such amounts
to the proper Authorities; (ii) paid all employer contributions and
premiums; and (iii) filed all federal, state, local and foreign returns and
reports with respect to employee income Tax withholding, and social
security and unemployment Taxes and premiums, all in compliance with the
withholding provisions of the Code and other applicable Laws.
(d) None of the Company's assets are tax exempt use property under
Code Section 168(h). None of the Company's assets are property that the
Company is required to treat as being owned by any other Person pursuant to
the safe harbor lease provision of former Code Section 168(f)(8).
(e) No portion of the cost of any of the Company's' assets were
financed directly or indirectly from the proceeds of any tax exempt state
or local government obligation described in Code Section 103(a).
(f) The Company has no (and has not previously had any) permanent
establishment in any foreign country and the Company does not engage (and
has not previously engaged) in a trade or business within the meaning of
the Code relating to the creation of a permanent establishment in any
foreign country. The Company is not a foreign person within the meaning of
Code Section 1445.
(g) Neither the Code nor any other provision of Law requires Purchaser
to withhold any portion of the Purchase Price.
(h) Except as described in Schedule 3.13 attached hereto, the Company
is not, nor has ever been a member of any consolidated, combined or unitary
group for federal, state, local or foreign Tax purposes.
(i) The Company is not a party to any joint venture, partnership or
other arrangement that could be treated as a partnership for federal income
Tax purposes.
(j) The federal income Tax returns of Seller have been examined by the
IRS, or have been closed by the applicable statute of limitations, for all
periods through 1995; and no deficiencies or reassessments for any Taxes
have been proposed, asserted or assessed against the Company by any
federal, state, local or foreign taxing authority except those that have
been paid.
(k) The Company has not executed or filed with any taxing authority
(whether federal, state, local or foreign) any agreement or other document
extending or have the effect of extending the period for assessment,
reassessment or collection of any Taxes, and no power of attorney granted
by the Company with respect to any Taxes is currently in force.
(l) No federal, state, local or foreign Tax audits or other
administrative proceedings, discussions or court proceedings are presently
pending with regard to any Taxes or Tax returns of the Company.
(m) The Company has not entered into any agreement relating to Taxes
which affects any taxable year ending after the Closing Date.
(n) The Company has not agreed to or is required to make any
adjustment by reason of a change in accounting methods that affects any
taxable year ending after the Closing Date. Neither the IRS nor any other
agency has proposed any such adjustment or change in accounting methods
that affects any taxable year ending after the Closing Date. The Company
has no application pending with any taxing authority requesting permission
for any changes in accounting methods that relate to its business or
operations and that affects any taxable year ending after the Closing Date.
(o) The Company is not now and never has been a party to any Tax
sharing agreement or similar arrangement for the sharing of Tax liabilities
or benefits.
(p) The Company has not consented to the application of Code Section
341(f).
(q) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company that, individually or
collectively, could give rise to the payment by the Company of any amount
that would not be deductible by reason of Code Section 280G.
3.14 Title to Purchased Shares; Assets.
(a) Seller owns the Shares free and clear of any Liens. Seller is the
record and beneficial owner of all of the issued and outstanding capital
stock of the Company. The Shares constitute all of the issued and
outstanding shares of capital stock of the Company and upon delivery of and
payment by Purchaser to Seller of the Purchase Price, Purchaser will
acquire good and marketable title to the Shares free and clear of all Liens
(other than Liens created by Purchaser, if any).
(b) Except as described on Schedule 3.14 hereto, the Company has good
and marketable title to, or with respect to the Leased Real Property, a
valid and binding leasehold interest in, all of its assets, free and clear
of all Liens. The Company owns or otherwise has an enforceable right under
a contract to use all of the assets and rights used in the operation of the
Business.
3.15 Real Property. Other than as identified on Schedule 3.15 hereto, the
Company has no title to or interest in any Real Property. All amounts due and
payable with respect to the Leased Real Property have been paid, the Real
Property Leases are valid and in full force and there does not exist any default
or event that with the notice or lapse of time, or both, could constitute a
default under any such Real Property Lease.
3.16 Conditions of Assets. Except as set forth on Schedule 3.16, all of the
Company's assets are in good operating condition and repair subject to normal
wear and tear and are sufficient for the operation of the Business.
3.17 Consents. Except as otherwise disclosed on Schedule 3.17 hereto, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any Authority or any other Person is required to be obtained or
made by the Company or Seller in connection with the execution and delivery of
this Agreement or the performance by the Company or Seller of their respective
obligations hereunder.
3.18 Licenses and Permits. Schedule 3.18 attached hereto lists and
describes all qualifications, registrations, filings, privileges, franchises,
immunities, licenses, permits, authorizations and approvals of Authorities which
are required in order for the Company to own and operate the Business
(collectively, the "Permits"). Each Permit is in good standing, valid and
subsisting, and in full force and effect in accordance with its terms.
3.19 Compliance With Laws. Except as set forth on Schedule 3.19, the
Company has been and is currently in compliance with all Laws and Orders
(including without limitation, all applicable federal, foreign, state or local
Laws and Orders governing environmental protection, occupational health and
safety and employment), except for non-compliance with which would not have a
Material Adverse Effect. Except as disclosed on Schedule 3.19, the Company has
not received any notice, citation, claim, assessment or proposed assessment as
to or alleging any violation of any federal, state or local occupational safety
and health Laws or Orders nor has the Company been subject to any investigation
by any federal, state or local occupational safety and health agency within the
three (3) years preceding the date hereof, and no such violation exists. The
Company is not a party to any pending dispute with respect to compliance with
any federal, state or local occupational safety and health Law or Order.
3.20 Insurance.
(a) Schedule 3.20 hereto sets forth a list and brief description of
all insurance policies maintained by the Company, including, without
limitation, workers' compensation, unemployment, auto, life, medical,
liability and casualty insurance.
(b) The Company is not in default with respect to any provision
contained in any such insurance policy, nor has the Company failed to give
any notice or present any claim thereunder in a due and timely fashion
(except for defaults or failures which would not have a Material Adverse
Effect), and such insurance policies are adequate and customary for the
conduct of the Business.
3.21 Financial Statements. The Financial Statements were prepared from the
books and records of the Company in accordance with GAAP (except for principles
of consolidation, lack of footnotes and normal year-end and audit adjustments
reflected or to be reflected thereon) and present fairly (subject to such
exceptions) the financial position and results of operations of the Company and
the Business at the dates and for the periods indicated therein.
3.22 Accounts Receivable. Except as set forth on Schedule 3.22 hereto, the
Accounts Receivable reflected on the Financial Statements: (a) were acquired by
the Company in the Ordinary Course of Business and represent fully completed
bona fide transactions that require no further act on the part of the Company to
make such Accounts Receivable payable by the account debtors; (b) are not
subject to any material claim, counterclaim, set-off or deduction; (c) represent
valid obligations owing to the Company by account debtors that are not
Affiliates of the Company, which are enforceable in accordance with their
respective terms; and (d) are owned by the Company free and clear of all Liens.
3.23 Undisclosed Liabilities. Except as disclosed on Schedule 3.23, on the
Reference Date, the Company had no Liability with respect to the Business which
was not fully disclosed, reflected or reserved against in the Financial
Statements; and, except for liabilities which have been incurred since the
Reference Date in the Ordinary Course of Business, since the Reference Date, the
Company has incurred no Liability.
3.24 Conduct of Business Since the Reference Date. Except as disclosed on
Schedule 3.24, and for the transactions contemplated in this Agreement, since
the Reference Date:
(a) the Business has been conducted only in the Ordinary Course of
Business;
(b) except for equipment, inventory and supplies purchased, sold or
otherwise disposed of in the Ordinary Course of the Business, the Company
has not purchased, sold, leased, mortgaged, pledged or otherwise acquired
or disposed of any properties or assets;
(c) the Company has not sustained or incurred any loss or damage with
respect to the Business (whether or not insured against) on account of
fire, flood, accident or other calamity which has interfered with or
affected, or may interfere with or affect, the operation of the Business;
(d) the Company has not increased the rate of compensation of any
officer or other employee of the Business, except in the Ordinary Course of
Business;
(e) there has been no material adverse change in or with respect to
the condition (financial or otherwise), operations, business, prospects,
rights, properties, assets or liabilities of the Business or the Company's
relations with Authorities or its employees, creditors, customers or others
having business relationships with a company;
(f) the Company has not canceled any of the debts or claims owed to it
and has paid and satisfied its accounts payable in the Ordinary Course of
Business;
(g) the Company has not changed any accounting methods or practices
(including, without limitation, any change in depreciation or amortization
policies or rates);
(h) the Company has not declared any dividends on its stock or made
any redemptions of its stock;
(i) the Company has not loaned or advanced any money to any Person
other than expense advances in the Ordinary Course of Business;
(j) the Company has not incurred any indebtedness for borrowed money
nor guaranteed the indebtedness of any Person;
(k) the Company has not agreed to take any of the actions described in
paragraphs (b), (d), (f), (g), (h), (i) or (j) above.
3.25 Brokers Fees. Neither Seller nor the Company has dealt with any
broker, finder or consultant (other than CIBC Oppenheimer) in connection with
the transactions contemplated by this Agreement, and, to Seller's Knowledge, no
Person is entitled to any commission or finder's fee in connection with the sale
of the Shares to Purchaser (other than CIBC Oppenheimer, whose fees and expenses
are to be paid exclusively by Seller and not by Purchaser).
3.26 Banking Arrangements. Except as set forth on Schedule 3.26 hereto, the
Company has no banking, borrowing or depository relationship, or accounts or
deposits of funds, and all persons authorized as signatories on each such
account are listed on Schedule 3.26.
3.27 Powers of Attorney. No Person holds any power of attorney from the
Company.
3.28 No Alternative Transaction. Neither the Company nor Seller is a party
to or otherwise bound by any agreement contemplating or providing for any
Alternative Transaction.
3.29 Disclosure. None of the representations and warranties made by Seller
or the Company in this Agreement, the Schedules hereto or in any letter,
certificate or memorandum furnished or to be furnished by Seller or the Company,
or on its behalf, contains or will contain any untrue statement of a material
fact, or omits any material fact the omission of which would make the statements
made therein misleading, after considering such statements as a whole. There is
no fact known to any of Seller's or the Company's officers which materially
adversely affects, or is reasonably likely to materially adversely affect, the
condition (financial or otherwise), assets, liabilities, business, operations or
prospects of the Business, the value or utility of the Shares or the ability of
Seller or the Company to consummate the transactions contemplated hereby that
has not been set forth herein or heretofore communicated to Purchaser in writing
pursuant hereto.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
As an inducement to Seller and the Company to enter into and perform their
respective obligations under this Agreement, and in consideration of the
covenants of Seller and the Company contained herein, Purchaser represents,
warrants and covenants to Seller and the Company as follows:
4.1 Corporate Status; Authority of Purchaser; Enforceability.
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is duly qualified
and in good standing in each other jurisdiction where the failure to so
qualify could reasonably be expected to have a material adverse effect on
Purchaser. Purchaser has the requisite power and authority necessary to
own, lease, operate or otherwise hold its properties and assets and to
carry on its businesses as presently conducted.
(b) Purchaser has the requisite power and authority (corporate or
otherwise) to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery by Purchaser of this
Agreement, and the performance by Purchaser of its obligations hereunder,
have been duly and validly authorized and approved by all necessary
corporate action on the part of Purchaser.
(c) This Agreement is binding upon, and enforceable against, Purchaser
in accordance with its terms, subject to bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally and by
general principles of equity (whether in a proceeding at law or in equity).
(d) Neither the execution or delivery of this Agreement by Purchaser
nor the performance by Purchaser of its obligations under this Agreement
conflicts with or results in a breach of any of the terms or provisions of,
or constitutes a default under, any lease, contract, agreement,
arrangement, commitment plan or permit to which Purchaser is a party or is
bound, the limited liability company agreement of Purchaser or any
applicable Law or Order to which Purchaser is bound.
4.2 Consents. Except as is contemplated by this Agreement, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any Authority or any other Person is required to be obtained or made by
Purchaser in connection with its execution and delivery of this Agreement or the
performance by it of its obligations hereunder.
4.3 Broker's Fees. Purchaser has not dealt with any broker, finder or
consultant in connection with any of the transactions contemplated by this
Agreement, and, to its knowledge, no Person is entitled to any commission or
finder's fee in connection with the sale of the Shares to Purchaser.
4.4 No Violations. Neither the execution, delivery and performance of this
Agreement by Purchaser nor the consummation of the purchase of the Shares or any
other transaction contemplated by this Agreement, does or will, after the giving
of notice, or the lapse of time, or otherwise, (a) conflict with, result in a
breach of, or constitute a default or a violation under, the limited liability
agreement of Purchaser, or any Law or Order to which Purchaser is bound or any
lease, contract, agreement, arrangement, commitment or plan to which Purchaser
is a party or is bound; or (c) terminate, amend or modify, or give any party the
right to terminate, amend, modify, abandon, or refuse to perform, any lease,
contract, agreement, arrangement, commitment or plan to which Purchaser is a
party or is bound.
ARTICLE V
COVENANTS
The parties hereto covenant and agree that from the date hereof:
5.1 Required Consents. Seller and the Company shall use all commercially
reasonable efforts to obtain the consents listed on Schedule 3.17.
5.2 Conduct of the Business. Except as otherwise contemplated by this
Agreement or consented to by Purchaser in writing:
(a) Seller and the Company shall (i) operate and maintain the Business
in the Ordinary Course of Business; and (ii) keep all Equipment and
Improvements in good operating condition and repair and replace any of it
that may be worn out, lost, stolen or destroyed.
(b) Neither Seller nor the Company shall (i) permit or allow any of
the Company's assets to be subjected to any Lien; (ii) sell, lease,
transfer or otherwise dispose of any of the Company's assets, except for
Inventory sold, leased, transferred or otherwise disposed of in the
Ordinary Course of Business and worn out or obsolete Inventory; (iii)
terminate, modify or amend materially any of the Contracts except as
specifically contemplated herein; (iv) enter into any material contract,
lease, registration, license or permit relating to the Company without the
prior written consent of Purchaser; (v) change the Business' accounting
methods, principles or practices (including without limitation, any change
in depreciation or amortization methods, policies or rates or income
recognition methods), provided, however, audit adjustments shall not be
deemed to constitute a change in accounting methods, principles or
practices); (vi) increase or otherwise change the rate or nature of the
compensation (including wages, salaries, bonuses and benefits under any
Plan) which is paid or payable to any officer, employee or other
representative of the Business, except in the Ordinary Course of Business;
(vii) make, or commit to make, any payment, contribution or award under or
into any Plan, except in the Ordinary Course of Business; (viii) make any
other material change in the Business or the operation thereof; (ix) incur
any indebtedness for borrowed money or make any loans or advances (except
expense advances in the Ordinary Course of Business); or (x) make or
declare any dividends or redemption; and
(c) Seller and the Company shall use all commercially reasonable
efforts to preserve and protect the Business' goodwill, prospects, rights,
properties, assets and business, to keep available to the Company and
Purchaser the services of the Business' employees, and to preserve and
protect the Business' relationships with Authorities and its employees,
officers, customers, creditors and others having business relationships
with it.
5.3 Right of Inspection; Access to Books and Personnel. The Company shall,
and shall cause the Company's officers, directors, employees, auditors and
agents to, afford to Purchaser and Purchaser's officers, employees, auditors and
agents the right at any time prior to the Closing during normal business hours,
access to the Company's directors, officers, employees, auditors, agents,
facilities, books and records as Purchaser reasonably shall deem necessary or
desirable and shall furnish such financial and operating data and other
information as Purchaser may reasonably require. No such access, examination or
review shall in any way affect, diminish or terminate any of the
representations, warranties or covenants of Seller or the Company set forth
herein.
5.4 Notification of Material Adverse Events. The Company and Seller shall
each promptly notify Purchaser in writing of any event following the date hereof
of which the Company or Seller are or become aware that will or could reasonably
be expected to have a material adverse effect on the condition (financial or
otherwise), rights, properties, assets or prospects of the Company or the
Business or the performance by Seller or the Company of their respective
obligations under this Agreement.
5.5 Supplemental Disclosures. Seller shall have the continuing obligation
to supplement promptly and amend the Schedules as necessary or appropriate with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
described in the Schedules; provided, however, that for the purpose of the
rights and obligations of the parties hereunder, any such supplemental or
amended disclosure shall not, except as Purchaser may otherwise agree in
writing, be deemed to have cured any breach of any representation or warranty
made in this Agreement.
5.6 Exclusivity. Unless this Agreement has been terminated in accordance
with Article XI, (a) the Company and Seller shall not, and shall not permit the
Company's or Seller's Affiliates, directors, officers, employees, agents or
advisors to, initiate, pursue or encourage (by way of furnishing information or
otherwise) any inquiries or proposals, or enter into any discussions,
negotiations or agreements (whether preliminary or definitive) with any Person,
contemplating or providing for any merger, acquisition, purchase or sale of all
or substantially all of the assets or any business combination or change in
control of the Business, other than the transaction contemplated by this
Agreement (an "Alternative Transaction"), and (b) the Company and Seller shall
deal exclusively with Purchaser with respect to the sale of the Business and the
Shares. In the event the Company or Seller or any of the Company's or Seller's
Affiliates, directors, officers, employees, agents or advisors receive a
proposal, directly or indirectly, from any Person or entity regarding an
Alternative Transaction, the Company or Seller shall give written notice to
Purchaser of such contact within one (1) day after receiving such contact.
5.7 Required Filings. Seller, the Company and Purchaser agree to (i)
promptly file, or cause to be promptly filed, with all appropriate Authorities
any and all other notices, registrations, declarations, applications and other
documents as may be necessary to consummate the transactions contemplated hereby
and to diligently seek to produce all of the deliveries required by Section 8.3
hereof and (ii) thereafter diligently pursue all consents, approvals and
authorizations from such Authorities as may be necessary to consummate the
transactions contemplated hereby.
5.8 Tax Indemnification. Seller shall be liable and indemnify Purchaser for
all Taxes incurred or payable by the Company for any taxable period ending on or
before the Closing Date. Purchaser shall be liable and indemnify Seller for all
Taxes incurred or payable by the Company for any taxable period beginning after
the Closing Date. Seller shall be entitled to receive any Tax refunds received
by the Company for any taxable period ending on or before the Closing Date.
Seller is hereby authorized to contest, on behalf of the Company, Taxes assessed
against the Company, to execute for the Company all Tax returns, claims for
refunds and related documents so long as such Taxes, claims, refunds and
documents relate solely for any taxable period ending on or before the Closing
Date. Seller is hereby authorized to contest, on behalf of the Company, Taxes
assessed against the Company, and to execute for the Company all Tax returns,
claims for refunds and related documents so long as such Taxes, claims, refunds
and documents relate solely to one or more taxable periods ending on or before
the Closing Date.
5.9 Sales and Transfer Taxes. Seller shall pay the cost of and indemnify
Purchaser from, any transfer, stamp, sales, purchase, use, value added, excise
documentation, recording or similar Tax which arises out of the transfer of any
of the Shares.
5.10 Tax Reports; Returns. Seller (or its successor) and Purchaser shall
provide each other with such assistance as may reasonably be requested by the
other in connection with the preparation of any return or report of Taxes, any
audit or other examination by any taxing authority, or any judicial or
administrative proceedings relating to liabilities for Taxes. Seller (or its
successor) and Purchaser will retain for the full period of any statute of
limitations and provide the other with any records or information which may be
relevant to such preparation, audit, examination, proceeding or determination.
Seller (or its successor) shall file all Tax returns and reports of the Company
due on, prior to, or after the Closing Date with respect to taxable periods
ending on or prior to the Closing Date. Purchaser shall cause the Company to
file all Tax returns and reports of the Company with respect to taxable periods
ending after the Closing Date. Seller (or its successor) agrees that all such
returns and reports shall be prepared and filed timely and on a basis consistent
with existing procedures for preparing such returns or reports and consistent
with prior practice with respect to the treatment of specific items on the
returns or reports.
5.11 Old Payables; Outstanding Checks. Prior to Closing, the Company shall
pay the aggregate amount necessary to satisfy the Old Payables in full. From and
after the Closing, Seller covenants and agrees that Seller (or its successor)
shall promptly pay and satisfy in full any amounts presented as due and owing
pursuant to any checks of the Company issued from account numbers 3191-051170
and 1850-553783 on or prior to March 26, 1999.
5.12 Purchaser Knowledge. Seller shall have no liability for breach of a
representation or warranty contained herein to the extent Purchaser (through its
officers or its agents) obtains actual knowledge that such representation or
warranty of Seller in this Agreement is not true and correct in all material
respects. If Seller asserts this Section 5.12 as a defense to any claim by
Purchaser for indemnification arising from a breach of any representation or
warranty of Seller, Seller shall have the burden to prove that Purchaser had
actual knowledge of the untruth or inaccuracy of the representation or warranty
prior to the Closing. Notwithstanding anything in this Agreement to the
contrary, in no event shall Purchaser's actual knowledge or Seller's cure of a
breach of a representation or warranty prior to Closing limit Purchaser's right
to terminate this Agreement in accordance with the terms hereof.
ARTICLE VI
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
6.1 Obligations to be Satisfied on or Prior to Closing Date. The obligation
of Purchaser to purchase the Shares under this Agreement is subject to the
satisfaction (or waiver by Purchaser), on or prior to the Closing Date, of the
following conditions:
(a) Accuracy of Representations and Warranties. Each of the
representations and warranties made by Seller and the Company in this
Agreement shall be true, correct and complete in all materials respects (if
not qualified by materiality and in all respects if qualified by
materiality) on the Closing Date as though made on such date.
(b) Compliance with Agreement. The Company and Seller shall have
performed or complied in all material respects with the covenants,
agreements and obligations required by this Agreement to be performed or
complied with the Company and Seller on or prior to the Closing Date.
(c) Consents. All consents, approvals, orders, authorizations,
registrations, declarations and filings described on Schedule 3.17 shall
have been obtained or made in form reasonably satisfactory to Purchaser.
All necessary authorizations, agreements and consents of any Persons or
Authorities to the consummation of the transactions contemplated by this
Agreement, or otherwise pertaining to the matters covered by it, shall have
been obtained by the Company and Seller and delivered to Purchaser and
shall be in full force and effect as of the Closing Date, and no such
authorizations, agreements and consents shall impose any burdensome or, in
Purchaser's reasonable determination, unsatisfactory conditions or
requirements on Purchaser.
(d) No Adverse Proceedings. No Law shall have been enacted or
promulgated, and no investigation, action, suit or proceeding shall have
been threatened or instituted against Seller, the Company or Purchaser,
which, in any case, in the reasonable judgment of Purchaser, challenges, or
could reasonably be expected to result in a challenge to, the consummation
of the transactions contemplated hereby, or which claims, or could
reasonably be expected to give rise to a claim for, damages against
Purchaser, Seller or the Company as a result of the consummation of such
transactions and there shall not be in effect any Order restraining or
otherwise prohibiting or making illegal the consummation of the
transactions contemplated by this Agreement.
(e) No Material Adverse Change. There shall have occurred no material
adverse change in or with respect to the condition (financial or
otherwise), business, prospects, rights, properties or assets of the
Business or the Company since December 31, 1998.
(f) Schedules. All amendments or supplements to the Schedules made by
Seller pursuant to Section 5.5 shall be reasonably acceptable to Purchaser.
(g) Closing Documents. Seller shall have delivered all reports,
agreements, certificates, instruments, opinions and other documents
required to be delivered by the Company on the Closing Date pursuant to
Section 8.3, and the form and substance of all such reports, agreements,
certificates, instruments, opinions and other documents shall be reasonably
satisfactory to Purchaser.
(h) UCC, Tax Lien and Judgment Search Results. Purchaser shall have
received, at Purchaser's sole cost and expense, a report, in form and
substance satisfactory to Purchaser, as to the results of an examination of
financing statements filed under the Uniform Commercial Code, and tax lien
and judgment records, in each office in each such jurisdiction as Purchaser
shall reasonably request, and such report shall indicate no material
security interests, tax liens, judgments or other Liens not previously
disclosed in writing to Purchaser.
(i) Regulatory Approvals. All approvals, permits or qualifications
from all appropriate Authorities for the consummation of the transactions
contemplated hereby shall have been obtained, or the waiting period
required thereby will have expired or have been terminated, as the case may
be.
(j) Investigation. Each of Purchaser and Purchaser's agents shall have
been afforded access to the Company's books and records, officers,
employees, agents, facilities and personnel relating to the Business, as
provided in Section 5.3.
(k) Withholding Certificate. The Company shall have provided Purchaser
with an executed certificate of non-foreign status substantially in the
form of Exhibit B.
(l) Composition Agreement. The Company shall have provided Purchaser
with proof of payment of all outstanding Old Payables, either as such Old
Payables shall have been compromised pursuant to Composition Agreements
substantially in the form of Exhibit C hereto (the "Composition Agreement")
executed by the Persons identified on Schedule 2.2(d), or otherwise.
6.2 Procedure for Failure to Satisfy Conditions. In the event that, in
Purchaser's reasonable judgment, any of the conditions precedent set forth in
Section 6.1 have not been satisfied, Purchaser shall notify Seller in writing
indicating its election to (a) waive such condition precedent or (b) terminate
this Agreement pursuant to Section 11.1.
ARTICLE VII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
7.1 Obligations to Be Satisfied on or Prior to Closing Date. The
obligations of Seller to sell the Shares under this Agreement are subject to the
satisfaction (or waiver by Seller), on or prior to the Closing Date, of the
following conditions:
(a) Accuracy of Representations and Warranties. Each of the
representations and warranties made by Purchaser in this Agreement shall be
true, correct and complete in all material respects (if not qualified by
materiality and in all respects if qualified by materiality) on the Closing
Date as though made on such date.
(b) Compliance with Agreement. Purchaser shall have performed or
complied in all material respects with the covenants, agreements and
obligations required by this Agreement to be performed or complied with by
it on or prior to the Closing Date.
(c) No Adverse Proceedings. No Law shall have been enacted or
promulgated, and no investigation, action, suit or proceeding shall have
been threatened or instituted against Seller, the Company or Purchaser,
which, in any case, in the reasonable judgment of Seller, challenges, or
could reasonably be expected to result in a challenge to, the consummation
of the transactions contemplated hereby, or which claims, or could
reasonably be expected to give rise to a claim for, damages against Seller
as a result of the consummation of such transactions and there shall not be
in effect any Order restraining or otherwise prohibiting or making illegal
the consummation of the transactions contemplated by this Agreement.
(d) Closing Documents. Purchaser shall have delivered all reports,
agreements, certificates, instruments, opinions and other documents
required to be delivered by it on the Closing Date pursuant to Section 8.4,
and the form and substance of all such reports, agreements, certificates,
instruments, opinions and other documents shall be reasonably satisfactory
to Seller.
(e) Regulatory Approvals. All approvals, permits or qualifications
from all appropriate Authorities for the consummation of the transactions
contemplated hereby shall have been obtained, or the waiting period
required thereby will have expired or have been terminated, as the case may
be.
7.2 Procedure for Failure to Satisfy Conditions. In the event that, in
Seller's reasonable judgment, any of the conditions set forth in Section 8.1
have not been satisfied, Seller shall notify Purchaser in writing indicating the
Company's election to: (a) waive such conditions precedent; or (b) terminate
this Agreement pursuant to Section 11.1.
ARTICLE VIII
CLOSING
8.1 Time and Place. The Closing shall take place at 10:00 a.m. (Chicago
time) on March 26, 1999 at the offices of Dykema Gossett, PLLC, 315 East
Eisenhower Parkway, Ann Arbor, Michigan, or at such other time and place as
Seller and Purchaser may mutually agree.
8.2 Closing Transactions. All documents and other instruments required to
be delivered at the Closing shall be regarded as having been delivered
simultaneously, and no document or other instrument shall be regarded as having
been delivered until all have been delivered. 8.3 Deliveries by the Company to
Purchaser. At the Closing, Seller shall deliver or cause to be delivered to
Purchaser:
(a) the articles of incorporation of Seller and the Company, each
certified by the Secretary of State of their respective states of
incorporation as of a date not earlier than five (5) days prior to the
Closing Date;
(b) a certificate of the Secretary or an Assistant Secretary of Seller
and the Company as of the Closing Date certifying to (i) the by-laws of
Seller and the Company, (ii) the resolutions of the board of directors of
Seller authorizing the execution and delivery of this Agreement and all
other documents and instruments executed and delivered in connection
herewith and the consummation of the transactions contemplated hereunder,
and (iii) the names of Seller's and the Company's officers authorized to
execute and deliver this Agreement and the other documents and instruments
executed and delivered in connection herewith, together with the true
signatures of such officers;
(c) certificates of good standing, as of a date not earlier than three
(3) days prior to the Closing Date, for Seller and the Company from the
State of Michigan;
(d) the legal opinion of Dykema Gossett PLLC, counsel for the Company
and Seller substantially in the form attached hereto as Exhibit A;
(e) a certificate executed by the President or Vice President of each
of Seller and the Company, each dated as of the Closing Date, certifying
that all representations and warranties of Seller and the Company, as the
case may be, herein contained are true, correct and complete in all
material respects as of the Closing Date as if made thereon and that the
Company and Seller have performed or complied in all material respects with
all of the covenants and obligations required by this Agreement to be
performed or complied with by the Company or Seller on or prior to the
Closing Date;
(f) an executed original (if available) of each consent required to be
obtained pursuant to Section 3.17;
(g) certificates representing all of the Shares which shall be either
duly endorsed or accompanied by stock powers duly endorsed;
(h) evidence of resignation of all directors and officers of the
Company other than those identified by Purchaser;
(i) pay-off and release letter from Comerica Bank, as Agent for
certain financial institutions, evidencing the aggregate amount necessary
to satisfy in full the outstanding obligations due and owing from the
Company to such financial institutions as of the Closing Date and agreeing
to terminate any Liens on the Shares and assets of the Company held by such
entity upon receipt of such amount, each in form and substance satisfactory
to Purchaser;
(j) evidence in form and substance reasonably satisfactory to
Purchaser that Seller has paid in full any and all Tax obligations of the
Company currently due and owing for periods ending prior to the Closing
Date;
(k) the Composition Agreements, together with all other releases
(including those of Comerica Bank, as agent for certain financial
institutions), if any, necessary to terminate and discharge any Liens on
the Shares and assets of the Company;
(l) an executed Withholding Certificate substantially in the form of
Exhibit B hereto;
(m) evidence of the termination and release in full of any Liabilities
due and owing by the Company to Seller in form and substance satisfactory
to Purchaser;
(n) evidence that Seller has transferred or relinquished any and all
control of each of the Company's bank accounts in form and substance
satisfactory to Purchaser; and
(o) such other instruments and documents as are: (i) required by any
other provisions of this Agreement to be delivered on the Closing Date by
the Company or Seller; or (ii) reasonably necessary, in the opinion of
Purchaser, to evidence the performance by the Company and Seller of their
respective obligations under this Agreement.
8.4 Deliveries by Purchaser to the Company. At the Closing, Purchaser shall
deliver or cause to be delivered to the Company:
(a) the Purchase Price in accordance with Section 2.2;
(b) a certificate of the Secretary or an Assistant Secretary of
Purchaser, dated as of the Closing Date, certifying to (i) the by-laws of
Purchaser; (ii) resolutions of the Board of Directors of Purchaser
approving the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby; and (iii) incumbency
and signatures of the officers of Purchaser executing this Agreement and
any other certificate or document delivered in connection herewith;
(c) a certificate executed by the President or any Vice President of
Purchaser, dated as of the Closing Date, certifying that all
representations and warranties of Purchaser herein contained are true,
correct and complete in all material respects as of the Closing Date as if
made thereon and that Purchaser has performed or complied in all material
respects with all of the covenants and obligations required by this
Agreement to be performed or complied with by Purchaser on or prior to the
Closing Date;
(d) certificate of incorporation of Purchaser certified by the
Secretary of State of the State of Delaware; and
(e) such other instruments and documents as are: (i) required by any
other provisions of this Agreement to be delivered on the Closing Date by
Purchaser to the Company; or (ii) reasonably necessary, in the opinion of
the Company to effect the performance of this Agreement by Purchaser.
ARTICLE IX
OTHER AGREEMENTS
9.1 Further Assurance. At any time and from time to time from and after the
Closing, Seller on the one hand, and Purchaser on the other hand, will, at the
request and expense of the other party hereto, execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, such instruments and other
documents and perform or cause to be performed such acts and provide such
information, as may reasonably be required to evidence or effectuate the sale,
conveyance, transfer, assignment and delivery to Purchaser of the Shares or for
the performance by Seller or Purchaser of any of their other respective
obligations under this Agreement.
9.2 Confidentiality.
(a) The parties hereto agree with respect to the terms and conditions
of this Agreement, including, without limitation, the Purchase Price, and
all information that is furnished or disclosed by the other party
(collectively, "Confidential Information"), that (i) such Confidential
Information is confidential and/or proprietary to the furnishing/disclosing
party and entitled to and shall receive treatment as such by the receiving
party; (ii) the receiving party will hold in confidence and not disclose
nor use (except in respect of the transactions contemplated by this
Agreement) any such Confidential Information, treating such Confidential
Information with the same degree of care and confidentiality as it accords
its own confidential and proprietary information; provided, however, that
the receiving party shall not have any restrictive obligation with respect
to any Confidential Information which (A) is contained in a printed
publication available to the general public, (B) is or becomes publicly
known through no wrongful act or omission of the receiving party, (C) is
known by the receiving party without any proprietary restrictions by the
furnishing/disclosing party at the time of receipt of such Confidential
Information, (D) is subject to disclosure pursuant to any Order or
regulation of any Authority (including the Securities Exchange Commission);
or (E) is disclosed to Comerica Bank, as Agent for certain financial
institutions or to the entities identified on Schedule 5.11 hereto, and
(iii) all such Confidential Information furnished to either party by the
other, unless otherwise specified in writing, shall remain the property of
the furnishing/disclosing party, and in the event this Agreement is
terminated, shall be returned to it, together with any and all copies made
thereof, upon request for such return by it (except for documents submitted
to an Authority with the consent of the furnishing/disclosing party or upon
subpoena and which cannot be retrieved with reasonable effort).
(b) Each party hereto acknowledges that the remedy at law for any
breach by either party of its obligations under Section 9.2(a) is
inadequate and that the other party shall be entitled to equitable
remedies, including an injunction, in the event of breach of any other
party.
9.3 Employee Benefits.
(a) Except to the extent adequately reserved for on the Financial
Statements, Seller shall be responsible for Liabilities arising from
workers' compensation claims, both medical and disability, or other
government-mandated programs which are based on injuries to the Company's
employees occurring prior to the Closing Date regardless of when such
claims are filed. Purchaser shall be solely responsible for such claims
made by employees retained as employees of the Company based on injuries
occurring after Closing.
(b) Except to the extent adequately reserved for on the Financial
Statements, Seller shall be responsible for the satisfaction of all claims
for medical, dental, life insurance, health, accident, disability or other
benefits brought by or in respect of employees under any of the Company's
welfare benefit plans where the claims were incurred prior to the Closing
regardless of when such claims are filed.
9.4 Indemnification for Employment Matters. Seller and Purchaser each agree
to indemnify, defend and hold the other harmless from and against any and all
loss, damage and expense, including without limitation attorneys' fees, arising
out of any Adverse Consequences for which it is responsible under Sections 9.3.
9.5 Non-Competition Agreement.
(a) In partial consideration for the Purchase Price paid, Seller, for
a period of five (5) years from and after the Closing Date, shall not,
without the prior written consent of the Board of Directors of Purchaser,
directly or indirectly, or as the agent of another Person or through other
Persons as an agent:
(i) participate or engage in, directly or indirectly (as an
owner, partner, employee, officer, director, independent contractor,
consultant, advisor or in any other capacity calling for the rendition
of services, advice, or acts of management, operation or control), any
business that is competitive with the Business (as conducted as of the
Closing) within any geographic area in which Purchaser, the Company
and their respective Affiliates' (collectively, the "Related
Entities") currently conduct the Business; provided, however, that
Seller may own up to five percent (5%) of any class of securities of a
corporation engaged in such a competitive business if such securities
are listed on a national securities exchange or registered under the
Securities Exchange Act of 1934;
(ii) solicit any current employee of the Related Entities or any
individual who becomes an employee during such period to leave such
employment other than general solicitation of employees through public
newspapers; or
(iii) seek to divert or dissuade from continuing to do business
with or entering into business with any of the Related Entities, any
supplier, customer or other Person that had a business relationship
with or with which any Related Entity was actively planning or
pursuing a business relationship during such five-year period.
(b) The necessity of protection against the competition of Seller
against Purchaser and the nature and scope of such protection has been
carefully considered by the parties hereto. The parties hereto agree and
acknowledge that the duration, scope and geographic areas applicable to the
covenant not-to-compete described in this Section 9.5 are fair, reasonable
and necessary and that adequate compensation has been received by Seller
for such obligations. If, however, for any reason any court determines that
the restrictions in this Section 9.5 are not reasonable or that
consideration is inadequate, such restrictions shall be interpreted,
modified or rewritten to include as much of the duration, scope and
geographic area identified in this Section 9.5 as will render such
restrictions valid and enforceable.
(c) In the event of a breach or threatened breach of this Section 9.5,
Purchaser shall be entitled, without the posting of a bond, to an
injunction restraining such breach. Nothing herein contained shall be
construed as prohibiting any party from pursuing any other remedy available
to it for such breach or threatened breach.
ARTICLE X
TERMINATION OF REPRESENTATIONS AND WARRANTIES
Except for representations and warranties contained in Sections 3.1(a) and
(b), 3.2, 3.14(a) and 3.25, all representations and warranties contained in any
section of this Agreement terminate at, and do not survive beyond, the Closing.
ARTICLE XI
TERMINATION
11.1 Rights to Terminate. This Agreement may be terminated at any time
prior to the Closing only as follows:
(a) by mutual written consent of Seller and Purchaser;
(b) by Seller if Purchaser is in material breach of any material
representation, warranty or covenant under this Agreement (and Seller is
not then in material breach of any material representation, warranty or
covenant);
(c) by Purchaser if Seller or the Company is in material breach of any
material representation, warranty or covenant under this Agreement (and
Purchaser is not then in material breach of any material representation,
warranty or covenant);
(d) by Seller or by Purchaser if, at or before the Closing, any
condition set forth herein for the benefit of Seller or Purchaser,
respectively, shall not have been timely met and cannot be met on or before
the Closing Date and has not been waived; or
(e) by Purchaser or Seller if the Closing shall not have occurred on
or before April 1, 1999.
Each party's right of termination hereunder is in addition to any of the
rights it may have hereunder or otherwise.
11.2 Effects of Termination. Notwithstanding any other provision of this
Agreement, no termination of this Agreement shall release (a) Seller from
Seller's obligation to pay the costs and expenses described in Section 5.9, (b)
any party of any Liabilities arising hereunder for any pre-termination breaches
hereof or intentional misrepresentations made herein or (c) any party from its
obligations under Section 9.2.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Public Announcements. Prior to the Closing Date, any announcements or
similar publicity with respect to this Agreement or the transactions
contemplated herein shall be at such time and in such manner as Seller and
Purchaser shall mutually agree; provided, that nothing herein shall prevent
either party upon notice to the other party from making such public
announcements as such party's counsel may consider advisable in order to satisfy
that party's legal obligations in such regard.
12.2 Post-Closing Deliveries. After the Closing, any monies, checks,
instruments, invoices, bills, receipts, notices, mail and other communications
received by one party but directed toward or due to another shall be promptly
delivered to the other party. Seller shall cooperate with Purchaser after the
Closing to ensure the orderly transition of the operation of the Business from
Seller to Purchaser and to minimize any disruption in the business of Purchaser
that might result from the transactions contemplated hereby.
12.3 Notices. All notices or other communications required or permitted by
this Agreement shall be in writing and shall be deemed to have been duly
received (a) if given by telecopier, when transmitted and the appropriate
telephonic confirmation received if transmitted on a business day and during
normal business hours of the recipient, and otherwise on the next business day
following transmission, (b) if given by certified or registered mail, return
receipt requested, postage prepaid, three (3) business days after being
deposited in the U.S. mails and (c) if given by courier or other means, when
received or personally delivered, and, in any such case, addressed as follows:
(i) if to Purchaser:
MacLean Acquisition Company
c/o MacLean-Fogg Corporation
1000 Allanson Road
Mundelein, IL 60060
Attention: President
Facsimile: (847) 566-0026
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Stanford J. Goldblatt, Esq.
Facsimile: (312) 558-5700
(ii) if to Seller:
JPE, Inc.
775 Technology Drive
Suite 200
Ann Arbor, MI 48108
Attention: Richard R. Chrysler
Facsimile: (734) 662-0133
with a copy to:
Barb Kaye
Dykema Gossett PLLC
315 East Eisenhower Parkway
Suite 100
Ann Arbor, Michigan 48108-3306
Facsimile: (734) 214-7696
or to such other addresses as may be specified by any such Person to the other
Person pursuant to notice given by such Person in accordance with the provisions
of this Section 12.3.
12.4 Assignment. No party may assign or transfer any or all of its rights
or obligations under this Agreement without the prior written approval of all
the other parties; provided, however, that Purchaser may assign or transfer all
(but not less than all) of its rights and obligations under this Agreement (a)
to any Person that is wholly-owned, directly or indirectly, by Purchaser or (b)
after the Closing, to any Person to whom Purchaser sells the Business and
substantially all of the Company's assets.
12.5 Benefit of the Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement shall not be construed so as to confer any
right or benefit upon any Person, other than the parties hereto and their
respective successors and permitted assigns.
12.6 Exhibits and Schedules. The Exhibits and Schedules hereto shall be
construed with and as an integral part of this Agreement to the same effect as
if the contents thereof had been set forth verbatim herein.
12.7 Headings. The headings used in this Agreement are for convenience of
reference only and shall not be deemed to limit, characterize or in any way
affect the interpretation of any provision of this Agreement.
12.8 Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof, and no
other representations, promises, agreements or understandings regarding the
subject matter hereof shall be of any force or effect unless in writing,
executed by the party to be bound thereby and dated on or after the date hereof.
12.9 Modifications and Waivers. No change, modification or waiver of any
provision of this Agreement shall be valid or binding unless it is in writing,
dated subsequent to the date hereof and signed by Purchaser and Seller. No
waiver of any breach, term or condition of this Agreement by any party shall
constitute a subsequent waiver of the same or any other breach, term or
condition.
12.10 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
12.11 Severability. In case any one or more of the provisions contained
herein for any reason shall be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision or provisions had never been
contained herein.
12.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
12.13 Expenses. Except as otherwise expressly provided herein, each party
hereto shall pay all of its own costs and expenses incurred or to be incurred in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement. Purchaser shall pay all fees and
expenses (other than legal fees and expenses of Seller) incurred in connection
with compliance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended. Seller shall pay all fees and expenses of Schafer & Weiner, P.C.,
incurred by Seller or the Company. All fees and expenses of the Company incurred
in connection with the transactions contemplated by this Agreement (other than
any necessary filing fees and other post-Closing expenses) shall be paid by the
Company prior to the Closing or shall be assumed and paid by the Seller.
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement as of the date first written above.
MACLEAN ACQUISITION COMPANY
By: /s/ Timothy N. Taylor
-----------------------------------
Name: Timothy N. Taylor
Title: Vice President
INDUSTRIAL & AUTOMOTIVE FASTENERS, INC.
By: /s/ Richard R. Chrysler
-----------------------------------
Name: Richard R. Chrysler
Title: President
JPE, INC.
By: /s/ Richard R. Chrysler
------------------------------------
Name: Richard R. Chrysler
Title: President
BYLAWS
OF
JPE, INC.
---------
ARTICLE I
OFFICES
1.1 REGISTERED OFFICE. The registered office of the Corporation shall be
located at such place in Michigan as the Board of Directors from time to time
determines.
1.2 OTHER OFFICES. The Corporation may also have offices or branches at
such other places as the Board of Directors from time to time determines or the
business of the Corporation requires.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 TIME AND PLACE. All meetings of the shareholders shall be held at such
place and time as the Board of Directors determines.
2.2 ANNUAL MEETINGS. An annual meeting of shareholders shall be held on a
date, not later than 180 days after the end of the immediately preceding fiscal
year, to be determined by the Board of Directors. At the annual meeting, the
shareholders shall elect directors and transact such other business as is
properly brought before the meeting and described in the notice of meeting. If
the annual meeting is not held on its designated date, the Board of Directors
shall cause it to be held as soon thereafter as convenient.
2.3 SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose, (a) may be called by the Corporation's chief executive officer or the
Board of Directors, and (b) shall be called by the President or Secretary upon
written request (stating the purpose for which the meeting is to be called) of
the holders of a majority of all the shares entitled to vote at the meeting.
2.4 NOTICE OF MEETINGS. Written notice of each shareholders' meeting,
stating the place, date and time of the meeting and the purposes for which the
meeting is called, shall be given (in the manner described in Section 5.1 below)
not less than 10 nor more than 60 days before the date of the meeting to each
shareholder of record entitled to vote at the meeting. Notice of adjourned
meetings is governed by Section 2.6 below.
2.5 LIST OF SHAREHOLDERS. The officer or agent who has charge of the stock
transfer books for shares of the Corporation shall make and certify a complete
list of the shareholders entitled to vote at a shareholders' meeting or any
adjournment of the meeting. The list shall be arranged alphabetically within
each class and series and shall show the address of, and the number of shares
held by, each shareholder. The list shall be produced at the time and place of
the meeting and may be inspected by any shareholder at any time during the
meeting.
2.6 QUORUM; ADJOURNMENT. At all shareholders' meetings, the shareholders
present in person or represented by proxy who, as of the record date for the
meeting, were holders of shares entitled to cast a majority of the votes at the
meeting, shall constitute a quorum. Once a quorum is present at a meeting, all
shareholders present in person or represented by proxy at the meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum. Regardless of whether a quorum
is present, a shareholders' meeting may be adjourned to another time and place
by a vote of the shares present in person or by proxy without notice other than
announcement at the meeting; provided, that (a) only such business may be
transacted at the adjourned meeting as might have been transacted at the
original meeting and (b) if the adjournment is for more than 60 days or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting must be given to each shareholder of record entitled to
vote at the meeting.
2.7 VOTING. Except as otherwise provided in Sections 794 and 798 of the
Michigan Business Corporation Act, each shareholder shall at every meeting of
the shareholders be entitled to one vote in person or by proxy for each share
having voting power held by such shareholder and on each matter submitted to a
vote, unless otherwise provided by the Articles of Incorporation. A vote may be
cast either orally or in writing. When an action, other than the election of
directors, is to be taken by vote of the shareholders, it shall be authorized by
a majority of the votes cast by the holders of shares entitled to vote on such
action, unless a greater vote is required by the Articles of Incorporation or by
the Michigan Business Corporation Act. Except as otherwise provided by the
Articles of Incorporation, directors shall be elected by a plurality of the
votes cast at any election.
2.8 PROXIES. A shareholder entitled to vote at a meeting of shareholders or
to express consent or dissent without a meeting may authorize other persons to
act for him or her by proxy. Each proxy shall be in writing and signed by the
shareholder or the shareholder's authorized agent or representative. A proxy is
not valid after the expiration of three years after its date unless otherwise
provided in the proxy.
2.9 QUESTIONS CONCERNING ELECTIONS. The Board of Directors may, in advance
of the meeting, or the presiding officer may, at the meeting, appoint one or
more inspectors to act at a shareholders' meeting or any adjournment. If
appointed, the inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine challenges and questions arising in
connection with the right to vote, count and tabulate votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders.
2.10 TELEPHONIC ATTENDANCE. Shareholders may participate in any
shareholders' meeting by means of conference telephone or similar communications
equipment through which all persons participating in the meeting may communicate
with the other participants. All participants shall be advised of the
communications equipment and the names of the participants in the conference
shall be divulged to all participants. Participation in a meeting pursuant to
this Section 2.10 constitutes presence in person at such meeting.
2.11 ACTION BY WRITTEN CONSENT. To the extent permitted by the Articles of
Incorporation or applicable law, any action required or permitted to be taken at
any shareholders' meeting may be taken without a meeting, prior notice and a
vote, by written consent of shareholders.
ARTICLE III
DIRECTORS
3.1 GOVERNANCE. The business and affairs of the Corporation shall be
managed by or under the direction of its Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Articles of Incorporation or by these Bylaws directed
or required to be exercised or done by the shareholders.
3.2 NUMBER, ELECTION AND TERM. The number of Directors which shall
constitute the whole Board of Directors shall be not less than three (3) nor
more than fifteen (15) members, which shall be divided into three classes as
nearly equal in number as possible, with the term of office of one class
expiring each year. The exact number of Directors shall be determined from time
to time solely by a resolution adopted by an affirmative vote or consent of the
majority of the entire Board of Directors. The Directors shall be elected at the
annual meeting of shareholders for a term of three (3) years except as provided
in the Articles of Incorporation and in Sections 3.4 and 3.5 of these Bylaws and
each Director shall hold office until his or her successor is elected and
qualified.
3.3 RESIGNATION. A Director may resign by written notice to the
Corporation. A Director's resignation is effective upon its receipt by the
Corporation or a later time set forth in the notice of resignation.
3.4 REMOVAL. One or more Directors may be removed with cause, by vote or
consent of the holders of a majority of the shares entitled to vote at an
election of Directors, or without cause by a vote or consent of the holders of
80% of the shares entitled to vote at an election of Directors, unless otherwise
provided by the Articles of Incorporation.
3.5 VACANCIES. During the intervals between annual meetings of
shareholders, any vacancy occurring in the Board of Directors caused by
resignation, death or other incapacity and any newly created directorships
resulting from an increase in the number of Directors shall be filled by a
majority vote of the Directors then in office, whether or not a quorum. Each
Director chosen to fill a vacancy shall hold office for the unexpired term in
respect of which such vacancy occurred. Each Director chosen to fill a newly
created directorship shall hold office until the next election of the class for
which such Director shall have been chosen. When the number of Directors is
changed, any newly created directorships or any decrease in directorships shall
be apportioned among the classes as to make all classes as nearly equal in
number as possible.
3.6 PLACE OF MEETINGS. The Board of Directors may hold meetings at any
location. The location of annual and regular Board of Directors' meetings shall
be determined by the Board and the location of special meetings shall be
determined by the person calling the meeting.
3.7 ANNUAL MEETINGS. Each newly elected Board of Directors may meet
promptly after the annual shareholders' meeting for the purposes of electing
officers and transacting such other business as may properly come before the
meeting. No notice of the annual Directors' meeting shall be necessary to the
newly elected Directors in order to legally constitute the meeting, provided a
quorum is present.
3.8 REGULAR MEETINGS. Regular meetings of the Board of Directors or Board
committees may be held without notice at such places and times as the Board or
committee determines at least 30 days before the date of the meeting.
3.9 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by the chief executive officer, and shall be called by the President or
Secretary upon the written request of two Directors, on two days notice to each
Director or committee member by mail or 24 hours notice by any other means
provided in Section 5.1. The notice must specify the place, date and time of the
special meeting, but need not specify the business to be transacted at, nor the
purpose of, the meeting. Special meetings of Board committees may be called by
the Chairperson of the committee or a majority of committee members pursuant to
this Section 3.9.
3.10 QUORUM. At all meetings of the Board or a Board committee, a majority
of the Directors then in office, or of members of such committee, constitutes a
quorum for transaction of business, unless a higher number is otherwise
required. If a quorum is not present at any Board or Board committee meeting, a
majority of the Directors present at the meeting may adjourn the meeting to
another time and place without notice other than announcement at the meeting.
Any business may be transacted at the adjourned meeting which might have been
transacted at the original meeting, provided a quorum is present.
3.11 VOTING. The vote of a majority of the members present at any Board or
Board committee meeting at which a quorum is present constitutes the action of
the Board of Directors or of the Board committee, unless a higher vote is
otherwise required.
3.12 TELEPHONIC PARTICIPATION. Members of the Board of Directors or any
Board committee may participate in a Board or Board committee meeting by means
of conference telephone or similar communications equipment through which all
persons participating in the meeting can communicate with each other.
Participation in a meeting pursuant to this Section 3.12 constitutes presence in
person at such meeting.
3.13 ACTION BY WRITTEN CONSENT. Any action required or permitted to be
taken under authorization voted at a Board or Board committee meeting may be
taken without a meeting if, before or after the action, all members of the Board
then in office or of the Board committee consent to the action in writing. Such
consents shall be filed with the minutes of the proceedings of the Board or
committee and shall have the same effect as a vote of the Board or committee for
all purposes.
3.14 COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the entire Board, designate one or more committees, each consisting
of one or more Directors. The Board may designate one or more Directors as
alternate members of a committee, who may replace an absent or disqualified
member at a committee meeting. In the absence or disqualification of a member of
a committee, the committee members present and not disqualified from voting,
regardless of whether they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in place of such absent
or disqualified member. Any committee, to the extent provided in the resolution
of the Board, may exercise all powers and authority of the Board of Directors in
management of the business and affairs of the Corporation, except a committee
does not have power or authority to:
(a) Amend the Articles of Incorporation.
(b) Adopt an agreement of merger or consolidation.
(c) Recommend to shareholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets.
(d) Recommend to shareholders a dissolution of the Corporation or a
revocation of a dissolution.
(e) Amend the Bylaws of the Corporation.
(f) Fill vacancies in the Board.
(g) Unless the resolution designating the committee or a later Board
of Directors' resolution expressly so provides, declare a distribution or
dividend or authorize the issuance of stock.
Each committee and its members shall serve at the pleasure of the Board, which
may at any time change the members and powers of, or discharge, the committee.
Each committee shall keep regular minutes of its meetings and report them to the
Board of Directors when required.
3.15 COMPENSATION. The Board, by affirmative vote of a majority of
Directors in office and irrespective of any personal interest of any of them,
may establish reasonable compensation of Directors for services to the
Corporation as directors, officers or members of a Board committee. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation for such services.
ARTICLE IV
OFFICERS
4.1 OFFICERS AND AGENTS. The Board of Directors, at its first meeting after
each annual meeting of shareholders, shall elect a President, a Secretary and a
Treasurer, and may also elect and designate as officers a Chairperson of the
Board, a Vice Chairperson of the Board and one or more Executive Vice
Presidents, Vice Presidents, Assistant Vice Presidents, Assistant Secretaries
and Assistant Treasurers. The Board of Directors may also from time to time
appoint, or delegate authority to the Corporation's chief executive officer to
appoint, such other officers and agents as it deems advisable. Any number of
offices may be held by the same person, but an officer shall not execute,
acknowledge or verify an instrument in more than one capacity if the instrument
is required by law to be executed, acknowledged or verified by two or more
officers. An officer has such authority and shall perform such duties in the
management of the Corporation as provided in these Bylaws, or as may be
determined by resolution of the Board of Directors not inconsistent with these
Bylaws, and as generally pertain to their offices, subject to the control of the
Board of Directors.
4.2 COMPENSATION. The compensation of all officers of the Corporation shall
be fixed by the Board of Directors.
4.3 TERM. Each officer of the Corporation shall hold office for the term
for which he or she is elected or appointed and until his or her successor is
elected or appointed and qualified, or until his or her resignation or removal.
The election or appointment of an officer does not, by itself, create contract
rights.
4.4 REMOVAL. An officer elected or appointed by the Board of Directors may
be removed by the Board of Directors with or without cause. An officer elected
by the shareholders may be removed, with or without cause, only by vote of the
shareholders, but his or her authority to act as an officer may be suspended by
the Board of Directors for cause. The removal of an officer shall be without
prejudice to his or her contract rights, if any.
4.5 RESIGNATION. An officer may resign by written notice to the
Corporation. The resignation is effective upon its receipt by the Corporation or
at a subsequent time specified in the notice of resignation.
4.6 VACANCIES. Any vacancy occurring in any office of the Corporation shall
be filled by the Board of Directors.
4.7 CHAIRPERSON OF THE BOARD. The Chairperson of the Board, if such office
is filled, shall be a Director and shall preside at all shareholders' and Board
of Directors' meetings.
4.8 CHIEF EXECUTIVE OFFICER. The Chairperson of the Board, if any, or the
President, as designated by the Board, shall be the chief executive officer of
the Corporation and shall have the general powers of supervision and management
of the business and affairs of the Corporation usually vested in the chief
executive officer of a corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect. If no designation of chief
executive officer is made, or if there is no Chairperson of the Board, the
President shall be the chief executive officer. The chief executive officer may
delegate to the other officers such of his or her authority and duties at such
time and in such manner as he or she deems advisable.
4.9 PRESIDENT. If the office of Chairperson of the Board is not filled, the
President shall perform the duties and execute the authority of the Chairperson
of the Board. If the Chairperson of the Board is designated by the Board as the
Corporation's chief executive officer, the President shall be the chief
operating officer of the Corporation, shall assist the Chairperson of the Board
in the supervision and management of the business and affairs of the Corporation
and, in the absence of the Chairperson of the Board, shall preside at all
shareholders' and Board of Directors' meetings. The President may delegate to
the officers other than the Chairperson of the Board, if any, such of his or her
authority and duties at such time and in such manner as he or she deems
appropriate.
4.10 EXECUTIVE VICE PRESIDENTS AND VICE PRESIDENTS. The Executive Vice
Presidents and Vice Presidents shall assist and act under the direction of the
Chairman of the Board and President. The Board of Directors may designate one or
more Executive Vice Presidents and may grant other Vice Presidents titles which
describe their functions or specify their order of seniority. In the absence or
disability of the President, the authority of the President shall descend to the
Executive Vice Presidents or, if there are none, to the Vice Presidents in the
order of seniority indicated by their titles or otherwise specified by the
Board. If not specified by their titles or the Board, the authority of the
President shall descend to the Executive Vice Presidents or, if there are none,
to the Vice Presidents, in the order of their seniority in such office.
4.11 SECRETARY. The Secretary shall act under the direction of the
Corporation's chief executive officer and President. The Secretary shall attend
all shareholders' and Board of Directors' meetings, record minutes of the
proceedings and maintain the minutes and all documents evidencing corporate
action taken by written consent of the shareholders and Board of Directors in
the Corporation's minute book. The Secretary shall perform these duties for
Board committees when required. The Secretary shall see to it that all notices
of shareholders' meetings and special Board of Directors' meetings are duly
given in accordance with applicable law, the Articles of Incorporation and these
Bylaws. The Secretary shall have custody of the Corporation's seal and, when
authorized by the Corporation's chief executive officer, President or the Board
of Directors, shall affix the seal to any instrument requiring it and attest
such instrument.
4.12 TREASURER. The Treasurer shall act under the direction of the
Corporation's chief executive officer and President. The Treasurer shall have
custody of the corporate funds and securities and shall keep full and accurate
accounts of the Corporation's assets, liabilities, receipts and disbursements in
books belonging to the Corporation. The Treasurer shall deposit all moneys and
other valuables in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Corporation's
chief executive officer, the President or the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Corporation's chief
executive officer, the President and the Board of Directors (at its regular
meetings or whenever they request it) an account of all his or her transactions
as Treasurer and of the financial condition of the Corporation. If required by
the Board of Directors, the Treasurer shall give the Corporation a bond for the
faithful discharge of his or her duties in such amount and with such surety as
the Board prescribes.
4.13 ASSISTANT VICE PRESIDENTS, SECRETARIES AND TREASURERS. The Assistant
Vice Presidents, Assistant Secretaries and Assistant Treasurers, if any, shall
act under the direction of the Corporation's chief executive officer, the
President and the officer they assist. In the order of their seniority, the
Assistant Secretaries shall, in the absence or disability of the Secretary,
perform the duties and exercise the authority of the Secretary. The Assistant
Treasurers, in the order of their seniority, shall, in the absence or disability
of the Treasurer, perform the duties and exercise the authority of the
Treasurer.
4.14 EXECUTION OF CONTRACTS AND INSTRUMENTS. The Board of Directors may
designate an officer or agent with authority to execute any contract or other
instrument on the Corporation's behalf; the Board may also ratify or confirm any
such execution. If the Board authorizes, ratifies or confirms the execution of a
contract or instrument, without specifying the authorized executing officer or
agent, the Corporation's chief executive officer, the President, any Executive
Vice President or Vice President or the Treasurer may execute the contract or
instrument in the name and on behalf of the Corporation and may affix the
corporate seal to such document or instrument.
4.15 VOTING OF SHARES AND SECURITIES OF OTHER CORPORATIONS AND ENTITIES.
Unless the Board of Directors otherwise directs, the Corporation's chief
executive officer shall be entitled to vote or designate a proxy to vote all
shares and other securities which the Corporation owns in any other corporation
or entity.
ARTICLE V
NOTICES AND WAIVERS OF NOTICE
5.1 DELIVERY OF NOTICE. All written notices to shareholders, Directors and
Board committee members shall be given personally or by mail (registered,
certified or other first class mail, with postage pre-paid), addressed to such
person at the address designated by him or her for that purpose or, if none is
designated, at his or her last known address. Written notices to Directors or
Board committee members may also be delivered at his or her office on the
Corporation's premises, if any, or by overnight courier, telegram, telex,
telecopy, radiogram, cablegram, facsimile, computer transmission or similar form
of communication, addressed to the address referred to in the preceding
sentence. Notices given pursuant to this Section 5.1 shall be deemed to be given
when dispatched, or, if mailed, when deposited in a post office or official
depository under the exclusive care and custody of the United States postal
service. Notices given by overnight carrier shall be deemed "dispatched" at 9:00
a.m. on the day the overnight carrier is reasonably requested to deliver the
notice. The Corporation shall have no duty to change the written address of any
Director, Board committee member or shareholder unless the Secretary receives
written notice of such address change.
5.2 WAIVER OF NOTICE. Action may be taken without a required notice and
without lapse of a prescribed period of time, if at any time before or after the
action is completed the person entitled to notice or to participate in the
action to be taken or, in the case of a shareholder, his or her
attorney-in-fact, submits a signed waiver of the requirements, or if such
requirements are waived in such other manner permitted by applicable law.
Neither the business to be transacted at, nor the purpose of, the meeting need
be specified in the written waiver of notice. Attendance at any shareholders'
meeting (in person or by proxy) will result in both of the following:
(a) Waiver of objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting.
(b) Waiver of objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder objects to considering the matter when it is
presented.
A Director's attendance at or participation in any Board or Board committee
meeting waives any required notice to him or her of the meeting unless he or
she, at the beginning of the meeting or upon his or her arrival, objects to the
meeting or the transacting of business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting.
ARTICLE VI
SHARE CERTIFICATES AND SHAREHOLDERS OF RECORD
6.1 CERTIFICATES FOR SHARES. The shares of the Corporation shall be
represented by certificates signed by the Chairperson of the Board,
Vice-chairperson of the Board, President or a Vice President and which also may
be signed by another officer of the Corporation. The officers' signatures may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar other than the Corporation or its employee. If any officer who
has signed or whose facsimile signature has been placed upon a certificate
ceases to be such officer before the certificate is issued, it may be issued by
the Corporation with the same effect as if the person were such officer at the
date of issue.
6.2 LOST OR DESTROYED CERTIFICATES. The Board of Directors may direct or
authorize an officer to direct that a new certificate for shares be issued in
place of any certificate alleged to have been lost or destroyed. When
authorizing such issue of a new certificate, the Board of Directors or officer
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner (or the owner's legal representative) of such lost or
destroyed certificate to give the Corporation an affidavit claiming that the
certificate is lost or destroyed or a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to such old or new certificate.
6.3 TRANSFER OF SHARES. Shares of the Corporation are transferable only on
the Corporation's stock transfer books upon surrender to the Corporation or its
transfer agent of a certificate for the shares, duly endorsed for transfer, and
the presentation of such evidence of ownership and validity of the transfer as
the Corporation requires.
6.4 RECORD DATE. The Board of Directors may fix, in advance, a date as the
record date for determining shareholders for any purpose, including determining
shareholders entitled to (a) notice of, and to vote at, any shareholders'
meeting or any adjournment of such meeting; (b) express consent to, or dissent
from, a proposal without a meeting; or (c) receive payment of a share dividend
or distribution or allotment of a right. The record date shall not be more than
60 nor less than 10 days before the date of the meeting, nor more than 10 days
after the Board resolution fixing a record date for determining shareholders
entitled to express consent to, or dissent from, a proposal without a meeting,
nor more than 60 days before any other action.
If a record date is not fixed:
(a) the record date for determining the shareholders entitled to
notice of, or to vote at, a shareholders' meeting shall be the close of
business on the day next preceding the day on which notice of the meeting
is given, or, if no notice is given, the close of business on the day next
preceding the day on which the meeting is held; and
(b) if prior action by the Board of Directors is not required with
respect to the corporate action to be taken without a meeting, the record
date for determining shareholders entitled to express consent to, or
dissent from, a proposal without a meeting, shall be the first date on
which a signed written consent is properly delivered to the Corporation;
and
(c) the record date for determining shareholders for any other purpose
shall be the close of business on the day on which the resolution of the
Board of Directors relating to the action is adopted.
A determination of shareholders of record entitled to notice of, or to vote at,
a shareholders' meeting shall apply to any adjournment of the meeting, unless
the Board of Directors fixes a new record date for the adjourned meeting.
Only shareholders of record on the record date shall be entitled to notice
of, or to participate in, the action relating to the record date,
notwithstanding any transfer of shares on the Corporation's books after the
record date. This Section 6.4 shall not affect the rights of a shareholder and
the shareholder's transferor or transferee as between themselves.
6.5 REGISTERED SHAREHOLDERS. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of a share
for all purposes, including notices, voting, consents, dividends and
distributions, and shall not be bound to recognize any other person's equitable
or other claim to interest in such share, regardless of whether it has actual or
constructive notice of such claim or interest.
6.6 CONTROL SHARES. Pursuant to Section 794 of the Michigan Business
Corporation Act (the "MBCA"), Chapter 7B of the MBCA does not apply to any
"control share acquisition" (as that term is defined in Section 791 of the MBCA)
of the shares of capital stock of the Corporation.
ARTICLE VII
INDEMNIFICATION
The Corporation shall, to the fullest extent authorized or permitted by the
Michigan Business Corporation Act, (a) indemnify any person, and his or her
heirs, executors, administrators and legal representatives, who was, is, or is
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding (whether civil, criminal, administrative or investigative) by
reason of the fact that such person is or was a Director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (collectively, "Covered Matters"); and (b)
pay or reimburse the reasonable expenses incurred by such person and his or her
heirs, executors, administrators and legal representatives in connection with
any Covered Matter in advance of final disposition of such Covered Matter. The
Corporation may provide such other indemnification to Directors, officers,
employees and agents by insurance, contract or otherwise as is permitted by law
and authorized by the Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
8.1 CHECKS AND FUNDS. All checks, drafts or demands for money and notes of
the Corporation must be signed by such officer or officers or such other person
or persons as the Board of Directors from time to time designates. All funds of
the Corporation not otherwise employed shall be deposited or used as the Board
of Directors from time to time designates.
8.2 FISCAL YEAR. The fiscal year of the Corporation shall end on such date
as the Board of Directors from time to time determines.
8.3 CORPORATE SEAL. The Board of Directors may adopt a corporate seal for
the Corporation. The corporate seal, if adopted, shall be circular and contain
the name of the Corporation and the words "Corporate Seal Michigan". The seal
may be used by causing it or a facsimile of it to be impressed, affixed,
reproduced or otherwise.
8.4 BOOKS AND RECORDS. The Corporation shall keep within or outside of
Michigan books and records of account and minutes of the proceedings of its
shareholders, Board of Directors and Board committees, if any. The Corporation
shall keep at its registered office or at the office of its transfer agent
within or outside of Michigan records containing the names and addresses of all
shareholders, the number, class and series of shares held by each and the dates
when they respectively became recordholders of shares. Any of such books,
records or minutes may be in written form or in any other form capable of being
converted into written form within a reasonable time.
8.5 FINANCIAL STATEMENTS. The Corporation shall cause to be made and
distributed to its shareholders, within four months after the end of each fiscal
year, a financial report (including a statement of income, year-end balance
sheet, and, if prepared by the Corporation, its statement of sources and
application of funds) covering the preceding fiscal year of the Corporation.
ARTICLE IX
AMENDMENTS
These Bylaws may be amended or repealed, or new Bylaws may be adopted, by
action of either the shareholders or a majority of the Board of Directors then
in office. The Shareholders or the Board may from time to time specify
particular provisions of the Bylaws which may not be altered or repealed by the
Board of Directors.
ARTICLE X
SCOPE OF BYLAWS
These Bylaws govern the regulation and management of the affairs of the
Corporation to the extent that they are consistent with applicable law and the
Articles of Incorporation; to the extent they are not consistent, applicable law
and the Articles of Incorporation shall govern. Greater voting, notice or other
requirements than those set forth in these Bylaws may be established by
contract.
December 1, 1998
JPE, Inc.
775 Technology Drive
Suite 200
Ann Arbor, Michigan 48108
Attention: Messrs. Richard P. Eidswick, Richard Chrysler and James J. Fahrner
RE: FORBEARANCE AGREEMENT AMONG COMERICA BANK, NBD BANK, NATIONAL BANK OF
CANADA, HARRIS TRUST AND SAVINGS BANK, AND BANK ONE, DAYTON, N.A.
(COLLECTIVELY, THE "BANKS"), COMERICA BANK, AS AGENT FOR THE BANKS
("AGENT"), JPE, INC. ("COMPANY") AND ALLPARTS, INCORPORATED ("API"), DAYTON
PARTS, INC. ("DPI"), SAC CORPORATION, STARBOARD INDUSTRIES, INC. ("SBI"),
INDUSTRIAL & AUTOMOTIVE FASTENERS, INC. ("IAF"), PLASTIC TRIM, INC.
("PTI"), BRAKE, AXLE AND TANDEM COMPANY CANADA INC. AND JPE FINISHING, INC.
(COLLECTIVELY, "GUARANTORS") DATED AUGUST 10, 1998, AND AMENDED BY A FIRST
AMENDMENT DATED AUGUST 31, 1998, A SECOND AMENDMENT DATED SEPTEMBER 4,
1998, A THIRD AMENDMENT DATED SEPTEMBER 16, 1998, AND A FOURTH AMENDMENT
DATED OCTOBER 1, 1998 (AS AMENDED, THE "FORBEARANCE AGREEMENT")
Dear Messrs. Eidswick, Chrysler and Fahrner:
Company and Guarantors have requested that Banks amend the Forbearance Agreement
to increase the Cap (net of PTI/SBI Adjustment) for December 1998.
Subject to written acceptance by Company and Guarantors of the following terms
and conditions, Agent and Banks are willing to amend the Forbearance Agreement,
as follows:
1. All capitalized terms not defined in this fifth amendment ("Fifth
Amendment") to the Forbearance Agreement shall have the meanings described
in the Forbearance Agreement and/or the Loan Documents.
2. Except as modified by this Fifth Amendment, the Indebtedness and the
financing arrangements among Agent, Banks, Company and Guarantors shall
continue to be governed by the covenants, terms and conditions of the
Forbearance Agreement and the Loan Documents, which are ratified and
confirmed. The liens and security interests granted to Agent and Banks
under the Loan Documents and the Forbearance Agreement are also ratified
and confirmed by Company and the undersigned Guarantors. This Fifth
Amendment shall be binding upon and shall inure to the benefit of Agent,
Banks, Company and the undersigned Guarantors, and their respective
successors and assigns.
3. The Cap and Month End Cap (both net of PTI/SBI Adjustment) for December
1998 are increased to $74,508,825 and $72,724,825, respectively.
4. Company covenants to engage a consulting firm satisfactory to Agent and
Banks under an engagement with a scope satisfactory to Agent and Banks
through January 1, 2000. Agent and Banks acknowledge that Conway, MacKenzie
& Dunleavy is satisfactory.
5. Company and Guarantors represent that this Fifth Amendment has been duly
authorized by each corporation's Board of Directors. Attached as Exhibit A
is a certified resolution and a certificate of incumbency for each.
6. This Fifth Amendment is not a waiver by Banks of any defaults under the
Forbearance Agreement and/or the Loan Documents.
7. Company and the undersigned Guarantors hereby represent and warrant that
(a) execution, delivery and performance of this Fifth Amendment are not in
contravention of law or the terms of any agreement by which they are bound,
and do not require the consent or approval of any governmental body,
agency, or authority, and this Fifth Amendment will be valid and binding in
accordance with its terms; (b) the continuing representations and
warranties of Company and the undersigned Guarantors set forth in Loan
Documents are true and correct on and as of the date hereof with the same
force and effect as made on and as of the date hereof other than as
previously specified in writing to Agent and Banks; and (c) no event of
default, or condition or event which, with the giving of notice or the
running of time, or both, would constitute an event of default under the
Forbearance Agreement, has occurred and is continuing as of the date hereof
other than as previously specified in writing to Agent and Banks.
8. COMPANY, THE UNDERSIGNED GUARANTORS, AGENT AND BANKS ACKNOWLEDGE AND AGREE
THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE
WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR
THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY
RELATED TO, THIS FIFTH AMENDMENT, THE FORBEARANCE AGREEMENT, THE LOAN
DOCUMENTS OR THE INDEBTEDNESS.
9. COMPANY AND THE UNDERSIGNED GUARANTORS, IN EVERY CAPACITY, INCLUDING, BUT
NOT LIMITED TO, AS SHAREHOLDERS, PARTNERS, OFFICERS, DIRECTORS, INVESTORS
AND/OR CREDITORS OF COMPANY AND/OR GUARANTORS, OR ANY ONE OR MORE OF THEM,
HEREBY WAIVE, DISCHARGE AND FOREVER RELEASE AGENT, BANKS, AND THEIR
EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND
ASSIGNS, FROM AND OF ANY AND ALL CLAIMS, CAUSES OF ACTION, DEFENSES,
COUNTERCLAIMS OR OFFSETS AND/OR ALLEGATIONS COMPANY AND/OR GUARANTORS MAY
HAVE, OR MAY HAVE MADE, OR ARE BASED ON FACTS OR CIRCUMSTANCES ARISING, AT
ANY TIME UP THROUGH AND INCLUDING THE DATE OF THIS FIFTH AMENDMENT, WHETHER
KNOWN OR UNKNOWN, AGAINST ANY OR ALL OF AGENT, BANKS, THEIR EMPLOYEES,
OFFICERS, DIRECTORS, ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND ASSIGNS.
Very truly yours,
COMERICA BANK, Agent
By: /s/ Cynthia B. Jones
---------------------------
Cynthia B. Jones
Its: Vice President
Special Assets Group
P.O. Box 75000
Detroit, Michigan 48275-3205
(313) 222-3780
(313) 222-5706 Fax
COMERICA BANK NBD BANK
By: /s/ Cynthia B. Jones By: /s/ Robert J. Izzo
-------------------------- -------------------------
Its: Vice President Its: First Vice President
NATIONAL BANK OF CANADA HARRIS TRUST and SAVINGS BANK
By: /s/ Loriann Curnyn By: /s/ Sandra J. Sanders
-------------------------- -------------------------
Its: Vice President Its: Sr. Vice President
By: /s/
--------------------------
Its: Group Vice President
BANK ONE, DAYTON, N.A.
By: /s/ Scott E. Roman
--------------------------
Its: Assistant Vice President
<PAGE>
ACKNOWLEDGED AND AGREED:
JPE, INC. INDUSTRIAL & AUTOMOTIVE
FASTENERS, INC.
By: /s/ James J. Fahrner By: /s/ James J. Fahrner
-------------------------- -------------------------
Its: COO and CFO Its: President and CFO
Date: 12/3/98 Date: 12/3/98
API/JPE, INC. (formerly Allparts, Inc.) BRAKE, AXLE AND TANDEM
COMPANY CANADA INC.
By: /s/ James J. Fahrner By: /s/ James J. Fahrner
------------------------- -------------------------
Its: President and CFO Its: Vice President and Treasurer
Date: 12/3/98 Date: 12/3/98
DAYTON PARTS, INC. JPE FINISHING, INC.
By: /s/ James J. Fahrner By: /s/ James J. Fahrner
-------------------------- -------------------------
Its: Vice President and CFO Its: President and CFO
Date: 12/3/98 Date: 12/3/98
SAC CORPORATION
By: /s/ James J. Fahrner
--------------------------
Its: President and Treasurer
Date: 12/3/98
March 26, 1999
JPE, Inc.
775 Technology Drive
Suite 200
Ann Arbor, Michigan 48108
Attention: Messrs. Richard P. Eidswick, Richard Chrysler and James J. Fahrner
RE: FORBEARANCE AGREEMENT AMONG COMERICA BANK, NBD BANK, NATIONAL BANK OF
CANADA, HARRIS TRUST AND SAVINGS BANK, AND BANK ONE, DAYTON, N.A.
(COLLECTIVELY, THE "BANKS"), COMERICA BANK, AS AGENT FOR THE BANKS
("AGENT"), JPE, INC. ("COMPANY") AND API/JPE, Inc. (FORMERLY KNOWN AS
ALLPARTS, INCORPORATED ("API"), DAYTON PARTS, INC.) ("DPI"), SAC
CORPORATION, STARBOARD INDUSTRIES, INC. ("SBI"), INDUSTRIAL & AUTOMOTIVE
FASTENERS, INC. ("IAF"), PLASTIC TRIM, INC. ("PTI"), BRAKE, AXLE AND TANDEM
COMPANY CANADA INC. AND JPE FINISHING, INC. (COLLECTIVELY, "GUARANTORS")
DATED AUGUST 10, 1998, AND AMENDED BY A FIRST AMENDMENT DATED AUGUST 31,
1998, A SECOND AMENDMENT DATED SEPTEMBER 4, 1998, A THIRD AMENDMENT DATED
SEPTEMBER 16, 1998, A FOURTH AMENDMENT DATED OCTOBER 1, 1998 AND A FIFTH
AMENDMENT DATED DECEMBER 1, 1998 (AS AMENDED, THE "FORBEARANCE AGREEMENT")
Dear Messrs. Eidswick, Chrysler and Fahrner:
Company and Guarantors have requested that Banks amend the Forbearance Agreement
to permit Company to sell its stock in IAF to MacLean-Fogg Company under a
definitive stock purchase agreement dated March 26, 1999 ("IAF Agreement").
Subject to written acceptance by Company and Guarantors of the following terms
and conditions, Agent and Banks are willing to amend the Forbearance Agreement,
as follows:
1. All capitalized terms not defined in this sixth amendment ("Sixth
Amendment") to the Forbearance Agreement shall have the meanings described
in the Forbearance Agreement and/or the Loan Documents.
2. Except as modified by this Sixth Amendment, the Indebtedness and the
financing arrangements among Agent, Banks, Company and Guarantors shall
continue to be governed by the covenants, terms and conditions of the
Forbearance Agreement and the Loan Documents, which are ratified and
confirmed. The liens and security interests granted to Agent and Banks
under the Loan Documents and the Forbearance Agreement are also ratified
and confirmed by Company and the undersigned Guarantors. This Sixth
Amendment shall be binding upon and shall inure to the benefit of Agent,
Banks, Company and the undersigned Guarantors, and their respective
successors and assigns.
3. The Purchase Price, as defined in the IAF Agreement, must be not less than
$20,000,000, payable on the Closing Date..
4. The Purchase Price shall be paid at closing directly to Agent in
immediately available funds. Company may pay the Old Payables (as defined
in the IAF Agreement). Company may provide funds for any amounts presented
as due and owing pursuant to any checks of IAF issued on or prior to March
26, 1999 not to exceed a total of $386,012. Company acknowledges that all
rights of Company under the IAF Agreement and any escrow agreement or other
related agreement or document are subject to Agent's security interest.
5. Effective upon closing and payment of the Purchase Price to Agent, Agent
and Banks agree: (a) the obligations of IAF with respect to the
Indebtedness or otherwise, as Guarantor or otherwise, under the Credit
Agreement, the Forbearance Agreement or any other Loan Document shall be
terminated in full and IAF shall be released from such obligations without
any further action; (b) all rights, mortgages, security interests and liens
in favor of Agent granted by or on behalf of IAF securing the Indebtedness
shall be deemed terminated, released, cancelled and discharged; (c) any and
all UCC-3 termination statements and/or discharges of mortgage necessary to
release such rights, mortgages, security interests and liens of record
shall be delivered to IAF.
6. Company and Guarantors represent that this Sixth Amendment has been duly
authorized by each corporation's Board of Directors. Attached as Exhibit A
is a certified resolution and a certificate of incumbency for each.
7. This Sixth Amendment is not a waiver by Banks of any defaults under the
Forbearance Agreement and/or the Loan Documents.
8. Company and the undersigned Guarantors hereby represent and warrant that
(a) execution, delivery and performance of this Sixth Amendment are not in
contravention of law or the terms of any agreement by which they are bound,
and do not require the consent or approval of any governmental body,
agency, or authority, and this Sixth Amendment will be valid and binding in
accordance with its terms; (b) the continuing representations and
warranties of Company and the undersigned Guarantors set forth in Loan
Documents are true and correct on and as of the date hereof with the same
force and effect as made on and as of the date hereof other than as
previously specified in writing to Agent and Banks; and (c) no event of
default, or condition or event which, with the giving of notice or the
running of time, or both, would constitute an event of default under the
Forbearance Agreement, has occurred and is continuing as of the date hereof
other than as previously specified in writing to Agent and Banks.
9. COMPANY, THE UNDERSIGNED GUARANTORS, AGENT AND BANKS ACKNOWLEDGE AND AGREE
THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE
WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR
THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY
RELATED TO, THIS SIXTH AMENDMENT, THE FORBEARANCE AGREEMENT, THE LOAN
DOCUMENTS OR THE INDEBTEDNESS.
10. COMPANY AND THE UNDERSIGNED GUARANTORS, IN EVERY CAPACITY, INCLUDING, BUT
NOT LIMITED TO, AS SHAREHOLDERS, PARTNERS, OFFICERS, DIRECTORS, INVESTORS
AND/OR CREDITORS OF COMPANY AND/OR GUARANTORS, OR ANY ONE OR MORE OF THEM,
HEREBY WAIVE, DISCHARGE AND FOREVER RELEASE AGENT, BANKS, AND THEIR
EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND
ASSIGNS, FROM AND OF ANY AND ALL CLAIMS, CAUSES OF ACTION, DEFENSES,
COUNTERCLAIMS OR OFFSETS AND/OR ALLEGATIONS COMPANY AND/OR GUARANTORS MAY
HAVE, OR MAY HAVE MADE, OR ARE BASED ON FACTS OR CIRCUMSTANCES ARISING, AT
ANY TIME UP THROUGH AND INCLUDING THE DATE OF THIS SIXTH AMENDMENT, WHETHER
KNOWN OR UNKNOWN, AGAINST ANY OR ALL OF AGENT, BANKS, THEIR EMPLOYEES,
OFFICERS, DIRECTORS, ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND ASSIGNS.
Very truly yours,
COMERICA BANK, Agent
By: /s/ Cynthia B. Jones
--------------------------
Cynthia B. Jones
Its: Vice President
Special Assets Group
P.O. Box 75000
Detroit, Michigan 48275-3205
(313) 222-3780
(313) 222-5706 Fax
COMERICA BANK NBD BANK
By: /s/ Cynthia B. Jones By: /s/ Scott E. Roman
-------------------------- -------------------------
As Agent for NBD Bank
Its: Vice President Its: Vice President
NATIONAL BANK OF CANADA HARRIS TRUST and SAVINGS BANK
By: /s/ Loriann Curnyn By: /s/ Sandra J. Sanders
-------------------------- -------------------------
Its: Group Vice President Its: Sr. Vice President
By: /s/
--------------------------
Its: Vice President
BANK ONE, DAYTON, N.A.
By: /s/ Scott E. Roman
--------------------------
Its: Vice President
ACKNOWLEDGED AND AGREED:
JPE, INC. INDUSTRIAL & AUTOMOTIVE
FASTENERS, INC.
By: /s/ Richard R. Chrysler By: /s/ Richard R. Chrysler
-------------------------- -------------------------
Its: President Its: President
Date: 3/26/99 Date: 3/26/99
API/JPE, INC. BRAKE, AXLE AND TANDEM
(formerly Allparts, Incorporated) COMPANY CANADA INC.
By: /s/ Richard R. Chrysler By: /s/ Richard R. Chrysler
-------------------------- -------------------------
Its: President Its: Chief Executive Officer
Date: 3/26/99 Date: 3/26/99
DAYTON PARTS, INC. JPE FINISHING, INC.
By: /s/ Richard R. Chrysler By: /s/ Richard R. Chrysler
-------------------------- -------------------------
Its: Chief Executive Officer Its: President
Date: 3/26/99 Date: 3/26/99
SAC CORPORATION
By: /s/ Richard R. Chrysler
--------------------------
Its: President
Date: 3/26/99
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of September 30, 1998
between JPE, Inc., a Michigan corporation ("Corporation"), and Richard P.
Eidswick ("Director").
Recitals
A. Director is a member of Corporation's Board of Directors and Corporation
desires Director to continue in such capacity. Director is willing to
continue to serve on Corporation's Board of Directors if Director receives
the protections provided by this Agreement.
B. Corporation's Bylaws obligate it to indemnify its directors and officers.
C. Corporation has furnished, at its expense, directors and officers liability
insurance ("D&O Insurance") protecting its directors in connection with
their performance of services for Corporation.
D. Corporation believes that (1) litigation against corporate directors,
regardless of whether meritorious, is expensive and time-consuming for the
director to defend; (2) there is a substantial risk of a large judgment or
settlement in litigation in which a corporate director was neither culpable
nor profited personally to the detriment of the corporation; (3) it is
increasingly difficult to attract and keep qualified directors because of
such potential liabilities; (4) it is important for a director to have
assurance that indemnification will be available if the director acts in
accordance with reasonable business standards; and (5) because available
D&O Insurance and the indemnification available from Corporation are not
adequate to fully protect Corporation's directors against the problems
discussed above, it is in the best interests of Corporation and its
shareholders for Corporation to contractually obligate itself to indemnify
its directors and to set forth the details of the indemnification process.
E. Based upon the conclusions stated in Recital D above, to induce Director to
continue to serve on Corporation's Board of Directors and in consideration
of Director's continued service as a director, Corporation wishes to enter
into this Agreement with Director.
Therefore, Corporation and Director agree as follows:
1. Agreement to Serve. Director will serve as a member of the Board of
Directors of the Corporation so long as Director is duly elected and
qualified to so serve or until Director resigns or is removed from
Corporation's Board of Directors.
2. Indemnification.
(a) Corporation will indemnify Director to the fullest extent permitted
under applicable law if Director was or is a party or threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding of any kind, whether civil, criminal, administrative or
investigative and whether formal or informal (including actions by or
in the right of Corporation and any preliminary inquiry or claim by
any person or authority), by reason of the fact that Director is or
was a director, officer, partner, trustee, employee or agent of
Corporation or is or was serving at Corporation's request as a
director, officer, employee or agent of another corporation (including
a Subsidiary (as defined in paragraph 19 below)), limited liability
company, partnership, joint venture, trust, employee benefit plan or
other enterprise, whether or not for profit, or by reason of anything
done or not done by Director in any such capacity (collectively,
"Covered Matters"). Such indemnification will cover all Expenses (as
defined in paragraph 5(a) below), liabilities, judgments (including
punitive and exemplary damages), penalties, fines (including excise
taxes relating to employee benefit plans and civil penalties) and
amounts paid in settlement which are incurred or imposed upon Director
in connection with a Covered Matter (collectively, "Indemnified
Amounts").
(b) Director will be indemnified for all Indemnified Amounts and
Corporation will defend Director against claims (including threatened
claims and investigations) in any way related to Director's service as
a director including claims brought by or on behalf of Corporation or
any Subsidiary, except if it is finally determined by the court of
last resort (or by a lower court if not timely appealed) that (1) the
payment is prohibited by applicable law or (2) Director engaged in
intentional misconduct for the primary purpose of significant personal
financial benefit through actions adverse to Corporation's and its
shareholders' best interests. As used in this Agreement, (1)
"intentional misconduct" will not include violations of disclosure or
reporting requirements of federal securities laws or a breach of
fiduciary duties (including duties of loyalty or care) if Director
relied on advice of counsel to Corporation, or otherwise reasonably
believed that there was no violation of such requirements or breach of
fiduciary duty; and (2) "significant personal financial benefit" will
not include compensation or employee benefits for past or prospective
services to Corporation or Corporation's successor in connection with
an agreement not to compete or similar agreement, or any benefit
received by directors or officers or shareholders of Corporation
generally.
(c) If Director is entitled under this Agreement to indemnification for
less than all of the amounts incurred by Director in connection with a
Covered Matter, Corporation will indemnify Director for the
indemnifiable amount.
3. Claims for Indemnification. Director will give Corporation written notice
of any claim for indemnification under this Agreement. Payment requests
will include a schedule setting forth in reasonable detail the amount
requested and will be accompanied (or, if necessary, followed) by copies of
the relevant invoices or other documentation. Upon Corporation's request,
Director will provide Corporation with a copy of the document or pleading,
if any, notifying Director of the Covered Matter. To the extent
practicable, Corporation will pay Indemnified Amounts directly without
requiring Director to make any prior payment.
4. Determination of Right to Indemnification.
(a) Director will be presumed to be entitled to indemnification under this
Agreement and will receive such indemnification, subject to paragraph
4(b) below, irrespective of whether the Covered Matter involves
allegations of intentional misconduct, alleged violations of Section
16(b) of the Securities Exchange Act of 1934, alleged violations of
Section 10(b) of the Securities Exchange Act of 1934 (including Rule
10b-5 thereunder), breach of Director's fiduciary duties (including
duties of loyalty or care) or any other claim.
(b) If, in the opinion of counsel to Corporation, applicable law permits
indemnification in a Covered Matter only as authorized in the specific
case upon a determination that indemnification is proper in the
circumstances because Director has met a standard of conduct
established by applicable law, and upon an evaluation of Indemnified
Amounts to be paid in connection with such Covered Matter, the
following will apply:
(1) Corporation will give Director notice that a determination and
evaluation will be made under this paragraph 4(b); such notice
will be given immediately after receipt of counsel's opinion that
such a determination and evaluation is necessary and will include
a copy of such opinion.
(2) Such determination and evaluation will be made in good faith, as
follows:
(A) by a majority vote of a quorum of the Corporation's Board of
directors who are not parties or threatened to be made
parties to the Covered Matter in question ("Disinterested
Directors") or, if such a quorum is not obtainable, by a
majority vote of a committee of Disinterested Directors who
are selected by the Board; or
(B) by an attorney or firm of attorneys, having no previous
relationship with Corporation or Director, which is selected
by Corporation and Director; or
(C) by all independent directors of Corporation (a defined in
the Michigan Business Corporation Act) who are not parties
or threatened to be made parties to the Covered Matter.
(3) Director will be entitled to a hearing before the entire Board of
Directors of Corporation and any other person or persons making
the determination and evaluation under clause (2) above. Director
will be entitled to be represented by counsel at such hearing.
(4) The cost of a determination and evaluation under this paragraph
4(b) (including attorneys' fees and other expenses incurred by
Director in preparing for and attending the hearing contemplated
by clause (3) above and otherwise in connection with the
determination and evaluation under this paragraph 4(b)) will be
borne by Corporation.
(5) The determination will be made as promptly as possible after
final adjudication of the Covered Matter.
(6) Director will be presumed to have met the required standard of
conduct under this Section 4(b) unless it is clearly demonstrated
to the determining body that Director has not met the required
standard of conduct.
5. Advance of Expenses.
(a) Before final adjudication of a Covered Matter, upon Director's request
pursuant to paragraph 3 above, Corporation will promptly either
advance Expenses directly or reimburse Director for all Expenses. As
used in this Agreement, "Expenses" means all costs and expenses
(including attorneys' fees, expert fees, other professional fees and
court costs) incurred by Director in connection with a Covered Matter
other than judgments, penalties, fines and settlement amounts.
(b) If, in the opinion of counsel to Corporation, applicable law permits
advancement of Expenses only as authorized in the specific case upon a
determination that Director has met a standard of conduct established
by applicable law, the determination will be made at Corporation's
cost, in good faith and as promptly as possible after Director's
request, in accordance with clauses (1) through (4) and (6) of
paragraph 4(b) above. Because of the difficulties inherent in making
any such determination before final disposition of the Covered Matter,
to the extent permitted by law such advance will be made if (1) the
facts then known to those persons making the determination, without
conducting a formal independent investigation, would not preclude
advancement of Expenses under applicable law and (2) Director submits
to Corporation a written affirmation of Director's belief that
Director has met the standard of conduct necessary for advancement of
Expenses under the circumstances.
(c) Director will repay any Expenses that are advanced under this
paragraph 5 if it is ultimately determined, in a final, non-appealable
judgment rendered by the court of last resort (or by a lower court if
not timely appealed), that Director is not entitled to be indemnified
against such Expenses. This undertaking by Director is an unlimited
general undertaking but no security for such undertaking will be
required.
6. Defense of Claim.
(a) Except as provided in paragraph 6(c) below, Corporation, jointly with
any other indemnifying party, will be entitled to assume the defense
of any Covered Matter as to which Director requests indemnification.
(b) Counsel selected by Corporation to defend any Covered Matter will be
subject to Director's advance written approval, which will not be
unreasonably withheld.
(c) Director may employ Director's own counsel in a Covered Matter and be
fully reimbursed therefor if (1) Corporation approves, in writing, the
employment of such counsel or (2) either (A) Director has reasonably
concluded that there may be a conflict of interest between Corporation
and Director or between Director and other parties represented by
counsel employed by Corporation to represent Director in such action
or (B) Corporation has not employed counsel reasonably satisfactory to
Director to assume the defense of such Covered Matter promptly after
Director's request.
(d) Neither Corporation nor Director will settle any Covered Matter
without the other's written consent, which will not be unreasonably
withheld.
(e) If Director is required to testify (in court proceedings, depositions,
informal interviews or otherwise), consult with counsel, furnish
documents or take any other reasonable action in connection with a
Covered Matter, Corporation will pay Director a fee for Director's
efforts at a rate equal to the amount payable to Director for
attending Board and Board committee meetings, plus reimbursement for
all reasonable expenses incurred by Director in connection therewith.
7. Disputes; Enforcement.
(a) If there is a dispute relating to the validity or enforceability of
this Agreement or a denial of indemnification, advance of Expenses or
payment of any other amounts due under this Agreement or Corporation's
Articles of Incorporation or Bylaws, Corporation will provide such
indemnification, advance of Expenses or other payment until a final,
non-appealable judgment that Director is not entitled to such
indemnification, advance of Expenses or other payment has been
rendered by the court of last resort (or by a lower court if not
timely appealed). Director will repay such amounts if such final,
non-appealable judgment so requires.
(b) Corporation will reimburse all of Director's reasonable expenses
(including attorneys' fees) in pursuing an action to enforce
Director's rights under this Agreement unless a final, non-appealable
judgment against Director has been rendered in such action by the
court of last resort (or by a lower court if not timely appealed). At
Director's request, such expenses will be advanced by Corporation to
Director as incurred before final resolution of such action by the
court of last resort; such expenses will be repaid by Director if a
final, non-appealable judgment in Corporation's favor is rendered in
such action by the court of last resort (or by a lower court if not
timely appealed).
8. D&O Insurance.
(a) Corporation represents that it currently has in full force and effect
the D&O insurance listed on the schedule which is attached to this
Agreement.
(b) Except as provided in paragraph 8(c) below, Corporation will purchase
and maintain D&O Insurance with a policy limit of at least $2,500,000
without deductible or co-insurance in excess of the amounts set forth
on the schedule which is attached to this Agreement, insuring Director
against any liability arising out of Director's status as a director
of Corporation, regardless of whether Corporation has the power to
indemnify Director against such liability under applicable law.
(c) Corporation will not be required to purchase and maintain D&O
Insurance if the Board of Directors of Corporation determines, after
diligent inquiry, that (1) such insurance is not available; or (2) the
premiums for available insurance are disproportionate to the amount of
coverage and to the premiums paid by other corporations similarly
situated. The Board of Directors of Corporation will, at least twice
annually, in good faith review its decision not to maintain D&O
Insurance and will purchase such insurance at any time that the
conditions of this paragraph 8(c) cease to apply.
(d) The parties will cooperate to obtain advances of Expenses,
indemnification payments and consents from D&O Insurance carriers in
any Covered Matter to the full extent of applicable D&O Insurance. The
existence of D&O Insurance coverage will not diminish or limit
Corporation's obligation to make indemnification payments to Director.
Amounts paid directly to Director with respect to a Covered Matter by
Corporation's D&O Insurance carriers will be credited to the amounts
payable by Corporation to Director under this Agreement.
9. Limitations of Actions; Release of Claims; Limitation of Liability.
(a) No action will be brought by or on behalf of Corporation against
Director or Director's heirs or personal representatives relating to
Director's service as a director, after the expiration of one year
from the date Director ceases (for any reason) to serve as a Director
of Corporation, and any claim or cause of action of Corporation will
be extinguished and deemed released unless asserted by the filing of a
legal action before the expiration of such period.
(b) The Directors of Corporation who are employees of Corporation (the
"Inside Directors"), with the assistance of legal counsel, have
investigated Director's activities during Director's prior service and
the Inside Directors have determined and acknowledged that Corporation
has no basis for any claim against Director for negligence or
misconduct in the performance of Director's duties on the basis of any
information presently available. Accordingly, Corporation releases
Director and Director's heirs, personal representatives and assigns
from all causes of action and claims which may be based upon
negligence or misconduct by Director in the performance of Director's
duties to Corporation by reason of facts existing on the date of this
Agreement and known or available to the Inside Directors.
(c) As soon as possible after the end of each fiscal year of Corporation,
the Inside Directors will cause Corporation to conduct an
investigation, similar to that described in paragraph 9(b) above, of
Director's activities during the immediately preceding fiscal year and
to report the results of such investigation in writing to Director and
to Corporation's Board of Directors. Unless Corporation notifies
Director within180 days after the end of the applicable fiscal year
that the results of such investigation do not so permit, Director and
Director's personal representatives, heirs and assigns will be
automatically released (in the manner described in paragraph 9(b)
above) with respect to Director's actions during the fiscal year
covered by the report.
10. Rights Not Exclusive. The indemnification provided to Director under this
Agreement will be in addition to any indemnification provided to Director
by any law, agreement, Board resolution, provision of the Articles of
Incorporation or Bylaws of Corporation or otherwise.
11. Subrogation. Upon payment of any Indemnified Amount under this Agreement,
Corporation will be subrogated to the extent of such payment to all of
Director's rights of recovery therefor and Director will take all
reasonable actions requested by Corporation (at no cost or penalty to
Director) to secure Corporation's rights under this paragraph 11 including
executing documents.
12. Continuation of Indemnity. All of Corporation's obligations under this
Agreement will continue as long as Director is subject to any actual or
possible Covered Matter, notwithstanding Director's termination of service
as a director.
13. Amendments. Neither Corporation's Articles of Incorporation nor its Bylaws
will be changed to increase liability of directors or to limit Director's
indemnification. Any repeal or modification of Corporation's Articles of
Incorporation or Bylaws or any repeal or modification of the relevant
provisions of any applicable law will not in any way diminish any of
Director's rights or Corporation's obligations under this Agreement. This
Agreement cannot be amended except with the written consent of Corporation
and Director.
14. Governing Law. This Agreement will be governed by Michigan Law.
15. Successors.
(a) This Agreement will be binding upon and inure to the benefit of the
parties and their respective heirs, legal representatives and assigns.
(b) Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business or assets of the Corporation to assume all of
Corporation's obligations under this Agreement. Such assumption will
not release Corporation from its obligations under this Agreement.
16. Severability. The provisions of this Agreement will be deemed severable,
and if any part of any provision is held illegal, void or invalid under
applicable law, such provision may be changed to the extent reasonably
necessary to make the provision, as so changed, legal, valid and binding.
If any provision of this Agreement is held illegal, void or invalid in its
entirety, the remaining provisions of this Agreement will not in any way be
affected or impaired but will remain binding in accordance with their
terms.
17. Notices. All notices given under this Agreement will be in writing and
delivered either personally, by registered or certified mail (return
receipt requested, postage prepaid), by recognized overnight courier or by
telecopy (if promptly followed by a copy delivered personally, by
registered or certified mail or overnight courier), as follows:
If to Director: Richard P. Eidswick
3964 Penberton
Ann Arbor, Michigan 48105
If to Corporation: JPE, Inc.
775 Technology Drive, Suite 200
Ann Arbor, Michigan 48108
Attention: Secretary
or to such other address as either party furnishes to the other in writing.
18. Counterparts: This Agreement may be signed in counterparts.
19. Subsidiaries: As used in this Agreement, the term "Subsidiary" means any
corporation in which Corporation owns a majority interest.
In witness whereof, the parties have executed this Agreement as of the date set
forth in the introductory paragraph of this Agreement.
JPE, INC.
a Michigan corporation
By: /s/ Donna L. Bacon
-----------------------------------
Donna L. Bacon
Its: President
/s/ Richard P. Eidswick ("Director")
---------------------------------------
Richard P. Eidswick
<PAGE>
D&O Insurance Schedule
----------------------
<TABLE>
<CAPTION>
Policy
Company Policy No. Amount Deductible/Co-Insurance Expiration Date
- ------- ---------- ------ ----------------------- ---------------
<S> <C> <C> <C> <C>
St. Paul Mercury 563CM0098 $10,000,000 $250,000 payable by Corporation in 10/26/99
Ins. Co. each securities claim and $150,000
all other claims; no retention
payable by insureds. Insurer
responsible for 100% of loss in
excess of retention amount.
Great American DFX0009459 $5,000,000 Policy is excess of amount payable 10/26/99
Insurance Co. by St. Paul Mercury Ins. Co. policy.
</TABLE>
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made on as of November 9, 1998
between JPE, Inc., a Michigan corporation ("Corporation"), and Richard R.
Chrysler ("Director").
Recitals
A. Director is a member of Corporation's Board of Directors and Corporation
desires Director to continue in such capacity. Director is willing to
continue to serve on Corporation's Board of Directors if Director receives
the protections provided by this Agreement.
B. Corporation's Bylaws obligate it to indemnify its directors and officers.
C. Corporation has furnished, at its expense, directors and officers liability
insurance ("D&O Insurance") protecting its directors in connection with
their performance of services for Corporation.
D. Corporation believes that (1) litigation against corporate directors,
regardless of whether meritorious, is expensive and time-consuming for the
director to defend; (2) there is a substantial risk of a large judgment or
settlement in litigation in which a corporate director was neither culpable
nor profited personally to the detriment of the corporation; (3) it is
increasingly difficult to attract and keep qualified directors because of
such potential liabilities; (4) it is important for a director to have
assurance that indemnification will be available if the director acts in
accordance with reasonable business standards; and (5) because available
D&O Insurance and the indemnification available from Corporation are not
adequate to fully protect Corporation's directors against the problems
discussed above, it is in the best interests of Corporation and its
shareholders for Corporation to contractually obligate itself to indemnify
its directors and to set forth the details of the indemnification process.
E. Based upon the conclusions stated in Recital D above, to induce Director to
continue to serve on Corporation's Board of Directors and in consideration
of Director's continued service as a director, Corporation wishes to enter
into this Agreement with Director.
Therefore, Corporation and Director agree as follows:
1. Agreement to Serve. Director will serve as a member of the Board of
Directors of the Corporation so long as Director is duly elected and
qualified to so serve or until Director resigns or is removed from
Corporation's Board of Directors.
2. Indemnification.
(a) Corporation will indemnify Director to the fullest extent permitted
under applicable law if Director was or is a party or threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding of any kind, whether civil, criminal, administrative or
investigative and whether formal or informal (including actions by or
in the right of Corporation and any preliminary inquiry or claim by
any person or authority), by reason of the fact that Director is or
was a director, officer, partner, trustee, employee or agent of
Corporation or is or was serving at Corporation's request as a
director, officer, employee or agent of another corporation (including
a Subsidiary (as defined in paragraph 19 below)), limited liability
company, partnership, joint venture, trust, employee benefit plan or
other enterprise, whether or not for profit, or by reason of anything
done or not done by Director in any such capacity (collectively,
"Covered Matters"). Such indemnification will cover all Expenses (as
defined in paragraph 5(a) below), liabilities, judgments (including
punitive and exemplary damages), penalties, fines (including excise
taxes relating to employee benefit plans and civil penalties) and
amounts paid in settlement which are incurred or imposed upon Director
in connection with a Covered Matter (collectively, "Indemnified
Amounts").
(b) Director will be indemnified for all Indemnified Amounts and
Corporation will defend Director against claims (including threatened
claims and investigations) in any way related to Director's service as
a director including claims brought by or on behalf of Corporation or
any Subsidiary, except if it is finally determined by the court of
last resort (or by a lower court if not timely appealed) that (1) the
payment is prohibited by applicable law or (2) Director engaged in
intentional misconduct for the primary purpose of significant personal
financial benefit through actions adverse to Corporation's and its
shareholders' best interests. As used in this Agreement, (1)
"intentional misconduct" will not include violations of disclosure or
reporting requirements of federal securities laws or a breach of
fiduciary duties (including duties of loyalty or care) if Director
relied on advice of counsel to Corporation, or otherwise reasonably
believed that there was no violation of such requirements or breach of
fiduciary duty; and (2) "significant personal financial benefit" will
not include compensation or employee benefits for past or prospective
services to Corporation or Corporation's successor in connection with
an agreement not to compete or similar agreement, or any benefit
received by directors or officers or shareholders of Corporation
generally.
(c) If Director is entitled under this Agreement to indemnification for
less than all of the amounts incurred by Director in connection with a
Covered Matter, Corporation will indemnify Director for the
indemnifiable amount.
3. Claims for Indemnification. Director will give Corporation written notice
of any claim for indemnification under this Agreement. Payment requests
will include a schedule setting forth in reasonable detail the amount
requested and will be accompanied (or, if necessary, followed) by copies of
the relevant invoices or other documentation. Upon Corporation's request,
Director will provide Corporation with a copy of the document or pleading,
if any, notifying Director of the Covered Matter. To the extent
practicable, Corporation will pay Indemnified Amounts directly without
requiring Director to make any prior payment.
4. Determination of Right to Indemnification.
(a) Director will be presumed to be entitled to indemnification under this
Agreement and will receive such indemnification, subject to paragraph
4(b) below, irrespective of whether the Covered Matter involves
allegations of intentional misconduct, alleged violations of Section
16(b) of the Securities Exchange Act of 1934, alleged violations of
Section 10(b) of the Securities Exchange Act of 1934 (including Rule
10b-5 thereunder), breach of Director's fiduciary duties (including
duties of loyalty or care) or any other claim.
(b) If, in the opinion of counsel to Corporation, applicable law permits
indemnification in a Covered Matter only as authorized in the specific
case upon a determination that indemnification is proper in the
circumstances because Director has met a standard of conduct
established by applicable law, and upon an evaluation of Indemnified
Amounts to be paid in connection with such Covered Matter, the
following will apply:
(1) Corporation will give Director notice that a determination and
evaluation will be made under this paragraph 4(b); such notice
will be given immediately after receipt of counsel's opinion that
such a determination and evaluation is necessary and will include
a copy of such opinion.
(2) Such determination and evaluation will be made in good faith, as
follows:
(A) by a majority vote of a quorum of the Corporation's Board of
directors who are not parties or threatened to be made
parties to the Covered Matter in question ("Disinterested
Directors") or, if such a quorum is not obtainable, by a
majority vote of a committee of Disinterested Directors who
are selected by the Board; or
(B) by an attorney or firm of attorneys, having no previous
relationship with Corporation or Director, which is selected
by Corporation and Director; or
(C) by all independent directors of Corporation (a defined in
the Michigan Business Corporation Act) who are not parties
or threatened to be made parties to the Covered Matter.
(3) Director will be entitled to a hearing before the entire Board of
Directors of Corporation and any other person or persons making
the determination and evaluation under clause (2) above. Director
will be entitled to be represented by counsel at such hearing.
(4) The cost of a determination and evaluation under this paragraph
4(b) (including attorneys' fees and other expenses incurred by
Director in preparing for and attending the hearing contemplated
by clause (3) above and otherwise in connection with the
determination and evaluation under this paragraph 4(b)) will be
borne by Corporation.
(5) The determination will be made as promptly as possible after
final adjudication of the Covered Matter.
(6) Director will be presumed to have met the required standard of
conduct under this Section 4(b) unless it is clearly demonstrated
to the determining body that Director has not met the required
standard of conduct.
5. Advance of Expenses.
(a) Before final adjudication of a Covered Matter, upon Director's request
pursuant to paragraph 3 above, Corporation will promptly either
advance Expenses directly or reimburse Director for all Expenses. As
used in this Agreement, "Expenses" means all costs and expenses
(including attorneys' fees, expert fees, other professional fees and
court costs) incurred by Director in connection with a Covered Matter
other than judgments, penalties, fines and settlement amounts.
(b) If, in the opinion of counsel to Corporation, applicable law permits
advancement of Expenses only as authorized in the specific case upon a
determination that Director has met a standard of conduct established
by applicable law, the determination will be made at Corporation's
cost, in good faith and as promptly as possible after Director's
request, in accordance with clauses (1) through (4) and (6) of
paragraph 4(b) above. Because of the difficulties inherent in making
any such determination before final disposition of the Covered Matter,
to the extent permitted by law such advance will be made if (1) the
facts then known to those persons making the determination, without
conducting a formal independent investigation, would not preclude
advancement of Expenses under applicable law and (2) Director submits
to Corporation a written affirmation of Director's belief that
Director has met the standard of conduct necessary for advancement of
Expenses under the circumstances.
(c) Director will repay any Expenses that are advanced under this
paragraph 5 if it is ultimately determined, in a final, non-appealable
judgment rendered by the court of last resort (or by a lower court if
not timely appealed), that Director is not entitled to be indemnified
against such Expenses. This undertaking by Director is an unlimited
general undertaking but no security for such undertaking will be
required.
6. Defense of Claim.
(a) Except as provided in paragraph 6(c) below, Corporation, jointly with
any other indemnifying party, will be entitled to assume the defense
of any Covered Matter as to which Director requests indemnification.
(b) Counsel selected by Corporation to defend any Covered Matter will be
subject to Director's advance written approval, which will not be
unreasonably withheld.
(c) Director may employ Director's own counsel in a Covered Matter and be
fully reimbursed therefor if (1) Corporation approves, in writing, the
employment of such counsel or (2) either (A) Director has reasonably
concluded that there may be a conflict of interest between Corporation
and Director or between Director and other parties represented by
counsel employed by Corporation to represent Director in such action
or (B) Corporation has not employed counsel reasonably satisfactory to
Director to assume the defense of such Covered Matter promptly after
Director's request.
(d) Neither Corporation nor Director will settle any Covered Matter
without the other's written consent, which will not be unreasonably
withheld.
(e) If Director is required to testify (in court proceedings, depositions,
informal interviews or otherwise), consult with counsel, furnish
documents or take any other reasonable action in connection with a
Covered Matter, Corporation will pay Director a fee for Director's
efforts at a rate equal to the amount payable to Director for
attending Board and Board committee meetings, plus reimbursement for
all reasonable expenses incurred by Director in connection therewith.
7. Disputes; Enforcement.
(a) If there is a dispute relating to the validity or enforceability of
this Agreement or a denial of indemnification, advance of Expenses or
payment of any other amounts due under this Agreement or Corporation's
Articles of Incorporation or Bylaws, Corporation will provide such
indemnification, advance of Expenses or other payment until a final,
non-appealable judgment that Director is not entitled to such
indemnification, advance of Expenses or other payment has been
rendered by the court of last resort (or by a lower court if not
timely appealed). Director will repay such amounts if such final,
non-appealable judgment so requires.
(b) Corporation will reimburse all of Director's reasonable expenses
(including attorneys' fees) in pursuing an action to enforce
Director's rights under this Agreement unless a final, non-appealable
judgment against Director has been rendered in such action by the
court of last resort (or by a lower court if not timely appealed). At
Director's request, such expenses will be advanced by Corporation to
Director as incurred before final resolution of such action by the
court of last resort; such expenses will be repaid by Director if a
final, non-appealable judgment in Corporation's favor is rendered in
such action by the court of last resort (or by a lower court if not
timely appealed).
8. D&O Insurance.
(a) Corporation represents that it currently has in full force and effect
the D&O insurance listed on the schedule which is attached to this
Agreement.
(b) Except as provided in paragraph 8(c) below, Corporation will purchase
and maintain D&O Insurance with a policy limit of at least $2,500,000
without deductible or co-insurance in excess of the amounts set forth
on the schedule which is attached to this Agreement, insuring Director
against any liability arising out of Director's status as a director
of Corporation, regardless of whether Corporation has the power to
indemnify Director against such liability under applicable law.
(c) Corporation will not be required to purchase and maintain D&O
Insurance if the Board of Directors of Corporation determines, after
diligent inquiry, that (1) such insurance is not available; or (2) the
premiums for available insurance are disproportionate to the amount of
coverage and to the premiums paid by other corporations similarly
situated. The Board of Directors of Corporation will, at least twice
annually, in good faith review its decision not to maintain D&O
Insurance and will purchase such insurance at any time that the
conditions of this paragraph 8(c) cease to apply.
(d) The parties will cooperate to obtain advances of Expenses,
indemnification payments and consents from D&O Insurance carriers in
any Covered Matter to the full extent of applicable D&O Insurance. The
existence of D&O Insurance coverage will not diminish or limit
Corporation's obligation to make indemnification payments to Director.
Amounts paid directly to Director with respect to a Covered Matter by
Corporation's D&O Insurance carriers will be credited to the amounts
payable by Corporation to Director under this Agreement.
9. Limitations of Actions; Release of Claims; Limitation of Liability.
(a) No action will be brought by or on behalf of Corporation against
Director or Director's heirs or personal representatives relating to
Director's service as a director, after the expiration of one year
from the date Director ceases (for any reason) to serve as a Director
of Corporation, and any claim or cause of action of Corporation will
be extinguished and deemed released unless asserted by the filing of a
legal action before the expiration of such period.
(b) The Directors of Corporation who are employees of Corporation (the
"Inside Directors"), with the assistance of legal counsel, have
investigated Director's activities during Director's prior service and
the Inside Directors have determined and acknowledged that Corporation
has no basis for any claim against Director for negligence or
misconduct in the performance of Director's duties on the basis of any
information presently available. Accordingly, Corporation releases
Director and Director's heirs, personal representatives and assigns
from all causes of action and claims which may be based upon
negligence or misconduct by Director in the performance of Director's
duties to Corporation by reason of facts existing on the date of this
Agreement and known or available to the Inside Directors.
(c) As soon as possible after the end of each fiscal year of Corporation,
the Inside Directors will cause Corporation to conduct an
investigation, similar to that described in paragraph 9(b) above, of
Director's activities during the immediately preceding fiscal year and
to report the results of such investigation in writing to Director and
to Corporation's Board of Directors. Unless Corporation notifies
Director within180 days after the end of the applicable fiscal year
that the results of such investigation do not so permit, Director and
Director's personal representatives, heirs and assigns will be
automatically released (in the manner described in paragraph 9(b)
above) with respect to Director's actions during the fiscal year
covered by the report.
10. Rights Not Exclusive. The indemnification provided to Director under this
Agreement will be in addition to any indemnification provided to Director
by any law, agreement, Board resolution, provision of the Articles of
Incorporation or Bylaws of Corporation or otherwise.
11. Subrogation. Upon payment of any Indemnified Amount under this Agreement,
Corporation will be subrogated to the extent of such payment to all of
Director's rights of recovery therefor and Director will take all
reasonable actions requested by Corporation (at no cost or penalty to
Director) to secure Corporation's rights under this paragraph 11 including
executing documents.
12. Continuation of Indemnity. All of Corporation's obligations under this
Agreement will continue as long as Director is subject to any actual or
possible Covered Matter, notwithstanding Director's termination of service
as a director.
13. Amendments. Neither Corporation's Articles of Incorporation nor its Bylaws
will be changed to increase liability of directors or to limit Director's
indemnification. Any repeal or modification of Corporation's Articles of
Incorporation or Bylaws or any repeal or modification of the relevant
provisions of any applicable law will not in any way diminish any of
Director's rights or Corporation's obligations under this Agreement. This
Agreement cannot be amended except with the written consent of Corporation
and Director.
14. Governing Law. This Agreement will be governed by Michigan Law.
15. Successors.
(a) This Agreement will be binding upon and inure to the benefit of the
parties and their respective heirs, legal representatives and assigns.
(b) Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business or assets of the Corporation to assume all of
Corporation's obligations under this Agreement. Such assumption will
not release Corporation from its obligations under this Agreement.
16. Severability. The provisions of this Agreement will be deemed severable,
and if any part of any provision is held illegal, void or invalid under
applicable law, such provision may be changed to the extent reasonably
necessary to make the provision, as so changed, legal, valid and binding.
If any provision of this Agreement is held illegal, void or invalid in its
entirety, the remaining provisions of this Agreement will not in any way be
affected or impaired but will remain binding in accordance with their
terms.
17. Notices. All notices given under this Agreement will be in writing and
delivered either personally, by registered or certified mail (return
receipt requested, postage prepaid), by recognized overnight courier or by
telecopy (if promptly followed by a copy delivered personally, by
registered or certified mail or overnight courier), as follows:
If to Director: Richard R. Chrysler
8485 Hilton Road
Brighton, Michigan 48114
If to Corporation: JPE, Inc.
775 Technology Drive, Suite 200
Ann Arbor, Michigan 48108
Attention: Secretary
or to such other address as either party furnishes to the other in writing.
18. Counterparts: This Agreement may be signed in counterparts.
19. Subsidiaries: As used in this Agreement, the term "Subsidiary" means any
corporation in which Corporation owns a majority interest.
In witness whereof, the parties have executed this Agreement as of the date set
forth in the introductory paragraph of this Agreement.
JPE, INC.
a Michigan corporation
By: /s/ Richard P. Eidswick
---------------------------------
Richard P. Eidswick
Its: Chairman of the Board
/s/ Richard R. Chrysler ("Director")
--------------------------------------
Richard R. Chrysler
<PAGE>
D&O Insurance Schedule
----------------------
<TABLE>
<CAPTION>
Policy
Company Policy No. Amount Deductible/Co-Insurance Expiration Date
- ------- ---------- ------ ----------------------- ---------------
<S> <C> <C> <C> <C>
St. Paul Mercury 563CM0098 $10,000,000 $250,000 payable by Corporation in 10/26/99
Ins. Co. each securities claim and $150,000
all other claims; no retention
payable by insureds. Insurer
responsible for 100% of loss in
excess of retention amount.
Great American DFX0009459 $5,000,000 Policy is excess of amount payable 10/26/99
Insurance Co. by St. Paul Mercury Ins. Co. policy.
</TABLE>
November 23, 1998
VIA CERTIFIED MAIL
Re: Shareholder Agreement
Dear :
-----------
This is to advise you that, pursuant to Section 5 of the Shareholder Agreement
(the "Shareholder Agreement") dated November 29, 1992 between Dr. John
Psarouthakis and you, as holder of 75,500 shares of JPE, Inc. Common Stock, I am
terminating the Shareholder Agreement as of the date of this letter. This notice
is being sent to all shareholders who are a party to the Shareholder Agreement.
If you would like to have the Shareholder Agreement legend removed from your
stock certificate(s), please send your certificate(s), along with a copy of this
letter to the Company's transfer agent at the following address:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Mr. Isaac Kagan
Sincerely,
/s/ John Psarouthakis
February 5, 1999
Mr. James J. Fahrner
41445 Fawn Trail
Novi, Michigan
Re: Stay Bonus Agreement
Dear Jim:
Reference is made to that certain Stay Bonus Agreement dated as of September 21,
1998, by and between you and JPE, Inc. (the "Corporation"). Pursuant to Section
2(b)(1) and 2(c) of the Stay Bonus Agreement, you are entitled to receive a
payment of an installment of the Stay Bonus on December 31, 1998. As you know,
the Corporation is prohibited from paying such installment pursuant to the terms
of the October 1, 1998 Fourth Amendment to the Forbearance Agreement, dated
August 10, 1998, as amended, by and among the Corporation and its Banks.
Pursuant to our discussion, you have agreed to extend the date of receipt of
payment of the December 31, 1998 installment of the Stay Bonus until the
earliest date described in Section 2(b)(2), (3) or (4) or June 30, 1999. In
addition, you have agreed that, if the December 31, 1998 installment is paid by
June 30, 1999 and the remaining installments are paid as agreed on time to a
total of $175,000, then you will waive any claim for the balance under the Stay
Bonus Agreement. You also agree that this extension of the date for receipt of
the December 31, 1998 installment does not operate as a breach of the Stay Bonus
Agreement as long as all other terms of the Agreement are met.
Please confirm your agreement with the foregoing by signing the enclosed copy of
this letter and returning it to the undersigned. Thank you for your assistance.
Very truly yours,
JPE, Inc.
/s/ Richard R. Chrysler
--------------------------------
Richard R. Chrysler
President
Agreed this 5th day of February, 1999,
to be effective as of December 31, 1998
/s/ James J. Fahrner
- ---------------------------------------
James J. Fahrner
February 5, 1999
Ms. Karen A. Radtke
1918 Lloyd
Royal Oak, Michigan
Re: Stay Bonus Agreement
Dear Karen:
Reference is made to that certain Stay Bonus Agreement dated as of September 30,
1998, by and between you and JPE, Inc. (the "Corporation"). Pursuant to Section
2(b)(1) and 2(c) of the Stay Bonus Agreement, you are entitled to receive a
payment of an installment of the Stay Bonus in the amount of $41,666.67 on
December 31, 1998. As you know, the Corporation is prohibited from paying such
installment pursuant to the terms of the October 1, 1998 Fourth Amendment to the
Forbearance Agreement, dated August 10, 1998, as amended, by and among the
Corporation and its Banks.
Pursuant to our discussion, you have agreed to extend the date of receipt of
payment of the December 31, 1998 installment of the Stay Bonus until the
earliest date described in Section 2(b)(2), (3) or (4) or June 30, 1999. You
also agree that this extension of the date for receipt of the December 31, 1998
installment does not operate as a breach of the Stay Bonus Agreement as long as
all other terms of the Agreement are met.
Please confirm your agreement with the foregoing by signing the enclosed copy of
this letter and returning it to the undersigned. Thank you for your assistance.
Very truly yours,
JPE, Inc.
/s/ Richard R. Chrysler
--------------------------------
Richard R. Chrysler
President
Agreed this 5th day of February, 1999,
to be effective as of December 31, 1998
/s/ Karen A. Radtke
- ---------------------------------------
Karen A. Radtke
Subsidiaries of the Registrant
SUBSIDIARY STATE/PROVINCE OF INCORPORATION
API/JPE, Inc. Missouri
Brake, Axle and Tandem Company Canada
Inc., a subsidiary of Dayton Parts, Inc. Alberta, Canada
Dayton Parts, Inc. Michigan
Fastener Acquisition, Inc. Michigan
JPE Canada Inc. Ontario, Canada
JPE Finishing, Inc. Ohio
Plastic Trim, Inc. Ohio
SAC Corporation Michigan
Starboard Industries, Inc., Michigan
a subsidiary of SAC Corporation
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
JPE, Inc. on Form S-8 (File Nos. 33-86060, 33-93326, and 33-93328), of our
report dated April 1, 1999, on our audits of the consolidated financial
statements and financial statement schedule of JPE, Inc. as of December 31, 1998
and 1997, and for the years ended December 31, 1998, 1997 and 1996 which report
is included in this Annual Report on Form 10-K.
/s/ PRICEWATERHOUSECOOPERS LLP
April 12, 1999
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