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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, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 0-22580
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
INCORPORATED IN MICHIGAN IRS EMPLOYER IDENTIFICATION NUMBER 38-2958730
30400 TELEGRAPH ROAD, SUITE 401, BINGHAM FARMS, MI 48025
(248) 723-5531
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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
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Based on the closing price on March 15, 2000, the aggregate market value of the
Registrant's Common Stock held by non-affiliates of the Registrant was
approximately $1,725,818.
The number of shares of the Registrant's Common Stock outstanding at March 15,
2000 was 14,043,600.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant intends to file with the Securities and Exchange Commission a
definitive Proxy Statement pursuant to Regulation 14A or Information Statement
pursuant to Regulation 14C of the Securities Exchange Act of 1934 within 120
days of the close of its year ended December 31, 1999, portions of which
document shall be deemed to be incorporated by reference in Part I and Part III
of this Annual Report on Form 10-K from the date such document is filed.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
PART I
<S> <C>
1. Business 3
2. Properties 11
3. Legal Proceedings 11
4. Submission of Matters to a Vote of Security Holders 11
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 12
6. Selected Financial Data 13
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
7A. Quantitative and Qualitative Disclosures About Market Risk 20
8. Financial Statements and Supplementary Data 21
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 49
PART III
10. Directors and Executive Officers of the Registrant 50
11. Executive Compensation 50
12. Security Ownership of Certain Beneficial Owners and Management 50
13. Certain Relationships and Related Transactions 50
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 51
Signatures 52
FINANCIAL STATEMENT SCHEDULES
JPE, INC. (d/b/a ASCET INC and ASC Exterior Technologies) and Subsidiary Financial 53
Statement Schedule
Exhibits Index 55
</TABLE>
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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 Original Equipment Manufacturer's ("OEM") programs;
(iii) cyclical consumer demand for new vehicles; (iv) competition in pricing and
new product development from larger companies with substantial resources; (v)
the concentration of a substantial percentage of the Company's Sales with a few
major OEM customers; and (vi) labor relations at the Company and its customers
and suppliers.
GENERAL AND RECENT INFORMATION
JPE, Inc. (together with its subsidiaries, the "Company"), through its five
operating subsidiaries in existence as of January 1, 1999, manufactures and
distributes automotive and truck components to ("OEMs") and to the aftermarket.
During 1998 and through May 1999, the Company experienced financial difficulty
resulting in a strategy to sell certain subsidiaries, obtain additional capital
and restructure its debt.
During the period from August, 1998 through May, 1999, three of the Company's
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"), and the parent
company of all five operating subsidiaries, JPE, Inc., continued to operate
without court protection. 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 a total sales price of $11.6 million.
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On February 8, 1999, under court order, the Company sold substantially all the
assets of JPEC for approximately Cdn. $21.0 million, to the Ventra Group, Inc.
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 on February 8, 1999. JPEC had no assets to pay its
unsecured debt and, as such, JPEC was dissolved. The Company had provided an
unsecured guarantee not to exceed Cdn. $2.0 million for a portion of the JPEC
debt to the Canadian Bank. The proceeds of the sale were not sufficient to fully
pay such secured lender, and the Company was indebted to such lender under this
guarantee which was settled for Cnd. $86 thousand on October 25, 1999, pursuant
to an agreement dated September 24, 1999. In addition, the agreement required
the payment of approximately Cnd. $93 thousand by PTI, representing the
satisfaction of 30% of amounts payable to JPEC for unsecured claims, together
with the assignment and transfer to the Canadian Bank of all royalties payable
by the Ventra Group for the use of patented technology owned by the Company.
On March 26, 1999, the Company sold the stock of IAF for approximately $20
million. As part of this transaction, certain vendors of IAF agreed to accept a
30% payment for past due payables resulting in a gain on debt forgiveness of $2
million. The Company recognized a loss of approximately $2.5 million as a result
of the stock sale.
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 was contingent on the consummation of an investment in the Company by
ASC Holdings LLC ("ASC") and Kojaian Holdings LLC ("Kojaian"), as described
below, which occurred on May 27, 1999. As a result, these reorganization plans
were confirmed by the Bankruptcy Court, and the unsecured creditors of PTI and
Starboard forgave 70% of their claims, totaling approximately $4.1 million. In
addition, on December 8, 1999, the Bankruptcy Court entered a Final Decree
discharging Starboard from bankruptcy proceedings. PTI's discharge from
bankruptcy proceedings will occur after the settlement of two outstanding
claims, which the Company fully expects to resolve during the second quarter of
2000.
On May 27, 1999, in accordance with the terms of an Investment Agreement among
JPE, Inc., and ASC and Kojaian dated April 28, 1999 (the "Investment Agreement")
the Company issued 1,952,352.19 shares of First Series Preferred Shares in equal
proportions to ASC and Kojaian for an aggregate purchase price of $16,413,274
payable in cash. Each First Series Preferred Share possesses voting rights equal
to 50 Common Shares of the Company. In addition, the Investment Agreement
provided that the shareholders of record of JPE, Inc. common stock on June 11,
1999 were entitled to receive warrants to purchase First Series Preferred Shares
(the "Warrants"). Each holder of common stock received .075 Warrants for each
share of common stock held on the record date, and each full Warrant entitles
the holder to purchase one First Series Preferred Share. The Warrants were
distributed as a dividend to such shareholders on June 12, 1999. The Warrants
carry an initial exercise price of $9.99 per First Series Preferred Share,
subject to price adjustments based on the Final Actual EBITDA (as defined in the
Investment Agreement) and the cost of certain environmental remediation for the
24 month period ending after the acquisition date. The Warrants are exercisable
for the 90 day period following the providing of notice by the Company to the
holders thereof of the Final Actual EBITDA.
In addition, on May 27, 1999 ASC and Kojaian (in equal proportions) subscribed
and paid for 9,441,420 newly issued shares of common stock of JPE, Inc. for an
aggregate purchase price of $1,986,726 payable in cash. These newly issued
shares of common stock were distributed to ASC and Kojaian on June 12, 1999.
As a precondition to consummation of the above transaction, the Company's then
existing bank lenders (the "Bank Group") agreed on May 27, 1999 to a $16.5
million forgiveness of the Company's existing bank debt. In consideration for
the debt forgiveness and pursuant to the Investment Agreement, the Company
issued 20,650.115 First Series Preferred Shares to the Bank Group on May 27,
1999 for $1,000 of consideration. In addition, the Company granted the Bank
Group 77,437.937 Warrants (which Warrants contain the same terms and conditions
as granted to the shareholders of common stock of the Company except the
exercise price per First Series Preferred Share is approximately $8.16).
The immediate effect of these transactions transferred (a) approximately 47.5%
of the voting securities of the Company to Kojaian, (b) approximately 47.5% of
the voting securities of the Company to ASC, and (c) approximately 1% of the
voting securities of the Company to the Bank Group. This transaction is
hereafter referred to as the "Investment Transaction." The remaining amount of
the voting securities continue to be held by the public
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shareholders of the Company. Thus, as of December 29, 1999, ASC and Kojaian
together beneficially owned approximately 95% of the voting securities of the
Company, and if all of the Warrants were exercised, would have beneficially
owned approximately 80% of the voting securities of the Company.
Pursuant to the terms of a separate letter agreement (the "Letter Agreement")
dated August 30, 1999 among ASC and the sole member of ASC (Heinz C. Prechter)
and Kojaian and the members of Kojaian (Mike Kojaian and C. Michael Kojaian),
Heinz C. Prechter agreed to purchase (through ASC or otherwise) 4,720,710 common
shares and 976,176.095 First Series Preferred Shares of JPE, Inc. from Kojaian
for $9.2 million. The Letter Agreement was subject to the conditions precedent
of (i) obtaining the consent of Comerica Bank, the Company's lender, and (ii)
the termination of the applicable waiting period under the Hart-Scott-Rodino
Act. On December 30, 1999, the last of the conditions precedent was fulfilled,
and on such date the Agreement was consummated.
As a result, ASC directly and Heinz C. Prechter, indirectly through ASC, own a
total of 9,441,420 common shares and 1,952,352.19 First Series Preferred Shares
of JPE, Inc., constituting approximately 95% of the beneficial interests of JPE,
Inc.
After these transactions, the Company owns three operating subsidiaries, DPI,
PTI and Starboard, with 1999 annual revenues of approximately $157 million and
total assets of approximately $79 million. The Company is now operating under
the assumed names of ASCET INC and ASC Exterior Technologies and is hereinafter
referred to as the Successor Company. PTI now operates under the assumed names
of ASC Exterior Technologies - Dayton and ASC Exterior Technologies -
Beavercreek. SBI now operates under the assumed name of ASC Exterior
Technologies - East Tawas. New financing in the amount of $56.3 million was
arranged with Comerica Bank to pay off the indebtedness of the Company owed to
the Bank Group (other than the debt forgiveness described above) and provide for
current working capital needs.
The following table sets forth information regarding the Company's sales for
only the operating subsidiaries it owned as of December 31, 1999 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,
-----------------------
1997 1998(2) 1999(2)
---- ------ -------
<S> <C> <C> <C>
OEM (Original Equipment):
Trim Products..................................... 56.2% 55.4% 64.4%
Aftermarket (truck and automotive
replacement parts):................................ 43.8% 44.6% 35.6%
------ ------ ------
100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
(1) See also Note 12, 14, 16, and 19 to the Notes to Consolidated Financial
Statements for additional operating subsidiary information.
(2) Includes sales of PTI and Starboard which were carried on the equity
method from September 15, 1998 through May 27, 1999.
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Original Equipment (OEM)
The Company's OEM group consisted of four operations during the first quarter of
1999: 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
manufactured, painted and supplied plastic injection-molded exterior trim.
Starboard, PTI and JPEC supply parts directly to OEMs and to suppliers which
sell to OEMs ("Tier 1 suppliers") in automotive and light truck applications.
These three companies, including JPEC prior to its divestiture on February 25,
1999, represent the Trim Products segment.
IAF manufactured and supplied decorative, specialty and standard wheel nuts for
domestic OEMs and certain Japanese transplants for use on automobiles and light
trucks. In addition, IAF used its proprietary process to manufacture stainless
steel capped wheel nuts. This business represented the Fastener segment prior to
its divestiture on March 26, 1999.
Aftermarket
The Company's aftermarket group consisted of DPI in 1999. This business
represents 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. Approximately 35% of DPI's
sales are related to products 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."
During most of 1998, Allparts was part of our Truck and Automotive Replacement
Parts segment. Allparts distributed 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. During second half of 1999, PTI consolidated certain labor intensive
finishing operations in-house, which were previously performed by third-party
subcontractors.
There is no discussion of the manufacturing operations of JPEC and IAF as these
businesses have been sold during 1999.
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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.
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, 1999, 64.4% of the
Company's net sales (for only the operating subsidiaries the Company owned as of
December 31, 1999) were to OEM or Tier 1 customers. Net sales (for only the
operating subsidiaries the Company owned as of December 31, 1999) to significant
customers for the year ending December 31, 1999 were as follows:
<TABLE>
<CAPTION>
<S> <C>
General Motors 34.4%
DaimlerChrysler Corporation 23.6%
</TABLE>
No other OEM or Tier 1 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
2000-2004 model years. The Company has entered into negotiations with its
exclusive sales agency to fully integrate their personnel into the Company's
operations, with such integration anticipated later in 2000.
Because the Company's OEM business supplies its customers on a "just-in-time"
basis and ships its products when orders are received in the aftermarket
business, it does not currently maintain a backlog.
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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.
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, 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.
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Aftermarket
The truck parts aftermarket in which DPI operates is highly competitive and has
numerous competitors. However, the product line of DPI is narrow and focuses on
specific markets. Some of the Company's more significant competitors are
Triangle Auto Spring Co. and Euclid/Meritor. 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 had
temporarily discontinued the sale of these parts. These parts historically
represented approximately $10 million of annual sales. DPI has located a
replacement source for these parts and began reselling medium duty brake drums
in the first quarter of year 2000.
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. Starboard and the Michigan Department of Environmental Quality have
engaged in discussions regarding groundwater contamination at one of Starboard's
East Tawas, Michigan facilities. While this matter is still pending, the Company
believes that the resolution of this issue would not result in a material
adverse effect on the Company. 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
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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.
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.
EMPLOYEES
The Company had a total of approximately 1,000 employees on December 31, 1999,
nine of which were located in Canada. Approximately 374 employees were
represented by labor unions, at the Company's PTI operations. Employees at PTI's
Jamestown operations previously voted to form a local under the United
Electrical, Radio & Machine Workers of America, and negotiations on the initial
contract began in early 1999. During May 1999, the Company gave formal notice
under the WARN Act of 1989 to the employees at PTI's Jamestown facility that
operations at that location would be terminated. Thereafter, the Jamestown
operations were consolidated into the Company's larger Beavercreek and East
Tawas facilities and an agreement was reached concerning severance and
continuation of medical benefits. No collective bargaining agreement was ever
finalized. As of December 31, 1999, the Jamestown facility is used only for
warehousing and limited light packaging activities. The Company anticipates this
will continue through April 2000 or until the Jamestown property is sold. The
Jamestown property is being carried on the books of the Company at its current
fair market value.
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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 Company's existing financing arrangement with Comerica Bank:
<TABLE>
<CAPTION>
Building Size
Primary Use (Approximate Owned
of the Facility Location Square Feet) or Leased Segment
--------------- -------- ------------ --------- -------
<S> <C> <C> <C> <C>
Corporate headquarters Bingham Farms, MI 2,000 Leased Corporate
Corporate headquarters (vacant) 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
Distribution and administrative Edmonton, Canada 5,000 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 filed Plans of Reorganization with the United States
Bankruptcy Court, and they emerged from Chapter 11 bankruptcy proceedings
concurrent with the closing of the Investment Transaction with ASC and Kojaian
on May 27, 1999. (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 on February 8,
1999 and, as such, will be dissolved by the court.
On December 8, 1999, the Bankruptcy Court entered a Final Decree discharging
Starboard from bankruptcy proceedings. PTI's discharge from bankruptcy
proceedings will occur after the settlement of two outstanding claims, which the
Company fully expects to resolve during the second quarter of 2000.
Other than those 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.
From time to time, we are subject to claims or litigation incidental to our
business. We are not currently involved in any legal proceedings that indirectly
or in the aggregate, are expected to have a material adverse effect on our
business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
11
<PAGE> 12
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 Market(SM) under the symbol "JPEI." From that
date forward 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.
<TABLE>
<CAPTION>
MARKET PRICE
------------------------------------------------------------
QUARTER 1998 1999
------- ---- ----
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First $6.25 $4.19 $ .81 $ .26
Second 4.88 1.00 1.07 .30
Third 2.75 0.31 .84 .06
Fourth 1.31 0.16 .28 .03
</TABLE>
On March 15, 2000, there were approximately 126 holders of record of the
Company's Common Stock.
The Company has never declared or paid any dividends on shares of Common Stock
or First Series Preferred Shares and has no intention of declaring or paying any
dividends on shares of Common Stock or First Series Preferred Shares in the
foreseeable future. The Company intends to retain its earnings, if any, for the
development of its business.
12
<PAGE> 13
ITEM 6.
SELECTED FINANCIAL DATA
The selected financial data presented below, as of and for the periods ended
December 31, 1995, 1996, 1997, 1998, May 27,1999 and December 31, 1999, are
derived from the Company's audited financial statements, 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 1999
presentation.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------------------------------
SUCCESSOR
COMPANY
JANUARY 1, ---------
1999, MAY 28,
THROUGH 1999
YEARS ENDED DECEMBER 31, MAY 27, 1999 THROUGH
------------------------ RESTATED DECEMBER 31,
1995 1996 1997 1998(2) (NOTE 1)(2) 1999
---- ---- ---- ---- ----- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Income statement data:
Net sales $142,476 $167,648 $247,539 $171,780 $24,044 $88,081
Cost of goods sold 111,060 134,859 211,120 151,802 17,716 73,448
-------- -------- -------- -------- ------- -------
Gross profit 31,416 32,789 36,419 19,978 6,328 14,633
Selling, general and administrative
expenses 20,479 22,250 26,983 25,583 5,538 12,137
Other expense (income) -- -- 618 1,886 682 (235)
Charge for subsidiaries under
court ordered protection -- -- -- 28,490 -- --
Discontinuance of stamping operations -- -- 2,164 -- -- --
Loss on sale of subsidiary -- -- -- 5,190 -- --
Affiliate companies' (income) loss -- -- -- 1,713 (8,680) --
Interest expense, net 6,456 7,225 10,464 13,085 2,859 2,766
-------- -------- -------- -------- ------- -------
Income (loss) from continuing
operations before income taxes
and extraordinary item 4,481 3,314 (3,810) (55,969) 5,929 (35)
Income tax expense (benefit) 2,780 203 (194) (1,035) 104 75
-------- -------- -------- -------- ------- -------
Income (loss) from continuing operations 1,701 3,111 (3,616) (54,934) 5,825 (110)
before extraordinary item
Discontinued operations:
Income (loss) from operations of IAF 2,748 (400) 1,473 1,364 214 --
Charge for impairment of goodwill -- (4,300) -- -- -- --
Loss on sale of stock of IAF -- -- -- -- (2,321) --
Extraordinary Item:
Forgiveness of debt and liabilities -- -- -- -- 18,272 --
-------- -------- -------- -------- ------- -------
Net income (loss) 4,449 (1,589) (2,143) (53,570) 21,990 (110)
</TABLE>
13
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------------------------------- SUCCESSOR
COMPANY
JANUARY 1, ---------
1999 MAY 28,
THROUGH 1999
YEARS ENDED DECEMBER 31, MAY 27, 1999 THROUGH
------------------------ RESTATED DECEMBER 31,
1995 1996 1997 1998(2) (NOTE 1)(2) 1999
---- ---- ---- ---- --------- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Other comprehensive expense:
Foreign currency translation adjustment -- -- (271) (65) -- $ --
-------- -------- -------- -------- -------- --------
Comprehensive income (loss) $ 4,449 $ (1,589) $ (2,414) $(53,635) $ 21,990 $ (110)
======== ======== ======== ======== ======== ========
Basic earnings (loss) per share from continuing
operations before extraordinary item:
Common Shares $ .42 $ .68 $ (.79) $ (11.94) $ 1.27 $ --
First Series Preferred Shares -- -- -- -- -- (0.05)
Earnings (loss) per share from continuing operations
before extraordinary item assuming dilution:
Common Shares $ .42 $ .68 $ (.79) $ (11.94) $ 1.25 $ --
First Series Preferred Shares -- -- -- -- -- (0.05)
Basic earnings (loss) per share:
Common Shares $ 1.09 $ (.35) $ (.47) $ (11.64) $ 4.78 $ --
First Series Preferred Shares -- -- -- -- -- (0.05)
Earnings (loss) per share assuming dilution
Common Shares $ 1.09 $ (.35) $ (.47) $ (11.64) $ 4.73 $ --
First Series Preferred Shares -- -- -- -- -- (0.05)
Balance sheet data at end of period:
Working capital (deficit) $ 39,955 $ 42,138 $(59,181)(1) $(62,815)(1) $(50,712)(1) $(12,805)(1)
Total assets 145,229 174,725 193,215 76,974 79,498 78,905
Long-term debt (including current
maturities) 83,375 110,001 9,272(1) 50 46 246
Total liabilities 108,482 138,947 159,721 97,115 77,084 59,753
Total shareholders' equity (deficit) 36,747 35,778 33,494 (20,141) 2,416 19,152
</TABLE>
1. Working capital and long-term debt reflect the classification of the
Company's outstanding debt as current in the amounts of $103,875, $84,492,
$66,261 and $45,877 at December 31, 1997, December 31, 1998, May 27, 1999,
and December 31, 1999 respectively. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Liquidity
and Capital Resources."
2. Effective in 1998, and through the date of the Investment Transaction (as
defined below), May 27, 1999, 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 in the
balance sheet caption "Investment in Affiliate Companies" which totaled
$14,661 at December 31, 1998, and $37,561 as of May 27, 1999, the date of
the Investment Transaction. The detail of assets and liabilities are shown
in Note 3 to the Consolidated Financial Statements. The results of
operations during the bankruptcy period are shown in the caption Loss
(income) in affiliate companies.
14
<PAGE> 15
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
Managements' discussion and analysis of the results of operations for the year
ended December 31, 1999 compared to the year ended December 31, 1998 and for the
year ended December 31, 1998 compared to the year ended December 31, 1997 has
been structured to compare the results of operations related only to the
operating locations that remain part of ASCET INC at December 31, 1999. To
facilitate this discussion, the information shown below makes the following
adjustments to the Company's income (loss) from continuing operations before
income taxes and extraordindary item:(1) the sale of Allparts, Inc. in October
1998, (2) the sale of JPE Canada Inc. in February 1999, and (3) the
consolidation of entities that were previously accounted for under the equity
method (Plastic Trim, Inc. and Starboard Industries, Inc., from September 16,
1998 through May 27, 1999).
RESULTS OF OPERATIONS FOR ASCET OPERATING LOCATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDESSOR SUCCESSOR
COMPANY COMPANY CONSOLIDATION OF
AS REPORTED ON AS REPORTED ON ENTITIES PREVIOUSLY ASCET
FACE OF FINANCIAL FACE OF FINANCIAL DIVESTED CARRIED ON EQUITY OPERATING
STATEMENT STATEMENT OPERATIONS (2) METHOD (3) LOCATIONS
--------- --------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 24,044 $ 88,081 $ -- $ 44,781 $ 156,906
Cost of goods sold 17,716 73,448 -- 38,001 129,165
--------- --------- --------- --------- ---------
Gross profit 6,328 14,633 -- 6,780 27,741
Selling, general and
administrative expenses 5,538 12,137 -- 3,163 20,838
Other expense (income) 682 (235) -- 804 1,251
Affiliate companies'
(income) loss (8,680) -- 2,620 6,060 --
Interest expense, net 2,859 2,766 -- 546 6,171
--------- --------- --------- --------- ---------
Income (loss) from continuing
operations before income
taxes and extraordinary item $ 5,929 $ (35) $ (2,620) $ (3,793) $ (519)
========= ========= ========= ========= =========
</TABLE>
15
<PAGE> 16
RESULTS OF OPERATIONS FOR ASCET OPERATING LOCATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY CONSOLIDATION OF
AS REPORTED ON ENTITIES PREVIOUSLY ASCET
FACE OF FINANCIAL DIVESTED CARRIED ON EQUITY OPERATING
STATEMENT OPERATIONS (1) &(2) METHOD (3) LOCATIONS
--------- ------------------- ---------- ---------
<S> <C> <C> <C> <C>
Net sales $ 171,780 $ (42,168) $ 29,080 $ 158,692
Cost of goods sold 151,802 (41,453) 26,165 136,514
--------- --------- --------- ---------
Gross profit 19,978 (715) 2,915 22,178
Selling, general and
administrative expenses 25,583 (4,536) 2,264 23,311
Other expense (income) 1,886 (1,040) 723 1,569
Affiliate companies'
(income) loss 1,713 (1,173) (540) --
Charges for subsidiaries
under court ordered
protection 28,490 726 -- 29,216
Loss on sales of subsidiary 5,190 (5,190) -- --
Interest expense, net 13,085 (1,522) 400 11,963
--------- --------- --------- ---------
Income (loss) from continuing
operations before income
taxes and extraordinary
item $ (55,969) $ 12,020 $ 68 $ (43,881)
========= ========= ========= =========
</TABLE>
RESULTS OF OPERATIONS FOR ASCET OPERATING LOCATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
AS REPORTED ON ASCET
FACE OF FINANCIAL DIVESTED OPERATING
STATEMENT OPERATIONS (1) &(2) LOCATIONS
--------- ------------------- ---------
<S> <C> <C> <C>
Net sales $ 247,539 $ (79,110) $ 168,429
Cost of goods sold 211,120 (72,574) 138,546
--------- --------- ---------
Gross profit 36,419 (6,536) 29,883
Selling, general and
administrative expenses 26,983 (5,825) 21,158
Other expense (income) 618 (469) 149
Affiliate companies'
(income) loss -- -- --
Discontinuance of
stamping operations 2,164 -- 2,164
Interest expense, net 10,464 (1,688) 8,776
--------- --------- ---------
Income (loss) from continuing
operations before income taxes
and extraordinary item $ (3,810) $ 1,446 $ (2,364)
========= ========= =========
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net sales for business segments comprised of ASCET operating locations for the
years ended December 31, 1999 and 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 $ Change % Change
---- ---- -------- --------
<S> <C> <C> <C> <C>
Trim Products $101,086 $ 87,962 $ 13,124 14.9 %
Replacement Parts 55,820 70,730 (14,910) (21.1)
-------- -------- --------- ------
Total $156,906 $158,692 $ (1,786) (1.1)%
</TABLE>
16
<PAGE> 17
The increase in Trim Products sales is mainly due to the negative effects of a
strike at General Motors in 1998, additional sales related to new programs that
began in the second half of 1998 and certain price increases. The decrease in
Replacement Parts sales is attributable to the loss of heavy-duty brake drum
business and lost customers due to concern over the Trim Products bankruptcy
filings.
Gross profit for business segments comprised of ASCET operating locations for
the years ended December 31, 1999 and 1998 was as follows (in thousands):
<TABLE>
<CAPTION>
1999 % Net Sales 1998 % Net Sales
---- ----------- ---- -----------
<S> <C> <C> <C> <C>
Trim Products $13,359 13.2% $ 5,133 5.8%
Replacement Parts 14,382 25.8 17,045 24.1
------- ---- ------- ----
Total $27,741 17.7 $22,178 14.0%
</TABLE>
Trim Products 1999 gross profit was $8,226 thousand higher than 1998 gross
profit. Trim Products gross profit as a percentage of net sales increased from
5.8% in 1998 to 13.2% in 1999. Trim Products increase in gross profit as a
percentage of net sales is the result of a customer mix change at Starboard,
lower scrap rates at PTI and the effect that the GM strike in 1998 had on
absorbing fixed overhead. Replacement Parts gross profit as a percentage of net
sales increased from 24.1% in 1998 to 25.8% in 1999. This increase is primarily
the result of the elimination of the heavy-duty drum business which was a low
margin product. Replacements Parts 1998 gross profit was $2,663 thousand or
15.6% lower than 1998 gross profit due to the lower sales levels described
previously.
Selling, general and administrative expenses (SG&A) for business segments
comprised of ASCET operating locations for the years ended December 31, 1999 and
1998 were as follows (in thousands):
<TABLE>
<CAPTION>
1999 % Net Sales 1998 % Net Sales
---- ----------- ---- -----------
<S> <C> <C> <C> <C>
Trim Product $ 6,354 6.3% $ 7,249 8.2%
Replacement Parts 10,976 19.7 12,821 18.1
Corporate 3,508 2.2 3,241 2.0
------- ---- ------- ----
Total $20,838 13.3% $23,311 14.7%
</TABLE>
1999 Trim Products SG&A expenses were $895 thousand or 12.3% lower than 1998
levels. This decrease is primarily attributable to higher 1998 SG&A expenses
caused by an adjustment of approximately $1.5 million related to price
concessions during bankruptcy proceedings. 1999 Trim Products SG&A expense as a
percent of Trim Products net sales was 6.3%, compared to 8.2% for the 1998
period. This improvement is due to the lower level of SG&A expense and increased
sales described above. 1999 Replacement Parts SG&A expenses were $1,845 thousand
or 14.4% lower than 1998 SG&A expenses. The lower Replacement Parts SG&A expense
is the result of cost cutting efforts and headcount reductions. Replacement
Parts SG&A expense as a percentage of Replacement Parts net sales increased from
18.1% in 1998 to 19.7% in 1999. This increase is primarily due to lower sales
volumes. 1999 Corporate SG&A expenses increased $267 thousand or 8.2% over 1998
levels. This increase is primarily due to higher levels, approximately $260
thousand, of professional services related to corporate acquisition and
development activity and approximately $425 thousand of separation expense
related to one of the companies former executives; all of these expenses were
recorded in the fourth quarter of 1999. Corporate SG&A expense as a percentage
of total net sales increased from 2.0% in 1998 to 2.2% in 1999.
ASCET operating locations other expense was $1,251 thousand for the year ended
December 31, 1999 compared to $1,569 thousand for the year ended December 31,
1998. These expenses decreased slightly due to lower costs associated with
bankruptcy filings and fees to legal, professional and financial advisors.
Interest expense related to ASCET operating locations for the year ended
December 31, 1999 was $6,171 thousand compared to $11,963 thousand for the same
period in 1998. The lower level of interest expense is mainly due to lower
outstanding debt in 1999 and higher interest rates in 1998 caused by default on
the U.S. bank debt.
Income tax expense for the periods January 1, 1999 through May 27, 1999 and May
28, 1999 through December 31, 1999 was $104 thousand and $75 thousand,
respectively. This relates primarily to state income tax expense and U.S.
federal tax associated with the Company's inability to deduct certain bankruptcy
costs for U.S. Federal tax purposes. This compares to a tax benefit of $1,035
thousand for the year ended December 31, 1998, which reflects the Company's
reversal of prior years' deferred tax liabilities no longer necessary. The
Company has sustained net operating losses of approximately $23 million for the
year ended December 31, 1998 and the period January 1, 1999 through May 27,
1999, of which approximately $22 million was absorbed by debt discharge income.
The Company has provided a valuation reserve of $4.3 million against net
deferred taxes at December 31, 1999.
17
<PAGE> 18
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net sales for business segments comprised of ASCET operating locations for the
years ended December 31, 1998 and 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 $ Change % Change
---- ---- -------- --------
<S> <C> <C> <C> <C>
Trim Products $ 87,962 $ 94,586 $ (6,624) (7.0)%
Replacement Parts 70,730 73,843 (3,113) (4.2)%
-------- -------- --------- -----
Total $158,692 $168,429 $ (9,737) (5.8)%
</TABLE>
The decrease in Trim Products sales is mainly due to the discontinuance of
stamping operations at Starboard and the negative effects of a strike at General
Motors in 1998. These items were partially offset by additional sales related to
new programs that began in the second half of 1998. The decrease in Replacement
Parts sales is attributable to lost customers due to concern over the Trim Group
bankruptcy filings.
Gross profit for business segments comprised of ASCET operating locations for
the years ended December 31, 1998 and 1997 was as follows (in thousands):
<TABLE>
<CAPTION>
1998 % Net Sales 1997 % Net Sales
---- ----------- ---- -----------
<S> <C> <C> <C> <C>
Trim Products $ 5,133 5.8% $11,215 11.9%
Replacement Parts 17,045 24.1% 18,668 25.3%
------- ----- ------- -----
Total $22,178 14.0% $29,883 17.7%
</TABLE>
Trim Products 1998 gross profit was $6,082 thousand, or 54.2% lower than 1997
gross profit. Trim Products gross profit as a percentage of net sales decreased
from 11.9% in 1997 to 5.8% in 1998. Trim Products dollar decrease in gross
profit and decrease in gross profit as a percentage of net sales are the result
of production inefficiencies related to the launch of the GMT800 program at PTI
and a product mix change at PTI (higher margin jobs were replaced with lower
margin jobs). In addition, PTI had a write-down of $1.8 million of inventory to
its net realizable value. Replacement Parts gross profit as a percentage of net
sales decreased from 25.3% in 1997 to 24.1% in 1998. This decrease is the result
of lower fixed cost absorption due to lower sales volume, production increases
related to a new manufacturing process and general pricing pressures in the
truck replacement parts market.
Selling, general and administrative expenses (SG&A) for business segments
comprised of ASCET operating locations for the years ended December 31, 1998 and
1997 were as follows (in thousands):
<TABLE>
<CAPTION>
1998 % Net Sales 1997 % Net Sales
---- ----------- ---- -----------
<S> <C> <C> <C> <C>
Trim Products $ 7,249 8.2% $ 6,682 7.1%
Replacement Parts 12,821 18.1 11,785 16.0%
Corporate 3,241 2.0 2,691 1.6%
------- ---- ------- -----
Total $23,311 14.7% $21,158 12.6%
</TABLE>
1998 Trim Products SG&A expenses were $567 thousand, or 8.5% higher than 1997
levels. This increase is primarily attributable to an adjustment of
approximately $1.5 million related to price concessions during the bankruptcy
proceeding. 1998 Replacement Parts SG&A expenses were $1,036 thousand, or 8.8%
higher than 1997 SG&A expenses. The increase in Replacement Parts SG&A expense
is the result of additional customer servicing cost related to the BATCO product
lines acquired in April 1997, additional bad debt expense and a settlement of a
large worker's compensation claim. 1998 Corporate SG&A expenses increased $550
thousand, or 20.4% over 1997 levels. This increase is primarily due to higher
levels of professional services related to the bankruptcy proceedings.
ASCET operating locations other expense was $1,569 thousand for the year ended
December 31, 1998 compared to other expense of $149 thousand for the year ended
December 31, 1997. ASCET operating locations other expense for the year ended
December 31, 1998 is mainly comprised of costs associated with bankruptcy
filings and fees to legal, professional and financial advisors.
Interest expense related to ASCET operating locations for the year ended
December 31, 1998 was $11,963 thousand compared to $8,776 thousand for the same
period in 1997. The higher level of interest expense is mainly due to higher
interest rates caused by the default on the U.S. bank debt.
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
18
<PAGE> 19
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 thousand.
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 thousand resulting in a net loss on the sale of $5.2 million.
Income tax benefit for the year ended December 31, 1998 was $1.0 million
compared to $194 thousand 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 future gains
of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Since May 27, 1999, the Company's principal source of liquidity is a $56.3
million demand loan from Comerica Bank (the "Comerica Facility"), which is
available to fund daily working capital needs in excess of internally generated
funds. Prior to May 27, 1999, the Company's source of liquidity was a
Forbearance Agreement dated August 10, 1998 (as amended August 31, 1998,
September 4, 1998, September 16, 1998, October 1, 1998, December 1, 1998, and
March 26, 1999), and debtor-in possession financing by GMAC Business Credit, LLC
for the Company's subsidiaries, PTI and Starboard. Borrowings under both the
Forbearance Agreement and debtor-in-possession financing were repaid May 27,
1999 in connection with the Investment Transaction.
In connection with the Comerica Facility, the Company has executed three
promissory notes in the amounts of $6.3 million, $20 million, and $30 million,
each providing for borrowing options at either a prime based rate plus 1/2% to
1% or Eurodollar plus 3% to 3 1/2%. Eurodollar borrowings for 1 to 6 months are
permitted at the option of the Company. Advances under the $30 million demand
note are subject to a borrowing base restriction equal to 80% of eligible trade
receivables and the lesser of 50% of eligible inventory or $9 million. There are
no restrictions on advances under either the $6.3 million or $20 million demand
notes. Borrowings under the three promissory notes are secured by the Company's
cash deposits, trade receivables, inventory, and personal property, as well as a
guaranty from ASC Holdings LLC. The source of collateral for the ASC Holdings
LLC guaranty is the common shares and First Series Preferred Shares of JPE, Inc.
held by ASC Holdings LLC.
Effective July 1, 1999, the $6.3 million demand note requires monthly principal
payments of $131 thousand. Beginning November 15, 1999, the $20 million demand
note requires quarterly principal payments equal to 75% of the preceding
quarter's excess cash flow, defined as after-tax net income, less principal note
payments, plus depreciation and amortization expense. Required covenants under
the Comerica Facility are the submissions of quarterly and annual financial
statements and projections within a prescribed time and a monthly borrowing
base. There are no financial covenants required by the terms of the Comerica
Facility.
The aggregate funds drawn under the Comerica Facility as of May 27, 1999, the
date of the consummation of the Investment Agreement, was $51.7 million. Current
borrowings at December 31, 1999, are $45.9 million. At December 31, 1999, unused
borrowing capacity under the Company's $30 million demand note was $1.5 million.
The Company believes the Comerica Facility is adequate to provide it with
monthly short term working capital needs, with the exception of certain cyclical
months affected by a reduction in operations brought upon by shutdowns for model
changeovers at certain OEM customers, such as General Motors Corporation. In
addition, the Company is able to supplement any working capital needs not
satisfied by the Comerica Facility through a $3 million subordinated demand note
dated August 23, 1999 from ASC Incorporated, an affiliate of ASC Holdings LLC.
Advances are permitted up to $3 million and are unsecured and subordinate to
advances made under the Comerica Facility. Interest accrues at prime plus 1 1/2%
and is payable quarterly. As of December 31, 1999 there were no advances made
under this note.
19
<PAGE> 20
Due to their demand nature, all of the notes described above have been
classified as short-term debt on the Company's balance sheet. As of December 31,
1999, in measuring working capital, the Company's Current Liabilities exceed
Current Assets by $12.8 million. Excluding the amount outstanding under the
Comerica Facility, working capital at December 31, 1999 would have been $33.1
million.
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. During the second and fourth quarter of 1999, the
Company completed its remediation and testing of systems. As a result of those
planning and implementation efforts, the Company experienced no significant
disruptions in mission critical information technology and non-information
technology systems and believes those systems successfully responded to the Year
2000 date change. The Company incurred costs of approximately $700 thousand in
connection with remediating its systems and anticipates no further costs. The
Company is not aware of any material problems resulting from Year 2000 issues,
either with its products, its internal systems, or the products and services of
third parties. The Company will continue to monitor its mission critical
computer applications and those of its suppliers and vendors throughout the year
2000 to ensure that any latent Year 2000 matters that may arise are addressed
promptly.
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 137
"Accounting for Derivative Instruments and Hedging Activities Deferral of the
Effective Date of SFAS No. 133" becomes effective for all fiscal quarters for
all fiscal years beginning after June 15, 2000 (effective January 1, 2001 for
the Company). SFAS No. 133 is not currently applicable to the Company as the
Company does not currently use derivative instruments or participate in hedge
activities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK
In the normal course of business the Company is subject to market exposures from
changes in interest rates. The Company's variable interest expense is sensitive
to changes in the general level of United States and European interest rates.
The Company's debt represents borrowings under several demand notes at the
bank's prime rate plus 1/2% to 1% or Eurodollar rates plus 3% to 3 1/2% and is
sensitive to changes in interest rates. The borrowings under the Eurodollar
rates have maturity dates varying between 30 to 37 days. At December 31, 1999,
the weighted average interest rate of the $45.9 million debt was 8.861% and the
fair value of the debt approximates its carrying value.
The Company had interest expense of $2,357 thousand for the period beginning May
28, 1999 and ending December 31, 1999. The potential increase in interest
expense from a hypothetical 2% adverse change, assuming the December 31, 1999
debt was outstanding for the entire year, would be $916 thousand.
20
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
INDEX TO FINANCIAL STATEMENTS
----------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports of Independent Auditors 22
Consolidated Balance Sheets as of December 31, 1998 and 1999 24
Consolidated Statements of Operations and Comprehensive Operations for the Years
Ended December 31, 1997, 1998 and the periods January 1, 1999 through
May 27, 1999 (PREDECESSOR COMPANY)
and May 28, 1999 through December 31, 1999 (SUCCESSOR COMPANY) 25
Consolidated Statements of Shareholders' Equity (Deficit) for the Years Ended
December 31, 1997, 1998 and the periods January 1, 1999 through May 27,
1999 (PREDECESSOR COMPANY)
and May 28, 1999 through December 31, 1999 (SUCCESSOR COMPANY) 26
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997,
1998 and the periods January 1, 1999 through May 27, 1999 (PREDECESSOR
COMPANY) and May 28,
1999 through December 31, 1999 (SUCCESSOR COMPANY) 28
</TABLE>
Notes to Consolidated Financial Statements
21
<PAGE> 22
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders of JPE, Inc.
(d/b/a ASCET INC and ASC Exterior Technologies)
We have audited the accompanying consolidated balance sheet of JPE, Inc. (d/b/a
ASCET INC and ASC Exterior Technologies) as of December 31, 1999 and the related
consolidated statements of operations and comprehensive operations,
shareholders' equity (deficit), and cash flows for the period from May 28, 1999
to December 31, 1999 and as to its predecessor (see Note 1) for the period from
January 1, 1999 to May 27, 1999. Our audits also included the 1999 information
in the financial statement schedule listed in Item 14(a)(2) of this Form 10-K.
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of JPE, Inc. (d/b/a
ASCET INC and ASC Exterior Technologies) at December 31, 1999 and the
consolidated results of its operations and its cash flows for the period from
May 28, 1999 to December 31, 1999 and the consolidated results of its
predecessor's operations and its predecessor's cash flows for the period from
January 1, 1999 to May 27, 1999, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related 1999
information in the financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
As more fully described in the notes to the consolidated financial statements,
effective May 27, 1999, an investment was made in the Company in exchange for a
95% voting and equity interest. The Company's assets, liabilities, and capital
structure have been adjusted to reflect estimated fair values as of May 28,
1999. As a result, the consolidated financial statements as of December 31, 1999
and for the period from May 28, 1999 to December 31, 1999 are not comparable to
the Company's predecessor consolidated financial statements.
/s/ Ernst & Young LLP
------------------
Detroit, Michigan
March 3, 2000
22
<PAGE> 23
To Board of Directors and Shareholders
of JPE, Inc. (d/b/a ASCET INC and ASC Exterior Technologies)
In our opinion, the accompanying consolidated balance sheet as of December 31,
1998 and the related consolidated statements of operations and comprehensive
operations, shareholders' equity (deficit), and cash flows for each of
the two years in the period ended December 31, 1998 present fairly, in all
material respects, the financial position, results of operations and cash flows
of JPE, Inc. (d/b/a ASCET INC and ASC Exterior Technologies) and its
subsidiaries at December 31, 1998 and for each of the two years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. In addition, the financial statement schedule for each of the two
years in the period ended December 31, 1998, listed in the index appearing 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. We have not audited the
consolidated financial statement of JPE, Inc. (d/b/a ASCET INC and ASC Exterior
Technologies) for any period subsequent to December 31, 1998.
/s/ PricewaterhouseCoopers LLP
---------------------------
Detroit, Michigan
April 1, 1999
23
<PAGE> 24
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED BALANCE SHEETS
at December 31,
(amounts in thousands, except share data)
----------
ASSETS
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSSOR
COMPANY COMPANY
1998 1999
----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 394 $ 639
Accounts receivable, net of allowance for doubtful
accounts of $684 and $1,053 at December 31, 1998
and 1999, respectively 12,151 20,205
Inventory 18,572 22,589
Other current assets 1,413 1,396
----------- ----------
Total current assets 32,530 44,829
Investment in affiliate companies 14,661 --
Property, plant and equipment, net 20,963 26,797
Goodwill, net 7,458 3,902
Deferred income taxes -- 2,778
Other assets 1,362 599
----------- ----------
Total assets $ 76,974 $ 78,905
=========== ==========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
<S> <C> <C>
Current liabilities:
Notes payable $ -- $ 45,877
Current portion of long-term debt 84,492 --
Accounts payable 8,273 8,306
Accrued liabilities 1,931 3,411
Income taxes 14 40
Loan guaranty 635 --
----------- ----------
Total current liabilities 95,345 57,634
Deferred income taxes 157 1,778
Other liabilities 1,563 95
Long-term debt, non-current 50 246
----------- ----------
Total liabilities 97,115 59,753
Shareholders' equity (deficit):
Warrants 293
First Series Preferred Shares, no par value, 50 votes per share,
3,000,000 authorized, 1,973,002 shares issued and outstanding at
December 31, 1999 and no shares issued and outstanding
at December 31, 1998 16,590
Common stock, no par value, 1 vote per share, 15,000,000
authorized, 14,043,600 shares issued and
outstanding at December 31, 1999 and 4,602,180
issued and outstanding at December 31, 1998 28,051 2,379
Accumulated other comprehensive loss (336) --
Accumulated deficit (47,856) (110)
----------- ----------
Total shareholders' equity (deficit) ( 20,141) 19,152
----------- ----------
Total liabilities and shareholders' equity (deficit) $ 76,974 $ 78,905
=========== ==========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
24
<PAGE> 25
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS
For the periods ended
(amounts in thousands, except per share data)
-------------------------
<TABLE>
<CAPTION>
PREDECESSOR COMPANY SUCCESSOR
------------------------------------------------ COMPANY
JANUARY 1, ------------
1999 MAY 28,
THROUGH 1999
FOR THE YEARS ENDED DECEMBER 31, MAY 27, 1999 THROUGH
-------------------------------- Restated December 31,
1997 1998 (NOTE 1) 1999
--------- --------- -------- ------------
<S> <C> <C> <C> <C>
Net sales $ 247,539 $ 171,780 $ 24,044 $ 88,081
Cost of goods sold 211,120 151,802 17,716 73,448
--------- --------- -------- --------
Gross profit 36,419 19,978 6,328 14,633
Selling, general and administrative expenses 26,983 25,583 5,538 12,137
Charge for subsidiaries under court
ordered protection -- 28,490 -- --
Loss on sale of subsidiary -- 5,190 -- --
Discontinuance of stamping operations 2,164 -- -- --
Other expense (income) 618 1,886 682 (235)
Affiliate companies' (income) loss -- 1,713 (8,680) --
Interest expense, net 10,464 13,085 2,859 2,766
--------- --------- -------- --------
Income (loss) from continuing operations
before income taxes
and extraordinary item (3,810) (55,969) 5,929 (35)
Income tax expense (benefit) (194) (1,035) 104 75
--------- --------- -------- --------
Income (loss) from continuing operations
before extraordinary item (3,616) (54,934) 5,825 (110)
Discontinued operations:
Income from operations of IAF 1,473 1,364 214 --
Loss on sale of stock of IAF -- -- (2,321) --
Extraordinary Item:
Forgiveness of debt and liabilities -- -- 18,272 --
--------- --------- -------- --------
Net income (loss) (2,143) (53,570) 21,990 (110)
Other comprehensive expense
Foreign currency translation adjustment (271) (65) -- --
--------- --------- -------- --------
Comprehensive income (loss) $ (2,414) $ (53,635) $ 21,990 $ (110)
========= ========= ======== ========
Basic earnings (loss) per share from continuing
operations before extraordinary item:
Common Shares $ (.79) $ (11.94) $ 1.27 $ --
First Series Preferred Shares -- -- -- (0.05)
Earnings (loss) per share from continuing
operations before extraordinary item
assuming dilution:
Common Shares $ (.79) $ (11.94) $ 1.25 $ --
First Series Preferred Shares -- -- -- (0.05)
Basic earnings (loss) per share:
Common Shares $ (.47) $ (11.64) $ 4.78 $ --
First Series Preferred Shares -- -- -- (0.05)
Earnings (loss) per shares assuming dilution:
Common Shares $ (.47) $ (11.64) $ 4.73 $ --
First Series Preferred Shares -- -- -- (0.05)
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
25
<PAGE> 26
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
For the periods ended
(amounts in thousands, except share data)
----------------
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998
--------------------------------------------------------------------------------------------
COMMON STOCK ACCUMULATED
------------------------ OTHER
SHARES COMPREHENSIVE RETAINED
OUTSTANDING AMOUNT LOSS EARNINGS (DEFICIT) TOTAL
----------- ------ ------------- ------------------ -----
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1997 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>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
FOR THE PERIOD JANUARY 1, 1999 THROUGH MAY 27, 1999
------------------------------------------------------------------------------------------
NET INCOME
FOR THE PERIOD BALANCES AT
BALANCE AT FOREIGN ISSUANCE JANUARY 1 TO MAY 27,
JANUARY 1, CURRENCY TO THE MAY 27, 1999 1999
1999 TRANSLATION BANK GROUP RESTATED (NOTE 1) RESTATED (NOTE 1)
----------- ----------- ---------- ----------------- -----------------
Common Stock:
<S> <C> <C> <C> <C> <C>
Shares Outstanding 4,602,180 4,602,180
Amount $ 28,051 $ 28,051
First Series Preferred Shares:
Shares Outstanding -- 20,650 20,650
Amount -- $ 177 $ 177
Warrants:
Warrants Outstanding -- 77,438 77,438
Amount -- $ 54 $ 54
Accumulated Other Comprehensive Loss $ (336) $ 336 -- -- --
Retained Earnings (Deficit) $ (47,856) $ 21,990 $(25,866)
---------- ------- -------- -------- --------
Total Shareholder Equity $ (20,141) $ 336 $ 231 $ 21,990 $ 2,416
========== ======= ======== ======== ========
</TABLE>
26
<PAGE> 27
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the period ended
(amounts in thousands, except share data)
----------------
<TABLE>
<CAPTION>
SUCCESSOR COMPANY
For the period May 28, 1999 through December 31, 1999
----------------------------------------------------------------------------------
BALANCE AT NET LOSS
MAY 28, INVESTMENT SHAREHOLDERS FOR THE PERIOD BALANCE AT
1999 NEW BASIS MAY 28 TO DECEMBER 31,
RESTATED (NOTE 1) SHAREHOLDERS CHANGE DECEMBER 31, 1999 1999
---------------- ------------ ----------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Common Stock:
Shares Outstanding 4,602,180 9,441,420 14,043,600
Amount $ 28,051 $ 2,287 $ (27,959) $ 2,379
First Series Preferred Shares:
Shares Outstanding 20,650 1,952,352 1,973,002
Amount $ 177 $ 16,413 $ 16,590
Warrants:
Warrants Outstanding 77,438 345,163 422,601
Amount $ 54 $ 239 $ 293
Retained Earnings (Deficit) $ (25,866) $ 25,866 $ (110) $ (110)
----------- ---------- ----------- ------- ----------
Total Shareholder Equity $ 2,416 $ 18,700 $ (1,854) $ (110) $ 19,152
=========== ========== =========== ======= ==========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
27
<PAGE> 28
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period ended
(amounts in thousands)
----------------
<TABLE>
<CAPTION>
PREDECESSOR COMPANY SUCCESSOR
----------------------------------------------------- COMPANY
------------
JANUARY 1, MAY 28, 1999
FOR THE YEARS ENDED DECEMBER 31, 1999 THROUGH THROUGH
-------------------------------- MAY 27, 1999 DECEMBER 31
1997 1998 RESTATED (NOTE 1) 1999
----------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,143) $ (53,570) $ 21,990 $ (110)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Extraordinary items, forgiveness of debt
and liabilities -- -- (18,272) --
Depreciation and amortization 10,412 8,669 1,250 2,045
Loss on sale of subsidiary -- 5,190 2,549 --
Discontinuance of stamping operations 2,250 -- -- --
Write-down of subsidiaries assets -- 31,855 -- --
Disposal of property and equipment 1,296 -- -- --
Affiliate companies' (income) loss -- 1,713 (8,680) --
Other -- -- 98 --
Changes in operating assets and liabilities:
Accounts receivable (9,109) 8,020 (2,204) 1,283
Inventory (1,322) 3,586 657 (1,675)
Other current assets 1,898 1,072 422 1,420
Accounts payable 4,260 (5,254) 2,065 (1,425)
Accrued liabilities and income taxes (4,140) 1,095 (570) (805)
Deferred income taxes 620 (3,487) 2 (101)
-------- --------- -------- --------
Net cash provided by (used for) operating activities 4,022 (1,111) (693) 632
-------- --------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment (13,172) (3,071) (238) (1,569)
Other -- -- -- (50)
Cash proceeds from sale of property and equipment 1,200 -- -- --
Acquisition of Brake, Axle and Tandem Company (5,518) -- -- --
Cash proceeds from sale of subsidiary -- 9,891 20,000 --
Cash received from (loaned to) equity investees -- 11,037 (13,980) --
-------- --------- -------- --------
Net cash provided by (used for) investing activities (17,490) 17,857 5,782 (1,619)
-------- --------- -------- --------
Cash flows from financing activities:
Sale of common stock 102 -- -- --
Repayments of other debt (1,727) (427) (6) --
Net borrowings under demand notes -- -- -- 45,774
Net borrowings (payments) under revolving loan 11,675 (19,389) (1,742) (66,257)
Net borrowings under Canadian credit facility 1,059 3,983 -- --
Borrowings (repayments) under capital lease 1,555 (195) -- (73)
Issuance of First Series Preferred Shares -- -- 1 16,413
Issuance of Common Stock -- -- -- 2,033
Tax benefit from options 28 -- -- --
-------- --------- -------- --------
Net cash provided by (used for) financing
activities 12,692 (16,028) (1,747) (2,110)
-------- --------- -------- --------
Effect of currency translation on cash (511) (353) -- --
-------- --------- -------- --------
Cash and cash equivalents:
Net increase (decrease) in cash (1,287) 365 3,342 (3,097)
Cash, beginning of period 1,316 29 394 3,736
-------- --------- -------- --------
Cash, end of period $ 29 $ 394 $ 3,736 639
======== ========= ======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
28
<PAGE> 29
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
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. In addition, net earnings for the
Predecessor Company for the period January 1, 1999 through May 27, 1999
has been restated from unaudited amounts as originally reported to
reflect additional income of $1.1 million, principally related to
additional revenue, inventory valuation and certain accrual
adjustments.
RESTRUCTURING OF JPE, INC. - On May 27, 1999 in accordance with the
terms of an Investment Agreement (the "Investment Agreement") among
JPE, Inc., ASC Holdings LLC ("ASC") and Kojaian Holdings LLC
("Kojaian") dated April 28, 1999 the Company issued 1,952,352.19 shares
of First Series Preferred Shares on May 27, 1999 (the "Closing Date"),
in equal proportions to ASC and Kojaian for an aggregate purchase price
of $16,413,274 payable in cash. Each First Series Preferred Share
possesses voting and equity rights equal to 50 common shares of the
Company. In addition, the Investment Agreement provided that the
shareholders of record of JPE, Inc. common stock on June 11, 1999 (the
"Record Date") were entitled to receive warrants to purchase First
Series Preferred Shares (the "Warrants"). Each holder of common stock
received .075 Warrants for each share of common stock held on the
record date, and each full Warrant entitled the holder to purchase one
First Series Preferred Share. The Warrants were distributed as a
dividend to such shareholders. The Warrants carry an initial exercise
price of $9.99 per First Series Preferred Share, subject to price
adjustments based on the Final Actual EBITDA and the cost of certain
environmental remediation for a 24 month period occurring after the
date of the Investment Transaction, as defined below. The Warrants are
exercisable for the 90 day period following the providing of notice by
the Company to the holders thereof of the Final Actual EBITDA.
In addition, on May 27, 1999 ASC and Kojaian (in equal proportions)
subscribed and paid for 9,441,420 newly issued shares of common stock
for an aggregate purchase price of $1,986,726 payable in cash. These
newly issued shares of common stock were distributed to ASC and Kojaian
on June 12, 1999.
As a precondition to consummation of the above transaction, the
Company's existing bank lenders (the "Bank Group") agreed on May 27,
1999 to a $16.5 million forgiveness of the Company's existing bank
debt, under the terms of the Company's Forbearance Agreement dated
August 10, 1998, as amended. In consideration for the debt forgiveness
and pursuant to the Investment Agreement, the Company issued 20,650.115
shares of Preferred Stock to the Bank Group on May 27, 1999 for $1,000
of consideration (see Note 15). In addition, the Company granted the
existing bank lenders 77,437.937 Warrants (which Warrants contain the
same terms and conditions as granted to the shareholders of common
stock of the Company on the Record Date), except the exercise price for
each First Series Preferred Shares is approximately $8.16 per share.
The immediate effect of these transactions transferred (a)
approximately 47.5% of the voting securities of the Company to Kojaian,
(b) approximately 47.5% of the voting securities of the Company to ASC,
and (c) approximately 1% of the voting securities of the Company to the
Bank Group (these transactions are hereafter referred to as the
"Investment Transaction"). The remaining amount of the voting
securities continues to be held by the public shareholders of the
Company. Thus, as of December 29, 1999 each of ASC and Kojaian
beneficially owned approximately 95% of the voting securities of the
Company, and after the exercise of all of the Warrants, would have
beneficially owned approximately 80% of the voting securities of the
Company.
Pursuant to the terms of a letter agreement (the " Letter Agreement")
dated August 30, 1999 among ASC and the sole member of ASC (Heinz C.
Prechter) and Kojaian and the members of Kojaian (Mike Kojaian and C.
Michael Kojaian ), Heinz C. Prechter agreed to purchase (through ASC or
otherwise) 4,720,710
29
<PAGE> 30
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
common shares and 976,176.095 First Series Preferred Shares of JPE,
Inc. from Kojaian for $9.2 million. The Letter Agreement was subject to
the conditions precedent of (i) obtaining the consent of Comerica Bank,
the Company's lender, and (ii) the termination of the applicable
waiting period under the Hart-Scott-Rodino Act. On December 30, 1999,
the last of the conditions precedent was fulfilled, and on such date
the Letter Agreement was consummated.
Upon consummation of the Letter Agreement, ASC directly and Heinz C.
Prechter, indirectly through ASC, owned a total of 9,441,420 common
shares and 1,952,353.19 First Series Preferred Shares of JPE, Inc.,
constituting approximately 95% of the beneficial interests of the
Company. In addition, the Shareholders Agreement dated May 27, 1999
which included provisions, addressing among other things, the
nomination, election, and voting of members to the Board of Directors
was terminated upon the execution of the Letter Agreement.
In connection with the closing of the Investment Transaction on May 27,
1999, the Company entered into a Consulting Services Agreement with ASC
Holdings LLC which requires payment of $250,000 annually, payable
monthly, for consulting services provided by ASC Holdings LLC with
respect to various business, operating, management, and financial
matters. In addition, the Company is required to pay ASC Holdings LLC
an additional fee equal to 2% of the excess of the final EBITDA over
the targeted EBITDA, (both defined in the Investment Agreement) for the
24 month period ending after the acquisition date.
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.
The net assets of the Company's Allparts subsidiary were sold October
28, 1998, as more fully described in Note 12. The stock of the
Company's IAF subsidiary was sold March 26, 1999, as more fully
described in Note 16. 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. On February 8, 1999,
the net assets of JPEC were sold, to the Ventra Group, as more fully
described in Note 14. 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 period beginning September 16, 1998 and ending
December 31, 1998 and for that portion of the 1999 year beginning
January 1, 1999 and ending May 27, 1999, the date of the Investment
Transaction. The remaining subsidiaries were included in the Company's
Investment Transaction, as more fully described above. All significant
intercompany accounts and transactions with the consolidated
subsidiaries have been eliminated in the preparation of the
consolidated financial statements.
Due to the events described above and the Investment Transaction, which
resulted in the Company's assets, liabilities, and new capital
structure being adjusted to reflect estimated fair values as of May 28,
30
<PAGE> 31
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
----------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
1999, the consolidated financial statements of the Successor Company
are not comparable to the consolidated financial statements of the
Predecessor Company.
BUSINESS - JPE, Inc. (d/b/a ASCET INC and d/b/a ASC Exterior
Technologies) 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, 1999 were approximately 50.2% for trim products, and
49.8% for the replacement parts markets, excluding sales of trim
products by subsidiaries that are being accounted for using the equity
method for the period from January 1, 1999 through May 27, 1999. The
Company's fastener business, IAF was sold during 1999, and as such is
accounted for as a discontinued operation.
REVENUE RECOGNITION - The Company recognizes sales revenue upon
shipment of products to customers.
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") 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.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION - Property, plant and
equipment are recorded at cost. As a result of the May 27, 1999
Investment Transaction change in control, costs were assigned to
property, plant, and equipment based on the fair value of such assets
on the date of the change in control. 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 - Goodwill was initially adjusted to $2.3 million as of the
date of the Investment Transaction. This amount has been subsequently
increased by $1.7 million to reflect additional legal fees, elimination
of certain accruals for estimated expenses as of the date of the
Investment Transaction and adjustments to the fair value of the
Company's assets. Accumulated amortization at December 31, 1998 and
1999 was $1,032 and $158, respectively. The recoverability of goodwill
is evaluated each year to include an assessment of conditions that
would result in an impairment charge, which include loss of major
customers, lower margin business, labor issues, and customer sourcing
and cost cutting issues. The Company's method of assessing an
impairment charge if any, would be based on an analysis of changes in
market value, giving effect to discounted cash flows.
DEFERRED FINANCING COSTS - Deferred financing costs associated with
borrowings are being amortized over their respective periods.
Accumulated amortization at December 31, 1998 and 1999 was $563 and
$292, respectively.
EARNINGS PER SHARE - The issuance of the First Series Preferred Shares
resulted in the Successor Company having a participating security. In
accordance with Statement of Financial Accounting Standards No. 128-
Earnings per Share, the "two class" method is used for computing
earnings per share. Under this
31
<PAGE> 32
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
method, an earnings allocation formula is used to determine the amount
of earnings allocated to each class of stock. Based on the
participating rights of the First Series Preferred Shares approximately
87.5% of the earnings will be allocated to these shares and 12.5% of
earnings to the Common Stock. Shares outstanding for the computation of
basic earnings per share was 14,043,600 common shares and for the First
Series Preferred Shares of 1,973,002.305. Earnings per share assuming
dilution requires the Company to use the treasury method for stock
options and warrants. The Common Stock options outstanding for the
periods presented had exercise prices that were in excess of the market
price and therefore had no effect on the computation assuming dilution.
The warrants for the First Series Preferred Shares which would have had
the effect of increasing the denominator in the earnings per share
calculation by 215,499 shares, for the period May 28, 1999 to December
31, 1999, were excluded because the effect is anti-dilutive.
Earnings per share for the years ended December 31, 1997 and 1998 was
computed based on 4,602,180 shares outstanding and stock options had no
effect on earnings per share assuming dilution. Earnings per share for
the period January 1, 1999 through May 27, 1999 was computed based on
4,602,180 shares outstanding and 43,296 equivalent shares related to
stock options having a dilutive effect
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.
2. INVENTORY:
Inventory consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Raw materials $ 1,606 $ 5,959
Work in process and components 1,411 1,544
Finished goods 13,291 13,292
Tooling 2,264 1,794
------- -------
$18,572 $22,589
======= =======
</TABLE>
3. INVESTMENT IN U.S. AFFILIATE COMPANIES:
JPE's subsidiaries, PTI and Starboard were 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 through the date of the Investment
Transaction, May 27, 1999. On February 25, 1999, both subsidiaries
filed a Plan of Reorganization and Disclosure Statement with the Court,
which was confirmed by the Bankruptcy Court on April 16, 1999. As a
result, these two subsidiaries emerged from
32
<PAGE> 33
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------------------
3. INVESTMENT IN U.S. AFFILIATE COMPANIES, continued:
Chapter 11 on that date, contingent upon the closing of the Investment
Transaction on May 27, 1999. Note 1 describes details of the Investment
Transaction.
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
------- --------- -------
<CAPTION>
PTI Starboard Total
------- --------- -------
<S> <C> <C> <C>
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 and January 1,
1999 to May 27, 1999 are as follows (amounts in thousands):
<TABLE>
<CAPTION>
September 16, 1998 to December 31, 1998: PTI Starboard Total
------- --------- -------
<S> <C> <C> <C>
Net 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>
33
<PAGE> 34
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------------------
3. INVESTMENT IN U.S. AFFILIATE COMPANIES, continued:
<TABLE>
<CAPTION>
January 1, 1999 to May 27, 1999: PTI Starboard Total
------- --------- -------
<S> <C> <C> <C>
Net sales $11,109 $ 33,672 $44,781
Cost of sales 8,409 29,592 38,001
------- --------- -------
Gross profit 2,700 4,080 6,780
Selling, general and administrative expense 591 2,572 3,163
Other reorganization expenses 180 624 804
------- --------- -------
Income (loss) before interest and taxes 1,929 884 2,813
Interest expense 107 439 546
------- --------- -------
Income (loss) before extraordinary item 1,822 445 2,267
Extraordinary item forgiveness of debt and liability 808 2,985 3,793
------- --------- -------
Net income $ 2,630 $ 3,430 $ 6,060
======= ========= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following at December
31:
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Land $ 1,123 $ 803
Buildings 4,823 5,980
Machinery and equipment 24,345 20,599
Furniture and fixtures 4,338 1,280
------- -------
34,629 28,662
Less accumulated depreciation (13,666) (1,865)
------- -------
$20,963 $26,797
======= =======
</TABLE>
5. ACCRUED LIABILITIES:
Accrued liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
------ -------
<S> <C> <C>
Accrued compensation $ 415 $ 469
Accrued interest 767 329
Accrued employee benefits 193 1,026
Accrued taxes 20 457
Other 536 1,130
------ -------
$1,931 $ 3,411
====== =======
</TABLE>
6. NOTES PAYABLE:
The Company's debt financing is provided by a $56.3 million demand loan
from Comerica Bank (the "Comerica Facility"). The Company has executed
three promissory notes in the amounts of $6.3 million, $20 million, and
$30 million, each providing for borrowing options at either a Prime
based rate plus 1/2% to 1% or Eurodollar rate plus 3% to 3 1/2%.
Eurodollar borrowings for 1 to 6 months are permitted at the option of
the Company. Advances under the $30 million demand note are subject to
a borrowing base restriction equal to 80% of eligible trade receivables
and the lesser of 50% of eligible inventory or $9 million. There are no
restrictions on advances under either the $6.3 million or $20 million
demand notes.
34
<PAGE> 35
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------------------
6. NOTES PAYABLE, continued:
Borrowings under the three promissory notes are secured by the
Company's cash deposits, trade receivables, inventory, and personal
property, as well as a guaranty from ASC. The source of collateral is
the Common Shares and First Series Preferred Shares of the Company held
by ASC.
Effective July 1, 1999, the $6.3 million demand note requires monthly
principal payments of approximately $131 thousand. Beginning November
15, 1999, the $20 million demand note requires quarterly principal
payments equal to 75% of the preceding quarter's excess cash flow,
defined as after-tax net income, less principal note payments, plus
depreciation and amortization expense. Required covenants under the
Comerica Facility are the submissions of quarterly and annual financial
statements and projections within a prescribed time period and a
monthly borrowing base calculation. There are no financial covenants
required by the terms of the Comerica Facility. Current borrowings at
December 31, 1999 under the Comerica Facility are $45.9 million and
unused borrowing capacity under the Company's $30 million demand note
was $1.5 million.
In addition, the Company is able to supplement any working capital
needs not satisfied by the Comerica Facility through a $3 million
demand note dated August 23, 1999 from ASC Incorporated, an affiliate
of ASC. Advances are permitted up to $3 million and are unsecured and
subordinated to advances made under the Comerica Facility. Interest
accrues at prime plus 1 1/2% and is payable quarterly. As of December
31, 1999 there were no advances made under this note.
During 1998, JPE was in default under its credit agreement with its
U.S. bank group and had a Forbearance Agreement under which the lender
agreed to grant certain accommodations and to forbear foreclosure until
January 1, 2000. At December 31, 1998, the Company classified the
amount owed on the Forbearance Agreement as current portion of
long-term debt. As of the date of the Investment Agreement, May 27,
1999, all amounts owed under the Forbearance Agreement have been paid
or forgiven.
Also during 1998, PTI and Starboard had post-petition loans provided by
a court financing order. These debt instruments were reflected on the
consolidated balance sheet at December 31,1998 through an investment in
affiliate companies (see Note 3).
At December 31, 1998 and 1999, the average effective borrowing rate was
9.75%, approximately 11% for the period ending May 27, 1999, and 8.57%
for the period ending December 31, 1999. The Comerica Bank Facility
provides for a facility fee which is payable quarterly in arrears.
Facility and amendment fees were $1.4 million in 1998, $33 thousand for
the period ending May 27, 1999, and $421 thousand for the period ending
December 31, 1999, and are included as interest expense in the
financial statements.
35
<PAGE> 36
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
----------------------
7. INCOME TAXES:
Income tax expense (benefit) for the years ended December 31, 1997 and
1998 and for the periods January 1, 1999 through May 27, 1999 and May
28, 1999 through December 31, 1999 is as follows:
<TABLE>
<CAPTION>
JANUARY 1, 1999 MAY 28, 1999
THROUGH THROUGH
1997 1998 MAY 27, 1999 DECEMBER 31, 1999
---- ---- ------------ -----------------
<S> <C> <C> <C> <C>
Income (loss) before income tax:
U.S. $ 63 $(48,544) $ 22,254 $ (135)
Foreign (2,400) (6,061) (160) 100
------ -------- -------- ------
$(2,337) $(54,605) $ 22,094 $ (35)
======= ======== ======== ======
Current income taxes
Federal $ (456) $ (366) $ -- $ 10
State 333 441 88 64
Foreign 43 (19) 16 (16)
------ -------- -------- ------
Total current income taxes (80) 56 104 58
------ -------- -------- ------
Deferred income taxes:
Federal 606 (1,649) -- --
State 88 (283) -- 17
Foreign (808) 841 -- --
------ -------- -------- ------
Total deferred income taxes (114) (1,091) -- 17
------ -------- -------- ------
Total income tax expense (benefit) $ (194) $ (1,035) $ 104 $ 75
====== ======== ======== ======
</TABLE>
The provision for income taxes differs from the amount of income taxes
determined by applying the statutory U. S. federal income tax rate to
pretax income as a result of the following:
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31 JANUARY 1, 1999 MAY 28, 1999
---------------- THROUGH THROUGH
1997 1998 MAY 27, 1999 DECEMBER 31, 1999
---- ---- ------------ -----------------
<S> <C> <C> <C> <C>
Statutory U. S. federal tax rate (34%) (34%) 34% (34%)
State taxes, net of federal tax benefit 12 -- -- 151
Goodwill amortization 10 -- -- 153
Nondeductible bankruptcy and other expenses -- -- -- 85
Foreign tax rate in excess of below U.S. -- -- -- (143)
federal tax rate 2 -- -- --
Increase /(decrease) in valuation reserve -- 32 (34) --
All other 2 -- -- 2
------ ------ ------ ------
Effective tax rate (8%) (2%) --% 214%
====== ====== ====== ======
</TABLE>
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. As of May 27, 1999, the date of the Investment
Transaction, the Company had approximately $23 million of taxable net
operating loss carryovers. Of this amount, approximately $22 million
was used to offset taxable income for the period January 1, 1999
through May 27, 1999, including income associated with the bank debt
forgiveness and vendor liability settlements. The remaining taxable
loss carryovers are subject to certain limitations as a result of the
Investment Agreement and utilization is dependent on the Company's
future profitability. This may prevent full utilization of these losses
during the carryover period, and as such, the Company has recorded a
valuation reserve related to the tax benefits associated with such
losses. In addition, the Company sustained a further net operating loss
of $1.2 million for the period May 28, 1999 through December 31, 1999.
The Company's 214% effective tax rate for the
36
<PAGE> 37
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
-----------------------------------
7. INCOME TAXES, continued:
period May 28, 1999 through December 31, 1999, represents taxes
computed at regular tax rates, and reflects the Company's inability to
deduct certain bankruptcy costs and the amortization of goodwill
associated with the Investment Transaction.
Deferred tax assets of approximately $6.7 million have been reduced by
a $4.3 million valuation reserve, and deferred tax liabilities of $1.4
million have been recorded at December 31, 1999. If in subsequent
periods, the valuation reserve related to the May 27, 1999 deferred tax
assets can be reduced, the effect will be to reduce goodwill before any
benefit is realized in the Consolidated Statement of Operations.
At December 31, 1998 and 1999, deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Deferred tax assets:
Goodwill $ 780 $3,491
Inventory 527 807
Allowance for doubtful accounts 380 456
Employee benefits 522 179
AMT tax credit 78 78
Net operating losses 2,904 1,275
All other 275 63
Patents 442 420
------- ------
Total deferred tax assets 5,908 6,769
------- ------
Deferred tax liabilities:
Property and equipment 1,819 1,301
Prepaid pension -- 125
------- ------
Total deferred tax liabilities 1,819 1,426
------- ------
Net deferred tax assets 4,089 5,343
Valuation reserve (4,164) (4,343)
------- ------
Net deferred tax assets (liabilities) $ (75) $1,000
======= ======
</TABLE>
8. WARRANTS TO ACQUIRE PREFERRED STOCK:
The Investment Agreement provides that the shareholders of record of
JPE, Inc. common stock on June 11, 1999 (the "Record Date") were
entitled to receive warrants (the "Warrants") entitling the holder with
the right to purchase .075 First Series Preferred Shares of the Company
for each share of common stock held on the Record Date. The Warrants
carry an initial exercise price of $9.99 per First Series Preferred
Share, subject to price adjustments based on the final actual EBITDA
and the cost of certain environmental remediation for the 24 month
period from the date of the Investment Transaction. The Warrants are
exercisable for a 90 day period following the providing of notice by
the Company to the holders thereof of the Final Actual EBITDA (as
defined in the Investment Agreement).
Based on the initial exercise price of the Warrants, the Company has
assigned a fair value based on the difference between the exercise
price and the present value of the exercise price for the 24 month
period at a cost of capital discount rate. The fair value assigned was
$238.9 thousand. If the exercise price of the Warrants is reduced by
achieving an EBITDA amount in excess of target EBITDA of $34.3 million,
then the difference in the exercise price will be treated as a
contingency based on earnings in future periods and recorded as
additional consideration. The additional consideration, if any, will be
an increase to goodwill.
37
<PAGE> 38
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------------------
9. STOCK OPTIONS AND WARRANTS:
Prior to the date of the Investment Transaction, May 27, 1999, the
Company 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. On December 16, 1996, the Company elected to reprice
415,000 of the outstanding options to the then fair market value of
$7.25.
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.
Information regarding the Plan, the prior plan and the JPE Director
Stock Option Plan for 1997, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE OPTIONS EXERCISE
SHARES PRICE EXERCISABLE PRICE
------ -------- ----------- -----
<S> <C> <C> <C> <C>
Balance, January 1, 1997 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
Options exercised -- --
Options terminated and expired (480,750) $ 3.20
Options granted -- --
--------
Balance, December 31, 1999 51,750 $ 7.25 41,126 $ 7.25
========
</TABLE>
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Options available for grant at end of year 323,814 200,108 680,858
Option price range at end of year $6.625-$8.00 $0.30-$8.00 $6.63-$8.00
Option price range for exercised shares $3.26-$7.25 -- --
Weighted average grant date fair value
of options granted $3.61 $0.66 --
Weighted average remaining life 7.5 years 8.5 years 6.3 years
</TABLE>
During 1994, in connection with the purchase of Starboard, the Company
granted warrants to purchase 100,000 shares of common stock at $9.50
per share to the former owners and key employees of that subsidiary.
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
38
<PAGE> 39
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
-----------------------------------
9. STOCK OPTIONS AND WARRANTS, continued:
based on the fair value at the grant date for awards in 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>
1997 1998 JANUARY 1, 1999 MAY 28, 1999
---- ---- THROUGH THROUGH
MAY 27, 1999 DECEMBER 31, 1999
------------ -----------------
<S> <C> <C> <C> <C>
Net income/(loss) - as reported $(2,143) $(53,570) $21,990 $ (110)
Net income/(loss) - pro forma $(2,380) $(53,336) $21,974 $ (125)
Income/(loss) per share assuming dilution:
As reported $(.47) $(11.64) $ 4.73 --
Pro forma $(.52) $(11.59) $ 4.73 --
</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 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.
10. 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 matching 401(k) and
profit sharing contributions are discretionary and were suspended July
1, 1998. On June 25, 1999, the Company's matching 401(k) and profit
sharing contributions were reinstated retroactive to January 1, 1999.
The charges to operations for the years ended December 31, 1997 and
1998 were $1,258 thousand and $567 thousand. The charges to operations
for the 1999 Predecessor and Successor periods were $213 thousand and
$518 thousand, respectively.
11. 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>
FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------
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
</TABLE>
39
<PAGE> 40
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------------------------------
11. CHARGES FOR SUBSIDIARIES UNDER COURT ORDERED PROTECTION, continued:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------
PTI Starboard JPEC Total
--- --------- ---- -----
<S> <C> <C> <C> <C>
Loan guarantee -- -- 635 635
Other assets -- -- 100 100
------- ------ ------- -------
Total $24,137 $5,683 $2,035 $31,855
======= ====== ====== =======
</TABLE>
These charges have been reflected on the income statement for the year
ended December 31, 1998 in the following captions:
<TABLE>
<S> <C> <C> <C> <C>
Cost of sales $ 1,759 -- -- $ 1,759
Selling, general and administrative expenses 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>
12. SALE OF ALLPARTS, INC.:
On October 28, 1998, the Company 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.
13. 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 severance and other costs
directly related to the stamping business.
14. SALE OF 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
40
<PAGE> 41
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
--------------------------------
14. SALE OF JPE CANADA INC., continued:
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 were eliminated through the bankruptcy proceeding, resulting in
a gain of approximately $2.9 million which was 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 for the periods August 28 to December 31,
1998 and January 1, 1999 through the dated of divestiture, February 8,
1999 (amounts in thousands):
<TABLE>
<S> <C>
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)
=======
For the periods August 28, 1998 to December 31, 1998:
Net 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)
=======
</TABLE>
41
<PAGE> 42
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------------------------------
14. SALE OF JPE CANADA INC., continued:
<TABLE>
<CAPTION>
For the period January 1, 1999 to February 8, 1999
<S> <C>
Net sales $ 4,066
Cost of sales 3,857
-------
Gross profit 209
Selling, general and administrative expenses 134
Other expense 242
-------
Loss before interest and taxes (167)
Interest expense 94
-------
Loss before taxes (261)
Tax benefit --
-------
(Loss) before extraordinary item (261)
Extraordinary item, forgiveness of
debt and liabilities 2,881
-------
Net income $ 2,620
=======
</TABLE>
15. FORGIVENESS OF BANK DEBT:
As a precondition to consummation of the Investment Agreement, the
Company's existing bank lenders (the "Bank Group") agreed on May 27,
1999 to a $16.5 million forgiveness of the Company's existing bank
debt. In consideration for the debt forgiveness and pursuant to the
Investment Agreement, the Company issued 20,650.115 First Series
Preferred Shares to the Bank Group on May 27, 1999 for $1,000 of
consideration. In addition, the Company granted the existing bank
lenders warrants to purchase 77,437.937 First Series Preferred Shares
(which contain the same terms and conditions as granted to the
shareholder of common stock of the Company on the Record Date except
the exercise price per First Series Preferred Share is approximately
$8.16).
The Company has determined the fair value of the First Series Preferred
Shares issued to the Bank Group to be $177.5 thousand based on the same
price per share paid by ASC. The Warrants issued to the Bank Group have
a fair value of $53.6 thousand computed in the same method used for
shareholders of record. These amounts reduce the forgiveness of the
bank debt, resulting in an extraordinary item of $16.3 million or $3.53
per share. The Company has utilized its net operating loss carryforward
to offset the taxable income from the forgiveness of debt and
liabilities.
16. DISCONTINUED OPERATIONS AND SALE OF INDUSTRIAL & AUTOMOTIVE FASTENERS,
INC.
On March 26, 1999, the Company sold the stock of Industrial &
Automotive Fasteners, Inc. ("IAF"), its fastener segment, to MacLean
Acquisition Company for approximately $20 million. The sales agreement
required certain vendors to compromise their accounts receivable from
IAF to 30% of the outstanding balance which resulted in an
extraordinary gain of $2.0 million or $.44 per share. The net proceeds
of $19.2 million from this sale were used to pay down U.S. Bank debt.
The measurement date for discontinued operation was February 5, 1999,
the date that the Board of Directors and the lenders approved the
letter of intent. IAF's income from operations prior to the measurement
date was $214 thousand, or $.05 per share. The loss on sale was $2.5
million, offset by income from operations after the measurement date of
$200 thousand, resulting in a net loss of $2.3 million, or $.50 per
share.
42
<PAGE> 43
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
--------------------------------
16. DISCONTINUED OPERATIONS AND SALE OF INDUSTRIAL & AUTOMOTIVE FASTENERS,
INC., continued:
Revenue for IAF for the three month period ended March 31, 1999 was
$10.0 million and for the year ended December 31, 1998 was $38.3
million.
17. ACQUISITIONS:
On April 16, 1997, Dayton Parts 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 thousand 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 Dayton Parts with
no change of assets or liabilities from this transaction.
18. SUPPLEMENTAL CASH FLOW INFORMATION:
Selected cash payments and noncash activities for the years ended
December 31, 1997, 1998 and for the periods ending May 27, 1999 and
December 31, 1999 were as follows:
<TABLE>
<CAPTION>
JANUARY 1, MAY 28,
1999 THROUGH
THROUGH DECEMBER 31
1997 1998 MAY 27, 1999 1999
---- ---- ------------ ----
<S> <C> <C> <C> <C>
Cash paid for interest $10,226 $12,978 $4,692 $2,077
Cash paid for income taxes 535 275 44 115
Noncash investing and financing activities:
Increase in fixed assets for revised allocation
of purchase price of JPE Canada 2,070 -- -- --
</TABLE>
19. SEGMENT INFORMATION:
In 1998, the Company 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
43
<PAGE> 44
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------------------------------
19. SEGMENT INFORMATION, continued:
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. The Company sold its brake systems segment during
1998 (see Note 12). In 1999, the Company also sold a portion of its
Trim Products segment (see Note 14). Information for the Fastener
segment has been excluded as it is accounted for as discontinued
operations as it was sold by the Company on March 26, 1999 (see Note
16).
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 Parts Total
-------- ----------- -----
<S> <C> <C> <C>
Sales to unaffiliated customers
1999 Predecessor Company $ -- $ 24,044 $ 24,044
1999 Successor Company 56,305 31,776 88,081
1998 85,671 86,109 171,780
1997 155,964 91,575 247,539
Segment profit (loss)
1999 Predecessor Company $ -- $ 1,240 $ 1,240
1999 Successor Company 2,938 2,166 5,104
1998 (8,218) 5,509 (2,709)
1997 3,677 8,706 12,383
Other charges (income)
1999 Predecessor Company $ -- $ 81 $ 81
1999 Successor Company (126) (173) (299)
1998 26,704 5,243 31,947
1997 2,782 -- 2,782
Affiliate companies' losses
1999 Predecessor Company $ (8,680) $ -- $ (8,680)
1999 Successor Company -- -- --
1998 1,713 -- 1,713
1997 -- -- --
</TABLE>
44
<PAGE> 45
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
19. SEGMENT INFORMATION, continued:
<TABLE>
<CAPTION>
Trim Replacement
Products Parts Total
-------- ----------- -----
<S> <C> <C> <C>
Depreciation and amortization
1999 Predecessor Company $ -- $ 785 $ 785
1999 Successor Company 1,515 451 1,966
1998 4,744 1,996 6,740
1997 6,305 2,165 8,470
Segment assets
1999 $ 48,437 $ 26,357 $74,794
1998* -- 37,642 37,642
Expenditures for segment assets
1999 Predecessor Company $ -- $ 132 $ 132
1999 Successor Company 1,320 249 1,569
1998 1,613 994 2,607
1997 8,963 8,099 17,062
</TABLE>
* At December 31, 1998, the Trim Products segment was being recognized
through Investment in Affiliates of $14,661. Total assets for the
Trim Products segment at December 31, 1998 were $68,671.
A reconciliation of segment profit (loss) for reportable segments to
consolidated loss before taxes is as follows:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
1997 1998 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Segment profit (loss) $ 12,383 $ (2,709) $ 1,240 $ 5,104
Other (charges) income (2,782) (31,947) (81) 299
Equity net (loss) income -- (1,713) 8,680 --
Corporate expense (2,947) (2,857) (1,051) (2,672)
Costs related to bankruptcy and
forbearance agreements -- (3,658) -- --
Interest expense (10,464) (13,085) (2,859) (2,766)
-------- -------- -------- -------
Income (loss) before taxes $ (3,810) $(55,969) $ 5,929 $ (35)
======== ======== ======= =======
</TABLE>
A reconciliation of segment assets to consolidated assets is as
follows:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
COMPANY COMPANY
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Segment Assets $189,800 $ 61,121 $ 74,794
Corporate Assets 3,415 1,192 4,111
Investment in Affiliates -- 14,661 --
-------- -------- --------
$193,215 $ 76,974 $ 78,905
======== ======== ========
</TABLE>
45
<PAGE> 46
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------------------------------
19. SEGMENT INFORMATION, continued:
The Company's sales to individual customers in excess of 10% of total
revenue were:
SUCCESSOR
COMPANY
1997 1998 1999
---- ---- -----
General Motors Corporation 44% 29% 36%
DaimlerChrysler Corporation 11% 16% 23%
The Company had export sales of approximately $29, $29.2 and $22.3
million, principally to Canada, Mexico, and Central America, for the
years ended December 31, 1997, 1998 and 1999, respectively. The
Company operates in the North American geographic area.
20. FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Accounts receivable and accounts payable: The carrying amounts reported
in the balance sheet for accounts receivable and accounts payable
approximate their fair value.
Long-and short-term debt: The carrying amounts of the Company's
borrowings under its short-term revolving credit arrangements and its
long-term debt approximate their fair values as the interest rates
float with short term rates.
21. COMMITMENTS
The Company maintains long-term operating leases covering office
equipment, vehicles, and real estate. Commitments related to these
leases are $1.3 million, $1.2 million, $585 thousand, $198 thousand,
and $148 thousand, for the years 2000 - 2004, respectively.
46
<PAGE> 47
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
----------------------------
22. QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company has restated its previously reported quarterly information
as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
FOR THE PERIODS ENDED
---------------------------------------------------------------------
PREDECESSOR COMPANY SUCCESSOR COMPANY
JANUARY 1, 1999 APRIL 1, 1999 MAY 28, 1999 JULY 1, 1999
TO MARCH 31, TO MAY 27, TO JUNE 30, TO SEPTEMBER 30,
1999 1999 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales
As originally reported $24,183 $ 9,738 $14,013 $38,005
Change primarily related to
classification of IAF as discontinued
operations and timing of revenue recognition (9,907) 30 48 (274)
------- ------- ------- -------
As restated $14,276 $ 9,768 $14,061 $37,731
======= ======= ======= =======
Cost of goods sold
As originally reported $18,997 $ 7,524 $11,021 $31,183
Change primarily related to
classification of IAF as discontinued
operations and adjustments to
inventory valuation (8,713) (92) 40 72
------- ------- ------- -------
As restated $10,284 $ 7,432 $11,061 $31,255
======= ======= ======= =======
Gross Profit
As originally reported $ 5,186 $ 2,214 $ 2,992 $ 6,822
Impact of amounts described above (1,194) 122 8 (346)
------- ------- ------- -------
As restated $ 3,992 $ 2,336 $ 3,000 $ 6,476
======= ======= ======= =======
Income from continuing operations
before extraordinary items
As originally reported $ 2,085 $ 2,535 $ 513 $ 549
Change primarily related to
classification of IAF as discontinued
operations and adjustments to inventory
valuation and certain accrual adjustments 674 531 (20) (308)
------- ---- -------- -------
As restated $ 2,759 $ 3,066 $ 493 $ 241
======= ======= ======== =======
Discontinued operation
As originally reported $ -- $ -- $ -- $ --
Changes primarily related to
classification of IAF as discontinued
operations (2,107) -- -- --
------- ------- -------- -------
As restated $(2,107) $ -- $ -- $ --
======= ======= ======== =======
Extraordinary item - forgiveness of debt and
liabilities
As originally reported $ -- $ 16,257 $ -- $ --
Reclassification of forgiveness of liabilities 2,015 -- -- --
-------- -------- -------- -------
As restated $ 2,015 $ 16,257 $ -- $ --
======== ======== ======== =======
Net income
As originally reported $ 2,085 $ 18,792 $ 513 $ 549
Impact of amounts described above 582 531 (20) (308)
-------- -------- -------- -------
As restated $ 2,667 $ 19,323 $ 493 $ 241
======== ======== ======== =======
</TABLE>
47
<PAGE> 48
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
------------------------------
22. QUARTERLY FINANCIAL DATA (UNAUDITED), continued:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
FOR THE PERIODS ENDED
------------------------------------------------------------------------
PREDECESSOR COMPANY SUCCESSOR COMPANY
JANUARY 1, 1999 APRIL 1, 1999 MAY 28, 1999 JULY 1, 1999
TO MARCH 31, TO MAY 27, TO JUNE 30, TO SEPTEMBER 30,
Per share amounts as restated are as follows: 1999 1999 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings per share from continuing
operations before extraordinary item:
Common Shares $ 0.60 $ 0.67 $ -- $ --
First Series Preferred Shares -- -- 0.22 0.11
Earnings per share from continuing
operations before extraordinary item
assuming dilution:
Common Shares $ 0.59 $ 0.66 $ -- $ --
First Series Preferred Shares -- -- 0.19 0.10
Basic earnings per share:
Common Shares $ 0.58 $ 4.20 $ -- $ --
First Series Preferred Shares -- -- 0.22 0.11
Earnings per share assuming dilution:
Common Shares $ 0.57 $ 4.16 $ -- $ --
First Series Preferred Shares -- -- 0.19 0.10
</TABLE>
48
<PAGE> 49
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
-------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On June 25, 1999, the Company engaged Ernst & Young LLP, independent auditors
("Ernst & Young"), as the Registrant's principal accountants to audit the
Registrant's financial statements for the year ending December 31, 1999. Ernst &
Young was engaged to replace PricewaterhouseCoopers LLP, independent accountants
("PwC"), who had previously been engaged for the same purpose, and whose
dismissal was effective on June 25, 1999. The decision to change the
Registrant's accountants was approved by the Registrant's Board of Directors on
June 25, 1999 and was based on Registrant's desire to appoint a new independent
auditor after Kojaian Holdings LLC and ASC Holdings LLC (with whom Ernst & Young
has had a long-standing working relationship) acquired a majority interest in
Registrant's outstanding shares of common and preferred stock on May 27, 1999.
The reports of PwC on the Registrant's financial statements for the past two
fiscal years ended December 31, 1998 did not contain an adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to audit scope or
accounting principles. The report of PwC on the Registrant's financial
statements for the past two fiscal years ended December 31, 1998 contained a
statement of uncertainty concerning the Registrant's ability to continue as a
going concern. This was due to the Registrant's deteriorating financial
condition as of December 31, 1998, the uncertainty over the emergence from
bankruptcy of three of the Registrant's subsidiaries, the successful
restructuring of the Registrant's bank debt, and the consummation of the sale of
a majority interest in the Registrant to ASC Holdings LLC and Kojaian Holdings
LLC.
During the last two years ended December 31, 1998 and in the subsequent interim
period, there were no disagreements with PwC on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of PwC, would
have caused it to make reference to the subject matter of the disagreements in
connection with its reports.
49
<PAGE> 50
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item with respect to executive officers and members
of the Board of Directors of the Company will be contained in the Proxy
Statement or Information Statement for the 2000 Annual Meeting of Shareholders
under the captions "Directors and Executive Officers of the Registrant" and
"Election of Directors" and is incorporated herein by reference. Additionally,
information required by this Item with respect to compliance with Section 16(a)
of the Securities Exchange Act of 1934 will be contained in the 2000 Proxy
Statement under the caption "Beneficial Ownership Reporting Compliance".
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item will be contained in the 2000 Proxy Statement
or Information Statement under the caption "Compensation of Directors and
Executive Officers" and incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item will be contained in the 2000 Proxy Statement
or Information Statement under the caption "Security Ownership of Certain
Beneficial Owners and Management" incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the closing of the Investment Transaction on May 27, 1999,
the Company entered into a Consulting Services Agreement with ASC Holdings LLC
which requires payment of $250,000 annually, payable monthly, for consulting
services provided by ASC Holdings LLC with respect to various business,
operating, management, and financial matters. In addition, the Company is
required to pay ASC Holdings LLC an additional fee equal to 2% of the excess of
the final EBITDA over the targeted EBITDA, (both defined in the Investment
Agreement) for the 24 month period ending after the acquisition date. Further
disclosures of information required by this Item will be contained in the 2000
Proxy Statement or Information Statement under the caption "Certain
Relationships and Related Transactions" incorporated herein by this reference.
50
<PAGE> 51
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, 1998 and 1999, and for the years
ended December 31, 1997, 1998 and for the periods
January 1, 1999 through May 27, 1999 and May 28,
1999 through December 31, 1999, consist of the
following:
- Reports of Independent Auditors
- Consolidated Balance Sheets
- Consolidated Statements of Operations
and Comprehensive Operations
- Consolidated Statements of Shareholders'
Equity (Deficit)
- Consolidated Statements of Cash Flows
- 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, 1997, 1998 and 1999, consists of the
following:
II. Valuation and Qualifying Accounts
(3) Exhibits
See Exhibit Index.
(b) REPORTS ON FORM 8-K
On January 11, 2000, Registrant filed a report on Form 8-K
dated December 30, 1999 reporting a change in control of
the Registrant. Pursuant to a Letter Agreement dated
August 30, 1999 among ASC Holdings LLC and its sole member
(Heinz C. Prechter) and Kojaian Holdings LLC and its
members (Mike Kojaian and C. Michael Kojaian), Heinz C.
Prechter agreed to purchase 4,720,710 common shares and
976,176.095 First Series Preferred Shares of the
Registrant from Kojaian Holding, LLC for $9.2 million. As
a result, Heinz C. Prechter owns 95% of the beneficial
interest of the Registrant.
51
<PAGE> 52
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 March 30, 2000 by the undersigned, thereunto duly authorized.
JPE, INC.
By: /s/ David L. Treadwell
-------------------------------
David L. Treadwell
Chairman of the Board and Chief
Executive Officer
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:
<TABLE>
<S> <C> <C>
/s/ David L. Treadwell Chairman of the Board March 30, 2000
- ------------------------------------ Chief Executive Officer
David L. Treadwell
/s/ Joseph E. Blake Vice President March 30, 2000
- ------------------------------------ Chief Financial Officer
Joseph E. Blake (Principal Financial Officer and
Principal Accounting Officer)
/s/ Mike Kojaian Director March 30, 2000
- ------------------------------------
Mike Kojaian
/s/ C. Michael Kojaian Director March 30, 2000
- ------------------------------------
C. Michael Kojaian
/s/ Heinz C. Prechter Director March 30, 2000
- ------------------------------------
Heinz C. Prechter
</TABLE>
52
<PAGE> 53
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
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, 1997 and 1998 and
for the periods January 1, 1999 through May 27, 1999 and May 28, 1999 through
December 31, 1999:
PAGE
----
II. Valuation and Qualifying Accounts 54
53
<PAGE> 54
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
SCHEDULE II - VALUATION ACCOUNTS
For the periods ended
-----------------
<TABLE>
<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, 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
========== =========== ========== =========== ==========
January 1, 1999 through
May 27, 1999 $ 684,000 $ 750,000 $1,363,000 $(1,770,000) $1,027,000
========== =========== ========== =========== ==========
May 28, 1999 through
December 31, 1999 $1,027,000 $ 326,000 $ -- $ (300,000) $1,053,000
========== =========== ========== =========== ==========
</TABLE>
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.
54
<PAGE> 55
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, incorporated by reference to Exhibit 2.9 filed
with the Registrant's Annual Report on Form 10-K dated
April 15, 1999.
2.10 Stock Purchase Agreement dated as of March 26, 1999 by and
among JPE, Inc., Industrial & Automotive Fasteners, Inc.
and MacLean Acquisition Company, incorporated by reference
on Form 10-K date April 15, 1999.
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, adopted as of May 28, 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).
4.1 Form of Certificate for Shares of Preferred Stock,
incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated May 27,
1999.
4.2 Form of Preferred Stock Warrant issued to Bank Group,
incorporated by reference to Exhibit 4.2 to the
Registrant's Current Report on Form 8-K dated May 27,
1999.
4.3 Form of Preferred Stock Warrant to be issued to share
holder of record of JPE, Inc. Common Stock as of June 11,
1999, incorporated by reference to Exhibit 4.2 to the
Registrant's Current Report on Form 8-K dated May 27,
1999.
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).
55
<PAGE> 56
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).
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.
56
<PAGE> 57
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.
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.
57
<PAGE> 58
* 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, incorporated by reference to Exhibit 10.39 to
the Registrant's Annual Report on Form 10-K dated April
15, 1999.
10.40 Sixth Amendment, dated March 26, 1999, to Forbearance
Agreement, incorporated by reference to Exhibit 10.40 to
the Registrant's Annual Report on Form 10-K dated April
15, 1999.
10.41 Form of Indemnification Agreement, dated as of September
30, 1998, between the Registrant and Richard P. Eidswick,
incorporated by reference to Exhibit 10.41 to the
Registrant's Annual Report on Form 10-K dated April 15,
1999.
10.42 Form of Indemnification Agreement, dated as of November 9,
1998, between the Registrant and Richard R. Chrysler,
filed with this report.
10.43 Form of letter dated November 28, 1998 from Dr. John
Psarouthakis terminating Shareholder Agreement,
incorporated by reference to Exhibit 10.43 to the
Registrant's Annual Report on Form 10-K dated April 15,
1999.
* 10.44 Letter dated February 5, 1999 amending terms of Stay Bonus
Agreement between the Registrant and James J. Fahrner,
incorporated by reference to Exhibit 10.44 to the
Registrant's Annual Report on Form 10-K dated April 15,
1999.
* 10.45 Letter dated February 5, 1999 amending terms of Stay Bonus
Agreement between the Registrant and Karen A. Radtke,
incorporated by reference to Exhibit 10.45 to the
Registrant's Annual Report on Form 10-K dated April 15,
1999.
10.46 Investment Agreement dated April 28, 1999 among ASC
Holdings LLC, Kojaian Holdings LLC and JPE, Inc.,
incorporated by reference to Exhibit 10.4 to the
Registrant's Annual Report on Form 10-K dated May 27,
1999.
10.47 Tenth Amendment dated May 21, 1999, to forbearance
Agreement, incorporated by reference to Exhibit 10.2 to
the Registrant's Annual Report on Form 10-K dated May 27,
1999.
10.48 Letter Agreement, dated May 26, 1999, among Comerica Bank
as Agent, JPE, Inc. and its subsidiaries, incorporated by
reference to Exhibit 10.3 to the Registrant's Current
Report on Form 8-K dated May 27, 1999
10.49 Letter Agreement, dated May 27, 1999, among Comerica Bank,
JPE, Inc. and its subsidiaries, incorporated by reference
to Exhibit 10.4 to the Registrant's Current Report on Form
8-K dated May 27, 1999
10.50 Form of Promissory Note dated May 27, 1999 in the
principal amount of $20, 000,000 executed by JPE, Inc. and
its subsidiaries, incorporated by reference to Exhibit
10.5 to the Registrant's Current Report on Form 8-K dated
May 27, 1999
10.51 Form of Promissory Note dated May 27, 1999 in the
principal amount of $6,300,000 executed by JPE, Inc. and
its subsidiaries, incorporated by reference to Exhibit
10.6 to the Registrant's Current Report on Form 8-K dated
May 27, 1999
10.52 Form of Promissory Note dated May 27, 1999 in the
principal amount of $30,000,000 executed by JPE, Inc. and
its subsidiaries, incorporated by reference to Exhibit
10.7 to the Registrant's Current Report on Form 8-K dated
May 27, 1999
10.53 Advance Formula Agreement, dated May 27, 1999 between JPE,
Inc. and its subsidiaries and Comerica Bank, incorporated
by reference to Exhibit 10.8 to the Registrant's Current
Report on Form 8-K dated May 27, 1999.
58
<PAGE> 59
10.54 Form of Security Agreement (All Assets), dated as of May
27, 1999, executed by JPE, Inc. and each of its
subsidiaries, incorporated by reference to Exhibit 10.9 to
the Registrant's Current Report on Form 8-K dated May 27,
1999
10.55 Patent and Trademark Security Agreement, dated as of May
27, 1999 made by JPE, Inc. in favor of Comerica Bank,
incorporated by reference to Exhibit 10.10 to the
Registrant's Current Report on Form 8-K dated May 27, 1999
10.56 Security Agreement (Negotiable Collateral), dated as of
May 27, 1999, executed by each of ASC Holdings LLC,
Kojaian Holdings, JPE, Inc. and its wholly-owned
subsidiary, SAC Corporation, incorporated by reference to
Exhibit 10.11 to the Registrant's Current Report on Form
8-K dated May 27, 1999
10.57 Guaranty, dated as of May 27, 1999, executed by ASC
Holdings LLC, Kojaian Holdings LLC, API/JPE, Inc. and SAC
Corporation, incorporated by reference to Exhibit 10.12 to
the Registrant's Current Report on Form 8-K dated May 27,
1999
10.58 Letter Agreement, dated May 27, 1999, among Heinz c.
Prechter, mike Kojaian and C. Michael Kojaian,
incorporated by reference to Exhibit 10.13 to the
Registrant's Current Report on Form 8-K dated May 27, 1999
10.59 Shareholders Agreement dated May 27, 1999 between ASC
Holdings LLC and Kojaian Holdings LLC, incorporated by
reference to Exhibit 10.14 to the Registrant's Current
Report on Form 8-K dated May 27, 1999
10.60 Employment Agreement, dated May 27, 1999, between Richard
R. Chrysler and JPE, Inc., incorporated by reference to
Exhibit 10.15 to the Registrant's Current Report on Form
8-K dated May 27, 1999
10.61 Termination Agreement and Release of All Liability, dated
May 27, 1999, between Richard C. Chrysler and JPE, Inc.,
incorporated reference to Exhibit 10.16 to the
Registrant's Current Report on Form 8-K dated May 27,
1999.
10.62 Termination Agreement and Release of All Liability, dated
May 27, 1999, between Richard P. Eidswick and JPE, Inc.,
incorporated reference to Exhibit 10.17 to the
Registrant's Current Report on Form 8-K dated May 27,
1999.
10.63 Letter Agreement among GMAC Business Credit LLC, Comerica
Bank and Plastic Trim, Inc., incorporated reference to
Exhibit 10.18 to the Registrant's Current Report on Form
8-K dated May 27, 1999.
10.64 Letter Agreement among GMAC Business Credit LLC, Comerica
Bank and Starboard Industries, Inc., incorporated
reference to Exhibit 10.19 to the Registrant's Current
Report on Form 8-K dated May 27, 1999.
10.65 Letter Agreement, dated August 30, 1999, among Mike
Kojaian, C. Michael Kojaian, Kojaian Holdings LLC, Heinz
C. Prechter and ASC Holdings LLC, incorporated reference
to Exhibit 10.1 to the Registrant's Current Report on Form
8-K dated December 30, 1999.
10.66 Release of Guarantor (Kojaian Holdings LLC) from Guaranty
dated May 27, 1999, incorporated reference to Exhibit 10.2
to the Registrant's Current Report on Form 8-K dated
December 30, 1999.
10.67 Agreement dated September 24, 1999 between Registrant and
The Bank Of Nova Scotia releasing the Registrant of the
Guarantee made on behalf of JPE Canada Inc., filed with
this report.
16 Letter dated June 29, 1999 from PricewaterhouseCoopers
LLP, the former independent accountants for the
Registrant, incorporated by reference to the Registrant's
Current Report on Form 8-K dated June 25, 1999.
20 Press Release dated July 1, 1999 announcing promotion of
Richard R. Chrysler to Vice Chairman, incorporated by
reference to Exhibit 20 to the Registrant's Current Report
on Form 8-K dated July 1, 1999.
20.1 Press Release dated December 30, 1999 announcing ASC
Holdings LLC becomes majority owner of Registrant,
incorporated by reference to Exhibit 20.1 to the
Registrant's Current Report on Form 8-K dated December 30,
1999.
21 Subsidiaries of the Registrant, incorporated by reference
to Exhibit 10.39 to the Registrant's Annual Report on Form
10-K dated April 15, 1999.
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<PAGE> 60
23 Consent of PricewaterhouseCoopers LLP, incorporated by
reference to Exhibit 23 to the Registrant's Annual Report
on Form 10-K dated April 15, 1999.
23.1 Consent of Ernst & Young LLP, filed with this report.
23.2 Consent of PricewaterhouseCoopers LLP, filed with this
report.
27 Financial Data Schedule
* Indicates management contract or compensatory plan or arrangement
60
<PAGE> 1
EXHIBIT 3.2
ADOPTED AS OF
MAY 28, 1999
BYLAWS
OF
JPE, INC.,
a Michigan corporation
<PAGE> 2
BYLAWS
OF JPE, INC.,
a Michigan corporation
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - OFFICES 1
1.1 Registered Office
1.2 Other Offices 1
ARTICLE II - MEETINGS OF SHAREHOLDERS 1
2.1 Time and Place 1
2.2 Annual Meetings 1
2.3 Special Meetings 1
2.4 Notice of Meetings 1
2.5 List of Shareholders 1
2.6 Quorum; Adjournment 2
2.7 Voting 2
2.8 Proxies 2
2.9 Questions Concerning Elections 2
2.10 Telephonic Attendance 2
2.11 Action By Written Consent 3
ARTICLE III - DIRECTORS 3
3.1 Governance 3
3.2 Number, Election and Term 3
3.3 Resignation 3
3.4 Removal 3
3.5 Vacancies 3
3.6 Place of Meetings 4
3.7 Annual Meetings 4
3.8 Regular Meetings 4
3.9 Special Meetings 4
3.10 Quorum 4
3.11 Voting 4
3.12 Telephonic Participation 4
3.13 Action By Written Consent 5
3.14 Committees 5
3.15 Compensation 5
ARTICLE IV - OFFICERS 6
4.1 Officers and Agents 6
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.2 Compensation 6
4.3 Term 6
4.4 Removal 6
4.5 Resignation 6
4.6 Vacancies 6
4.7 Chairperson of the Board 6
4.8 Chief Executive Officer 7
4.9 Chairperson of the Corporation 7
4.10 President; Executive Vice Presidents and Vice Presidents 7
4.11 Vice Chairpersons of the Corporation 7
4.12 Secretary 7
4.13 Treasurer 8
4.14 Assistant Vice Presidents, Secretaries
and Treasurers 8
4.15 Execution of Contracts and Instruments 8
4.16 Voting of Shares and Securities of
Other Corporations and Entities 8
ARTICLE V - NOTICES AND WAIVER OF NOTICE 9
5.1 Delivery of Notices 9
5.2 Waiver of Notice 9
ARTICLE VI - SHARE CERTIFICATES AND SHAREHOLDERS OF RECORD 10
6.1 Certificates for Shares 10
6.2 Lost or Destroyed Certificates 10
6.3 Transfer of Shares 10
6.4 Record Date 10
6.5 Registered Shareholders 11
6.6 Control Shares 11
ARTICLE VII - INDEMNIFICATION 11
ARTICLE VIII - GENERAL PROVISIONS 12
8.1 Checks and Funds 12
8.2 Fiscal Year 12
8.3 Corporate Seal 12
8.4 Books and Records 12
8.5 Financial Statements 12
ARTICLE IX - AMENDMENTS 12
ARTICLE X - SCOPE OF BYLAWS 13
</TABLE>
ii
<PAGE> 4
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 Chairperson of the
Corporation 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.
1
<PAGE> 5
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 vote or consent of the holders
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<PAGE> 6
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 Chairperson of
the Corporation 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.
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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 Director's 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 service.
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 Chairperson of the
Corporation, 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
President and one or more Vice Chairpersons, 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.
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<PAGE> 8
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 Chairperson of the Corporation, 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 there is no Chairperson of the Board, or if no designation of chief
executive officer is made, the Chairperson of the Corporation 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 Chairperson of the Corporation. If the office of Chairperson of the
Corporation is not filled, the Chairperson of the Board shall perform the duties
and execute the authority of the Chairperson of the Corporation. If the
Chairperson of the Corporation is designated by the Board as the Corporation's
chief executive officer, the Chairperson of the Corporation 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 Chairperson of the
Corporation 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 President, Executive Vice Presidents and Vice Presidents. The
President, Executive Vice Presidents and Vice Presidents, if any, shall assist
and act under the direction of the Chairman of the Board and the Chairperson of
the Corporation. The Board of Directors may designate a President and 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 Chairperson of the Corporation, the authority of the
Chairperson of the Corporation shall descend first to the President and, if
there is none, second to the Executive Vice Presidents or, if there are none,
third, 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 Chairperson of the Corporation shall descend
first to the President and, if there is none, second 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 Vice Chairpersons of the Corporation. Notwithstanding anything to
the contrary in these Bylaws, the Vice Chairpersons of the Corporation, if any,
shall have only such duties and powers as expressly granted by the Chairperson
of the Corporation and shall assist and solely act under the direction of the
Chairperson of the Corporation, or, in his or her absence, the Executive Vice
President, or, if there are none, to the Vice Presidents, in the order of their
seniority in such office.
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4.12 Secretary. The Secretary shall act under the direction of the
Corporation's chief executive officer. 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, or the Board of
Directors, shall affix the seal to any instrument requiring it and attest such
instrument.
4.13 Treasurer. The Treasurer shall act under the direction of the
Corporation's chief executive officer. 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,
or the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Corporation's chief executive officer, 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.
4.14 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.
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.
4.15 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, 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.
4.16 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.
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ARTICLE V
NOTICES AND WAIVERS OF NOTICE
5.1 Delivery of Notices. 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 over-night carrier, 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, Chairperson of the Corporation, the President or 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
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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 Company.
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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.
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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.
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<PAGE> 1
EXHIBIT 10.67
THIS AGREEMENT made as of the 24th day of September, 1999.
BETWEEN:
JPE, INC.
("JPE US")
-and-
BANK OF NOVA SCOTIA
(the "Bank")
WHERAS:
1. JPE US is the beneficial owner of all of the issued and outstanding
shares of JPE Canada Inc. ("JPE Canada").
2. JPE Canada is indebted or otherwise liable to the Bank (all such
liabilities and indebtedness and outstandings as of the Closing Date,
the "JPE Canada Debt").
3. As part of the security for payment of the JPE Canada Debt to the Bank,
the Bank holds certain security including:
(a) a guarantee by JPE US dated February 4, 1997 of payment of the
JPE Canada Debt (the "JPE Guarantee") up to a certain maximum
amount which exceeds the JPE Canada Debt;
(b) a general assignment of book debts of JPE Canada dated
December 20, 1996;
(c) an intellectual property security agreement dated December 20,
1996 made by JPE Canada, JPE US and the Bank (the "IP Security
Agreement").
4. The Bank has demanded payment of the JPE Canada Debt from JPE Canada
and has demanded payment of the JPE Canada debt from JPE US under the
JPE Guarantee.
5. Plastic Trim, Inc., a wholly-owned subsidiary of JPE US, is indebted or
otherwise liable to JPE Canada in the amount of U.S. $252,583.32 (the
"Plastic Trim - JPE Canada Debt") and JPE Canada is indebted or
otherwise liable to Plastic Trim, Inc. in the amount of U.S. $49,227.79
(the "JPE Canada - Plastic Trim Debt").
6. The Bank and JPE US have agreed to enter into this Agreement to settle
the terms under which the Bank will release JPE US from its obligations
to the Bank under the JPE Guarantee.
7. Pursuant to the provisions of the Bankruptcy and Insolvency Act
(Canada), on February 8, 1999, JPE Canada made an assignment for the
general benefit of its creditors (the "Assignment").
8. Plastic Trim, Inc. is in bankruptcy to the United States Bankruptcy
Code.
<PAGE> 2
NOW THEREFORE, For value, the parties agree as follows:
1. The Bank hereby agrees that upon delivery to the Bank on or before
October 25, 1999 (the "Closing Date") of each of the following, JPE US
shall thereupon be released and forever discharged from all actions,
proceedings, accounts, debts, sums of money, obligations, claims and
demands, which the Bank now has or may hereafter have against JPE US in
respect of JPE US's obligations to the Bank under the JPE Guarantee:
(a) a certified cheque payable to the Bank in the amount of Cdn.
$86,000;
(b) a certified cheque payable to the Bank in the amount of Cdn.
$92,730.17 in settlement of the Plastic Trim - JPE Canada Debt
and the JPE Canada - Plastic Trim Debt;
(c) an assignments and transfer to the Bank of all royalties
payable by Ventra Group Inc. to JPE US under a Licence
Agreement dated December 20, 1996 made by JPE US as Licensor
in favour of JPE Canada as Licensee relating to certain moulds
and patents (a copy of which Licence Agreement is attached
hereto as Exhibit "A")(the "Licence Agreement"), all in a form
attached hereto as Exhibit "B" and in respect of which all
persons having an interest in such mould and patents shall
have released such interest;
(d) a release by Plastic Trim, inc. in favour of JPE Canada of the
JPE Canada - Plastic Trim Debt in a form attached hereto as
Exhibit "C".
2. JPE US represents and warrants to the Bank as follows:
(a) that the authorized capital of JPE Canada Inc. consists of an
unlimited number of common shares of which 100 common shares
(and no more) have been duly issued and are outstanding as
fully paid and non-assessable (the "JPE Canada Shares");
(b) that no person, firm or corporation has any agreement or
option or any right or privilege capable of becoming an
agreement, including convertible securities, warrants or
convertible obligations of any nature, for the purchase,
subscription, allotment or issuance of any shares or other
securities of JPE Canada (where in this paragraph the words
"shares or other securities of JPE Canada" means for greater
certainty shares or other securities in the capital of only
JPE Canada and not in the capital of JPE US);
(c) that JPE US is the beneficial owner of record of the JPE
Canada Shares with good and marketable title thereto, free and
clear of all encumbrances and, without limiting the generality
of the foregoing, none of the JPE Canada Shares is subject to
any voting trust, shareholder agreement or voting agreement
and no person other than the Bank has any written or oral
agreement or option or right or privilege for the purchase or
acquisition from JPE US of any of the JPE Canada Shares, and
upon completion of the assignment and transfer contemplated
herein, all of the JPE Canada Shares will be owned by the
transferee hereof as the beneficial owner of record, with good
and marketable title thereto;
(d) that prior to the Assignment, the only indebtedness or
obligations of JPE Canada outstanding to JPE US or to and
companies in which JPE US has an ownership interest, or to
which JPE US is related, were the following:
(i) the indebtedness and obligations of JPE Canada under
the Licence Agreement; and
(ii) the JPE Canada - Plastic Trim Debt; and
<PAGE> 3
(e) that subsequent to the Assignment there is no indebtedness of,
and there are no obligations of, JPE Canada outstanding to JPE
US or to any companies in which JPE US has an ownership
interest, or to which JPE US is related.
3. JPE US agrees upon the request of the Bank at any time, to assign to a
third party to be identified by the Bank (the "Transferee"):
(a) the JPE Canada Shares and to deliver therewith all of the
share certificates evidencing the same duly endorsed in blank
and the corporate books and records relating to JPE Canada;
and
(b) all obligations and amounts due by JPE Canada to JPE US and to
all JPE US's related entities referred to in paragraph 2(d)
hereof (the "Related Debt").
JPE US agrees that the form of the assignment shall be substantially in
the form attached hereto as Exhibit "D":. JPE US further agrees to
arrange for or cause the transfer and assignment of the foregoing if it
can not do the foregoing directly.
4. JPE US appoints any Vice-President from time to time of the Bank as its
attorney, or, his failing, a person to be designated by the Bank from
time to time, with full and irrevocable power and authority to perform
all acts and do all things for and on behalf of JPE US as such attorney
may deem necessary or desirable to assign and transfer the JPE Canada
Shares and said corporate books and records and the Related Debt to the
Transferee. The Bank agrees to provide reasonable detail to JPE US from
time to time of any acts performed or things done by the attorney in
his capacity as attorney as aforesaid.
5. JPE US acknowledges and agrees that the release referred to in
paragraph 1 hereof shall not extend to release JPE US from its
obligations to the Bank under and pursuant to this Agreement.
6. In consideration of JPE US being released hereunder and effective as of
the Closing Date, JPE US hereby releases and forever discharges the
Bank and its officers, directors, employees, agents and representatives
(collectively the "Releasees") of and from all actions, proceedings,
accounts, claims and demands whatsoever which JPE US now has or may
hereafter have against the Releasees in respect of all matters in
connection with JPE Canada, the JPE Canada Shares, the JPE Guarantee,
the Licence Agreement or any other matters or things relating thereto.
7. The parties hereto 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 this
Agreement for the purposes of the more effectual carrying out of the
Agreement. All reasonable expenses in connection with such further
documents, papers, matters and assurances shall be borne by the party
requesting the same.
8. This agreement shall be binding on the successors and assignees of the
parties hereto and shall be governed in all respects by the laws of the
Province of Ontario, and JPE US hereby attorns to the jurisdiction of
the courts of Ontario. This Agreement may be signed in counter part
which taken together shall form one and the same agreement. The parties
agree that signed facsimile documents shall be as binding as originals.
Parties signing by facsimile undertake to promptly forward original
copies to the other party.
<PAGE> 4
IN WITNESS OF WHICH, the parties have executed this Agreement
under the hands of officers authorized to bind the parties.
JPE, INC.
By: /s/ J.E. Blake
------------------
Name: J.E. Blake
Title: Vice President and Chief Financial Officer
THE BANK OF NOVA SCOTIA
By: /s/ Pat Galluzzo
----------------------
Name: Pat Galluzzo
Title: Manager
<PAGE> 5
LICENSE AGREEMENT
This License Agreement dated this 20th day of December, 1996 (the
"License") is made by and between JPE, Inc., a Michigan corporation,
("Licensor") and JPE Canada Inc., an Ontario corporation formerly known as
1203462 Ontario Inc., ("Licensee").
WHEREAS, Licensor is the owner of certain patents and patent
applications identified on Schedule A attached hereto and, along with any
patents that may have been or will be granted thereon (collectively referred to
herein as the "Patents"); and
WHEREAS, Licensee desires to be licensed under the Patents and Licensor
is willing to grant such a license;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties agree as follows:
1. Grant of License. Licensor hereby grants unto Licensee the
irrevocable, nonexclusive right and license to make, have made, use and sell
throughout the United States, its territories and possessions, Canada and
Mexico, molded parts (the "Parts") using the plastic injection molding process
that falls within the scope of one or more claims of the Patents.
2. Royalty: Mandatory Minimum. Licensee agrees to pay Licensor
royalties equal to three percent (3%) of the net selling price of all Parts sold
by or on behalf of Licensee with a annual minimum royalty, regardless of sales
levels of Parts, of CDN $100,000, payable CDN$25,000 quarterly. The term "net
selling price" means the invoice price less quantity and cash discounts thereon
actually allowed and less sales, use and other similar taxes and any
transportation or delivery charges borne by Licensee. Except as otherwise
provided above, no royalty shall be due on Parts which are not accepted by the
customer and when royalties shall have been paid on such Parts, they shall be
credited against any future royalties to be paid hereunder.
3. Reports: Time of Royalty Payments. Within fifteen (15) days of the
end of each calendar quarter, Licensee shall render a written report to Licensor
setting forth the total net sales by Licensee of the Parts during such quarter
along with the payment to Licensor of the royalty amount due thereon. Licensee
agrees to make and keep full and accurate books and records showing the sales of
Parts sold under the License in sufficient detail to enable royalties payable
hereunder to be determined, and further agrees that Licensor and its
representatives shall be permitted to inspect such books and records from time
to time, during regular business hours, as contain any data material to the
computation of royalties hereunder, and to make copies thereof to the extent
necessary to verify the royalty reports and payments provided by this License.
4. Enforcement of Licensed Patents. It is mutually understood and
agreed that Licensee shall have the right to call to the attention of Licensor
any infringement of the patent rights set forth in Schedule A hereof, which
infringement, if continued, might affect the rights of Licensee herein, and if
after giving notice to Licensor, Licensor does not file suit or cause such
alleged infringement to cease within a period of six (6) months from the date of
such notice, then Licensor agrees to grant Licensee the right to sue in its own
name, at its own expense and for its own benefit, any such infringer under any
of the patents listed or included in Schedule A.
5. Improvements by Licensee: Assignment to Licensor. Licensee agrees to
disclose promptly to Licensor any improvements owned or acquired by Licensee.
Licensee further agrees that any such improvements shall be the property of, and
properly assigned to, Licensor, who may make, or have made for it, use and sell,
including the right to sublicense, such improvement without restriction, and
Licensee shall retain a perpetual nonexclusive royalty-free right to make, use
and sell Parts using such improvements. Licensee also agrees, whenever requested
to do so by Licensor and at Licensor's cost and expense, to execute any and all
documents and to take any and all action which may be necessary or appropriate
to assign and transfer to Licensee all the right, title and interest in and to
such improvements.
<PAGE> 6
6. Option to Purchase Patents. In the event Licensor sells
substantially all of the assets of, or all of the common stock of, Licensee to
an unrelated third party, Licensee shall have the option to purchase the Patents
and all then existing claims for infringement thereof, at the greater of (i) the
book value of the Patents then on Licensor's books and (ii) the fair market
value of the Patents. In the event Licensee exercises such option, Licensee
shall grant to Licensor a perpetual, irrevocable, royalty-free, nonexclusive
license to make, use and sell Parts.
7. Duration. This License granted herein shall continue until the
expiration of the last expiring Patent or any additions thereto as covered in
Schedule A hereof, it being understood that Schedule A shall be considered as
amended from time to time by the addition thereto of any further applications or
divisions of applications covering improvements developed by either Licensor or
Licensee as to the subject matter contained in the Patents, and Licensor hereby
agrees that such new applications or divisions thereof shall automatically be
included in the License.
8. Termination. The parties agree that the failure of Licensee to make
and render any statement or to make any payment as required by this License
shall give Licensor the right to cancel this License by giving Licensee thirty
(30) days' notice in writing of its election to do so, provided, however, if
within thirty (30) days after delivery of any such notice Licensee shall have
cured its default, then this License shall remain in force the same as if no
breach or default had occurred on the part of Licensee.
9. Succession. This License shall be binding upon and shall inure to
the benefit of the respective successors of the parties hereto, provided that,
the License or any rights granted hereunder may not be assigned, transferred,
conveyed, or encumbered by Licensee, except with the written consent of Licensor
and any attempt to so transfer shall be voided and not merely voidable.
10. Entire Agreement. This agreement constitutes the entire agreement
between the parties hereto relating to the specific subject matter hereof. There
are no terms, obligations, covenants, representations, or conditions other than
those contained herein. No variation or modification of this agreement or waiver
of any of the terms or provisions hereof shall be deemed valid unless in writing
and signed by both parties hereto.
11. Governing Law. This License shall be construed under and governed
by the laws of the State of Michigan, United States of America, and the parties
hereby submit to the jurisdiction of the courts of that state.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed in duplicate by their duly authorized representatives as of the day
and year first above written.
JPE, INC JPE CANADA, INC.
By: /s/ By: /s/
Title: Vice President Title: Secretary
<PAGE> 7
SCHEDULE "A"
LETTERS PATENT
<TABLE>
<CAPTION>
Patent No. Date Patentee Title
- ---------- ---- -------- -----
<S> <C> <C> <C>
5,484,278 01/16/96 Karl Berdan Blow-Out Vent Valve
5,511,967 04/30/96 Karl Berdan Self-Contained Gas Injector
</TABLE>
PATENTS & PATENT APPLICATIONS IN COUNTRIES FOREIGN TO THE U.S.
<TABLE>
<CAPTION>
Country Patent/Appln No. Date Title
- ------- ---------------- ---- -----
<S> <C> <C> <C>
Brazil PI9500620-6 02/13/95 Blow-Out Vent Valve
Canada 2,141.697 02/02/95 "
France 9501573 02/10/95 "
Germany 19504339.1 02/10/95 "
Japan 25061/95 02/14/95 "
Mexico 950931 02/14/95 "
United Kingdom 9502566.4 02/10/95 "
Brazil PI9500621.-4 02/13/95 Self Contained Gas Injector Nozzle
Canada 2,141,698 02/02/95 "
France 9501572 02/10/95 "
Germany 19504409.6 02/10/95 "
Japan 25544/95 02/14/95 "
Mexico 950932 02/14/95 "
United Kingdom 9502561.5 02/10/95 "
</TABLE>
<PAGE> 8
EXHIBIT "B"
ASSIGNMENT
TO: The Bank of Nova Scotia (the "Bank")
AND TO: Ventra Group Inc. and all assignees from Ventra Group Inc.
(collectively "Ventra")
RE: Licence Agreement dated December 20, 1996 made by JPE, Inc. as
Licensor in favor of JPE Canada Inc. as Licencee relating to certain
molds and patents, a copy of which is attached hereto as Exhibit "A"
(the "Licence Agreement")
The undersigned, JPE, Inc. ("JPE US") hereby refers to:
1. The Licence Agreement.
2. All right, title and interest of JPE US in and to all payments and
amounts now or hereafter due to US under or pursuant to the Licence
Agreement (the "Licence Amounts").
The undersigned, for value, hereby:
1. Transfers and assigns absolutely to the Bank all of the Licence Amounts
2. Gives notice to Ventra, which notice shall be irrevocable without the
accompanying written consent of the Bank, to pay all Licence Amounts to
the Bank and not to JPE US.
3. Authorizes the Bank to take whatever actions, including court
proceedings, the Bank deems necessary or advisable including action and
proceedings in the name of JPE US to enforce payment to the Bank of all
Licence Amounts.
4. Agrees to execute and deliver such other documents, papers, matters and
assurances as the Bank may reasonably require or request in connection
with this Assignment for the purposes of the more effectual carrying
out of this Assignment provided that all reasonable expenses in
connection with such further documents, papers and assurances shall be
borne by the Bank.
5. Agrees that payment by Ventura to the Bank of the Licence Amounts as
they become due shall release Ventura to the extent of such payment
from its obligations to pay the Licence Amounts to JPE US.
6. Agrees that Ventura may rely on this document as entitling and
requiring Ventura to pay all Licence Amounts to the Bank.
7. Agrees that the Licence Agreement is in full force and effect and
acknowledges and agrees to the transfer of the Licence Agreement under
the Assignment dated February 8, 1999 by the Bank of Ventra.
Dated this 21st day of October, 1999.
JPE, INC.
By: /s/ J.E. Blake
------------------
Name: J.E. Blake
Title: Vice President and Chief Financial Office
(I have authority to bind the Corporation)
<PAGE> 9
TO: JPE, Inc.
For value, the Bank:
(a) agrees with JPE US to provide reasonable detail to JPE US from time to
time of any action or proceedings taken by the Bank in the name of JPE
US under the provisions of paragraph 3 above; and
(b) agrees that as against the Bank, nothing in the foregoing Assignment
shall adversely affect any right JPE US has, at the sole expense of
JPE US, to intervene in any proceedings that challenge the
enforceability or validity of the rights of JPE US to the moulds or
patents described in the License Agreement.
Dated this 20th day of October, 1999.
THE BANK OF NOVA SCOTIA
By: /s/ P. Galluzzo
-------------------
Name: P. Galluzzo
Title: Manager
<PAGE> 10
EXHIBIT "C"
TO: JPE Canada Inc. ("JPE Canada")
For value, the undersigned Plastic Trim, Inc., hereby releases and forever
discharges JPE Canada and its officers, directors, employees, agents and
representatives (collectively the "Releasees") of and from all actions,
proceedings, accounts, claims and demands whatsoever which the undersigned now
has or may hereafter have against the Releasees in respect of all matters in
connection with JPE Canada or any other matters or things related thereto.
Dated the 21st day of October, 1999.
PLASTIC TRIM, INC.
By: /s/ J.E. Blake
------------------
Name: J.E. Blake
Title: Vice President and Chief Financial Officer
(I have authority to bind the Corporation)
<PAGE> 11
EXHIBIT "D"
ASSIGNMENT
TO: The Bank of Nova Scotia (the "Bank")
AND TO: (the "Transferee")
RE: JPE Canada Inc.
For value, the undersigned, JPE, Inc. ("JPE US") hereby:
1. Represents and warrants to you as follows:
(a) that the authorized capital of JPE Canada Inc. ("JPE Canada")
consists of an unlimited number of common shares of which 100
common shares (and no more) have been duly issued and are
outstanding as fully paid and non-assessable (the "JPE Canada
Shares");
(b) that no person, firm or corporation has any agreement or option or
any right or privilege capable of becoming an agreement, including
convertible securities, warrants or convertible obligations of any
nature, for the purchase, subscription, allotment or issuance of
any shares or other securities of JPE Canada (where in this
paragraph the words "shares or other securities of JPE Canada"
means for greater certainty shares or other securities in the
capital of only JPE Canada and not in the capital of JPE US);
(c) that JPE US is the beneficial owner of record of the JPE Canada
Shares with good and marketable title thereto, free and clear of
all encumbrances and, without limiting the generality of the
foregoing, none of the JPE Canada Shares is subject to any voting
trust, shareholder agreement or voting agreement and no person
other than you has any written or oral agreement or option or right
or privilege for the purchase or acquisition from JPE US of any of
the JPE Canada Shares, and upon completion of the assignment and
transfer contemplated herein, all of the JPE Canada Shares will be
owned by the Transferee as the beneficial owner of record, with a
good and marketable title thereto;
(d) that prior to the assignment for the general benefit of the
creditors made on February 8, 1999 by JPE Canada (the
"Assignment"), the only indebtedness or obligations of JPE Canada
outstanding to JPE US or to any companies in which JPE US has an
ownership interest or to which JPE US is related are the following
(collectively, the "Related Debt"):
(i) the indebtedness and obligations of JPE Canada under the
License Agreement dated December 20, 1999 made between
JPE, Inc. as licensor in favour of JPE Canada Inc. as
licensee relating to certain moulds and patents; and
(ii) the indebtedness or obligations of JPE Canada to Plastic
Trim, Inc.; and
(e) that after the Assignment there is no indebtedness of, and there
are no obligations of JPE Canada outstanding to JPE US or to any
companies in which JPE US has an ownership interest or to which JPE
US is related.
2. Assigns and transfers to the Transferee absolutely:
<PAGE> 12
(a) the JPE Canada Shares together with all of the share certificates
evidencing the same duly endorsed in blank and corporate books and
records relating to JPE Canada, which share certificate and
corporate books and records are delivered herewith; and
(b) the entire amount of the Related Debt together with all evidence of
the same which is delivered herewith.
3. JPE US appoints any Vice-President from time to time of the Bank as its
attorney, or, his failing, a person to be designated by the Bank from time
to time, with full and irrevocable power and authority to perform all acts
and do all things for and on behalf of JPE US as such attorney may deem
necessary or desirable to assign and transfer the JPE Canada Shares and
said corporate books and records and the Related Debt to the Transferee.
The Bank agrees to provide reasonable detail to JPE US from time to time of
any acts performed or things done by the attorney in his capacity as
attorney as aforesaid.
4. Agrees to execute and deliver such other documents, papers, matters and
assurances as the Transferee or the Bank may reasonably require or request
in connection with this Assignment for the purposes of the more effectual
carrying out of this Assignment, provided that all expenses in connection
with such further documents, papers and assurances shall be borne by the
party requesting the same.
Dated this 21st day October, 1999
JPE, INC.
By: /s/ J.E. Blake
------------------
Name: J.E. Blake
Title: Vice President and Chief Financial Officer
(I have authority to bind the Corporation)
<PAGE> 1
EXHIBIT 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statements
pertaining to the 1993 Stock Incentive Plan for Key Employees (Form S-8 No.
33-86060), as amended (Form S-8 No. 33-93326), and the Director Stock Option
Plan of JPE, Inc. (Form S-8 No. 33-93328), of our report dated March 3, 2000,
with respect to the consolidated financial statements and schedule of JPE,
Inc.(d/b/a ASCET INC and ASC Exterior Technologies) at December 31, 1999 and for
the successor period from May 28, 1999 to December 31, 1999 and the predecessor
period from January 1, 1999 to May 27, 1999, included in this Annual Report
(Form 10-K) for the year ended December 31, 1999.
/s/ Ernst & Young LLP
Detroit, Michigan
March 28, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
JPE, Inc. (d/b/a ASCET INC and ASC Exterior Technologies), 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. (d/b/a ASCET INC and ASC Exterior Technologies) as of December 31,
1998, and for the years ended December 31, 1998 and 1997 which report is
included in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
--------------------------
Detroit, Michigan
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 639
<SECURITIES> 0
<RECEIVABLES> 21,258
<ALLOWANCES> (1,053)
<INVENTORY> 22,589
<CURRENT-ASSETS> 44,829
<PP&E> 28,683
<DEPRECIATION> (1,886)
<TOTAL-ASSETS> 78,905
<CURRENT-LIABILITIES> 57,634
<BONDS> 0
0
16,590
<COMMON> 2,379
<OTHER-SE> 293
<TOTAL-LIABILITY-AND-EQUITY> 78,905
<SALES> 88,081
<TOTAL-REVENUES> 88,081
<CGS> 73,448
<TOTAL-COSTS> 85,585
<OTHER-EXPENSES> (235)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,766
<INCOME-PRETAX> (35)
<INCOME-TAX> 75
<INCOME-CONTINUING> (110)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (110)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
